Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Appendix 4E
Preliminary final report
1. Company details
Name of entity:
ASRN:
Reporting period:
Previous period:
Redcape Hotel Group
Redcape Hotel Trust I (ASRN 629 354 614) and Redcape Hotel Trust II (ASRN 629
354 696)
For the year ended 30 June 2019
For the year ended 30 June 2018
Redcape Hotel Trust I and Redcape Hotel Trust II were stapled on 2 July 2018. On guidance from the ASX, previous
period numbers in this Appendix 4E reflect aggregated financials and the assumption that the trusts were stapled during
the period.
2. Results for announcement to the market
Revenues from ordinary activities
Loss for the year attributable to the stapled security holders
up
down
17.4%
343.1%
285,215
(4,930)
242,885
2,028
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
%
Basic earnings per share
Diluted earnings per share
Stapled
Consolidated
2019
Cents
(0.93)
(0.93)
Comments
Commentary and analysis of the result can be found in the ASX released results announcement and presentation.
3. Net assets and Net tangible assets
Net assets per stapled security
Net tangible assets per stapled security
Reporting
Period
Cents
Previous
Period
Cents
114.09
6.96
118.92
10.57
No. of stapled securities on issue at 30 June 2019 are 551,445,932 and 30 June 2018 470,312,074.
4. Control gained over entities
Name of entities (or group of entities)
In accordance to the stapling deed, securities in Redcape Hotel Trust I
(RHT I) and Redcape Hotel II (RHT II) were stapled to one another on 2
July 2018. They were subsequently listed as a single security on the ASX
on 30 November 2018.
For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Appendix 4E
Preliminary final report
5. Loss of control over entities
Not applicable.
6. Distributions
Current period
Distribution for the quarter ended 30 September 2018 (paid 31 October 2018)
Distribution for the quarter ended 31 December 2018 (paid 31 January 2019)
Distribution for the quarter ended 31 March 2019 (paid 31 May 2019)
Distribution for the quarter ended 30 June 2019 (to be paid 30 August 2019)
Previous period
Distribution for the quarter ended 30 September 2017 (paid 31 October 2017) (a)
Distribution for the quarter ended 31 December 2017 (paid 31 January 2018)
Distribution for the quarter ended 31 March 2018 (paid 31 May 2018)
Distribution for the quarter ended 30 June 2018 (paid 31 August 2018)
Amount per
security
Cents
Franked
amount per
security
Cents
2.205
2.205
2.158
2.182
-
-
-
-
Amount per
security
Cents
Franked
amount per
security
Cents
2.205
2.205
2.158
2.182
-
-
-
-
Distributions prior to the listing on the ASX as at 30 November 2018 were calculated on a pro rata basis for days held.
(a) Calculated on a pro rata basis notwithstanding that distribution applied from 10 July 2017. Actual amount payable was
1.990 cents per security.
There is no foreign sourced distribution for the current and previous period.
7. Distribution reinvestment plans
The following dividend or distribution plans are in operation:
The Distribution Reinvestment Plan (“DRP”) applied to the June quarter distributions.
The key terms of the DRP are as follows:
●
●
●
Securities acquired under the DRP rank equally with existing securities on issue.
The price at which securities are allocated under the DRP is the average of the daily volume weighted average price of
all sales of stapled securities of Redcape Hotel Group (ASX code: RDC) recorded on ASX for each of the first ten ASX
trading days following the ASX trading day from and including the 3rd ASX trading day after the record date in respect
of the distribution.
Election for the DRP generally must be received by 5pm AEST on the final business day of each calendar quarter. In
line with the DRP rules, the Responsible Entity resolved to extend the election cut-off date to 12 July 2019 for the
June 19 quarter distribution.
8. Details of associates and joint venture entities
Not applicable.
For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Appendix 4E
Preliminary final report
9. Foreign entities
Details of origin of accounting standards used in compiling the report:
Not applicable.
10. Audit qualification or review
Details of audit/review dispute or qualification (if any):
The financial statements have been audited and an unqualified opinion has been issued.
11. Attachments
Details of attachments (if any):
Stapling of the entities occurred on 2 July 2018. Due to this, Redcape’s General Purpose consolidated financial statement
comparatives are for the RHT II group and do not include RHT I. In the interest of providing users with more relevant
financial information, the Responsible Entity has supplemented the Annual Report with Special Purpose financial
statements, which cover the activities of Redcape's 2019 financial year and provides aggregated comparative financial
information for the 2018 financial year.
12. Signed
Signed ___________________________
Date: 28 August 2019
Nicholas Roland Collishaw
Chairman
Sydney
For personal use only
A N N UA L R E P ORT – 30 J U N E 20 1 9
Redcape Hotel Group (ASX:RDC) is a leading hospitality
group of 800+ dedicated people, who passionately serve
30 different communities across Australia’s east coast.
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
ASRN Redcape Hotel Trust I (ASRN 629 354 614) and Redcape Hotel Trust II (ASRN 629 354 696)
FY19
For personal use only A N N UA L R E P ORT – 30 J U N E 20 1 9
CONTE NTS
Key Highlights
Cover Note
Corporate directory
Chairman's report
CEO report
Directors' report
Auditor's independence declaration
Statement of profit or loss and other comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of Redcape Hotel Group
Stapled Security Holders information
Appendix - Special Purpose Financial Statements ("SPFS")
SPFS - Statement of profit or loss and other comprehensive income
SPFS - Statement of financial position
SPFS - Statement of changes in equity
SPFS - Statement of cash flows
SPFS - Notes to the financial statements
SPFS - Directors' declaration
SPFS - Independent auditor's report to the members of Redcape Hotel Group
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
1
2
3
4
6
10
20
21
22
23
24
25
61
62
67
69
70
71
72
73
74
107
108
For personal use only Our Promise is
‘People First’.
A B OUT R E D CAPE
A leading hospitality group with scalable systems
and capable people, led by an experienced and
proven management team driving growth through
active management of a high quality real estate
backed portfolio.
.
’
t
s
r
i
F
e
l
p
o
e
P
‘
s
i
e
s
i
m
o
r
P
r
u
O
OU R VI S I ON
Our vision is to enrich communities through our
hospitality. Our promise is ‘People First’ – our staff,
our customers, our securityholders.
Our Assets
Our Communities
Our People
ASX:RDC
Annual Report 2019
For personal use only
Central Hotel ANZAC Day
Key
Highlights.
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
For personal use only K E Y H I G H LI G HTS
30 June 2019
Financial Performance
$46.5m1
Distributable earnings in line with PDS
Statutory net loss after tax of $4.9m
8.8cps
8.75cps
FY19 Distributable Earnings
8.8-9.0 cps guidance at IPO
FY Distributions2
8.75 cps guidance at IPO
Equates to 7.85% yield3
Portfolio
$1.08b
Portfolio value
32 venues includes 6 acquisitions
and 1 divestment
Capital Management
$1.14
NAV per stapled security
+$14.6m revaluation post IPO5
Progressed alternate
use opportunities
$21.6m
Growth Capex4
Spend. Includes major
refurbishment projects
38.0%
3.95x
Gearing6
Lower end of 35%-45%
target range
Interest Coverage Ratio7
Cash generative
business
1 Distributable Earnings defined as pro forma NPAT adjusted for non-cash items such as fair value adjustments, depreciation and amortisation
and other unrealised and non-recurring items less maintenance capex. Refer to P13 in the Director’s Report for reconciliation.
2 Cumulative distributions over FY19 including pre-IPO distributions.
3 Based on RDC share price as at 28 June 2019.
4 Growth Capex includes major refurbishments, one off acquisition and tactical capital expenditure.
5 Uplift measured against previous valuations plus growth capital expenditure over the financial year. Statutory valuation uplift of $20.5m (excluding Belrose
divestment reversal) over the financial year is higher due to treatment of depreciation expense and maintenance capital expenditure.
6 Gearing defined as total borrowings less cash as a percentage of total assets less cash.
7
Interest Cover Ratio (“ICR”) calculated as Operating EBITDA / Net finance costs less amortisation of borrowing costs (on a 12 month rolling basis).
.
’
t
s
r
i
F
e
l
p
o
e
P
‘
s
i
e
s
i
m
o
r
P
r
u
O
1
Key
Highlights.
ASX:RDCAnnual Report 2019For personal use only
COVE R N OTE
30 June 2019
Redcape Hotel Trust I (ARSN 629 354 614) and Redcape
Hotel Trust II (ARSN 629 354 696) were established on 13
June 2017, stapled together on 2 July 2018 and registered
as managed investment schemes on 26 October 2018.
ASIC granted relief to Redcape to exempt it from the
requirement to prepare half-year accounts for the six-
month period from their registration as managed investment
schemes. In accordance with ASX’s requirements,
Redcape released an Appendix 4D and Special Purpose
interim financial report for the 6-month period ended
31 December 2018 with aggregated comparatives.
Redcape has consulted with ASIC in relation to the
period for its financial year ended 30 June 2019. In
accordance with ASIC’s guidance and with reference
to the Corporations Act, Redcape’s financial year
ended 30 June 2019 is to be the 12-month period
commencing on 1 July 2018.
Redcape’s General Purpose Financial Statements (as
required by Chapter 2M of the Corporations Act) set out
Redcape’s financial information for its financial year being the
12 months to 30 June 2019. The comparative numbers in
the financial statements for the 12 months to 30 June 2018
are the numbers for Redcape Hotel Trust II only because
the trusts were not stapled during this period, hence only
the comparatives of the parent entity can be used. The
comparative period also commences on 10 July 2017,
being the date Redcape was acquired by entities
associated with Moelis Australia Ltd.
In accordance with ASX’s requirements, Redcape has
also provided a Special Purpose full year financial report,
as an appendix to the Annual Report, for the 12-month
period ending 30 June 2019 with full year aggregated
comparatives. In contrast to the General Purpose financial
report, the comparative period commences on 1 July
2017 using the scenario that Redcape was acquired by
entities associated with Moelis Australia Ltd on this date.
This comparative period is also the reference for both
the Appendix 4E and the Directors’ Report.
2
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
COR P ORATE D I R E CTO RY
30 June 2019
Directors
Mr Nicholas Collishaw
Mr Daniel Brady
Mr Andrew Ireland
Mr David Groves
Mr Hugh Thomson
Responsible Entity
Redcape Hotel Group Management Ltd ACN: 610 990 004
("The Responsible Entity")
Company secretary
Ms Rebecca Ong
Entity Information
Registered office
Principal place of business
Share register
Auditor
Redcape Hotel Trust II ARSN: 629 354 696 ("RHT II" or the "Parent Entity")
Redcape Hotel Trust I ARSN: 629 354 614 ("RHT I")
together form the stapled entity;
Redcape Hotel Group ("Redcape")
Level 27
Governor Phillip Tower
1 Farrer Place
Sydney NSW 2000
(02) 8288 5555
Level 1
Minskys Hotel
287 Military Road
Cremorne NSW 2090
(02) 9719 4000
Boardroom Pty Ltd
Level 12
Grosvenor Place
225 George Street
Sydney NSW 2000
1300 737 760
KPMG
Level 38
International Towers Sydney
300 Barangaroo Avenue
Sydney NSW 200
Stock exchange listing
Redcape Hotel Group stapled securities are listed on the
Australian Securities Exchange (ASX code: RDC)
Website
www.redcape.com.au
3
ASX:RDCAnnual Report 2019For personal use only
CHAI R MA N S’ R E P ORT
30 June 2019
Dear Securityholders,
This has been an exciting year for Redcape Hotel Group
(“Redcape” or “the Group”) including the successful
listing on the Australian Securities Exchange on
30 November 2018.
Delivering on our strategy
Future growth opportunities
We entered the public realm with a strong management
platform and a clear strategy to deliver consistent earnings
from our portfolio while pursuing growth through acquisition
and capital investment.
I am pleased to report that Redcape has executed well
on this strategy delivering a strong pro forma operating
EBITDA result up +21.3%1 year on year underpinned by the
acquisition of six venues and solid like for like revenue growth
of +3.3%. This sound performance delivered distributions
of 8.75cps2 for the year consistent with the Group’s PDS
guidance. Distributable earnings for the year came in at
8.80cps in line with the PDS forecast.
This is a commendable result given the overall weaker
market conditions resulting from consumer uncertainty in
the lead up to both State and Federal elections. A general
reduction in consumer spending impacted many businesses,
however our result is a clear demonstration of the resilient
nature of our business and our clear focus on delivering
shareholder returns.
Our robust operating business is underpinned by owning the
majority of the real estate in which we operate. This freehold
ownership structure sets us apart from many of our industry
peers and provides us with the flexibility to respond quickly to
customer preferences or regulatory changes through facility
improvements. It also provides us with a valuable land bank
for alternate use development opportunities.
Having completed several venue upgrades this year, we
already have a well-advanced pipeline of refurbishment
opportunities in place for FY20 and beyond. These are
designed to continue to deliver incremental earnings
growth and underpin a potential uplift in valuations as
we continue to improve the quality of our facilities within
their local communities. Management has a strong track
record of investing this type of growth capital and with
FY19 refurbishments now complete, we continue to be
optimistic about these growth opportunities that exist
across the portfolio.
Our growth proposition is further strengthened by the
opportunity to unlock latent land value through alternate
use across our freehold assets. Within our greater Sydney
portfolio (22 freehold assets), approximately 73% of the site
area is underutilised. With access to a depth of experience
in asset optimisation, we are enthusiastic about the
considerable opportunity to optimise land use and
extract additional value for the Group.
1 Refer to reconciliation provided on P12 of the Directors report
2 Cumulative distributions over FY19 including pre-IPO distributions.
4
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
CHAI R MA N S’ R E P ORT
30 June 2019
Experienced management platform
An optimistic outlook
The business’ strong fundamentals have been enhanced by
our industry leading management platform. This operating
platform has enabled our local venues to benefit from the
expertise of a management team with deep operational
experience that is focused on strong risk management and
governance whilst utilising the latest technology and data to
pinpoint growth opportunities. Over recent years significant
investment has been made in this management platform that
has positioned Redcape well for future growth.
A focus of this investment has been on talent development,
and this is proving rewarding. The development of our
people and creating programs that enable young, driven,
hospitality professionals to gain a depth of experience across
a number of disciplines, as well as gain exposure to broader
organisational projects, is something that we believe will
allow us to continue to attract high quality business leaders
to both Redcape and its venues.
Similarly, our investment in programs that improve social
outcomes for the communities in which we operate
continues to be a focus of Management. Our venues are the
cornerstone of their local communities and we continue to
look for opportunities to enhance our contribution through
direct financial support and improved harm minimisation
initiatives to enhance community life in these areas.
As we move into FY20, we will continue our focus on the
investment of growth capital through refurbishment and will
continue our disciplined approach to capital management
and portfolio optimisation.
Our long-term growth is intrinsically linked to the relationship
our venues have with the communities in which they operate.
We remain committed to delivering excellent and responsible
service, maintaining high quality facilities, and contributing
positively to our communities.
Redcape continues to offer a unique investment proposition
as a growth company with a strong capital structure, industry
leading systems and processes, capable people, and
a stable earnings base that is underpinned by owning
its real estate.
On behalf of the Board of Directors I would like to thank our
existing securityholders, our employees and the communities
in which we operate for their continued support throughout
the year. We are well placed for growth in FY20. Our
business fundamentals remain strong and the sector
remains attractive for investors.
I am confident that Redcape, led by Dan Brady and his
management team, has the right assets and capability,
and is well placed to continue delivering value and
positive returns to Securityholders.
Nicholas Collishaw, Chairman
5
ASX:RDCAnnual Report 2019For personal use only
CH I E F E X E CU TIV E OFFI CE R’ S R E P ORT
30 June 2019
FY19 Highlights
$46.5m FY19 pro forma distributable earnings3 of $46.5m or 8.80cps in line with PDS guidance.
Statutory net loss after tax of $4.9m
8.75cps
Distributions of 8.75cps4 equating to a 7.85%5 yield
+21.3% Pro forma operating EBITDA6 up +21.3% on FY18, driven by venue acquisitions
and like-for-like7 (“LFL”) revenue growth
+3.3%
$1.08b
$1.14
38.0%
LFL Revenue grew +3.3% on FY18
Portfolio value of $1.08b
Net Asset Value at $1.14 per stapled security underpinned by Valuations uplift
of $14.6m8 over the full year
Gearing9 of 38.0% at the lower end of target range of 35% - 45%
3 Distributable Earnings defined as pro forma NPAT adjusted for non-cash items such as fair value adjustments, depreciation and amortisation
and other unrealised and non-recurring items less maintenance capex. Refer to P13 in the Directors’ Report for reconciliation.
4 Cumulative distributions over FY19 includes pre-IPO distributions.
5 Based on RDC share price as at 28 June 2019
6 Pro forma operating EBITDA defined as Earnings Before Interest, Tax, Depreciation and Amortisation, impairment charges and fair
value adjustments. Refer to P12 of Directors’ Report for a reconciliation of pro forma to Statutory results.
7 Like for Like (“LFL”) revenue growth is based on venues that traded for the full year F18 and F19 and thus excludes any part year acquisitions.
8 Uplift measured against previous valuations plus growth capital expenditure over the financial year. Statutory valuation uplift of $20.5m (excluding Belrose
divestment reversal) over the financial year is higher due to treatment of depreciation expense and maintenance capital expenditure.
9 Gearing defined as total borrowings less cash as a percentage of total assets less cash.
6
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
CH I E F E X E CU TIV E OFFI CE R’ S R E P ORT
30 June 2019
This year has been focused on the balance of delivering
enhanced experiences for our customers across many
of our venues, improving the learning and development
of our people, investing accretive growth capital, and
further strategic crafting of the portfolio whilst delivering
Redcape’s financial objectives.
There is a high level of pride in the team’s achievements
as we successfully listed the group on the ASX during the
period while remaining focused on delivering positive
contributions to the communities in which we operate.
Operating Performance
The business is a highly cash generative business with
operating cash flows in FY19 of $36.0m.
Portfolio enhancement through acquisitions and capital
investment drove a 21.3% increase in Redcape’s FY19
Pro forma Operating EBITDA for the period.
Downward pressure on gaming margin as a result of
increased player win rates across the market and some
acquisitions taking longer to integrate than expected
was offset by a reduction of costs resulting in a $2.3m
overall improvement versus PDS forecast.
Reflecting Moelis Australia Hotel Management Pty Ltd
(“MAHM’s”) continued support of Redcape post listing,
the Trust Manager waived $1.5m from its Hotel Operating
fee, demonstrating its long-term alignment to Redcape
Securityholders.
Our existing portfolio performed well on a LFL basis,
achieving +3.3% LFL revenue growth demonstrating the
strength and defensive characteristics of the Redcape
business.
This pleasing operating result was attained against the
backdrop of a soft consumer market causing variable trading
conditions across the FY19 period, predominately due to
macro factors leading to this weaker consumer sentiment.
Redcape paid distributions of 8.75cps for the year
consistent with the PDS guidance. Pro forma distributable
earnings for the year came in at 8.80cps in line with the
PDS forecast range of 8.80-9.00cps.
Property Portfolio
Portfolio Management
FY19 was an active year acquiring and integrating six
venues into our portfolio and investing $21.6m in growth
capex. Both measures have enhanced the quality of the
portfolio, diversified earnings and lay a strong platform
to drive future earnings growth.
The acquisition of three hotels south of Sydney comprising
the Central Hotel, the Unanderra Hotel and the Figtree
Hotel, as well as Sydney hotels, the Vauxhall Inn, the
Australian Hotel and Brewery, and the Sun Hotel in
Northern Queensland, were undertaken in the period.
The Belrose Hotel in Sydney’s Northern Beaches was
divested during the period, allowing for the recycling of
capital into higher-growth opportunities. This disposal is
consistent with the Groups strategy of portfolio optimisation.
Redcape now has a portfolio of 3210 quality venues
in strategic locations across New South Wales and
Queensland.
Refurbishment Program
Redcape has a 5-year pipeline of refurbishment opportunities
within the existing portfolio that will modernise the Group’s
venues and make them more appealing to customers. Recent
refurbishment activity has delivered IRR’s in excess of 20%11.
10 Excludes post reporting period exchange of contracts to acquire the Eden Brewhouse, Redbank Plains.
11 Based on Internal Rate of Return (“IRR”) achieved on a select group of venues (control group of 9 venue refurbishments) where sufficient data exists both pre and post capex investment
to reliably establish returns. IRR’s are typically determined over a 5-year period. Assumptions used by Management included base line estimate of growth without any capital spend.
7
ASX:RDCAnnual Report 2019For personal use only
CH I E F E X E CU TIV E OFFI CE R’ S R E P ORT
30 June 2019
$21.6m of growth capex was invested in FY19 which
included the major refurbishments of the Leumeah Hotel,
the Eastwood Hotel and the Cabramatta Hotel. All three
have provided enhanced facilities commensurate with the
local communities in which they operate and all three are
performing well in these early stages of relaunch.
Valuation
A combination of independent and Directors valuations
was completed during the period which saw a net uplift of
$14.6m12. While uplifts outweighed downward revaluations,
the Trust adjusted valuations for a small number of venues
that had weaker earnings performance over the course of the
year. Management executed a plan to improve the profitability
of these venues and are pleased with the trajectory these
venues are on.
Alternative Uses
Of the 32 venues, 31 are Freehold Going Concern
assets which provide a valuable land bank and the flexibility
to consider alternative uses for those sites to augment
the hotels’ underlying profitability and unlock this latent
land value.
Importantly, freehold ownership enables Redcape
Securityholders to retain the benefits associated with
both property and hotel operator growth.
Management has completed feasibility studies on four of its
sites identified for potential alternate use development. Two
developments were marked for alternate use development
within the existing Local Environmental Plan. The Revesby
Hotel, Revesby which sits approximately 100 metres from the
Revesby train station on a site are of 2,150 sqm has been
earmarked for a 144-bed scheme aged care/retirement site.
