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Results built on
strong fundamentals
FINANCIAL REPORT
30 June 2016
Contents
Letter from the Chairman
Letter from the Managing Director and CEO
Directors’ Report
Operating and Financial Review
Directors
Corporate Governance
Remuneration Report – Audited
Lead Auditor’s Independence Declaration under Section 307C
of the Corporations Act 2001
Consolidated Statements of Profi t or Loss and Other Comprehensive Income
Consolidated Balance Sheets
Consolidated Statements of Changes in Equity
Consolidated Cash Flow Statements
Consolidated Notes
Directors’ Declaration
Independent Auditor’s Report
Security Information and Key Dates
Glossary
1
3
5
5
17
22
35
51
52
53
54
56
57
122
123
125
128
KEEPING IT SIMPLE….
The aim of the text in ‘Keeping it simple’
boxes is to explain more complex
sections in plain English.
Notes to the fi nancial statements
provide information required by law,
accounting standards or ASX Listing
Rules to explain a particular feature
of the fi nancial statements. The notes
to the fi nancial statements will also
provide explanations and additional
disclosure to assist readers’
understanding and interpretation
of the fi nancial statements.
GLOSSARY
Capitalised terms and acronyms
used in this Report are defi ned
in the Glossary.
Contents
Letter from the Chairman
Letter from the Managing Director and CEO
Directors’ Report
Operating and Financial Review
Directors
Corporate Governance
Remuneration Report – Audited
Consolidated Balance Sheets
Consolidated Statements of Changes in Equity
Consolidated Cash Flow Statements
Consolidated Notes
Directors’ Declaration
Independent Auditor’s Report
Security Information and Key Dates
Glossary
Lead Auditor’s Independence Declaration under Section 307C
of the Corporations Act 2001
Consolidated Statements of Profi t or Loss and Other Comprehensive Income
1
3
5
5
17
22
35
51
52
53
54
56
57
122
123
125
128
KEEPING IT SIMPLE….
The aim of the text in ‘Keeping it simple’
Notes to the fi nancial statements
boxes is to explain more complex
sections in plain English.
GLOSSARY
Capitalised terms and acronyms
used in this Report are defi ned
in the Glossary.
provide information required by law,
accounting standards or ASX Listing
Rules to explain a particular feature
of the fi nancial statements. The notes
to the fi nancial statements will also
provide explanations and additional
disclosure to assist readers’
understanding and interpretation
of the fi nancial statements.
Letter from
the Chairman
All three of our core
businesses are realising
the benefits of our
strategy, underpinned
by our strong balance
sheet and our focus on
operational excellence.
GRAHAM BRADLEY AM
CHAIRMAN
Accordingly, our distribution policy from
FY17 will be the higher of 100% of Trust
taxable income or 75–85% of funds from
operations. This is equivalent to our current
distribution policy to pay the higher of 100%
of Trust taxable income or 80–90% of
underlying profit.
In recognition of our consistent profit growth
over the last three years, we are targeting
to increase distributions to 25.5 cents per
security in FY17, assuming there is no
material change in market conditions.
Governance
Following more than 10 years of service,
director Peter Scott retired from the
Stockland Board in August 2016. With his
engineering and construction background
and his broad business management
experience, Peter has brought many insights
to us and contributed enormously throughout
his time on the Board. I thank Peter sincerely
for his long and dedicated service.
Dear Securityholders,
I am very pleased to report that Stockland
has continued to deliver good value for
securityholders with another strong profit
performance in FY16.
Strong Performance
Funds from operations grew by 12.5% to
$740 million and underlying profit rose 8.5%
on FY15, to $660 million. Funds from
operations per security grew 11.1% on the
prior year, exceeding the target growth
range of 9–10%. Underlying earnings per
security rose by 7.3%, at the top end of the
target range of 6.5–7.5%. Statutory profit
was $889 million.
These excellent results show the progress
we have made over the last three years in
our disciplined pursuit of sustainable growth.
All three of our core businesses are realising
the benefits of our strategy, underpinned
by our strong balance sheet and our focus
on operational excellence. Progress includes
more than $681 million commercial property
developments underway, seven medium
density residential projects launched across
four states, the launch of our unique Retire
Your Way selling proposition, and several
new greenfield developments that
demonstrate our ability to create
outstanding masterplanned communities.
We also achieved international recognition
for our sustainability leadership, being
named the 2015-2016 Global Real Estate
Industry Leader in the Dow Jones
Sustainability Index, and we retained our
Employer of Choice for Gender Equality
citation from Australia’s Workplace Gender
Equality Agency.
Distribution
As forecast, our full year distribution was
24.5 cents per security, representing a
payout ratio of 88% of underlying profit.
Looking ahead, from FY17 funds from
operations will replace underlying profit
as our primary reporting measure,
recognising the importance of this measure
in enabling comparison across the Australian
property industry1.
1 Funds from operations (FFO) has been determined with reference to the Property Council of Australia’s voluntary disclosure guidelines to help investors and analysts compare
Australian real estate organisations. FFO is calculated by adding back tenant incentive amortisation and non-cash tax benefit/expense to underlying profit and deducting straight-line
rent from underlying profit.
1
Letter from the Chairman | As part of the Board renewal process, we
were delighted to welcome Stephen Newton
to the Board in June 2016. Stephen is a
highly experienced director with an
extensive career history in the property and
investment sectors. His deep experience
across real estate development, property
management and infrastructure investment
makes him an excellent addition to our team
and we look forward to his contribution.
As required by the Stockland Constitution,
Stephen will offer himself for election by
securityholders at the 2016 Annual General
Meeting on 26 October 2016.
I am confident that the strong
fundamentals we have established
over the last three years will allow
Stockland to sustain solid growth
in the year ahead.
GRAHAM BRADLEY AM
CHAIRMAN
Stockland CARE Foundation
I am delighted to report that the Stockland
CARE Foundation has made a real impact
in its first full year of operation, contributing
much needed funds in the areas of health,
wellbeing and education and also boosting
volunteering and giving among our
employees, business partners and the
broader community.
In addition to the $200,000 donated by the
CARE Foundation Trust in FY16, Stockland
and its employees, customers and residents
donated over $100,000 and more than
2,200 hours of support to chosen charity
partners, Redkite and Touched By Olivia
Foundation (TBO). Through these efforts
72 families who have children or young
people with cancer gained access to
Redkite’s suite of programs in FY16, and
four inclusive play spaces and four social
enterprise cafés based in our communities
were added to TBO’s expanding national
network. As Chair of the Foundation,
I congratulate all involved.
Conclusion
In closing, I would like to thank my Board
colleagues and Stockland’s talented
employees for their continued dedication
in supporting our many achievements over
the past year. I am confident that the strong
fundamentals we have established over the
last three years will allow Stockland to
sustain solid growth in the year ahead.
GRAHAM BRADLEY AM
CHAIRMAN
2
| Stockland Financial Report 2016
Letter from the
Managing Director and CEO
Dear Securityholders,
This has been a year of strong and sustained
performance for Stockland as we continue
our disciplined approach to growing asset
returns and our customer base, improving
our capital strength, and delivering
operational excellence.
We have achieved strong results across
all of our key metrics in FY16 and I am very
pleased that our Commercial Property,
Residential and Retirement Living
businesses have each made significant
contributions to the performance of the
Group. This demonstrates that our strategy
set in 2013 is working and we are succeeding
in positioning our business to capitalise
on good market conditions.
Our focus remains squarely on implementing
our strategy to deliver sustainable growth
and creating inspiring places where people
want to live, work, shop, and invest. Our aim
is to continue to improve our customer
experience and take advantage of new
opportunities so that our business is more
stable and resilient for the long term.
Grow Asset Returns and Customer Base
Commercial Property accounts for around
70% of our assets and remains a key profit
driver, delivering comparable growth in funds
from operations of 4.5% across the portfolio,
with 3.7% in Retail, 3.7% in Logistics and
Business Parks, and 9.9% in Office.
Our Retail portfolio performed well, with
high occupancy and positive leasing spreads,
and continued sales growth, with total
Moving Annual Turnover up 4.6%, driven
by 6% growth in specialty retail.
We have also made good progress on major
redevelopments, completing Harrisdale in
Perth and the remodelling of our Pitt Street
Mall asset in the Sydney CBD. Wetherill Park
in Sydney has achieved practical completion
over the majority of stages and is trading well.
We have also commenced our $372 million
Green Hills redevelopment in New South
Wales and progressed a number of small but
important projects, including casual dining
precincts at Rockhampton in Queensland
and Shellharbour in New South Wales. All of
these projects have been very well received
by customers. Stockland has a future retail
development pipeline of $1.0 billion and is
targeting stabilised funds from operations
yields of 7–8% from this activity.
The good performance in our Logistics and
Business Parks portfolio reflected our active
asset management, disciplined acquisition
strategy and good progress on our $467 million
development pipeline. We executed leases
on more than 25% of our portfolio in FY16
and also acquired three new sites in Sydney
and Melbourne.
We have achieved strong
results across all of our
key metrics in FY16 and
we are confident that
our strategy set in 2013
is working.
MARK STEINERT
MANAGING DIRECTOR AND CEO
In Office we continue to focus on optimising
returns from the portfolio while managing
our exposure tactically. The bulk of our
assets are located in the improving Sydney
market where our assets are fully occupied.
Our Residential business settled a record
6,135 lots in FY16 and achieved significant
operating profit growth of 38.8% as well
as a lift in return on assets to 19.6% on the
core portfolio.
This strong result reflected our repositioning
of this business over the last three years
to enhance our community creation
capabilities and capitalise on supportive
market conditions. We have activated a
high proportion of our Residential portfolio
in key growth corridors and more than 90%
of our net funds employed are in projects
that are actively selling, up from 60% in
FY13. We also broadened our market reach
with the introduction of medium density
homes and completed homes within
a number of our communities, and we
are now exploring mixed use apartment
opportunities at Merrylands in Sydney.
Letter from the Managing Director and CEO |
3
Our Retirement Living business operating
profit was up 19.7% on FY15 reflecting strong
sales and active management. Cash return
on assets also increased by 50 basis points
to 5.8%, reflecting our continuing focus on
operational efficiencies and growing our
development pipeline.
In FY16 we sold more than 1,000 retirement
living homes and apartments, which is a
record number of settlements, including the
first apartments at Cardinal Freeman in
Sydney. We also launched a new village
within our Willowdale community in Sydney
and we continued to reshape our portfolio,
embedding eight South Australian villages
acquired in FY15 and selling five relatively
small, low return on asset villages in
Western Australia in July 2016.
Capital Strength
We have maintained our strong balance
sheet and A-/stable credit rating,
supporting investment in the future
growth of our business.
Our disciplined capital management has
seen us improve our weighted average cost
of debt and increase our average debt
maturity. Gearing at the end of FY16 was
23.8%, at the lower end of our 20–30%
target range, due to disciplined capital
management, the strong and increasing
velocity of operating cash flows and growth
in the value of our investment portfolio.
Operational Excellence
Our people remain highly engaged,
delivering great outcomes and contributing
to a range of initiatives that improve the way
we work. Our new Stockland Support Centre,
established in June 2015 to outsource some
finance and IT functions, is progressing well
and providing more flexible and scalable
support for our in-house teams. We have
also made significant progress improving
our Group system capabilities, including the
commitment to implement SAP and
Salesforce as core systems, with deployment
to take place during the next two years.
Stockland has also maintained its leadership
in sustainable operations. We have
continued our commitment to engage
effectively and improve the liveability,
convenience and efficiency of our
communities and commercial operations,
and to continue to reduce our impact on
the environment, particularly energy and
water efficiency. Recognising these efforts,
we were proud to be named the 2015–16
Global Real Estate Industry Leader in the
Dow Jones Sustainability Index, the third
time we have received this outstanding
acknowledgement.
Stockland has been a signatory to the
United Nations Global Compact since 2015,
and we remain committed to its principles
and to promoting the Global Compact
where we operate. I am pleased to
confirm our continued support of this
important initiative.
Outlook
The low interest rate, moderate population
growth environment in Australia is
supportive of economic growth and we
have set our business on a course that
provides us with a positive outlook for FY17,
despite considerable uncertainty in
macroeconomic conditions.
Assuming no material change in market
conditions, our commercial properties are
expected to maintain moderate growth in
returns and our retail centres remain highly
productive. Expected residential lot
settlements and retirement living net
reservations also remain buoyant for the
year ahead.
I am confident in the strategy we are
executing and that Stockland is well placed
to generate profitable business growth
in FY17 and beyond. We have forecast
growth in funds from operations per
security of 5–7% and distribution growth
of 4.1% in FY17, assuming no material
change in market conditions.
MARK STEINERT
MANAGING DIRECTOR AND CEO
4
| Stockland Financial Report 2016
Directors’ Report
Directors’ Report
YEAR ENDED 30 JUNE 2016
Year ended 30 June 2016
The Directors of Stockland Corporation Limited (ACN 000 181 733) and the Directors of Stockland Trust
Management Limited (ACN 001 900 741, AFSL 241190), the Responsible Entity of Stockland Trust
(ARSN 092 897 348), present their report together with the Financial Report of Stockland and the
Financial Report of Trust for the year ended 30 June 2016 and the Independent Auditor’s Report thereon.
The Financial Report of Stockland comprises the consolidated Financial Report of Stockland Corporation
Limited (‘the Company’) and its controlled entities, including Stockland Trust and its controlled entities,
(collectively referred to as ‘Stockland’ or “Group’). The Financial Report of Trust comprises the consolidated
Financial Report of the Trust and its controlled entities (‘Stockland Trust Group’ or ‘Trust’).
Operating and Financial Review
About Stockland
Stockland is one of the largest diversified property groups in Australia with more than $15.8 billion of real estate
assets. We own, manage and develop shopping centres, logistics centres and business parks, office assets,
residential communities, and retirement living villages.
Founded in 1952, today Stockland leverages its diversified model to help create thriving communities where people
live, shop and work. Our vision is to be a great Australian real estate company that makes a valuable contribution to
our communities and our country.
This approach is underpinned by our purpose – “we believe there is a better way to live” – and is brought to life
by our employees who are guided by Stockland’s values of Community, Accountability, Respect, and Excellence
(CARE).
Our primary objective is to deliver earnings per security growth and total risk-adjusted securityholder returns above
the Australian Real Estate Investment Trust index average, by creating quality communities and property assets
and delivering great customer experiences.
To optimise value to securityholders we are structured as a stapled security: a combination of a unit in Stockland
Trust and a share in Stockland Corporation that are together traded as one security on the Australian Securities
Exchange. This stapled structure allows Stockland to efficiently undertake property investment, property
management and property development activities to create sustainable risk/reward outcomes.
Our strategy
Directors’ Report Year ended 30 June 2016 |
5
Stockland Financial Report — 5
Directors’ Report
Directors’ Report
Year ended 30 June 2016
Year ended 30 June 2016
We focus on three strategic priorities:
We focus on three strategic priorities:
• Grow asset returns and our customer base - driving returns in our core businesses
• Grow asset returns and our customer base - driving returns in our core businesses
• Operational excellence - improving the way we operate across the Group to drive efficiencies and effectiveness
• Operational excellence - improving the way we operate across the Group to drive efficiencies and effectiveness
• Capital strength - actively managing our balance sheet to maintain diverse funding sources and an efficient cost
• Capital strength - actively managing our balance sheet to maintain diverse funding sources and an efficient cost
of capital
of capital
Our progress in FY16 against these priorities is set out below:
Our progress in FY16 against these priorities is set out below:
Strategic priorities
Strategic priorities
Grow asset returns
and our customer base
Grow asset returns
and our customer base
FY16 progress
FY16 progress
4.5% growth in comparable FFO in our Commercial Property portfolio
•
$681 million Retail development under construction and a pipeline of $1.0 billion
•
4.5% growth in comparable FFO in our Commercial Property portfolio
•
$400 million Logistics and Business Parks future development pipeline
•
•
$681 million Retail development under construction and a pipeline of $1.0 billion
• A record 6,135 settlements and 4,567 contracts on hand in our Residential business
$400 million Logistics and Business Parks future development pipeline
•
Improvement in return on assets on our core Residential portfolio to 19.6%,
•
• A record 6,135 settlements and 4,567 contracts on hand in our Residential business
excluding impaired projects
•
Improvement in return on assets on our core Residential portfolio to 19.6%,
• Over 90% of Residential capital employed in projects actively selling
excluding impaired projects
• Broadening our customer reach in Residential, with seven medium density projects
• Over 90% of Residential capital employed in projects actively selling
• Broadening our customer reach in Residential, with seven medium density projects
• A record 1,013 Retirement Living settlements
•
• A record 1,013 Retirement Living settlements
•
•
•
• Recognised as Global Real Estate Sector Leader on the Dow Jones Sustainability
launched across four states
19.7% increase in Retirement Living operating profit
Launched our unique selling proposition 'Retire Your Way'
19.7% increase in Retirement Living operating profit
Launched our unique selling proposition 'Retire Your Way'
Index (DJSI) for 2015-16
• Recognised as Global Real Estate Sector Leader on the Dow Jones Sustainability
• Strong employee engagement of 83%, equal to the Global High Performing Norm
launched across four states
Index (DJSI) for 2015-16
and eight points above the Australian National Norm
and eight points above the Australian National Norm
• Strong employee engagement of 83%, equal to the Global High Performing Norm
• Retained our Employer of Choice for Gender Equality WGEA citation
• Embedded Flexibility@Stockland, a program to improve flexible working practices
• Retained our Employer of Choice for Gender Equality WGEA citation
• Established the Stockland Support Centre offshore team, adding capacity and
• Embedded Flexibility@Stockland, a program to improve flexible working practices
• Established the Stockland Support Centre offshore team, adding capacity and
•
• Significant progress improving Group system capabilities including commitment to
•
• Significant progress improving Group system capabilities including commitment to
• Maintained A-/stable credit rating for over ten years and gearing remains within our
capability across a range of finance and IT activities
Improved ROE from 9.9% to 11.0%1
capability across a range of finance and IT activities
Improved ROE from 9.9% to 11.0%1
implement SAP and Salesforce as our core systems
implement SAP and Salesforce as our core systems
target range
• Maintained A-/stable credit rating for over ten years and gearing remains within our
• Extended pro forma weighted average debt maturity from 5.3 to 5.9 years
• Reduced average FY16 cost of debt by 40bp to 5.8%
• Extended pro forma weighted average debt maturity from 5.3 to 5.9 years
• Maintained diversification of our funding sources
• Reduced average FY16 cost of debt by 40bp to 5.8%
• Significant improvement in operating cash flows, from $401 million to $787 million
• Maintained diversification of our funding sources
• Significant improvement in operating cash flows, from $401 million to $787 million
target range
Operational excellence
Operational excellence
Capital strength
Capital strength
1 Return on Equity accumulates individual business Return on Assets and incorporates cash interest paid and average drawn debt for the 12 month
period. Excludes residential communities workout projects.
1 Return on Equity accumulates individual business Return on Assets and incorporates cash interest paid and average drawn debt for the 12 month
period. Excludes residential communities workout projects.
| Stockland Financial Report 2016
6
Stockland Financial Report — 6
Stockland Financial Report — 6
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
Risks and opportunities
Stockland adopts a rigorous approach to understanding and proactively managing the risks faced in the business.
We recognise that making business decisions that involve calculated risks, and managing these risks within
sensible tolerances, is fundamental to creating long-term value for securityholders and meeting commitments to
our employees, tenants, customers, business partners, consultants and the communities in which we do business.
More information on Stockland’s risk management policy is available at stockland.com.au.
There are various risks that could impact our business. The nature and potential impact of these risks change over
time. These include, but are not limited to:
Risk
Response and opportunities
Short
term –
strategy
execution
Increased
competition and
changing market
conditions impact
our opportunities
for growth
focus on retaining a strong balance sheet with appropriate gearing
use diverse funding sources
concentrate on efficiency and cost management
Continue to:
• maintain a diversified business model at scale in each sector
•
•
•
• maintain a prudent approach to provisioning
•
• maintain discipline and agility in our investment decision making
•
replenish our land and asset pipeline
use a rigorous whole of business approach informed by detailed research to drive our
capital allocation process
Delays or changes
to the delivery of
infrastructure and
amenities affect
customer
satisfaction
Continue to:
• use our proprietary Liveability Index research to understand priorities of residents in our
communities and drive property management and development decisions
• focus on stakeholder engagement plans for all projects that minimise obstacles to
infrastructure and amenity delivery and provide appropriate communication with all
stakeholders about these matters
• improve our project delivery through enhanced supply chain management
Housing
affordability is
increasingly
challenging in
Australia
Systems
enhancements
affect business
process efficiency
Regulatory
changes impact our
business and
customers
Stockland’s Residential business is influenced by the dynamics of the Australian residential
market. Housing affordability remains of key concern for Australians as the price of housing and
rental properties continues to increase. We will continue to:
•
seek opportunities to provide market leading sustainable communities and a broader mix of
value for money housing options including house and land packages, completed housing,
medium density and apartments
balance the demand from home owners and investors so that our residential communities
remain attractive to future buyers
engage with government to seek effective solutions on land supply issues
•
•
As part of our continued investment in the efficiency of our operations, we have made significant
progress on improving the Group’s systems capabilities including the commitment to implement
SAP and Salesforce as core systems. With deployment to take place during the next two years,
we will continue to maintain two-way engagement with employees across the business to
enable a smooth transition
Continue to:
•
engage with industry and government on policy areas including taxation and
planning reform
develop in areas where governments support growth
focus on good practice to remain well positioned in the market
•
•
Longer
term –
changing
marketplace
Community
resilience to
evolving security
and safety risks
Continue to:
•
•
•
•
train our employees and increase their risk awareness
undertake regular scenario testing
engage with peers and across industry
invest in asset upgrades
Capital market
volatility impacts
our ability to
access suitable
capital
Stockland’s long term growth is dependent on our ability to access capital at the appropriate
time and cost even as capital markets fluctuate in response to domestic and global economic
shifts. So that we are able to continue to raise sufficient capital to fund growth, we will continue
to:
•
• maintain diverse funding sources
• maintain our prudent capital management policies
focus on retaining a strong balance sheet at appropriate levels of gearing
Stockland Financial Report — 7
7
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Risk
Response and opportunities
Continue to:
•
Continue to:
•
Ability to develop
products that meet
anticipated future
customer and
societal demands
Digital disruption
affects customer
behaviour and
transforms the
market
•
•
•
•
•
foster a culture of innovation where we remain flexible, and identify and take advantage of
opportunities to leverage movements in stakeholder preferences
evolve our market leading product innovation and deepen our customer insights using our
proprietary Liveability Index research and platforms such as Stockland Exchange (our
online research community) and Quantium (which provides customer transactional data to
inform how we view markets and opportunities)
focus on creating sustainable and liveable communities and assets
enhance our design excellence, providing greater functionality and value for money
identify, develop and integrate technical enhancements across our business, including
online residential and retirement living engagement opportunities
support Stockland retail centres as thriving community hubs by delivering quality services
and community spaces that are e-enabled
promote employee innovation and collaboration through Ideas@Stockland to further enable
us to take advantage of new opportunities
Stockland results and outlook
Key metrics:
• Full year distribution was 24.5 cents per security
• Statutory profit was $889 million, down 1.6% on FY15
• Statutory EPS was 37.4 cents, down 2.9% on FY15
• FFO was $740 million, up 12.5% on FY15
• FFO per security was 31.1 cents, up 11.1% on FY15
• Underlying profit was $660 million, up 8.5% on FY15
• Underlying EPS was 27.8 cents, up 7.3% on FY15
Stockland has performed strongly for the full year ended 30 June 2016. We achieved this by delivering on our
purpose across our portfolio of communities and properties to grow asset returns sustainably, broaden our customer
base and take advantage of supportive market conditions.
Profit growth from business activities was strong, with FFO of $740 million, up 12.5% on FY15.
Statutory profit was $889 million. This was marginally down on the prior year, primarily due to a number of
unrealised fair value items including the mark to market movement in Stockland's debt and derivatives as well as
the prior year realised gain of $73 million from the sale of Stockland’s investment in Australand.
We delivered solid underlying EPS growth of 7.3% and FFO per security growth of 11.1%. We also delivered our
target distribution per security of 24.5 cents in FY16, which represents a payout ratio of 88% of underlying EPS and
79% of FFO. Statutory EPS was 37.4 cents.
ROE increased 1.1% to 11.0%, excluding workout assets.
Our Commercial Property, Residential and Retirement Living businesses have each made significant contributions
to the performance of the Group. Our Commercial Property business delivered comparable FFO growth of 4.5%
and we achieved a record number of settlements in both our Residential and Retirement Living businesses.
We have been disciplined in the implementation of our three strategic priorities to grow our asset returns and
customer base, deliver operational excellence, and maintain and improve on our capital strength. Over the last
three years we have positioned each business to take advantage of good market conditions and deliver sustainable
profit growth.
We continue to build resilience into our businesses so that we are well placed to deliver above sector average FFO
growth through the cycle.
Stockland has maintained its strong balance sheet and A-/stable credit rating, supporting investment in the future
growth of the business. Gearing at the end of FY16 was 23.8%, at the lower end of our 20–30% target range, due to
disciplined capital management, the strong operating cash flows and growth in the value of our investment portfolio.
Our active debt management program has seen us improve our weighted average cost of debt and, partly as a
result of our post year-end US Private Placement, increase our average weighted debt maturity to 5.9 years on
a pro forma basis.
8
| Stockland Financial Report 2016
Stockland Financial Report — 8
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
Recognising the importance of FFO in managing our business and the use of FFO as a comparable performance
measurement tool in the Australian property industry, FFO will replace underlying profit as Stockland’s primary
reporting measure from FY17. We will also continue to report underlying profit.
Outlook
Stockland is well placed to generate profitable business growth in FY17 and beyond.
We have been refining our business strategy to improve our customer experience and take advantage of new,
synergistic opportunities, to create a business that is more stable and resilient to any potential changes in market
conditions. Our approach to maintaining project contingencies within the Residential business is a key part of this.
The low interest rate environment is supportive of economic growth and we have set our business on a course that
provides us with a positive outlook for FY17, despite considerable uncertainty in macroeconomic conditions.
Assuming no material change in market conditions, Commercial Property should maintain moderate growth in
returns, with comparable FFO growth of 2–3%, including comparable Retail FFO growth of 3–4%. We expect to
achieve more than 6,000 residential lot settlements, with a strong profit skew towards the second half of FY17 as a
result of medium density settlements and project timing. We also expect to achieve further improvement in
Retirement Living returns as we continue to focus on operational efficiencies and our development pipeline.
From FY17, our distribution policy will be based on FFO and will reflect a payout ratio of 75–85%. We are targeting
growth in FFO per security of 5–7% with a skew to the second half in FY17, and a distribution per security targeted
at 25.5 cents, assuming no material change in market conditions.
Group results summary
Underlying profit and statutory profit reconciliation
Year ended 30 June
Revenue
Cost of property developments sold:
•
Land and development
• Capitalised interest
• Utilisation of provision for write-down
of inventories
Investment property expenses
Share of profits of equity-accounted
investments
Management, administration, marketing
and selling expenses
Net change in fair value of investment properties:
• Commercial Property
• Retirement Living
Net change in fair value of Retirement
Living resident obligations
Impairment of intangibles
Net gain on other financial assets
Net loss on sale of other non-current assets
Finance income
Finance expense
Profit before income tax
benefit/(expense)
Income tax benefit/(expense)
Profit attributable to securityholders
EPS (cents)
2016
2015
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
2,312
16
2,328
2,087
27
2,114
(1,049)
(124)
67
(239)
31
(270)
–
26
–
–
–
–
8
(81)
681
(21)
660
27.8
–
–
–
–
59
(1)
373
45
(85)
–
4
(2)
–
(171)
238
(9)
229
–
(1,049)
(124)
67
(239)
90
(983)
(126)
113
(226)
44
–
–
–
–
44
(983)
(126)
113
(226)
88
(271)
(258)
–
(258)
373
71
(85)
–
4
(2)
8
(252)
919
(30)
889
37.4
–
18
–
–
–
–
8
(73)
604
4
608
25.9
253
50
(70)
253
68
(70)
(43)
(43)
73
(2)
1
(40)
293
2
295
–
73
(2)
9
(113)
897
6
903
38.5
Stockland Financial Report — 9
9
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Underlying profit excludes items such as unrealised fair value gains/losses, unrealised provision gains/losses and
adjustments arising from the effect of revaluing assets/liabilities (such as derivatives, financial instruments and
investment properties). These items are required to be included in statutory profit in accordance with Australian
Accounting Standards.
Other adjustments are made to Statutory profit for realised transactions occurring infrequently and those that
are outside the course of Stockland’s core ongoing business activities. Underlying profit is the basis on which
distributions have been determined.
Despite the strong underlying performance of the business in FY16, statutory profit fell slightly to $889 million.
While revaluation gains from Commercial Property investment properties are higher than the previous year, net
losses on marked to market derivatives and financial instruments were significantly higher than in FY15. Net credit
derivative losses of $171 million (FY15: $40 million) reflect market volatility, particularly in relation to forward interest
rate expectations. Our FY15 result also benefited from a realised gain of $73 million from the sale of our investment
in Australand.
Commercial Property, including equity-accounted investments, contributed $432 million (FY15: $297 million)
to statutory profit from valuation movements, primarily due to continued capitalisation rate compression,
income growth across the portfolio and valuation uplift from completed Retail developments (namely Baldivis
and Wetherill Park).
No impairments of intangible assets were recorded in FY16. The prior year included impairment charges of
$43 million on the carrying value of goodwill and software assets.
Funds from operations reconciliation
$ million
Group FFO
Adjust for:
Amortisation of fit out incentives
Amortisation of rent-free incentives
Straight-line rent
Tax (expense)/benefit on underlying profit
Underlying profit
Commercial Property revaluations (including equity investments)
Change in fair value of Retirement Living investment properties
Impairment of IT intangibles and Retirement Living goodwill
Mark to market loss on financial instruments
Net gain on other financial assets
Net loss on sale of other non-current assets
Other items
Tax (expense)/benefit on statutory profit adjustments
Statutory profit
FY16
740
(49)
(18)
8
(21)
660
432
(24)
–
(171)
4
(2)
(1)
(9)
889
FY15
657
Change
↑12.5%
(45)
(16)
8
4
608
297
7
(43)
(39)
73
(2)
–
2
903
↑8.5%
↓1.6%
FFO has been determined with reference to the Property Council of Australia’s voluntary disclosure guidelines to
help investors and analysts compare Australian real estate organisations. FFO is calculated by adding back tenant
incentive amortisation and non-cash tax benefit/expense to underlying profit and deducting straight-line rent from
underlying profit. Apart from Stockland’s Commercial Property business, underlying profit and FFO reported for the
other business units remain the same. FFO will become our primary reporting measure from FY17. Underlying profit
will continue to be reported in the medium term.
10
| Stockland Financial Report 2016
Stockland Financial Report — 10
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Directors’ Report
Year ended 30 June 2016
Year ended 30 June 2016
Business unit performance and priorities
Business unit performance and priorities
Commercial Property
Our Commercial Property business comprises retail centres, logistics and business parks, and office assets.
Commercial Property
Our Commercial Property business comprises retail centres, logistics and business parks, and office assets.
We are one of the largest retail property owners, developers and managers in Australia. Our 42 retail centres
accommodate more than 3,500 retailers. The Logistics and Business Parks portfolio comprises 27 properties, with
We are one of the largest retail property owners, developers and managers in Australia. Our 42 retail centres
1.3 million square metres of building area. These properties are strategically positioned in key locations for logistics,
accommodate more than 3,500 retailers. The Logistics and Business Parks portfolio comprises 27 properties, with
infrastructure and employment. The Office portfolio comprises nine assets, mostly in Sydney.
1.3 million square metres of building area. These properties are strategically positioned in key locations for logistics,
infrastructure and employment. The Office portfolio comprises nine assets, mostly in Sydney.
Portfolio at 30 June 2016
Approximate value*
42 retail centres
Portfolio at 30 June 2016
27 logistics and business parks
42 retail centres
9 office buildings
27 logistics and business parks
78 Commercial Property assets
9 office buildings
78 Commercial Property assets
*Stockland’s ownership interest
*Stockland’s ownership interest
Performance
Performance
Commercial Property
($m, unless otherwise stated)
Commercial Property
• Retail
($m, unless otherwise stated)
•
• Retail
Logistics and Business Parks
• Office
•
Logistics and Business Parks
Net overheads
• Office
Total Commercial Property
Net overheads
ROA
Total Commercial Property
$6.8 billion
Approximate value*
$2.0 billion
$6.8 billion
$0.8 billion
$2.0 billion
$9.52 billion
$0.8 billion
$9.52 billion
Funds from operations
Underlying profit
FY16
Funds from operations
FY15 Change
Comparable
growth
Comparable
↑3.7%
growth
Underlying profit
FY16
FY15 Change
371
FY16
↑5.8%
FY15 Change
351
Comparable
growth
Comparable
↑3.2%
growth
402
FY16
↑6.1%
FY15 Change
379
132
402
68
132
(18)
68
584
(18)
584
131
379
78
131
(18)
78
570
(18)
570
↑0.5%
↑6.1%
↓13.0%
↑0.5%
↓13.0%
↑2.4%
↑2.4%
↑3.7%
↑3.7%
↑9.9%
↑3.7%
↑9.9%
↑4.5%
119
371
53
119
(18)
53
525
(18)
120
351
64
120
(18)
64
517
(18)
↑4.5%
8.3%
525
8.4%
517
↓1.3%
↑5.8%
↓17.0%
↓1.3%
↓17.0%
↑1.4%
↑1.4%
↑1.0%
↑3.2%
↑5.9%
↑1.0%
↑5.9%
↑3.0%
↑3.0%
8.4%
8.3%
ROA
Commercial Property accounts for around 70% of our assets and remains a key component of our stable earnings
growth, delivering comparable FFO growth of 4.5% across the portfolio in FY16 (FY15: 4.8%), with 3.7% in Retail
Commercial Property accounts for around 70% of our assets and remains a key component of our stable earnings
(FY15: 4.8%), 3.7% in Logistics and Business Parks (FY15: 5.1%), and 9.9% in Office (FY15: 4.2%).
growth, delivering comparable FFO growth of 4.5% across the portfolio in FY16 (FY15: 4.8%), with 3.7% in Retail
(FY15: 4.8%), 3.7% in Logistics and Business Parks (FY15: 5.1%), and 9.9% in Office (FY15: 4.2%).
Retail
Stockland’s Retail portfolio performed well in FY16 and maintained high occupancy and positive leasing spreads.
Retail
Stockland’s Retail portfolio performed well in FY16 and maintained high occupancy and positive leasing spreads.
The Retail portfolio recorded 3.7% growth in comparable FFO and continued sales growth, with total Moving Annual
Turnover (MAT) up 4.6%, driven by 6% growth in specialty retail. The best performing categories continued to be
The Retail portfolio recorded 3.7% growth in comparable FFO and continued sales growth, with total Moving Annual
communication and technology, retail services, food catering and fast casual dining.
Turnover (MAT) up 4.6%, driven by 6% growth in specialty retail. The best performing categories continued to be
communication and technology, retail services, food catering and fast casual dining.
Some areas of specialty retail, such as apparel, slowed in the June quarter due to unseasonably warm weather.
Comparable growth in supermarket sales has been impacted by strong competition in pricing.
Some areas of specialty retail, such as apparel, slowed in the June quarter due to unseasonably warm weather.
Comparable growth in supermarket sales has been impacted by strong competition in pricing.
While the number of retailer closures in the last six months has been slightly elevated and retail trade at some
centres has moderated, we have continued to produce sales growth and our centres are highly productive.
While the number of retailer closures in the last six months has been slightly elevated and retail trade at some
Comparable specialty sales per square metre is 9.8% above the Urbis average.
centres has moderated, we have continued to produce sales growth and our centres are highly productive.
Comparable specialty sales per square metre is 9.8% above the Urbis average.
We have made good progress on major redevelopment projects. We opened Stage 3 of the $228 million Wetherill
Park redevelopment in Sydney, which is trading well. We completed construction of the $51 million Harrisdale
We have made good progress on major redevelopment projects. We opened Stage 3 of the $228 million Wetherill
neighbourhood centre, which is a key part of our Newhaven community development in Perth, and opened the
Park redevelopment in Sydney, which is trading well. We completed construction of the $51 million Harrisdale
remodelled Pitt Street Mall asset in the Sydney CBD, incorporating flagship H&M and Zara Home stores. We also
neighbourhood centre, which is a key part of our Newhaven community development in Perth, and opened the
commenced the $372 million redevelopment of Green Hills in New South Wales, which will be anchored by David
remodelled Pitt Street Mall asset in the Sydney CBD, incorporating flagship H&M and Zara Home stores. We also
Jones, JB Hi-Fi Home and a new Harris Scarfe department store, and is targeting an accretive FFO yield of 7.0%
commenced the $372 million redevelopment of Green Hills in New South Wales, which will be anchored by David
and IRR of 12.6%.
Jones, JB Hi-Fi Home and a new Harris Scarfe department store, and is targeting an accretive FFO yield of 7.0%
and IRR of 12.6%.
During FY16, we also commenced and completed a number of relatively small but important projects, creating new
casual dining precincts at Rockhampton in Queensland and Shellharbour in New South Wales, and undertaking
During FY16, we also commenced and completed a number of relatively small but important projects, creating new
anchor retailer redevelopment and remixing activities at Point Cook in Melbourne and Cairns in Queensland.
casual dining precincts at Rockhampton in Queensland and Shellharbour in New South Wales, and undertaking
anchor retailer redevelopment and remixing activities at Point Cook in Melbourne and Cairns in Queensland.
2 Total does not add due to rounding.
2 Total does not add due to rounding.
11
Stockland Financial Report — 11
Stockland Financial Report — 11
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Directors’ Report
Year ended 30 June 2016
Year ended 30 June 2016
Retail strategic priorities
The Retail business maintains its focus on creating market leading centres, redeveloping its most productive
Retail strategic priorities
assets to create community and entertainment hubs and maximise trade area share. We have $681 million of
The Retail business maintains its focus on creating market leading centres, redeveloping its most productive
retail development under construction and a future pipeline of $1.0 billion, targeting incremental IRRs of 11–14%3
assets to create community and entertainment hubs and maximise trade area share. We have $681 million of
and stabilised FFO yields of 7–8% from this activity.
retail development under construction and a future pipeline of $1.0 billion, targeting incremental IRRs of 11–14%3
and stabilised FFO yields of 7–8% from this activity.
Stockland’s retail mix continues to evolve, underpinned by supermarkets, mini majors, food catering and fast casual
dining and speciality food and retail services. The business will continue to focus on tailoring its offering to each
Stockland’s retail mix continues to evolve, underpinned by supermarkets, mini majors, food catering and fast casual
specific trade area, cultivating retailer relationships and long-term sustainable rent, and invest in industry research
dining and speciality food and retail services. The business will continue to focus on tailoring its offering to each
and technology to adapt to an evolving retail landscape.
specific trade area, cultivating retailer relationships and long-term sustainable rent, and invest in industry research
and technology to adapt to an evolving retail landscape.
Logistics and Business Parks
Our Logistics and Business Parks portfolio delivered good profit growth, with comparable FFO up 3.7%, reflecting
Logistics and Business Parks
positive leasing momentum.
Our Logistics and Business Parks portfolio delivered good profit growth, with comparable FFO up 3.7%, reflecting
positive leasing momentum.
We have been very active in our asset management, executing leases on more than 300,000 square metres in
FY16, representing more than 25% of our Logistics and Business Parks portfolio.
We have been very active in our asset management, executing leases on more than 300,000 square metres in
FY16, representing more than 25% of our Logistics and Business Parks portfolio.