The Cabramatta Hotel which sits within approximately 150
metres from the Cabramatta train station on a 4,308 sqm site
has been earmarked for a 234 mixed use unit development.
With the independent feasibility studies indicating material
potential value uplift if the Group were to undertake the
developments, management are continuing to progress
preliminary planning and approvals whilst assessing options
for extracting this latent land value and de-risking projects.
Capital Management
Redcape has a strong capital structure and a disciplined
approach to the deployment of capital.
Our balance sheet has been strengthened by the increase
in property asset values, which are a result of an uplift in
valuations.
As at 30 June 2019, gearing13 of 38.0% was at the lower
end of our target range of 35%-45% - and interest coverage
ratio was calculated at 3.95times14.
Post the reporting period, the Group successfully refinanced
a $503m15 debt facility with enhanced terms, an extension of
tenor to a weighted average of four years, and an expanded
lender group with four financiers now in place versus three
previously.
As a result of closing out the existing hedge program and
the refinance, we expect the all-in interest costs to improve
~100 bps from September 2019.
Leumeah Hotel post refurbishment
12 Uplift measured against previous valuations plus growth capital expenditure over the financial year. Statutory valuation uplift of $20.5m (excluding Belrose
divestment reversal) over the financial year is higher due to treatment of depreciation expense and maintenance capital expenditure.
13 Gearing defined as total borrowings less cash as a percentage of total assets less cash.
14 Interest Cover Ratio calculated as Operating EBITDA/Net finance costs, less amortisation of borrowing costs (on a 12-month rolling basis).
15 Includes $3.0m ancillary facility.
8
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
CH I E F E X E CU TIV E OFFI CE R’ S R E P ORT
30 June 2019
Our People
Summary and Outlook
To help ensure each of our venues reflects the needs of
our local communities and to provide local employment
opportunities, our venues employ approximately 800 staff
mostly from the communities in which we operate.
We strive to offer work environments that provide
opportunities for growth and empowerment enabling our
staff to thrive, excel and find fulfillment in their career.
Staff in our venues are supported by a strong board and
senior leadership team, all with extensive experience in
hospitality business management.
Our Community Focus
We continue our focus on providing venues where local
communities can come together in sociable environments.
Our goal is to continue to provide the best possible
customer experiences by focusing on the development
of our staff, our appeal to customers and the enhancement
of the communities in which we operate.
Throughout the year we continued to provide direct
financial support to 106 community groups, local schools,
charities and sporting clubs across the 30 communities
we serve. We spent over $1.0m in entertainment for local
communities, appointed 192 local jobs, 74 through the
development of internal staff and contributed $80.8m in
state government taxes.
We continue to remain focused on harm minimisation,
taking a community centric approach to our entertainment
offering and the responsible service of alcohol and gaming.
We also continue to make advances in providing our
customers with tools that promote greater awareness
and management of gambling activity.
Having now completed FY19 and our first year as a listed
entity we have a strong opportunity set for growth and
believe Redcape is well positioned for the future.
Operating in a consumer facing sector with high regulatory
and capital investment barriers to entry, the business
has stable earnings base, strong cashflows and revenue
growth prospects.
The portfolio is difficult to replicate, comprising of
strategically located, high-quality assets, most of which
are on sites we own and are largely underutilised, providing
an opportunity to unlock value through alternate use
development.
An optimized program of refurbishment opportunities has
been marked for FY20 and an extensive pipeline beyond
this perpetuates the growth opportunity set. These facility
improvements generate earnings growth coupled with
enhanced customer experiences for a total venue offering
that is modern and appealing to local communities.
Looking to FY20, we are forecasting distributable earnings
to be greater than 9.0cps16. Distributions are expected to
be maintained at 8.75cps, equating to a 7.85% yield. The
pay-out ratio is to be consistent at 90-100% of distributable
earnings. Like for like revenue growth is expected to track
above CPI.
Dan Brady, Chief Executive Officer
Australian Hotel & Brewery
16 Subject to no change in economic conditions, no change to management fee construct and/or portfolio numbers.
9
ASX:RDCAnnual Report 2019For personal use only Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
The directors of the Responsible Entity present their report, together with the financial statements, of the consolidated
entity (referred to hereafter as 'Redcape') consisting of RHT II, RHT I and the entities they controlled at the end of, or
during, the year ended 30 June 2019.
Directors
The following persons were directors of the Responsible Entity of Redcape from their appointment this financial year and
up to the date of this report, unless otherwise stated:
Mr Nicholas Collishaw - appointed 27 September 2018
Mr Daniel Brady - appointed 29 October 2018
Mr Andrew Ireland - appointed 29 October 2018
Mr David Groves - appointed 27 September 2018
Mr Hugh Thomson - appointed 26 February 2016
Non-IFRS Disclosures
The Group also utilises non-IFRS “Pro Forma” and other financial metrics such as Distributable earnings in its assessment
and presentation of Group performance. In particular the Group references Pro forma Earnings Before Interest, Tax,
Depreciation and Amortisation (“EBITDA”), Distributable Earnings per Security and Pro Forma Net Profit After Tax (“NPAT”).
The directors believe the pro forma financial and distributable earnings information is useful to users as it:
•
reveals the underlying run rate business economics of the Group which enhances the reader’s understanding of
past performance;
• provides insight into Management’s decision making as Management uses these measures to run the business,
•
•
allocate resources and make financial, strategic and operating decisions;
forms the basis of the Group’s annual budgeting and internal forecasting processes; and
forms the basis of the financial metrics relevant to the determination of variable components of executive and
employee remuneration.
The Pro forma and other financial metrics, such as Distributable earnings, are not prepared in accordance with International
Financial Reporting Standards and are not audited.
Differences in measurement can have both a positive and negative impact on the Pro Forma financial information
presented. Specifically, some adjustments give rise to material reductions in underlying measures but align with the
principles by which the Company views and manages itself internally.
Principal activities
Redcape is an ASX listed, leading Australian hotel business operating a portfolio of 32 hotels across NSW and QLD.
Redcape owns 31 of the 32 hotels it operates as Freehold Going Concerns. The Hotels offer patrons:
●
●
●
●
Gaming
On-Premise Food and Beverage
Off-Premise packaged liquor through retail bottle shops
Corporate and Other Revenue
Freehold Going Concern ownership gives Redcape the ability to invest in refurbishment opportunities as well as provide
potential future capital gains from the real estate on which the hotels are situated.
10
10
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
Distributions
Distributions paid/payable during the financial year were as follows:
Final distribution for the quarter ended 30 September 2018 of 2.205 cents (FY18: 2.205
cents (a)) per unit
Final distribution for the quarter ended 31 December 2018 of 2.205 cents (FY18: 2.205
cents) per unit
Final distribution for the quarter ended 31 March 2019 of 2.158 cents (FY18: 2.158 cents)
per unit
Final distribution for the quarter ended 30 June 2019(b) of 2.182 cents (FY18: 2.182 cents)
per unit
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
10,795
7,839
11,548
9,032
11,898
9,912
12,030
10,243
46,271
37,026
(a) Calculated on a pro rata basis notwithstanding that distribution applied from 10 July 2017. Actual payable was 1.990
cents per security.
(b) On 24 June 2019 the directors declared a final dividend for the quarter ended 30 June 2019 of 2.182 cents per unit to
be paid on 30 August 2019.
Distributions prior to the listing on the ASX as at 30 November 2018 were calculated on a pro rata basis for days held.
Review of operations
The statutory loss for Redcape after providing for income tax amounted to $4.9 million (30 June 2018: profit of $2.0
million).
●
●
●
●
●
●
●
Distributable earnings of $46.5 million or 8.80 cents per stapled security
Distributions of $46.3 million or 8.75 cents per stapled security
Pro forma operating EBITDA increased 21.3% to $67.1 million
Operating cash flows of $36.0 million
Portfolio value increased to $1,077.4 million from $906.2 million in FY18
Net Asset Value of $1.14 per stapled security
Total capex of $25.2m of which $21.6 million related to growth capex and $3.7m for maintenance capex
11
11
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
Gaming Revenue
On-Premise Revenue
Off-Premise Revenue
Corporate and Other Revenue
Total Revenue (a)
Cost of Sales (a)
Gross profit
Employment Costs
Other Operating Costs
Management Fees
Pro Forma Operating EBITDA
Listing costs and Performance fee
Loss on Asset Revaluation
Venue Acquisition costs (b)
Gain on sale of venues
Loss on sale of other non-current assets
Restatement of management fees pre-IPO
One-off Employee share grants
Employment costs
Other operating costs
Statutory EBITDA
Depreciation
Statutory EBIT
Net Financing costs
Profit / (Loss) before tax
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
Change
$'000
Change
%
179,099
56,877
48,022
1,217
285,215
153,846
39,999
48,126
915
242,885
25,253
16,878
(104)
302
42,330
16.4%
42.2%
(0.2%)
33.0%
17.4%
(133,021)
152,194
(117,110)
125,775
(15,911)
26,419
(13.6%)
21.0%
(38,522)
(32,162)
(14,421)
67,089
(20,562)
(17,998)
(7,631)
1,026
(523)
254
(199)
-
-
21,456
(11,360)
10,097
(29,487)
(27,462)
(13,511)
55,316
-
-
(31,509)
1,952
(605)
372
-
(121)
340
25,745
(9,035)
(4,700)
(910)
11,773
(30.6%)
(17.1%)
(6.7%)
21.3%
(20,562)
(17,998)
23,878
(926)
82
(118)
(199)
121
(340)
(4,289)
(100.0%)
(100.0%)
75.8%
(47.4%)
13.6%
(31.7%)
(100.0%)
100.0%
(100.0%)
(16.7%)
(9,036)
16,709
(2,324)
(6,612)
(25.7%)
(39.6%)
(17,324)
(7,227)
(14,911)
1,798
(2,413)
(9,025)
(16.2%)
(501.9%)
Tax benefit
Statutory Net Profit / (Loss) after tax
2,297
(4,930)
230
2,028
2,067
(6,958)
898.7%
(343.1%)
(a) Revised statutory mapping since 2018 resulting in Revenue, Cost of Sales and Expenses differing marginally from
metrics listed in the PDS.
(b) FY18 includes acquisition costs of $26.3 million for Redcape by the entities associated with Moelis Australia Ltd.
12
12
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
Change
$'000
Change
%
Statutory Net Profit / (Loss) after tax
(4,930)
2,028
(6,958)
(343.1%)
Pro Forma adjustments
Listing Costs and Performance Fee
Venue Acquisition costs (a)
Restatement of management fees pre-IPO
One-off Employee share grants
Employment costs
Other operating costs
Tax benefit / (expense)
Pro Forma Net Profit after tax
Add / (Deduct) non-cash & non-operating items
Loss on Asset Revaluation
Depreciation
Venue Acquisition costs
Gain on sale of venues
Loss on sale of other non-current assets
Amortisation of borrowing costs
Maintenance capital expenditure
Other non-cash items
Tax expense
Distributable Earnings
Distributable Earnings per stapled security (Cents)
20,562
-
(254)
199
-
-
(3,625)
11,951
17,998
11,360
7,631
(1,026)
523
486
(3,686)
(43)
1,328
46,522
8.80
-
26,316
(568)
-
121
(144)
(999)
26,753
-
9,036
5,193
(1,952)
605
681
(4,648)
376
770
36,814
8.50
20,562
(26,316)
314
199
(121)
144
(2,626)
(14,802)
100.0%
(100.0%)
55.3%
100.0%
(100.0%)
100.0%
(262.9%)
(55.3%)
17,998
2,324
2,438
926
(82)
(195)
962
(419)
558
9,708
0.30
(100.0%)
25.7%
46.9%
47.4%
(13.6%)
(28.7%)
20.7%
(111.4%)
72.5%
26.4%
3.5%
(a) FY18 includes acquisition costs of $26.3 million for Redcape by the entities associated with Moelis Australia Ltd.
Significant changes in the state of affairs
Securities in RHT II and RHT I were stapled on 2 July 2018 in accordance with the stapling deed and are dealt with as a
stapled security. For further details refer to Note 1 of the consolidated financial statements.
RHT II and RHT I are domiciled in Australia and were registered as managed investment schemes on 26 October 2018
under the Corporations Act 2001.
On 30 November 2018 Redcape Hotel Group listed on the Australian Securities Exchange (“ASX”).
Redcape has acquired 6 venues and disposed of 1 venue during the year. They were all Freehold Going Concern venues.
There were no other significant changes in the state of affairs of Redcape during the financial year.
Matters subsequent to the end of the financial year
Subsequent to 30 June 2019, Redcape refinanced its debt facilities resulting in an increased facility of $503.0 million
(including $3.0 million ancillary facility) with a weighted average term of 4 years. As a result of the refinancing, in FY20 the
hedge position of the existing finance facility will be closed out at a cost of approximately $4.0 million. Capitalised loan
establishment costs of $0.5 million will be written off upon activation of the new facility in FY20.
Post the end of the financial year, Redcape exchanged contracts to acquire the Eden Brewhouse Redbank Plains
Queensland as part of the ongoing portfolio optimisation program.
No other material matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect Redcape's operations, the results of those operations, or Redcape's state of affairs in future financial years.
13
13
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
Likely developments and expected results of operations
Having now completed FY19 and our first year as a listed entity we have a strong opportunity set for growth and believe
Redcape is well positioned for the future.
Operating in a consumer facing sector with high regulatory and capital investment barriers to entry, the business has
stable earnings base, strong cashflows and revenue growth prospects.
The portfolio is difficult to replicate, comprising of strategically located, high-quality assets, most of which are on sites
we own and are largely underutilised, providing an opportunity to unlock value through alternate use development.
An optimized program of refurbishment opportunities has been marked for FY20 and an extensive pipeline beyond this
perpetuates the growth opportunity set. These facility improvements generate earnings growth coupled with enhanced
customer experiences for a total venue offering that is modern and appealing to local communities.
Looking to FY20, we expect like-for-like revenue growth to track above CPI. We are forecasting distributions to be
maintained in line with FY19 and distributable earnings to be greater than 9.0cps subject to no material change in
economic conditions, standard management fee construct and/or portfolio numbers.
Environmental regulation
Redcape is not subject to any significant environmental regulation under Australian Commonwealth or State law.
Information on directors
Name:
Title:
Experience and expertise:
Nicholas Collishaw
Independent Non-Executive Director and Chairman
Nicholas was appointed to the Board on 27 September 2018.
Nicholas has over 35 years’ experience in Australian and Global real estate and funds
management markets. He has considerable experience in the development and
management of residential, hotel, commercial, retail, industrial and retirement assets.
Nicholas is a Fellow of Australian Institute of Valuers, a Fellow of Royal Institute of
Chartered Surveyors, a Graduate Member of FINSIA and the Institute of Company
Directors.
Nicholas is currently a Non-Executive Director of Centuria Capital Group ("Centuria")
and was previously CEO – Listed Property Funds at Centuria.
Other current directorships:
Former directorships (last 3 years): None
Special responsibilities:
Interests in stapled securities:
Prior to his time at Centuria, Nicholas held the position of CEO and Managing Director
of Mirvac Group and successfully guided the business through the GFC and
implemented a strategy of sustained growth for the Real Estate and Investment
Company.
Centuria Capital Group (ASX: CNI)
Chairman of the Board and Member of the Audit, Risk & Compliance Committee
Ordinary stapled securities – 100,000
14
14
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
Name:
Title:
Experience and expertise:
Daniel Brady
Executive Director
Daniel was appointed to the Board on 29 October 2018.
Daniel is currently Chief Executive Officer of Moelis Australia Hotel Management Pty
Ltd (MAHM), the manager and hotel operator of Redcape. Prior to this, he was Chief
Operating Officer at Redcape, a role which he assumed in October 2012. He has
extensive operational experience and has held senior positions within listed, privately
owned pub organisations and was the owner operator of a pub.
Prior to joining Redcape, Daniel was National Operations Manager at National Leisure
and Gaming Limited ("NLG"), a position he held for five years before being made Chief
Executive Officer at NLG in January 2011.
Daniel has previously held key industry positions as well as currently being a Director
of the Liquor Stax Retail Group.
Daniel completed an Advanced Management Program at Harvard Business School in
2016.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in stapled securities:
Chief Executive Officer (MAHM)
Ordinary stapled securities – 1,480,000
Name:
Title:
Experience and expertise:
Andrew Ireland
Independent Non-Executive Director
Andrew was appointed to the Board on 29 October 2018.
Andrew is currently Chair of Clemenger Brisbane, Director of Sports Australia and
Director of the Sydney Swans.
Prior to this, Andrew was Managing Director and Chief Executive Officer (CEO) of
Sydney Swans having been appointed as CEO in September 2009 after joining the
club in 2002 as General Manager of Football. Since 1990, Andrew has been involved
in the management of leading Australian sporting teams including a successful tenure
as CEO of Brisbane Bears and Brisbane Lions (1990 – 2001). He led the Brisbane
Lions to their first premiership in 2001 as CEO and has overseen a strong and
successful football program and growth in commercial areas during his time at Sydney
Swans. During both tenures as CEO, Andrew had ultimate responsibility for the AFL
clubs’ substantial social clubs, which included bars, restaurants and EGMs.
During his tenure at the Brisbane Lions, Andrew was appointed by the QLD Treasurer
as a Director of The Golden Casket Corporation, overseeing a gaming entity in a highly
regulated market.
Andrew holds a Bachelor of Science from La Trobe University, is a Fellow of the
Australian Institute of Company Directors and is a Life Member of the Australian
Football League.
Other current directorships:
None
Former directorships (last 3 years): None
Special responsibilities:
Interests in stapled securities:
Member of the Audit, Risk & Compliance Committee
Ordinary stapled securities – 50,000
15
15
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
Name:
Title:
Experience and expertise:
David Groves
Independent Non-Executive Director
David was appointed to the Board on 27 September 2018.
David has over 25 years’ experience as a company director.
David is a non-executive director of Pengana Capital Group Limited, Pengana
International Equities Limited and Pipers Brook Vineyard Pty Ltd. He is a former director
of EQT Holdings Limited, Tassal Group Limited and GrainCorp Limited and a former
executive with Macquarie Bank Limited and its antecedent, Hill Samuel Australia. David
is a member of the Council of Wollongong University.
David is a member of the Australian Institute of Chartered Accountants and a fellow of
the Australian Institute of Company Directors and holds a Bachelor of Commerce from
the University of Wollongong and a Master of Commerce at the University of NSW.
Pengana Capital Group Limited (ASX: PCG), Pengana International Equities Limited
(ASX: PIA)
Other current directorships:
Former directorships (last 3 years): Pyrolyx AG (ASX: PLX)
Special responsibilities:
Interests in stapled securities:
Chairman of the Audit, Risk & Compliance Committee
Ordinary stapled securities – 200,000
Name:
Title:
Experience and expertise:
Hugh Thomson
Hugh was appointed to the Board on 26 February 2016.
Hugh is a Managing Director at Moelis Australia Limited (Moelis Australia) within its
Advisory businesses. Prior to this, he was Chief Operating Officer of Moelis Australia.
Hugh has over 24 years’ experience in Investment Management, with a particular
emphasis on the acquisition of alternative assets, finance and operations in Australia
across a range of industry sectors. Hugh’s previous roles include CFO and CEO of ING
Real Estate Investment Management, COO of HiLife Health & Beauty and CFO of
Industrie Clothing.
Hugh has considerable expertise in managing ASX listed funds, including as an
executive Board member and Chairman of investment committees and operational risk
management committees.
Hugh is a qualified chartered accountant and member of the Institute of Chartered
Accountants in England and Wales and holds a Bachelor of Arts (Honours) from the
University of East Anglia.
Other current directorships:
None
Former directorships (last 3 years): None
None
Special responsibilities:
Ordinary stapled securities – 50,000
Interests in stapled securities:
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships of all
other types of entities, unless otherwise stated.
'Former directorships (last 3 years)' quoted above are directorships held in the last 3 years for listed entities only and
excludes directorships of all other types of entities, unless otherwise stated.
16
16
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
Company secretary
Ms Rebecca Ong was appointed to the position of Company Secretary in October 2018.
Rebecca joined Moelis Australia as a Senior Legal Counsel in February 2018. She has over 13 years of experience in
areas of corporate, regulatory and funds management.
Prior to joining Moelis Australia, Rebecca was Regional Counsel with UBS, with primary responsibilities for advising its
Asset Management businesses across Asia Pacific both from Sydney and Hong Kong.
Rebecca holds a Bachelor of Commerce (Finance Major) / Bachelor of Laws from the University of New South Wales and
is a Fellow with the Governance Institute of Australia.
Meetings of directors
The number of meetings of the Responsible Entity's Board of Directors ('the Board') held during the year ended 30 June
2019, and the number of meetings attended by each director were
Mr Nicholas Collishaw
Mr Daniel Brady
Mr Andrew Ireland
Mr David Groves
Mr Hugh Thomson
Full Board
Audit and Risk Committee
Attended
Held
Attended
Held
8
8
8
8
7
8
8
8
8
8
3
*
3
3
*
3
*
3
3
*
Held: represents the number of meetings held during the time the director held office.
* Not a member of the committee
Remuneration report
Remuneration of the Responsible Entity is as per the Constitution of RHT I and RHT II. As the Responsible Entity is wholly
owned by Moelis Australia Limited (Moelis Australia), Moelis Australia oversees the appointment of Directors to the Board
of the Responsible Entity and in this connection sets Director remuneration. Remuneration of the Directors is paid either
directly by the Responsible Entity or by entities associated with Moelis Australia. The Directors are not provided with any
remuneration by the Trusts. Directors are not entitled to any equity interests in the Trusts or any rights to or options for
equity interests in the Trusts as a result of their remuneration provided by the Responsible Entity.
Corporate Governance Statement
'Redcape' is a stapled entity comprising of Redcape Hotel Trust I ARSN: 629 354 614 and Redcape Hotel Trust II ARSN:
629 354 696. Redcape Hotel Group Management Ltd (ACN 610 990 004) ('Responsible Entity') is the responsible entity of
Redcape and the Board of the Responsible Entity in this capacity ('the Board') is responsible for the overall corporate
governance of Redcape and its controlled entities.
The Board has created a framework for managing Redcape, including adopting relevant internal controls, risk management
processes and corporate governance policies and practices which it believes are appropriate for Redcape’s business and
which are designed to promote the responsible management and conduct of Redcape.
The Corporate Governance Statement sets out the key features of Redcape's governance framework and reports against
the ASX Corporate Governance Council's Corporate Governance Principles and Recommendations (3rd edition) ('ASX
Principles and Recommendations'). The 4th edition ASX Principles and Recommendations apply to the financial years
beginning on or after January 2020. Redcape is in the process of reviewing its corporate governance policies and practices
against the 4th edition ASX Principles and Recommendations and has incorporated many of the new recommendations
into its Corporate Governance Statement already.
The policies and charters referred to in the Corporate Governance Statement are available via the 'Corporate
Governance' section of Redcape's website which is available at WWW.REDCAPE.COM.AU
17
17
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
Indemnity and insurance of officers
In accordance with the Constitution of RHT I and RHT II, the Responsible Entity is indemnified on a full indemnity basis in
respect of all taxes, costs and losses which it may pay or incur, in exercising any of its powers, rights, or obligations in
properly performing its duties in connection with RHT I and RHT II.
All Directors of the Responsible Entity are appointed by Moelis Australia. Moelis Australia has agreed to indemnify all
current and former Directors and company secretaries of the Responsible Entity against all liabilities to persons which arise
out of the performance of their normal duties as a Director or Company Secretary to the extent permitted by law unless the
liability relates to conduct involving willful misconduct, bad faith or conduct known to be in breach of law.
During the financial year, RHT I and RHT II paid an insurance premium in respect of customary Directors' and Officers’
insurance coverage for the Responsible Entity. The contract of insurance prohibits disclosure of the nature of the liability
and the amount of the premium.
Indemnity and insurance of auditor
The trusts have not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the
trusts or any related entity against a liability incurred by the auditor.
During the financial year, the trusts have not paid a premium in respect of a contract to insure the auditor of the trust or any
related entity.
Proceedings on behalf of the trust
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on
behalf of the trusts, or to intervene in any proceedings to which the trust is a party for the purpose of taking responsibility
on behalf of the trusts for all or part of those proceedings.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor
are outlined in note 30 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another
person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by
the Corporations Act 2001.
The directors are of the opinion that the services as disclosed in note 30 to the financial statements do not compromise the
external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
●
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity
of the auditor; and
none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code
of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including
reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the trust, acting
as advocate for the trust or jointly sharing economic risks and rewards.
●
Officers of the trust who are former partners of KPMG
There are no officers of the trusts who are former partners of KPMG.
Rounding of amounts
Amounts have been rounded to the nearest thousand dollars unless otherwise stated, in accordance with ASIC
Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191.
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out
immediately after this directors' report.
18
18
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' report
30 June 2019
Auditor
KPMG continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
___________________________
Nicholas Roland Collishaw
Chairman
28 August 2019
Sydney
___________________________
Daniel John Brady
Executive Director
19
19
ASX:RDCAnnual Report 2019For personal use only
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
To the Directors of Redcape Hotel Group Management Ltd, as Responsible
Entity of Redcape Hotel Group
I declare that, to the best of my knowledge and belief, in relation to the audit of Redcape Hotel Group
for the financial year ended 30 June 2019 there have been:
i.
ii.
no contraventions of the auditor independence requirements as set out in the
Corporations Act 2001 in relation to the audit; and
no contraventions of any applicable code of professional conduct in relation to the audit.
KPM_INI_01
KPMG
Cameron Roan
Partner
Sydney
28 August 2019
PAR_SIG_01
PAR_NAM_01
PAR_POS_01
PAR_DAT_01
PAR_CIT_01
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
20For personal use only Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Statement of profit or loss and other comprehensive income
For the year ended 30 June 2019
Revenue
Cost of sales
Expenses
Operating costs
Management fees
Net finance costs
Employment costs
Depreciation and amortisation expense
Gain/(loss) on disposal of non-current assets
Loss on asset revaluation
Business acquisition costs
Operating profit/(loss)
Listing costs and performance fee
Loss before income tax benefit
Income tax benefit
Loss after income tax benefit for the year
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Gain on the revaluation of land
Items that may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity
Other comprehensive income for the year, net of tax
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
Note
6
285,215
238,200
(133,021)
(115,005)
7
8
9
15
15
35
(32,162)
(14,166)
(17,324)
(38,720)
(11,360)
502
(17,998)
(7,631)
(61,917)
(12,217)
(9,016)
(28,938)
(8,080)
511
-
(4,879)
13,335
(1,341)
10
(20,562)
-
(7,227)
(1,341)
11
2,297
185
(4,930)
(1,156)
37,573
(3,216)
34,357
-
-
-
Total comprehensive income for the year
29,427
(1,156)
Profit/(loss) for the year is attributable to:
Unitholders of Redcape Hotel Trust I
Unitholders of Redcape Hotel Trust II
Total comprehensive income for the year is attributable to:
Unitholders of Redcape Hotel Trust I
Unitholders of Redcape Hotel Trust II
10,691
(15,621)
-
(1,156)
(4,930)
(1,156)
45,048
(15,621)
-
(1,156)
29,427
(1,156)
Basic earnings per share (cents)
Diluted earnings per share (cents)
39
39
(0.93)
(0.93)
The above statement of profit or loss and other comprehensive income should be read in conjunction with the
accompanying notes
21
21
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Statement of financial position
As at 30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Employee benefits
Distribution payable
Total current liabilities
Non-current liabilities
Other payables
Borrowings
Derivative financial instruments
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Accumulated losses
Equity attributable to the stapled security holders of RHT II
Non-controlling interest
Total equity
Equity attributable to RHT I (non-controlling interest)
Contributed equity
Reserves
Accumulated losses
Total equity attributable to unitholders of RHT I (non-controlling interest) (a)
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
Note
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
16,981
3,936
5,130
3,319
29,366
20,537
1,415
5,104
2,849
29,905
486,601
590,757
15,645
1,093,003
57,502
278,461
12,674
348,637
1,122,369
378,542
38,749
1,708
12,030
52,487
430
436,561
3,489
255
440,735
28,641
1,432
-
30,073
13,302
136,534
-
240
150,076
493,222
180,149
629,147
198,393
235,545
(43,293)
192,252
436,895
199,549
(1,156)
198,393
-
629,147
198,393
318,469
161,923
(43,497)
436,895
-
-
-
-
a) RHT II stand-alone is the comparative therefore the RHT I (non-controlling interest) balance reflected is zero
The above statement of financial position should be read in conjunction with the accompanying notes
22
22
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Statement of changes in equity
For the year ended 30 June 2019
Contributed Accumulated
equity
$'000
losses
$'000
Non-
controlling
interest
$'000
Total equity
$'000
RHT II Consolidated
Balance at 1 July 2017
Loss after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
-
-
-
-
-
(1,156)
-
(1,156)
Transactions with security holders in their capacity as security
holders:
Contributions of equity, net of transaction costs (note 25)
Balance at 30 June 2018
199,549
-
199,549
(1,156)
-
-
-
-
-
-
-
(1,156)
-
(1,156)
199,549
198,393
Stapled Consolidated
Balance at 1 July 2018
Arising due to stapling arrangement
Profit/(loss) after income tax benefit for the year
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Transactions with stapled security holders in their capacity as
stapled security holders:
Contributions of equity, net of transaction costs (note 25)
Distributions paid (note 27)
Issued
capital
$'000
Accumulated
losses
$'000
Non-
controlling
interest
$'000
Total equity
$'000
199,549
(1,156)
-
198,393
-
-
-
-
(26,516)
387,410
360,894
(15,621)
-
10,691
34,357
(4,930)
34,357
(15,621)
45,048
29,427
35,996
-
-
-
50,708
(46,271)
86,704
(46,271)
Balance at 30 June 2019
235,545
(43,293)
436,895
629,147
The above statement of changes in equity should be read in conjunction with the accompanying notes
23
23
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Statement of cash flows
For the year ended 30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Income taxes paid
Net cash from operating activities
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Business acquisition transaction costs
Payments for property, plant and equipment
Proceeds from disposal of business
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of stapled securities
Proceeds from borrowings
Repayment of borrowings
Stapled Securities issue transaction costs
Distributions paid
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
Note
311,559
(257,638)
53,921
262,414
(245,186)
17,228
259
(18,183)
-
135
(9,317)
(1,632)
38
35,997
6,414
35
15
25
27
(153,349)
(7,631)
(25,182)
20,430
112
(306,863)
(4,879)
(14,739)
5,848
425
(165,620)
(320,208)
89,757
119,000
(49,000)
(3,724)
(44,484)
203,849
283,275
(146,650)
(6,143)
-
111,549
334,331
(18,074)
35,055
20,537
-
Cash and cash equivalents at the end of the financial year
12
16,981
20,537
The above statement of cash flows should be read in conjunction with the accompanying notes
24
24
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 1. General Information
(a) Reporting Entity
The Redcape Hotel Trust II ("RHT II") and Redcape Hotel Trust I ("RHT I") were stapled on 2 July 2018 such that the
securities are effectively dealt with as a stapled security.
The stapled securities of RHT I and RHT II (collectively “Redcape Hotel Group” or "Redcape") commenced trading as a
single stapled security on the ASX on 30 November 2018 under the ticker code “RDC”.
In accordance with AASB 3 Business Combinations one of the entities in the stapled structure is required to be identified
as the parent for the purpose of preparing consolidated financial reports. In accordance with this requirement, RHT II was
identified as the parent entity.
Redcape is a for-profit entity and its principal activity is the ownership and operation of Hotels. There has been no
significant change in the nature of the principal activity during the year.
(b) Responsible Entity
Redcape Hotel Group Management Ltd (“RHGM”) is the Responsible Entity of RHT I and RHT II effective 24 October 2018
(replacing Moelis Australia Asset Management Ltd).
(c) Scheme Registration
RHT I (ARSN 629 354 614) and RHT II (ARSN 629 354 696) are domiciled in Australia and were registered as managed
investment schemes on 26 October 2018 under the Corporations Act 2001.
(d) First-year report
Redcape has consulted with ASIC in relation to the period for its financial year ended 30 June 2019. In accordance with
ASIC’s guidance and with reference to the Corporations Act, Redcape’s financial year ended 30 June 2019 is to be the 12-
month period commencing on 1 July 2018.
Redcape’s General Purpose Financial Statements (as required by Chapter 2M of the Corporations Act) set out Redcape’s
financial information for its financial year being the 12 months to 30 June 2019. The comparative numbers for the 12
months to 30 June 2018 are the numbers for Redcape Hotel Trust II consolidated only. The trusts were not stapled during
this period; hence the comparatives exclude Redcape Hotel Trust I.
Redcape has also provided a Special Purpose full year financial report for the 12-month period ending 30 June 2019 with
full year aggregated comparatives. This can be seen in the appendix of the Annual Report.
Note 2. Basis of preparation
The Responsible Entity has prepared General Purpose consolidated financial statements for the year ended 30 June 2019
for the purpose of meeting the listing requirements of the Australian Securities Exchange ("ASX").
(a) Compliance Statement
The 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, as
appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting
Standards as issued by the International Accounting Standards Board ('IASB').
The financial report has been prepared on a going concern basis.
The consolidated financial report as at and for the year ended 30 June 2019 was approved by the directors of the
Responsible Entity on 28 August 2019
25
25
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 2. Basis of preparation (continued)
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis, except for the following that are measured at fair
value:
- land; and
- derivative financial instruments.
The methods used to measure fair values are discussed in the relevant notes
(c) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Redcape's functional currency and
amounts have been rounded to the nearest thousand dollars unless otherwise stated, in accordance with ASIC
Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191.
(d) Use of estimates and judgements
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying accounting policies. Estimates and judgements affect the
application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in any future periods affected.
(e) Going Concern
The consolidated financial statements have been prepared on a going concern basis, which contemplates continuity of
normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. At 30
June 2019, Redcape had current assets of $29.4 million and current liabilities of $52.5 million leaving a net deficit of
working capital of $23.1 million. The directors of the Responsible Entity believe Redcape will continue to generate
operating cash flows sufficient to meet current liability obligations.
Note 3. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
Redcape has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations did not have any material impact on the financial
performance or position of Redcape.
The following Accounting Standards and Interpretations are most relevant to Redcape:
AASB 9 Financial Instruments
From 1 July 2018, Redcape has applied AASB 9 prospectively. The resulting accounting policies for Redcape's financial
instruments are explained in further detail in Note 3.
AASB 15 Revenue from Contracts with Customers
From 1 July 2018, Redcape has applied AASB 15 prospectively. The resulting accounting policies for Redcape's revenue
are explained in further detail in Note 3 Revenue Recognition.
26
26
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of RHT II as at 30 June 2019
and the results of all subsidiaries for the year then ended. RHT II and its subsidiaries together are referred to in these
financial statements as 'Redcape'.
Subsidiaries are all those entities over which Redcape has control. Redcape controls an entity when Redcape is exposed
to, or has rights to, variable returns from its involvement with the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to Redcape. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in Redcape are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries align with the policies adopted by Redcape.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Where Redcape loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity. Redcape recognises the
fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit
or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ("CODM"). Redcape operates wholly within
one business segment being the ownership and operation of hotels in Australia.
Revenue recognition
Redcape recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which Redcape is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, Redcape identifies the
contract with a customer, identifies the performance obligations in the contract, determines the transaction price which
takes into account estimates of variable consideration and the time value of money, allocates the transaction price to the
separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be
delivered, and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the
transfer to the customer of the goods or services promised.
Variable consideration is not material in the context of Redcape's 'total revenue'.
Gaming Revenue
Gaming revenue is the net difference between gaming wins and losses and is recognised upon the outcome of the game at
the close of business.
Food and beverage revenue (On-Premise and Off-Premise)
Food and beverage revenue is recognised at the point in time the goods are provided and payment is collected.
Accommodation and other revenues
Accommodation and other revenues are recognised at the point in time services are performed.
Interest
Interest income is recognised using the effective interest method.
27
27
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
Income tax
RHT I
Under current income tax legislation, RHT I is not liable for income tax provided unit holders are presently entitled to all of
RHT I’s income at 30 June each year.
RHT II
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
● When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
● When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled, and it is probable that the temporary difference will not reverse in the foreseeable
future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
RHT II and its wholly owned Australian subsidiaries have formed an income tax consolidated group under the tax
consolidation regime, effective July 2017 and are taxed as a single entity from that date. The head entity and each
subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax
consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of
taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group. These are recognised as amounts payable to or receivable from other entities in the tax consolidated
group in conjunction with any tax funding arrangement amount.
The members of the tax consolidated group have entered into a tax funding arrangement which sets out the funding
obligations of members of the tax consolidated group in respect of tax amounts. The tax funding arrangement requires
payments to or from the head entity equal to the current tax liability or asset assumed by the head entity and any tax-loss
deferred tax asset assumed by the head entity.
The members of the tax consolidated group have also entered into a tax sharing agreement. The tax sharing agreement
provides for the determination of the allocation of income tax liabilities between the entities should the head entity default
on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement
as payment of any amounts under the tax sharing agreement is considered remote.
28
28
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
In determining the amount of current and deferred tax RHT II takes into account the impact of uncertain tax positions and
whether additional taxes and interest may be due. RHT II believes that its accruals for tax liabilities are adequate for all
open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This
assessment relies on estimates and assumptions and may involve a series of judgements about future events. New
information may become available that causes RHT II to change its judgement regarding the adequacy of existing tax
assets and liabilities; such changes to tax assets and liabilities will impact tax expense in the period such a determination is
made.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses.
Redcape has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Inventories
Inventories include food and beverages, these are costed on a weighted average basis and stated at the lower of cost and
net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
Derivative financial instruments
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 each reporting date. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to hedge Redcape's interest rate risk exposures. The effective portion of the gain or loss on the
hedging instrument is recognised in other comprehensive income through the cash flow hedges reserve in equity, whilst
the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in
the measurement of the hedged transaction when the forecast transaction occurs.
Cash flow hedges are tested for effectiveness on a regular basis prospectively to ensure that each hedge is highly effective
and continues to be designated as a cash flow hedge. If the forecast transaction is no longer expected to occur, the
amounts recognised in equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes
ineffective and is no longer a designated hedge, the amounts previously recognised in equity remain in equity until the
forecast transaction occurs.
29
29
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
Property, plant and equipment
Recognition and measurement
With the exception of land, all other items of property, plant and equipment are measured at cost less accumulated
depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets
includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working
condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are
located, and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is
capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant and equipment and are recognised net within other income in profit or
loss.
Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it
is probable that the future economic benefits embodied within the part will flow to Redcape, and its cost can be measured
reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant
and equipment are recognised in profit or loss as incurred.
Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost,
less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption
of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term
and their useful lives unless it is reasonably certain that Redcape will obtain ownership by the end of the lease term.
The estimated useful lives are as follow:
Freehold buildings
Property improvements
Furniture, fittings and equipment
Software
40-150 years
7-40 years
7-15 years
4-7 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to
Redcape. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any
revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
Revaluation
Land is recognised at fair value based on periodic valuations by external independent valuers and/or 6-month director
valuations. A revaluation surplus is credited to other reserves in securityholders’ equity.
Increases in the carrying amounts arising on revaluation of land are recognised in other comprehensive income and
accumulated in other reserves in securityholders’ equity. To the extent that the increase reverses a decrease previously
recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of
the same asset are first recognised in other comprehensive income to the extent of the remaining surplus attributable to
the asset. All other decreases are charged to profit or loss.
30
30
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation
method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at
cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Gaming licences
Separately acquired Gaming licences are shown at historical cost. Gaming licences acquired in a business combination
are recognised at fair value at the acquisition date. They have an indefinite useful life and are subsequently carried at cost
less accumulated impairment losses.
Gaming licenses are not amortised but tested for impairment annually, or more frequently if events or changes in
circumstances indicate that they might be impaired, and are carried at cost less accumulated impairment losses.
Liquor licences
Separately acquired Liquor licences are shown at historical cost. Liquor licences acquired in a business combination are
recognised at fair value at the acquisition date. They have an indefinite useful life and are subsequently carried at cost less
accumulated impairment losses.
Liquor licenses are not amortised but tested for impairment annually, or more frequently if events or changes in
circumstances indicate that they might be impaired, and are carried at cost less accumulated impairment losses.
Impairment
Non-financial assets
Goodwill and other 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 non-financial assets are reviewed 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.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Financial assets
Redcape recognises a loss allowance for expected credit losses on financial assets which are either measured at
amortised cost. Redcape has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables. These provisions are considered representative across all customers of Redcape based on recent sales
experience, historical collection rates and forward-looking information that is available.
Trade and other payables
These amounts represent liabilities for goods and services provided to Redcape prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost, are unsecured and are not
discounted.
31
31
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
Loans and borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Finance costs
Finance costs are expensed in the period in which they are incurred. Finance costs comprise interest expense on
borrowings, using the effective interest rate method, and unwinding of the discount on provisions.
Provisions
Provisions are recognised when Redcape has a present (legal or constructive) obligation as a result of a past event, it is
probable Redcape will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, considering the risks and uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service
is provided.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at 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 expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields
at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on 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; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data is
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an
analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
Issued capital
Ordinary stapled securities are classified as equity.
32
32
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
Incremental costs directly attributable to the issue of new stapled securities or options are shown in equity as a deduction,
net of tax, from the proceeds.
Distributions
Distributions are recognised when declared during the financial year and no longer at the discretion of the trust.
Provision is made for the amount of any distribution declared, being appropriately authorised and no longer at the
discretion of the trust, on or before the end of the financial year but not distributed at the reporting date.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued, or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling
interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at the
proportionate share of identifiable net assets of the acquiree. All acquisition costs are expensed as incurred to profit or
loss.
On the acquisition of a business, Redcape assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, Redcape's operating or
accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, Redcape remeasures its previously held equity interest in the
acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based
on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement
period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
33
33
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 3. Significant accounting policies (continued)
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by Redcape for the annual reporting period ended 30 June 2019. Redcape's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to Redcape,
are set out below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However, EBITDA results will be improved as the operating expense is
replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of
cash flows, the lease payments will be separated into principal (financing activities) and interest (either operating or
financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts
for leases. The consolidated entity will adopt this standard from 1 July 2019 and its impact on adoption is expected to result
in total lease assets increasing by approximately $23.8 million and total lease liabilities increasing approximately $25.6
million. Deferred tax asset that arises as a result of both the internal and external leases that will not be eliminated on
consolidation is by approximately $9.5 million.
Note 4. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events, which
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. Judgements, estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial
year are discussed below.
Valuation of land
The fair value of land is reviewed regularly by management with reference to external independent valuations, recent offers
and market conditions existing at reporting date, using generally accepted market practices. Then critical assumptions
underlying management’s estimates of fair value are those relating to the capitalisation rate and adopted earnings. If there
is any change in these assumptions or economic conditions, the fair value of the land may differ.
Fair value measurement hierarchy
Redcape is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the
lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in
active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level
3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair
value and therefore which category the asset or liability is placed in can be subjective.
34
34
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 4. Critical accounting judgements, estimates and assumptions (continued)
Goodwill and other indefinite life intangible assets
Redcape tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in
Note 3. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital
and growth rates of the estimated future cash flows.
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
Redcape assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each
reporting date by evaluating conditions specific to Redcape and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal
or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Note 5. Operating segments
Identification of reportable operating segments
Redcape operates as one business segment being the owner and/or operator of Hotels, and in one geographic segment
being Australia. These operating segments are based on the internal reports that are reviewed and used by the Board of
Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in
determining the allocation of resources. There is no aggregation of operating segments.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies
adopted for internal reporting to the CODM are consistent with those adopted in the financial statements.