We have been disciplined in our acquisition strategy, buying three new assets including Wonderland Drive in
Sydney on an 8.0% initial FFO yield, Mulgrave in Melbourne on a 7.1% initial FFO yield and a development site at
We have been disciplined in our acquisition strategy, buying three new assets including Wonderland Drive in
Erskine Park in Sydney. We are also making good progress on our development pipeline, with more than $67
Sydney on an 8.0% initial FFO yield, Mulgrave in Melbourne on a 7.1% initial FFO yield and a development site at
million worth of accretive projects underway and a further development pipeline of $400 million, also targeting IRRs
Erskine Park in Sydney. We are also making good progress on our development pipeline, with more than $67
of 11–14%3 and stabilised FFO yields of 7–8%. Our Logistics and Business Parks business is well positioned to
million worth of accretive projects underway and a further development pipeline of $400 million, also targeting IRRs
achieve solid growth and deliver consistent returns.
of 11–14%3 and stabilised FFO yields of 7–8%. Our Logistics and Business Parks business is well positioned to
achieve solid growth and deliver consistent returns.
Logistics and Business Parks strategic priorities
Our focus is on growing a quality portfolio of logistics centres and business parks. We will leverage our existing
Logistics and Business Parks strategic priorities
assets and land, strong tenant relationships and asset management skills to become a scale player in this market.
Our focus is on growing a quality portfolio of logistics centres and business parks. We will leverage our existing
assets and land, strong tenant relationships and asset management skills to become a scale player in this market.
Office
Comparable Office FFO increased 9.9%, reflecting the strength of the Sydney market where the bulk of our assets
Office
are located. We also completed the sale of Waterfront Place and Eagle Street Pier in Brisbane in October 2015.
Comparable Office FFO increased 9.9%, reflecting the strength of the Sydney market where the bulk of our assets
are located. We also completed the sale of Waterfront Place and Eagle Street Pier in Brisbane in October 2015.
Our exposure to the office sector remains tactical, reflecting our view on the state of the market. The majority of
our portfolio is located in the improving Sydney market, with our assets in this market currently fully occupied. The
Our exposure to the office sector remains tactical, reflecting our view on the state of the market. The majority of
Perth and Australian Capital Territory markets remain very challenging.
our portfolio is located in the improving Sydney market, with our assets in this market currently fully occupied. The
Perth and Australian Capital Territory markets remain very challenging.
Office strategic priorities
In Office we continue to focus on optimising returns from the portfolio while managing our exposure tactically.
Office strategic priorities
We intend to retain the majority of our residual office portfolio whilst we maximise returns and highest and best
In Office we continue to focus on optimising returns from the portfolio while managing our exposure tactically.
use opportunities over time. Joint ventures (or part sales) will also be considered as appropriate.
We intend to retain the majority of our residual office portfolio whilst we maximise returns and highest and best
use opportunities over time. Joint ventures (or part sales) will also be considered as appropriate.
Residential
Stockland is the largest residential land developer in Australia. The business has 56 communities across New
Residential
South Wales, Queensland, Victoria and Western Australia. We are focused on delivering a range of masterplanned
Stockland is the largest residential land developer in Australia. The business has 56 communities across New
communities and medium density housing in growth areas across the country. We hold 76,800 lots in our portfolio,
South Wales, Queensland, Victoria and Western Australia. We are focused on delivering a range of masterplanned
with a total end value of approximately $18.8 billion4.
communities and medium density housing in growth areas across the country. We hold 76,800 lots in our portfolio,
with a total end value of approximately $18.8 billion4.
Performance
Residential Communities
Performance
($m, unless otherwise stated)
Residential Communities
Lots settled (lots)
($m, unless otherwise stated)
Revenue – Retail
Lots settled (lots)
FY15
FY16
6,135
FY16
1,373
6,135
109
1,373
354
109
23.9%
354
230
23.9%
15.5%
230
19.6%
15.5%
13.8%
19.6%
5,876
FY15
1,194
5,876
51
1,194
290
51
23.3%
290
166
23.3%
13.3%
166
17.0%
13.3%
12.7%
17.0%
Change
↑4.4%
Change
↑15.0%
↑4.4%
↑111.1%
↑15.0%
↑21.9%
↑111.1%
↑
↑21.9%
↑38.8%
↑
↑
↑38.8%
↑
↑
↑
↑
– Superlots5
Revenue – Retail
EBIT (before interest in COGS)
– Superlots5
EBIT margin
EBIT (before interest in COGS)
Operating profit (funds from operations)
EBIT margin
Operating profit margin
Operating profit (funds from operations)
ROA – core portfolio6
Operating profit margin
ROA – total portfolio
ROA – core portfolio6
ROA – total portfolio
3 Unlevered 10 year IRR on incremental development from completion.
4 Excluding value on projects identified for disposal and assuming no material change in market conditions.
3 Unlevered 10 year IRR on incremental development from completion.
5 33 superlot settlements in FY16; 30 superlot settlements in FY15. FY16 includes the part disposal of impaired projects Bahrs Scrub (Queensland)
4 Excluding value on projects identified for disposal and assuming no material change in market conditions.
5 33 superlot settlements in FY16; 30 superlot settlements in FY15. FY16 includes the part disposal of impaired projects Bahrs Scrub (Queensland)
6 Core excludes impaired projects.
and the disposal of The Islands Apartments at Southbeach (Western Australia).
and the disposal of The Islands Apartments at Southbeach (Western Australia).
6 Core excludes impaired projects.
12
| Stockland Financial Report 2016
Stockland Financial Report — 12
Stockland Financial Report — 12
13.8%
12.7%
↑
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Directors’ Report
Year ended 30 June 2016
Year ended 30 June 2016
Our Residential business settled a record 6,135 lots in FY16, achieved significant operating profit growth of 38.8%
and lifted ROA to 19.6% on the core portfolio.
Our Residential business settled a record 6,135 lots in FY16, achieved significant operating profit growth of 38.8%
and lifted ROA to 19.6% on the core portfolio.
This strong performance is a direct result of our strategy to activate the highest possible proportion of our
Residential portfolio. More than 90% of our net funds employed are in projects that are actively selling, up from
This strong performance is a direct result of our strategy to activate the highest possible proportion of our
60% in FY13.
Residential portfolio. More than 90% of our net funds employed are in projects that are actively selling, up from
60% in FY13.
The results also reflect our repositioning of the business over the last three years to enhance our community
creation capabilities and capitalise on supportive market conditions in key growth corridors as well as the positive
The results also reflect our repositioning of the business over the last three years to enhance our community
impact of new projects, efficiency improvements and our broader product range.
creation capabilities and capitalise on supportive market conditions in key growth corridors as well as the positive
impact of new projects, efficiency improvements and our broader product range.
We launched five major projects in FY16 including Aura, Pallara and Newport in Queensland, Altrove (formerly
Schofields) in Sydney, and Cloverton in Melbourne.
We launched five major projects in FY16 including Aura, Pallara and Newport in Queensland, Altrove (formerly
Schofields) in Sydney, and Cloverton in Melbourne.
We have also broadened our market reach with the introduction of medium density homes and completed homes
within a number of our communities. We settled 110 completed homes and 74 medium density homes in FY16. We
We have also broadened our market reach with the introduction of medium density homes and completed homes
are now exploring mixed use apartment opportunities within our portfolio, including at our Sydney asset in
within a number of our communities. We settled 110 completed homes and 74 medium density homes in FY16. We
Merrylands, adjacent to our regional shopping centre.
are now exploring mixed use apartment opportunities within our portfolio, including at our Sydney asset in
Merrylands, adjacent to our regional shopping centre.
We continue to focus on affordability and community creation within our Residential business; over 75% of our
buyers are owner-occupiers. We commenced FY17 with 4,567 residential contracts on hand, a record for the
We continue to focus on affordability and community creation within our Residential business; over 75% of our
Group.
buyers are owner-occupiers. We commenced FY17 with 4,567 residential contracts on hand, a record for the
Group.
Residential strategic priorities
Residential strategic priorities
The Residential business is making good progress on its plans to make the portfolio more resilient and profitable in
the future by continuing to focus on:
The Residential business is making good progress on its plans to make the portfolio more resilient and profitable in
the future by continuing to focus on:
(1) Reshaping the portfolio – actively manage the portfolio to improve returns and achieve and maintain an optimal
pipeline with a preference to acquire land on capital efficient terms. We continue to make good progress in
(1) Reshaping the portfolio – actively manage the portfolio to improve returns and achieve and maintain an optimal
activating our land through the launch of new projects and working through low margin and impaired stock.
pipeline with a preference to acquire land on capital efficient terms. We continue to make good progress in
activating our land through the launch of new projects and working through low margin and impaired stock.
(2) Improving efficiency – continue to manage costs. Project management has been embedded into the business
and is driving significant cost savings.
(2) Improving efficiency – continue to manage costs. Project management has been embedded into the business
and is driving significant cost savings.
(3) Delivering revenue growth – increase revenue by creating a better community value proposition that drives high
customer referrals and broaden market reach through a medium density/built form offering.
(3) Delivering revenue growth – increase revenue by creating a better community value proposition that drives high
customer referrals and broaden market reach through a medium density/built form offering.
Retirement Living
Retirement Living
Stockland is a top three retirement living operator within Australia, with over 9,600 established units in 70
established villages across five states and the Australian Capital Territory. The portfolio includes a development
Stockland is a top three retirement living operator within Australia, with over 9,600 established units in 70
pipeline of over 3,100 units.
established villages across five states and the Australian Capital Territory. The portfolio includes a development
pipeline of over 3,100 units.
Performance
Performance
Retirement Living
($m, unless otherwise stated)
Retirement Living
($m, unless otherwise stated)
EBIT
FY15
54
FY16
FY15
FY16
64
Change
Change
↑20.5%
EBIT
Operating profit (funds from operations)
Transaction value7
Operating profit (funds from operations)
Transaction value7
Occupancy
Occupancy
ROA
ROA
Established
Established
Established settlements (units)
Established settlements (units)
Average re-sale price
Average re-sale price
Turnover cash per unit
Turnover cash per unit
Turnover cash margin
Turnover cash margin
Reservations on hand (units)
Reservations on hand (units)
Development
Development
Average price per unit
Average price per unit
Average margin – excludes DMF
Average margin – excludes DMF
Development settlements (units)
Development settlements (units)
Reservations on hand (units)
Reservations on hand (units)
64
57
57
393
393
94.9%
94.9%
5.8%
5.8%
716
716
$329k
$329k
$81k
$81k
24.7%
24.7%
155
155
$509k
$509k
16.8%
16.8%
297
297
67
67
54
48
48
333
333
94.4%
94.4%
5.3%
5.3%
663
663
$329k
$329k
$84k
$84k
25.4%
25.4%
132
132
$413k
$413k
15.9%
15.9%
282
282
119
119
↑20.5%
↑19.7%
↑19.7%
↑18.0%
↑18.0%
↑
↑
↑
↑
↑8.0%
↑8.0%
-
-
↓3.1%
↓3.1%
↓
↓
↑17.4%
↑17.4%
↑23.3%
↑23.3%
↑%
↑%
↑5.3%
↑5.3%
↓43.7%
↓43.7%
7 Reflects gross sales value of established villages and new developments settlements.
7 Reflects gross sales value of established villages and new developments settlements.
13
Stockland Financial Report — 13
Stockland Financial Report — 13
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Directors’ Report
Year ended 30 June 2016
Year ended 30 June 2016
Operating profit in the Retirement Living business was up 19.7% on FY15 reflecting strong sales, active management
and improved efficiency.
Operating profit in the Retirement Living business was up 19.7% on FY15 reflecting strong sales, active management
and improved efficiency.
Retirement Living sold more than 1,000 homes and apartments in FY16, which is a record number of settlements.
We also lifted our cash ROA by 50 basis points in the last 12 months to 5.8%, reflecting our continued focus on
Retirement Living sold more than 1,000 homes and apartments in FY16, which is a record number of settlements.
operational efficiencies and growing our development pipeline. Our development margin was 16.8% in FY16, which
We also lifted our cash ROA by 50 basis points in the last 12 months to 5.8%, reflecting our continued focus on
is at the top end of our target range.
operational efficiencies and growing our development pipeline. Our development margin was 16.8% in FY16, which
is at the top end of our target range.
We completed and sold the first 57 apartments in two buildings at Cardinal Freeman The Residences in Sydney,
with the next building of 40 apartments due for completion in the second half of FY17. We also launched a new
We completed and sold the first 57 apartments in two buildings at Cardinal Freeman The Residences in Sydney,
village within our Willowdale community in Sydney in the second half of FY16.
with the next building of 40 apartments due for completion in the second half of FY17. We also launched a new
village within our Willowdale community in Sydney in the second half of FY16.
We have continued to reshape our business, embedding the eight new South Australian villages acquired in FY15 into
our portfolio, and selling five relatively small, low ROA villages in Western Australia in July 2016. We will continue to
We have continued to reshape our business, embedding the eight new South Australian villages acquired in FY15 into
recycle capital, drive our development pipeline, which currently comprises 400 homes under development, and grow
our portfolio, and selling five relatively small, low ROA villages in Western Australia in July 2016. We will continue to
profits and returns.
recycle capital, drive our development pipeline, which currently comprises 400 homes under development, and grow
profits and returns.
Retirement Living strategic priorities
The business remains focused on being a preferred operator and developer of Retirement Living villages. The
Retirement Living strategic priorities
business has a clear strategy to continue to improve its return on assets by:
The business remains focused on being a preferred operator and developer of Retirement Living villages. The
business has a clear strategy to continue to improve its return on assets by:
(1) Actively managing the portfolio;
(2) Growing development volumes; and
(1) Actively managing the portfolio;
(3) Differentiating the customer experience through access to a range of resident care and other services.
(2) Growing development volumes; and
(3) Differentiating the customer experience through access to a range of resident care and other services.
Capital management
Capital management
Financial position
We maintained our focus on prudent balance sheet management, continuing to utilise diverse funding sources
Financial position
throughout the year. Our gearing level increased marginally to 23.8% at 30 June 2016 (2015: 23.4%), as continued
We maintained our focus on prudent balance sheet management, continuing to utilise diverse funding sources
reinvestment into our businesses was largely offset by the impact of revaluation gains across the commercial
throughout the year. Our gearing level increased marginally to 23.8% at 30 June 2016 (2015: 23.4%), as continued
property portfolio. This remains within our target range of 20–30% and the Group continues to retain its A-/stable
reinvestment into our businesses was largely offset by the impact of revaluation gains across the commercial
credit rating.
property portfolio. This remains within our target range of 20–30% and the Group continues to retain its A-/stable
credit rating.
The fixed/hedged ratio has increased to 96% at 30 June 2016 (2015: 72%) as we continue to take advantage of low
fixed interest rates. The weighted average cost of debt for FY16 has decreased to 5.8% (2015: 6.2%) following the
The fixed/hedged ratio has increased to 96% at 30 June 2016 (2015: 72%) as we continue to take advantage of low
termination of three swaps during the first half of FY16, funded from gains on asset sales.
fixed interest rates. The weighted average cost of debt for FY16 has decreased to 5.8% (2015: 6.2%) following the
termination of three swaps during the first half of FY16, funded from gains on asset sales.
Interest cover has increased to 4.5:1 (2015: 4.0:1) due to stronger earnings across the business.
Interest cover has increased to 4.5:1 (2015: 4.0:1) due to stronger earnings across the business.
Balance Sheet
$ million
Balance Sheet
Cash
$ million
Real estate assets8:
Cash
• Commercial Property
Real estate assets8:
• Residential
• Commercial Property
• Retirement Living
• Residential
• Other
• Retirement Living
Other assets
• Other
Total assets
Other assets
Interest bearing loans and borrowings
Total assets
Resident loan obligations
Interest bearing loans and borrowings
Other liabilities
Resident loan obligations
Total liabilities
Other liabilities
Net assets/total equity
Total liabilities
Net assets/total equity
FY16
208
FY16
208
9,706
2,517
9,706
3,589
2,517
–
3,589
922
–
16,942
922
3,800
16,942
2,427
3,800
1,461
2,427
7,688
1,461
9,254
7,688
9,254
Change
↑22.4%
Change
↑22.4%
↑8.5%
↓1.4%
↑8.5%
↑7.6%
↓1.4%
nm
↑7.6%
↑26.6%
nm
↑26.6%
↑15.7%
↑9.8%
↑15.7%
↑0.9%
↑9.8%
↑0.9%
FY15
170
FY15
170
8,942
2,552
8,942
3,335
2,552
7
3,335
723
7
15,729
723
3,283
15,729
2,211
3,283
1,448
2,211
6,942
1,448
8,787
6,942
8,787
8 Includes non-current assets held for sale, inventory, investment properties, equity-accounted investments and certain other assets.
8 Includes non-current assets held for sale, inventory, investment properties, equity-accounted investments and certain other assets.
14
| Stockland Financial Report 2016
Stockland Financial Report — 14
Stockland Financial Report — 14
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
The Commercial Property investment portfolio has increased by $764 million to $9,706 million primarily due to
valuation uplift across all three asset classes (up $432 million including equity-accounted joint venture investments).
The overall increase also reflects continued capital and development expenditure predominantly on the Retail
development pipeline, and acquisitions across Retail, and Logistics and Business Parks. The valuation gains were
largely in Retail assets in New South Wales, namely Green Hills ($35 million), Merrylands ($32 million), Balgowlah
($21 million), Glendale ($21 million) and Wetherill Park ($87 million), all benefitting from income growth and
capitalisation rate compression. The Group’s Office portfolio recorded a net valuation gain of $21 million, while
Logistics and Business Parks similarly delivered strong valuation gains of $77 million during the period. Valuation
gains across the portfolio saw the Group’s weighted average capitalisation rate reduce from 6.9% to 6.4%.
Residential assets (mainly land under development) decreased slightly to $2,517 million at 30 June 2016. Strong
settlement volumes in FY16 led to a reduction in inventory, while a disciplined approach to development
expenditure throughout the year ensured that production did not exceed sales. Land acquisitions reflect our focus
on acquiring land on capital efficient terms. Finished goods levels remain appropriate.
The value of the Retirement Living assets, net of resident loan obligations, was $1,162 million, an increase of
$38 million from June 2015. This primarily reflects capital expenditure on the development pipeline, partly offset
by an increase in resident loan obligations created on first sales of development units.
Total debt increased by $517 million to $3,800 million at 30 June 2016 as a result of increased operating activity
satisfied by the issuance of Domestic Medium term notes and US Private Placement notes, partly offset by the
repayment of bank facilities and Asian Private Placement notes. Unfavourable foreign exchange and fair value
movements on debt were largely offset by net favourable movements in derivative financial instruments. Movements
in other assets and liabilities mainly reflect the changes in value of the Group’s financial instruments and intangibles.
Cash flows
$ million
Operating cash flows
Investing cash flows
Financing cash flows
Net change in cash and cash equivalents
Cash at the end of the period
FY16
787
(508)
(241)
38
208
FY15
401
184
(646)
(61)
170
Change %
↑96.3%
nm
↓62.7%
↑37.7%
↑22.4%
Operating cash flows are up significantly on the prior year, primarily as a result of improved trading revenues across
the business combined with a disciplined approach to Residential development spend and lower land acquisitions in
Residential during the year.
Net cash outflows from investing activities reflect lower proceeds from the sale of investment properties and
investments in the current year. FY16 includes investment proceeds from the disposal of Waterfront Place while
the prior year includes disposal proceeds from the 50% disposal of Townsville ($223 million), the remaining assets
in the UK ($44 million), aged care ($20 million) and our investment in Australand ($506 million). Overall net cash
payments in relation to Commercial Property and Retirement Living capital expenditure are in line with the prior year.
Net financing cash outflows reflect the net proceeds from borrowings to fund acquisitions and development
expenditure, as well as payments for the termination of derivatives. The prior year included the net repayment
of borrowings from the proceeds on the sale of our investment in Australand.
Equity
Distribution/Dividend Reinvestment Plan
On 20 June 2016, Stockland announced that the DRP would operate for the final distribution to 30 June 2016 and
that investors participating in the DRP will be entitled to receive a full distribution.
The DRP security price was determined to be $4.85 being the average for 15 daily volume weighted average prices
of Stockland securities for the 15 trading days from 5 July 2016 to 25 July 2016 inclusive, with a discount of 1.0% on
the securities acquired under the DRP.
Stockland Financial Report — 15
15
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Distributions
The dividend and distribution payable for the full year ended 30 June 2016 is 24.5 cents per security. Our distribution
policy in FY16 has been to pay the higher of 100% of Trust taxable income or 80–90% of underlying profit. For FY17,
we are targeting distribution per security at 25.5 cents which reflects the higher of 100% of Trust taxable income or
75–85% of FFO, within our distribution policy.
The distribution for the full year comprises:
Stockland
Trust distribution
Corporation dividend, fully franked
Total dividend and distribution
FY16
Cents
24.5
–
24.5
FY15
Cents
24.0
–
24.0
Registers closed at 5.00pm on 30 June 2016 to determine entitlement to the full year-end dividend and distribution,
which will be paid on 31 August 2016.
16
| Stockland Financial Report 2016
Stockland Financial Report — 16
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
Directors
The Directors of the Company and the Responsible Entity at any time during or since the end of the financial year
(‘the Directors’) were:
Graham Bradley
BA, LLB (Hons 1),
LLM, FAICD
Chairman
(Non-Executive)
Duncan Boyle
BA (Hons), FCII, FAICD
(Non-Executive)
Carolyn Hewson
BEc (Hons), MA (Ec),
FAICD
(Non-Executive)
Barry Neil
BE (Civil)
(Non-Executive)
Mr Bradley was appointed to the Board on 9 February 2004 and was appointed Non-
Executive Chairman on 25 October 2005. He is Non-Executive Chairman of HSBC Bank
Australia Limited (appointed December 2004), Virgin Australia International Holdings
Limited (appointed March 2012) and Energy Australia Holdings Limited (appointed June
2012). He is a Non-Executive Director of GI Dynamics Inc. (appointed June 2011) and The
Hongkong and Shanghai Banking Corporation Limited (appointed November 2012) and is
Chairman of Infrastructure NSW (appointed July 2013). He was formerly Chairman of the
Film Finance Corporation of Australia Limited (January 2004 to June 2008) and a Director
of MBF Australia Limited (November 2003 to November 2007), and Singapore
Telecommunications Limited (May 2004 to July 2011). Mr Bradley also chairs the
Sustainability Committee and the Stockland CARE Foundation, and is a member of the
Human Resources Committee.
Former Directorships of listed entities in last three years
Mr Bradley was Chairman of Po Valley Energy Limited from September 2004 to April 2016.
Mr Boyle was appointed to the Board on 7 August 2007 and retired from the Board on
27 October 2015. He has over forty years’ experience within the insurance industry in
Australia, New Zealand, the United Kingdom and Europe. Mr Boyle is Chairman of TAL
Dai Ichi Life Australia Pty Ltd and TAL Life Limited (appointed May 2014) and formerly a
Director of QBE Insurance Group Limited (September 2006 to December 2014). He was a
Director of O’Connell Street Associates Pty Limited (until 30 June 2013) and Clayton Utz
(until June 2014). Prior to his retirement Mr Boyle was a member of the Human Resources
and Sustainability Committees and was a member of the Stockland Audit Committee until
1 October 2014.
Former Directorships of listed entities in last three years
Mr Boyle was a Director of QBE Insurance Group Limited from September 2006 to
31 December 2014.
Ms Hewson was appointed to the Board on 1 March 2009. She has over thirty years’
experience in the financial sector, with extensive financial markets, risk management
and investment management expertise. Ms Hewson is a Non-Executive Director of BHP
Billiton (appointed March 2010), and previously served as a Director on the Boards of the
Australian Gas Light Company, AGL Energy Limited, AMP, CSR Limited, BT Investment
Management, South Australia Water, the Economic Development Board of South Australia
and Westpac Banking Corporation. Ms Hewson is Chair of the Human Resources
Committee and a member of the Sustainability Committee and was Chair of the Risk
Committee until 1 October 2014.
Former Directorships of listed entities in last three years
Ms Hewson was a Director of BT Investment Management Limited from December 2007 to
December 2013.
Mr Neil was appointed to the Board on 23 October 2007 and has over forty years’ experience
in property, both in Australia and overseas. He is Chairman of Keneco Pty Limited and
Bitumen Importers Australia Pty Limited, a Director of Terrace Tower Group Pty Ltd and was
previously Director of Property for Woolworths Limited. He also served as Chief Executive
Officer, Investment Division (1999 to 2004), and Executive Director (1987 to 2004) of Mirvac
Limited. Mr Neil is Chairman of Stockland Capital Partners Limited, the Responsible Entity
for Stockland’s unlisted funds and a member of the Stockland Audit and Sustainability
Committees.
Former Directorships of listed entities in last three years
None.
Stockland Financial Report — 17
17
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Stephen Newton
BA (Ec and Acc),
M.Com, MICAA, MAICD
(Non-Executive)
Tom Pockett
BComm, FCA
(Non-Executive)
Mr Newton was appointed to the Board on 20 June 2016*.
Mr Newton is currently a Director of BAI Communications Group, Gateway Lifestyle
Residential Parks Group, VIVA Energy REIT Group and the University of Notre Dame
Australia. He is also an Advisory Board Member, representing Alberta Investment
Management Corp (Canada), of the Forestry Investment Trust, and Chairman of the
Finance Council for the Catholic Archdiocese of Sydney. He is a former Director of
Campus Living Funds Management Limited, Australand Property Group and Newcastle
Airport Limited.
Mr Newton has deep experience across real estate investment, development and
management and infrastructure investment and management. He is a Principal of Arcadia
Funds Management Limited, a real estate investment management and capital advisory
business he established in 2002. Prior to this, Mr Newton was the Chief Executive Officer -
Asia/Pacific for the real estate investment management arm of Lend Lease Corporation
and a member of the global senior executive management group. His career at Lend Lease
spanned almost 23 years including experience across residential development, retail
shopping centres, and commercial and industrial property as well as real estate investment
in Australia and overseas.
Mr Newton is a Member of the Institute of Chartered Accountants in Australia, the
Australian Institute of Company Directors and the Stockland Sustainability Committee.
Former Directorships of listed entities in last three years
Mr Newton was a Director of Australand Property Group from December 2007 to October
2014.
*As required by the Stockland Constitution, Mr Newton will offer himself for election by securityholders
at the 2016 Annual General Meeting to be held in October.
Mr Pockett was appointed to the Board on 1 September 2014. He is a Director of Insurance
Australia Group Limited (appointed 1 January 2015), O’Connell Street Associates Limited
(appointed 1 November 2014) and Sunnyfield, a not for profit disability services provider in
New South Wales. Mr Pockett was Chief Financial Officer of Woolworths Limited from
August 2002 to February 2014. He was an Executive Director of Woolworths Limited from
November 2006 to 1 July 2014. He previously held the position of Deputy Chief Financial
Officer at the Commonwealth Bank of Australia and prior to that held several senior finance
roles within the Lend Lease Group following a successful career with Deloitte. Mr Pockett
was formerly Chairman of The Quantium Group Holdings Pty Limited (September 2014 to
February 2016), and a Director of ALH Group Pty Ltd (September 2014 to February 2016)
and Hydrox Holdings Pty Ltd (September 2014 to December 2015). Mr Pockett was a
member of the Financial Reporting Council from March 2003 to March 2006, National
President of G100 from August 2000 to January 2003. Mr Pockett was appointed as the
Chair of the Stockland Audit Committee and the Stockland Capital Partners Limited Audit
Committee in October 2015, having previously been a member of the Audit Committee
from 2014. He is also a member of the Stockland Risk and Sustainability Committees.
Mr Pockett is a Chartered Accountant.
Former Directorships of listed entities in last three years
Mr Pockett was a Director of Woolworths Limited from November 2006 to 1 July 2014.
18
| Stockland Financial Report 2016
Stockland Financial Report — 18
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
Nora Scheinkestel
LLB (Hons), PhD, FAICD
(Non-Executive)
Dr Scheinkestel was appointed to the Board on 19 August 2015. She is an experienced
company director, having served for over 20 years as a non-executive chairman and
director of companies in a wide range of industry sectors and in the public, government and
private spheres. She is currently Chairman of Macquarie Atlas Roads Limited (appointed
28 August 2014) as well as a Director of its stapled entity, Macquarie Atlas Roads
International Limited (appointed 17 April 2015) and of Telstra Corporation Limited
(appointed 12 August 2010). Dr Scheinkestel is also an Associate Professor at the
Melbourne Business School (MBS) at Melbourne University and a former member of
the Takeovers Panel.
Dr Scheinkestel’s executive background is as a senior banking executive in international
and project financing, responsible for the development and financing of major projects in
Australasia and South East Asia. She is a published author of Rethinking Project Finance –
Allocating and Mitigating Risk in Australasian Projects.
In 2003, she was awarded a centenary medal for services to Australian society in business
leadership. Dr Scheinkestel is a member of the Stockland Audit, Risk and Sustainability
Committees.
Former Directorships of listed entities in last three years
Dr Scheinkestel was a director of Orica Limited from August 2006 to December 2015 and
Insurance Australia Group Limited from 1 July 2013 to 16 September 2014.
Carol Schwartz
BA, LLB, MBA, FAICD
(Non-Executive)
Ms Schwartz was appointed to the Board on 1 July 2010. She has extensive experience
in business, property and community organisations. Ms Schwartz is on the Board of a
number of organisations including Bank of Melbourne, Qualitas Property Partners and the
Australian Chamber Orchestra. Her other appointments include Chair of the ASX-listed
entity Temple and Webster, Chair of Our Community and Creative Partnerships, Australia,
and Chair of Women’s Leadership Institute Australia. Ms Schwartz serves on the Risk,
Human Resources and Sustainability Committees.
Peter Scott
BE (Hons), MEng Sc,
FIE. Aust, CPEng, MICE
(Non-Executive)
Mark Steinert
BAppSc, G Dip App Fin
& Inv (Sec Inst),
F Fin, AAPI
Managing Director
Former Directorships of listed entities in last three years
None.
Mr Scott was appointed to the Board on 9 August 2005. He is Chairman of Perpetual
Limited, where he was appointed a Director on 31 July 2005 and Perpetual Equity
Investment Company Limited (appointed 18 December 2014). Mr Scott is a Director of
Igniting Change, a not-for-profit making organisation and O’Connell Street Associates
Pty Limited. Mr Scott is also a Director of Transurban Group (appointed 1 March 2016).
He was Chairman of Sinclair Knight Mertz Holdings until December 2013, and a member
of the Advisory Board of Laing O’Rourke Australia from August 2008 to August 2011.
Mr Scott was the Chief Executive Officer of MLC and Executive General Manager, Wealth
Management of National Australia Bank until January 2005. Prior to this, he held a number
of senior positions with Lend Lease, following a successful career as a consulting engineer
in Australia and overseas. Mr Scott is Chair of the Risk Committee and a member of the
Sustainability Committee. He also served as Chair of the Human Resources Committee
until October 2014. Mr Scott will retire from the Board in August 2016.
Former Directorships of listed entities in last three years
None
Mr Steinert was appointed Managing Director and Chief Executive Officer of Stockland
on 29 January 2013. Mr Steinert has over twenty-six years of experience in property and
financial services including eight years in direct property primarily with Jones Lang LaSalle
and ten years in listed real estate with UBS. Mr Steinert was appointed as Head of
Australasian Equities at UBS in 2004 and as Global Head of Research in New York in
late 2005. In 2012 he was appointed as Global Head of Product Development and
Management for Global Asset Management at UBS, a $559 billion Global Fund Manager.
Mr Steinert is President of the Property Council of Australia, a Director of the Shopping
Centre Council of Australia and Stockland Capital Partners Limited, the Responsible Entity
for Stockland’s unlisted property funds. He is a member of the Sustainability Committee.
Mr Steinert is a former Director of The Green Building Council of Australia.
Former Directorships of listed entities in last three years
None.
Stockland Financial Report — 19
19
Directors’ Report Year ended 30 June 2016 | Directors’ Report
Year ended 30 June 2016
Terry Williamson
BEc, MBA, FCA,
FCIS, MACS
(Non-Executive)
Mr Williamson was appointed to the Board in April 2003 and retired from the Board on
27 October 2015. He is a Director of Avant Insurance Limited and The Doctors Health
Fund. Mr Williamson was previously the Chief Financial Officer of Bankers Trust Australia
Limited/BT Financial Group Pty Limited from 1997 to 2002 and prior to that was a partner
of Pricewaterhouse for seventeen years. Prior to his resignation Mr Williamson was Chair
of the Stockland Audit Committee, the Stockland Capital Partners Audit Committee, the
Stockland Financial Services Compliance Committee, the Stockland Capital Partners
Financial Services Compliance Committee and a member of the Sustainability Committee.
Former Directorships of listed entities in last three years
None.
External Independent Committee Members and
Independent Directors of Stockland
Anthony Sherlock
BEc, FCA, MAICD
Mr Sherlock was appointed as a Director of Stockland Capital Partners Limited, the
Responsible Entity for Stockland’s unlisted funds, in August 2004. He is a former Senior
Partner of Coopers & Lybrand having national responsibility for credit risk management. In
that capacity, he obtained experience in the banking and finance, mining, agriculture,
building, construction and development sectors. Mr Sherlock is a non-executive Director of
Equatorial Mining Limited and Kerrygold Limited. He is the former Chairman of Australian
Wool Corporation Limited and The Woolmark Company Pty Ltd, a former Non-Executive
Director of Austral Coal Limited, Sydney Attractions Group Limited, IBA Health Limited and
Export Finance Insurance Corporation Limited and has acted on a number of committees
for both Federal and State Governments. He is a member of the Stockland Capital
Partners Audit Committee. Mr Sherlock was also a member of the Stockland and the
Stockland Capital Partners Financial Services Compliance Committees prior to the
incorporation of these committees into the Audit Committee and Stockland Capital Partners
Audit Committee respectively.
Company Secretaries
Katherine Grace
BA (Hons), LLB (Hons
1st Class), MPP, MAICD
Company Secretary
Ms Grace was appointed as General Counsel and Company Secretary in August 2014.
Ms Grace has over 15 years’ experience specialising in the property sector. Most recently
Ms Grace was General Counsel and Company Secretary for Westfield Retail Trust. She
has extensive experience in corporate, property, debt and capital market transactions.
Prior to Westfield Retail Trust, Ms Grace was General Counsel at Valad Property Group.
She has previously held positions in legal private practice (where she acted for a variety
of corporations and financial institutions in relation to landmark developments across
Australia and overseas) and at Multiplex Limited and Pacific Capital Partners.
Ms Grace reports directly to the Managing Director and also has accountability directly
to the Board of Directors, through the Chairman, on all matters regarding the proper
functioning of the Board.
Derwyn Williams
BComm, CPA, FCIS,
FGIA, MAICD
Company Secretary
(resigned 20 November
2015)
Mr Williams joined Stockland in December 2004 and has over twenty years’ experience
as a Company Secretary. Prior to joining Stockland he was General Manager, Corporate
Governance & Group Secretary at CUSCAL Limited and prior to that Deputy Group
Secretary at St. George Bank Limited. He has held a number of senior management,
accountancy, risk management and internal audit positions across the property, finance,
heavy and light industry and public sectors.
20
| Stockland Financial Report 2016
Stockland Financial Report — 20
Directors’ Report YEAR ENDED 30 JUNE 2016 Directors’ Report
Year ended 30 June 2016
Directors’ meetings
The number of meetings of the Board of Directors (‘the Board’) and of the Board Committees and the number of
meetings attended by each of the Directors during the financial year were:
Stockland (Stockland Corporation Limited and Stockland Trust Management Limited)
Scheduled
Board
Audit
Committee
Financial
Services
Compliance
Committee1
Human
Resources
Committee
Sustainability
Committee
Risk
Committee
A
B
A
B
A
B
A
B
A
B
A
B
11
3
11
11
2
11
8
11
11
11
3
–
–
11
3
11
11
2
11
10
11
11
11
3
–
–
–
–
–
4
–
4
1
–
–
–
2
–
–
–
–
–
4
–
4
2
–
–
–
2
–
–
–
–
–
–
–
–
–
–
–
–
1
1
1
–
–
–
–
–
–
–
–
–
–
1
1
1
5
2
5
–
–
–
–
4
–
–
–
–
–
5
2
5
–
–
–
–
4
–
–
–
–
–
3
–
3
3
1
3
3
3
3
3
–
–
–
3
–
3
3
1
3
3
3
3
3
–
–
–
–
–
–
–
–
4
1
4
4
–
–
–
–
–
–
–
–
–
4
2
4
4
–
–
–
–
Director
Mr G Bradley
Mr D Boyle2
Ms C Hewson
Mr B Neil
Mr S Newton4
Mr T Pockett
Ms N Scheinkestel3
Ms C Schwartz
Mr P Scott
Mr M Steinert
Mr T Williamson2
Other members
Ms K Grace
Mr A Sherlock
A – Meetings attended / B – Meetings eligible to attend
1 The Financial Services Compliance Committee was incorporated into the Audit Committee in February 2016
2 Retired from the Board on 27 October 2015
3 Appointed to the Board on 19 August 2015
4 Appointed to the Board on 20 June 2016
Stockland Capital Partners
Scheduled
Board
Audit
Committee
Financial
Services
Compliance
Committee1
A
B
A
B
A
B
4
–
3
4
–
–
4
–
4
4
–
–
–
2
3
–
1
–
–
3
3
–
1
–
–
1
2
–
1
2
–
1
2
–
1
2
Director
Mr B Neil
Mr T Pockett2
Mr A Sherlock
Mr M Steinert
Mr T Williamson3
Other members
Ms K Grace
A – Meetings attended / B – Meetings eligible to attend
1 The Financial Services Compliance Committee was incorporated into the Audit Committee in February 2016.
2 Appointed to the Committee on 27 October 2015
3 Retired from the Committee on 27 October 2015
Stockland Financial Report — 21
21
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Corporate Governance
The Board takes its governance responsibilities very seriously and believes it has the necessary mix of experience
and skills to oversee the high standard of corporate governance, integrity and accountability required of a
professional and ethical organisation. The Board believes that Stockland’s governance accords fully with the
principles and recommendations of the ASX Corporate Governance Council as summarised in the table at the
end of this corporate governance statement.
Role of the Board
The Board has overall responsibility for the good governance of Stockland. The Board:
• oversees the development and implementation of Stockland’s corporate strategy, operational performance
objectives and management policies with a view to creating sustainable long-term value for security holders;
• establishes Stockland’s overall framework of governance, risk management, internal control and compliance
which underpins the integrity of management information systems and fosters high ethical standards throughout
the organisation;
• appoints the Managing Director, approves the appointment of the Company Secretary and Senior Executives
reporting to the Managing Director and determines the level of authority delegated to the Managing Director;
• sets Executive remuneration policy, monitors Senior Executive performance and approves the performance
objectives and remuneration of the Managing Director and his direct reports;
• approves the annual budget and monitors financial and operating performance;
•
reviews and approves financial and other reports to securityholders and approves dividends from Stockland
Corporation and distributions from the Trust;
reviews Executive and Board succession planning and Board performance;
• approves major capital expenditure, acquisitions and divestitures;
•
• monitors compliance with laws and regulations which apply to Stockland and its business; and
• appoints and monitors the independence of Stockland’s external auditors.
The Board has delegated responsibility to the Managing Director to manage Stockland’s business and to its various
Board Committees to oversee specific areas of governance. Delegated responsibilities are regularly reviewed and the
Managing Director regularly consults with the Board on Stockland’s performance. Matters which are not specifically
delegated to the Managing Director require Board approval, including capital expenditure decisions above delegated
levels, expenditure outside the ordinary course of business, major acquisitions and sales, changes to corporate
strategy, the issue of equity or debt by Stockland and key risk management and accounting policies. The Company
Secretary is directly accountable to the Board through the Chairman on all matters to do with the proper functioning
of the Board.