The information is reported to the CODM at the end of each period.
Note 6. Revenue
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Major revenue streams
Gaming revenue
On-premise revenue
Off-premise revenue
Corporate and other revenue
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
179,099
56,877
48,022
1,217
150,918
39,268
47,308
706
285,215
238,200
All major revenue streams are within Australia and timing of revenue recognition is when goods or services transferred.
35
35
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 7. Operating costs
Administrative expenses
Advertising and marketing expenses
Operating expenses
Repairs and maintenance expenses
Property outgoing expenses
Rental expenses
Note 8. Management fees
Hotel operating fee
Asset management fee
Note 9. Net finance costs
Finance income
Finance costs
36
36
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
3,287
5,082
11,771
2,161
8,613
1,248
2,161
3,758
9,541
1,826
6,991
37,640
32,162
61,917
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
9,138
5,028
9,389
2,828
14,166
12,217
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
(259)
17,583
(136)
9,152
17,324
9,016
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 10. Listing costs and performance fee
Listing costs (a)
Performance fee (b)
Total listing costs and performance fee
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
6,762
13,800
20,562
-
-
-
(a) Expensed costs associated with listing Redcape on the ASX.
(b) Fee payable to the Responsible Entity, in its personal capacity, on the overall performance of Redcape and realised
upon IPO event. Comprises fee of $13.5 million plus non-claimable GST of $0.3 million.
Note 11. Income tax benefit
Income tax benefit
Deferred tax - origination and reversal of temporary differences
Aggregate income tax benefit
Deferred tax included in income tax benefit comprises:
Increase in deferred tax assets (note 17)
Numerical reconciliation of income tax benefit and tax at the statutory rate
Loss before income tax benefit
Tax at the statutory tax rate of 30%
Trust loss not subject to tax
Non-deductible expenses
Income tax benefit
Amounts credited directly to equity
Deferred tax assets (note 17)
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
(2,297)
(2,297)
(185)
(185)
(2,297)
(185)
(7,227)
(1,341)
(2,168)
(402)
(787)
658
-
217
(2,297)
(185)
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
(674)
(1,843)
37
37
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 12. Current assets - cash and cash equivalents
Cash and cash equivalents
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
16,981
20,537
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less.
Note 13. Current assets - trade and other receivables
Trade receivables
Other receivables (a)
(a) Includes receivables from supplier rebates.
Allowance for expected credit losses
There was no expense for expected credit losses for the year ended 30 June 2019.
Note 14. Current assets - other current assets
Prepayments
Acquisition costs
Capitalised loan establishment costs
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
514
3,422
81
1,334
3,936
1,415
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
2,760
-
559
1,388
1,388
73
3,319
2,849
38
38
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 15. Non-current assets - property, plant and equipment
Land - at valuation
Buildings - at cost
Less: Accumulated depreciation
Property improvements - at cost
Less: Accumulated depreciation
Furniture, fittings & equipment - at cost
Less: Accumulated depreciation
Work in progress - at cost
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
351,648
351,648
59,505
(2,033)
57,472
37,189
(2,615)
34,574
41,869
(9,691)
32,178
-
-
-
-
-
24,957
(1,420)
23,537
29,946
(4,530)
25,416
10,729
8,549
486,601
57,502
39
39
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 15. Non-current assets - property, plant and equipment (continued)
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Land
Building
Property
improvement
Furniture,
fittings &
equipment
Work in
progress
RHT II Consolidated
$'000
$'000
$'000
$'000
$'000
Balance at 1 July 2017
Disposals
Disposal - business
Additions
Additions - business
acquisitions
Transfers in/(out)
Depreciation expense
Stapled Consolidated
Balance at 30 June 2018
Disposals
Disposal - business (a)
Additions
Additions - business
acquisitions (a)
Revaluation increments (b)
Adjustment arising from stapling
arrangement
Transfers in/(out)
Depreciation expense
-
-
-
-
-
-
-
-
-
(1,821)
-
40,756
20,453
292,260
-
-
-
-
-
-
-
-
-
-
-
(4,841)
86
16,751
-
46,804
-
(1,328)
-
(250)
(199)
689
22,529
2,305
(1,537)
23,537
(839)
(264)
3,518
-
-
-
10,634
(2,012)
-
(756)
(573)
5,091
26,704
1,493
(6,543)
25,416
(133)
(710)
6,513
6,975
-
-
2,137
(8,020)
Total
$'000
-
(1,028)
(802)
14,739
52,673
-
(8,080)
57,502
(972)
(7,750)
25,182
64,482
20,453
-
(22)
(30)
8,959
3,440
(3,798)
-
8,549
-
(114)
15,065
-
-
-
(12,771)
-
339,064
-
(11,360)
Balance at 30 June 2019
351,648
57,472
34,574
32,178
10,729
486,601
(a) Note 35 details treatment of business combination and disposal.
(b) Net revaluation uplift of $20.5 million includes gain of $38.5 million recognised in the asset revaluation reserve offset by
a loss of $18.0 million recognised in the income statement. Gain on revaluation of land of $37.6 million in other
comprehensive income includes the reserve released on the sale of Belrose Hotel.
Valuations of land
The basis of the valuations of land is fair value. A portion of the land was last revalued on 31 May 2019 based on
independent external assessments by a professionally qualified valuer, having recent experience in the location and
category of land being valued. Land is also revalued by the directors each half year where an independent valuation has
not been sought. The directors do not believe that there has been a material movement in fair value since the revaluation
date. Valuations are based on current prices for similar properties in the same location and condition.
Land stated under the historical cost convention
If land and buildings were stated under the historical cost convention, the amounts would be as follows:
Land - at cost
40
40
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
204,233
204,233
-
-
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 16. Non-current assets - intangible assets
Goodwill - at cost
Gaming and liquor licences - at cost
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
327,714
278,461
263,043
-
590,757
278,461
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
RHT II Consolidated
Balance at 1 July 2017
Additions - business acquisitions
Disposals
Stapled Consolidated
Balance at 30 June 2018
Additions - business acquisitions (note 35)
Disposals (a)
Adjustment arising from stapling arrangement
Gaming and
liquor
licences
Goodwill
$'000
$'000
Total
$'000
-
283,403
(4,942)
278,461
56,275
(7,022)
-
-
-
-
-
283,403
(4,942)
-
37,423
(5,509)
231,129
278,461
93,698
(12,531)
231,129
Balance at 30 June 2019
327,714
263,043
590,757
(a) Relates to disposal of Belrose hotel. Refer disposal commentary in note 35.
Impairment testing
Goodwill is allocated to the group of cash-generating units which in total reflect Redcape’s operating segment.
The recoverable amount of Redcape's goodwill has been determined by a value-in-use calculation using a discounted cash
flow model, based on a 1 year projection period approved by management and extrapolated for a further 4 years using a
steady rate, together with a terminal value applied to the forecast fifth year after tax cashflows.
Management has based the value-in-use calculations on the historical performance and future prospects of the business
as reported to the CODM, taking into consideration the like-for-like historical growth.
As a result of the value-in-use calculation, no impairment of goodwill has been recorded in the Financial Statements.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
The following key assumptions were used in the value-in-use calculations:
41
41
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 16. Non-current assets - intangible assets (continued)
Discount rate (pre-tax)
EBITDAR growth rate
Terminal value growth rate
2019
%
2018
%
8.1%
3.0%
3.0%
8.7%
3.0%
3.0%
The pre-tax discount rate of 8.1% reflects management’s estimate of the time value of money and Redcape’s weighted
average cost of capital adjusted for, the risk-free rate and the volatility of the share price relative to market movements.
Management believes the projected 3% growth rate is prudent and justified, based on the like-for-like historical growth.
Sensitivity
Management believes that any reasonably possible change in the key assumptions used would not cause the cash-
generating unit’s carrying amount to exceed its recoverable amount and result in a material impairment based on current
economic conditions and CGU performance
The below table shows the key assumptions used in the value in use calculation and the amount by which each key
assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value.
Assumptions used in value in use calculation
Rate required for recoverable amount to equal carrying value (a)
(a) Each rate is determined in isolation.
Terminal
value
%
Pre-tax
discount rate
%
3.0%
1.7%
8.1%
9.2%
42
42
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 17. Non-current assets - deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Tax losses
Property, plant and equipment
Employee benefits
Accrued expenses
Straight-line lease liability
Over market rent (Onerous rent) liability
Transaction costs
Other items
Deferred tax asset
Movements:
Opening balance
Credited to profit or loss (note 11)
Credited to equity (note 11)
Additions through business combinations
Closing balance
Note 18. Current liabilities - trade and other payables
Trade payables
Accrued interest
Performance fee
Other payables
State Government taxes
Over market rent (Onerous rent) (a)
Straight-line lease liability (a)
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
4,975
1,249
589
163
1,659
2,360
4,636
14
1,770
1,002
501
584
1,763
2,928
4,092
34
15,645
12,674
12,674
2,297
674
-
-
185
1,843
10,646
15,645
12,674
Stapled
Consolidated
2019
$'000
Stapled
Consolidated
2019
RHT II
Consolidated
2018
$'000
RHT II
Consolidated
2018
3,972
1,944
6,400
8,125
18,308
-
-
3,056
-
-
6,930
16,321
1,894
440
38,749
28,641
(a) Leases in which a significant portion of the risks and rewards of ownership are not transferred to Redcape as lessee
are classified as operating leases. Payments made under operating leases (net of any incentives received from the
lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
43
43
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 19. Current liabilities - employee benefits
Annual leave
Long service leave
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
1,453
255
1,208
224
1,708
1,432
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The
entire amount is presented as current, since Redcape does not have an unconditional right to defer settlement. However,
based on past experience, Redcape does not expect all employees to take the full amount of accrued leave or require
payment within the next 12 months.
The following amounts reflect leave that is not expected to be taken within the next 12 months:
Employee benefits obligation expected to be settled after 12 months
255
240
Note 20. Current liabilities - distribution payable
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
Distributions
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
12,030
-
Distributions
The provision represents distributions declared, being appropriately authorised and no longer at the discretion of the trust,
on or before the end of the financial year but not distributed at the reporting date.
Carrying amount at the start of the year
Additional provisions recognised
Payments relating to prior period
Payments relating to current period
Carrying amount at the end of the year
44
44
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
10,243
46,271
(10,243)
(34,241)
12,030
-
-
-
-
-
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 21. Non-current liabilities - other payables
Straight line lease liability
Over market rent (onerous rent) provision
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
430
-
5,436
7,866
430
13,302
Leases in which a significant portion of the risks and rewards of ownership are not transferred to Redcape as lessee are
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to profit or loss on a straight-line basis over the period of the lease.
Note 22. Non-current liabilities - borrowings
Bank loans
Redcape Hotel Property Trust (a)
Capitalised loan establishment costs
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Redcape Hotel Property Trust (a)
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
436,700
-
(139)
-
136,625
(91)
436,561
136,534
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
436,700
-
-
136,625
436,700
136,625
Syndicated Bank Facility
The total facility amount is $477.0 million (excluding $3.0 million ancillary facility) and expires on 23 September 2020.
Assets pledged as security
The financiers in respect of the bank loans have first ranking security over all of the assets of each entity in Redcape, a
registered mortgage over each property and a fixed charge over each liquor and gaming licence.
Defaults and breaches
There have been no breaches of bank covenants in the year ended 30 June 2019.
Restrictions on distributions
There have been no breaches of the restrictions on distributions in the year ended 30 June 2019.
45
45
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 22. Non-current liabilities - borrowings (continued)
(a) This entity is a related party (subsidiary of RHT I). In FY19 the borrowing is eliminated on consolidation.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans
Used at the reporting date
Bank loans
Unused at the reporting date
Bank loans
Note 23. Non-current liabilities - derivative financial instruments
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
477,000
436,700
40,300
-
-
-
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
Interest rate swap contracts - cash flow hedges
3,489
-
Refer to note 28 for further information on financial instruments.
Note 24. Non-current liabilities - employee benefits
Long service leave
Note 25. Equity - contributed equity
Stapled
Consolidated
2019
Stapled
Securities
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
255
240
Consolidated
RHT II
2018
Stapled
Consolidated
2019
Securities
$'000
RHT II
Consolidated
2018
$'000
Contributed equity
551,445,932 470,312,074
235,545
199,549
46
46
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 25. Equity - contributed equity (continued)
Details
RHT II Consolidated
Balance at beginning of the period
Unit issuances
Equity raising costs
Deferred tax asset
June 2019 June 2019 June 2018 June 2018
No of
securities
'000
$'000
No of
securities
'000
$'000
470,312
81,134
-
-
199,549
37,569
(2,247)
674
-
470,312
-
-
-
203,849
(6,143)
1,843
Balance at end of the period
551,446
235,545
470,312
199,549
Details
RHT I Consolidated (non-controlling interest)
Balance at beginning of the period
Unit issuances
Equity raising costs
Balance at end of the period
June 2019 June 2019 June 2018 June 2018
No of
securities
'000
$'000
No of
securities
'000
$'000
470,312
81,134
-
267,758
52,188
(1,477)
551,446
318,469
-
-
-
-
-
-
-
-
Ordinary stapled securities
The Ordinary securities of RHT II are stapled to the securities of RHT I. Each stapled security entitles the holder to
participate in distributions and the proceeds on the winding up of the trust in proportion to the number of and amounts paid
on the securities held. The fully paid stapled ordinary securities have no par value and the trust does not have a limited
amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
stapled security shall have one vote.
Stapled Securities buy-back
As disclosed in the PDS, the Responsible Entity may in its sole discretion proceed with an on-market buy-back of up to 5%
of Redcape stapled securities. The timing of and conduct of the buy-back will be in accordance with the Listing Rules and
all applicable laws. No buy-back of Redcape stapled securities has been undertaken by the Responsible Entity.
Voluntary Escrow
There are currently 51.5 million shares subject to a voluntary escrow arrangement. The escrow period ends in February
2020 in line with Redcape's FY20 HY results release.
Capital risk management
Redcape's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for stapled security holders and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, Redcape may adjust the amount of distributions paid to stapled security
holders, return capital to stapled security holders, issue new stapled securities or sell assets to reduce debt.
Redcape would look to raise capital when an opportunity to invest in a business or company is seen as value adding
relative to the current trust's stapled securities price at the time of the investment.
47
47
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 25. Equity - contributed equity (continued)
Redcape is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
The capital risk management policy remains unchanged from the previous reporting period.
Note 26. Equity - non-controlling interest
Contributed equity
Reserves
Accumulated losses
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
318,469
161,923
(43,497)
436,895
-
-
-
-
RHT II only comparative therefore the RHT I (non-controlling interest) balance reflected is zero.
Contributed
Hedging
Revaluation
equity
$'000
reserve
$'000
reserve
$'000
Retained
earnings/
(Accumulate
d losses)
$'000
RHT I Consolidated
Profit for the year
Total other comprehensive income
Arising on stapling
Issue of securities
Equity raising costs
Interim distributions paid to unitholders
Provisions for distribution to unitholders
-
-
267,758
52,188
(1,477)
-
-
-
(3,216)
(272)
-
-
-
-
-
37,573
127,838
-
-
-
-
10,691
-
(7,917)
-
-
(34,241)
(12,030)
Total
$'000
10,691
34,357
387,407
52,188
(1,477)
(34,241)
(12,030)
Balance at 30 June 2019
318,469
(3,488)
165,411
(43,497)
436,895
48
48
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 27. Equity - distributions
Distributions paid/payable during the financial year were as follows:
Final distribution for the quarter ended 30 September 2018 of 2.205 cents (FY18: 2.205
cents (a)) per unit
Final distribution for the quarter ended 31 December 2018 of 2.205 cents (FY18: 2.205
cents) per unit
Final distribution for the quarter ended 31 March 2019 of 2.158 cents (FY18: 2.158 cents)
per unit
Final distribution for the quarter ended 30 June 2019(b) of 2.182 cents (FY18: 2.182 cents)
per unit
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
10,795
11,548
11,898
12,030
46,271
-
-
-
-
-
(a) Calculated on a pro rata basis notwithstanding that distribution applied from 10 July 2017. Actual payable was 1.990
cents per security.
(b) On 24 June 2019 the directors declared a final dividend for the quarter ended 30 June 2019 of 2.182 cents per unit to
be paid on 30 August 2019.
Distributions prior to the listing on the ASX as at 30 November 2018 were calculated on a pro rata basis for days held.
Distributions of $44.5 million (2018: $26.8 million) were paid during the current period from RHT I. This represents the last
quarter of FY18 and the first three quarters of FY19 (2018: First three quarters of FY18).
Note 28. Financial instruments
Financial risk management objectives
Redcape's activities expose it to interest rate risk, credit risk and liquidity risk. Redcape's overall risk management program
seeks to minimise potential adverse effects on the financial performance of Redcape. Redcape uses derivative financial
instruments such as interest rate swaps to hedge its interest rate risk exposure. Derivatives are exclusively used for
hedging purposes, i.e. not as trading or other speculative instruments. Redcape uses different methods to measure
different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and
ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('Finance') under policies approved by the directors of the
Responsible Entity. These policies include identification and analysis of the risk exposure of Redcape and appropriate
procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within Redcape's operations.
Finance reports to the directors on a monthly basis.
Market risk
Foreign currency risk
Redcape is not exposed to any foreign currency risk.
Price risk
Redcape is not exposed to any significant price risk.
Interest rate risk
Redcape's main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose Redcape
to interest rate risk. Borrowings obtained at fixed rates expose Redcape to fair value interest rate risk. The policy is to
maintain approximately 50% of current borrowings at fixed rates using interest rate swaps to achieve this when necessary.
49
49
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 28. Financial instruments (continued)
As at the reporting date, Redcape had the following variable rate borrowings and interest rate swap contracts outstanding:
Bank loans
Redcape Hotel Property Trust
Interest rate swaps (notional principal amount)
Net exposure to interest rate risk
Stapled Consolidated
RHT II Consolidated
2019
2018
Weighted
average
interest rate
%
Weighted
average
interest rate
%
Balance
$'000
2.98%
-
-
436,700
-
(238,500)
198,200
-
6.50%
-
Balance
$'000
-
136,625
-
136,625
The bank loans outstanding, totalling $436.7 million, are interest payment loans. Monthly cash outlays of approximately
$1.1 million per month are required to service the interest payments. An official increase/decrease in interest rates of 100
basis points would have an adverse/favourable effect on profit before tax of $4.4 million per annum.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
Redcape. Redcape has a strict code of credit, including obtaining agency credit information, confirming references and
setting appropriate credit limits. The maximum exposure to credit risk at the reporting date to recognised financial assets is
the carrying amount. Redcape does not hold any collateral. Redcape does not hold any collateral or have any expected
credit losses.
Liquidity risk
Redcape manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Redcape has
a voluntary working capital deficiency based on its capital management strategy of paying down debt with excess cash.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank loans
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
40,300
-
50
50
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 28. Financial instruments (continued)
Remaining contractual maturities
The following tables detail Redcape's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Stapled Consolidated 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans
Total non-derivatives
Weighted
average
interest rate
%
1 year or
less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Remaining
contractual
maturities
$'000
Over 5 years
$'000
-
-
3,972
34,777
-
-
2.98%
17,386
56,135
468,102
468,102
-
-
-
-
-
-
-
-
3,972
34,777
485,488
524,237
RHT II Consolidated 2018
Weighted
average
interest rate
%
1 year or
less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Remaining
contractual
maturities
$'000
Over 5 years
$'000
Non-derivatives
Non-interest bearing
Trade payables
Other payables
-
-
3,056
25,585
-
-
Interest-bearing - variable
Redcape Hotel Property Trust
Total non-derivatives
6.50%
1,094
29,735
183,389
183,389
-
-
-
-
-
-
-
-
3,056
25,585
184,483
213,124
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above. Subsequent to 30 June 2019, Redcape has refinanced its debt facilities which will extend the repayments by
another four years. The extension of the bank loans is not reflected in the above contractual maturities.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
51
51
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 29. Fair value measurement
Fair value hierarchy
The following tables detail Redcape's assets and liabilities, measured or disclosed at fair value, using a three-level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3: Unobservable inputs for the asset or liability
Stapled Consolidated 2019
Assets
Land
Total assets
Liabilities
Interest rate swaps
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
-
-
-
-
-
-
351,648
351,648
351,648
351,648
3,489
3,489
3,489
3,489
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market
interest rate that is available for similar financial liabilities.
Valuation techniques for fair value measurements categorised within level 2 and level 3
The basis of the valuations of land is fair value. A portion of the land was last revalued on 31 May 2019 based on
independent external assessments by a professionally qualified valuer, having recent experience in the location and
category of land being valued. Land is revalued by the directors each half year where an independent valuation has not
been sought. The remaining land values were based on internal valuations performed by Redcape's property team and
approved by the Board to form Directors valuations. All internal valuations have been reviewed and approved by the Board.
The directors do not believe that there has been a material movement in fair value since the revaluation date. Valuations
are based on current prices for similar properties in the same location and condition.
Derivative financial instruments have been valued using quoted market rates. This valuation technique maximises the use
of observable market data where it is available.
Note 30. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of the trust:
Audit services - KPMG
Audit or review of the financial statements
Other services - KPMG
IPO related services including due diligence
52
52
Stapled
Consolidated
2019
$
RHT II
Consolidated
2018
$
349,075
299,534
799,914
20,000
1,148,989
319,534
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 31. Contingent liabilities
Redcape has provided bank guarantees to a supplier and landlord as at 30 June 2019 of $1,800,000.
Note 32. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
-
1,296
1,322
5,803
25,993
34,279
108,348
94,686
33,118
237,313
Note 33. Related party transactions
Parent entity
Redcape Hotel Trust II is the parent entity.
Transactions with related parties
(a) Responsible entity
Moelis Australia Asset Management Ltd (i)
Fund establishment fee
Asset management fee
Debt arrangement fee
Acquisition fee
Disposal fee
Redcape Hotel Group Management Ltd (ii)
Asset management fee
Acquisition fee
Performance fee (iii)
Transaction
values for
the year
ended 30
June 2019
$
Balance
outstanding
as at 30 June
2019
$
Transaction
values for
the year
ended 30
June 2018
$
Balance
outstanding
as at 30 June
2018
$
-
1,466,532
250,000
1,080,000
210,000
3,006,532
-
-
-
-
-
-
2,850,000
2,828,190
-
275,500
60,000
-
268,992
-
-
-
6,013,690
268,992
3,561,614
500,000
14,400,000
435,667
-
6,400,000
18,461,614
6,835,667
-
-
-
-
-
-
-
-
53
(i) Moelis Australia Asset Management Ltd ceased to be the Responsible Entity on 24th October 2018.
53
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 33. Related party transactions (continued)
(ii) Redcape Hotel Group Management Ltd became the Responsible Entity of the Trust from 24th October 2018.
(iii) Performance fee of $0.9 million has been capitalised to equity and $13.5 million has been expensed.
(b) Other related party transactions
The aggregate amounts recognised during the period relating to transactions between Redcape and related entities were
as follows:
Related Entity
Transaction
Transaction fee
Underwriting fee
Moelis Australia Advisory Pty
Limited
Moelis Australia Advisory Pty
Limited
Moelis Australia Hotel
Management Pty Ltd
Moelis Australia Hotel
Management Pty Ltd
Redcape Hotel Property Trust Related party loan
Redcape Hotel Property Trust Interest expense
Redcape Hotel Property Trust Rent
Hotel operating fee (a)
Project development fee
Transaction
values for
the year
ended 30
June 2019
$
Balance
outstanding
as at 30 June
2019
$
Transaction
values for
the year
ended 30
June 2018
$
Balance
outstanding
as at 30 June
2018
$
2,375,000
3,115,670
-
-
6,137,854
-
-
-
9,137,915
(409,473)
9,389,155
655,924
743,851
-
-
-
73,822
329,205
53,715
- 136,625,095 136,625,095
-
-
8,454,975
-
- 37,285,984
15,372,436
(335,651) 198,222,268 137,334,734
(a) Includes the $1.45 million waiver of the Hotel Operator Fee by the Trust manager.
Note 34. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Parent
2019
$'000
2018
$'000
(12,815)
6,154
(12,815)
6,154
54
54
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 34. Parent entity information (continued)
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Retained profits / (Accumulated losses)
Total equity
Parent
2019
$'000
2018
$'000
191,798
168,297
232,443
205,971
3,559
3,559
268
268
235,545
(6,661)
199,549
6,154
228,884
205,703
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The subsidiaries of RHT II are the initial guarantors of the syndicated bank facility of Redcape Hotel Property Trust, a
subsidiary of RHT I. Redcape Hotel Fund Pty Ltd, a subsidiary of RHT II also has in placed a Deed of Cross Guarantees in
relation to the debts of certain subsidiaries.
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
The accounting policies of the parent entity are consistent with those of Redcape, as disclosed in note 3, except for the
following:
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Note 35. Business combinations and disposals
Business combination to form Redcape Hotel Group
Stapling
In accordance to the stapling deed, securities in RHT I and RHT II were stapled to one another on 2 July 2018. They were
listed as a single security on the ASX at 30 November 2018. RHT II is identified as the parent of Redcape and acquirer of
RHT I with the acquisition accounted for as a change in ownership without a loss of control. The issued securities of RHT I
are not owned by RHT II and are presented as non-controlling interests in Redcape even though securities in RHT I are
held directly by the unitholders of the Trust. Additionally, no goodwill has been recognised on acquisition of RHT I because
no direct ownership interest was acquired by Redcape in RHT I.
The equity in the net assets of RHT I and the profit/(loss) arising from those net assets have been separately identified in
the statements of comprehensive income and financial position. RHT I’s contributed equity and retained
earnings/accumulated losses are shown as a non-controlling interest in the consolidated financial statements in
accordance with accounting standards.
Redcape was admitted to the official list of the ASX as a stapled group and consequently, ASX reserves the right (but
without limiting its absolute discretion) to remove any or both of RHT I and RHT II from the official list of ASX if any of the
securities in RHT I or RHT II comprising Redcape stapled securities cease to be stapled together or any equity securities
are issued by either RHT I or RHT II which are not stapled to the equivalent securities in the other of RHT I or RHT II.
55
55
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 35. Business combinations and disposals (continued)
Details of the acquisition arising from stapling are as follows:
Cash and cash equivalents
Related party loan
Other current assets
Investment property
Trade and other payables
Distribution payable
Loans and borrowings
Derivative financial instruments
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Accumulated losses
Accumulated losses are losses attributable to RHT II.
Movement in accumulated losses were as follows:
Balance at 1 July 2018
Net loss for the year attributable to RHT II
Arising from stapling (a)
Fair value
$'000
14,519
136,625
5,184
611,873
(3,900)
(10,243)
(366,376)
(272)
387,410
-
387,410
Stapled
Consolidated
2019
$'000
(1,156)
(15,621)
(26,516)
(43,293)
(a) RHT I holds the Freehold assets which are recognised collectively as investment properties in the RHT I balance sheet.
On consolidation, where Redcape holds the Freehold assets, the investment properties are disaggregated into their
components (Land, Buildings, Licences). On disaggregation, depreciation and capitalised acquisition costs are also
expensed to the income statement causing losses to the income statement as a result of stapling.
56
56
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 35. Business combinations and disposals (continued)
Other business acquisitions
Redcape has settled on the acquisition of 6 hotels during the year ended 30 June 2019. The following summarises the
major classes of consideration transferred and recognises the amounts of assets acquired and liabilities assumed at the
acquisition date:
Details of the acquisition of Venues are as follows:
Cash and cash equivalents
Inventory
Prepayments
Property, plant and equipment (Note 15)
Gaming and liquor licences (Note 16)
Trade and other payables
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Acquisition costs expensed to profit or loss
Cash used to acquire businesses; net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Add: payments made for future period acquisition
Less: cash and cash equivalents
Less: payments made in prior periods
Net cash used
Fair value
$'000
229
263
105
64,482
37,423
(698)
(149)
101,655
56,275
157,930
157,930
7,631
Stapled
Consolidated
2019
$'000
157,930
-
(229)
(4,352)
153,349
Acquisition related costs
Business acquisition costs of $7.6 million include stamp duty, legal fees and due diligence costs were included in
Redcape's consolidated statement of profit or loss and other comprehensive income.
Disposals
Redcape has disposed 1 hotel during the year ended 30 June 2019 resulting in a gain on disposal of $1.0 million The
carrying amount of property plant and equipment at the date of disposal amounted to $7.8 million. The value of intangibles
at the date of disposal amounted to $12.5 million.
57
57
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 36. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in
accordance with the accounting policy described in note 3:
Subsidiaries of RHT II
(All incorporated in Australia)
Redcape Hotel Fund Pty Ltd
MAHF Custodian Pty Ltd
MAHPT TT Pty Ltd
Redcape Group Limited
Redcape Hotel Group Pty Ltd
RHG Operations Pty Ltd
Redcape Services Pty Ltd
RGM TT Pty Ltd
Stapled
Consolidated
2019
%
RHT II
Consolidated
2018
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
100.00%
-
58
58
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 36. Interests in subsidiaries (continued)
Subsidiaries of RHT I
(All incorporated in Australia)
Redcape Hotel Property Trust
St George Hotel Trust
Doonside Hotel Trust
El Cortez Hotel Trust
Keighery Hotel Trust
Lakeview Hotel Motel Trust
Prospect Hotel Trust
Royal Hotel Trust
St Marys Hotel Trust
Belrose Hotel Trust
Red Lantern Hotel Trust
Campbelltown Hotel Trust
Eastwood Hotel Trust
Leumeah Hotel Trust
Mount Annan Hotel Trust
Revesby Pacific Hotel Trust
Willoughby Hotel Trust
Eastern Creek Tavern Hotel Trust
Landmark Hotel Trust
Crown Revesby Hotel Trust
Minskys Hotel Trust
Shamrock Hotel Trust
Hermit Park Hotel Trust
Wattle Hotel Trust
Carrington Hotel Trust
Andergrove Tavern Hotel Trust
Cabramatta Hotel Trust
Crescent Hotel Trust
Wattle Grove Hotel Trust
Sun Hotel Trust - Acquired on 2 July 2018
Vauxhall Hotel Trust - Acquired on 13 August 2018
Australian Hotel & Brewery Trust - Acquired on 20 August 2018
Central Hotel Trust - Acquired on 4 December 2018
Unanderra Hotel Trust - Acquired on 4 December 2018
Figtree Hotel Trust - Acquired on 4 December 2018
Note 37. Events after the reporting period
Stapled
Consolidated
2019
%
RHT II
Consolidated
2018
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Subsequent to 30 June 2019, Redcape refinanced its debt facilities resulting in an increased facility of $503.0 million
(including $3.0 million ancillary facility) with a weighted average term of 4 years. As a result of the refinancing, in FY20 the
hedge position of the existing finance facility will be closed out at a cost of approximately $4.0 million. Capitalised loan
establishment costs of $0.5 million will be written off upon activation of the new facility in FY20.
Post the end of the financial year, Redcape exchanged contracts to acquire the Eden Brewhouse Redbank Plains
Queensland as part of the ongoing portfolio optimisation program.
No other material matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect Redcape's operations, the results of those operations, or Redcape's state of affairs in future financial years.
59
59
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Notes to the financial statements
30 June 2019
Note 38. Reconciliation of loss after income tax to net cash from operating activities
Loss after income tax benefit for the year
Adjustments for:
Depreciation and amortisation expense
Loss on asset revaluation
Net loss/(gain) on disposal of non-current assets
Business acquisition costs
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Increase in deferred tax assets
Decrease/(increase) in prepayments
Increase/(decrease) in trade and other payables
Decrease in provision for income tax
Increase/(decrease) in employee benefits
Stapled
Consolidated
2019
$'000
RHT II
Consolidated
2018
$'000
(4,930)
(1,156)
11,360
17,998
(502)
7,631
(2,520)
237
(2,297)
(2)
8,880
-
142
8,080
-
(511)
4,879
157
(175)
(186)
295
(2,628)
(1,632)
(709)
Net cash from operating activities
35,997
6,414
Note 39. Earnings per stapled securities
Loss after income tax
Weighted average number of ordinary securities used in calculating basic and diluted
earnings per stapled securities
Basic and diluted earnings per stapled unit (cents)
Stapled
Consolidated
2019
$'000
(4,930)
528,811,312
(0.93)
RHT II
Consolidated
2018
$'000
-
-
-
60
60
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Directors' declaration
30 June 2019
In the directors' opinion:
●
●
●
●
the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the
Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 3 to the financial statements;
the attached financial statements and notes give a true and fair view of Redcape's financial position as at 30 June 2019
and of its performance for the financial year ended on that date;
there are reasonable grounds to believe that the trust will be able to pay its debts as and when they become due and
payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001.
On behalf of the directors
___________________________
Nicholas Roland Collishaw
Chairman
28 August 2019
Sydney
___________________________
Daniel John Brady
Executive Director
61
61
ASX:RDCAnnual Report 2019For personal use only
Independent Auditor’s Report
To the stapled security holders of Redcape Hotel Group
Opinion
We have audited the Financial Report of
Redcape Hotel Group (the Stapled Group
Financial Report).
In our opinion, the accompanying Stapled
Group Financial Report is in accordance with
the Corporations Act 2001, including:
•
•
giving a true and fair view of the
Stapled Group’s financial position as at
30 June 2019 and of its financial
performance for the year ended on that
date; and
complying with Australian Accounting
Standards and the Corporations
Regulations 2001.
The Financial Report of the Stapled Group comprises:
• Statement of financial position as at 30 June 2019
• Statement of profit or loss and other comprehensive
income, Statement of changes in equity, and Statement
of cash flows for the year then ended
• Notes including a summary of significant accounting
policies
• Responsible Entity’s Directors’ Declaration.
The Stapled Group consists of Redcape Hotel Trust II and
the entities it controlled at the year-end or from time to time
during the financial year and Redcape Hotel Trust I and the
entities it controlled at the year-end or from time to time
during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 Stapled Group and Redcape Hotel Group Management Ltd (the Responsible
Entity) in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code)
that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical
responsibilities in accordance with the Code.
Key Audit Matters
The Key Audit Matters we identified for the
Stapled Group are:
• Carrying value of goodwill and intangible
Key Audit Matters are those matters that, in our
professional judgement, were of most significance in our
audit of the Financial Report of the current period.
assets
• Valuation of land
These matters were addressed in the context of our audit of
the Financial Report as a whole, and in forming our opinion
thereon, we do not provide a separate opinion on these
matters.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
62For personal use only Carrying value of goodwill and intangible assets ($590.8m)
Refer to Note 16 to the financial report
The key audit matter
How the matter was addressed in our audit
Annual testing of goodwill and intangible assets
for impairment is a key audit matter, given the
size of the balance (being 53% of total assets).
We focussed on the significant forward-looking
assumptions the Stapled Group applied in their
value in use model for the group of CGUs,
including:
•
•
forecast cash flows, growth rates (including
terminal growth rate).
discount rate. This is complex in nature and
varies according to the conditions and
environment in which the group of Cash
Generating Unit’s (CGUs) operate.
The Stapled Group uses a complex model to
perform their annual testing of goodwill and
intangible assets for impairment. The model is
largely manually developed, uses adjusted
historical performance, and a range of internal
and external sources as inputs to the
assumptions. Complex modelling, particularly
those containing highly judgemental forward-
looking assumptions tend to be prone to greater
risk for potential bias, error and inconsistent
application. These conditions necessitate
additional scrutiny by us, in particular to address
the objectivity of sources used for assumptions,
and their consistent application.
The Stapled Group has a large number of
individual developed properties, necessitating
our consideration of the Stapled Group’s
determination of CGUs, based on the smallest
group of assets to generate largely independent
cash inflows. We considered the Stapled
Group’s allocation of goodwill and intangible
assets to the Group of CGUs to which they
belong based on the management and
monitoring of the business.
In addition to the above, the carrying amount of
net assets of the Stapled Group is above the
Stapled Group’s market capitalisation at 30 June
2019. This increased our audit effort in this key
audit area.
We involved valuation specialists to supplement
our audit team in assessing this key audit matter.
Working with our valuation specialists, our
procedures included:
• we considered the appropriateness of the value
in use method applied by the Stapled Group to
perform the annual test of goodwill and
intangible assets for impairment, for the group of
CGUs, against the requirements of the
accounting standards.
• we assessed the integrity of the value in use
model used, including the accuracy of the
underlying calculation formulas.
• we considered the sensitivity of the model by
varying key assumptions, such as forecast
growth rates, terminal growth rate and discount
rate, within a reasonably possible range. We did
this to identify those assumptions at higher risk
of bias or inconsistency in application and to
focus our further procedures.
• we compared the forecast cash flows contained
in the value in use model to Board approved
forecasts.
• we assessed the accuracy of previous Stapled
Group forecasts to inform our evaluation of
forecasts incorporated in the model.
• we challenged the Stapled Group’s significant
forecast cash flow and growth assumptions by
comparing the forecast to historical results of the
Stapled Group’s operations and applied
increased scepticism to areas where previous
forecasts were not achieved. We compared
forecast growth rates, including terminal growth
rate to published studies of industry trends and
expectations. We used our knowledge of the
Group, their past performance, business and
customers, and our industry experience.
• we independently developed a discount rate
range considered comparable using publicly
available market data for comparable entities,
adjusted by risk factors specific to the Stapled
Group and the industry it operates in.
• we considered the Stapled Group’s
determination of their CGUs based on our
63For personal use only understanding of the operations of the Stapled
Group’s business, and how independent cash
inflows were generated, against the
requirements of the accounting standards.
• we analysed the Stapled Group’s internal
reporting to assess the Stapled Group’s
monitoring and management of activities, and
the consistency of the allocation of goodwill and
intangible assets to the Group of CGUs.
• we assessed the Stapled Group’s reconciliation
of differences between the year-end market
capitalisation and the carrying amount of the net
assets by comparing the implicit earnings
multiples from the Stapled Group’s model to
market multiples of comparable entities.
• we assessed the disclosures in the financial
report using our understanding obtained from our
testing and against the requirements of the
accounting standards.
Valuation of Land ($351.6m)
Refer to Note 15 to the financial report
The key audit matter
How the matter was addressed in our audit
It is the Stapled Group’s policy that land is
recognised at fair value based on periodic
valuations of individual developed properties.
Valuations are conducted by either the Stapled
Group’s Directors or external valuation experts
engaged by the Stapled Group.
We considered valuation of land as a key audit
matter, given the:
•
•
•
relative size of land in the statement of
financial position (being 31% of total assets);
quantum of the revaluation gains/losses that
directly impact the Statement of profit or loss
and other comprehensive income through the
fair value fluctuations;
inherently subjective nature of property
valuations due to the use of assumptions
containing estimation uncertainty. These
estimates lead to additional audit effort due
to differing assumptions such as prevailing
market conditions, the individual nature,
Working with our real-estate valuation specialists,
our procedures included:
• we assessed the appropriateness of the
accounting policies applied by the Stapled
Group, against the requirements of the
accounting standards.
• we assessed the scope, competence and
objectivity of Stapled Group’s Directors and its
external valuation experts, to fair value the
individual developed properties.
• we assessed the valuation methodology used
by the Directors of the Stapled Group and its
external valuation experts for consistency with
the Stapled Group’s valuation policy, and
compliance with accounting standards and
industry practice.
• we assessed the specific valuation
assumptions (including the capitalisation rate)
for a sample of property valuations, through
comparison to market data published by
64For personal use only condition and location of each property and
the expected future income for each
property.
We focused on the following key assumptions
contained in valuation methodology used by the
Stapled Group and its external valuation experts:
•
•
Capitalisation rate
Stabilised net operating profit (EBITDA)
We involved real-estate valuation specialists to
supplement our audit team in assessing this key
audit matter.
commercial real estate agents, recent market
transactions and our knowledge of historical
performance of the properties held by the
Stapled Group and their condition and location.
• we compared the stabilised net operating profit
(EBITDA) used in the valuations to historical
results of the Stapled Group’s operations. We
adjusted for expected changes such as the
annualisation of results of properties acquired
by the Stapled Group during the year. We used
our knowledge of the Group, their past
performance, business and customers, and our
industry experience.
• we visited a sample of properties to observe
the condition and location of the land.
• we checked amounts recorded in the
statement of profit or loss and other
comprehensive, to movements in the fair value
of the land for the year from the Stapled
Group’s Statement of financial position.
• we assessed the disclosures in the financial
report using our understanding obtained from
our testing and against the requirements of the
accounting standards.
Other Matter
The Consolidated Financial Report of Redcape Hotel Group for the year ended 30 June 2018 was not
prepared, nor audited.
Other Information
Other Information is financial and non-financial information in Redcape Hotel Group’s annual reporting which
is provided in addition to the Financial Report and the Auditor's Report. The Directors of Redcape Hotel
Group Management Ltd (the Responsible Entity) are responsible for the Other Information.
Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not
express an audit opinion or any form of assurance conclusion thereon, with the exception of the Stapled
Group Special Purpose Financial Statements and our related assurance opinion.
In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In
doing so, we 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.
We are required to report if we conclude that there is a material misstatement of this Other Information, and
based on the work we have performed on the Other Information that we obtained prior to the date of this
Auditor’s Report we have nothing to report.
65For personal use only Responsibilities of the Directors for the Financial Report
The Directors of Redcape Hotel Group Management Ltd (the Responsible Entity) are responsible for:
•
•
•
preparing the Financial Report that gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001
implementing necessary internal control to enable the preparation of a Financial Report that gives a
true and fair view and is free from material misstatement, whether due to fraud or error
assessing the Stapled Group’s ability to continue as a going concern and whether the use of the
going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters
related to going concern and using the going concern basis of accounting unless they either intend to
liquidate the Stapled 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 objective is:
•
•
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 Australian Auditing Standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the
Financial Report.
A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This
description forms part of our Auditor’s Report.
KPMG
Cameron Roan
Partner
Sydney
28 August 2019
66For personal use only Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Stapled Security Holders information
30 June 2019
The stapled security holder’s information set out below was applicable as at 13 August 2019.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Number
of holders
of options
Number
of holders
of ordinary ordinary
stapled
securities
stapled
securities
over
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
THE TRUST COMPANY (AUSTRALIA) LIMITED
WESTERN FUNDS MANAGEMENT PTY LTD
MOELIS AUSTRALIA ASSET MANAGEMENT LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
CARPE DIEM ASSET MANAGEMENT PTY LTD
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BARANA CAPITAL PTY LTD
RHINO TRADE PTY LTD
TPIC PTY LTD
PETERS MEATS (EXPORT) PTY LTD
TOP 4 PTY LTD
NETWEALTH INVESTMENTS LIMITED
AUSTRALIAN BRANDS PTY LTD
CHAO DUAN
ONE MANAGED INVESTMENT FUNDS LIMITED
BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD DRP
LIANGROVE MEDIA PTY LIMITED
NDPM PTY LTD
Unquoted equity securities
There are no unquoted equity securities.