The Board aims to ensure that its securityholders are kept well-informed of all major developments and business
events that are likely to materially affect Stockland’s operations and financial standing and the market price of its
securities. Further information in relation to communication with Stockland’s securityholders is located on the
Stockland website at https://www.stockland.com.au/about-stockland/corporate-governance.
Stockland’s Directors, management and employees are required to maintain high ethical standards of conduct.
Stockland’s Code of Conduct and Ethical Behaviour (the ‘Code’) is periodically reviewed and endorsed by the Board
and covers dealings with both external parties and internal operations. Further information in relation to the Code is
located on the Stockland website at https://www.stockland.com.au/about-stockland/corporate-governance.
Role of Stockland Trust Management Limited as Responsible Entity for Stockland Trust
Stockland Trust Management Limited, as Responsible Entity for Stockland Trust, is responsible for the operation of
the Trust. The Responsible Entity must exercise its powers and perform its obligations under the Stockland Trust
Constitution and the Corporations Act 2001 in the best interests of unitholders to ensure that the activities of the
Trust are conducted in a proper and efficient manner. The major activities of the Responsible Entity include:
• ongoing selection and management of property investments;
• management of the Trust’s property portfolio;
• maintenance of the accounting and statutory records of the Trust;
• management of equity and debt raisings and making distributions to unitholders; and
• preparation of notices and reports issued to unitholders.
22
| Stockland Financial Report 2016
Stockland Financial Report — 22
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
Composition and diversity of the Board
Stockland is committed to having a Board whose members have the capacity to act independently of management,
and have the collective skills and diversity of experience necessary to optimise the long-term financial performance
of Stockland so as to sustain superior returns to securityholders.
As at the date of this report, the Board comprised one Executive Director and eight Non-Executive Directors.
The Boards of Stockland Corporation Limited and Stockland Trust Management Limited have the same Directors.
Directors’ details are listed on pages 17 to 20, including details of their other listed company Directorships
and experience.
The Board recognises the advantage of having a mix of relevant business, executive and professional experience
on the Board, the importance of cultural and ethical values, and the benefits of diversity, including gender diversity.
The Board has identified a range of core skills and experience that will assist the Board collectively to fulfil its
oversight role effectively. These include experience with property investment and management, property and
community development, construction and project management, retailing and consumer marketing, industrial supply
chain logistics, funds management, banking and finance, government and regulatory relations and environmental,
social and governance matters. It is also advantageous for some Board members to have experience in the audit
and risk management field, people management and executive remuneration. The Board believes that the core
skills of importance to Stockland are well represented among the current Directors. In addition, most Directors have
occupied senior executive management positions in large corporations both in Australia and globally, including CEO
and CFO positions, covering a wide range of industry sectors or have held senior positions in relevant finance and
accounting disciplines.
Board skills and experience in 2016
D S K I L L S A ND EXPERIENCE IN 2016
R
A
O
B
Environment,
social and
Governance
Property
management
& investment
People
management
& executive
remuneration
Accounting,
audit & risk
Government
& regulatory
Property
& community
development
Construction
& project
management
Retailing
& customer
marketing
Banking
& finance
Funds
management
Industrial
supply chain
logistics
The Board also believes that it is important to maintain a range of director tenures to facilitate orderly Board renewal
while maintaining valuable continuity and corporate knowledge among Directors. As at 30 June 2016, of the nine
Directors, including the Managing Director, five had tenure of less than six years, two had tenure of between six
and nine years and two had served for more than nine years. The Board also values the importance of diversity,
currently three of the eight Non-Executive Directors are women and three of the last six director appointments
have been women.
Mr Stephen Newton joined the Board on 20 June 2016. Mr Newton has deep experience across real estate
development, property management and infrastructure investment gained during almost 23 years with Lend Lease
Corporation and more than 13 years as a Principal of investment management and capital advisory business,
Arcadia Funds Management. It was also announced in June 2016 that Mr Peter Scott would retire from the Board in
August 2016. These changes reflect the ongoing succession planning and renewal programme for the Board.
Stockland Financial Report — 23
23
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Where a Board vacancy occurs or whenever it is considered that the Board would benefit from the services of
an additional director the Board identifies the skills and experience it seeks to complement the competencies of
continuing Directors. In defining the Board’s requirements for a new director, consideration is given to the skills,
professional experience and educational backgrounds of continuing members of the Board, including any identified
skills gaps. Criteria used also include consideration of the value of gender diversity on the Board.
The Human Resources Committee oversees the Director nomination process, and will from time-to-time engage
external search firms to ensure that a wide range of candidates are considered. Ultimately, the full Board
determines who is invited to fill a casual vacancy after extensive one-on-one and collective interviews with
candidates and thorough due diligence and reference checking. Directors coming up for re-election are also
reviewed by the Human Resources Committee and, in their absence, the Board considers whether to support their
re-election. It is the Board’s policy that Directors offer themselves for re-election only with the agreement of the
Board and continue to serve only so long as they have the confidence of their fellow Board members.
Stockland has for many years had a focus on actively encouraging gender diversity at all levels within the
organisation and a culture that supports workplace diversity and inclusion. As part of this focus, gender diversity
targets are set by management and regularly reviewed and endorsed by the Human Resources Committee.
In 2014, we reached our original 2017 target for women in our management levels (approximately 34% of all
employees) and we have now revised this target to 50% by 2020. We also set annual progress targets for both
Women in Management (45.2% for FY17) and Senior Women in Management (36% for FY17). The latter group
is approximately 11% of all employees.
In addition, we have a formal Diversity and Inclusion Policy which is available on the Stockland website at
https://www.stockland.com.au/about-stockland/corporate-governance. Further details of this policy and our
achievements, including measurable objectives for achieving gender diversity, are set out in the 2016 Remuneration
Report on pages 39 to 40 within the Directors’ Report as well as on the Stockland website at
https://www.stockland.com.au/about-stockland/sustainability.
Board Independence
Stockland recognises that having a majority of independent Non-Executive Directors provides assurance that the
Board is structured properly to fulfil its role in holding management accountable for Stockland’s performance. The
Board has resolved that it should continue to have a majority of independent Non-Executive Directors, that the
positions of Chairman and Managing Director must be separate, and that the Chairman should be an independent
Non-Executive Director.
Stockland has developed criteria for determining the independence of its Board members. A Director is considered
to be independent if he or she:
•
is not a substantial securityholder of Stockland or of a company holding more than 5% of Stockland’s voting
securities, or an officer of or directly or indirectly associated with a securityholder holding more than 5% of
Stockland’s voting securities;
is not and has not within the last three years been an employee of Stockland;
is not a principal of a material professional advisor to Stockland;
is not a material supplier or customer of Stockland or an officer of, or directly or indirectly associated with a
significant supplier or customer;
•
•
•
• has no material contractual relationship with Stockland or any of its associates other than as a Director of
Stockland; and
• has no other interest or relationship that could interfere with the Director’s ability to act in the best interests of
Stockland and independently of management.
In this context, the Board considers that any Director-related business relationship that is or is likely in the future to
be more than 10% of the Director-related business’s revenue to be material. All Directors are expected to act in the
best interests of Stockland at all times.
Having considered carefully the above criteria, the Board has determined that all of Stockland’s Non-Executive
Directors are independent Directors for the 2016 financial year.
In making this determination, the Board considered the transactions between Stockland and entities with which
Stockland Directors are associated as Directors or advisors. The Board concluded that none of these transactions
rendered these entities significant suppliers to, or customers of, Stockland when the relative size of the transactions
was compared to the total revenues or business of those entities. Further, in none of these transactions did
Stockland Directors receive direct financial benefits as principals, partners, or substantial shareholders of the
entities concerned.
24
| Stockland Financial Report 2016
Stockland Financial Report — 24
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
Board meetings
The Board currently holds 10 scheduled meetings each financial year. Additional meetings are convened as
required. During the 2016 financial year, the Board held 11 formal meetings and a considerable number of
additional unscheduled informal briefings and discussions.
The Board’s practice is for Non-Executive Directors to meet prior to the full Board meeting in the absence of
management and the Non-Executive Directors meet privately on other occasions from time-to-time when necessary.
Board and Director performance
The Board has instituted a formal annual process to review the performance and effectiveness of the Board, the
Board Committees and individual Directors. The Human Resources Committee oversees this process.
As part of the review, each Director completes a questionnaire relating to the Board’s role, composition, procedures,
practices and behaviour. The questionnaires are confidential. The Chairman leads a discussion of the questionnaire
results with the Board as a whole. The Chairman also meets one-on-one with each Director annually to discuss their
individual contribution, their views on the Board’s performance and their suggestions for improvement in Board
processes or procedures. Following these sessions, the Chairman provides feedback to individual Directors as
necessary. The Chairman of the Human Resources Committee follows a similar process of one-on-one discussions
with each Director annually to provide feedback to the Chairman on his performance and effectiveness. In 2015 the
Board engaged an external consultant to facilitate a review of Board performance.
The Company has adopted a process requiring each Committee Chairman to lead a discussion on a regular basis
on their Committee’s performance and effectiveness.
Director remuneration and securities ownership
Non-Executive Directors receive fees for their services, being an all-inclusive fee including statutory and elected
superannuation contributions.
To underpin the alignment of Directors and securityholder interests, the Board believes that Directors should hold
a meaningful number of Stockland securities. In August 2015 the Board revised its existing policy to increase the
minimum number of securities each Non-Executive Director is required to acquire from 10,000 to 40,000 securities
within a reasonable time of becoming a Director. The increased minimum roughly equates to one year’s base Board
fees. All new directors will have a period of three years to comply with this policy and any existing directors that
hold less than 40,000 securities will have until 30 June 2018 to comply. Stockland also has a policy regarding the
minimum securityholdings for Senior Executives as set out in the Remuneration Report. Both these policies are
intended to align the personal financial interests of Directors and Senior Executives with those of securityholders.
Board Committees
Four permanent Board Committees have been established to assist in the execution of the Board’s responsibilities
as described below. These are the:
(1) Human Resources Committee;
(2) Audit Committee;
(3) Risk Committee; and
(4) Sustainability Committee.
The Financial Services Compliance Committee previously operated as a permanent Board Committee but was
incorporated into the Audit Committee from February 2016.
The Board’s policy is that a majority of the members of each Board Committee should be independent Directors.
The Audit Committee, Risk Committee and the Human Resources Committee comprise only independent Directors.
The Financial Services Compliance Committee, prior to its incorporation into the Audit Committee, and the
Sustainability Committee are chaired by an independent Director and have a majority of independent Directors, or
external independent persons as Members.
The Board reviews the composition of each Committee periodically, balancing the benefits of rotation with those of
maintaining continuity of experience and knowledge, and to ensure Committee members have skills appropriate to
their roles. Each Committee has its own written charter which it reviews annually and recommends any appropriate
changes to the Board.
All Non-Executive Directors may attend any Board Committee meeting. Committees may meet with external
advisors in the absence of management. Each Board Committee works in conjunction with other Board Committees
to assist the Board in fulfilling its responsibilities for ensuring Stockland has adopted and maintains appropriate
corporate governance procedures. The membership and the procedures for the Committee meetings are set out in
the Board Committee Charter located, together with the charters for each Board Committee (except the Financial
Services Compliance Committee) on the Stockland website at https://www.stockland.com.au/about-
stockland/corporate-governance.
Stockland Financial Report — 25
25
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Human Resources Committee
The Human Resources Committee incorporates the functions of two Board Committees recommended by the ASX
Guidelines: a Nominations Committee and a Remuneration Committee.
A copy of the charter for the Human Resources Committee is located at the Stockland website at
https://www.stockland.com.au/about-stockland/corporate-governance. The Human Resources Committee
seeks to ensure that there is a strong link between employee reward, Stockland’s performance and ultimately
securityholder returns. The Human Resources Committee also seeks to ensure that remuneration for Non-
Executive Directors is designed to attract and retain talented and experienced individuals. Refer to the
Remuneration Report on pages 35 to 49 for further information.
Members of the Human Resources Committee during or since the end of the financial year were:
(1) Ms C Hewson (Chair) – Non-Executive Director
(2) Mr G Bradley – Non-Executive Director
(3) Mr D Boyle – Non-Executive Director (retired in October 2015)
(4) Ms C Schwartz – Non-Executive Director (appointed in October 2015)
The Human Resources Committee meets as frequently as required and held 5 meetings during the 2016
financial year.
Audit Committee
The Board has delegated oversight for the preparation of Stockland’s Financial Reports and the maintenance of a
sound financial reporting control environment to the Audit Committee.
the integrity of Stockland’s Financial Reports and external audit;
the appropriateness of Stockland’s accounting policies and processes;
the effectiveness of Stockland’s financial reporting controls and procedures;
the effectiveness of Stockland’s internal control environment;
The purpose of the Audit Committee is to assist the Board to discharge its responsibilities for:
•
•
•
•
• compliance with its Australian Financial Services Licence and Compliance Plan; and
• compliance with relevant laws and regulations including any prudential supervision procedures.
The Audit Committee works in conjunction with the Sustainability Committee, Human Resources Committee and
Risk Committee to assist the Board in fulfilling its responsibilities for ensuring Stockland has adopted and maintains
appropriate corporate governance procedures.
In February 2016, the Financial Services Compliance Committee was incorporated into the Audit Committee and
the matters formerly delegated to the Financial Services Compliance Committee now sit within the charter for the
Audit Committee.
A copy of the charter for the Audit Committee is located on the Stockland website at
https://www.stockland.com.au/about-stockland/corporate-governance.
In order to appropriately discharge its responsibilities, the Audit Committee is specifically authorised to amend
Stockland’s accounting policies which the Audit Committee determines do not require Board approval; and review
and approve any NGER’s or emissions reporting by the Group; review credit limits applicable to specific
counterparties, consistent with treasury policy; and review and approve borrowing, investment and hedging
transactions within the limits and other parameters set out in the Treasury Policy.
The external auditor provides a declaration of independence each reporting period, consistent with the
requirements of the Corporations Act 2001. The Audit Committee also adopts safeguards to maintain audit
independence as follows:
• designating the types of services that may be and may not be performed by the external auditor;
• ensuring management retains responsibility for decision making on all Non-Audit Services provided by the
•
external auditor; and
reviewing and approving the external auditor’s process for the rotation and succession of audit and review
partners including the approach to managing the transition.
In addition, Stockland has an internal audit function which also regularly reviews and independently assesses the
effectiveness and efficiency of the risk management framework and periodic reporting.
26
| Stockland Financial Report 2016
Stockland Financial Report — 26
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
Audit Committee meetings are held at least quarterly and are attended, where appropriate, by the Managing
Director, the Chief Financial Officer, and Stockland’s external auditor and, as required, other Stockland Executives
and external advisors. The Committee meets privately with the external auditor and internal auditor in the absence
of management at least once a year.
The Committee has at least three independent Non-Executive members with the majority being independent
Directors. The Chairman of the Audit Committee will not also be the Chairman of the Board.
At least one member of the Audit Committee has relevant accounting qualifications and experience and all
members have a good understanding of financial reporting.
The members of the Audit Committee during or since the end of the financial year were:
(1) Mr T Williamson (Chair) – Non-Executive Director (retired 27 October 2015)
(2) Mr B Neil – Non-Executive Director
(3) Mr T Pockett – Non-Executive Director (Chair from October 2015)
(4) Dr N Scheinkestel – Non-Executive Director (appointed August 2015)
The Audit Committee met 4 times during the 2016 financial year.
Tax Control and Governance Policy Framework
Stockland maintains a Tax Control and Governance Framework, reviewed and approved by the Audit Committee,
which outlines the principles governing Stockland’s tax strategy and risk management policy.
Stockland’s Tax Control and Governance Framework is consistent with the guidelines published by the Australian
Taxation Office regarding tax risk management and governance processes for large business taxpayers.
Stockland undertakes periodic review of the Tax Control and Governance Framework to test the robustness of the
design of the framework against ATO benchmarks and to demonstrate the operating effectiveness of internal
controls to stakeholders.
The key principles of the Stockland Tax Control and Governance Framework are summarised as follows:
• A tax strategy that ensures all tax affairs are conducted in a transparent, equitable and commercially responsible
manner, whilst having full regard to all relevant tax laws, regulations and tax governance processes, to
demonstrate good corporate citizenship;
• A balanced tax risk appetite which is consistent with the Board approved risk appetite, to ensure Stockland
remains a sustainable business and a reputable and attractive investment proposition;
• A commitment to engage and maintain relationships with tax authorities which are open, transparent and
co-operative, consistent with Stockland’s Code of Conduct and Ethical Behaviour policy; and
• An operating and trading business based in Australia, with no strategic intentions of engaging in any tax
planning involving the use of offshore entities or low tax jurisdictions.
Risk Committee
The Board as a whole is ultimately responsible for the sound management of risk and compliance across the
organisation.
The purpose of the Risk Committee is to assist the Board to fulfil its risk governance responsibilities. The Risk
Committee provides a board level forum to oversee Stockland’s risk culture and review the effectiveness of risk
identification and management including the structures, processes and management systems within Stockland’s
overall risk management framework. The Risk Committee reviews Stockland’s risk management framework
on an annual basis including in the 2016 financial year to satisfy itself that it continues to be sound and any
material changes are reviewed and resolved at Board level. Further information risk management at Stockland is
available at https://www.stockland.com.au/about-stockland/corporate-governance.
The members of the Risk Committee during or since the end of the financial year were:
(1) Mr P Scott (Chair) – Non-Executive Director
(2) Mr T Pockett – Non-Executive Director
(3) Ms C Schwartz – Non-Executive Director
(4) Dr N Scheinkestel – Non-Executive Director (appointed February 2016)
A copy of the charter for the Risk Committee is located on the Stockland website at
https://www.stockland.com.au/about-stockland/corporate-governance.
The Risk Committee met 4 times during the 2016 financial year.
Stockland Financial Report — 27
27
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Sustainability Committee
Stockland recognises that a sustainable future for its business depends upon the sustainability of the communities,
economy and society in which it operates.
The purpose of the Sustainability Committee is to consider: the social, environmental and ethical impact of
Stockland’s business activities; major corporate responsibility and sustainability initiatives and changes in
policy; and Stakeholder communication about Stockland’s corporate and sustainability policies.
A copy of the charter for the Sustainability Committee is located on the Stockland website under the heading
Corporate Governance at https://www.stockland.com.au/about-stockland/corporate-governance.
The Board has charged Executive management with responsibility for managing Stockland’s business operations
to a high standard of ethical business practice, corporate citizenship and environmental responsibility.
With regard to environmental regulation, Stockland is committed to achieving high standards of environmental
performance. The Sustainability Committee regularly considers issues associated with the environmental impact
of Stockland’s operations and, together with management, monitors Stockland’s compliance with relevant statutory
requirements as well as published policies and guidelines.
Stockland’s operations are subject to various environmental regulations under both Commonwealth and State
legislation, particularly in relation to its property development activities. Stockland undertakes an environmental due
diligence and risk assessment of all properties it acquires. The Sustainability Committee monitors environmental
performance by setting objectives, monitoring progress against these objectives and identifying remedial action
where required.
The Committee comprises the whole Board, and met 3 times during the 2016 financial year.
Financial Services Compliance Committee (incorporated into the Audit Committee from February 2016)
The Financial Services Compliance Committee is responsible for monitoring and reviewing the effectiveness of the
Compliance Plan in respect of Stockland Trust and its controlled entities and in ensuring adherence to applicable
laws and regulations.
The Compliance Plan are designed to protect the interests of securityholders.
The Compliance Plan for Stockland Trust and its controlled entities has been approved by the Australian Securities
and Investments Commission (‘ASIC’). The Financial Services Compliance Committee meets regularly and must
report breaches of the law and Constitution to the Board which is required to report any material breach of the
Compliance Plan to ASIC.
The members of the Committee during or since the end of the financial year were:
(1) Mr T Williamson (Chair) – Non-Executive Director
(2) Mr A Sherlock – External Independent Non-Executive Director
(3) Ms K Grace – Executive Member
From February 2016 the Stockland Trust and the Stockland Capital Partners Financial Services Compliance
Committees were incorporated into the Audit Committee and Stockland Capital Partners Audit Committee,
respectively.
The Financial Services Compliance Committee for Stockland Trust met once during the 2016 financial year and the
Financial Services Compliance Committee for Stockland Capital Partners Limited met twice during the 2016
financial year.
Stockland Capital Partners
Stockland Capital Partners (‘Capital Partners’) was established in 2005 to offer unlisted property investment
opportunities for both small and large investors, provide new sources of capital, facilitate asset growth and generate
additional sustainable income. A wholly-owned entity, Stockland Capital Partners Limited (‘SCPL’) operates this
business, with a separate Board of Directors (‘SCPL Board’).
SCPL acts as the Responsible Entity or Manager of Stockland’s unlisted funds, except for Macquarie Park Trust.
Stockland Trust Management Limited is the Responsible Entity of Macquarie Park Trust.
Since the Capital Partners business has dealings with and may acquire assets from Stockland, the SCPL Board
has one external independent Non-Executive Director who is not a member of the Stockland Board. The
independent Director must approve each transaction SCPL enters into with Stockland and must be satisfied
that such transactions are on arm’s length commercial terms.
28
| Stockland Financial Report 2016
Stockland Financial Report — 28
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
In order to protect the unitholders in the event there is a dispute or default by Stockland under the terms of any
agreement, the SCPL Board has resolved that the consent of the independent Director must be obtained as to
any related party contract with Stockland.
The members of the SCPL Board during or since the end of the financial year were:
(1) Mr B Neil (Chair) – Non-Executive Director
(2) Mr A Sherlock – External Independent Non-Executive Director
(3) Mr M Steinert – Managing Director
The SCPL Board met 4 times during the 2016 financial year.
The Stockland Capital Partners Audit Committee mirror the Audit Committee and the Risk Committee of Stockland
but covers SCPL and the unlisted funds for which SCPL is the Responsible Entity or Manager. In addition, prior to
its incorporation into the Stockland Capital Partners Audit Committee in February 2016 the Financial Services
Compliance Committee oversaw the Compliance Plan approved by SCPL for Stockland Direct Retail Trust No. 1
(‘SDRT No. 1’). Further information these committees and SCPL generally is located on the Stockland website at
https://www.stockland.com.au/investor-centre/unlisted-property-funds.
Executive confirmations
In accordance with Stockland’s legal obligations, the Managing Director and the Chief Financial Officer have
declared in writing to the Board that, for the year ended 30 June 2016, in their opinion:
With regard to Stockland’s Financial Reports:
(1) Stockland’s financial records have been properly maintained in accordance with section 286 of the
Corporations Act 2001; and
(2) Stockland’s financial statements present a true and fair view of the Stockland’s financial condition and
operational results and comply with relevant Australian Accounting Standards and the Corporations
Regulations 2001.
With regard to risk management and internal compliance and control systems of Stockland:
(1) the statements made with respect to the integrity of Stockland’s Financial Reports are founded on a sound
system of risk management and internal compliance and control systems which in all material respects
implement the policies adopted by the Board either directly or through delegation to Senior Executives; and
(2) the risk management and internal compliance and control systems, based on the risk management model
adopted by the Board, were operating effectively and efficiently in all material respects throughout the period.
Since 30 June 2016, nothing has come to the attention of the Managing Director and the Chief Financial Officer that
would indicate any material change to any of the statements made above.
Associates and joint ventures, which Stockland does not control, are not covered for the purposes of this statement
or declaration given under S295A of the Corporations Act 2001.
Whilst these statements are comprehensive in nature, they provide a reasonable but not absolute level of
assurance about risk management, internal compliance and control systems. They do not imply a guarantee against
adverse events or more volatile outcomes occurring in the future.
Stockland Financial Report — 29
29
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Corporate Governance Principles and Recommendations
ASX Principles and Recommendations
Recommendation
Followed
Reference
Principle 1: Lay solid foundations for management and oversight
1.1 A listed entity should disclose:
Yes
a) the respective roles and responsibilities of its board and
management; and
b) those matters expressly reserved to the board and those
delegated to management.
1.2 A listed entity should:
a) undertake appropriate checks before appointing a person,
Yes
or putting forward to security holders a candidate for
election, as a director; and
b) provide security holders with all material information in its
Yes
possession relevant to a decision on whether or not to elect
or re-elect a director.
Financial Report p.22, and at
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Financial Report, p. 23-24, and at
https://www.stockland.com.au/abou
t-stockland/corporate-governance
See notice of annual general
meeting and announcements to
securityholders as required from
time to time
1.3 A listed entity should have a written agreement with each
director and senior executive setting out the terms of their
appointment.
1.4 The company secretary of a listed entity should be accountable
directly to the board, through the chair, on all matters to do with
the proper functioning of the board.
1.5 A listed entity should:
a) have a diversity policy which includes requirements for the
board or a relevant committee of the board to set
measurable objectives for achieving gender diversity and to
assess annually both the objectives and the entity’s
progress in achieving them;
b) disclose that policy or a summary of it; and
c) disclose as at the end of each reporting period the
measurable objectives for achieving gender diversity set by
the board or a relevant committee of the board in
accordance with the entity’s diversity policy and its progress
towards achieving them, and either:
(1) the respective proportions of men and women on the
board, in senior executive positions and across the
whole organisation (including how the entity has defined
‘senior executive’ for these purposes); or
(2) if the entity is a ‘relevant employer’ under the Workplace
Gender Equality Act, the entity’s most recent ‘Gender
Equality Indicators’, as defined in and published under
that Act.
1.6 A listed entity should:
a) have and disclose a process for periodically evaluating the
performance of the board, its committees and individual
directors; and
b) disclose, in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting
period in accordance with that process.
1.7 A listed entity should:
a) have and disclose a process for periodically evaluating the
performance of its senior executives; and
b) disclose, in relation to each reporting period, whether a
performance evaluation was undertaken in the reporting
period in accordance with that process.
30
| Stockland Financial Report 2016
Yes
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Yes
Financial Report p. 22.
Yes
Yes
Yes
N/A
Yes
Financial Report, p. 24 and at
https://www.stockland.com.au/abou
t-stockland/corporate-governance
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Financial Report, p. 24 and 39, and
at
https://www.stockland.com.au/abou
t-stockland/corporate-governance
See 1.5(c)(2) below.
See WGEA Report at
https://www.stockland.com.au/abou
t-stockland/sustainability
Yes
Financial Report p. 25
Yes
Financial Report p. 25
Yes
Yes
Remuneration report.
Remuneration report.
Stockland Financial Report — 30
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
ASX Principles and Recommendations
Principle 2: Structure the Board to add value
2.1 The board of a listed entity should:
a) have a nomination committee which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of
times the committee met throughout the period and the
individual attendances of the members at those
meetings; or
b) if it does not have a nomination committee, disclose that fact
and the processes it employs to address board succession
issues and to ensure that the board has the appropriate
balance of skills, knowledge, experience, independence and
diversity to enable it to discharge its duties and
responsibilities effectively.
Recommendation
Followed
Reference
Financial Report p. 26 and at
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Note that the Human Resources
Committee carries out the role of
the Nomination Committee, see
details for this Committee in
Section 8.1.
Yes
N/A
2.2 A listed entity should have and disclose a board skills matrix
Yes
Financial Report p. 23-24
setting out the mix of skills and diversity that the board currently
has or is looking to achieve in its membership.
2.3 A listed entity should disclose:
Yes
Financial Report p. 17-20 and 24
a) the names of the directors considered by the board to be
independent directors;
b)
if a director has an interest, position, association or
relationship of the type described in Box 2.3 but the board
is of the opinion that it does not compromise the
independence of the director, the nature of the interest,
position, association or relationship in question and an
explanation of why the board is of that opinion; and
c)
the length of service of each director.
2.4 A majority of the board of a listed entity should be independent
directors.
2.5 The chair of the board of a listed entity should be an
independent director and, in particular, should not be the same
person as the CEO of the entity.
2.6 A listed entity should have a program for inducting new
directors and provide appropriate professional development
opportunities for directors to develop and maintain the skills
and knowledge needed to perform their role as directors
effectively.
Principle 3: Act ethically and responsibly
3.1 A listed entity should:
N/A
N/A
Yes
Yes
Yes
Yes
Financial Report p. 17-20
Financial Report p. 24
Financial Report p. 24
https://www.stockland.com.au/abou
t-stockland/corporate-governance
a) have a code of conduct for its directors, senior executives
Yes
and employees; and
Financial Report p. 22 and at
https://www.stockland.com.au/abou
t-stockland/corporate-governance
b) disclose that code or a summary of it.
Yes
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Stockland Financial Report — 31
31
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
ASX Principles and Recommendations
Principle 4: Safeguard integrity in corporate reporting
4.1 The board of a listed entity should:
a) have an audit committee which:
Recommendation
Followed
Reference
(1) has at least three members, all of whom are non-
Yes
Financial Report p. 26-27
executive directors and a majority of whom are
independent directors; and
(2) is chaired by an independent director, who is not the
Yes
Financial Report p. 26-27
chair of the board,
and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and experience of the
members of the committee; and
(5) in relation to each reporting period, the number of times
the committee met throughout the period and the
individual attendances of the members at those
meetings; or
Yes
Yes
Yes
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Financial Report p. 17-20 and 26-
27
Financial Report p. 21 and 27
b) if it does not have an audit committee, disclose that fact and
N/A
N/A
the processes it employs that independently verify and
safeguard the integrity of its corporate reporting, including
the processes for the appointment and removal of the
external auditor and the rotation of the audit engagement
partner.
4.2 The board of a listed entity should, before it approves the
Yes
Financial Report p. 29
entity’s financial statements for a financial period, receive from
its CEO and CFO a declaration that, in their opinion, the
financial records of the entity have been properly maintained
and that the financial statements comply with the appropriate
accounting standards and give a true and fair view of the
financial position and performance of the entity and that the
opinion has been formed on the basis of a sound system of risk
management and internal control which is operating effectively.
4.3 A listed entity that has an AGM should ensure that its external
Yes
auditor attends its AGM and is available to answer questions
from security holders relevant to the audit.
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Principle 5: Make timely and balanced disclosure
5.1 A listed entity should:
a) have a written policy for complying with its continuous
disclosure obligations under the Listing Rules; and
b) disclose that policy or a summary of it.
Principle 6: Respect the rights of security holders
6.1 A listed entity should provide information about itself and its
governance to investors via its website.
6.2 A listed entity should design and implement an investor
relations program to facilitate effective two-way communication
with investors.
6.3 A listed entity should disclose the policies and processes it has
in place to facilitate and encourage participation at meetings of
security holders.
6.4 A listed entity should give security holders the option to receive
communications from, and send communications to, the entity
and its security registry electronically.
Yes
https://www.stockland.com.au/abou
t-stockland/corporate-governance
https://www.stockland.com.au/abou
t-stockland/corporate-governance
https://www.stockland.com.au/abou
t-stockland/corporate-governance
https://www.stockland.com.au/abou
t-stockland/corporate-governance
https://www.stockland.com.au/abou
t-stockland/corporate-governance
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Yes
Yes
Yes
Yes
32
| Stockland Financial Report 2016
Stockland Financial Report — 32
Directors’ Report YEAR ENDED 30 JUNE 2016 Directors’ Report
Year ended 30 June 2016
ASX Principles and Recommendations
Principle 7: Recognise and manage risk
7.1 The board of a listed entity should:
a) have a committee or committees to oversee risk, each of
which:
(1) has at least three members, a majority of whom are
independent directors; and
Recommendation
Followed
Reference
Yes
Financial Report, p. 27
(2) is chaired by an independent director,
Yes
Financial Report. p. 27
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of
times the committee met throughout the period and the
individual attendances of the members at those
meetings; or
Yes
Yes
Yes
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Financial Report. p.27
Financial Report. p. 21 and 27
b) if it does not have a risk committee or committees that
N/A
N/A
satisfy (a) above, disclose that fact and the processes it
employs for overseeing the entity’s risk management
framework.
7.2 The board or a committee of the board should:
Yes
a) review the entity’s risk management framework at least
annually to satisfy itself that it continues to be sound; and
Financial Report. p. 27
and at
https://www.stockland.com.au/abou
t-stockland/corporate-governance
b) disclose, in relation to each reporting period, whether such a
Yes
Financial Report. p. 27
review has taken place.
7.3 A listed entity should disclose:
Yes
a) if it has an internal audit function, how the function is
structured and what role it performs; or
Financial Report. p. 27 and at
https://www.stockland.com.au/abou
t-stockland/corporate-governance
b) if it does not have an internal audit function, that fact and the
N/A
N/A
processes it employs for evaluating and continually
improving the effectiveness of its risk management and
internal control processes.
7.4 A listed entity should disclose whether it has any material
Yes
Operating and Financial Review
exposure to economic, environmental and social sustainability
risks and, if it does, how it manages or intends to manage
those risks.
Principle 8: Remunerate fairly and responsibly
8.1 The board of a listed entity should:
a) have a remuneration committee which:
(1) has at least three members, a majority of whom are
independent directors; and
(2) is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the
number of times the committee met throughout
the period and the individual attendances of the
members at those meetings; or
and at
https://www.stockland.com.au/abou
t-stockland/sustainability
Yes
Financial Report. p. 26
Yes
Yes
Yes
Yes
Financial Report. p. 26
https://www.stockland.com.au/abou
t-stockland/corporate-governance
Financial Report. p. 26
Financial Report. p. 21 and 26
b)
if it does not have a remuneration committee, disclose that
fact and the processes it employs for setting the level and
composition of remuneration for directors and senior
executives and ensuring that such remuneration is
appropriate and not excessive.
N/A
N/A
Stockland Financial Report — 33
33
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
ASX Principles and Recommendations
Recommendation
Followed
Reference
8.2 A listed entity should separately disclose its policies and
Yes
Remuneration Report
practices regarding the remuneration of non-executive directors
and the remuneration of executive directors and other senior
executives.
8.3 A listed entity which has an equity-based remuneration scheme
Yes
should:
a) have a policy on whether participants are permitted to enter
into transactions (whether through the use of derivatives or
otherwise) which limit the economic risk of participating in
the scheme; and
b) disclose that policy or a summary of it.
Remuneration Report and at
https://www.stockland.com.au/abou
t-stockland/corporate-governance
https://www.stockland.com.au/abou
t-stockland/corporate-governance
34
| Stockland Financial Report 2016
Stockland Financial Report — 34
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
Remuneration Report – Audited
The Board is pleased to present this Remuneration Report for Stockland for the year ended 30 June 2016
(‘FY16’), which forms part of the Directors’ Report and has been audited in accordance with section 308(3C)
of the Corporations Act 2001. The Remuneration Report covers Stockland and the Trust.
1. Overview
In FY16 there was no change to the remuneration arrangements for the Managing Director nor the remuneration
framework for the other senior executives who are Stockland’s Key Management Personnel (‘Senior Executives’).
During the year, three of our nine senior executives were awarded modest increases in their fixed pay to reflect
increased scope of responsibilities and market relativities.
Following the strong financial and operational performance delivered by the executive team in FY16, as reflected in
the Corporate Balanced Scorecard set out in section 3.3 of this Report, the aggregate short-term incentives paid to
our Senior Executives was marginally higher than in the previous year. Under our remuneration policies, the greater
part of the increased STI awards was made in the form of Stockland securities with deferred vesting. For the first
time in five years, a portion of the LTI awards available to our senior executives vested as relevant hurdles were
achieved in the three years to 30 June 2016.
At Stockland, the Human Resources Committee is responsible for recommending senior executive remuneration
policies to the Board for its approval and is charged with reviewing Stockland’s remuneration policies each year to
ensure that they remain fair and competitive when compared to those of companies of similar size, business mix
and complexity in the property industry in Australia. This review has led the Board to make a number of
enhancements to our remuneration policies for FY17 which are set out in this report in section 2.3.
1.1 Key Messages
(a) Financial Highlights for FY16
Stockland again delivered strong financial and organisational performance with reported underlying profit of $660
million for the full year to 30 June 2016 with underlying EPS of 27.8 cps, an increase of 7.3% on the prior financial
year. TSR for the year to 30 June 2016 was 16.4% and for the three years to 30 June 2016 was 57.4%.
(b) Fixed Pay
In FY16, there was no increase in the Fixed Pay for the Managing Director as the current level of Fixed Pay remains
appropriate. The Managing Director’s Fixed Pay has remained unchanged for the prior three years. The Fixed Pay
for three Senior Executives was increased to reflect their market relativities. The average increase in Fixed Pay
for the Senior Executives was two per cent. Our prudent approach to remuneration will continue in FY17 with no
changes planned for the Fixed Pay of the Managing Director and the majority of our Senior Executives.
(c) Annual STI
Reflecting Stockland’s strong business, financial and organisational performance, as measured against our
Corporate Balanced Scoreboard, above target STIs were awarded to the Managing Director and Senior Executives
this year. These awards are set out in section 3.3. In line with our remuneration framework, any STI awarded above
target takes the form of Stockland securities which vest in future years, subject to continued service by those
executives and to Stockland’s clawback policy.
(d) LTI Vesting for the year
Over the three years to 30 June 2016, Stockland delivered a Compound Average Growth in underlying EPS of
7.5%. This was above the maximum vesting target of 6.25% set in FY14. Accordingly all of the EPS component of
the FY14 LTI has vested. Stockland delivered a TSR over the three year performance period of 57.4% which, while
a strong return, was nevertheless below the performance benchmark (the ASX AREIT 200 index excluding
Stockland) of 67.4% and accordingly none of the TSR component of the FY14 LTI has vested. These combined
outcomes resulted in the vesting of 50.0% of FY14 LTI awards.
2. Remuneration Framework
Stockland is committed to an executive remuneration framework that supports Stockland’s objectives which are to
deliver growth in EPS and total risk-adjusted securityholder returns above the average Australian Real Estate
Investment Trust index, to create quality property assets and to deliver value for our customers.
Stockland Financial Report — 35
35
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
2.1 Framework
Stockland’s remuneration policies are framed around several key principles, including:
• Fixed Pay should be fair, competitive and regularly benchmarked against market practice;
• A significant portion of executive remuneration should be ‘at risk’; that is awarded only if clear performance
criteria set in advance are achieved;
‘At risk’ or variable pay should be aligned to securityholder interests;
•
• Variable pay as a portion of total remuneration should be higher for more senior executives;
• Short term incentives must be affordable and funded from annual earnings;
• STI awards should be based on a mix of individual and company performance measures that reflect progress
against a Balanced Scorecard;
• A portion of performance-based pay for Executives should be awarded as Stockland securities with deferred
vesting;
• Vesting of LTI should be dependent on achievement of long-term goals;
• LTI should not only help motivate and retain key Executives but also build a sense of ownership of business
performance that benefits all stakeholders;
• Remuneration policies and decisions must reflect prudent risk and capital management considerations; and
• Unvested equity awards should be forfeited if employees resign during the applicable vesting period and should
be subject to a broadly framed clawback policy which give the Board discretion to adjust or forfeit these awards
in certain circumstances.
2.2 Remuneration mix
Stockland has not changed its remuneration mix in FY16. Variable pay (STI and LTI) is a key component of
remuneration for our Senior Executives. Generally, Stockland’s Senior Executives have a greater proportion of
remuneration at risk than their counterparts in comparable companies.
Managing Director & CEO
Other Senior Executives
%
33
17
17
33
Fixed Pay
Cash STI
Deferred STI
LTI
%
41
23
12
24
Fixed Pay
Cash STI
Deferred STI
LTI
36
| Stockland Financial Report 2016
Stockland Financial Report — 36
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
The table below provides a summary of Stockland’s framework and how each component is determined.
PRINCIPLES
REMUNERATION COMPONENT
MEASURE
AT RISK WEIGHTING
Fixed Pay should be fair,
competitive and regularly
benchmarked to relevant
market levels
Fixed Pay
Salary and other benefits
(including statutory
superannuation)
External benchmarking
based on surveys
sourced from a number
of organisations including
EY and AON Hewitt
A significant portion of
remuneration should be
‘at risk’ and reward executives
if pre-set objectives are
achieved or exceeded
and
Build a sense of business
ownership and alignment
which benefits all
securityholders interests with
Senior Executives having
“skin in the game”
Target
100% of Fixed Pay
(Managing Director)
80-90% of Fixed Pay
(Other Senior Executives)
Maximum
125% of Target
In FY17 the maximum
will be 150% of Target
100% of Fixed Pay
(Managing Director)
60% of Fixed Pay
(Other Senior Executives)
In FY17, LTI grants will
be based on face value
methodology
STI
50% awarded as cash for
performance up to Target for
MD (two-thirds as cash for
other Senior Executives)
50% awarded in deferred
securities for performance up
to Target for MD (one-third
for Senior Executives) and
100% awarded as deferred
securities for any
performance above target
Any deferred securities vest
equally after 1 and 2 years
subject to continued service
LTI
Delivered as Performance
Rights measured against
hurdles over a three year
performance period based
on a ‘fair value’ methodology
Applicable rights convert
to deferred securities if
performance hurdles are
exceeded and vest equally
after 3 and 4 years subject
to continued service
Based on company and
individual performance
reflecting progress against
a Balanced Scorecard of
Key Performance Indicators
that measure:
• Business/Financial
outcomes
• Customer/Stakeholder and
Sustainability performance
• Leadership and People
Management
• Operational Excellence
and Risk Management
• Underlying EPS
Compound average growth
rate in Underlying Profit
(50% weighting)
and
• TSR above AREIT 200
index excluding Stockland
(50% weighting)
In FY17 EPS will be based
on Funds From Operations
(FFO) and TSR will be
measured against a
composite index reflecting
AREIT 200 competitors,
as described below
Minimum securityholding
requirement
The Managing Director is required to retain a minimum holding
of Stockland securities equivalent to at least two-times Fixed Pay
(one times for other Senior Executives)
Stockland Financial Report — 37
37
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
2.3 Future enhancement
Following a review of the competitiveness of Stockland’s Remuneration Framework relative to our property industry
peers, the Board has made three changes which will apply from 1 July 2016 (that is, in FY17). These changes are
as follows:
• To make our long-term incentive program simpler and more transparent, we will award LTI grants based on the
face value of Stockland’s securities at the time of grant, rather than the fair value methodology which we have
used for the past 10 years. This change is responsive to feedback from investors and governance advisors, and
is in line with the approach taken by an increasing number of Australian listed companies. This change will also
bring our methodology into line with the way we award deferred short-term incentives. The new methodology will
not increase the monetary value of long-term incentives that can be earned by our Senior Executives if relevant
hurdles are achieved compared to the previous fair value approach.
• To make our long-term incentive plan more reflective of Stockland’s performance relative to the major
competitors in our industry against whom our performance is normally compared by investors, we will in future
measure our relative TSR performance against a tailored index rather than the ASX AREIT 200 Index excluding
Stockland. We will equally weight the performance of the six largest AREIT competitors, excluding Westfield
Development Corporation and Stockland, and together these six companies will represent 80 percent of a
composite index, with the balance of the AREIT Index comprising 20 percent weighted according to their market
capitalisation. This “bespoke” index will more closely align our comparator index with Stockland’s diversified
asset and business mix.
• To provide a modest potential increase in short-term incentives for our executives, and to further weight their
remuneration towards “at risk” compensation, we will increase the potential maximum STI opportunity which our
Senior Executives may earn, subject to their performance against the Corporate Balanced Scorecard and their
individual annual objectives, from 125 percent of Target to 150 percent of Target. Increasing this short-term
incentive brings our remuneration policy into line with most of our industry peers, and is in line with our
philosophy of restraining the growth of fixed pay in favour of increased “at risk” incentive opportunity for our
executives. There is no change to the existing potential STI at Target for any of our executives.
3. Remuneration Outcomes
3.1 Financial performance over the past 5 years
Underlying profit, EPS and other key financial performance measures over the last five years are set out below.
Underlying profit1 ($M)
FFO2 ($M)
Statutory profit ($M)
Security price as at 30 June ($)
Distributions/Dividends per security (cents)
Underlying EPS (cents)
FFO per security (cents)
Statutory EPS (cents)
Stockland TSR – 1 year (%)
A-REIT 200 TSR (excluding SGP) – 1 year (%)
FY12
FY13
FY14
FY15
FY16
676
N/A
487
3.08
24.0
29.3
N/A
21.1
0.5
9.9
495
472
105
3.48
24.0
22.4
21.3
4.7
17.5
24.8
555
573
527
3.88
24.0
24.0
24.8
22.8
20.5
11.3
608
657
903
4.10
24.0
25.9
28.0
38.5
12.3
24.2
660
740
889
4.71
24.5
27.8
31.1
37.4
16.4
21.1
1 Underlying profit is the performance measure used in determining remuneration. The reconciliation of underlying profit to statutory profit is provided
in section (B2b) to the financial statements of the Financial Report and on page 9 of the Operating and Financial Review.
2 FFO will replace underlying profit as Stockland’s primary reporting measure from FY17. This change recognises the importance of FFO in
managing our business and the use of FFO as a comparable performance measurement tool in the Australian property industry. The reconciliation
of FFO to statutory profit is provided on page 9 of the Operating and Financial Review.
3.2 Fixed Pay
Fixed Pay includes salary, superannuation and other employee benefits. Annual reviews of Fixed Pay take into
account each individual’s skills and experience relevant to their roles, internal and external benchmarks and the
importance of a prudent approach to pay. Our policy is to review Senior Executives’ Fixed Pay each year against
independently provided external data sources and market benchmarks from a group of ASX50 companies and
larger property firms, ensuring that our Fixed Pay remains competitive with companies of comparable size and
complexity in our industry.
For the 2016 financial year, Fixed Pay did not increase for our Managing Director or for the majority of our Senior
Executives. The average increase across all KMP in FY16 was two percent.
38
| Stockland Financial Report 2016
Stockland Financial Report — 38
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
3.3 STI
STI rewards the annual progress towards long-term objectives. All permanent employees employed at 30 June of the
applicable financial year and who have greater than 3 months service are eligible to be considered for a STI award.
(a) STI pool
STI awards are dependent on Group, business unit and individual performance measures based on a Balanced
Scorecard approach which the Board uses to set financial and non-financial KPIs that are aligned to overall
business strategy and priorities. The Corporate Balanced Scorecard is used by the Board to determine the size
of the overall STI pool.
The Board’s assessment of performance against the Corporate Balanced Scorecard in FY16 is provided in the
following table.
Corporate Balanced Scorecard
Performance Measure
Commentary
Overall Rating
Business and Financial Performance (75%)
Underlying profit performance
• EPS growth target of 5% to 6% (27.4-
27.6cps)
• ROE of 9.5%-9.8%
Business Performance
• Actual underlying EPS growth was 7.3% to 27.8 cps
• ROE was 11.0%1
Above Target
Above Target
• Operating business performance in line
with plan
Profitability of all business units was at or above plan:
• Commercial Property profit of $524m was up on FY15
Above Target
and in line with plan
• Residential profit of $230m was well up on FY15 and
significantly above plan
• Retirement Living profit of $57m was up on FY15 and
above plan
• Average Debt Maturity was over 5 years and A- Credit
Rating was maintained, liquidity buffer increased, and
gearing and interest cover were all within guidelines
On or Above
Target
• Maintain conservative debt profile and
remain within policy limits for gearing,
interest cover, asset mix, credit rating and
debt profile:
• Credit Rating Maintain A- rating
• Debt Maturity profile >5 Years
•
Liquidity Buffer 10% above committed and
undrawn facilities
• Gearing within range 20-30%
• Deliver against Key Business Priorities
• Good progress
Customer, Stakeholder and Sustainability Performance
On or Above
Target
• Achieve independent customer satisfaction
• The customer satisfaction scores were above or at
On Target
goals for each business unit
target for Commercial and Retirement Living but below
target for Residential
• Embed sustainable business practices
• The Leading Global Real Estate firm in DJSI
across Stockland and make good progress
towards environment improvement goals
Sustainability Survey. Continued progress across our
GHG measures and other sustainability targets
On or Above
Target
Organisational Performance (25%)
People Management
• Maintain employee-initiated turnover
• Turnover was 11.8%
On Target
(employees rated good and above) to 12.0%
or less
• Achieve Employee Engagement target of
• Employee engagement score was 83%
Above Target
80%
• Maintain women as percentage of total
• Women in management was 45%
On Target
•
management at 45% or better
Increase women as percentage of total
senior management to 34.5% or better
• Women in senior management was 35%
• Progress longer term diversity and
inclusiveness objectives
• Good progress made including again being recognised
as a WGEA Employer of Choice for Gender Equality
On Target
Stockland Financial Report — 39
39
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Performance Measure
Commentary
Overall Rating
Operational Excellence & Risk Management
• Continued process improvement and
enhanced innovation
• Good progress with introduction of Stockland Support
Centre and commencement of Core Systems upgrade
program
On Target
• Embed strong risk compliance and safety
• Excellent safety record with no major preventable
On Target
management practices
injuries, and with continued embedding of the risk and
compliance framework
1 Excluding Residential workout projects. ROE was 9.8% including these projects.
The approved STI pool for all employees in FY16 was $37.0 million of which $8.6 million (or 23% of the pool) was
awarded in Stockland securities with deferred vesting and is subject to the risk of forfeiture until vesting dates at the
end of FY17 and FY18.
Details of the FY16 and previous years’ STI pools for all employees are provided below. The approved total STI
pool includes Cash STI awards as well as Deferred STI awards that are subject to vesting in future years and to
service conditions being met.
$ millions
Underlying profit
Cash STI1
DSTI2
Total STI pool2
FY12
FY13
FY14
FY15
FY16
676
21.6
4.2
25.8
495
17.9
3.6
21.5
555
21.4
6.0
27.4
608
24.0
9.0
33.0
660
28.4
8.6
37.0
1 Includes applicable superannuation.
2 The STI pool for FY12 has been restated using the STI/LTI mix including DSTI that applied for employees in FY13 to ensure comparison on a like
with like basis.
(c) STI outcomes – Managing Director and other Senior Executives
The table below sets out the STI awards for FY16. One-half of any STI for the Managing Director and one-third for
Senior Executives up to Target and any STI awarded above target is awarded as securities with deferred vesting.
The maximum STI that could have been awarded to the Managing Director and Senior Executives in FY16 is 125%
of Target.
Target STI
(as % of
Fixed Pay)
STI awarded
(as % of
Maximum STI)
%
100
90
80
80
90
80
90
80
90
%
98
98
93
93
98
90
90
96
98
STI paid in cash1
STI deferred
into equity2
DSTIs
granted3
$
%
$
%
750,000
41
1,080,000
59
223,049
420,000
266,667
453,333
450,000
320,000
630,000
320,000
450,000
55
57
57
55
60
60
56
55
348,600
197,333
335,467
373,500
217,600
428,400
256,000
373,500
45
43
43
45
40
40
44
45
71,996
40,755
69,283
77,138
44,941
88,476
52,871
77,138
Managing Director
Mark Steinert
Senior Executives
Stephen Bull
Katherine Grace
Tiernan O’Rourke
Darren Rehn
Michael Rosmarin
John Schroder
Simon Shakesheff
Andrew Whitson
1 The portion of STI awarded for the FY16 performance year which is paid as cash.
2 The portion of STI awarded for FY16 performance that is deferred into Stockland securities which will vest over the next two years
3 The number of securities granted for deferred STI is based on the Volume Weighted Average Price for the ten business days after 30 June 2016.
This price was $4.842.
40
| Stockland Financial Report 2016
Stockland Financial Report — 40
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
3.4 LTI
Our LTI plan aims to align executive remuneration with securityholder returns and help retain our key talent. LTI
awards are issued as performance rights granted under the Stockland Performance Rights Plan. Half of the LTI
allocated to Senior Executives is linked to Stockland’s performance against underlying EPS growth targets with
the remaining half linked to a TSR performance hurdle.
The tables below show Stockland’s performance against the respective underlying EPS and TSR performance
hurdles for the three years to 30 June 2016.
Hurdle
Underlying EPS for FY14-16
Compound Average Growth Rate EPS1
TSR for FY14-16
Relative TSR FY14-FY162
Total Vesting
Target/
benchmark
performance
Actual
performance
(Under)/Out
performance
%
Vested
Weight
Vesting
outcome
5.0%
7.5%
2.5%
100%
50%
50%
67.5%
57.4%
(9.9%)
0%
50%
0%
50%
1 Based on underlying profit
2 Benchmark based on ASX AREIT 200 Index excluding Stockland
Stockland Financial Report — 41
41
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
(a) LTI awarded for FY16
The performance rights that were awarded to the Managing Director and other Senior Executives under the
Performance Rights Plan in FY16 are outlined in the table below. These awards are subject to a three year
performance period (FY16-FY18) with the awards measured against two performance hurdles: Relative TSR and
Underlying EPS Growth.
As advised at the October 2015 AGM, the maximum vesting hurdle based on the Compound Annual Growth Rate
for Underlying EPS for LTI awards granted during FY16 was 6.25% (31.1cps) for the three years from 1 July 2015
to 30 June 2018, with the threshold or minimum vesting hurdle being 4.5% (29.6 cps).
Vesting date1
LTIs Granted
Fair Value of LTI2
Executive Director
Mark Steinert
Senior Executives
Stephen Bull
Katherine Grace
Tiernan O’Rourke
Darren Rehn
Michael Rosmarin
John Schroder
Simon Shakesheff
Andrew Whitson
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2018
30/06/2019
30/06/2018
30/06/2019
375,000
375,000
750,000
105,000
105,000
210,000
75,000
75,000
150,000
127,500
127,500
255,000
112,500
112,500
225,000
90,000
90,000
180,000
157,500
157,500
315,000
90,000
90,000
180,000
112,500
112,500
225,000
561,000
561,000
1,122,000
190,050
190,050
380,100
135,750
135,750
271,500
230,775
230,775
461,550
203,625
203,625
407,250
162,900
162,900
325,800
285,075
285,075
570,150
162,900
162,900
325,800
203,625
203,625
407,250
1 Vesting date refers to the date at which the performance and service conditions are met. The rights convert to securities subject to the three year
performance period to 30 June 2018. Any rights which convert to securities then vest at the dates shown. The securities remain in holding lock
until the 10th anniversary of the grant date except at Board discretion.
2 Fair value is determined using a Monte Carlo simulation (TSR hurdle) and the Black-Scholes option pricing model (EPS hurdle). Details of the
assumptions made in determining fair value are discussed in Note D7 of the financial statements.
3 The minimum future value of unvested securities is $Nil as future performance and service criteria may not be met.
42
| Stockland Financial Report 2016
Stockland Financial Report — 42
Directors’ Report YEAR ENDED 30 JUNE 2016
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44
| Stockland Financial Report 2016
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
4. Non-Executive Director Remuneration
4.1 Directors Fees
Stockland’s remuneration policy for Non-Executive Directors aims to ensure Stockland can attract and retain
suitably skilled, experienced and committed individuals to serve on the Board and remunerate them appropriately
for their time and expertise and for their responsibilities and liabilities as public company directors.
The Human Resources Committee is responsible for reviewing and recommending to the Board any changes to
Board and Committee’ remuneration, taking into account the size and scope of Stockland’s activities, the
responsibilities and liabilities of directors and the demands placed upon them. In developing its recommendations,
the Committee may take advice from external consultants.
With the exception of the Chairman, Non-Executive Directors receive additional fees for their work on Board
committees. Where a special purpose Board committee is established by the Board, committee members may
receive a fee in line with those paid for existing Board committees. Non-Executive Directors do not receive
performance-related remuneration or termination benefits other than accumulated superannuation.
In FY16, the Board decided to increase the annual base fees for Non-Executive Directors by $5,000 to $175,000
(an increase of 2.9%). This is the first increase in base fees since July 2011. Board committee fees remained
unchanged in FY16 except for a reduction in the fees paid to the independent Director on the Stockland Capital
Partners Limited (‘SCPL’) Board (reduced to $30,000 from $45,000) reflecting the reduced number of managed
funds and workload. The annual fees paid for the Board and Board committees are shown in the table below. The
amounts shown are inclusive of applicable statutory superannuation contributions.
In FY17, in line with our prudent approach to remuneration, there are no changes in the base fees for the Chairman
and Non-Executive Directors or for Board committee fees.
Stockland Board
Chairman
Non-Executive Director
Stockland Board Committees
Audit
Risk
Financial Services Compliance
Human Resources
SCPL Board
Chairman
Non-Executive Director
Independent Non-Executive Director1
SCPL Board Committees
Audit
Financial Services Compliance
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Chair
Member
Chair
Member
1 Independent Non-Executive Directors of SCPL are those who are not on the Stockland Board.
FY17
FY16
$500,000
$175,000
$500,000
$175,000
$40,000
$20,000
$35,000
$17,500
$10,900
$6,540
$35,000
$17,500
$32,700
$32,700
$30,000
$15,260
$8,720
$10,900
$6,540
$40,000
$20,000
$35,000
$17,500
$10,900
$6,540
$35,000
$17,500
$32,700
$32,700
$30,000
$15,260
$8,720
$10,900
$6,540
45
Stockland Financial Report 2016 — 45
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Total remuneration available to Non-Executive Directors is approved by securityholders and is currently $2,500,000
(including superannuation payments) as approved at the 2007 Annual General Meeting. No increase in the total fee
pool is proposed for FY17.
Total fees of $1,913,356 (77% of the approved limit) were paid to Non-Executive Directors in FY16. This amount
was 1.1% lower than the total fees paid in FY15.
The nature and amount of each element of remuneration for each Non-Executive Director is detailed below:
Short-term
Post-
employment
Board and
Committee Fees
$
Non-monetary
benefits
$
Superannuation
contributions
$
Non-Executive Directors
Graham Bradley
Duncan Boyle
Carolyn Hewson
Barry Neil
Tom Pockett
Nora Scheinkestel
Carol Schwartz
Peter Scott
Terry Williamson
Total consolidated
remuneration
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
2016
2015
495,173
495,304
57,886
183,429
205,173
204,679
222,873
218,004
246,075
165,096
160,693
–
199,515
182,804
205,173
204,679
77,352
242,364
1,869,913
1,896,359
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,827
4,696
4,827
4,696
4,827
4,696
4,827
4,696
4,827
4,696
4,827
–
4,827
4,696
4,827
4,696
4,827
4,696
Total1
$
500,000
500,000
62,713
188,125
210,000
209,375
227,700
222,700
250,902
169,792
165,520
–
204,342
187,500
210,000
209,375
82,179
247,060
43,443
37,568
1,913,356
1,933,927
1 The fees for each Director are paid on a total cost basis which includes any applicable compulsory superannuation (The amount of superannuation
included in the total fees will vary depending on the timing of payments and in line with applicable legislation).
4.2 Directors’ security holdings
To align our directors with securityholder interests, the Board believes that directors should hold a meaningful
number of Stockland securities. Each Non-Executive Director is required to acquire 40,000 securities within a
reasonable time after becoming a director. This minimum roughly equates to one year’s base Board fees. All new
directors have a period of three years to comply with this policy and directors holding less than 40,000 securities
have until 30 June 2018 to comply. Stockland also has a policy regarding the minimum securityholding for Senior
Executives as set out in the Remuneration Report. Both these policies are intended to align the personal financial
interests of Directors and Senior Executives with those of securityholders.
46
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 46
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
The relevant interest of each director in Stockland securities and securities in related entities, as notified by the
Directors to the ASX in accordance with S205G(1) of the Corporations Act 2001, at the date of this Report are
as follows:
Stockland
2016
2015
2016
2015
SDRT No.1
Non-Executive Directors
Graham Bradley
Duncan Boyle
Carolyn Hewson
Barry Neil
Stephen Newton
Tom Pockett
Nora Scheinkestel
Carol Schwartz
Peter Scott
Terry Williamson
Executive Director
Mark Steinert1
Total
216,540
61,169
35,648
58,510
10,000
30,000
41,207
40,000
31,946
107,245
194,571
61,169
19,482
55,200
–
10,000
–
10,000
30,415
101,178
1,001,364
1,633,629
571,017
1,053,032
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,000
20,000
–
–
–
–
20,000
20,000
1 The above holdings of the Executive Director include vested securities acquired under LTI plans but do not include unvested performance rights or
FY16 DSTI securities detailed in section 3.3 of this Report.
5. Other remuneration information
5.1 Remuneration governance
The Human Resources Committee assists the Board to exercise sound governance of its responsibility for the
appointment, performance and remuneration of the Managing Director and Senior Executives.
The Committee also oversees all employment and remuneration policies to ensure that, at all levels in the
organisation, fairness and balance are maintained between reward, cost and value to Stockland.
The Committee approves the remuneration framework for all employees, including risk and financial control
personnel and employees whose total remuneration includes a significant variable component.
Following the retirement of Duncan Boyle as a director in October 2015, Carol Schwartz joined the Committee
which now comprises three independent Non-Executive Directors: Carolyn Hewson (Chair), Graham Bradley and
Carol Schwartz.
The roles and responsibilities of the Committee are outlined in the Committee’s charter which is available on
Stockland’s website.
5.2 Use of remuneration consultants during the year
Stockland seeks relevant benchmarking and commentary on a number of remuneration issues from a variety of
consultants including EY. Stockland also subscribes to a number of independent salary and remuneration surveys,
including property sector specific surveys run by AON Hewitt and Mercer. During FY16, no remuneration
recommendations in relation to Key Management Personnel, as defined by Division 1 of Part 1.2 of Chapter 1 of the
Corporations Act 2001, were made by these or other consultants.
Stockland Financial Report 2016 — 47
47
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
5.3 Stockland Equity held by Senior Executives
The table below outlines the number of vested and ordinary holdings (personal) and unvested equity (DSTI and LTI)
held by Executives as at the end of FY16. This table highlights the direct exposure that each executive has to the
Stockland security price.
Holding
Balance
1 July 2015
Acquired/
(Disposed)
or Granted
Equity
Incentives
which
lapsed
Equity
Incentives
which
vested
Balance
30 June 2016
Employee
Executive Director
Mark Steinert
Senior Executives
Stephen Bull
Securities
DSTI
LTI
Securities
DSTI
LTI
456,220
385,229
1,726,000
40,711
92,320
159,915
223,049
750,000
–
71,996
–
–
478,762
1,094,897
(250,012)
358,266
(457,500)
(228,750)
1,789,750
–
–
117,564
(58,064)
449,000
210,000
(119,000)
(59,500)
–
39,806
163,000
23,549
102,075
588,000
74,830
159,292
456,000
81,174
74,570
415,000
388,888
147,714
726,000
218,590
93,947
397,000
52,084
129,278
485,000
–
40,755
150,000
–
69,283
–
–
–
–
–
19,903
(19,903)
-
140,812
(62,812)
255,000
(156,000)
(78,000)
–
77,138
–
–
176,061
(119,061)
225,000
(114,000)
(57,000)
4,899
44,941
–
–
180,000
(110,000)
28,965
88,476
–
–
103,126
(48,126)
(55,000)
189,878
(93,628)
315,000
(192,500)
(96,250)
(36,009)
52,871
–
–
180,000
(101,000)
–
77,138
–
–
225,000
(128,500)
115,000
(64,500)
(50,500)
149,297
(85,047)
(64,250)
158,275
106,252
480,500
19,903
60,658
313,000
164,361
108,546
609,000
250,891
117,369
510,000
189,199
71,385
430,000
607,731
142,562
752,250
297,581
82,318
425,500
201,381
121,369
517,250
Katherine Grace
Securities
DSTI
LTI
Tiernan O’Rourke
Securities
Darren Rehn
DSTI
LTI
Securities
DSTI
LTI
Michael Rosmarin
Securities
John Schroder
DSTI
LTI
Securities
DSTI
LTI
Simon Shakesheff
Securities
DSTI
LTI
Andrew Whitson
Securities
DSTI
LTI
48
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 48
Directors’ Report YEAR ENDED 30 JUNE 2016
Directors’ Report
Year ended 30 June 2016
5.4 Senior Executives’ employment and termination arrangements
The Managing Director and other Senior Executives are on rolling contracts until notice of termination is given by
either Stockland or the Senior Executive. The notice period for the Managing Director and other Senior Executives
is six and three months, respectively. In appropriate circumstances, payment may be made in lieu of notice. Where
Stockland initiates termination, including mutually agreed resignation, the executive would receive a termination
payment of twelve months’ Fixed Pay (including applicable notice).
Where the termination occurs as a result of misconduct or a serious or persistent breach of contract (termination for
cause), Stockland may terminate employment immediately without notice, payment in lieu of notice or any other
termination payment.
In cases of termination for cause or resignation, all unvested employee securities or rights lapse. In other
circumstances, the Board has the discretion to adjust the vesting conditions. Typically, this discretion is applied as
outlined below.
Death or Total and Permanent Disablement
Full vesting of any unvested equity awards.
For termination other than for cause
or resignation
For unvested DSTI, full vesting on 30 June in the year of termination.
For LTI, unvested rights are vested prorated based on service to the date of
termination. Any applicable prorated hurdled rights remain subject to the
applicable performance hurdles over the full performance period. Any
applicable restricted rights vest on 30 June in the year of termination. Other
unvested LTI awards forfeited.
5.5 Key Management Personnel
Individuals who were KMP’s of Stockland at any time during the financial year are as follows:
Non-Executive Directors
Mr Graham Bradley
Mr Duncan Boyle
Ms Carolyn Hewson
Mr Barry Neil
Mr Stephen Newton
Mr Tom Pockett
Dr Nora Scheinkestel
Ms Carol Schwartz
Mr Peter Scott
Mr Terry Williamson
Executive Director
Mr Mark Steinert
Senior Executives
Mr Stephen Bull
Ms Katherine Grace
Mr Tiernan O’Rourke
Mr Darren Rehn
Mr Michael Rosmarin
Mr John Schroder
Mr Simon Shakesheff
Mr Andrew Whitson
Chairman
(resigned 27 October 2015)
(appointed 20 June 2016)
(appointed 19 August 2015)
(resigned 16 August 2016)
(resigned 27 October 2015)
Managing Director and Chief Executive Officer (‘CEO’)
Group Executive, CEO, Retirement Living
General Counsel & Company Secretary
Chief Financial Officer (‘CFO’)
Group Executive, Chief Investment Officer
Group Executive, Chief Operating Officer
Group Executive, CEO, Commercial Property
Group Executive, Strategy & Stakeholder Relations
Group Executive, CEO, Residential
Stockland Financial Report 2016 — 49
49
Directors’ Report Year ended 30 June 2016 |
Directors’ Report
Year ended 30 June 2016
Indemnities and insurance of officers and auditor
Since the end of the prior year, the Group has not indemnified or agreed to indemnify any person who is or has
been an officer or an auditor of Stockland against any liability.
Since the end of the prior year, the Group has paid insurance premiums in respect of Directors’ and Officers’ liability
insurance contracts, for Directors, Executive Directors, Company Secretaries and Officers. Such insurance
contracts insure against certain liabilities (subject to specified exclusions) for persons who are or have been
Directors and Officers of Stockland.
Premiums are also paid for Fidelity insurance and Professional Indemnity insurance policies to cover certain risks
for a broad range of employees, including Directors and Executives.
Non-audit services
During the financial year the Group’s auditor, PwC provided certain other services to the Group in addition to their
statutory duties as auditor.
The Board has considered the non-audit services provided during the financial year by the auditor and is satisfied
that the provision of those services is compatible with, and did not compromise, the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
•
the non-audit services were for taxation, regulatory and assurance-related work closely linked to the Group’s
audit, and none of this work created any conflicts with the auditor’s statutory responsibilities;
the Audit Committee resolved that the provision of non-audit services during the financial year by PwC as
auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations
Act 2001;
the Board’s own review conducted in conjunction with the Audit Committee, having regard to the Board policy
set out in this Report, concluded that it is satisfied the non-audit services did not impact the integrity and
objectivity of the auditor; and
the declaration of independence provided by PwC, as auditor of Stockland.
•
•
•
Details of the amounts paid to the auditor of the Group, PwC, and its related practices for audit and non-audit
services provided during the financial year are set out in section (F9) of the accompanying financial statements.
Lead Auditor’s Independence Declaration under section 307C of the Corporations Act 2001
The external auditor’s independence declaration is set out on page 51 and forms part of the Directors’ Report for the
year ended 30 June 2016.
Rounding off
Stockland is an entity of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports)
Instrument 2016/191 and in accordance with that Instrument, amounts in the Financial Report and Directors’ Report
have been rounded to the nearest million dollars, unless otherwise stated.
Signed in accordance with a resolution of the Directors:
Graham Bradley
Chairman
Mark Steinert
Managing Director
Dated at Sydney, 17 August 2016
50
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 50
Directors’ Report YEAR ENDED 30 JUNE 2016
Lead Auditor’s Independence Declaration under
Lead Auditor’s Independence Declaration
Section 307C of the Corporations Act 2001
UNDER SECTION 307C OF THE CORPORATIONS ACT 2001
Year ended 30 June 2016
YEAR ENDED 30 JUNE 2016
Auditor’s Independence Declaration
As lead auditor for the audit of Stockland Corporation Limited and Stockland Trust for the year ended 30 June 2016, I
declare that to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit;
and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Stockland Corporation Limited and the entities it controlled during the period and
Stockland Trust and the entities it controlled during the period.
S J Hadfield
Partner
PricewaterhouseCoopers
Sydney
17 August 2016
Stockland Financial Report 2016 — 51
51
Lead Auditor’s Independence Declaration |
Consolidated Statements of Profit or Loss
Consolidated Statements of Profit or Loss and Other
Comprehensive Income
and Other Comprehensive Income
Year ended 30 June 2016
YEAR ENDED 30 JUNE 2016
Stockland
Trust
Section
(B1)
2016
$M
2,328
2015
$M
2,114
Year ended 30 June
Revenue
Cost of property developments sold:
•
Land and development
• Capitalised interest
• Utilisation of provision for write-down of inventories
Investment property expenses
Share of profits of equity-accounted investments
(E1)
Management, administration, marketing and selling expenses
Net change in fair value of investment properties:
• Commercial Property
• Retirement Living
Net change in fair value of Retirement Living resident obligations
Impairment of intangibles
Net gain on other financial assets
Net loss on sale of other non-current assets
Finance income
Finance expense
Profit before income tax
Income tax benefit/(expense)
Profit for the year
Items that are or may be reclassified to profit or loss, net of tax
Available for sale financial assets – net change in fair value
Available for sale financial assets – reclassified to profit or loss
Cash flow hedges – net change in fair value of effective portion
Cash flow hedges – reclassified to profit or loss
Foreign operations – foreign currency translation differences
Foreign operations – reclassified to profit or loss
Other comprehensive income, net of tax
Total comprehensive income for the year
Basic earnings per security (cents)
Diluted earnings per security (cents)
(C1b)
(B2d)
(B2d)
(C3a)
(D4)
(D1)
(D1)
(B3a)
(D4)
(D4)
(F2)
(F2)
2016
$M
737
–
–
–
(230)
90
(27)
2015
$M
707
–
–
–
(218)
86
(25)
329
247
–
–
–
6
(2)
294
(365)
832
–
832
–
–
23
4
–
–
27
859
35.0
35.0
–
–
–
–
(1)
301
(230)
867
–
867
–
–
36
(2)
–
–
34
901
36.9
36.9
(1,049)
(124)
67
(239)
90
(271)
373
71
(85)
–
4
(2)
8
(252)
919
(30)
889
7
–
23
4
–
–
34
923
37.4
37.3
(983)
(126)
113
(226)
88
(258)
253
68
(70)
(43)
73
(2)
9
(113)
897
6
903
13
(51)
36
(2)
5
–
1
904
38.5
38.5
The above consolidated Statements of Profit or Loss and Other Comprehensive Income should be read in
conjunction with the accompanying notes.
52
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 52
Consolidated Balance Sheets
Consolidated Balance Sheets
AS AT 30 JUNE 2016
As at 30 June 2016
Stockland
Trust
2015
$M
2016
$M
2015
$M
As at 30 June
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other financial assets
Other assets
Non-current assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Inventories
Investment properties – Commercial Property
Investment properties – Retirement Living
Equity-accounted investments
Other financial assets
Property, plant and equipment
Intangible assets
Deferred tax assets
Other assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Retirement Living resident obligations
Development provisions
Other financial liabilities
Other liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Retirement Living resident obligations
Development provisions
Other financial liabilities
Other liabilities
Total non-current liabilities
Total liabilities
Net assets
Securityholders’ funds
Issued capital
Reserves
Retained earnings/undistributed income
Total securityholders’ funds
Section
(D2)
(C2a)
(C1a)
(D4)
(C3b)
(C2a)
(C1a)
(C1b)
(C1c)
(E1)
(D4)
(C3a)
(B3b)
(C2b)
(D3)
(C1c)
(C1a)
(D4)
(C2b)
(D3)
(C1c)
(C1a)
(D4)
(D7)
2016
$M
208
134
802
79
91
1,314
97
1,411
100
1,713
8,800
3,576
524
468
53
122
27
148
15,531
16,942
643
481
2,205
284
19
82
170
103
549
2
84
908
246
1,154
92
1,991
7,917
3,335
518
366
58
98
59
141
14,575
15,729
595
286
1,992
300
33
87
3,714
3,293
–
3,319
222
113
297
23
3,974
7,688
9,254
8,681
126
447
9,254
33
2,997
219
98
284
18
3,649
6,942
8,787
8,560
84
143
8,787
97
18
–
79
70
264
61
325
3,510
–
8,702
–
505
432
–
–
–
152
13,301
13,626
422
481
–
–
19
36
958
–
3,319
–
–
297
–
3,616
4,574
9,052
7,374
103
1,575
9,052
89
33
–
2
64
188
224
412
3,435
–
7,840
–
506
347
–
–
–
144
12,272
12,684
379
286
–
–
33
54
752
–
2,997
–
–
284
–
3,281
4,033
8,651
7,255
68
1,328
8,651
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
Consolidated Balance Sheets As at 30 June 2016 |
53
Stockland Financial Report 2016 — 53
Consolidated Statements of Changes in Equity
Consolidated Statements of Changes in Equity
YEAR ENDED 30 JUNE 2016
Year ended 30 June 2016
Attributable to securityholders of Stockland
Reserves
Section
Issued
capital
$M
8,420
Balance as at 1 July 2014
Profit for the year
Other comprehensive
income, net of tax
Total comprehensive
income
Dividends and distributions
(D8)
Securities issued under DRP
(D7a)
Expense relating to Share
Plans, net of tax
Acquisition of treasury
securities
Securities vested under
Share Plans
Total of other movements
Balance as at 30 June 2015
(F7)
(D7b)
(D7b)
Profit for the year
Other comprehensive
income, net of tax
Total comprehensive
income
Dividends and distributions
(D8)
Securities issued under DRP
(D7a)
Expense relating to Share
Plans, net of tax
Acquisition of treasury
securities
Securities vested under
Share Plans
Total of other movements
Balance as at 30 June 2016
(F7)
(D7b)
(D7b)
Executive
remuneration
$M
Cash
flow
hedge
$M
25
–
–
–
–
–
13
–
(3)
10
35
–
–
–
–
–
13
–
(5)
8
43
2
–
34
34
–
–
–
–
–
–
36
–
27
27
–
–
–
–
–
–
63
Fair
value
$M
51
–
(38)
(38)
–
–
–
–
–
–
13
–
7
7
–
–
–
–
–
–
20
Foreign
currency
translation
$M
Retained
earnings
$M
Total
equity
$M
(5)
(195)
8,298
–
5
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
903
–
903
1
903
904
(565)
(565)
–
–
–
–
141
13
(4)
–
(565)
143
889
–
(415)
8,787
889
34
889
923
(585)
(585)
–
–
–
–
125
13
(9)
–
(585)
(456)
447
9,254
–
–
–
–
141
–
(4)
3
140
8,560
–
–
–
–
125
–
(9)
5
121
8,681
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
54
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 54
Consolidated Statements of Changes in Equity
Year ended 30 June 2016
Attributable to securityholders of Trust
Balance as at 1 July 2014
Profit for the year
Other comprehensive income
Total comprehensive income
Distributions
Securities issued under DRP
Expense relating to Share Plans,
net of tax
Section
(D8)
(D7a)
(F7)
Acquisition of treasury securities
(D7b)
Securities vested under Share Plans
(D7b)
Total of other movements
Balance as at 30 June 2015
Profit for the year
Other comprehensive income
Total comprehensive income
Distributions
Securities issued under DRP
Expense relating to Share Plans,
net of tax
(D8)
(D7a)
(F7)
Acquisition of treasury securities
(D7b)
Securities vested under Share Plans
(D7b)
Total of other movements
Balance as at 30 June 2016
Issued
capital
$M
7,116
–
–
–
–
140
–
(4)
3
139
7,255
–
–
–
–
123
–
(9)
5
119
7,374
Reserves
Executive
remuneration
$M
Cash flow
hedge
$M
Undistributed
income
$M
Total equity
$M
24
–
–
–
–
–
11
–
(3)
8
32
–
–
–
–
–
13
–
(5)
8
40
2
–
34
34
–
–
–
–
–
–
36
–
27
27
–
–
–
–
–
–
63
1,026
8,168
867
–
867
(565)
–
–
–
–
(565)
1,328
832
–
832
(585)
–
–
–
–
(585)
1,575
867
34
901
(565)
140
11
(4)
–
(418)
8,651
832
27
859
(585)
123
13
(9)
–
(458)
9,052
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
Consolidated Statements of Changes in Equity Year ended 30 June 2016 |
55
Stockland Financial Report 2016 — 55
Consolidated Cash Flow Statements
Consolidated Cash Flow Statements
YEAR ENDED 30 JUNE 2016
Year ended 30 June 2016
Stockland
Trust
Section
2016
$M
2015
$M
Year ended 30 June
Cash flows from operating activities
Cash receipts in the course of operations (including GST)
Cash payments in the course of operations (including GST)
Payments for land
Distributions received from equity-accounted investments
Distributions received from managed funds
Receipts from Retirement Living residents
Payments to Retirement Living residents, net of DMF
Interest received
Interest paid
Net cash flow from operating activities
(F3)
Cash flows from investing activities
Proceeds from sale of investment properties
Payments for and development of investment properties:
• Commercial Property
• Retirement Living
Payments for plant and equipment and software
Proceeds from sale/capital returns from investments
Payments for investments, including equity-accounted
investments
Distributions received from other entities
Net cash flow from/(used in) investing activities
Cash flows from financing activities
Payment for securities under Share Plans
(D7b)
Proceeds from borrowings
Repayment of borrowings
Loans to related entities
Payments for termination and restructuring of derivatives
(D1)
Dividends and distributions paid (net of DRP)
Net cash flow used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2016
$M
854
(398)
–
32
–
–
–
294
(199)
583
2015
$M
797
(395)
–
34
1
–
–
301
(198)
540
2,496
(1,575)
(186)
35
1
371
(164)
8
(199)
787
2,243
(1,457)
(380)
38
1
299
(152)
7
(198)
401
11
322
42
233
(431)
(167)
(35)
221
(107)
–
(508)
(9)
2,589
(2,254)
–
(119)
(448)
(241)
38
170
208
(386)
(199)
(15)
508
(63)
17
184
(4)
2,536
(2,718)
–
(41)
(419)
(646)
(61)
231
170
(475)
(399)
–
–
219
(66)
–
(280)
(9)
2,589
(2,254)
(54)
(119)
(448)
(295)
8
89
97
–
–
1
(65)
–
(230)
(4)
2,536
(2,718)
292
(39)
(419)
(352)
(42)
131
89
The above consolidated Cash Flow Statements should be read in conjunction with the accompanying notes.