251
90
388
213,908
342,798
3,347,024
1,646 74,040,677
444 473,501,525
2,891 551,445,932
-
-
Ordinary stapled securities
% of total
stapled
securities
issued
Number held
113,881,938
51,541,700
46,770,651
39,507,068
34,610,919
10,000,000
8,261,537
7,288,943
5,205,537
5,000,000
5,000,000
4,629,630
4,522,192
3,961,526
3,940,000
3,120,000
2,935,000
2,582,139
2,394,547
1,806,163
20.65
9.35
8.48
7.16
6.28
1.81
1.50
1.32
0.94
0.91
0.91
0.84
0.82
0.72
0.71
0.57
0.53
0.47
0.43
0.33
356,959,490
64.73
67
67
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Stapled Security Holders information
30 June 2019
Substantial holders
Substantial holders in Redcape are set out below:
Substantial Holders
Percentage
Securities
held at date of
notice
of
securities
held at date
of notice
%
Date of notice
Moelis Australia Limited (including its related bodies corporate)
213,953,331
38.8
4 December 2018
Moelis & Company Group LP, Moelis & Company International
Holdings LLC, Kenneth Moelis and each of their related bodies
corporate
Redcape Hotel Group Management Limited in its capacity as
responsible entity of Redcape Hotel Trust I and Redcape Hotel
Trust II
213,953,331
38.8
4 December 2018
51,500,000
9.34
4 December 2018
MAGIC TT Pty Ltd and Andrew Pridham
220,043,766
39.9
4 December 2018
Voting rights
The voting rights attached to ordinary stapled securities are set out below:
Ordinary stapled securities
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
stapled security shall have one vote.
There are no other classes of equity securities.
68
68
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
Appendix - Special Purpose Financial Statements ("SPFS")
30 June 2019
Redcape Hotel Group comprising Redcape Hotel Trust I
and Redcape Hotel Trust II
ASRN Redcape Hotel Trust I (ASRN 629 354 614) and Redcape Hotel Trust II
(ASRN 629 354 696)
Special Purpose Annual Report - 30 June 2019
69
69
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Statement of profit or loss and other comprehensive income
30 June 2019
Revenue
Cost of sales
Expenses
Operating costs
Management fees
Net finance costs
Employment costs
Depreciation and amortisation expense
Gain/(loss) on disposal of non-current assets
Loss on asset revaluation
Business acquisition costs
Operating profit
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
6
285,215
242,885
(133,021)
(117,110)
7
8
9
15
15
35
(32,162)
(14,166)
(17,324)
(38,720)
(11,360)
502
(17,998)
(7,631)
(27,122)
(13,139)
(14,911)
(29,608)
(9,036)
1,348
-
(31,509)
13,335
1,798
Listing costs and performance fee
10
(20,562)
-
Profit/(loss) before income tax benefit
(7,227)
1,798
Income tax benefit
11
2,297
230
Profit/(loss) after income tax benefit for the year
(4,930)
2,028
Other comprehensive income
Items that will not be reclassified subsequently to profit or loss
Gain on the revaluation of land
Items that may be reclassified subsequently to profit or loss
Net change in the fair value of cash flow hedges taken to equity
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Profit/(loss) for the year is attributable to:
Unitholders of Redcape Hotel Trust I
Unitholders of Redcape Hotel Trust II
Total comprehensive income for the year is attributable to:
Unitholders of Redcape Hotel Trust I
Unitholders of Redcape Hotel Trust II
37,573
127,840
(3,216)
(272)
34,357
127,568
29,427
129,596
10,691
(15,621)
-
2,028
(4,930)
2,028
45,048
(15,621)
-
129,596
29,427
129,596
Basic earnings per share (cents)
Diluted earnings per share (cents)
39
39
(0.93)
(0.93)
70
70
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Statement of financial position
30 June 2019
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Deferred tax
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Employee benefits
Distribution payable
Total current liabilities
Non-current liabilities
Other payables
Borrowings
Derivative financial instruments
Employee benefits
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Accumulated losses
Equity attributable to the stapled security holders of RHT II
Non-controlling interest
Total equity
Equity attributable to RHT I (non-controlling interest)
Contributed equity
Reserves
Accumulated losses
Total equity attributable to unitholders of RHT I (non-controlling interest) (a)
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
16,981
3,936
5,130
3,319
29,366
35,055
1,416
5,104
7,286
48,861
486,601
590,757
15,645
1,093,003
396,565
509,590
12,674
918,829
1,122,369
967,690
38,749
1,708
12,030
52,487
430
436,561
3,489
255
440,735
29,460
1,430
10,243
41,133
474
366,284
272
240
367,270
493,222
408,403
629,147
559,287
235,545
-
(43,293)
192,252
436,895
467,307
127,568
(35,588)
559,287
-
629,147
559,287
318,469
161,923
(43,497)
436,895
-
-
-
-
(a) Aggregated comparative hence no parent entity or non-controlling interest, therefore the balance reflected is zero.
71
71
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Statement of changes in equity
30 June 2019
Contributed
equity
$'000
Asset
revaluation
reserve
$'000
Cash flow
hedge
reserve
$'000
Accumulated
losses
$'000
Non-
controlling
interest
$'000
Aggregated
Balance at 1 July 2017
Profit after income tax benefit
for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income for
the year
Transactions with stapled
security holders in their capacity
as stapled security holders:
Contributions of equity, net of
transaction costs (note 25)
Distributions paid (note 27)
Adjustments
-
-
-
-
-
-
-
-
127,840
(272)
-
2,028
-
127,840
(272)
2,028
467,307
-
-
-
-
-
-
-
-
-
(37,026)
(590)
Total equity
$'000
-
2,028
127,568
129,596
467,307
(37,026)
(590)
559,287
-
-
-
-
-
-
-
-
Balance at 30 June 2018
467,307
127,840
(272)
(35,588)
Stapled Consolidated
Issued
capital
$'000
Asset
revaluation
reserve
$'000
Cash flow
hedge
reserve
$'000
Accumulated
losses
$'000
Non-
controlling
interest
$'000
Total equity
$'000
Balance at 1 July 2018
467,307
127,840
(272)
(35,588)
-
559,287
(267,758)
(127,840)
272
7,916
387,410
-
Arising due to stapling
arrangement
Profit/(loss) after income tax
benefit for the year
Other comprehensive income
for the year, net of tax
Total comprehensive income for
the year
Transactions with stapled
security holders in their capacity
as stapled security holders:
Contributions of equity, net of
transaction costs (note 25)
Distributions paid (note 27)
-
-
-
35,996
-
Balance at 30 June 2019
235,545
72
-
-
-
-
-
-
(15,621)
10,691
(4,930)
-
34,357
34,357
(15,621)
45,048
29,427
-
-
50,708
(46,271)
86,704
(46,271)
(43,293)
436,895
629,147
-
-
-
-
-
-
72
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Statement of cash flows
30 June 2019
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest and other finance costs paid
Income taxes paid
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
311,559
(257,638)
53,921
267,530
(213,764)
53,766
259
(18,183)
-
257
(13,126)
(1,632)
Net cash from operating activities
38
35,997
39,265
Cash flows from investing activities
Payment for purchase of business, net of cash acquired
Business acquisition transaction costs
Payments for property, plant and equipment
Payments for intangibles
Proceeds from disposal of business
Proceeds from disposal of investment property
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of stapled securities
Proceeds from borrowings
Repayment of borrowings
Stapled Securities issue transaction costs
Distributions paid
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
35
15
16
25
27
(153,349)
(7,631)
(25,182)
-
20,430
-
112
(794,378)
(31,509)
(14,761)
(1,329)
20,412
2,646
724
(165,620)
(818,195)
89,757
119,000
(49,000)
(3,724)
(44,484)
474,068
390,072
(23,372)
-
(26,783)
111,549
813,985
(18,074)
35,055
35,055
-
Cash and cash equivalents at the end of the financial year
12
16,981
35,055
73
73
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 1. General Information
(a) Reporting Entity
The Redcape Hotel Trust II ("RHT II") and Redcape Hotel Trust I ("RHT I") were stapled on 2 July 2018 such that the
securities are effectively dealt with as a stapled security.
The stapled securities of RHT I and RHT II (collectively “Redcape Hotel Group” or "Redcape") commenced trading as a
single stapled security on the ASX on 30 November 2018 under the ticker code “RDC”.
In accordance with AASB 3 Business Combinations one of the entities in the stapled structure is required to be identified
as the parent for the purpose of preparing consolidated financial reports. In accordance with this requirement, RHT II was
identified as the parent entity.
Redcape is a for-profit entity and its principal activity is the ownership and operation of Hotels. There has been no
significant change in the nature of the principal activity during the year.
(b) Responsible Entity
Redcape Hotel Group Management Ltd (“RHGM”) is the Responsible Entity of RHT I and RHT II effective 24 October 2018
(replacing Moelis Australia Asset Management Ltd).
(c) Scheme Registration
RHT I (ARSN 629 354 614) and RHT II (ARSN 629 354 696) are domiciled in Australia and were registered as managed
investment schemes on 26 October 2018 under the Corporations Act 2001.
(d) First-year report
Redcape has consulted with ASIC in relation to the period for its financial year ended 30 June 2019. In accordance with
ASIC’s view, Redcape’s financial year ended 30 June 2019 was the 12-month period commencing on 1 July 2018.
Redcape’s General Purpose Financial Statements (as required by Chapter 2M of the Corporations Act) set out Redcape’s
financial information for its financial year being the 12 months to 30 June 2019. The comparative numbers for the 12
months to 30 June 2018 are the numbers for Redcape Hotel Trust II only. The trusts were not stapled in during this period,
hence only the comparatives of the parent entity can be used.
Redcape has provided this Special Purpose full year financial report for the 12-month period ending 30 June 2019 with full
year aggregated comparatives.
Note 2. Basis of preparation
The Responsible Entity has prepared a Special Purpose consolidated financial statements for the year ended 30 June
2019 for the purpose of meeting the listing requirements of the Australian Securities Exchange ("ASX").
74
74
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
(a) Compliance Statement
The consolidated financial statements are Special Purpose financial statements which have been prepared in accordance
with the recognition, measurement and classification aspects of the Australian Accounting Standards (AASBs) adopted by
the Australian Accounting Standards Board (AASB). The Special Purpose consolidated financial statements include those
disclosures considered necessary by the directors of the Responsible Entity to meet the needs of users. The Special
Purpose consolidated financial statements comply with all disclosure requirements of the AASBs except for the
comparatives not complying with:
- AASB 10 Consolidated financial statements
Stapling of the entities occurred on 2 July 2018 hence Redcape’s FY18 accounts were prepared on an aggregated basis
as there was no single parent entity. Under AASB 10 aggregation of Redcape is not a consolidation. To comply with AASB
10, the comparative financials to be included in the 30 June 2019 consolidated financial statements are those of RHT II
(the parent entity in the FY18 accounts). As RHT I and RHT II were not stapled during the twelve months to 30 June 2018,
AASB 10 would require that the financials of RHT I would be wholly excluded from the comparative numbers in the 30 June
2019 consolidated financial statements.
The Responsible Entity has deemed that aggregated financials of RHT II and RHT I are the most relevant financials to be
used as comparatives for the year ended 30 June 2019 with the sole difference being the allocation of non-controlling
interest to RHT I with RHT II as the parent. For this reason alone, the 30 June 2019 financial statements have been
prepared as a Special Purpose accounts.
The financial report has been prepared on a going concern basis.
The Special Purpose consolidated financial report as at and for the year ended 30 June 2019 was approved by the
directors of the Responsible Entity on 28 August 2019
(b) Basis of measurement
The financial statements have been prepared on the historical cost basis, except for the following that are measured at fair
value:
- land; and
- derivative financial instruments.
The methods used to measure fair values are discussed in the relevant notes
(c) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is Redcape's functional currency and
amounts have been rounded to the nearest thousand dollars unless otherwise stated, in accordance with ASIC
Corporations (Rounding in Financial/Directors' Reports) Instrument 2016/191.
(d) Use of estimates and judgements
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgment in the process of applying accounting policies. Estimates and judgements affect the
application of policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from
these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in any future periods affected.
(e) Going Concern
The Special Purpose consolidated financial statements have been prepared on a going concern basis, which contemplates
continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of
business. At 30 June 2019, Redcape had current assets of $29.4 million and current liabilities of $52.5 million leaving a net
deficit of working capital of $23.1 million. The directors of the Responsible Entity believe Redcape will continue to generate
operating cash flows sufficient to meet current liability obligations.
75
75
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 3. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies
have been consistently applied to all the years presented, unless otherwise stated.
New or amended Accounting Standards and Interpretations adopted
Redcape has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian
Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The adoption of these Accounting Standards and Interpretations did not have any material impact on the financial
performance or position of Redcape.
The following Accounting Standards and Interpretations are most relevant to Redcape:
AASB 9 Financial Instruments
From 1 July 2018, Redcape has applied AASB 9 prospectively. The resulting accounting policies for Redcape's financial
instruments are explained in further detail in Note 3.
AASB 15 Revenue from Contracts with Customers
From 1 July 2018, Redcape has applied AASB 15 prospectively. The resulting accounting policies for Redcape's revenue
are explained in further detail in Note 3 Revenue Recognition.
Principles of consolidation
The consolidated Special Purpose financial statements incorporate the assets and liabilities of all subsidiaries of RHT II as
at 30 June 2019 and the results of all subsidiaries for the year then ended. RHT II and its subsidiaries together are referred
to in these financial statements as the 'Redcape'.
Subsidiaries are all those entities over which Redcape has control. Redcape controls an entity when Redcape is exposed
to, or has rights to, variable returns from its involvement with the entity. Subsidiaries are fully consolidated from the date on
which control is transferred to Redcape. They are de-consolidated from the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities in Redcape are eliminated.
Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred.
Accounting policies of subsidiaries align with the policies adopted by Redcape.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest,
without the loss of control, is accounted for as an equity transaction, where the difference between the consideration
transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity
attributable to the parent.
Where Redcape loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling
interest in the subsidiary together with any cumulative translation differences recognised in equity. Redcape recognises the
fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit
or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the same
basis as the internal reports provided to the Chief Operating Decision Makers ("CODM"). Redcape operates wholly within
one business segment being the ownership and operation of hotels in Australia.
76
76
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Revenue recognition
Redcape recognises revenue as follows:
Revenue from contracts with customers
Revenue is recognised at an amount that reflects the consideration to which Redcape is expected to be entitled in
exchange for transferring goods or services to a customer. For each contract with a customer, Redcape: identifies the
contract with a customer, identifies the performance obligations in the contract, determines the transaction price which
takes into account estimates of variable consideration and the time value of money, allocates the transaction price to the
separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be
delivered, and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the
transfer to the customer of the goods or services promised.
Variable consideration is not material in the context of Redcape's 'total revenue'.
Gaming Revenue
Gaming revenue is the net difference between gaming wins and losses and is recognised upon the outcome of the game at
the close of business.
Food and beverage revenue (On-Premise and Off-Premise)
Food and beverage revenue is recognised at the point in time the goods are provided and payment is collected.
Accommodation and other revenues
Accommodation and other revenues are recognised at the point in time services are performed.
Interest
Interest income is recognised using the effective interest method.
Income tax
RHT I
Under current income tax legislation, RHT I is not liable for income tax provided unit holders are presently entitled to all of
RHT I’s income at 30 June each year.
RHT II
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to
temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
●
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a
transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor
taxable profits; or
When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the
timing of the reversal can be controlled, and it is probable that the temporary difference will not reverse in the foreseeable
future.
●
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
77
77
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
RHT II and its wholly owned Australian subsidiaries have formed an income tax consolidated group under the tax
consolidation regime, effective July 2017 and are taxed as a single entity from that date. The head entity and each
subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax
consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of
taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets)
and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax
consolidated group. These are recognised as amounts payable to or receivable from other entities in the tax consolidated
group in conjunction with any tax funding arrangement amount.
The members of the tax consolidated group have entered into a tax funding arrangement which sets out the funding
obligations of members of the tax consolidated group in respect of tax amounts. The tax funding arrangement requires
payments to or from the head entity equal to the current tax liability or asset assumed by the head entity and any tax-loss
deferred tax asset assumed by the head entity.
The members of the tax consolidated group have also entered into a tax sharing agreement. The tax sharing agreement
provides for the determination of the allocation of income tax liabilities between the entities should the head entity default
on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement
as payment of any amounts under the tax sharing agreement is considered remote.
In determining the amount of current and deferred tax RHT II takes into account the impact of uncertain tax positions and
whether additional taxes and interest may be due. RHT II believes that its accruals for tax liabilities are adequate for all
open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This
assessment relies on estimates and assumptions and may involve a series of judgements about future events. New
information may become available that causes RHT II to change its judgement regarding the adequacy of existing tax
assets and liabilities; such changes to tax assets and liabilities will impact tax expense in the period such a determination is
made.
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses.
Redcape has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
Inventories
Inventories include food and beverages, these are costed on a weighted average basis and stated at the lower of cost and
net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion
and the estimated costs necessary to make the sale.
Derivative financial instruments
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 each reporting date. The accounting for subsequent changes in fair value depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Cash flow hedges
Cash flow hedges are used to hedge Redcape's interest rate risk exposures. The effective portion of the gain or loss on the
hedging instrument is recognised in other comprehensive income through the cash flow hedges reserve in equity, whilst
the ineffective portion is recognised in profit or loss. Amounts taken to equity are transferred out of equity and included in
the measurement of the hedged transaction when the forecast transaction occurs.
78
78
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Cash flow hedges are tested for effectiveness on a regular basis prospectively to ensure that each hedge is highly effective
and continues to be designated as a cash flow hedge. If the forecast transaction is no longer expected to occur, the
amounts recognised in equity are transferred to profit or loss.
If the hedging instrument is sold, terminated, expires, exercised without replacement or rollover, or if the hedge becomes
ineffective and is no longer a designated hedge, the amounts previously recognised in equity remain in equity until the
forecast transaction occurs.
Property, plant and equipment
Recognition and measurement
With the exception of land, all other items of property, plant and equipment are measured at cost less accumulated
depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets
includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working
condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are
located, and capitalised borrowing costs. Purchased software that is integral to the functionality of the related equipment is
capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from
disposal with the carrying amount of property, plant and equipment and are recognised net within other income in profit or
loss.
Subsequent costs
The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it
is probable that the future economic benefits embodied within the part will flow to Redcape, and its cost can be measured
reliably. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant
and equipment are recognised in profit or loss as incurred.
Depreciation
Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost,
less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption
of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term
and their useful lives unless it is reasonably certain that Redcape will obtain ownership by the end of the lease term.
The estimated useful lives are as follow:
Freehold buildings
Property improvements
Furniture, fittings and equipment
Software
40-150 years
7-40 years
7-15 years
4-7 years
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to
Redcape. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any
revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.
79
79
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Revaluation
Land is recognised at fair value based on periodic valuations by external independent valuers and/or 6-month director
valuations. A revaluation surplus is credited to other reserves in securityholders’ equity.
Increases in the carrying amounts arising on revaluation of land are recognised in other comprehensive income and
accumulated in other reserves in securityholders’ equity. To the extent that the increase reverses a decrease previously
recognised in profit or loss, the increase is first recognised in profit or loss. Decreases that reverse previous increases of
the same asset are first recognised in other comprehensive income to the extent of the remaining surplus attributable to
the asset. All other decreases are charged to profit or loss.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value
at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible
assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are
subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss
arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the
carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually.
Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation
method or period.
Goodwill
Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at
cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
Gaming licences
Separately acquired Gaming licences are shown at historical cost. Gaming licences acquired in a business combination
are recognised at fair value at the acquisition date. They have an indefinite useful life and are subsequently carried at cost
less accumulated impairment losses.
Gaming licenses are not amortised but tested for impairment annually, or more frequently if events or changes in
circumstances indicate that they might be impaired, and are carried at cost less accumulated impairment losses.
Liquor licences
Separately acquired Liquor licences are shown at historical cost. Liquor licences acquired in a business combination are
recognised at fair value at the acquisition date. They have an indefinite useful life and are subsequently carried at cost less
accumulated impairment losses.
Liquor licenses are not amortised but tested for impairment annually, or more frequently if events or changes in
circumstances indicate that they might be impaired, and are carried at cost less accumulated impairment losses.
Impairment
Non-financial assets
Goodwill and other 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 non-financial assets are reviewed 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.
Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or
cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to
form a cash-generating unit.
Financial assets
Redcape recognises a loss allowance for expected credit losses on financial assets which are either measured at
amortised cost. Redcape has adopted a lifetime expected loss allowance in estimating expected credit losses to trade
receivables. These provisions are considered representative across all customers of Redcape based on recent sales
experience, historical collection rates and forward-looking information that is available.
80
80
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Trade and other payables
These amounts represent liabilities for goods and services provided to Redcape prior to the end of the financial year and
which are unpaid. Due to their short-term nature they are measured at amortised cost, are unsecured and are not
discounted.
Loans and borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date, the
loans or borrowings are classified as non-current.
Finance costs
Finance costs are expensed in the period in which they are incurred. Finance costs comprise interest expense on
borrowings and unwinding of the discount on provisions.
Provisions
Provisions are recognised when Redcape has a present (legal or constructive) obligation as a result of a past event, it is
probable Redcape will be required to settle the obligation, and a reliable estimate can be made of the amount of the
obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present
obligation at the reporting date, considering the risks and uncertainties surrounding the obligation. If the time value of
money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the
provision resulting from the passage of time is recognised as a finance cost.
Employee benefits
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service
is provided.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at 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 expected future wage and salary levels,
experience of employee departures and periods of service. Expected future payments are discounted using market yields
at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible,
the estimated future cash outflows.
Fair value measurement
When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the
fair value is based on 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; and assumes that the transaction will take place either: in the
principal market; or in the absence of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market participants would use when pricing the asset or liability,
assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its
highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data is
available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and
transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair
value measurement.
For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either
not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge
and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an
analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison,
where applicable, with external sources of data.
81
81
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Issued capital
Ordinary stapled securities are classified as equity.
Incremental costs directly attributable to the issue of new stapled securities or options are shown in equity as a deduction,
net of tax, from the proceeds.
Distributions
Distributions are recognised when declared during the financial year and no longer at the discretion of the trust.
Provision is made for the amount of any distribution declared, being appropriately authorised and no longer at the
discretion of the trust, on or before the end of the financial year but not distributed at the reporting date.