56
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 56
Consolidated Notes
Consolidated Notes
YEAR ENDED 30 JUNE 2016
Year ended 30 June 2016
(A) Basis of preparation
(B) Results for the year
(B1) Revenue
(B2) Operating segments
(B3) Taxation
(C) Operating assets and liabilities
(C1) Real estate assets and liabilities
(C2) Financial assets and liabilities
(C3) Other non-financial assets and liabilities
(D) Capital structure and financing costs
(D1) Net financing costs
(D2) Cash and cash equivalents
(D3) Interest-bearing loans and borrowings
(D4) Other financial assets and liabilities
(D5) Fair value hierarchy
(D6) Financial risk factors
(D7) Issued capital
(D8) Dividends and distributions
(E) Group structure
(E1) Equity-accounted investments
(E2) Other arrangements
(E3) Controlled entities
(E4) Deed of Cross Guarantee
(E5) Parent entity disclosures
(F) Other items
(F1) Accounting policies
(F2) Earnings per security
(F3) Notes to cash flow statements
(F4) Contingent liabilities
(F5) Commitments
(F6) Related party disclosures
(F7) Personnel expenses
(F8) Key Management Personnel disclosures
(F9) Auditor’s remuneration
(F10) Events subsequent to the end of the year
58
60
60
61
66
70
70
82
83
86
86
88
88
91
95
97
103
106
107
107
109
110
112
113
114
114
116
117
118
118
119
120
121
121
121
Stockland Financial Report 2016 — 57
57
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(A) Basis of preparation
IN THIS SECTION
This section sets out the basis upon which the Group’s financial statements are prepared as a whole.
Specific accounting policies are described in the section to which they relate.
A glossary of acronyms and defined terms is included at the back of the Financial Report.
Stockland represents the combination or stapling of Stockland Corporation Limited and its controlled entities and
Stockland Trust and its controlled entities. Stockland Corporation Limited and Stockland Trust are both for profit
entities that were incorporated, formed and domiciled in Australia.
The constitutions of Stockland Corporation Limited and Stockland Trust ensure that, for so long as the two entities
remain jointly quoted, the number of shares in Stockland Corporation Limited and the number of units in the Trust
shall be equal and that the shareholders and unitholders be identical. Both Stockland Corporation Limited and the
Responsible Entity of the Stockland Trust must at all times act in the best interest of Stockland. The stapling
arrangement will cease upon the earliest of either the winding up of Stockland Corporation Limited or Stockland
Trust or either entity terminating the stapling arrangement.
The financial statements as at and for the year ended 30 June 2016 were authorised for issue by the Directors on
17 August 2016.
(i) Statement of compliance
The financial statements are general purpose financial reports which have been prepared in accordance with
the requirements of the Corporations Act 2001, AASB’s issued by the Australian Accounting Standards Board and
International Financial Reporting Standards adopted by the International Accounting Standard Board.
(ii) Basis of preparation
As permitted by Class Order 13/1050, issued by ASIC, these financial statements are combined financial
statements that present the financial statements and accompanying notes of both Stockland and the Trust.
The financial statements are presented in Australian dollars, which is Stockland Corporation Limited’s and
Stockland Trust’s functional currency and the functional currency of the majority of Stockland and the Trust.
The financial statements have been prepared on a going concern basis, using historical cost conventions except for:
investment properties, derivative financial instruments, certain financial assets and liabilities which are stated at
•
their fair value; and
• non-current assets classified as held for sale which are stated at the lower of carrying amount and fair value less
costs to sell.
In accordance with ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, amounts in
the Financial Report have been rounded to the nearest million dollars, unless otherwise stated.
Certain comparative amounts have been restated to conform with the current year’s presentation.
Change in presentation of borrowings in cash flow statement
In the current year, the Group has changed the presentation of the rollover of bank debt.
Previously, the rollover of bank debt was presented as the repayment of the original bank debt and a drawdown of
a new bank debt. As there is no cash transferred between Stockland and the financial institution when a bank debt
is rolled, the presentation has been changed to treat a rollover as a non-cash transaction.
This change has resulted in a reduction in proceeds from borrowings and an offsetting reduction in repayment of
borrowings presented in the cash flow statement. There is no impact on net cash flow used in financing activities
presented in the consolidated cash flow statement. Comparative disclosures have been restated to ensure
consistency between the periods.
58
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 58
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(A) Basis of preparation (continued)
Stockland and Trust net current asset deficiency position
Stockland and the Trust have a net current asset deficiency at 30 June 2016.
Based on the profits and net operating cash inflows in the period and forecast for the next 12 months Stockland
and the Trust will be able to pay their debts as and when they become due and payable. Undrawn bank facilities
of $800 million (refer to section (D3c)) are also available should they need to be drawn down.
The deficiency in the Trust primarily arises due to the requirement under Accounting Standards to classify the ‘at
call’ intercompany loan receivable from Corporation as a non-current asset.
In relation to Stockland, a number of liabilities are classified as current under Accounting Standards that are not
expected to actually result in net cash outflows within the next 12 months (in particular Retirement Living Resident
Obligations). Similarly, some assets held as non-current will generate cash income in the next 12 months (including
Retirement Living DMF included within Investment Properties – Retirement Living, development work in progress
and vacant stock).
In addition, current inventory is held on the balance sheet at the lower of cost and net realisable value, whereas this
is expected to generate cash inflows above the carrying value.
In relation to Retirement Living resident obligations for existing residents (2016: $2,202 million; 2015: $1,989
million), approximately 8% of residents are estimated to leave each year and therefore it is not expected that the
majority of the obligations to residents will fall due within one year. In the vast majority of transactions involving the
turnover of units the resident obligations will be repaid from receipts from incoming residents. However, resident
obligations are classified as current under the definitions in the Accounting Standards as there is no unconditional
contractual right to defer settlement for at least 12 months (residents may give notice of their intention to vacate
their unit with immediate effect). In contrast, the corresponding Retirement Living assets are classified as non-
current under AASBs as the majority are not expected to be realised within 12 months.
(iii) Critical accounting estimates and judgements
The Group makes estimates and assumptions concerning the future. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next
financial year are discussed below.
Estimates and judgements are continually evaluated and are based on historical experience as adjusted for current
market conditions and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.
Assumptions underlying management’s estimates of fair value and recoverability can be found in the following
sections to the financial statements:
Area of Estimation
Tax losses – assumptions underlying recoverability
Inventories – assumptions underlying net realisable value
Commercial properties – assumptions underlying fair value
Retirement Living – assumptions underlying fair value
Goodwill – assumptions underlying recoverable value
Software – assumptions underlying recoverable value
Fair value of investment in other entities – assumptions underlying fair value
Fair value of derivatives – assumptions underlying fair value
Valuation of share based payments – assumptions underlying fair value
Section
(B3b)
(C1a)
(C1b)
(C1c)
(C3a)
(C3a)
(D4)
(D4)
(D7c)
Stockland Financial Report 2016 — 59
59
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(B) Results for the year
IN THIS SECTION
This section explains the results and performance of the Group.
This section provides additional information about those individual line items in the financial statements that
the Directors consider most relevant in the context of the operations of the entity, including:
(a) Accounting policies that are relevant for understanding the items recognised in the financial
statements; and
(b) Analysis of the result for the year by reference to key areas, including revenue, results by
operating segment and income tax.
(B1) Revenue
Revenue is recognised at the fair value of the consideration received or receivable, net of the amount of GST levied.
Property development sales
Revenue from land and property sales is recognised when significant risks and rewards of ownership are
transferred to the buyer and the amount of revenue can be reliably measured.
Rent from investment properties
Rent is recognised on a straight-line basis over the lease term, net of any incentives.
Rent from investment properties includes $5 million (2015: $5 million) contingent rent billed to tenants. Contingent
rent represents 1% (2015: 1%) of gross lease income.
DMF revenue
DMF is recognised over the tenancy period and includes both fixed fees recognised on a straight-line basis and
contingent fees recognised when earned.
DMF calculated on the entry price of the unit are recognised each period, however fees are only realised in cash at
the end of the residents tenure.
DMF calculated on the exit price of the unit are recognised and realised in cash at the end of the resident’s tenure.
Accounting for DMF is further explained in section (B2d).
Dividends and distributions
Revenue from dividends and distributions are recognised in profit or loss on the date they are declared by the
relevant entity.
Revenue recognised in statutory profit during the year is set out below:
Property development sales
Rent from investment properties
DMF revenue
Dividends and distributions
Other revenue
Total revenue
Stockland
Trust
2016
$M
1,484
728
88
4
24
2015
$M
1,288
698
94
5
29
2016
$M
–
726
–
3
8
2015
$M
–
698
–
2
7
2,328
2,114
737
707
60
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 60
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(B2) Operating segments
KEEPING IT SIMPLE…
This section shows a reconciliation from underlying profit to the statutory profit. Underlying profit remains
the Group’s key profit indicator. This reflects the way the business is managed and how the Directors and
Executive Committee assess performance.
Both underlying profit and segment operating profit are presented on a proportionate consolidation basis
within the segment report, whereby earnings from equity-accounted investments are grossed up and
included in segment EBIT based on Stockland’s proportionate ownership interest.
FFO will replace underlying profit as Stockland’s primary reporting measure from FY17. This change
recognises the importance of FFO in managing our business and the use of FFO as a comparable
performance measurement tool in the Australian property industry.
Underlying profit is a non-IFRS measure that is designed to present, in the opinion of the CODM, the results from
ongoing operating activities of Stockland in a way that appropriately reflects the Group’s underlying performance.
Underlying profit is the basis on which distributions and dividends are determined and reflects the way the business
is managed and how the CODM assess the performance of the Group. It excludes costs of a capital nature and
profit or loss made from realised transactions occurring infrequently and those that are outside the course of
Stockland’s core ongoing business activities.
Operating segments are reported in a manner that is consistent with the internal reporting provided to the Managing
Director and the Executive Committee, who are the CODM.
Stockland has four reportable segments, as listed below:
• Commercial Property – invests in, develops and manages retail, office and logistic & business park properties;
• Residential – delivers a range of master planned and mixed use residential communities in growth areas and
townhouses and apartments in general metropolitan areas;
• Retirement Living – designs, develops and manages communities for retirees; and
• Other – in the prior year this reportable segment includes the results from the remaining assets in the UK and
aged care businesses, dividends/distributions from strategic investments and other items which are not able to
be classified within any of the other defined segments.
The Trust has one reportable segment in which it operates, being Commercial Property, therefore no separate
segment note has been prepared.
There is no customer who accounts for more than 10% of the gross revenues of Stockland or the Trust.
Stockland Financial Report 2016 — 61
61
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(B2a) Underlying profit
The following table shows the contribution to underlying profit by each reportable segment:
Stockland
Year ended 30 June 2016
External segment revenue
Total external segment revenue
Segment EBIT
Interest expense in cost of sales
Share of interest expense in joint ventures
Segment operating profit1
Interest income
Interest expense
Unallocated corporate and other expenses
Underlying profit before income tax
Income tax expense on underlying profit
Underlying profit for the year
1 Included within segment operating profits are the following:
Straight-line rent adjustments
Amortisation of lease incentives
Share of profits of equity-accounted investments:
• Excluding fair value gains
• Including fair value gains
Year ended 30 June 2015
External segment revenue
Total external segment revenue
Segment EBIT
Interest expense in cost of sales
Share of interest expense in joint ventures
Segment operating profit1
Interest income
Interest expense
Unallocated corporate and other expenses
Underlying profit before income tax
Income tax benefit on underlying profit
Underlying profit for the year
1 Included within segment operating profits are the following:
Straight-line rent adjustments
Amortisation of lease incentives
Share of profits of equity-accounted investments:
• Excluding fair value gains
• Including fair value gains
Commercial
Property
$M
Residential
$M
Retirement
Living
$M
Other
$M
Consolidated
$M
750
750
525
–
(1)
524
8
(67)
31
90
715
715
517
–
(4)
513
8
(61)
42
86
1,487
1,487
354
(124)
–
230
–
–
–
–
1,239
1,239
290
(124)
–
166
–
–
2
2
752
75
64
(7)
–
57
–
–
–
–
732
73
54
(6)
–
48
–
–
–
–
–
–
–
–
–
–
–
–
–
–
60
60
4
(2)
–
2
–
–
–
–
2,312
2,312
943
(131)
(1)
811
8
(81)
(57)
681
(21)
660
8
(67)
31
90
2,087
2,087
865
(132)
(4)
729
8
(73)
(60)
604
4
608
8
(61)
44
88
2 $16 million of unrealised DMF revenue (2015: $27 million) is excluded from segment revenues. Refer to reconciliation of underlying profit to
statutory profit below
62
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 62
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(B2b) Reconciliation of underlying profit to statutory profit
Underlying profit excludes items such as unrealised fair value gains/losses (such as revaluing derivatives, financial
instruments and investment properties) and unrealised provision gains/losses. These items are required to be
included in statutory profit in accordance with Accounting Standards.
Stockland
Year ended 30 June
Revenue
Note
A
2016
2015
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
2,312
16
2,328
2,087
27
2,114
Cost of property developments
sold:
•
Land and development
• Capitalised interest
• Utilisation of provision for
write-down of inventories
Investment property expenses
Share of profits of equity-
accounted investments
Management, administration,
marketing and selling expenses
Net change in fair value of
investment properties:
• Commercial Property
• Retirement Living
Net change in fair value of
Retirement Living resident
obligations
Impairment of intangibles
Net gain on other financial assets
Net loss on sale of other non-
current assets
Finance income
Finance expense
Profit before income tax
Income tax benefit/(expense)
Profit for the year
B
C
B
B
B
D
E
F
G
(1,049)
(124)
67
(239)
31
(270)
–
26
–
–
–
–
8
(81)
681
(21)
660
–
–
–
–
59
(1)
373
45
(85)
–
4
(2)
–
(171)
238
(9)
229
(1,049)
(124)
67
(239)
90
(983)
(126)
113
(226)
44
(271)
(258)
373
71
(85)
–
4
(2)
8
(252)
919
(30)
889
–
18
–
–
–
–
8
(73)
604
4
608
–
–
–
–
44
–
253
50
(70)
(43)
73
(2)
1
(40)
293
2
295
(983)
(126)
113
(226)
88
(258)
253
68
(70)
(43)
73
(2)
9
(113)
897
6
903
Stockland Financial Report 2016 — 63
63
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(B2b) Reconciliation of underlying profit to statutory profit (continued)
Trust
Year ended 30 June
Note
Revenue
Investment property expenses
Share of profits of equity-
accounted investments
Management, administration,
marketing and selling expenses
Net change in fair value of
Commercial Property
Net gain on other financial
assets
Net loss on sale of other non-
current assets
Finance income
Finance expense
Profit before income tax
Income tax benefit/(expense)
Profit for the year
B
B
F
G
2016
2015
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
737
(230)
31
(27)
–
–
–
294
(194)
611
–
611
–
–
59
–
329
6
(2)
–
(171)
221
–
221
737
(230)
90
(27)
329
6
(2)
294
(365)
832
–
832
707
(218)
41
(25)
–
–
–
301
(190)
616
–
616
–
–
45
–
247
–
(1)
–
(40)
251
–
251
707
(218)
86
(25)
247
–
(1)
301
(230)
867
–
867
Explanation of statutory adjustments
A DMF revenue is excluded from underlying profit until it is realised in cash. Refer to section (B2d).
B Underlying profit excludes the net change in fair value of investment properties for properties held by Stockland both directly and indirectly through
equity-accounted investments. Similarly, the net change in fair value of Retirement Living Resident Obligations are excluded from underlying profit.
Refer to section C for further information on fair value adjustments for the Commercial Properties (C1b) and Retirement Living (C1c) businesses.
C In the current year, underlying profit excludes $1 million of integration costs related to the eight South Australian Retirement Living villages
acquired. Refer to section (C1c).
D Underlying profit excludes impairment of intangibles. In the prior year this included write-downs to goodwill ($18 million) and software ($25 million).
Refer to section (C3a).
E In the prior year, the net gain on sale of other financial assets primarily comprised the realised profit on the sale of securities in Australand, net of
transaction costs.
F Net loss on sale of other non-current assets predominantly relate to the loss on the sale of investment properties.
G Net change in fair value of financial instruments and foreign exchange movements, classified as finance expense, are excluded from underlying
profit. Refer to section (D1).
(B2c) Balance sheet by operating segment
Stockland
30 June 2016
Assets
Cash
Real estate related assets1
Intangibles
Other financial assets
Other assets
Total assets
Liabilities
Interest-bearing liabilities
Retirement Living resident obligations
Other financial liabilities
Other liabilities
Total liabilities
Net assets/(liabilities)
Other items
Acquisition of investment properties
64
| Stockland Financial Report 2016
Commercial
Property
$M
Residential
$M
Retirement
Living
$M
Other
$M
Unallocated
$M
Consolidated
$M
–
9,668
–
–
50
9,718
–
–
–
115
115
–
2,517
–
–
151
2,668
–
–
–
549
549
9,603
2,119
–
3,589
76
–
15
3,680
–
2,427
–
14
2,441
1,239
222
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
208
38
46
547
37
876
3,800
–
316
467
4,583
(3,707)
208
15,812
122
547
253
16,942
3,800
2,427
316
1,145
7,688
9,254
–
222
Stockland Financial Report 2016 — 64
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(B2c) Balance sheet by operating segments (continued)
30 June 2015
Assets
Cash
Real estate related assets1
Intangibles
Other financial assets
Other assets
Total assets
Liabilities
Interest-bearing liabilities
Retirement Living resident
obligations
Other financial liabilities
Other liabilities
Total liabilities
Net assets/(liabilities)
Other items
Acquisition of investment properties
Commercial
Property
$M
Residential
$M
Retirement
Living
$M
Other
$M
Unallocated
$M
Consolidated
$M
–
8,902
–
–
67
8,969
–
–
–
121
121
–
2,552
–
–
120
2,672
–
–
–
569
569
8,848
2,103
–
3,335
76
–
18
3,429
–
2,211
–
18
2,229
1,200
72
–
81
–
7
–
–
–
7
–
–
–
15
15
(8)
–
170
40
22
368
52
652
3,283
–
317
408
4,008
(3,356)
170
14,836
98
368
257
15,729
3,283
2,211
317
1,131
6,942
8,787
–
153
1 Includes non-current assets held for sale, inventory, investment properties, equity-accounted investments and certain other assets.
(B2d) Retirement Living segment result
KEEPING IT SIMPLE …
As accounting for Retirement Living assets is not straight forward we have included a section specifically
in relation to it.
Retirement Living residents generally lend Stockland an amount equivalent to the value of the unit in
exchange for a lease to live in the unit and access to community facilities. This loan is recorded as a
resident obligation liability.
During the resident’s tenure, Stockland earns DMF revenue which is calculated based on the individual
resident contract. There are various contractual arrangements, however a standard contract will typically
provide for DMF to be earned at a rate of 8% in the first year and 3% in subsequent years, capped at 35%,
with Stockland and the resident sharing in any net capital gain when the unit is re-leased to the next
resident. The DMF on an individual unit covers, to a significant extent, the resident’s share of up-front capital
costs of building the common infrastructure of the village, which typically includes amenities such as a pool,
bowling green and community hall, and allow the resident to pay for these at the end of their tenancy,
instead of the start. The DMF revenue is included in the Retirement Living underlying profit when Stockland
receives the accumulated DMF in cash when a resident leaves and a new resident enters the unit.
The Retirement Living segment result also includes the settled development margin. This settled
development margin represents the unit price realised on first lease less the cost of development and is
recognised in underlying profit on settlement of a newly developed unit.
Refer to section (C1c) for further information on the fair value measurement and valuation technique used
for Retirement Living investment properties and resident obligations.
Stockland Financial Report 2016 — 65
65
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(B2d) Retirement Living segment result (continued)
Reconciliation of Retirement Living statutory profit to segment results
Year ended 30 June
Note
Total realised revenue
Net DMF base fees earned,
unrealised
DMF Revenue
Net change in fair value of
investment properties:
•
•
settled development margin
operating villages and
villages under development
Total net change in fair value
of investment properties
Net change in fair value of
Retirement Living resident
obligations
Impairment of intangibles
Management, administration,
marketing and selling expenses
Other income/(expenses)
Retirement Living profit/(loss)
A
B
B
C
D
2016
2015
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
Underlying
profit
$M
Statutory
adjustments
$M
Statutory
profit
$M
72
–
72
26
–
26
–
–
(37)
(4)
57
–
16
16
–
45
45
72
16
88
26
45
71
(85)
(85)
–
(1)
–
(25)
–
(38)
(4)
32
67
–
67
18
–
18
–
–
(33)
(4)
48
–
27
27
–
50
50
67
27
94
18
50
68
(70)
(70)
(18)
–
–
(11)
(18)
(33)
(4)
37
Explanation of statutory adjustments
A DMF base fees earned comprise DMF which is calculated on the entry price of a unit. For statutory profit these fees are accrued progressively as
Stockland becomes entitled to the fee but is not recognised in underlying profit until the DMF accrued is realised in cash.
B Underlying profit excludes the net change in fair value for operating villages, villages under development and Retirement Living Resident
Obligations. Refer to section (C1c).
C Underlying profit excludes the write-down of goodwill related to the Retirement Living business (2016: $Nil; 2015: $18 million). Refer to section
(C3a).
D In the current year, underlying profit excludes $1 million of integration costs related to the eight South Australian villages acquired. Refer to section
(C1c).
(B3) Taxation
KEEPING IT SIMPLE…
This section sets out Stockland’s tax accounting policies and provides an analysis of the income tax
expense/benefit and deferred tax balances, including a reconciliation of tax expense to accounting profit.
Accounting income is not always the same as taxable income, creating temporary differences. These
differences usually reverse over time. Until they reverse a deferred asset or liability must be recognised on
the balance sheet. This is known as the balance sheet liability method.
Stockland
Accounting for income tax
Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. Income tax expense is calculated at the applicable corporate tax rate of
30%, and is comprised of current and deferred tax expense.
Current tax expense represents the expense relating to the expected taxable income at the applicable tax rate for
the financial year. Deferred tax expense represents the tax expense in respect of the future tax consequences of
recovering or settling the carrying amount of an asset or liability.
66
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 66
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(B3) Taxation (continued)
Tax consolidation
Stockland Corporation Limited is head of the tax consolidated group which includes its wholly-owned Australian
resident subsidiaries. As a consequence, all members of the tax consolidated group are taxed as a single entity.
Members of the tax consolidated group have entered into a tax funding arrangement. The arrangement requires that
Stockland Corporation Limited assumes the current tax liabilities and deferred tax assets arising from unused tax
losses, with payments to or from subsidiaries settled via intercompany loan. Any subsequent period adjustments are
recognised by Stockland Corporation Limited only and do not result in further amounts being payable or receivable
under the tax funding arrangement. The tax liabilities of the entities included in the tax consolidated group will be
governed by the tax sharing agreement should Stockland Corporation Limited default on its tax obligations.
Trust
Under current Australian income tax legislation, Stockland Trust and its sub-trusts are not liable for income tax on
their taxable income (including any assessable component of capital gains) provided that the unitholders are
presently entitled to the income of the Trust.
(B3a) Income tax benefit/(expense)
Year ended 30 June
Current tax benefit/(expense)
Current year
Adjustments for prior years
Deferred tax benefit/(expense)
Origination and reversal of temporary differences
Total income tax benefit/(expense)
Stockland
2016
$M
49
(2)
47
(77)
(30)
2015
$M
35
(1)
34
(28)
6
Reconciliation of profit before income tax to income tax benefit
Year ended 30 June
Profit before income tax
Less: Trust profit before income tax
Less: Intergroup eliminations
Profit/(Loss) before income tax
Prima facie income tax benefit/(expense) calculated at 30%
Increase/(decrease) in income tax benefit/expense due to:
Other assessable income
Other non-assessable income
Other non-deductible expenses
Tax effect of FX loss transferred from foreign currency translation reserve
Underprovided in prior years
Temporary differences recognised on future RL gain on turnover deductions1
Income tax benefit/(expense)
Effective tax rate
Stockland
2016
2015
Statutory
profit
$M
Underlying
profit
$M
Statutory
profit
$M
Underlying
profit
$M
919
(832)
8
95
(28)
(1)
1
–
–
(2)
–
(30)
681
(611)
–
70
(21)
(1)
1
–
–
–
–
(21)
30%
897
(867)
7
37
(11)
(7)
2
(5)
(3)
(1)
31
6
604
(616)
–
(12)
4
–
2
–
(1)
(1)
–
4
30%
1 Tax benefit relates to the temporary difference on future deductions of Retirement Living gain on turnover liabilities assumed on prior period RL
village acquisitions which, following an amended ATO tax ruling, are now treated as tax deductible.
Stockland Financial Report 2016 — 67
67
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(B3a) Income tax expense (continued)
Tax expense relating to items of other comprehensive income
Year ended 30 June
Fair value reserve
Tax expense relating to items of other comprehensive income
(B3b) Deferred tax
Stockland
2016
$M
(2)
(2)
2015
$M
16
16
Stockland
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against
which the temporary differences can be utilised. Deferred tax assets are reviewed at each balance date and are
reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax is based upon the expected manner of realisation or settlement of the carrying amount of assets and
liabilities using the applicable tax rates.
Deferred tax arises due to temporary differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following
temporary differences:
initial recognition of goodwill;
(i)
(ii)
the initial recognition of assets or liabilities that affect neither accounting nor taxable profit; and
(iii) differences relating to investments in subsidiaries to the extent that they are unlikely to reverse in the
foreseeable future.
Deferred tax assets and liabilities are attributable to the following:
As at 30 June
Inventories
Investment properties
Other financial assets
Property, plant and equipment
Trade and other payables
Retirement Living resident obligations
Provisions
Reserves
Tax losses carried forward
Tax assets/(liabilities)
Less: Tax losses not recognised
Recognised tax assets/(liabilities)
Set-off of deferred tax liabilities
Net tax asset
Assets
Liabilities
Net
2016
$M
116
11
1
7
15
27
5
9
493
684
(139)
545
(518)
27
2015
$M
118
12
–
9
17
33
5
7
404
605
(139)
466
(407)
59
2016
$M
(170)
(339)
(9)
–
–
–
–
–
–
2015
$M
(152)
(249)
(6)
–
–
–
–
–
–
(518)
(407)
2016
$M
(54)
(328)
(8)
7
15
27
5
9
493
166
–
–
(139)
(518)
(407)
518
–
407
–
27
–
27
2015
$M
(34)
(237)
(6)
9
17
33
5
7
404
198
(139)
59
–
59
68
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 68
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(B3b) Deferred Tax (continued)
Movement in temporary differences during the financial year
Balance
1 July
2014
$M
Recognised
in profit
or loss
$M
Recognised
in OCI
$M
Balance
30 June
2015
$M
Recognised
in profit
or loss
$M
Recognised
in OCI
$M
Inventories
Investment properties
Other financial assets
Property, plant and
equipment
Trade and other payables
Retirement Living resident
obligations
Provisions
Reserves
Recognised tax losses
carried forward
(19)
(185)
(22)
3
14
9
4
5
224
33
(15)
(52)
–
6
3
24
1
2
41
10
–
–
16
–
–
–
–
–
–
16
(34)
(237)
(6)
9
17
33
5
7
265
59
(20)
(91)
–
(2)
(2)
(6)
–
2
89
–
–
(2)
–
–
–
–
–
–
(30)
(2)
Balance
30 June
2016
$M
(54)
(328)
(8)
7
15
27
5
9
354
27
Recoverability of deferred tax assets
An assessment of the recoverability of the net deferred tax asset has been made to determine if the carrying value
should be reduced or more tax losses should be recognised with reference to the latest available profit forecasts, to
determine the availability of suitable taxable profits or taxable temporary differences. The assessment for the
current period determined that the deferred tax asset was considered to be recoverable with sufficient certainty and
accordingly no additional deferred tax asset write off required and no additional tax losses recognised.
At each reporting period, the net deferred tax asset and unrecognised tax losses will be assessed for recoverability
and recognition, respectively. This may lead to the partial or full recognition of this unrecognised tax benefit in future
reporting periods.
Stockland has $139 million (2015: $139 million) of unrecognised deferred tax assets. This balance consists of $133
million (2015: $133 million) Australian income tax losses and $6 million (2015: $6 million) Australian capital losses.
Trust
There are no deferred tax assets or liabilities in the Trust.
Stockland Financial Report 2016 — 69
69
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(C) Operating assets and liabilities
IN THIS SECTION
This section shows the real estate assets used to generate the Group’s trading performance and the
liabilities incurred as a result. Information on other assets and liabilities are in the following sections:
• Section B – Deferred tax assets and liabilities
• Section D – Financing activities
• Section E – Equity-accounted investments
(C1) Real estate assets and liabilities
(C1a) Inventories
Properties held for development and resale are stated at the lower of cost and net realisable value. Cost includes
the costs of acquisition, development and holding costs such as borrowing costs, rates and taxes. Holding costs
incurred after completion of development activities are expensed.
Cost of acquisition
The cost of acquisition comprises the purchase price of the land, including land under option, along with any direct
costs incurred as part of the acquisition including legal, valuation and stamp duty costs.
Land under options
Stockland has a number of arrangements with third parties primarily relating to the purchase of land on capital
efficient terms, through call or put and call option arrangements.
Where the arrangement uses call options only, the decision to proceed with a purchase is controlled by Stockland.
A future obligation under a call option is only triggered if Stockland exercises the option. No asset or liability for the
land under option is recognised on the balance sheet until the option has been exercised. The call option is not
disclosed as a capital commitment as there is no commitment to purchase until the option is exercised.
Where Stockland enters into put and call options it is with a fixed exercise price. Where such an arrangement exists,
the put option requires Stockland to purchase the land at the discretion of the seller, creating a present obligation
once the option is exercised by the holder. If Stockland also presently exhibits control over the future economic
benefits of the asset such as via a presently exercisable call option or physical control of the asset, the land is
recognised in inventory with a corresponding liability recognised in provisions for development costs at the exercise
price of the option.
For both put and call options, any costs incurred in relation to the options including option fees are included
in inventory.
Development and other costs
Cost includes variable and fixed costs directly related to specific contracts, costs related to general contract activity
which can be allocated to specific projects on a reasonable basis, and other costs specifically chargeable under the
contract including under rectification provisions.
Interest capitalised
Financing costs on qualifying assets are also included in the cost of inventory. Finance costs were capitalised at
interest rates ranging from 5.2% to 6.4% during the financial year (2015: 6.1% to 6.7%). Capitalised finance costs
are further explained in section (D1).
Impairment provision
The net realisable value of inventories is the estimated selling price in the ordinary course of business less
estimated costs of completion and costs to sell. Net realisable value is based on the most reliable evidence
available at the time of the amount the inventories are expected to realise (using estimates such as revenue
escalations) and the estimate of total costs (including costs to complete). These estimates take into consideration
fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such
events confirm conditions existing at the end of the period.
Each reporting period, key estimates are reviewed including the costs of completion, dates of completion and
revenue escalations. As a result of this review, no net impairment provisions have been recognised in the profit or
loss for the year ended 30 June 2016 (2015: Nil).
70
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 70
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(C1a) Inventories (continued)
Development provisions
The provision for development costs relates to obligated future costs including land acquired on capital efficient
deferred terms. This includes present obligations that are recognised in relation to put options.
The development provision is recorded as a separate liability in the balance sheet with a corresponding asset
recognised in inventory as a cost of acquisition.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current
market assessments of the time value of money and, where appropriate, the risks specific to the liability.
The composition of inventory is presented in the table below:
As at 30 June
Finished development stock held for sale1
•
cost of acquisition
•
•
•
development and other costs
interest capitalised
impairment provision
Total finished stock held for sale
Development work in progress
Residential communities under development
•
cost of acquisition
•
•
•
development and other costs
interest capitalised
impairment provision
Total residential communities under development
Apartments
•
cost of acquisition
•
•
•
development and other costs
interest capitalised
impairment provision
Total apartments
Logistics & business parks projects
•
cost of acquisition
•
•
•
development and other costs
interest capitalised
impairment provision
Total logistics & business parks projects
Total inventory
2016
Non-
current
$M
Current
$M
Total
$M
Current
$M
2015
Non-
current
$M
103
196
40
(31)
308
350
125
75
(85)
465
–
2
–
–
2
25
16
7
(21)
27
802
–
–
–
–
–
103
196
40
(31)
308
1,099
1,449
419
334
(164)
1,688
544
409
(249)
2,153
–
2
–
–
2
26
6
–
(9)
23
–
4
–
–
4
51
22
7
(30)
50
1,713
2,515
59
149
29
(1)
236
182
116
50
(44)
304
15
18
5
(31)
7
9
12
7
(26)
2
549
Total
$M
59
149
29
(1)
236
–
–
–
–
–
1,389
1,571
449
376
(266)
1,948
565
426
(310)
2,252
–
–
–
–
–
30
17
5
(9)
43
15
18
5
(31)
7
39
29
12
(35)
45
1,991
2,540
1 Included within current finished development stock held for sale are logistics and business parks of $7 million (2015: $11 million). There are no
apartments included in finished development stock held for sale (2015: $nil).
Stockland Financial Report 2016 — 71
71
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(C1a) Inventories (continued)
The following impairment provisions are included in the inventory balance with movements for the year recognised
in the profit or loss:
Balance as at 1 July 2015
Amounts utilised
Balance as at 30 June 2016
Development cost provisions
Residential
communities
$M
Apartments
$M
Logistics &
business parks
$M
311
(31)
280
31
(31)
–
35
(5)
30
Total
$M
377
(67)
310
The following development provisions are recorded as a separate liability on the balance sheet with a corresponding
asset recognised in inventory:
As at 30 June
Current
Non-current
Total development cost provision
Movement in development cost provisions
Balance as at 1 July 2015
Additional provisions recognised
Amounts used during the financial year
Balance as at 30 June 2016
2016
$M
284
113
397
2015
$M
300
98
398
$M
398
293
(294)
397
(C1b) Commercial Properties
Commercial properties comprise investment interests in land and buildings including integral plant and equipment
held for the purpose of producing rental income, capital appreciation, or both.
Commercial properties are initially recognised at cost including any acquisition costs and subsequently stated at fair
value at each balance date. Fair value is based on the latest independent valuation adjusting for capital expenditure
and capitalisation and amortisation of lease incentives since the date of the independent valuation report. Any gain
or loss arising from a change in fair value is recognised in the profit or loss in the period.
Commercial properties under development are classified as investment properties and stated at fair value at each
balance date. Fair value is assessed with reference to reliable estimates of future cash flows, status of the
development and the associated risk profile. Finance costs incurred on properties undergoing development or
redevelopment are included in the cost of the development.
As at 30 June 2016, fair value for commercial properties in development has been assessed by the Directors after
considering the latest valuations and subsequent capital works-in-progress. An independent valuation of the
property will be undertaken upon completion of the works.
A property interest under an operating lease is classified and accounted for as an investment property on a
property-by-property basis when Stockland holds it to earn rentals or for capital appreciation or both. Any such
property interest under an operating lease classified as an investment property is carried at fair value.
Subsequent costs
Stockland recognises in the carrying amount of an investment property the cost of replacing part of that investment
property if it is probable that the future economic benefits embodied within the item will flow to Stockland and the
cost can be measured reliably. All other costs are recognised in the profit or loss as an expense as incurred.
72
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 72
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(C1b) Commercial Properties (continued)
Lease incentives
Lease incentives provided by Stockland to lessees, and rental guarantees which may be received by Stockland
from third parties (arising from the acquisition of investment properties) are included in the measurement of fair
value of investment property and are treated as separate assets. Such assets are amortised over the respective
periods to which the lease incentives and rental guarantees apply using a straight-line basis.
If an investment property becomes owner-occupied, it is reclassified as property, plant and equipment and its fair
value at the date of reclassification becomes its cost for accounting purposes.
Disposal of revalued assets
The gain or loss on disposal of revalued assets is calculated as the difference between the carrying amount of
the asset at the time of disposal and the net proceeds on disposal and is recognised in the profit or loss in the
year of disposal.
Commercial properties including Stockland’s share of property held by equity-accounted investments
Stockland
Trust
Retail
Logistics & Business Parks
Office
Capital works in progress and sundry properties
Book value of commercial properties
Less amounts classified as:
• Property, plant and equipment
• Non-current assets held for sale
• Other assets (including lease incentives and lease fees)
• Other assets (including lease incentives and lease fees)
attributable to equity-accounted investments
• Other receivables (straight-lining of operating lease rental
income)
• Other receivables (straight-lining of operating lease rental
income) attributable to equity-accounted investments
Total investment properties (including share of investment
property held by equity-accounted investments)
Less: Stockland’s share of investment properties held by equity-
accounted investments
Total investment properties
Investment property reconciliation
Direct investments and controlled entities
2016
$M
6,660
1,962
845
202
9,669
(44)
(67)
(200)
(10)
(61)
(13)
2015
$M
6,022
1,699
1,102
195
9,0181
(44)
–
(185)
(26)
(54)
(18)
2016
$M
6,609
1,962
829
130
9,530
–
(61)
(205)
(10)
(65)
(13)
2015
$M
5,992
1,699
1,108
87
8,886
–
–
(191)
(25)
(58)
(18)
9,274
8,691
9,176
8,594
(474)
(774)1
(474)
(754)
8,800
7,917
8,702
7,840
Carrying amount at the beginning of the financial year
7,917
7,489
7,840
7,412
Acquisitions
Transfers from equity-accounted investments2
Expenditure capitalised
Transfers to non-current assets held for sale
Disposals
Net change in fair value of investment properties
Balance at the end of the financial year
222
70
287
(67)
(2)
373
8,800
72
–
336
–
(233)
253
7,917
222
70
345
(61)
(43)
329
8,702
72
–
342
–
(233)
247
7,840
1 Includes joint ventures holding the Waterfront Place and Eagle Street Pier assets which have been reclassified as an Asset Held for Sale at
30 June 2015. Refer to (C3b) and (E1a).
2 Transfer of 50% of Stockland Bundaberg. In the current year, Stockland acquired the remaining 50% of the trust that holds Stockland Bundaberg.
Refer (E1a).
Stockland Financial Report 2016 — 73
73
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(C1b) Commercial Properties (continued)
Description
Retail
Directly owned
Stockland Shellharbour, Shellharbour NSW
Stockland Wetherill Park, Western Sydney NSW
Stockland Merrylands, Merrylands NSW
Stockland Rockhampton, Rockhampton QLD
Stockland Green Hills, East Maitland NSW
Stockland Glendale, Newcastle NSW
Stockland Cairns, Cairns QLD
Stockland Point Cook, Point Cook VIC
Stockland Townsville, Townsville QLD (50%)2
Stockland Baldivis, Baldivis WA
Stockland Hervey Bay, Hervey Bay QLD
Stockland Burleigh Heads, Burleigh Heads QLD
Stockland The Pines, Doncaster East VIC
Stockland Forster, Forster NSW
Stockland Jesmond, Newcastle NSW
Stockland Wendouree, Wendouree VIC
Stockland Balgowlah, Balgowlah NSW
Stockland Baulkham Hills, Baulkham Hills NSW
Stockland Gladstone, Gladstone QLD
Stockland Bundaberg, Bundaberg QLD
(2016: 100%2; 2015: 50%8)
Stockland Caloundra, Caloundra QLD
Stockland Nowra, Nowra NSW6
Stockland Traralgon, Traralgon VIC
Stockland Bull Creek, Bull Creek WA
Stockland Cleveland, Cleveland QLD
Stockland Bathurst, Bathurst NSW
Stockland Corrimal, Corrimal NSW
Stockland Wallsend, Wallsend NSW
Stockland Tooronga, Tooronga VIC
Shellharbour Retail Park, Shellharbour NSW
Stockland Harrisdale Complex, Harrisdale WA
Stockland Cammeray, Cammeray NSW
Stockland Highlands, Craigieburn VIC3
North Shore Townsville, Townsville QLD
Stockland Jimboomba Village Shopping Centre,
Jimboomba QLD (50%)2
Stockland Vincentia Shopping Centre, Vincentia NSW
Stockland Merrylands Court, Merrylands NSW3
Woolworths Toowong, Toowong QLD4
Stockland Townsville Kingsvale Sunvale, QLD (50%)2,5
Owned through equity-accounted investments
Stockland Riverton, Riverton WA (50%)
Total Retail9
Independent valuation
Independent Cap rate1 %
Book value ($M)
Date
$M
2016
2015
2016
2015
Dec 2015
Dec 20117
Dec 2015
Jun 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Jun 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Jun 2016
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
–
Dec 2015
Jun 2016
Dec 2015
Jun 2015
Dec 2015
Dec 2014
Dec 2015
Dec 2014
Dec 2015
700
358
540
404
354
299
230
230
229
200
195
190
170
167
160
148
148
145
140
139
127
116
107
102
102
94
75
70
63
53
–
46
34
23
14
11
10
6
5
64
5.75
6.75
5.75
6.00
5.75
6.25
6.00
6.25
6.00
6.75
6.00
6.00
6.50
6.50
6.25
7.25
6.00-6.75
6.00-7.00
6.00
6.25
7.50
6.25
6.75-7.50
7.00-8.25
6.25
6.50
6.50
6.50
6.00
6.25
7.00
6.50
6.50
6.50
6.75
6.50
6.75
6.75
6.75
7.00
6.00
7.75
–
6.25
6.50
6.75
8.00
8.25
7.50
n/a
n/a
6.50
7.00
6.75
7.00
7.00
6.75
6.75
7.00
6.75
7.00
6.75
7.00
6.75
7.00
7.25
7.25
7.25
6.75
7.75
–
6.75
7.00
7.00
8.00
8.00
7.50
n/a
n/a
6.75
700
685
537
406
354
301
235
230
227
200
195
191
170
167
161
149
148
145
142
139
127
117
108
103
103
95
75
71
63
53
48
45
34
23
14
11
10
7
2
64
688
522
506
404
308
274
230
185
227
172
195
181
157
158
144
138
126
130
149
67
117
110
99
101
94
92
70
67
53
52
–
37
31
22
14
13
10
14
2
64
6,660
6,022
1 A range of cap rates are disclosed for a complex comprising of a number of properties.
2 Stockland’s share of this property is held through a direct interest in the asset.
3 Property is not held by the Trust. In the case of Merrylands Court, this property was held by the Trust at 30 June 2015.
4 Property is valued as land.
5 Independent valuation based on 100% ownership.
6 Independent valuation excludes the adjacent property owned by Stockland.
7 Property is currently undergoing redevelopment. An external valuation will be obtained on completion of the redevelopment.
8 In the prior year, Stockland Bundaberg was owned through an equity-accounted investment. Refer to (E1a) for further details.
9 Totals may not add due to rounding.
74
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 74
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(C1b) Commercial Properties (continued)
Description
Logistics & Business Parks
Directly owned
Yennora Distribution Centre, Yennora NSW
Triniti Business Campus, North Ryde NSW
Port Adelaide Distribution Centre, Port Adelaide SA
60-66 Waterloo Road, Macquarie Park NSW
Stockland Mulgrave, Mulgrave VIC6
Hendra Distribution Centre, Brisbane QLD
Brooklyn Estate, Brooklyn VIC
Forrester Distribution Centre, St Marys NSW
Ingleburn Distribution Centre, Ingleburn NSW6
Balcatta Distribution Centre, Balcatta WA
9-11a Ferndell Street, Granville NSW
Macquarie Technology Centre, Macquarie Park NSW
Toll Business Park, Altona VIC
20-50 & 76-82 Fillo Drive and 10 Stubb Street,
Somerton VIC
16 Giffnock Avenue, Macquarie Park NSW
1090-1124 Centre Road, Oakleigh VIC
23 Wonderland Drive, Eastern Creek NSW6
72-76 Cherry Lane, Laverton North VIC7
Altona Distribution Centre, Altona VIC
2 Davis Road, Wetherill Park NSW
2-8 Baker Street, Botany NSW7
Coopers Paddock, Warwick Farm NSW6
Erskine Park, Erskine Park NSW6
Export Park, 9-13 Viola Place, Brisbane Airport QLD4
40 Scanlon Drive, Epping VIC
M1 Yatala Enterprise Park, Yatala QLD
Owned through equity-accounted investments
Optus Centre, Macquarie Park NSW (51%)
Total Logistics & Business Parks10
Office
Directly owned
Stockland Piccadilly, 133-145 Castlereagh Street,
Sydney NSW (50%)2, 3, 4, 8
Durack Centre, 263 Adelaide Terrace, Perth WA4
601 Pacific Highway, St Leonards NSW
77 Pacific Highway, North Sydney NSW
Garden Square, Mt Gravatt QLD
40 Cameron Avenue, Belconnen ACT4
110 Walker Street, North Sydney NSW
80-88 Jephson Street, Toowong QLD
23-29 High Street, Toowong QLD
Owned through equity-accounted investments
Waterfront Place, Eagle Street, Brisbane QLD (50%)5
135 King Street, Sydney NSW (50%)3
Total Office10
Independent valuation
Independent Cap rate1 %
Book value ($M)
Date
$M
2016
2015
2016
2015
Dec 2015
Dec 2015
Dec 2015
Dec 2015
–
Jun 2016
Dec 2015
Dec 2015
–
Dec 2015
Dec 2015
Dec 2015
Dec 2015 -
Jun 2016
Dec 2015
Dec 2015
Dec 20129
–
Dec 2015
Dec 2015
Jun 2016
Dec 2015
–
–
Dec 2015
Dec 2015
Jun 2016
381
178
100
95
–
88
83
81
–
58
56
49
50
44
42
32
–
32
30
26
23
–
–
9
9
7
Mar 2016
227
7.00
7.00
9.00
6.50-7.00
–
8.25
8.00
7.25
–
7.00
7.25-9.00
7.00-8.25
6.75-7.50
7.75
7.75
9.25
7.25-7.50
–
8.75
9.25
7.75
–
7.25
8.50-9.75
7.25-8.50
8.25
8.25
8.75-9.00
7.75
9.25
–
7.00
8.25
7.25
6.25
–
–
9.29
7.5
n/a
6.75
8.75
9.25
–
–
8.75
8.00
–
–
–
9.75
8.00
n/a
7.25
Dec 2015
Jun 2016
Dec 2015
Dec 2015
Jun 2014
Dec 2015
Dec 2015
Dec 2015
Dec 2015
Jun 2015
Dec 2015
242
116
98
68
37
33
30
20
6
296
207
6.00-7.00
8.00
7.00
7.00
9.25
11.00
7.25
8.75
7.5
6.63–7.75
8.25-8.75
7.75
7.75
9.25
10.50
7.75
9.00
8.25-8.50
–
4.75-6.00
6.75
5.75-6.50
384
176
101
97
93
88
82
81
78
59
54
54
50
45
43
40
36
32
31
26
24
19
19
9
9
7
369
170
95
80
–
85
83
78
77
57
47
43
48
47
38
32
–
31
29
19
22
19
–
12
8
10
227
1,962
204
1,699
232
116
97
69
35
33
30
22
6
–
206
845
206
158
87
59
38
42
28
19
8
296
161
1,102
1 A range of cap rates are disclosed for a complex comprising of a number of properties.
2 Stockland’s share of this property is held through a direct interest in the asset.
3 Book value includes the retail component of the property.
4 Property is a leasehold property.
5 At 30 June 2015, the joint venture holding Waterfront Place was reclassified as an Asset Held for Sale. Refer to (C3b) and (E1). The property was
disposed during the current period.
6 The values adopted above are a result of a Directors’ valuations.
7 The values adopted in the comparative period are a result of a Directors’ valuation.
8 The book value excludes the revaluation relating to the area occupied by Stockland. This owner-occupied area is classified as property, plant and
equipment and is recognised at historical cost.
9 Property is currently undergoing redevelopment. An external valuation will be obtained on completion of the redevelopment.
10 Totals may not add due to rounding.
Stockland Financial Report 2016 — 75
75
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(C1b) Commercial Properties (continued)
Fair value measurement, valuation techniques and inputs
The adopted valuations (both internal and external) for investment properties in the Retail, Office and Logistics &
Business Parks portfolios are a combination of the valuations determined using the DCF method and the income
capitalisation method.
The adopted value of properties in the properties under development portfolio is based on an internal tolerance
check performed by the Directors’ at each reporting date. The tolerance check takes into account the expected cost
of completion, the stage of completion, the risk associated with the project, expected underlying income and
applying the income capitalisation method.
The following table shows the valuation techniques used in measuring the fair value of commercial properties, as
well as significant unobservable inputs used.
Class of
property
Fair value
hierarchy
Valuation
technique
Inputs used to measure fair value
30 June 2016 30 June 2015
Range of unobservable inputs
Retail
Level 3
Logistics &
Business
Parks
Level 3
Office
Level 3
DCF and
income
capitalisation
method
DCF and
income
capitalisation
method
DCF and
income
capitalisation
method
Net market rent (per sqm p.a.)
10 year average specialty market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Net market rent (per sqm p.a.)
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Net market rent (per sqm p.a.)
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Properties
under
development
Level 3
Income
capitalisation
method
Net market rent (per sqm p.a.)
Adopted capitalisation rate
$188 – $794
3.0% – 4.0%
4.8% – 7.8%
5.0% – 8.0%
6.8% – 9.0%
$56 – $430
2.4% – 3.7%
6.3% – 9.3%
6.5% – 11.0%
7.5% – 9.3%
$317 – $707
2.9% – 3.9%
6.0% – 11.0%
6.5% – 11.0%
7.5% – 11.0%
$56 – $794
5.75% – 8.0%
$119 – $794
3.0% – 4.3%
6.0% – 9.5%
6.25% – 9.75%
8.25% – 9.5%
$56 – $434
2.6% – 3.6%
7.0% – 9.75%
7.25% – 11.0%
8.5% – 10.0%
$326 – $695
2.9% – 3.9%
6.5% – 10.5%
6.75% – 10.5%
8.0% – 10.5%
$309 – $1,190
5.5% – 7.0%
Both the DCF and income capitalisation methods use inputs which are not frequently observable, in determining fair
value, as per the table above.
The table below explains the key inputs used to measure fair value for commercial properties:
DCF method
Income capitalisation
method
Net market rent
Under the DCF method, a property’s fair value is estimated using explicit assumptions regarding the
benefits and liabilities of ownership over the asset’s life including an exit or terminal value. The DCF
method involves the projection of a series of cash flows on a real property interest. To this projected
cash flow series, an appropriate, market-derived discount rate is applied to establish the present
value of the income stream associated with the real property.
This method involves assessing the total net market income receivable from the property and
capitalising this in perpetuity to derive a capital value, with allowances for capital expenditure
reversions.
A net market rent is the estimated amount for which a property or space within a property should
lease between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length
transaction, after proper marketing and wherein the parties have each acted knowledgeably,
prudently and without compulsion. In a net rent, the owner recovers outgoings from the tenant on a
pro-rata basis (where applicable).
10 year average specialty
market rental growth
An average of a 10 year period of forecast annual percentage growth rates in Retail specialty
tenancy rents. Specialty tenants are those tenancies with a gross lettable area of less than 400
square metres (excludes ATMs and kiosks).
76
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 76
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(C1b) Commercial Properties (continued)
10 year average market
rental growth
The expected annual rate of change in market rent over a 10 year forecast period in alignment with
expected market movements.
Adopted capitalisation rate
The rate at which net market income is capitalised to determine the value of a property. The rate is
determined with regards to market evidence and the prior external valuation.
Adopted terminal yield
Adopted discount rate
The capitalisation rate used to convert income into an indication of the anticipated value of the
property at the end of the holding period when carrying out the DCF method. The rate is determined
with regards to market evidence and the prior external valuation.
The rate of return used to convert a monetary sum, payable or receivable in the future, into present
value. It reflects the opportunity cost of capital, that is, the rate of return the capital can earn if put to
other uses having similar risk. The rate is determined with regards to market evidence and the prior
external valuation.
Valuation process
The Commercial Property valuation team are responsible for managing the bi-annual valuation process across
Stockland’s balance sheet investment portfolio. The aim of the valuation process is to ensure that assets are held at
fair value in Stockland’s accounts and facilitate compliance with applicable regulations (for example the
Corporations Act and ASIC regulations) and the STML RE Constitution and Compliance Plan.
Stockland’s external valuations are performed by independent professionally qualified valuers who hold a
recognised relevant professional qualification and have specialised expertise in the investment properties valued.
Internal tolerance checks have been performed by Stockland’s internal valuers who hold recognised relevant
professional qualifications.
Internal tolerance check
An internal tolerance check is performed every six months with the exception of those properties being
independently valued during the current reporting period. Stockland’s internal valuers perform tolerance checks by
utilising the information from a combination of asset plans and forecasting tools prepared by the asset management
teams. For the Retail, Office and Logistics & Business Parks classes, appropriate capitalisation rates, terminal
yields and discount rates based on comparable market evidence and recent external valuation parameters are used
to produce a capitalisation and DCF valuation. The internal tolerance check is generally weighted more to the
capitalisation value (75% weighting) than the DCF valuation (25% weighting).
The current book value, which is the value per the asset’s most recent external valuation plus any capital
expenditure since the valuation date, is compared to the internal tolerance check.
•
If the internal tolerance check is within 5.0% of the current book value, then the current book value is retained,
and judgement is taken that this remains the fair value of the property.
If the internal tolerance check varies by more than 5.0% to the current book value (higher or lower), then an
external independent valuation will be undertaken and adopted after assessment by the Commercial Property
valuation team to provide an appropriate level of evidence to support fair value.
•
The internal tolerance checks are reviewed by Commercial Property senior management who recommend the
adopted valuation to the Audit Committee and Board in accordance with Stockland’s internal valuation protocol
above.
A development feasibility is prepared for each commercial property under development. The feasibility includes an
estimated valuation upon project completion based on the income capitalisation method. During the development
period, fair value is assessed by reference to the value of the property when complete, less deductions for costs
required to complete the project and appropriate adjustments for profit and risk. Through this process, we arrive at
fair value. The fair value is compared to the current book value.
•
If the internal tolerance check is within 5.0% of the current book value, then the current book value is retained,
and judgement is taken that this remains the fair value of the property under development.
If the internal tolerance check varies by more than 5.0% to the current book value (higher or lower), then an
internal valuation will be adopted with an external valuation obtained on completion of the development.
•
Stockland Financial Report 2016 — 77
77
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(C1b) Commercial Properties (continued)
External Valuations
The STML RE Limited Compliance Plan requires that each asset in the portfolio must be valued by an independent
external valuer at least once every three years.
In practice, assets are independently valued more than once every three years primarily as a result of:
• A variation between book value and internal tolerance check. Refer to the internal tolerance check
section above.
• The asset is undergoing major development or significant capital expenditure on a property.
• An opportunity to undertake a valuation in line with a joint owners’ valuation.
• Ensuring an appropriate cross-section of assets are externally assessed at each reporting period.
Sensitivity information
Significant input
Net market rent
10 year specialty market rental growth
10 year average market rental growth
Adopted capitalisation rate
Adopted terminal yield
Adopted discount rate
Impact on fair value
of an increase in input
Impact on fair value
of a decrease in input
Increase
Increase
Increase
Decrease
Decrease
Decrease
Decrease
Decrease
Decrease
Increase
Increase
Increase
Generally, a change in the assumption made for the adopted capitalisation rate is accompanied by a directionally
similar change in the adopted terminal yield. The adopted capitalisation rate forms part of the income capitalisation
approach and the adopted terminal yield forms part of the DCF method.
When calculating the income capitalisation approach, the net market rent has a strong interrelationship with the
adopted capitalisation rate given the methodology involves assessing the total net market income receivable from
the property and capitalising this in perpetuity to derive a capital value. In theory, an increase in the net market rent
and an increase (softening) in the adopted capitalisation rate could potentially offset the impact to the fair value. The
same can be said for a decrease in the net market rent and a decrease (tightening) in the adopted capitalisation
rate. A directionally opposite change in the net market rent and the adopted capitalisation rate could potentially
magnify the impact to the fair value.
When assessing a DCF valuation, the adopted discount rate and adopted terminal yield have a strong
interrelationship in deriving a fair value given the discount rate will determine the rate in which the terminal value is
discounted to the present value.
In theory, an increase (softening) in the adopted discount rate and a decrease (tightening) in the adopted terminal
yield could potentially offset the impact to the fair value. The same can be said for a decrease (tightening) in the
discount rate and an increase (softening) in the adopted terminal yield. A directionally similar change in the adopted
discount rate and the adopted terminal yield could potentially magnify the impact to the fair value.
Non-cancellable operating lease receivable from investment property tenants
Annual rent receivable by the Group under current leases from tenants is from property held by the Commercial
Property business.
Non-cancellable operating lease receivable not recognised in the financial statements at balance date:
As at 30 June
Within one year
Later than one year but not later than five years
Later than five years
Total non-cancellable operating lease receivable
78
| Stockland Financial Report 2016
Stockland
Trust
2016
$M
607
1,575
1,075
3,257
2015
$M
566
1,483
948
2,997
2016
$M
609
1,588
1,077
3,274
2015
M
564
1,476
935
2,975
Stockland Financial Report 2016 — 78
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(C1c) Retirement Living
For information on results of the Retirement Living business refer to section (B2d).
Investment properties
Retirement Living investment properties comprise retirement villages (both operating villages and villages under
development) held to earn revenue and capital appreciation over the long-term. Retirement villages comprise
independent living units, serviced apartments, community facilities and integral plant and equipment.
Stockland
As at 30 June
Net investment in Retirement Living
Operating villages
Villages under development
Total Retirement Living investment properties
Existing resident obligations
Net carrying value of Retirement Living villages
2016
$M
3,368
208
3,576
(2,414)
1,162
2015
$M
3,111
224
3,335
(2,198)
1,137
Retirement Living net carrying value movement during the year
Balance at the beginning of the financial year
1,137
1,003
Acquisition
Disposal
Expenditure capitalised
Transferred to assets held for sale
Realised fair value movements
Cash received on first sales
Change in fair value of investment properties
Other movements
Balance at the end of the financial year
–
–
168
(12)
26
(152)
(20)
15
1,162
81
(20)
130
–
21
(115)
6
31
1,137
Acquisitions
In the prior year, Stockland purchased eight established Retirement Living villages in South Australia for a total cost
of $81 million. The transaction included the recognition of operating villages ($245 million), development land ($11
million) and the assumption of resident obligations ($175 million).
Disposals
Subsequent to year end, Stockland disposed of five villages located in Western Australia. At 30 June 2016, these
villages were revalued to their sale price ($12 million) and classified as assets held for sale.
In the prior year, Stockland disposed of two established Retirement Living villages in Victoria for total proceeds of
$20 million. The villages contained units on strata title and did not have an associated resident obligation.
Fair value measurement, valuation techniques and inputs
The fair value of Retirement Living investment properties (including villages under development) is the value of the
Retirement Living assets and the future cash flows associated with the contracts. Changes in fair value of
investment properties are recognised in profit or loss.
The fair value is determined by the Directors using a DCF methodology.
Both the investment properties and resident obligations are considered to be level 3 in the Fair Value Hierarchy
Refer to section (D5).
Stockland Financial Report 2016 — 79
79
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(C1c) Retirement Living (continued)
The following inputs are used to measure the fair value of the investment properties:
Inputs
Discount rate
Average 20 year growth rate
Average length of stay of existing and future residents
Current market value of unit
Renovation/Reinstatement cost
Renovation recoupment
Range of unobservable inputs
30 June 2016 30 June 2015
12.5% – 14.0% (Average: 12.9%)
12.5% – 14.0% (Average: 13.0%)
3.7%
10.6 years
3.8%
10.4 years
$0.1 million – $1.3 million
$0.1 million – $1.0 million
$5k – $80k
0% – 100%
$5k – $80k
0% – 100%
The DCF methodology uses unobservable inputs as shown in the table above. These are further explained below:
Item
DCF method
Discount rate
20 year growth rate
Description
Under the DCF method, an asset or liability’s fair value is estimated using explicit
assumptions regarding the benefits and liabilities of ownership over the asset’s life
including an exit or terminal value. The DCF method involves the projection of a series
of cash flows the property asset will generate. To this projected cash flow series, an
appropriate, market-derived discount rate is applied to establish the present value of
the income stream associated with the real property.
The rate of return used to convert a monetary sum, payable or receivable in the future,
into present value. It reflects the opportunity cost of capital, that is, the rate of return the
capital can earn if put to other uses having similar risk. The rate is determined with
regards to market evidence and the external valuations performed.
This is the rate that it is expected the unit will increase in value over 20 years. Growth
rates from the external valuation reports are taken as a base to estimate the 20 year rate
on a semi-annual basis.
Average length of stay of existing and
future residents
Assumptions on future resident gender and entry age based upon analysis of historical
entrant profiles are used to estimate average length of stay.
Current market value
Market values are generally reviewed semi-annually by the sales and operational teams,
and approved by the National Sales Manager and CEO Retirement Living.
Renovation/Reinstatement cost
The cost that is required to maintain the independent living units and serviced
apartments to the appropriate condition.
Renovation recoupment
The percentage of renovation costs that will be recouped from the residents based on
contractual terms.
Valuation process
The Retirement Living finance team are responsible for managing the bi-annual valuation process across
Stockland’s Retirement Living portfolio. The aim of the valuation process is to confirm that assets are held at fair
value on Stockland’s balance sheet.
Operating villages
Internal valuations are completed every six months using valuation models with reference to external market data.
An independent professionally qualified valuer who holds a recognised relevant professional qualification and has
specialised expertise in the investment properties valued provides assurance on the key assumptions used. The
most recent independent assessment was obtained at 30 June 2016.
Villages under construction
Villages under construction are carried at fair value. There are two elements to the value of villages under
construction – the value of land and other development expenditure and the value of discounted future DMF
revenue. The land and other development expenditure is made up of costs incurred to date plus a development
margin. Development margin is recognised on a percentage of completion basis and is based on an internally
certified level of completion of the stage. Development margin recognition is also described in section (B2d). The
DMF asset is recognised on a percentage of completion basis.
Units are transferred from villages under construction to established villages once they have been leased for the
first time. This transfer is at the cost of the unit plus development profit recognised during construction.
80
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 80
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(C1c) Retirement Living (continued)
Sensitivity information
Significant input
Discount rate
20 year growth rate
Average length of stay of existing and future residents1
Current market value of unit
Renovation cost
Renovation recoupment
Impact on fair value
of an increase in input
Impact on fair value
of a decrease in input
Decrease
Increase
Decrease
Increase
Decrease
Increase
Increase
Decrease
Increase
Decrease
Increase
Decrease
1 This is dependent on the length of stay as the majority of contracts have maximum DMF periods.
When assessing a DCF valuation, the adopted discount rate and adopted terminal yield have a strong
interrelationship in deriving a fair value given the discount rate will determine the rate in which the terminal value is
discounted to the present value.
In theory, an increase (softening) in the discount rate and a decrease (tightening) in the adopted terminal yield could
potentially offset the impact to the fair value. The same can be said for a decrease (tightening) in the discount rate
and an increase (softening) in the adopted terminal yield. A directionally similar change in the discount rate and the
adopted terminal yield could potentially magnify the impact to the fair value.
Resident obligations
Resident obligations represent the net amount owed by Stockland to current and former residents. Resident
obligations are non-interest bearing and recognised at fair value.
Current resident obligations
Based on actuarial turnover calculations, approximately 8% of residents are estimated to leave each year and
therefore it is not expected that the full obligation to residents will fall due within one year. In the vast majority of
cases, the resident obligations are able to be repaid from receipts from incoming residents.
Accounting Standards require that resident obligations are classified as current because all residents have the right
to terminate their occupancy contract with immediate effect, and Stockland has no unconditional contractual right to
defer settlement for at least 12 months.
Non-current resident obligations
Certain legacy contracts are classified as non-current as these contracts give Stockland a right to defer settlement
for up to eight years.
As at 30 June
2016
Existing resident obligations
Former resident obligations
Total resident obligations
2015
Existing resident obligations
Former resident obligations
Total resident obligations
Current
$M
Non-Current
$M
2,202
3
2,205
1,989
3
1,992
212
10
222
209
10
219
Total
$M
2,414
13
2,427
2,198
13
2,211
Fair value measurement, valuation techniques and inputs
The fair value of the resident obligations is the amount payable on demand to residents and comprises the initial
loan amount plus the resident’s share of any capital gains in accordance with their contracts less DMF earned to
date. Changes in fair value of resident obligations are recognised in profit or loss.
Inputs used in relation to the resident obligations are identical to those used for Investment Properties. Refer above
for a detailed description of the inputs used.
Stockland Financial Report 2016 — 81
81
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(C1c) Retirement Living (continued)
Valuation process
Resident obligations are calculated in the valuation model, as at the measurement date based on the initial loan
amount paid by the resident adjusted for DMF and their share of capital gain or loss arising on the unit.
It is not possible to have the resident obligations valued externally, therefore these are valued every six months by
the Directors as described above.
Sensitivity information
As the resident obligations are a financial liability, a quantitative sensitivity analysis has been disclosed. Sensitivity
of the resident obligations to changes in the weighted assumptions are shown in the table below.
Increase/(Decrease) in resident obligations
Increase in input
Decrease in input
Significant input
Current market value
Change in
assumption
10%
2016
$M
150
2015
$M
124
2016
$M
(150)
2015
$M
(124)
Current market value is the only input that will significantly impact the fair value of the resident obligation since this
impacts the amount of any capital gain that will be shared between Stockland and the resident upon exit.
(C2) Financial assets and liabilities
KEEPING IT SIMPLE …
This section shows the financial assets and liabilities Stockland generates through its trading activity.
Careful management of working capital enables the Group to meet its trading and financing obligations
within its ordinary operating cycle. Cash and cash equivalents are disclosed in section (D2).
(C2a) Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest rate method, less an allowance for impairment. Collectability of trade
receivables is reviewed on an ongoing basis and at balance date, specific impairment losses are recorded
for any doubtful accounts.
As at 30 June
Current
Trade receivables
Provision for impairment
Net trade receivables
Other receivables
Total current trade and other receivables
Non-current
Straight-lining of rental income
Other receivables
Receivables due from related companies
Total non-current trade and other receivables
Stockland
Trust
2016
$M
2015
$M
2016
$M
2015
$M
54
(2)
52
82
134
62
38
–
100
40
(1)
39
64
103
54
38
–
92
2
(1)
1
17
18
65
–
10
–
10
23
33
57
–
3,445
3,510
3,378
3,435
82
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 82
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(C2b) Trade and other payables
Trade and other payables are initially recognised at fair value less transaction costs and subsequently carried at
amortised cost.
As at 30 June
Current
Trade payables and accruals
Land purchases
Distributions payable
GST payable/(receivable)
Section
(D8)
Total current trade and other payables
Non-current
Land purchases
Total non-current trade and other payables
(C3) Other non-financial assets and liabilities
Stockland
2016
$M
2015
$M
Trust
2016
$M
273
48
295
27
643
–
–
243
37
283
32
595
33
33
129
–
295
(2)
422
–
–
2015
$M
98
–
283
(2)
379
–
–
(C3a) Intangible assets
Intangible assets are an identifiable non-monetary asset without physical substance. Stockland has two types of
intangible assets: goodwill and software. There are no intangible assets held in the Trust.
Stockland
Cost
Balance as at 1 July 2014
Additions
Balance as at 30 June 2015
Additions
Balance as at 30 June 2016
Amortisation and impairment losses
Balance as at 1 July 2014
Amortisation
Impairment of intangibles
Balance as at 30 June 2015
Amortisation
Balance as at 30 June 2016
Carrying amounts
As at 30 June 2015
As at 30 June 2016
Goodwill
$M
Software
$M
117
–
117
–
117
(23)
–
(18)
(41)
–
(41)
76
76
58
22
80
33
113
(27)
(6)
(25)
(58)
(9)
(67)
22
46
Total
$M
175
22
197
33
230
(50)
(6)
(43)
(99)
(9)
(108)
98
122
Stockland Financial Report 2016 — 83
83
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(C3a) Intangible assets (continued)
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of Stockland’s share of the net
identifiable assets of the acquired subsidiary at the date of acquisition.
Goodwill that has an indefinite useful life is not subject to amortisation and is tested annually for impairment, or
more frequently if events or changes in circumstances indicate that they might be impaired. An impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at the lowest levels for which goodwill is monitored
for internal management purposes and allocated to cash-generating units (‘CGU’). The allocation is made to each
CGU or groups of CGU that are expected to benefit from the business combination in which the goodwill arose,
identified according to operating segments.
Goodwill arose on the acquisition of the Retirement Living division of Australian Retirement Communities on 28
February 2007, the acquisition of the Rylands Retirement Living business on 17 July 2008 and the acquisition of
Aevum Limited on 31 October 2010.
Impairment Test
An impairment test was performed with no impairment recognised in the current year (2015: $18 million).
The goodwill impairment test is based upon the value in use method using cash flow projections for Retirement
Living unrecognised development profits. Unrecognised development profits comprises of cash flows from both the
development pipeline and deferred repayment contracts which are considered to benefit from the acquisitions.
In FY15, an impairment arose as a result of cash flows related to the development pipeline and deferred repayment
contracts. Changes to the mix and timing of development projects in the pipeline as well as changes in assumptions
in the calculation of the net present value of the future cash flows for the development pipeline and deferred
repayment contracts were the primary reasons for the impairment.
Deferred Repayment (‘DR’) Contracts
The Australian Retirement Communities portfolio acquired in 2007, included a number of DR contracts. These DR
contracts were initially sold prior to the Stockland acquisition at a wholesale price on development, and therefore
were expected to result in higher conversion profit upon next settlement when they are priced at retail value and
converted to Stockland target contracts.
The cash flows are discounted over their forecast maturity at 12.9% (2015: 13.0%) and cash flows beyond the five
year period have been determined by applying a growth rate of 3.7% p.a. (2015: 3.8% p.a.). The growth rate applied
does not exceed the long-term average rate for the Australian retirement living property market.
Development Pipeline
Future development cash flows are based on formal budgets approved by management expected to commence
in the next five year period and future development pipeline assumptions. The cash flows incorporate projections
for development costs, selling price and associated DMF for the Retirement Living Communities in the
development pipeline.
Future cash flows are discounted at 15.0% (2015: 15.0%). Cash flows beyond the five year period have been
determined by applying a growth rate of 3.7% p.a. (2015: 3.8% p.a.). The growth rate applied does not exceed the
long-term average rate for the Australian Retirement Living property market.
Management believe that due to the extended time it takes to develop a village and the general long-term nature of
Retirement Living Communities, where Stockland has the ability to manage assets over that extended period, it is
reasonable to use a cash flow period of greater than five years.
84
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 84
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(C3a) Intangible assets (continued)
Software
Software is stated at cost less accumulated amortisation and impairment losses. Amounts incurred in design and
testing of software are capitalised including employee costs and an appropriate part of relevant overheads where
the software will generate probable future economic benefits.
Costs associated with maintaining software are recognised as an expense as incurred.
All software is amortised based on the straight-line method and using rates between 20-33% from the point at which
the asset is ready for use. Amortisation is recognised in profit or loss. Rates used are consistent with the prior year.
The residual value, the useful life and the amortisation method applied to an asset are reviewed at least annually.
Impairment Test
No impairment has been recognised in the current year.
In the prior year, a strategic review of the IT systems identified software that will be abandoned or phased out over
the next three years. This review resulted in an impairment of $25 million which was fully allocated against software
and classified as ‘impairment of intangibles’ within the profit or loss. The impairment test was based upon the value
in use method using the future benefit derived from the internal use of software.
(C3b) Non-current assets held for sale
Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying
amount and fair value less costs to sell. Investment property held for sale will continue to be carried at fair value.
Non-current assets and disposal groups are classified as held for sale if their carrying amounts will be recovered
principally through a sale transaction rather than through continuing use. This condition is met only when the sale is
highly probable and the asset or disposal group is available for immediate sale in its present condition. Management
must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one
year from the date of classification.
Property, plant and equipment are not depreciated once classified as held for sale.
Investment properties transferred from Commercial Property
Investment properties transferred from Retirement Living
SDOT Sub Trust No. 1
Eagle Street Pier Pty Limited
Total non-current assets held for sale
Stockland
Trust
2016
$M
67
12
–
18
97
2015
$M
–
–
224
22
246
2016
$M
61
–
–
–
61
2015
$M
–
–
224
–
224
During the year, Stockland completed the sale of properties at Waterfront Place and Eagle Street Pier which were
held by SDOT Sub Trust No. 1 and Eagle Street Pier Pty Limited, respectively. In the prior year, these properties
were revalued to their sale value.
The final proceeds from the sale of the Eagle Street Pier property were distributed by the joint venture to Stockland
and its joint venture partner in July 2016.
Refer to (E1) for further details.
Stockland Financial Report 2016 — 85
85
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D) Capital structure and financing costs
IN THIS SECTION
This section outlines how the Group manages its capital structure and related financing costs, including its
balance sheet liquidity and access to capital markets.
The Board determines the appropriate capital structure of the Group, specifically, how much is raised from
shareholders (equity) and how much is borrowed from financial institutions and capital markets (debt), in
order to finance Group's activities both now and in the future.
The Board considers the Group's capital structure and its dividend and distribution policy at least twice a
year ahead of announcing results, in the context of its ability to continue as a going concern, to execute the
strategy and to deliver its business plan. During the year Stockland’s credit rating remained unchanged at
A-/stable, and the Board continued to focus on improving the efficiency of the balance sheet.
The Group is exposed to changes in interest rates on its net borrowings and to changes in foreign exchange
rates on its foreign currency transactions and net assets. In accordance with risk management policies, the
Group uses derivatives to hedge these underlying exposures.
(D1) Net financing costs
KEEPING IT SIMPLE …
This section details the interest income generated on the Group's cash and other financial assets and the
interest expense incurred on borrowings and other financial assets and liabilities. The presentation of the net
financing costs in this note reflects income and expenses according to the classification of the financial
instruments.
Mark to market movements reflect the change in value of the Group’s derivative instruments between the
later of inception or 1 July 2015 and 30 June 2016. The value at year end is not necessarily the same as the
value at which they will be settled at maturity.
Finance income includes interest receivable on funds invested, any net gains on fair value movement of effective
and ineffective hedged items, financial instruments and any net foreign exchange gains recognised in profit
or loss.
Interest income is recognised in profit or loss as it accrues using the effective interest method and if not received at
balance date, is reflected in the balance sheet as a receivable.
Finance costs include interest payable on short-term and long-term borrowings calculated using the effective
interest method, payments on derivatives, losses on hedging instruments that are recognised in profit or loss and
amortisation of ancillary costs incurred in connection with arrangement of borrowings.
Finance costs are expensed as incurred except to the extent that they are directly attributable to the acquisition,
construction or production of a qualifying asset such as investment properties or inventories. Qualifying assets are
assets that necessarily take a substantial period of time to reach the stage of their intended use or sale.
In these circumstances, borrowing costs are capitalised to the cost of the assets whilst in active development until
the assets are ready for their intended use or sale. Total interest capitalised must not exceed the net interest
expense in any period. Project carrying values, including all capitalised interest attributable to projects, must
continue to be recoverable based on the latest project feasibilities. In the event that development is suspended for
an extended period of time or the decision is taken to dispose of the asset, the capitalisation of borrowing costs is
also suspended.
The rate at which interest has been capitalised to qualifying assets is disclosed in section (C1).
Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate
applied to the expenditures on the asset excluding specific borrowings.
The fair value of derivatives is discussed further at section (D5).
86
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 86
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(D1) Net financing costs (continued)
Net financing costs can be analysed as follows:
Stockland
Trust
Interest income from related parties
Interest income from other parties
Net gain transferred from the foreign currency translation reserve
Finance income
Interest expense relating to interest-bearing financial liabilities
Interest paid or payable on other financial liabilities at amortised cost
Less interest capitalised to inventories
Less interest capitalised to investment properties
Interest expense
Net loss on fair value hedges
Net loss on derivatives
Total loss on debt and derivatives
Total finance expense
2016
$M
2015
$M
–
8
–
8
197
12
(116)
(12)
81
15
156
171
252
–
8
1
9
198
12
(122)
(15)
73
18
22
40
113
2016
$M
293
1
–
294
2015
$M
297
4
–
301
197
198
–
–
(3)
194
15
156
171
365
The interest expense relating to interest-bearing financial liabilities includes $96 million (2015: $105 million)
related to interest on financial liabilities carried at amortised cost.
The table below shows the composition of losses on derivatives, including those eligible and ineligible for
hedge accounting:
Net loss on fair value hedges
Loss/(Gain) on net change in fair value of derivatives
Loss/(Gain) on net change in fair value of interest-bearing liabilities
Net loss on fair value hedges
Net loss on derivatives
Loss/(Gain) on foreign exchange movement
Loss/(Gain) on fair value movement
Net loss on derivatives
Stockland
Trust
2016
$M
(151)
166
15
25
131
156
2015
$M
(178)
196
18
165
(143)
22
2016
$M
(151)
166
15
25
131
156
–
–
(8)
190
18
22
40
230
2015
$M
(178)
196
18
164
(142)
22
During the year financial instruments were closed out by the Group. The following table shows the cash and profit or
loss impact of closing out these instruments:
Cash costs of closing out financial instruments
Cumulative fair value loss previously recognised
Loss realised during the year
Stockland
Trust
2016
$M
(119)
112
(7)
2015
$M
(41)
38
(3)
2016
$M
(119)
112
(7)
2015
$M
(39)
36
(3)
Stockland Financial Report 2016 — 87
87
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D2) Cash and cash equivalents
Cash and cash equivalents comprise cash balances and at call deposits. Bank overdrafts that are repayable on
demand form an integral part of Stockland’s cash management and are included as a component of cash and cash
equivalents for the purpose of the Cash Flow Statement. As at 30 June 2016 Stockland does not have any bank
overdrafts.
Included in the cash and cash equivalents balance is $75 million (2015: $58 million) in cash that is held to satisfy
real estate and financial services licensing requirements and is not immediately available for use by the Group.
(D3) Interest-bearing loans and borrowings
KEEPING IT SIMPLE …
The Trust borrows money from financial institutions and debt investors in the form of bonds and other
financial instruments. The Trust’s bonds generally have fixed interest rates and are for a fixed term.
The interest expense on these instruments are shown in section (D1).
Stockland and Trust
Interest-bearing loans and borrowings are carried at amortised cost. The table below shows fair value of each of
these instruments, which is the amount required to replicate at balance date the principal and duration of these
notes based on current market interest rates and conditions.
2016
Foreign medium term notes
Domestic medium term notes
Bank facilities
Total
2015
Foreign medium term notes
Domestic medium term notes
Bank facilities
Total
Carrying value
Section
Current
$M
Non-Current
$M
Total
$M
Fair value
$M
(D3a)
(D3b)
(D3c)
(D3a)
(D3b)
(D3c)
331
150
–
481
286
–
–
286
2,644
555
120
3,319
2,259
458
280
2,997
2,975
705
120
3,800
2,545
458
280
3,283
3,257
764
120
4,141
2,740
510
280
3,530
The difference of $341 million (2015: $247 million) between the carrying amount and fair value of the domestic and
foreign medium term notes is due to notes being carried at amortised cost under AASB 139 Financial Instruments:
Recognition and Measurement, while the fair value represents the amount required to replicate at balance date the
principal and duration of these notes based on current market interest rates and conditions.
(D3a) Foreign medium term notes
Stockland and Trust
US private placement
The Trust has issued fixed coupon notes in the US private placement market. Generally, notes are issued in USD
and converted back to AUD principal and AUD floating coupons through CCIRS.
In the prior year, Stockland secured USD 275 million (AUD 359 million) in funding which was delivered in the
current period.
In December 2015, the Trust secured new 10 year notes with a face value of AUD 100 million in the US private
placement market. The placement was issued as a single tranche denominated in AUD with fixed coupons.