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments
issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest
in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at the
proportionate share of the identifiable net assets of the acquiree. All acquisition costs are expensed as incurred to profit or
loss.
On the acquisition of a business, Redcape assesses the financial assets acquired and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic conditions, Redcape's operating or
accounting policies and other pertinent conditions in existence at the acquisition-date.
Where the business combination is achieved in stages, Redcape remeasures its previously held equity interest in the
acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is
recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment
in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair
value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a
gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and
measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred
and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based
on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement
period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the
information possible to determine fair value.
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part
of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
82
82
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by Redcape for the annual reporting period ended 30 June 2019. Redcape's
assessment of the impact of these new or amended Accounting Standards and Interpretations, most relevant to Redcape,
are set out below.
AASB 16 Leases
This standard is applicable to annual reporting periods beginning on or after 1 January 2019. The standard replaces AASB
117 'Leases' and for lessees will eliminate the classifications of operating leases and finance leases. Subject to exceptions,
a 'right-of-use' asset will be capitalised in the statement of financial position, measured at the present value of the
unavoidable future lease payments to be made over the lease term. The exceptions relate to short-term leases of 12
months or less and leases of low-value assets (such as personal computers and small office furniture) where an
accounting policy choice exists whereby either a 'right-of-use' asset is recognised or lease payments are expensed to profit
or loss as incurred. A liability corresponding to the capitalised lease will also be recognised, adjusted for lease
prepayments, lease incentives received, initial direct costs incurred and an estimate of any future restoration, removal or
dismantling costs. Straight-line operating lease expense recognition will be replaced with a depreciation charge for the
leased asset (included in operating costs) and an interest expense on the recognised lease liability (included in finance
costs). In the earlier periods of the lease, the expenses associated with the lease under AASB 16 will be higher when
compared to lease expenses under AASB 117. However, EBITDA results will be improved as the operating expense is
replaced by interest expense and depreciation in profit or loss under AASB 16. For classification within the statement of
cash flows, the lease payments will be separated into principal (financing activities) and interest (either operating or
financing activities) component. For lessor accounting, the standard does not substantially change how a lessor accounts
for leases. The consolidated entity will adopt this standard from 1 July 2019 and its impact on adoption is expected to result
in total lease assets increasing by approximately $23.8 million and total lease liabilities increasing approximately $25.6
million. Deferred tax asset that arises as a result of both the internal and external leases that will not be eliminated on
consolidation is by approximately $9.5 million.
Note 4. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in
relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates
and assumptions on historical experience and on other various factors, including expectations of future events, which
management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will
seldom equal the related actual results. Judgements, estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial
year are discussed below.
Valuation of land
The fair value of land is reviewed regularly by management with reference to external independent valuations, recent offers
and market conditions existing at reporting date, using generally accepted market practices. Then critical assumptions
underlying management’s estimates of fair value are those relating to the capitalisation rate and adopted earnings. If there
is any change in these assumptions or economic conditions, the fair value of the land may differ.
Fair value measurement hierarchy
Redcape is required to classify all assets and liabilities, measured at fair value, using a three level hierarchy, based on the
lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in
active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2: Inputs other
than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and Level
3: Unobservable inputs for the asset or liability. Considerable judgement is required to determine what is significant to fair
value and therefore which category the asset or liability is placed in can be subjective.
Goodwill and other indefinite life intangible assets
Redcape tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill
and other indefinite life intangible assets have suffered any impairment, in accordance with the accounting policy stated in
note 3. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.
These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital
and growth rates of the estimated future cash flows.
83
83
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
Redcape assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each
reporting date by evaluating conditions specific to Redcape and to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal
or value-in-use calculations, which incorporate a number of key estimates and assumptions.
Note 5. Operating segments
Identification of reportable operating segments
Redcape operates as one business segment being the owner and/or operator of pubs, and in one geographic segment
being Australia. These operating segments are based on the internal reports that are reviewed and used by the Board of
Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in
determining the allocation of resources. There is no aggregation of operating segments.
The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies
adopted for internal reporting to the CODM are consistent with those adopted in the financial statements.
The information is reported to the CODM at each period end.
Note 6. Revenue
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Major revenue streams
Gaming revenue
On-premise revenue
Off-premise revenue
Corporate and other revenue
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
179,099
56,877
48,022
1,217
153,846
39,998
48,126
915
285,215
242,885
All major revenue streams are within Australia and timing of revenue recognition is when goods or services are transferred.
Note 7. Operating costs
Administrative expenses
Advertising and marketing expenses
Operating expenses
Repairs and maintenance expenses
Property outgoing expenses
Rental expenses
84
84
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
3,287
5,082
11,771
2,161
8,613
1,248
2,348
3,825
9,668
1,858
7,209
2,214
32,162
27,122
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 8. Management fees
Hotel operating fee
Asset management fee
Note 9. Net finance costs
Finance income
Finance costs
Note 10. Listing costs and performance fee
Listing costs (a)
Performance fee (b)
Total listing costs and performance fee
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
9,138
5,028
9,389
3,750
14,166
13,139
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
(259)
17,583
(257)
15,168
17,324
14,911
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
6,762
13,800
20,562
-
-
-
(a) Expensed costs associated with listing Redcape on the ASX.
(b) Fee payable to the Responsible Entity, in its personal capacity, on the overall performance of Redcape and realised
upon IPO event. Comprises fee of $13.5 million plus non-claimable GST of $0.3 million.
85
85
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 11. Income tax benefit
Income tax benefit
Deferred tax - origination and reversal of temporary differences
Aggregate income tax benefit
Deferred tax included in income tax benefit comprises:
Increase in deferred tax assets (note 17)
Numerical reconciliation of income tax benefit and tax at the statutory rate
Profit/(loss) before income tax benefit
Tax at the statutory tax rate of 30%
Trust loss not subject to tax
Non-deductible expenses
Income tax benefit
Amounts credited directly to equity
Deferred tax assets (note 17)
Note 12. Current assets - cash and cash equivalents
Cash and cash equivalents
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
(2,297)
(2,297)
(230)
(230)
(2,297)
(230)
(7,227)
1,798
(2,168)
(787)
658
(2,297)
539
(941)
172
(230)
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
(674)
(1,843)
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
16,981
35,055
Cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-term, highly
liquid investments with original maturities of three months or less.
86
86
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 13. Current assets - trade and other receivables
Trade receivables
Other receivables (a)
(a) Includes receivables from supplier rebates.
Note 14. Current assets - other current assets
Prepayments
Acquisition costs
Capitalised loan establishment costs
Note 15. Non-current assets - property, plant and equipment
Land - at valuation
Buildings - at cost
Less: Accumulated depreciation
Property improvements - at cost
Less: Accumulated depreciation
Furniture, fittings & equipment - at cost
Less: Accumulated depreciation
Work in progress - at cost
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
514
3,422
81
1,335
3,936
1,416
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
2,760
-
559
2,321
4,632
333
3,319
7,286
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
351,648
351,648
292,260
292,260
59,505
(2,033)
57,472
37,189
(2,615)
34,574
41,869
(9,691)
32,178
47,607
(803)
46,804
24,957
(1,420)
23,537
29,945
(4,530)
25,415
10,729
8,549
486,601
396,565
87
87
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
(a) Note 35 details treatment of business combination and disposal.
(b) Net revaluation uplift of $20.5 million includes gain of $38.5 million recognised in the asset revaluation reserve offset by
a loss of $18.0 million recognised in the income statement. Gain on revaluation of land of $37.6 million in other
comprehensive income includes the reserve released on the sale of Belrose Hotel.
Valuations of land
The basis of the valuations of land is fair value. The land was last revalued on 31 May 2019 based on independent external
assessments by a professionally qualified valuer, having recent experience in the location and category of land being
valued. Land is revalued by the directors each half year where an independent valuation has not been sought. The
directors do not believe that there has been a material movement in fair value since the revaluation date. Valuations are
based on current prices for similar properties in the same location and condition.
Land stated under the historical cost convention
If land and buildings were stated under the historical cost convention, the amounts would be as follows:
Land
Building
Property
improvement
Furniture,
fittings &
equipment
Work in
progress
Stapled Consolidated
$'000
$'000
$'000
$'000
$'000
Balance at 1 July 2017
Disposals
Disposals - business
Additions
Additions - business
acquisitions
Revaluation increments
Transfers in/(out)
Depreciation expense
Balance at 30 June 2018
Disposals
Disposals - business (a)
Additions
Additions - business
acquisitions (a)
Revaluation increments (b)
Transfers in/(out)
Depreciation expense
-
-
(6,293)
-
170,713
127,840
-
-
292,260
-
(1,821)
-
40,756
20,453
-
-
-
-
(1,038)
22
48,634
-
-
(814)
46,804
-
(4,841)
86
16,751
-
-
(1,328)
-
(225)
(199)
689
22,529
-
2,305
(1,562)
23,537
(839)
(264)
3,518
-
-
10,634
(2,012)
-
(640)
(573)
5,091
26,704
-
1,493
(6,660)
25,415
(132)
(710)
6,513
6,975
-
2,137
(8,020)
-
(22)
(30)
8,959
3,440
-
(3,798)
-
8,549
-
(114)
15,065
-
-
(12,771)
-
Total
$'000
-
(887)
(8,133)
14,761
272,020
127,840
-
(9,036)
396,565
(971)
(7,750)
25,182
64,482
20,453
-
(11,360)
Balance at 30 June 2019
351,648
57,472
34,574
32,178
10,729
486,601
Land - at cost
88
88
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
204,233
204,233
164,421
164,421
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 16. Non-current assets - intangible assets
Goodwill - at cost
Gaming and liquor licences - at cost
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
327,714
278,461
263,043
231,129
590,757
509,590
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out
below:
Aggregated
Balance at 1 July 2017
Additions
Disposals
Additions - business acquisitions
Stapled Consolidated
Balance at 30 June 2018
Disposals (a)
Additions - business acquisitions (note 35)
Balance at 30 June 2019
Gaming and
liquor
licences
Goodwill
$'000
$'000
Total
$'000
-
-
(4,942)
283,403
-
1,329
(5,700)
235,500
-
1,329
(10,642)
518,903
278,461
(7,022)
56,275
231,129
(5,509)
37,423
509,590
(12,531)
93,698
327,714
263,043
590,757
(a) Relates to disposal of Belrose hotel. Refer to commentary in note 35.
Impairment testing
Goodwill is allocated to the group of cash-generating units which in total reflect Redcape’s operating segment.
The recoverable amount of Redcape's goodwill has been determined by a value-in-use calculation using a discounted cash
flow model, based on a 1 year projection period approved by management and extrapolated for a further 4 years using a
steady rate, together with a terminal value applied to the forecast fifth year after tax cashflows.
Management has based the value-in-use calculations on the historical performance and future prospects of the business
as reported to the CODM, taking into consideration the like-for-like historical growth.
As a result of the value-in-use calculation, no impairment of goodwill has been recorded in the Financial Statements.
Key assumptions are those to which the recoverable amount of an asset or cash-generating units is most sensitive.
The following key assumptions were used in the value-in-use calculations:
Discount rate (pre-tax)
EBITDAR growth rate
Terminal value growth rate
89
2019
%
2018
%
8.1%
3.0%
3.0%
8.7%
3.0%
3.0%
89
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Sensitivity
Management believes that any reasonably possible change in the key assumptions used would not cause the cash-
generating unit’s carrying amount to exceed its recoverable amount and result in a material impairment based on current
economic conditions and CGU performance
The below table shows the key assumptions used in the value in use calculation and the amount by which each key
assumption must change in isolation in order for the estimated recoverable amount to be equal to its carrying value.
Terminal
value
%
Pre-tax
discount rate
%
3.0%
1.7%
8.1%
9.2%
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
4,975
1,249
589
163
1,659
2,360
4,636
14
1,770
1,002
501
584
1,763
2,928
4,092
34
15,645
12,674
12,674
2,297
674
-
-
230
1,843
10,601
15,645
12,674
Assumptions used in value in use calculation
Rate required for recoverable amount to equal carrying value (a)
(a) Each rate is determined in isolation.
Note 17. Non-current assets - deferred tax
Deferred tax asset comprises temporary differences attributable to:
Amounts recognised in profit or loss:
Tax losses
Property, plant and equipment
Employee benefits
Accrued expenses
Straight-line lease liability
Over market rent liability
Transaction costs
Other items
Deferred tax asset
Movements:
Opening balance
Credited to profit or loss (note 11)
Credited to equity (note 11)
Additions through business combinations
Closing balance
90
90
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 18. Current liabilities - trade and other payables
Trade payables
Accrued interest
Performance fee
Other payables
State government taxes
Note 19. Current liabilities - employee benefits
Annual leave
Long service leave
Stapled
Consolidated
2019
$'000
Stapled
Consolidated
2019
Aggregated
2018
$'000
Aggregated
2018
3,972
1,944
6,400
8,125
18,308
3,055
2,595
-
7,489
16,321
38,749
29,460
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
1,453
255
1,206
224
1,708
1,430
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes all unconditional entitlements where employees have completed the
required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The
entire amount is presented as current, since Redcape does not have an unconditional right to defer settlement. However,
based on past experience, Redcape does not expect all employees to take the full amount of accrued leave or require
payment within the next 12 months.
The following amounts reflect leave that is not expected to be taken within the next 12 months:
Employee benefits obligation expected to be settled after 12 months
255
240
Note 20. Current liabilities - distribution payable
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
Distributions
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
12,030
10,243
91
91
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Distributions
The provision represents distributions declared, being appropriately authorised and no longer at the discretion of the trust,
on or before the end of the financial year but not distributed at the reporting date.
Carrying amount at the start of the year
Additional provisions recognised
Payments relating to prior period
Payments relating to current period
Carrying amount at the end of the year
Note 21. Non-current liabilities - other payables
Straight-line lease liability
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
10,243
46,271
(10,243)
(34,241)
-
37,026
-
(26,783)
12,030
10,243
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
430
474
Leases in which a significant portion of the risks and rewards of ownership are not transferred to Redcape as lessee are
classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are
charged to profit or loss on a straight-line basis over the period of the lease.
Note 22. Non-current liabilities - borrowings
Bank loans
Capitalised loan establishment costs
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
436,700
(139)
366,700
(416)
436,561
366,284
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
436,700
366,700
Syndicated Bank Facility
The total facility amount is $477.0 million (excluding $3.0 million ancillary facility) and expires on 23 September 2020.
92
92
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Assets pledged as security
The financiers in respect of the bank loans have first ranking security over all of the assets of each entity in Redcape, a
registered mortgage over each property and a fixed charge over each liquor and gaming licence.
Defaults and breaches
There have been no breaches of bank covenants in the year ended 30 June 2019.
Restrictions on distributions
There have been no breaches of the restrictions on distributions in the year ended 30 June 2019.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans
Used at the reporting date
Bank loans
Unused at the reporting date
Bank loans
Note 23. Non-current liabilities - derivative financial instruments
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
477,000
427,000
436,700
366,700
40,300
60,300
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
Interest rate swap contracts - cash flow hedges
3,489
272
Refer to note 28 for further information on financial instruments.
Refer to note 29 for further information on fair value measurement.
Note 24. Non-current liabilities - employee benefits
Long service leave
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
255
240
93
93
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 25. Equity - contributed equity
Stapled
Consolidated
2019
Stapled
Securities
Aggregated
2018
Stapled
Securities
Stapled
Consolidated
2019
Aggregated
2018
$'000
$'000
Contributed equity
551,445,932 470,312,074
235,545
467,307
Details
RHT II Consolidated
Balance at beginning of the period
Securities issued
Equity raising costs
Deferred tax asset
June 2019 June 2019 June 2018 June 2018
No of
securities
'000
$'000
No of
securities
'000
$'000
470,312
81,134
-
-
199,549
37,569
(2,247)
674
-
470,312
-
-
-
203,849
(6,143)
1,843
Balance at end of the period
551,446
235,545
470,312
199,549
Details
RHT I Consolidated (non-controlling interest)
Balance at beginning of the period
Securities issued
Equity raising costs
June 2019 June 2019 June 2018 June 2018
No of
securities
'000
$'000
No of
securities
'000
$'000
470,312
81,134
-
267,758
52,188
(1,477)
-
470,312
-
-
270,219
(2,461)
Balance at end of the period
551,446
318,469
470,312
267,758
Ordinary stapled securities
The Ordinary securities of RHT II are stapled to the securities of RHT I. Each stapled security entitles the holder to
participate in distributions and the proceeds on the winding up of the trust in proportion to the number of and amounts paid
on the securities held. The fully paid stapled ordinary securities have no par value and the trust does not have a limited
amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
stapled security shall have one vote.
Stapled Securities buy-back
As disclosed in the PDS, the Responsible Entity may in its sole discretion proceed with an on-market buy-back of up to 5%
of Redcape stapled securities. The timing of and conduct of the buy-back will be in accordance with the Listing Rules and
all applicable laws. No buy-back of Redcape stapled securities has been undertaken by the Responsible Entity.
Voluntary Escrow
There are currently 51.5 million shares subject to a voluntary escrow arrangement. The escrow period ends in February
2020 in line with Redcape's FY20 HY results release.
Capital risk management
Redcape's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can
provide returns for stapled security holders and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
94
94
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated
as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, Redcape may adjust the amount of distributions paid to stapled security
holders, return capital to stapled security holders, issue new stapled securities or sell assets to reduce debt.
Redcape would look to raise capital when an opportunity to invest in a business or company was seen as value adding
relative to the current trust's stapled securities price at the time of the investment.
Redcape is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk
management decisions. There have been no events of default on the financing arrangements during the financial year.
The capital risk management policy remains unchanged from the previous reporting period.
Note 26. Equity - non-controlling interest
Contributed equity
Reserves
Accumulated losses
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
318,469
161,923
(43,497)
436,895
-
-
-
-
Aggregated comparative with no parent entity or non-controlling interest, therefore the balance reflected is zero.
Contributed
Hedging
Revaluation
equity
$'000
reserve
$'000
reserve
$'000
Retained
earnings/
(Accumulate
d losses)
$'000
RHT I Consolidated
Profit for the year
Total other comprehensive income
Arising on stapling
Issue of securities
Equity raising costs
Interim distributions paid to unitholders
Provisions for distribution to unitholders
-
-
267,758
52,188
(1,477)
-
-
-
(3,216)
(272)
-
-
-
-
-
37,573
127,838
-
-
-
-
10,691
-
(7,917)
-
-
(34,241)
(12,030)
Total
$'000
10,691
34,357
387,407
52,188
(1,477)
(34,241)
(12,030)
Balance at 30 June 2019
318,469
(3,488)
165,411
(43,497)
436,895
95
95
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 27. Equity - distributions
Distributions paid/payable during the financial year were as follows:
Final distribution for the quarter ended 30 September 2018 of 2.205 cents (FY18: 2.205
cents) per unit
Final distribution for the quarter ended 31 December 2018 of 2.205 cents (FY18: 2.205
cents) per unit
Final distribution for the quarter ended 31 March 2019 of 2.158 cents (FY18: 2.158 cents)
per unit
Final distribution for the quarter ended 30 June 2019(a) of 2.182 cents (FY18: 2.182 cents)
per unit
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
10,795
7,839
11,548
9,032
11,898
9,912
12,030
10,243
46,271
37,026
(a) On 24 June 2019 the directors declared a final dividend for the quarter ended 30 June 2019 of 2.182 cents per unit to
be paid on 30 August 2019.
Distributions prior to the listing on the ASX as at 30 November 2018 were calculated on a pro rata basis for days held.
Note 28. Financial instruments
Financial risk management objectives
Redcape's activities expose it to interest rate risks, credit risk and liquidity risk. Redcape's overall risk management
program seeks to minimise potential adverse effects on the financial performance of Redcape. Redcape uses derivative
financial instruments such as interest rate swaps to hedge its interest rate risk exposure. Derivatives are exclusively used
for hedging purposes, i.e. not as trading or other speculative instruments. Redcape uses different methods to measure
different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and
ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('Finance') under policies approved by the directors of the
Responsible Entity. These policies include identification and analysis of the risk exposure of Redcape and appropriate
procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within Redcape's operations.
Finance reports to the directors on a monthly basis.
Market risk
Foreign currency risk
Redcape is not exposed to any foreign currency risk.
Price risk
Redcape is not exposed to any significant price risk.
Interest rate risk
Redcape's main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose Redcape
to interest rate risk. Borrowings obtained at fixed rates expose Redcape to fair value interest rate risk. The policy is to
maintain approximately 50% of current borrowings at fixed rates using interest rate swaps to achieve this when necessary.
96
96
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
As at the reporting date, Redcape had the following variable rate borrowings and interest rate swap contracts outstanding:
Stapled Consolidated
Stapled Consolidated 2019
Weighted
average
interest rate
%
Balance
$'000
Weighted
average
interest rate
%
Aggregated 2018
Balance
$'000
Bank loans
Interest rate swaps (notional principal amount)
2.98%
-
436,700
(238,500)
2.84%
-
366,700
(215,000)
Net exposure to interest rate risk
198,200
151,700
For Redcape the bank loans outstanding, totalling $436.7 million (2018: $366.7 million), are interest payment loans.
Monthly cash outlays of approximately $1.1 million (2018: $0.8 million) per month are required to service the interest
payments. An official increase/decrease in interest rates of 100 (2018: 100) basis points would have an adverse/favourable
effect on profit before tax of $4.4 million (2018: $3.7 million) per annum.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to
Redcape. Redcape has a strict code of credit, including obtaining agency credit information, confirming references and
setting appropriate credit limits. The maximum exposure to credit risk at the reporting date to recognised financial assets is
the carrying amount. Redcape does not hold any collateral or have any expected credit losses.
Liquidity risk
Redcape manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously
monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Redcape has
a voluntary working capital deficiency based on its capital management strategy of paying down debt with excess cash.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank loans
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
40,300
60,300
Remaining contractual maturities
The following tables detail Redcape's remaining contractual maturity for its financial instrument liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the
financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining
contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position.
Stapled Consolidated 2019
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans
Total non-derivatives
Weighted
average
interest rate
%
1 year or
less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Remaining
contractual
maturities
$'000
Over 5 years
$'000
-
-
3,972
34,777
-
-
2.98%
17,386
56,135
468,102
468,102
-
-
-
-
97
-
-
-
-
3,972
34,777
485,488
524,237
97
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Aggregated 2018
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans
Total non-derivatives
Weighted
average
interest rate
%
1 year or
less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years
$'000
Remaining
contractual
maturities
$'000
Over 5 years
$'000
-
-
3,055
26,405
-
-
-
-
2.84%
16,345
45,805
17,970
17,970
380,691
380,691
-
-
-
-
3,055
26,405
415,006
444,466
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed
above. Redcape is in the process of refinancing its debt facilities which, when approved, will extend the repayments by
another four years. The extension of the bank loans is not reflected in the above contractual maturities.
Fair value of financial instruments
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
Note 29. Fair value measurement
Fair value hierarchy
The following tables detail Redcape's assets and liabilities, measured or disclosed at fair value, using a three-level
hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly
Level 3: Unobservable inputs for the asset or liability
Stapled Consolidated 2019
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
Assets
Land
Total assets
Liabilities
Interest rate swaps
Total liabilities
Aggregated 2018
Assets
Land
Total assets
Liabilities
Interest rate swaps
Total liabilities
Level 1
$'000
-
-
-
-
-
-
-
-
Level 2
$'000
-
-
-
-
-
-
-
-
351,648
351,648
351,648
351,648
3,489
3,489
3,489
3,489
Level 3
$'000
Total
$'000
292,260
292,260
292,260
292,260
272
272
272
272
There were no transfers between levels during the financial year.
The carrying amounts of trade and other receivables and trade and other payables are assumed to approximate their fair
values due to their short-term nature.
98
98
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market
interest rate that is available for similar financial liabilities.
Valuation techniques for fair value measurements categorised within level 2 and level 3
The basis of the valuations of land is fair value. The land was last revalued on 31 May 2019 based on independent external
assessments by a professionally qualified valuer, having recent experience in the location and category of land being
valued, and internal valuations performed by Redcape's internal property team. All internal valuations have been reviewed
and approved by the Board to form Directors valuation. All internal valuations have been reviewed and approved by the
Board. The directors do not believe that there has been a material movement in fair value since the revaluation date.
Valuations are based on current prices for similar properties in the same location and condition.
Derivative financial instruments have been valued using quoted market rates. This valuation technique maximises the use
of observable market data where it is available.
Note 30. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by KPMG, the auditor of the trust:
Audit services - KPMG
Audit or review of the financial statements
Other services - KPMG
IPO related services including due diligence
Stapled
Consolidated
2019
$
Aggregated
2018
$
349,075
299,534
799,914
20,000
1,148,989
319,534
Note 31. Contingent liabilities
Redcape has provided bank guarantees to a supplier and landlord as at 30 June 2019 of $1,800,000 (2018: $1,800,000).
Note 32. Commitments
Capital commitments
Committed at the reporting date but not recognised as liabilities, payable:
Property, plant and equipment
Lease commitments - operating
Committed at the reporting date but not recognised as liabilities, payable:
Within one year
One to five years
More than five years
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
-
1,296
1,322
5,803
25,993
1,274
4,117
-
33,118
5,391
99
99
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 33. Related party transactions
Parent entity
Redcape Hotel Trust II is the parent entity.
Transactions with related parties
(a) Responsible entity
Moelis Australia Asset Management Ltd (i)
Fund establishment fee
Asset management fee
Debt arrangement fee
Acquisition fee
Disposal fee
Redcape Hotel Group Management Ltd (ii)
Asset management fee
Acquisition fee
Performance fee (iii)
Transaction
values for
the year
ended 30
June 2019
$
Balance
outstanding
as at 30 June
2019
$
Transaction
values for
the year
ended 30
June 2018
$
Balance
outstanding
as at 30 June
2018
$
-
1,466,532
250,000
1,080,000
210,000
3,006,532
-
-
-
-
-
-
3,850,000
3,750,064
321,500
1,231,500
237,500
-
358,656
-
-
-
9,390,564
358,656
3,561,614
500,000
14,400,000
435,667
-
6,400,000
18,461,614
6,835,667
-
-
-
-
-
-
-
-
(i) Moelis Australia Asset Management Ltd ceased to be the Responsible Entity on 24th October 2018.
(ii) Redcape Hotel Group Management Ltd became the Responsible Entity of the Trust from 24th October 2018.
(iii) Performance fee of $0.9 million has been capitalised to equity and $13.5 million has been expensed.
(b) Other related party transactions
The aggregate amounts recognised during the period relating to transactions between Redcape and related entities were
as follows:
100
100
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Related Entity
Transaction
Moelis Australia Advisory Pty
Limited
Moelis Australia Advisory Pty
Limited
Moelis Australia Hotel
Management Pty Ltd
Moelis Australia Hotel
Management Pty Ltd
Underwriting fee
Transaction fee
Hotel operating fee (a)
Project development fee
Transaction
values for
the year
ended 30
June 2019
$
Balance
outstanding
as at 30 June
2019
$
Transaction
values for
the year
ended 30
June 2018
$
Balance
outstanding
as at 30 June
2018
$
2,375,000
3,115,670
-
-
8,115,597
-
-
-
9,137,915
(409,473)
9,389,155
655,924
743,851
73,822
329,205
53,715
15,372,436
(335,651) 17,833,957
709,639
(a) Includes the $1.45 million waiver of the Hotel Operator Fee by the Trust manager.
Note 34. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Retained profits/ (Accumulated losses)
Total equity
Parent
2019
$'000
2018
$'000
(12,815)
6,154
(12,815)
6,154
Parent
2019
$'000
2018
$'000
191,798
168,297
232,443
205,971
3,559
3,559
268
268
235,545
(6,661)
199,549
6,154
228,884
205,703
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
The subsidiaries of RHT II are the initial guarantors of the syndicated bank facility of Redcape Hotel Property Trust, a
subsidiary of RHT I. Redcape Hotel Fund Pty Ltd, a subsidiary of RHT II also has in placed a Deed of Cross Guarantees in
relation to the debts of the trading subsidiaries.
101
101
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2019 and 30 June 2018.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment as at 30 June 2019 and 30 June 2018.
The accounting policies of the parent entity are consistent with those of Redcape, as disclosed in note 3, except for the
following:
●
Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity.
Note 35. Business combinations and disposals
Business combination to form Redcape Hotel Group
Stapling
In accordance to the stapling deed, securities in RHT I and RHT II were stapled to one another on 2 July 2018. They were
listed as a single security on the ASX at 30 November 2018. RHT II is identified as the parent of Redcape and acquirer of
RHT I with the acquisition accounted for as a change in ownership without a loss of control. The issued securities of RHT I
are not owned by RHT II and are presented as non-controlling interests in Redcape even though securities in RHT I are
held directly by the unitholders of the Trust. Additionally, no goodwill has been recognised on acquisition of RHT I because
no direct ownership interest was acquired by Redcape in RHT I.
The equity in the net assets of RHT I and the profit/(loss) arising from those net assets have been separately identified in
the statements of comprehensive income and financial position. RHT I’s contributed equity and retained
earnings/accumulated losses are shown as a non-controlling interest in the consolidated financial statements in
accordance with accounting standards.
Redcape was admitted to the official list of the ASX as a stapled group and consequently, ASX reserves the right (but
without limiting its absolute discretion) to remove any or both of RHT I and RHT II from the official list of ASX if any of the
securities in RHT I or RHT II comprising Redcape stapled securities cease to be stapled together or any equity securities
are issued by either RHT I or RHT II which are not stapled to the equivalent securities in the other of RHT I or RHT II.
Details of the acquisition arising from stapling are as follows:
Cash and cash equivalents
Related party loan
Other current assets
Investment property
Trade and other payables
Distribution payable
Loans and borrowings
Derivative financial instruments
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Accumulated losses
Accumulated losses are losses attributable to RHT II.
Movement in accumulated losses were as follows:
102
102
Fair value
$'000
14,519
136,625
5,184
611,873
(3,900)
(10,243)
(366,376)
(272)
387,410
-
387,410
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Balance at 1 July 2018
Net loss for the year attributable to RHT II
Arising from stapling (a)
Stapled
Consolidated
2019
$'000
(1,156)
(15,621)
(26,516)
(43,293)
(a) RHT I holds the Freehold assets which are recognised collectively as investment properties in the RHT I balance sheet.
On consolidation, where Redcape holds the Freehold of the assets, the investment properties are disaggregated into
their components (Land, Buildings, Licences). On disaggregation, depreciation and capitalised acquisition costs are
also expensed to the income statement causing losses to the income statement as a result of stapling.
Other business acquisitions
Redcape has settled on the acquisition of 6 hotels during the year ended 30 June 2019. The following summarises the
major classes of consideration transferred and recognises the amounts of assets acquired and liabilities assumed at the
acquisition date:
Details of the acquisition are as follows:
Cash and cash equivalents
Inventories
Prepayments
Property, plant and equipment (Note 15)
Gaming and liquor licences (Note 16)
Trade and other payables
Employee benefits
Net assets acquired
Goodwill
Acquisition-date fair value of the total consideration transferred
Representing:
Cash paid or payable to vendor
Acquisition costs expensed to profit or loss
Cash used to acquire businesses; net of cash acquired:
Acquisition-date fair value of the total consideration transferred
Add: payments made for future period acquisition
Less: cash and cash equivalents
Less: payments made in prior periods
Less: payments of equity raising fee as part of acquisition
Net cash used
103
Fair value
$'000
229
263
105
64,482
37,423
(698)
(149)
101,655
56,275
157,930
157,930
7,631
Stapled
Consolidated
2019
$'000
157,930
-
(229)
(4,352)
-
153,349
103
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Acquisition related costs
Business acquisition costs of $7.6 million include stamp duty, legal fees and due diligence costs were included in
Redcape's consolidated statement of profit or loss and other comprehensive income.
Disposals
Redcape has disposed 1 hotel during the year ended 30 June 2019 resulting in a gain on disposal of $1.0 million. The
carrying amount of property plant and equipment at the date of disposal amounted to $7.8 million and 2018 investment
property $2.3 million. The value of intangibles at the date of disposal amounted to $12.5 million
Note 36. Interests in subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in
accordance with the accounting policy described in note 3:
Subsidiaries of RHT II
(All incorporated in Australia)
Redcape Hotel Fund Pty Ltd
MAHF Custodian Pty Ltd
MAHPT TT Pty Ltd
Redcape Group Limited
Redcape Hotel Group Pty Ltd
RHG Operations Pty Ltd
Redcape Services Pty Ltd
RGM TT Pty Ltd
2019
%
2018
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
100.00%
100.00%
100.00%
100.00%
-
104
104
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Subsidiaries of RHT I
(All incorporated in Australia)
Redcape Hotel Property Trust
St George Hotel Trust
Doonside Hotel Trust
El Cortez Hotel Trust
Keighery Hotel Trust
Lakeview Hotel Motel Trust
Prospect Hotel Trust
Royal Hotel Trust
St Marys Hotel Trust
Belrose Hotel Trust
Red Lantern Hotel Trust
Campbelltown Hotel Trust
Eastwood Hotel Trust
Leumeah Hotel Trust
Mount Annan Hotel Trust
Revesby Pacific Hotel Trust
Willoughby Hotel Trust
Eastern Creek Tavern Hotel Trust
Landmark Hotel Trust
Crown Revesby Hotel Trust
Minskys Hotel Trust
Shamrock Hotel Trust
Hermit Park Hotel Trust
Wattle Hotel Trust
Carrington Hotel Trust
Andergrove Tavern Hotel Trust
Cabramatta Hotel Trust
Crescent Hotel Trust
Wattle Grove Hotel Trust
Sun Hotel Trust - Acquired on 2 July 2018
Vauxhall Hotel Trust - Acquired on 13 August 2018
Australian Hotel & Brewery Trust - Acquired on 20 August 2018
Central Hotel Trust - Acquired on 4 December 2018
Unanderra Hotel Trust - Acquired on 4 December 2018
Figtree Hotel Trust - Acquired on 4 December 2018
Note 37. Events after the reporting period
2019
%
2018
%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
100.00%
-
-
-
-
-
-
Subsequent to 30 June 2019, Redcape refinanced its debt facilities resulting in an increased facility of $503.0 million
(including $3.0 million ancillary facility) with a weighted average term of 4 years. As a result of the refinancing, in FY20 the
hedge position of the existing finance facility will be closed out at a cost of approximately $4.0 million. Capitalised loan
establishment costs of $0.5 million will be written off upon activation of the new facility in FY20.
Post the end of the financial year, Redcape exchanged contracts to acquire the Eden Brewhouse Redbank Plains
Queensland as part of the ongoing portfolio optimisation program.
No other material matter or circumstance has arisen since 30 June 2019 that has significantly affected, or may significantly
affect Redcape's operations, the results of those operations, or Redcape's state of affairs in future financial years.
105
105
ASX:RDCAnnual Report 2019For personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Notes to the financial statements
30 June 2019
Note 38. Reconciliation of profit/(loss) after income tax to net cash from operating activities
Profit/(loss) after income tax benefit for the year
(4,930)
2,028
Stapled
Consolidated
2019
$'000
Aggregated
2018
$'000
Adjustments for:
Depreciation and amortisation expense
Loss on asset revaluation
Net loss/(gain) on disposal of non-current assets
Business acquisition costs
Change in operating assets and liabilities:
Decrease/(increase) in trade and other receivables
Decrease/(increase) in inventories
Increase in deferred tax assets
Increase in prepayments
Increase in trade and other payables
Decrease in provision for income tax
Increase/(decrease) in employee benefits
Decrease in other operating liabilities
11,360
17,998
(502)
7,631
(2,520)
237
(2,297)
(2)
8,880
-
142
-
9,036
-
(1,348)
31,509
119
(175)
(185)
(287)
1,501
(1,632)
(709)
(592)
Net cash from operating activities
35,997
39,265
Note 39. Earnings per stapled securities
Loss after income tax
Weighted average number of ordinary stapled securities used in calculating basic and
diluted earnings per stapled securities
Basic and diluted earnings per stapled unit (cents)
Stapled
Consolidated
2019
$'000
(4,930)
528,811,312
(0.93)
Aggregated
2018
$'000
-
-
-
106
106
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust IIFor personal use only
Redcape Hotel Group comprising Redcape Hotel Trust I and Redcape Hotel Trust II
SPFS - Independent auditor's report to the members of Redcape Hotel Group
30 June 2019
Directors’ declaration
In the opinion of the directors, acting in their capacity as Management for the Redcape Hotel Group (‘the Group’):
•
the financial statements and notes:
(i)
(ii)
present fairly the financial position of the Group as at 30 June 2019 and its performance, as represented
by the results of its operations and its cash flows, for the financial year ended on that date in accordance
with the statement of compliance and basis of preparation described in Notes 1 and 2; and
comply with Australian Accounting Standards (including the Australian Accounting Interpretations) to the
extent described in Notes 1 and 2; and
•
there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due
and payable.
In respect of the year ended 30 June 2019 the Group has:
•
•
kept such accounting records as correctly record and explain its transactions and financial position;
kept its accounting records that financial statements of the Group that are presented fairly can be prepared from
time to time; and
•
kept its accounting records so that the financial statements of the Group can be conveniently and properly audited
Signed in accordance with a resolution of the directors:
On behalf of the directors
___________________________
Nicholas Roland Collishaw
Chairman
28 August 2019
Sydney
___________________________
Daniel John Brady
Executive Director
107
107
ASX:RDCAnnual Report 2019For personal use only
Independent Auditor’s Report
To the Directors of Redcape Hotel Group Management Ltd, as Responsible
Entity of the Stapled Group (Directors of the Responsible Entity)
Opinion
We have audited the Special Purpose
Financial Statements of Redcape Hotel
Group (the Stapled Group Special Purpose
Financial Statements).
In our opinion, the accompanying Stapled
Group Special Purpose Financial
Statements present fairly, in all material
respects, the financial position of the
Stapled Group as at 30 June 2019, and
of its financial performance and its cash
flows for the year then ended, in
accordance with the basis of preparation
described in Notes 1, 2 and 3 to the
financial statements.
The Special Purpose Financial Statements of the
Stapled Group comprise:
• Statement of financial position as at 30 June 2019
• Statement of profit or loss and other comprehensive
income, Statement of changes in equity, and
Statement of cash flows for the year then ended
• Notes including a summary of significant accounting
policies
The Stapled Group consists of Redcape Hotel Trust II
and the entities it controlled at the year-end or from
time to time during the financial year and Redcape Hotel
Trust I and the entities it controlled at the year-end or
from time to time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for
the audit of the Special Purpose Financial Statements section of our report.
We are independent of the Stapled Group and Redcape Hotel Group Management Ltd (the
Responsible Entity) in accordance with the ethical requirements of the Accounting Professional and
Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are
relevant to our audit of the Special Purpose Financial Statements in Australia. We have fulfilled our
other ethical responsibilities in accordance with the Code.
Emphasis of matter – basis of preparation and restriction on use
We draw attention to Notes 1 and 2 to the Special Purpose Financial Statements, which describes
the basis of preparation.
The preparation of the comparative aggregation involved allocations of income, expenses, assets and
liabilities. Consequently, the Stapled Group’s comparative aggregation may not necessarily be
indicative of the financial position, performance and cash flows that would have been achieved if the
Stapled Group had operated as an independent entity in that year, nor may they be indicative of the
results of the position, operations and cash flows of the Stapled Group for any future period.
The Special Purpose Financial Statements have been prepared to assist the Directors of Redcape
Hotel Group Management Ltd, as Responsible Entity of the Stapled Group, for the purpose of
meeting the listing requirements of the Australian Securities Exchange (“ASX”). As a result, the
Special Purpose Financial Statements and this Auditor’s Report may not be suitable for another
purpose. Our opinion is not modified in respect of this matter.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
108For personal use only Our report is intended solely for the Directors of Redcape Hotel Group Management Ltd, as
Responsible Entity of the Stapled Group and should not be used by parties other than the Directors of
Redcape Hotel Group Management Ltd, as Responsible Entity of the Stapled Group. We disclaim any
assumption of responsibility for any reliance on this report, or on the Special Purpose Financial
Statements to which it relates, to any person other than the Directors of Redcape Hotel Group
Management Ltd, as Responsible Entity of the Stapled Group, or for any other purpose than that for
which they were prepared.
Other Matter
The Stapled Group has prepared a Financial Report using a general purpose framework issued and
approved by the Directors of the Responsible Entity on 28 August 2019. We issued an audit report
thereon on 28 August 2019. The Special Purpose Financial Statements, subject of this audit opinion
are separate and distinct from those prepared using a general purpose framework.
Other Information
Other Information is financial and non-financial information in Redcape Hotel Group’s annual reporting
which is provided in addition to the Special Purpose Financial Statements and the Auditor’s Report.
The Directors of Redcape Hotel Group Management Ltd (the Responsible Entity), acting in their
capacity as Management for the Redcape Hotel Group (Management), are responsible for the Other
Information.
Our opinion on the Special Purpose Financial Statements does not cover the Other Information and,
accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with
the exception of the Stapled Group Financial Report and our related assurance opinion.
In connection with our audit of the Special Purpose Financial Statements, our responsibility is to read
the Other Information. In doing so, we consider whether the Other Information is materially
inconsistent with the Special Purpose Financial Statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
We are required to report if we conclude that there is a material misstatement of this Other
Information, and based on the work we have performed on the Other Information that we obtained
prior to the date of this Auditor’s Report we have nothing to report.
Responsibilities of Management for the Special Purpose Financial Statements
The Directors of Redcape Hotel Group Management Ltd (the Responsible Entity), acting in their
capacity as Management for the Redcape Hotel Group (Management), are responsible for:
•
•
•
the preparation and fair presentation of the Special Purpose Financial Statements and have
determined that the basis of preparation described in Notes 1 and 2 to the financial
statements are appropriate to meet the needs of the Directors of the Responsible Entity.
implementing necessary internal control to enable the preparation of Special Purpose
Financial Statements that are free from material misstatement, whether due to fraud or error
assessing the Stapled Group’s ability to continue as a going concern and whether the use of
the going concern basis of accounting is appropriate. This includes disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting unless
they either intend to liquidate the Stapled Group or to cease operations, or have no realistic
alternative but to do so.
The Directors of Redcape Hotel Group Management Ltd, as Responsible Entity of the Stapled Group
are responsible for overseeing the Stapled Group’s Financial Reporting process.
109For personal use only Auditor’s responsibilities for the audit of the Special Purpose Financial Statements
Our objective is:
•
•
to obtain reasonable assurance about whether the Special Purpose Financial Statements as a
whole are 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 Australian Auditing Standards will always detect a material misstatement when it
exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on
the basis of the Special Purpose Financial Statements.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the Special Purpose Financial Statements,
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 Stapled Group's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by Management.
• Conclude on the appropriateness of Management's 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 Stapled 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
report to the related disclosures in the Special Purpose Financial Statements 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 report. However, future events or conditions may cause the Stapled Group to
cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the Special Purpose Financial
Statements, including the disclosures, and whether the Special Purpose Financial Statements
represent the underlying transactions and events in a manner that achieves fair presentation.
•Obtain sufficient appropriate audit evidence regarding the Special Purpose Financial Statements of
the entities or business activities within the Stapled Group to express an opinion on the Stapled
Group Financial Statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for the audit opinion.
We communicate with Management and the Directors of the Responsible Entity 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 the audit.
110For personal use only We also provide Management and the Directors of the Responsible Entity with a statement that we
have complied with relevant ethical requirements regarding independence, and to communicate with
them all relationships and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
KPMG
Cameron Roan
Partner
Sydney
28 August 2019
111For personal use only For personal use only