During the year, the Trust repaid USD 115 million (AUD 164 million) of its notes that were issued in the US private
placement market and matured in July 2015 and October 2015.
Subsequent to year-end, Trust secured new US private placement debt equivalent to $398 million which comprises
of four tranches denominated in either US or Australian dollars. The debt will be settled in August 2016 with terms of
between 10 and 15 years.
88
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 88
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(D3a) Foreign medium term notes (continued)
The fair value of the US private placements as at 30 June 2016 is $2,482 million (2015: $1,977 million). Details of
the foreign medium term notes on issue in the US private placement market are set out below.
Fixed rate
coupon
Floating
CCIRS2
2016
$M
2015
$M
2016
$M
2015
$M
Face value1
Carrying amount
Maturity date
July 2015
October 2015
July 2016
October 2016
June 2017
October 2017
June 2018
October 2018
July 2019
July 2020
September 2021
June 2022
August 2022
August 2024
August 2025
December 2025
June 2027
August 2027
February 2029
August 2030
Total
4.99%
5.72%
5.04%
5.87%
5.93%
5.96%
5.98%
6.01%
5.19%
5.24%
4.32%
6.15%
0.78% - 0.77%
0.70% - 0.60%
0.79% - 0.78%
0.76%
0.48% - 0.76%
0.76%
0.25%
0.73% - 0.65%
0.85% - 0.83%
0.87% - 0.86%
2.44% - 2.48%
1.00%
3.99% / 6.80%
2.93% - 3.08%
4.14%
3.75%
5.09%
6.28%
3.85%
4.67%
4.00%
2.99%
1.62%
–
0.87%
1.63%
1.52%
1.69%
–
–
62
27
188
61
250
269
71
90
176
28
105
50
156
100
20
131
141
72
1,997
64
99
62
27
188
61
250
269
71
90
176
28
105
50
–3
–
20
–3
141
–3
1,701
–
–
65
25
242
57
223
260
75
96
266
41
109
53
181
100
32
153
209
87
2,274
(2)
2,272
65
86
63
25
239
57
217
257
73
94
246
40
104
47
2
–
32
2
180
2
1,831
(2)
1,829
Less: attributable transaction costs
Total balance sheet carrying amount
1 Face value of the notes in Australian dollars after the effect of the CCIRS.
2 Variable interest rate margin above the 90 day bank bill rate. The 90 day bank bill rate as at 30 June 2016 was 1.96% (2015: 2.15%)
3 New US private placement notes were transacted in June 2015 and settled in August 2015. The carrying amount at 30 June 2015 represents the
fair value movement in the notes from trade date to balance date.
Asian and European private placement
The Trust has issued medium term notes into the Asian and European private placement markets with face values
of JPY 13,000 million ($151 million), HKD 470 million ($62 million), HKD 400 million ($55 million) and EUR 300
million ($433 million).
All notes are issued at a fixed coupon payable in JPY, HKD and EUR and converted back to AUD floating coupons
through cross currency principal and interest rate swaps.
On 24 August 2015, notes outstanding in the Asian private placement market with a face value of JPY 13,000
million ($151 million) were redeemed ahead of the 2035 maturity date, as part of the Group’s ongoing capital
management program.
On 21 January 2016, the Trust issued medium term notes with a face value of HKD 540 million ($100 million). All
the notes were converted back to AUD principal and AUD fixed coupons through CCIRS.
The fair value of the notes as at 30 June 2016 is $775 million (2015: $763 million). Details of the foreign medium
term notes on issue in the Asian and European private placement market are set out below:
Stockland Financial Report 2016 — 89
89
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D3a) Foreign medium term notes (continued)
CCIRS
Face value1
Carrying amount
Maturity date
August 20153
November 2021
May 2025
October 2025
January 2026
Total
Fixed rate
coupon
Type
Rate2
3.99%
1.50%
3.37%
4.00%
3.38%
Floating
Floating
Floating
Floating
Fixed
0.80%
1.48%
1.63%
1.63%
4.90%
2016
$M
–
433
62
55
100
650
2015
$M
151
433
62
55
–
701
Less: attributable transaction costs
Total balance sheet carrying amount
2016
$M
–
453
85
80
88
706
(3)
703
2015
$M
135
435
77
73
–
720
(4)
716
1 Face value of the notes in Australian dollars after the effect of the CCIRS.
2 Variable interest rate margin above the 90 day bank bill rate. The 90 day bank bill rate as at 30 June 2016 was 1.96% (2015: 2.15%).
3 Prior to Stockland’s election to early redeem these notes on August 2015, the maturity was August 2035.
(D3b) Domestic medium term notes
Stockland and Trust
Medium term notes have been issued at either face value, or at a discount or premium to face value and are carried
at amortised cost. The discount or premium is amortised to finance costs over the term of the notes. The medium
term notes are issued on either fixed or floating interest rate terms.
On 13 November 2015, the Trust issued fixed coupon notes at face value of $250 million.
The fair value of the notes as at 30 June 2016 is $764 million (2015: $510 million). Details of unsecured domestic
medium term notes on issue are set out below:
Maturity date
July 2016
September 2019
November 2020
November 2022
Total
Less: attributable transaction costs
Total balance sheet carrying amount at amortised cost
(D3c) Bank facilities
Stockland and Trust
Fixed rate
coupon
7.50%
5.50%
8.25%
4.50%
2016
$M
150
150
160
250
710
(5)
705
2015
$M
150
150
160
–
460
(2)
458
The bank facilities are multi-use facilities which may be used partially for bank guarantees. Bank facilities are
unsecured and held at amortised cost. Details of maturity dates and security for facilities, excluding bank guarantee
facilities (refer to section F4), are set out below:
Maturity date
July 2017
August 2018
December 2017
January 2019
February 2020
November 2020
2016
2015
Utilised
$M
Facility Limit
$M
Utilised
$M
Facility Limit
$M
–
–
–
–
20
100
120
100
120
200
250
150
100
920
–
–
–
30
150
100
280
100
120
200
250
150
100
920
90
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 90
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(D4) Other financial assets and liabilities
KEEPING IT SIMPLE …
A derivative is a type of financial instrument typically used to manage risk. A derivative's value changes over
time in response to underlying variables such as exchange rates or interest rates and is entered into for a
fixed period. A hedge is where a derivative is used to manage an underlying exposure. The Group uses
derivatives to manage exposure to foreign exchange and interest rate risk.
Investments in other financial assets are managed in accordance with the Group’s documented risk policy.
Based on the nature of the asset and its purpose, movements in the fair value of other financial assets are
recognised either through profit or loss or other comprehensive income.
Investments in other entities
The fair value of ‘Securities in listed entities’ is determined by reference to the quoted bid price of the entity at
balance date.
The fair value of ‘Units in unlisted entities’ is determined by reference to the net assets of the underlying
investments at balance date.
These investments are included in ‘Non-current assets – Other financial assets’ unless the Group intends to dispose
of the investment within 12 months of balance date in which case the investment is classified as ‘Current assets –
Other financial assets’.
An investment is derecognised when the Group has transferred the contractual rights to receive cash flows from the
investment and substantially all the risks and rewards of ownership of the investment to a third party. If an
investment does not qualify for derecognition, the investment will continue to be recognised and a liability
recognised for the consideration received. If the investment will qualify for derecognition within 12 months of
balance date, the liability is recorded as ‘Current liabilities – Other liabilities’.
Investment in BGP Holdings, Plc (‘BGP’)
Stockland holds a 12.4% non-transferrable, non-tradable, investment in BGP. BGP is a European (predominantly
Euro currency denominated) real estate investment company, which Stockland acquired via an in specie distribution
through its previous investment in The GPT Group (‘GPT’). This investment is held as an available for sale
investment, in non-current Other Financial Assets.
BGP is not a listed company and as such there is limited financial information provided to investors.
In the prior year, Stockland recognised a fair value of $19 million ($13 million after tax) through other
comprehensive income based on the information available at the time.
The 31 December 2015 financial statements of BGP indicate the company had net assets of €588 million (A$878
million). Applying Stockland’s percentage ownership of 12.4%, this equates to a prima facie value of A$109 million.
Following an assessment of available information as at 30 June 2016, including financial information and
announcements published by BGP, a fair value of $28 million has been applied to the investment with the
movement since 30 June 2015 of $9 million ($7 million after tax) recognised in the fair value reserve.
Valuation process
The fair value of the investment has been determined by the Directors using a DCF methodology. Internal
valuations are completed every six months using DCF methods with reference to publicly available information on
BGP as well as external market data. The aim of the valuation process is to ensure the investment is held at fair
value on Stockland’s balance sheet.
Inputs
The investment in BGP is considered to be a level 3 in the Fair Value Hierarchy (the Fair Value Hierarchy is
explained in (D5)). The inputs used by Stockland in estimating the fair value of BGP are based on assumptions.
These assumptions, particularly cash flow projections, are based on public information, largely limited to public
financial statements. These financial statements do not specifically provide projections of forward cash flows and as
a result these have been estimated by Stockland using point in time values set out in those statements. These
inputs should be read in that context.
Stockland Financial Report 2016 — 91
91
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D4) Other financial assets and liabilities (continued)
The following inputs are used to measure the fair value of Stockland’s investment in BGP:
Inputs
Discount rate
DCF period
These unobservable inputs are further explained below:
Unobservable inputs
30 June 2016
30 June 2015
30%
5 years
30%
5 years
Item
DCF method
Discount rate
DCF period
Description
Under the DCF method, an asset or liability’s fair value is estimated using explicit assumptions
regarding the benefits and liabilities of ownership over the asset’s life. The DCF method involves the
assumption of a series of cash flows based on the valuations of BGP’s assets contained within BGP’s
financial statements. To this projected cash flow series, an appropriate, market-derived discount rate
is assumed to estimate the present value of the income stream associated with the asset.
The rate of return used to convert a monetary sum, payable or receivable in the future, into present
value. It reflects the opportunity cost of capital, that is, the rate of return the capital can earn if put to
other uses having similar risk. In the case of BGP, this includes having regard to public statements by
BGP on the progress of its asset disposal process as well as an assessment of the current European
economic climate and the impact that might have on asset values. BGP is a highly illiquid asset and
the assumed cash flows are highly uncertain, therefore a discount rate of 30% has been used as the
unobservable input.
This represents an assumption of the number of years it will take in order for the shareholders to
receive a distribution following the sale of assets or Initial Public Offering (IPO). Notwithstanding
BGP’s stated intention to divest its investment asset portfolio there is a risk any such disposal process
will be prolonged given the current environment in Europe. Sensitivities around unobservable inputs
are set out below.
Sensitivity information
When assessing the valuation of the BGP investment, a change in the assumed discount rate or DCF period, would
impact the valuation. In theory, a decrease in the discount rate and/or DCF period would increase the fair value of
the investment, and an increase in the discount rate and/or DCF period would decrease the fair value. Sensitivity of
the investment fair value (pre-tax) to changes in the weighted assumptions is shown in the table below.
Increase / (Decrease) in Fair Value
Increase in input
Decrease in input
Significant input
Discount rate
DCF period
Change in
assumption
10%
2 years
2016
$M
(9)
(9)
2015
$M
(6)
(8)
2016
$M
14
18
2015
$M
9
19
Investments made by Stockland CARE Foundation (‘CARE Foundation’)
The CARE Foundation is a charitable trust set up by Stockland. Under accounting standards, the CARE Foundation
is considered a subsidiary that forms part of Stockland’s consolidated group. Included in other financial assets is $8
million (2015: nil) of donations which the CARE Foundation has invested to fund its ongoing charitable projects.
Investment in Australand Property Group (‘Australand’)
In the prior year, Stockland disposed of its interest in Australand, which comprised a 15.7% direct holding in
securities of Australand and 4.2% indirect interest via a cash settled equity swap agreement. On disposal,
Stockland realised a net gain on sale after transaction costs and before tax of $73 million. As this investment was
carried at fair value at 30 June 2014, $51 million (net of tax) of realised fair value gains were transferred from other
comprehensive income to the profit or loss upon disposal of the investment.
Derivative financial instruments
Stockland holds a number of derivative instruments including interest rate swaps, foreign exchange contracts
and CCIRS.
Derivative financial instruments are recognised initially at fair value and remeasured at each balance date.
92
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 92
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(D4) Other financial assets and liabilities (continued)
The fair value of interest rate swaps is the estimated amount that Stockland would receive or pay to transfer
the swap at the reporting date, taking into account current interest rates and the current creditworthiness of
swap counterparties.
The fair value of forward foreign exchange contracts is determined by using the difference between the contract
exchange rate and the quoted forward exchange rate at the reporting date.
Third party valuations are used to determine the fair value of Stockland's derivatives. The valuation techniques use
inputs such as interest rate yield curves and currency prices/yields, volatilities of underlying instruments and
correlations between inputs.
The gain or loss on re-measurement to fair value is recognised in profit or loss. However, where derivatives qualify
for hedge accounting, recognition of any resultant gain or loss depends on the nature of the item being hedged,
refer below.
Stockland enters into ISDA Master Agreements with its derivative counterparties. Under the terms of these
arrangements, where certain credit events occur, the net position owing/receivable to a single counterparty in
relation to all outstanding derivatives with that counterparty, will be taken as owing/receivable and all the relevant
arrangements terminated. As Stockland does not presently have a legally enforceable right of set-off, these
amounts have not been offset in the balance sheet. In the event a credit event occurred, the ISDA Master
Agreement would allow reduction to derivative assets and derivative liabilities of the same amount of $205 million
(2015: $123 million).
Derivatives that qualify for hedge accounting
Stockland uses a limited number of derivative financial instruments to hedge its exposure to fluctuations in interest
and foreign exchange rates. At the inception of the transaction, Stockland designates and documents these
derivative instruments into a hedging relationship with the hedged items, as well as its risk management objective
and strategy for undertaking various hedge transactions.
Stockland also documents its assessment, both at hedge inception and on an ongoing basis, of whether the
derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting
changes in fair values or cash flows of hedged items.
Fair value hedge
A fair value hedge is a hedge of the exposure to changes in fair value of an asset or liability that is attributable to a
particular risk.
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in
profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to
the hedged risk.
Hedge accounting is discontinued when the hedging instrument matures or is sold, terminated or exercised, no
longer qualifies for hedge accounting, or when Stockland revokes designation. Any adjustment between the carrying
amount and the face value of a hedged financial instrument is amortised to profit or loss using the effective interest
rate method. Amortisation begins when the hedged item ceases to be adjusted for changes in its fair value
attributable to the risk being hedged.
Cash flow hedge
A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk associated
with an asset, liability or highly probable forecast transaction that could affect profit or loss.
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised in equity in the cash flow hedge reserve. The gain or loss relating to the ineffective portion
is recognised immediately in profit or loss within finance income or expense.
Amounts in the cash flow hedge reserve are recognised in profit or loss in the periods when the hedged item is
recognised in profit or loss.
When the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously in the cash flow hedge reserve are transferred from equity and included in
the initial measurement of the cost of the asset or liability.
Hedge accounting is discontinued when the hedging instrument matures or is sold, terminated or exercised, no
longer qualifies for hedge accounting, or when Stockland revokes designation. Any cumulative gain or loss
recognised in equity at that time remains in equity and is recognised when the forecast transaction is ultimately
recognised in profit or loss. When a forecast transaction is no longer expected to occur, the cumulative gain or loss
that was recognised in equity is recognised immediately in profit or loss.
Stockland Financial Report 2016 — 93
93
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D4) Other financial assets and liabilities (continued)
The following table shows the fair value of financial instruments analysed by type of instrument:
Stockland
Current
Fair value hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Total current other financial instruments
Non-current
Investments in other entities
Securities in unlisted entities
Other investments
Total non-current investments in other entities
Fair value hedges
Cash flow hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Total non-current other financial instruments
Trust
Current
Fair value hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Total current other financial instruments
Non-current
Investments in other entities
Securities in unlisted entities
Total non-current investments in other entities
Fair value hedges
Cash flow hedges
CCIRS – through profit or loss
Interest rate derivatives – through profit or loss
Total non-current other financial instruments
Other financial assets
Other financial liabilities
2016
$M
2015
$M
–
72
7
79
36
8
44
271
53
64
36
468
–
2
–
2
24
–
24
133
35
116
58
366
2016
$M
(3)
(9)
(7)
(19)
–
–
–
(18)
(5)
(7)
(267)
(297)
2015
$M
(14)
(13)
(6)
(33)
–
–
–
(15)
(4)
(7)
(258)
(284)
Other financial assets
Other financial liabilities
2016
$M
2015
$M
–
72
7
79
8
8
271
53
64
36
432
–
2
–
2
5
5
133
35
116
58
347
2016
$M
(3)
(9)
(7)
(19)
–
–
(18)
(5)
(7)
(267)
(297)
2015
$M
(14)
(13)
(6)
(33)
–
–
(15)
(4)
(7)
(258)
(284)
94
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 94
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(D5) Fair value hierarchy
KEEPING IT SIMPLE …
The financial instruments included on the balance sheet are measured at either fair value or amortised cost.
The measurement of fair value may in some cases be subjective and may depend on the inputs used in the
calculations. The Group generally uses external valuations based on market inputs or market values (e.g.
external share prices). The different valuation methods are called ‘hierarchies’ and are described below.
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data
(‘unobservable inputs’).
Determination of fair value
The fair value of derivative financial instruments, including domestic and foreign medium term notes, interest rate
derivatives and CCIRS, is determined in accordance with generally accepted pricing models by discounting the
expected future cash flows using assumptions supported by observable market rates. Whilst certain derivatives are
not quoted in an active market, Stockland has determined the fair value of these derivatives using quoted market
inputs (e.g. interest rates, volatility, and exchange rates) adjusted for specific features of the instruments and debit
or credit value adjustments based on Stockland or the derivative counterparties current credit worthiness.
The fair value of forward exchange contracts is the quoted market price of the derivative at balance date, being the
present value of the quoted forward price.
The table below sets out the financial instruments included on the balance sheet at ‘fair value’.
Quantitative sensitivities required under AASB 13 Fair Value Measurement in relation to the Retirement Living
resident obligations have been disclosed in section (C1c).
Stockland
2016
Financial assets carried at fair value
Derivative assets
Securities in unlisted entities
Other investments
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative liabilities
Retirement Living resident obligations
Total financial liabilities carried at fair value
Net position
2015
Financial assets carried at fair value
Securities in unlisted entities
Derivative assets
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative liabilities
Retirement Living resident obligations
Total financial liabilities carried at fair value
Net position
Level 1
$M
Level 2
$M
Level 3
$M
Total
$M
–
–
8
8
–
–
–
8
–
–
–
–
–
–
–
503
–
–
503
(316)
–
(316)
187
–
344
344
(304)
–
(304)
40
–
36
–
36
–
(2,427)
(2,427)
(2,391)
24
–
24
(13)
(2,211)
(2,224)
(2,200)
503
36
8
547
(316)
(2,427)
(2,743)
(2,196)
24
344
368
(317)
(2,211)
(2,528)
(2,160)
Stockland Financial Report 2016 — 95
95
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D5) Fair value hierarchy (continued)
Trust
2016
Financial assets carried at fair value
Derivative assets
Securities in unlisted entities
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative liabilities
Total financial liabilities carried at fair value
Net position
2015
Financial assets carried at fair value
Derivative assets
Securities in unlisted entities
Total financial assets carried at fair value
Financial liabilities carried at fair value
Derivative liabilities
Total financial liabilities carried at fair value
Net position
Level 1
$M
Level 2
$M
Level 3
$M
–
–
–
–
–
–
–
–
–
–
–
–
503
–
503
(316)
(316)
187
344
–
344
(304)
(304)
40
–
8
8
–
–
8
–
5
5
(13)
(13)
(8)
Total
$M
503
8
511
(316)
(316)
195
344
5
349
(317)
(317)
32
Derivative financial assets and liabilities are not offset in the balance sheet as under agreements held with derivative
counterparties, the Group does not have a legally enforceable right to set-off the position payable/receivable to a
single counterparty.
The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements
in Level 3 of the fair value hierarchy:
Stockland
Balance at 1 July 2014
Total gains and losses recognised in:
•
profit or loss
•
other comprehensive income
Net cash settled on resident turnover
Purchased
Disposal of aged care bonds
Capital distributions
Balance at 30 June 2015
Total gains and losses recognised in:
•
•
profit or loss
other comprehensive income
Net cash settled on resident turnover
Capital distributions
Disposed / Settled
Balance at 30 June 2016
96
| Stockland Financial Report 2016
Units in
unlisted
entities
$M
Derivatives
$M
Aged care
bonds
$M
Retirement
Living
resident
obligations
$M
(53)
(1,865)
6
–
19
–
–
–
(1)
24
3
9
–
–
–
36
(11)
(2)
–
–
–
–
–
(13)
–
–
–
–
13
–
–
–
–
–
53
–
–
–
–
–
–
–
–
Total
$M
(1,923)
(27)
19
(146)
(175)
53
(1)
(25)
–
(146)
(175)
–
–
(2,211)
(2,200)
(3)
–
(213)
–
–
–
9
(213)
–
13
(2,427)
(2,391)
Stockland Financial Report 2016 — 96
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(D5) Fair value hierarchy (continued)
Trust
Balance at 1 July 2014
Total gains and losses recognised in:
•
profit or loss
Capital distributions
Balance at 30 June 2015
Total gains and losses recognised in:
•
profit or loss
Capital distributions
Disposed / Settled
Balance at 30 June 2016
(D6) Financial risk factors
Units in
unlisted entities
$M
Derivatives
$M
6
–
(1)
5
3
–
–
8
(11)
(2)
–
(13)
–
–
13
–
Total
$M
(5)
(2)
(1)
(8)
3
–
13
8
KEEPING IT SIMPLE …
The Group's activities expose it to a variety of financial risks; market risks (including currency risk, interest
rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on
financial performance.
The Group uses derivative financial instruments within its policies described below as hedges to manage
certain risk exposures.
Financial risk and capital management is carried out by a central treasury department. The Board reviews
and approves written principles of overall risk management, as well as written policies covering specific
areas such as managing capital, mitigating interest rates, liquidity, foreign exchange and credit risks, use of
derivative financial instruments and investing excess liquidity. The Audit Committee assists the Board in
monitoring the implementation of these treasury policies.
The sensitivity analysis included in this section shows the impact that a shift in the financial risks would have
on the financial statements at year-end, but is not a forecast or prediction. In addition, it does not include
any management action that might take place to mitigate these risks were they to occur.
(D6a) Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity
prices will affect Stockland’s financial performance or the value of its holdings of financial instruments. The objective
of market risk management is to manage and control market risk exposures within acceptable parameters, while
optimising returns.
Foreign exchange risk
Foreign exchange risk arises when anticipated transactions or recognised assets and liabilities are denominated in
a currency that is not Stockland’s functional currency, being Australian dollars. Stockland has currency exposures to
the Euro, Hong Kong Dollar, US Dollar and Yen.
The Group manages its foreign exchange exposure by using CCIRS and forward exchange contracts.
The Group’s foreign medium term notes create both an interest rate and a foreign currency risk exposure. The
Group’s policy is to minimise its exposure to both interest rate and exchange rate movements. Accordingly, the
Group has entered into a series of CCIRS which cover 100% of the US, UK, European and Asian private placement
principals outstanding and are timed to expire when each private placement loan matures. These swaps also swap
the obligation to pay fixed interest to floating interest. When swaps held are no longer effective in hedging the
interest rate and foreign currency risk exposure, management will reassess the value in continuing to hold the swap.
In accordance with the accounting policy, these CCIRS have been designated as fair value and cash flow hedges
with the movements in fair value recognised whilst they are still in effective hedge relationships.
Stockland Financial Report 2016 — 97
97
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D6a) Market risk (continued)
The following table provides a summary of the face values of the Group’s foreign exchange risk exposures together
with the derivatives which have been entered into to manage these exposures.
2016
Borrowings
Other net assets
CCIRS
Foreign exchange contracts
Total exposure
2015
Borrowings
Other net assets
CCIRS
Foreign exchange contracts
Total exposure
Stockland
Trust
Euro
€M
HKD
$M
USD
$M
Yen
¥M
Euro
€M
HKD
$M
USD
$M
Yen
¥M
(300)
(1,410)
(1,469)
23
300
(3)
20
–
–
1,410
1,469
–
–
–
–
–
–
–
–
–
(300)
(1,410)
(1,469)
–
300
–
–
–
–
1,410
1,469
–
–
–
–
–
–
–
–
–
(300)
(870)
(1,426)
(13,000)
(300)
(870)
(1,426)
(13,000)
17
300
(3)
14
–
870
–
–
–
–
1,426
13,000
–
–
–
–
–
300
–
–
–
870
–
–
–
–
1,426
13,000
–
–
–
–
Sensitivity analysis – foreign exchange risk
The following sensitivity analysis shows the impact on the profit or loss and equity if there was an increase/decrease
in exchange rates of 10% at balance date with all other variables held constant.
Stockland
2016
EUR
HKD
USD
YEN
Total impact
2015
EUR
HKD
USD
YEN
Total impact
Profit or loss
Equity
Increase
$M
Decrease
$M
Increase
$M
Decrease
$M
(3)
–
(7)
–
(10)
(2)
–
(8)
–
(10)
4
–
8
–
12
2
–
10
–
12
(47)
(10)
(21)
–
(78)
(46)
(1)
(21)
–
(68)
47
13
26
–
86
45
2
26
–
73
98
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 98
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(D6a) Market risk (continued)
Trust
2016
EUR
HKD
USD
YEN
Total impact
2015
EUR
HKD
USD
YEN
Total impact
Profit or loss
Equity
Increase
$M
Decrease
$M
Increase
$M
Decrease
$M
–
–
(7)
–
(7)
–
–
(8)
–
(8)
–
–
8
–
8
–
–
10
–
10
(47)
(10)
(21)
–
(78)
(46)
(1)
(21)
–
(68)
47
13
26
–
86
45
2
26
–
73
Interest rate risk
Interest rate risk is the risk that the fair value or cash flows of financial instruments will fluctuate due to changes in
market interest rates.
The Trust’s interest rate risk arises from borrowings. Borrowings issued at variable rates expose the Trust to cash
flow interest rate risk. Borrowings issued at fixed rates expose the Trust to fair value interest rate risk. The Group’s
treasury policy allows it to enter into a variety of approved derivative instruments to manage the risk profile of the
total debt portfolio to achieve an appropriate mix of fixed and floating interest rate exposures. The Group manages
its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate swaps have the
economic effect of converting borrowings from floating rates to fixed rates. The Trust manages its fair value interest
rate risk through CCIRS and fixed-to-floating interest rate swaps.
These derivatives have been recorded on the balance sheet at their fair value in accordance with AASB 139
Financial Instruments: Recognition and Measurement. These derivatives have not been designated as hedges
for accounting purposes, nevertheless management believe the hedges are effective economically. As a result
movements in the fair value of these instruments are recognised in profit or loss.
The table below provides a summary of the Group’s interest rate risk exposure on interest-bearing loans and
borrowings after the effect of the interest rate derivatives.
Stockland and Trust
As at 30 June
Fixed rate interest-bearing loans and borrowings1
Floating rate interest-bearing loans and borrowings1
Total interest-bearing loans and borrowings
1 Notional principal amounts
Net exposure
(after the effect of derivatives)
2016
$M
3,331
146
3,477
2015
$M
2,255
887
3,142
Stockland Financial Report 2016 — 99
99
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D6a) Market risk (continued)
Sensitivity analysis – interest rate risk
The following sensitivity analysis shows the impact on profit or loss and equity if market interest rates at balance
date had been 100 basis points higher/lower (2015: 100 basis points) with all other variables held constant.
Stockland
As at 30 June
Impact on profit or loss
Impact on interest income/expense
Impact on net gain/loss on derivatives – through profit or loss
Total impact on profit or loss
Impact on equity
Total impact on equity
Trust
2016
2015
100bp higher
$M
100bp lower
$M
100bp higher
$M
100bp lower
$M
2
153
155
39
(2)
(160)
(162)
(42)
2
130
132
42
(2)
(142)
(144)
(49)
As at 30 June
Impact on profit or loss
Impact on interest income/expense
Impact on net gain/loss on derivatives – through profit or loss
Total impact on profit or loss
Impact on equity
Total impact on equity
2016
2015
100bp higher
$M
100bp lower
$M
100bp higher
$M
100bp lower
$M
35
153
188
(35)
(160)
(195)
35
130
165
(35)
(142)
(177)
39
(42)
42
(49)
Equity price risk
Equity price risk is the risk that the fair value of investments in listed/unlisted entities fluctuate due to changes in
the underlying share/unit price. The Group’s equity price risk arises from investments in listed securities and units
in unlisted funds. These investments are classified as financial assets carried at fair value, with any resultant gain
or loss recognised in other comprehensive income.
Material investments within the portfolio are managed on an individual basis and all buy and sell decisions are
approved by the Risk Committee.
Sensitivity analysis - equity price risk
The following sensitivity analysis shows the impact on profit or loss and equity if the market price of the
underlying equity securities/units at balance date had been 10% higher/lower with all other variables held constant.
As at 30 June
Stockland
Total impact on profit or loss
Total impact on equity
Trust
Total impact on profit or loss
Total impact on equity
100
| Stockland Financial Report 2016
2016
2015
10% higher
$M
10% lower
$M
10% higher
$M
10% lower
$M
2
–
–
–
(2)
–
–
–
–
–
–
–
–
–
–
–
Stockland Financial Report 2016 — 100
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(D6b) Credit risk
Credit risk is the risk that a customer or counterparty to a financial instrument fails to meet its contractual obligations
resulting in a financial loss to the Group.
The Group has no significant concentrations of credit risk to any single counterparty and has policies to review the
aggregate exposure of tenancies across its portfolio. The Group also has policies to ensure that sales of properties
and development services are made to customers with an appropriate credit history.
Derivative counterparties and cash deposits are currently limited to financial institutions approved by the Risk
Committee. There are also policies that limit the amount of credit risk exposure to any one of the approved financial
institutions based on their credit rating and country of origin.
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of
financial assets mentioned above.
As at 30 June 2016, these financial institutions had an S&P credit rating of BBB stable or above (2015: A- or above).
Bank guarantees and mortgages over land are held as security over certain trade and other receivables balances.
As at 30 June 2016 and 30 June 2015, there were no significant financial assets that were past due.
(D6c) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Due to the
dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping sufficient
cash and/or committed credit lines available whilst maintaining a low cost of holding these facilities. Management
prepares and monitors rolling forecasts of liquidity requirements on the basis of expected cash flow.
The Group manages liquidity risk through monitoring the maturity of its debt portfolio. The Group also manages
liquidity risk by maintaining a liquidity buffer of cash and undrawn credit facilities. The current weighted average
debt maturity is 5.3 years (2015: 4.6 years).
KEEPING IT SIMPLE …
The table below analyses the Group’s financial liabilities including derivatives into relevant maturity
groupings based on the period remaining until the contractual maturity date. The amounts disclosed in the
table are the contractual undiscounted cash flows (including interest), and therefore may not reconcile with
the amounts disclosed on the balance sheet.
As derivative assets have been excluded from this table, refer to section (D5) for the fair value of the
derivative assets to provide a meaningful analysis of Stockland’s total derivatives.
Stockland Financial Report 2016 — 101
101
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D6c) Liquidity risk (continued)
Stockland
2016
Non-derivative financial liabilities
Trade and other payables (excl. GST)
Dividends and distributions payable
Interest-bearing loans and borrowings
Retirement Living resident obligations
Derivative financial liabilities
Interest rate derivatives
CCIRS
•
Inflow
• Outflow
Carrying
amount
$M
Contractual
cash flows
$M
1 year
or less
$M
1 – 2
years
$M
2 – 5
years
$M
Over
5 years
$M
(321)
(295)
(3,800)
(2,427)
(274)
(42)
(323)
(295)
(4,443)
(2,428)
(323)
(295)
(644)
(2,205)
–
–
(416)
(3)
–
–
–
–
(1,135)
(2,248)
(8)
(212)
(302)
(71)
(67)
(118)
(46)
Total financial liabilities
(7,159)
(7,858)
(3,537)
2015
Non-derivative financial liabilities
Trade and other payables (excl. GST)
Dividends and distributions payable
Interest-bearing loans and borrowings
Retirement Living resident obligations
Derivative financial liabilities
Interest rate derivatives
CCIRS
•
Inflow
• Outflow
(313)
(283)
(3,283)
(2,211)
(264)
(53)
Total financial liabilities
(6,407)
730
(797)
59
(58)
(316)
(283)
(4,497)
(2,212)
(280)
(283)
(449)
(1,992)
307
(328)
(507)
(36)
–
(622)
(1)
254
(287)
110
(124)
(1,294)
(2,520)
–
–
–
–
(1,306)
(2,120)
(11)
(208)
(293)
(80)
(71)
(110)
(32)
1,363
(1,489)
(7,727)
266
(278)
68
(58)
571
(651)
458
(502)
(3,096)
(720)
(1,507)
(2,404)
In most cases settlement of Retirement Living resident obligations occurs simultaneously with receipt of the
incoming resident’s contribution. Of the total Retirement Living resident obligations, $2,414 million (2015: $2,198
million) does not represent an anticipated net cash outflow as it is expected to be covered by receipts from incoming
residents. Refer to section (C1c) for further details on Retirement Living resident obligations.
102
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 102
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(D6c) Liquidity risk (continued)
Trust
2016
Carrying
amount
$M
Contractual
cash flows
$M
1 year
or less
$M
1 – 2
years
$M
2 – 5
years
$M
Over
5 years
$M
Non-derivative financial liabilities
Trade and other payables (excl. GST)
Distributions payable
(129)
(295)
(129)
(295)
Interest-bearing loans and borrowings
(3,800)
(4,443)
Derivative financial liabilities
Interest rate derivatives
CCIRS
•
Inflow
• Outflow
(274)
(42)
(302)
730
(797)
(129)
(295)
(644)
(71)
59
(58)
Total financial liabilities
(4,540)
(5,236)
(1,138)
–
–
–
–
–
–
(416)
(1,135)
(2,248)
(67)
(118)
(46)
307
(328)
(504)
254
(287)
110
(124)
(1,286)
(2,308)
2015
Non-derivative financial liabilities
Trade and other payables (excl. GST)
Distributions payable
(98)
(283)
(98)
(283)
Interest-bearing loans and borrowings
(3,283)
(4,497)
(98)
(283)
(449)
–
–
–
–
–
–
(622)
(1,306)
(2,120)
Derivative financial liabilities
Interest rate derivatives
CCIRS
•
Inflow
• Outflow
Total financial liabilities
(3,981)
(D7) Issued capital
(264)
(53)
(293)
(80)
(71)
(110)
(32)
1,363
(1,489)
(5,297)
266
(278)
(922)
68
(58)
(683)
571
(651)
458
(502)
(1,496)
(2,196)
KEEPING IT SIMPLE …
This section explains material movements recorded in issued capital that are not explained elsewhere in the
financial statements. The movements in equity of the Group and the balances are presented in the
statements of changes in equity.
Issued capital represents the amount of consideration received for stapled securities issued by the Group.
Transaction costs of an equity transaction are accounted for as a deduction from equity, net of any related
income tax benefit.
For so long as Stockland remains jointly quoted, the number of shares in Stockland Corporation Limited and
the number of units in the Stockland Trust shall be equal and the securityholders and unitholders shall be
identical. Unitholders of Stockland Trust are only entitled to distributions and voting rights upon stapling.
Holders of stapled securities are entitled to receive dividends and distributions as declared from time to time and
are entitled to one vote per stapled security at securityholder meetings. The liability of a member is limited to the
amount, if any, remaining unpaid in relation to a member’s subscription for securities. A member is entitled to
receive a distribution following termination of the stapling arrangement (for whatever reason). The net proceeds
of realisation must be distributed to members, after making an allowance for payment of all liabilities (actual and
anticipated) and meeting any actual or anticipated expenses of termination.
Stockland Financial Report 2016 — 103
103
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(D7) Issued capital (continued)
The following table provides details of securities issued by the Group:
Details
Ordinary securities on issue
Issued and fully paid
Other equity securities
Treasury Shares
Total Issued Capital
Stockland and Trust
Stockland
Trust
Number of
securities
2016
Number of
securities
2015
2016
$M
2015
$M
2016
$M
2015
$M
2,392,042,302
2,361,717,862
8,696
8,571
7,389
7,266
(3,878,867)
(2,621,149)
2,388,163,435
2,359,096,713
(15)
8,681
(11)
8,560
(15)
7,374
(11)
7,255
(D7a) Ordinary securities
The following table provides details of movements in securities issued:
Details
Movement of securities issued
Balance as at 1 July 2014
Securities issued under the DRP
Balance as at 30 June 2015
Securities issued under the DRP
Balance as at 30 June 2016
Stockland and Trust
Number of securities
Stockland
$M
2,326,978,560
34,739,302
2,361,717,862
30,324,440
2,392,042,302
8,430
141
8,571
125
8,696
Trust
$M
7,126
140
7,266
123
7,389
DRP
In the current year, Stockland issued 30,324,440 securities (2015: 34,739,302) under the DRP. The DRP security
price for each period was determined by the average of the daily volume weighted averages over a 15-day trading
period and applying a 1.0% discount.
On 20 June 2016, Stockland announced that the DRP would operate for the final distribution to 30 June 2016 and
that investors participating in the DRP will be entitled to receive a full distribution.
The DRP security price was determined to be $4.85 being the average for 15 daily volume weighted average prices
of Stockland securities for the 15 trading days from 5 July 2016 to 25 July 2016 inclusive, with a discount of 1.0% on
the securities acquired under the DRP.
(D7b) Other equity securities
Treasury Shares
Treasury shares are securities in Stockland that are held by the Stockland Employee Securities Plan Trust.
Securities are held until the end of the vesting period affixed to the securities. As the securities are held on behalf of
eligible employees, the employees are entitled to the distributions and dividends.
Movement of other equity securities
Details
Opening balance as at 1 July 2015
Securities acquired
Securities transferred to employees on vesting
Balance as at 30 June 2016
Stockland and Trust
Number of securities
Stockland
$M
2,621,149
2,030,936
(773,218)
3,878,867
(11)
(9)
5
(15)
Trust
$M
(11)
(9)
5
(15)
Securities acquired
During the year, 2,030,936 securities (2015: 870,187) were acquired on market for the purpose of issuing securities
under the Share Plans.
Securities transferred to employees on vesting
During the year, 773,218 securities (2015: 953,912) vested and were transferred to employees under the Share
Plans.
104
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 104
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
At 30 June 2016, the Stockland Employee Securities Plan Trust is holding 3,878,867 securities, including 998,589
securities which have already vested and which employees are entitled to transfer out of the plan.
(D7c) Share based payments
KEEPING IT SIMPLE …
Stockland operates three Share Plans for eligible employees which are described below.
LTI
Under the LTI, employees have the right to acquire Stockland securities at nil consideration when certain
performance conditions are met. Each grant will comprise two equal tranches, each of which vest based on
separate performance hurdles (being underlying EPS growth and relative TSR) and has a three year vesting
period. Eligibility is by invitation of the Board and is reviewed annually.
DSTI
For Executives and Senior Management there is a compulsory deferral of at least one third of STI incentives
to further align remuneration outcomes with securityholders. Half of the awarded DSTI securities will vest 12
months after award with the remaining half vesting 24 months after award, provided employment continues
to the applicable vesting date.
$1,000 Plan
Under this plan, eligible employees receive up to $1,000 worth of Stockland securities.
The number and weighted average fair value of LTI rights and DSTI securities under the Share Plans are as follows:
Details
Rights/Securities outstanding at the beginning of the year
Rights/Securities granted during the year
Rights/Securities forfeited and lapsed during the year
Rights converted to vested Stockland stapled securities
Rights/Securities outstanding at the end of the year
Weighted average price
per right/security
2016
$2.29
$2.76
$1.75
$3.19
$2.40
2015
$2.19
$2.50
$1.82
$3.84
$2.29
Number of
rights/securities
2016
2015
10,990,123
5,996,393
9,981,793
6,446,993
(2,240,203)
(4,097,446)
(2,962,814)
(1,341,217)
11,783,499
10,990,123
LTI
The fair value of LTI rights is measured at grant date using the Black-Scholes and Monte Carlo Simulation
option pricing models taking into account the terms and conditions upon which the rights were granted. The fair
value is expensed on a straight-line basis over the vesting period, the period over which the rights are subject to
performance and service conditions, with a corresponding increase in reserves.
Where the individual forfeits the rights due to failure to meet a service or performance condition, the cumulative
expense is reversed through profit or loss in the current year. The cumulative expenditure for rights forfeited due
to market conditions are not reversed.
Where amendments are made to the terms and conditions subsequent to the grant, the value of the grant
immediately prior to and following the modification is determined. This occurs upon resignation or termination
where the amendment relates to rights becoming vested in terms of beneficial ownership, which would otherwise
have been forfeited due to the failure to meet future service conditions. In this situation, the value that would have
been recognised in future periods in respect of the rights not forfeited is recognised in the period that the rights vest.
The number of rights granted to employees under the plan for the year ended 30 June 2016 was 3,986,221
(2015: 4,335,343).
Stockland Financial Report 2016 — 105
105
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
Assumptions made in determining the fair value of rights granted under the share plans are detailed below.
Details
Grant date
Fair value of rights granted under plan
Spot price of the Stapled Securities at grant date
Exercise price
Distribution yield
Risk-free rate at grant date
Expected remaining life at grant date
Volatility of Stockland
Volatility of Index price
2016
2015
31 August 2015
29 August 2014
$2.66
$3.91
–
6.3%
2.0%
2.8 years
20.0%
15.0%
$2.47
$4.25
–
6.5%
2.7%
2.8 years
20.0%
15.0%
The LTI rights of 8,924,633 (2015: 8,158,801) are outstanding as at 30 June 2016, which have fair values ranging
from $1.45 to $2.08 (2015: $1.45 to $2.08) per right and a weighted average restricted period remaining of 1.5 years
(2015: 1.5 years).
During the year, 1,060,733 rights vested and will convert to securities (2015: Nil) with a weighted average fair value
of $1.59 (2015: $Nil).
DSTI
The fair value of securities granted under the DSTI has been calculated based on the 10 day volume weighted
average price post 30 June 2016 of $4.84 (2015: $4.16).
The DSTI outstanding as at 30 June 2016, included in the table above, are 2,858,866 (2015: 2,831,322).
The DSTI outstanding have fair values ranging from $3.94 to $4.84 (2015: $3.55 to $4.16) per security.
$1,000 Plan
Stockland securities issued to eligible employees under the Tax Exempt Employee Security Plan (‘$1,000 Plan’) are
recognised as an expense with a corresponding increase in issued capital. The value recognised is the market price
of the securities granted at grant date.
(D8) Dividends and distributions
Dividends and distributions recognised in the financial year by the Group are detailed below.
The tax preferred component represents income of Stockland Trust which is not included in the Trust’s taxable
income. The tax preferred component includes concessional capital gain amount not included in the Trust’s taxable
income and tax deferred amounts, being the amount distributed in excess of the Trust’s taxable income.
Stockland Corporation Limited
There was no dividend from Stockland Corporation Limited during the current, or previous, financial year.
The dividend franking account balance as at 30 June 2016 is $13 million based on a 30% tax rate
(2015: $13 million).
Stockland Trust
2016
Interim distribution
Final distribution
Total distribution
2015
Interim distribution
Final distribution
Total distribution
Cents per
security
Total amount
$M
Date of payment
Tax preferred
%
12.2
12.3
24.5
12.0
12.0
24.0
29 February 2016
31 August 2016
27 February 2015
31 August 2015
290
295
585
282
283
565
24.3
24.3
13.3
13.3
106
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 106
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(E) Group structure
IN THIS SECTION
This section provides information which will help users understand how the Group structure affects the
financial position and performance of the Group as a whole. The Group includes entities that are classified
as joint ventures, joint operations, associates and structured entities.
Joint ventures and associates are accounted for using the equity method, while joint operations are
proportionately consolidated and structured entities are recorded as investments at cost.
In this section of the notes there is information about:
(1) Interests in joint operations;
(2) Transactions with non-controlling interests; and
(3) Changes to the structure that occurred during the year as a result of business combinations or
the disposal of a discontinued operation
(E1) Equity-accounted investments
Stockland and the Trust have interests in a number of individually immaterial joint ventures that are accounted for
using the equity method. The Group did not have investments in associates at 30 June 2016 or 30 June 2015.
(E1a) Investments in joint ventures
A joint venture is either a venture or operation over whose activities the Group has joint control, established by
contractual agreement. Investments in joint venture entities are accounted for on an equity-accounted basis.
Investments in joint ventures are assessed for impairment when indicators of impairment are present and if
required, written down to the recoverable amount.
The Group’s share of the joint venture’s profit or loss and other comprehensive income is from the date joint control
commences until the date joint control ceases.
If the Group’s share of losses exceeds its interest in a joint venture, the carrying amount is reduced to nil and
recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the joint venture.
Transactions with the joint venture are eliminated to the extent of the Group’s interest in the joint venture until such
time as they are realised by the joint venture on consumption or sale.
The following table analyses, in aggregate, the carrying amount and share of profit or loss and other comprehensive
income of these joint venture entities.
Aggregate carrying amount of individually immaterial joint
venture entities
Aggregate share of:
Profit from continuing operations
Other comprehensive income
Total comprehensive income
Stockland
Trust
2016
$M
524
90
–
90
2015
$M
518
88
–
88
2016
$M
505
90
–
90
2015
$M
506
86
–
86
Stockland Financial Report 2016 — 107
107
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(E1a) Investments in joint ventures (continued)
The ownership interest in each of these immaterial entities is presented below:
Year ended 30 June
Investment in joint ventures:
Brisbane Casino Towers
Compam Property Management Pty Limited
Eagle Street Pier Pty Limited
Macquarie Park Trust
Riverton Forum Pty Limited
SDOT Sub Trust No. 1
Stockland Ormeau Trust
Sugarland Shopping Centre Trust
The King Trust
Willeri Drive Trust
Changes to Joint Ventures
Brisbane Casino Towers
Stockland
2016
%
2015
%
Trust
2016
%
2015
%
50
50
50
51
50
–
100
100
50
50
–
50
50
51
50
50
50
50
50
50
–
50
–
51
50
–
–
100
50
50
–
50
–
51
50
50
–
50
50
50
On 26 October 2015, Stockland entered into a joint arrangement with an unrelated party to develop apartments in
the Brisbane area. As part of the arrangement, Stockland has equal voting rights and decision making powers.
Stockland’s investment ranks behind any external debt but ahead of the joint venture partner’s investment. Any
undistributed profits from the project will be distributed equally after each party has been repaid its initial investment.
Eagle Street Pier Pty Limited and SDOT Sub Trust No. 1
Through joint venture entities, Stockland held an indirect interest in properties located at Waterfront Place and
Eagle Street Pier in Brisbane. On 19 June 2015, these joint venture entities entered into an agreement to sell the
properties to an unrelated party and the sale was settled during the current period.
At 30 June 2015, the joint venture entities were reclassified as assets held for sale at which point the investments
were no longer equity-accounted. During the current period, $3 million of net profits was distributed by SDOT Sub
Trust No. 1 to Stockland. As equity accounting is no longer applied, these amounts have been recognised within
profit or loss as dividend and distribution income.
As at 30 June 2016, SDOT Sub Trust No. 1 has been wound up.
Refer to (C3b) for further details.
Stockland Ormeau Trust
On 22 December 2015, Stockland acquired all units in Stockland Ormeau Trust held by its joint venture partner,
SREEF No.1 which is also a related party. Refer to (E2a) and (F6).
The units were acquired for $16 million and increased Stockland’s equity interest in Stockland Ormeau Trust from
50% to 100%. Upon acquisition of the additional units, Stockland Ormeau Trust ceased being a joint venture and
became a wholly-owned subsidiary of Stockland. Accordingly, the information presented in the above table includes
the results of Stockland Ormeau Trust for the period from 1 July 2015 to 22 December 2015.
Sugarland Shopping Centre Trust
On 10 October 2014, Stockland Trust acquired a 50% interest in Sugarland Shopping Centre Trust (‘SSCT’) from
an unrelated party for $59 million. The SSCT owns Sugarland Shoppingtown in Bundaberg, Queensland, which
was subsequently re-named Stockland Bundaberg.
At the time of acquiring the 50% interest in SSCT, Stockland Trust entered into a Put and Call option to acquire the
remaining 50% interest. Based on an independent valuation at 31 December 2015, the value of the remaining 50%
of the Stockland Bundaberg was estimated to be $69 million, resulting in a realised gain on the option of $7 million,
before costs associated with the acquisition.
108
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 108
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(E1a) Investments in joint ventures (continued)
On 4 April 2016, the counterparty exercised their put option resulting in Stockland acquiring the remaining 50%
interest for $62 million.
Upon acquisition of the additional units, SSCT ceased being a joint venture and became a wholly-owned subsidiary
of Stockland. Accordingly, the information presented in the above table includes the results of SSCT for the period
from 1 July 2015 to 4 April 2016.
(E1b) Investments in associates
Associates are those entities over which Stockland have significant influence, but not control or joint control, over
the financial and operating policies. The financial statements include the Group’s share of the total recognised gains
and losses of associates on an equity-accounted basis, from the date that significant influence commences until the
date that significant influence ceases.
If the Group’s share of losses exceeds its interest in an associate, their carrying amount is reduced to nil and
recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive
obligations or made payments on behalf of the associate.
Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s
interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
(E2) Other arrangements
(E2a) Investments in unconsolidated structured entities
A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in
deciding who controls the entity. The Group considers all Retail Funds in which it currently holds an investment, and
from which it currently earns fee income, to be structured entities.
The Group holds interests in closed-end, unlisted property funds that invest in real estate assets in Australia for the
purpose of generating investment income and for capital appreciation. The funds finance their operations through
unitholder contributions and also through external banking facilities. These funds have been determined to meet the
definition of a structured entity.
SDRT No.1
As at 30 June 2016, Stockland held a 19.9% interest in SDRT No.1 (2015; 19.9%), valued at $8 million. The
Group’s interest in this fund is included in the ‘Other Financial Assets’ line item on the balance sheet. Stockland also
provided a loan facility offer to SDRT No.1 of $40 million for which it was charged a line fee of 30 basis points. This
facility offer was extinguished on 19 December 2014.
The maximum exposure to risk for SDRT No.1 is the carrying value of its investment in the Fund.
SREEF No.1
SREEF No.1 was wound up during the current year. The loan facility offer previously provided to SREEF No.1 has
also been extinguished.
(E2b) Joint operations
Interests in unincorporated joint operations are consolidated by recognising the Group’s proportionate share of the
joint operations’ assets, liabilities, revenues and expenses and the joint operation’s revenue from the sale of their
share of goods or services on a line-by-line basis, from the date joint control commences to the date joint control
ceases and are not included in the above table.
Changes to Joint Operations
Stockland Townsville
In the prior period, Stockland Trust sold a direct 50% stake in Stockland Townsville. The owners have joint control
over the asset with strategic decisions requiring unanimous approval from the Management Committee comprising
equal representation of the owners. Therefore, the Group’s share of the results from Stockland Townsville Shopping
Centre are recognised on a proportionately consolidated basis for the period 16 October 2014 to 30 June 2015.
Stockland Townsville Shopping Centre’s results were fully consolidated until 16 October 2014.
At the time of disposal, a Put and Call Option Deed was established in relation to selected sundry assets located in
Townsville.
Stockland Financial Report 2016 — 109
109
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(E3) Controlled entities
The following entities were 100% controlled during the current and prior years:
Controlled entities of Stockland Trust
9 Castlereagh Street Unit Trust
ADP Trust
Advance Property Fund
Capricornia Property Trust
Endeavour (No. 1) Unit Trust
Flinders Industrial Property Trust
Stockland Eastern Creek Trust2
Stockland Finance Holdings Pty Limited1
Stockland Finance Pty Limited1
Stockland Harrisdale Trust
Stockland Industrial No. 1 Property 1 Trust
Stockland Industrial No. 1 Property 4 Trust
Flinders Industrial Property Subtrust (No. 1)
Stockland Industrial No. 1 Property 5 Trust
Hervey Bay Holding Trust
Hervey Bay Sub Trust
Industrial Property Trust
Stockland Industrial No. 1 Property 6 Trust
Stockland Industrial No. 1 Property 7 Trust
Stockland Industrial No. 1 Property 8 Trust
Jimboomba Village Shopping Centre and Tavern Trust
Stockland Industrial No. 1 Property 9 Trust
SDOT 4 Property # 1 Trust
SDOT 4 Property # 2 Trust
SDOT 4 Property # 3 Trust
SDRT 1 Property # 3 Trust
SDRT 3 Property # 1 Trust
SDRT 3 Property # 2 Trust
SDRT 3 Property # 3 Trust
Shellharbour Property Trust
Stockland Bundaberg Trust
Stockland Castlereagh Street Trust
Stockland Direct Diversified Fund
Stockland Direct Office Trust No. 4
Stockland Direct Retail Trust No. 3
Stockland Industrial No. 1 Property 11 Trust
Stockland Mulgrave Unit Trust
Stockland Quarry Road Trust
Stockland Retail Holding Sub-Trust No. 1
Stockland Retail Holding Trust No. 1
Sugarland Shopping Centre Trust2
Stockland Wholesale Office Trust No. 1
Stockland Wholesale Office Trust No. 2
Stockland Willawong Industrial Trust
Stockland Wonderland Drive Property Trust
SWOT2 Sub Trust No. 1
SWOT2 Sub Trust No. 2
SWOT2 Sub Trust No. 3
1 These entities are parties to the Deed of Cross Guarantee (Finance) as at 30 June 2016.
2 These entities were formed/incorporated or acquired in the current year.
Controlled entities of Stockland Corporation Limited
Albert & Co Pty Ltd1
A.C.N 116 788 713 Pty Ltd1
Aevum Limited1
Aevum SPV Finance No. 1 Pty Limited
Affinity Retirement Village Pty Limited
ARC Joint Ventures Pty. Ltd1
Bayview Road Property Trust
Bellevue Gardens Pty. Limited
Bellevue Gardens Trust
Castlehaven Pty Ltd
Castleridge Pty Ltd
Endeavour (No. 2) Unit Trust
Farrington Grove Retirement Village Pty Limited
Golden Ponds Forster Pty Limited
Greenleaves Management Services Pty. Ltd.
Greenleaves Village Pty. Ltd.
Hibernian Investment Company Pty Ltd1
Highlands Retirement Village Pty Limited
IOR Friendly Society Pty Limited1
IOR Group Pty Limited1
Jimboomba Trust
Knowles Property Management Unit Trust
110
| Stockland Financial Report 2016
Knox Unit Trust
Knox Village Pty. Ltd.1
Lensworth Glenmore Park Limited1
Lincoln Gardens Pty Limited
Long Island Village Pty. Ltd1
Maybrook Manor Pty Limited
Mayflower Investments Pty Ltd
Mernda Retirement Village Pty Ltd
Merrylands Court Pty. Limited2
Midlands Terrace Adult Community Pty Limited1
Nowra Property Unit Trust
Oak Grange Pty Ltd.1
Patterson Lakes Unit Trust
Patterson Village Pty. Ltd.1
Pine Lake Management Services Pty Limited
Queenslake Village Pty Limited
Retirement Living Acquisition Trust
Retirement Living Holding Trust No. 1
Retirement Living Holding Trust No. 2
Retirement Living Holding Trust No. 3
Retirement Living Holding Trust No. 4
Retirement Living Holding Trust No. 5
Stockland Financial Report 2016 — 110
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
Retirement Living Holding Trust No. 6
Retirement Living Unit Trust No. 1
Retirement Living Unit Trust No. 2
Ridgecrest Village Management Services Pty Limited
Ridgecrest Village Pty Limited
Rogan's Hill Retirement Village Trust
Rosebud Village Pty Limited1
RVG (Queensland) Pty Ltd
Salford Living Pty Limited1
SDRT 2 Property 1 Trust
SDRT 2 Property 2 Trust
SDRT 2 Property 3 Trust
SDRT 2 Property 4 Trust
Selandra Rise Retirement Village Pty Limited
Stockland (Billingham) Limited5
Stockland (Boardwalk Sub2) Pty Ltd
Stockland (IH) No. 1 Pty Limited
Stockland (NSW) No. 1 Pty Limited
Stockland (NSW) No. 2 Pty Limited
Stockland (Queen Street) Limited5
Stockland (Queensland) Pty Limited1
Stockland (Russell Street) Pty Limited1
Stockland (St Andrew) Limited4
Stockland (Stafford) Limited5
Stockland (UK) Limited5
Stockland (Warminster) Limited5
Stockland (William Hunter) Limited4
Stockland Bells Creek Pty Ltd.1
Stockland Buddina Pty Ltd.1
Stockland Caboolture Waters Pty Ltd1
Stockland Caloundra Downs Pty Ltd1
Stockland Capital Partners Limited1
Stockland Care Foundation Pty Limited
Stockland Care Foundation Trust
Stockland Catering Pty Limited
Stockland Development (Holdings No. 1) Pty Limited1
Stockland Development (Holdings) Pty Limited1
Stockland Development (NAPA NSW) Pty Limited1
Stockland Development (NAPA QLD) Pty Limited1
Stockland Development (NAPA VIC) Pty Limited1
Stockland Development (PHH) Pty Limited1
Stockland Development (PR1) Pty Limited
Stockland Development (PR2) Pty Limited
Stockland Development (PR3) Pty Limited
Stockland Development (PR4) Pty Limited
Stockland Development (Sub3) Pty Limited
Stockland Development (Sub4) Pty Limited
Stockland Development (Sub5) Pty Limited
Stockland Development (Sub6) Pty Limited
Stockland Development (Sub7) Pty Limited1
Stockland Development Pty Limited1
Stockland Direct Retail Trust No. 2
Stockland Eurofinance Pty Ltd1
Stockland Financial Services Pty Limited1
Stockland Highlands Pty Limited1
Stockland Holding Trust No. 3
Stockland Holding Trust No. 4
Stockland Holding Trust No. 5
Stockland Holding Trust No. 6
Stockland Holdings Limited5
Stockland Kawana Waters Pty Limited1
Stockland Lake Doonella Pty Limited1
Stockland Management Limited1
Stockland North Lakes Development Pty Limited1
Stockland North Lakes Pty Limited1
Stockland Ormeau Trust
Stockland PR1 Trust
Stockland PR2 Trust
Stockland PR3 Trust
Stockland PR4 Trust
Stockland Property Holdings Limited5
Stockland Property Management Pty Limited1
Stockland Property Services Pty Limited1
Stockland Retail Services Pty Limited1
Stockland Retirement Pty Limited1
Stockland Scrip Holdings Pty Limited
Stockland Services Pty Limited1
Stockland Singapore Pte Limited
Stockland South Beach Pty Limited1
Stockland Trust Management Limited1
Stockland Tweed Heads Retirement Village Pty Limited1,2
Stockland WA (Estates) Pty Limited1
Stockland WA Development (Realty) Pty Limited1
Stockland WA Development (Sub 6) Pty Ltd
Stockland WA Development (Vertu Sub 1) Pty Limited
Stockland WA Development Pty Limited1
Stockland Wallarah Peninsula Management Pty Ltd1
Stockland Wallarah Peninsula Pty Ltd1
Templestowe Retirement Village Pty. Ltd1
Templestowe Unit Trust
The Hastings Valley Parklands Village Pty Limited
The Mount Gravatt Retirement Village Unit Trust
The Pine Lake Management Services Unit Trust
The Pine Lake Village Pty Limited
Toowong Place Pty Limited2
Vermont Retirement Village Pty Limited1
Vermont Unit Trust
Wantirna Village Pty. Ltd.1
Willowdale Retirement Village Pty Limited
Willows Retirement Village Services Pty Limited
1 These entities are parties to the Deed of Cross Guarantee and members of the Closed Group as at 30 June 2016.
2 These entities were formed/incorporated or acquired in the current year.
3 These entities were sold or liquidated in the current financial year.
4 These UK entities were liquidated at 30 June 2016.
5 These UK entities are in liquidation at 30 June 2016.
All Stockland entities were formed/incorporated in Australia with the exception of Stockland Singapore Pte Limited
which is incorporated in Singapore and all UK subsidiaries identified as being incorporated in the UK.
Stockland owns all the issued units/shares of the respective controlled entities (unless otherwise stated) and such
units/shares carry the voting, distribution/dividend and equitable rights.
Stockland Financial Report 2016 — 111
111
Consolidated Notes Year ended 30 June 2016 | Consolidated Notes
Year ended 30 June 2016
(E4) Deed of Cross Guarantee
Stockland Corporation Limited and certain wholly-owned companies (the ‘Closed Group’), identified in section (E3),
are parties to a Deed of Cross Guarantee (the ‘Deed’). The effect of the Deed is that the members of the Closed
Group guarantee to each creditor, payment in full of any debt, in the event of winding up of any of the members
under certain provisions of the Corporations Act 2001.
ASIC Class Order 98/1418 (as amended) dated 13 August 1998, provides relief to parties to the Deed from the
Corporations Act 2001 requirements for preparation, audit and lodgement of Financial Reports and Directors’
reports, subject to certain conditions as set out therein. This Class Order does not apply to trusts.
Pursuant to the requirements of this Class Order, a summarised consolidated Statement of Comprehensive Income
for the year ended 30 June 2016 and consolidated balance sheet as at 30 June 2016, comprising the members of
the Closed Group after eliminating all transactions between members, are set out on the following pages.
Closed Group
Balance sheet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other assets
Non-current assets held for sale
Total current assets
Non-current assets
Trade and other receivables
Inventories
Investment properties
Equity-accounted investments
Other financial assets
Property, plant and equipment
Intangibles
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Interest-bearing loans and borrowings
Retirement Living resident obligations
Provisions
Other liabilities
Total current liabilities
Non-current liabilities
Trade and other payables
Retirement Living resident obligations
Provisions
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated losses
Total equity
112
| Stockland Financial Report 2016
2016
$M
60
69
794
23
946
36
982
23
1,713
1,892
25
1
32
38
29
3,753
4,735
337
2,784
1,006
295
24
4,446
–
38
136
174
4,620
115
2015
$M
64
69
548
8
689
–
689
22
1,991
1,906
25
1
40
10
64
4,059
4,748
291
2,701
1,084
319
6
4,401
33
38
115
186
4,587
161
1,307
3
(1,195)
115
1,305
2
(1,146)
161
Stockland Financial Report 2016 — 112
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(E4) Deed of Cross Guarantee (continued)
Summarised Statement of Comprehensive Income
Profit/(loss) before income tax benefit
Income tax benefit / (expense)
Profit/(Loss) for the year/Total comprehensive income/(expense)
Summary of movements in accumulated losses
Accumulated losses at 1 July
Profit/(Loss) for the year
Accumulated losses at 30 June
Closed Group
2016
$M
(19)
(30)
(49)
2015
$M
23
6
29
(1,146)
(49)
(1,195)
(1,175)
29
(1,146)
(E5) Parent entity disclosures
The financial information of the parent entities of Stockland and the Trust has been prepared on the same basis as
the consolidated financial report.
The parent entity of Stockland and the Trust was Stockland Corporation Limited and Stockland Trust, respectively.
Results for the year ended 30 June
Profit/(Loss) for the year
Other comprehensive income
Total comprehensive income for the year
Financial position as at 30 June
Current assets
Total assets1
Current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Retained earnings
Total equity
Stockland
Corporation Limited
Stockland
Trust
2016
$M
62
–
62
3,910
4,049
3,831
3,831
218
1,307
3
(1,092)
218
2015
$M
60
(51)
9
3,802
3,984
3,831
3,831
153
1,305
2
(1,154)
153
2016
$M
836
13
849
376
16,909
5,402
7,940
8,969
7,374
94
1,501
8,969
2015
$M
876
–
876
251
16,674
6,150
8,106
8,568
7,255
63
1,250
8,568
1 There were no intangible assets as at 30 June 2016 (2015: $Nil).
Parent entity contingencies
There are no contingencies within either parent entity as at 30 June 2016 (2015: $Nil).
Parent entity capital commitments
Neither parent entity has entered into any capital commitments as at 30 June 2016 (2015: $Nil).
ASIC Deed of Cross Guarantee
Stockland Corporation Limited has entered into a Deed of Cross Guarantee with the effect that it has guaranteed
debts in respect of its subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to
the deed are disclosed in section (E4).
Stockland Financial Report 2016 — 113
113
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(F) Other items
IN THIS SECTION
This section includes information about the financial performance and position of the Group, that must be
disclosed to comply with the Accounting Standards, the Corporations Act 2001 or the Corporations
Regulations.
(F1) Accounting policies
KEEPING IT SIMPLE …
To aid the reader, accounting policies that apply to a specific category in the profit or loss or balance sheet
have been included within the relevant notes.
The accounting policies listed below are those that apply across a number of the Group’s profit or loss and
balance sheet categories and are not specific to a single category.
Principles of consolidation
Controlled entities
The consolidated financial statements of the Group incorporate the assets, liabilities and results of all controlled
entities.
Controlled entities are all entities over which the parent entities Stockland or the Trust has the power to govern the
financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights.
The existence and effect of potential voting rights that are currently exercisable or convertible are considered when
assessing whether Stockland or the Trust controls another entity.
Intercompany transactions, balances and unrealised gains on transactions between controlled entities are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the
asset transferred.
Foreign currency
Transactions
Foreign currency transactions are translated into the entity’s functional currency at the exchange rate on the
transaction date.
Assets and liabilities denominated in foreign currencies are translated to Australian dollars at balance date using
the following applicable exchange rates:
Foreign currency amount
Monetary assets and liabilities
Non-monetary assets and liabilities measured at historical cost
Non-monetary assets and liabilities measured at fair value
Applicable exchange rate
Balance date
Date of transaction
Date fair value is determined
Foreign exchange differences arising on translation are recognised in the profit or loss.
Translation of financial reports of foreign operations
Financial reports of foreign operations are translated to Australian dollars using the following applicable exchange rates:
Foreign currency amount
Revenues and expenses of foreign operations
Assets and liabilities of foreign operations, including goodwill and fair value adjustments
arising on consolidation
Equity items
Applicable exchange rate
Date of transaction
Balance date
Historical rates
114
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 114
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(F1) Accounting policies (continued)
The following foreign exchange differences are recognised directly in the foreign currency translation reserve, a
separate component of equity:
• Foreign currency differences arising on translation of foreign operations;
• Exchange differences arising from the translation of the net investment in foreign entities and of related hedges.
They are recycled into profit or loss upon disposal.
• Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign
operation, the settlement of which is neither planned nor likely in the foreseeable future. These monetary items
are considered to form part of the net investment in a foreign operation.
Reserves
Executive remuneration reserve
The executive remuneration reserve arises due to the rights and deferred shares awarded under the LTI and DSTI
being accounted for as share based payments. The fair value of the rights is recognised as an employee expense in
the profit or loss with a corresponding increase in reserves and decrease upon vesting.
Cash flow hedge reserve
The cash flow hedge reserve is used to record the effective portion of changes in the fair value of derivatives that
are designated and qualify as cash flow hedges. Refer to section (D4).
Fair value reserve
The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets
until the assets are derecognised or impaired.
Foreign currency translation reserve
The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the
financial statements of foreign operations and from derivatives used to hedge operations/funding.
New and amended Accounting Standards
Mandatory in future years
Certain new accounting standards and interpretations have been published that are not mandatory for the year
ended 30 June 2016. Stockland’s assessment of the impact of these new standards and interpretations is set out
below:
AASB 9 Financial Instruments (effective for annual reporting periods beginning on or after 1 January 2018)
AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and
financial liabilities. The standard is not applicable until 1 January 2018 but is available for early adoption. When
adopted, the standard will affect in particular Stockland’s accounting for its available-for-sale financial assets, but no
impact is expected on Stockland’s financial liabilities. Stockland has not yet decided when to adopt AASB 9.
AASB 15 Revenue from Contracts with Customers (effective for annual reporting periods beginning on or
after 1 January 2018)
AASB 15 Revenue from Contracts with Customers establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including
AASB 118 Revenue, AASB 111 Construction Contracts and IFRIC 13 Customer Loyalty Programmes. AASB 15 is
effective for annual reporting periods beginning on or after 1 January 2018, with early adoption permitted. Stockland
is assessing the potential impact on its consolidated financial statements resulting from the application of AASB 15.
Stockland has not yet decided when to adopt AASB 15.
AASB 16 Leases (effective for annual reporting periods beginning on or after 1 January 2019)
AASB 16 Leases requires recognition of a right-of-use asset along with the associated lease liability in the balance
sheet when acting as a lessee. Interest expense, using the effective interest rate method, and depreciation expense
on the right-to-use asset will now be recognised on operating leases by lessees instead of a rental expense. Lessor
accounting remains largely unchanged. AASB 16 replaces existing guidance, including AASB 117 Leases and
IFRIC 4 Determining whether an Arrangement contains a Lease. AASB 16 is effective for annual reporting periods
beginning on or after 1 January 2019, with early adoption permitted. Stockland has not yet decided when to adopt
AASB 16.
Stockland Financial Report 2016 — 115
115
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(F2) Earnings per security
KEEPING IT SIMPLE …
EPS is the amount of post-tax profit attributable to each security.
Basic EPS is calculated on the Group’s statutory profit for the year divided by the weighted average number
of securities outstanding.
Diluted EPS adjusts the Basic EPS for the dilutive effect of any instruments, such as options, that could be
converted into ordinary securities.
Basic underlying EPS is disclosed in the Directors’ Report on page 9.
The calculation of basic EPS has been based on the following profit attributable to ordinary securityholders and
weighted average number of ordinary securities outstanding.
Year ended 30 June
Basic and diluted EPS
Basic EPS
Diluted EPS
Reconciliations of earnings used in calculating EPS
Year ended 30 June
Basic and diluted earnings
Stockland
Trust
2016
cents
37.4
37.3
2015
cents
38.5
38.5
2016
cents
2015
cents
35.0
35.0
36.9
36.9
Stockland
2016
$M
2015
$M
Trust
2016
$M
2015
$M
Profit attributable to securityholders
889
903
832
867
Weighted average number of securities used as the denominator
As at 30 June
Weighted average number of securities (basic)
Weighted average number of securities
Weighted average number of securities (diluted)
Weighted average number of securities (basic)
Effect of rights and securities granted under Share Plans
Weighted average number of securities/units (diluted)
Stockland and Trust
2016
No.
2015
No.
2,375,730,846
2,346,566,571
2,375,730,846
5,639,783
2,381,370,629
2,346,566,571
2,715,233
2,349,281,804
Rights and securities granted under Share Plans are only included in diluted earnings per security where Stockland
is meeting performance hurdles for contingently issuable share based payment rights.
116
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 116
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(F3) Notes to cash flow statements
Reconciliation of profit to net cash flow from operating activities:
Profit for the year
Add/(less) items classified as investing/financing activities:
Net loss on fair value hedges
Net loss on derivatives – through profit or loss
Interest capitalised to investment properties
Net loss on sale of non-current assets
Net gain on sale of other financial assets
Dividends and distributions income
Add/(less) non-cash items:
DMF base fee earned, unrealised
Depreciation
Impairment of intangibles
Straight-line rent adjustment
Net change in fair value of investment properties
(including equity-accounted investments)
Share of profits of equity-accounted investments, net of
distributions received
Equity-settled share based payments
Other items
Net cash flow from operating activities before change in
assets and liabilities
(Increase)/Decrease in receivables
(Increase)/Decrease in other assets
(Increase)/Decrease in inventories
Increase/(Decrease) in deferred tax assets
Increase/(Decrease) in payables and other liabilities
Increase in resident obligations
Increase in employee benefits
Increase/(Decrease) in other provisions
Net cash flow from operating activities
Stockland
2016
$M
Trust
2015
$M
2016
$M
889
15
156
(12)
2
(4)
(4)
(16)
13
–
(8)
903
18
22
(15)
2
(73)
(5)
(27)
15
43
(8)
832
15
156
(3)
2
(6)
(3)
–
–
–
(8)
2015
$M
867
18
22
(8)
1
–
(2)
–
–
–
(8)
(476)
(344)
(387)
(292)
4
13
(8)
564
(39)
(1)
52
30
(34)
216
–
(1)
787
(6)
13
(8)
530
1
(31)
(268)
(9)
20
170
2
(14)
401
2
–
(6)
594
6
(1)
–
–
(16)
–
–
–
583
(7)
–
(1)
590
8
(34)
–
–
(19)
–
–
(5)
540
Stockland Financial Report 2016 — 117
117
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(F4) Contingent liabilities
KEEPING IT SIMPLE …
A contingent liability is a liability that is not sufficiently certain to qualify for recognition as a provision where
uncertainty may exist regarding the outcome of future events.
The only known contingent liabilities at 30 June 2016 are the bank guarantees and insurance bonds.
Stockland and Trust
2016
$M
2015
$M
Guarantees
Bank guarantees and insurance bonds issued to semi and local government and other authorities
against performance contracts, maximum facility $570 million (2015: $450 million)
334
300
No deficiencies of assets exist in relation to any of the companies to which bank guarantees apply.
(F5) Commitments
Capital expenditure commitments
Commitments for the acquisition of land and future development costs not recognised in the financial statements at
balance date:
Inventory commitments
Investment property commitments
Total capital expenditure commitments
Stockland
Trust
2016
$M
283
298
581
2015
$M
183
152
335
2016
$M
–
240
240
Operating lease commitments
Commitments for the operating lease expenditure not recognised in the financial statements at balance date:
Within one year
Later than one year but not later than five years
Later than five years
Total operating lease commitments
9
24
14
47
8
25
12
451
–
–
–
–
1 Revised to include Stockland’s operating lease commitments to its joint operation partner at Stockland Piccadilly.
2015
$M
–
54
54
–
–
–
–
During the current financial year, $8 million was recognised as an expense in Stockland’s profit or loss in respect of
operating leases (2015: $8 million).
118
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 118
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(F6) Related party disclosures
Details of arrangements with Stockland and the Trust related party entities are set out below:
Revenue
Responsible Entity fees
Management and service fee
Property management and leasing fees
Rental income
Finance income
Total revenue from related parties
Expenses
Responsible Entity fees
Property management and leasing fees
Recoupment of expenses
Development management fee capitalised to
investment property
Total expenses to related parties
Stockland
Trust
2016
$’000s
2015
$’000s
2016
$’000s
2015
$’000s
738
834
3,103
–
9
4,684
–
–
–
–
–
1,003
2,900
2,787
–
195
6,885
–
–
–
–
–
–
–
–
4,600
292,206
296,806
20,027
25,468
66,782
51,926
–
–
–
4,557
296,991
301,548
18,043
24,336
70,193
13,260
164,203
125,832
Responsible Entity and other management fees
Stockland received Responsible Entity and other Management Fees from the unlisted property funds managed by
Stockland during the financial year.
The Trust paid Responsible Entity fees to Stockland Trust Management Limited, calculated at 0.2% of gross assets
of the Trust less intercompany loans (2015: 0.2%). From 1 July 2016, the Responsible Entity fee will increase to
0.3% - 0.35% to align to the latest market benchmarks.
Property management expenses were paid by the Trust to Stockland Trust Management Limited (the Responsible
Entity) or its related parties provided in the normal course of business and on normal terms and conditions.
Rental income
Rent was paid by Stockland Corporation Limited, a related party of the Responsible Entity to Stockland Trust in the
normal course of business and on normal terms and conditions.
Finance income
Stockland Trust Management Limited (a controlled entity of Stockland Corporation Limited) or a nominated
subsidiary of Stockland provided loan facility offers to two unlisted property funds managed by Stockland, SDRT
No.1 and SREEF No. 1. These offers were on market terms and conditions available at the date of acceptance of
the loan facility offer. Both loan facility offers have been extinguished.
The Trust has an unsecured loan to Corporation of $3,437 million (2015: $3,378 million) repayable at call. Interest
on the loan is payable monthly in arrears at interest rates within the range of 7.7% to 8.9% during the year ended
30 June 2016 (2015: 8.6% to 9.2%). The Trust has not called on this loan at 30 June 2016.
Interest was paid by Stockland Corporation Limited to Stockland Trust, a related party of the Responsible Entity
provided in the normal course of business and on normal terms and conditions.
Development Management Fee
A development management deed was executed between Stockland Trust and Stockland Development Pty Limited
(a controlled entity of the Stockland Corporation Limited) effective 1 July 2012 in relation to a management fee in
respect of Retail developments. The fee represents remuneration for the Corporation’s property development
expertise and is calculated as 50.0% of the total valuation gain or loss on the completion of a development. Fees
are paid by Stockland Trust to Stockland Development Pty Limited.
From 1 July 2016, the Development Management Fee will be calculated based on a fixed 4.0% of total development
costs in line with recent changes to benchmark methodologies.
Stockland Financial Report 2016 — 119
119
Consolidated Notes Year ended 30 June 2016 |
Consolidated Notes
Year ended 30 June 2016
(F6) Related party disclosures (continued)
Stockland has trade receivables of $1,344 thousand (2015: $2,921 thousand) due from the unlisted property funds.
As at 30 June 2016, the carrying amount of Stockland’s investment in the unlisted property funds was $8,575
thousand (2015: $5,237 thousand).
(F7) Personnel expenses
Personnel expenses comprised of the following:
Year ended 30 June
Wages and salaries (including on-costs)
Equity-settled share based payment transactions
Contributions to defined contribution plans
Increase in annual and long service leave provisions
Total personnel expenses
Stockland
Trust
2016
$M
187
13
13
1
214
2015
$M
173
14
12
2
201
2016
$M
2015
$M
–
–
–
–
–
–
–
–
–
–
This disclosure note includes the accounting policies for all items related to personnel expenses. This includes the
treatment of balance sheet items that relate to personnel expenses such as provision for employee benefits, which
are included in Other Liabilities on the balance sheet.
Annual leave
Accrued annual leave of $8 million (2015: $7 million) is presented as current, since Stockland does not have an
unconditional right to defer settlement for any of these obligations. Based on past experience, Stockland expects all
employees to take the full amount of accrued leave within the next 12 months.
Long service leave
The current portion of long service leave 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 liability for long service leave expected to be settled more than 12 months from the balance date is recognised
in the provision for employee benefits and measured as the present value of expected payments to be made in
respect of services provided by employees up to the balance date.
Consideration is given to expected future wage and salary levels, past experience of employee departures and
periods of service. Expected future payments are discounted using market yields at the balance date on corporate
bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows.
Bonus entitlements
A liability is recognised in current trade and other payables for employee benefits in the form of employee bonus
entitlements where there is a contractual obligation or where there is a past practice that has created a constructive
obligation. Liabilities for employee bonus entitlements are expected to be settled within 12 months and are
measured at the amounts expected to be paid when they are settled.
Superannuation plan
Stockland contributes to several defined contribution superannuation plans. Contributions are recognised as a
personnel expense as they are incurred.
120
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 120
Consolidated Notes YEAR ENDED 30 JUNE 2016
Consolidated Notes
Year ended 30 June 2016
(F8) Key Management Personnel disclosures
Key management personnel compensation comprised of the following:
Year ended 30 June
Short term employee benefits
Post-employment benefits
Other long term benefits
Termination benefits
Share based payments
Total key management personnel compensation
2016
$’000s
13,075
217
131
–
7,188
20,611
2015
$’000s
12,769
207
104
–
5,560
18,640
Information regarding individual Directors’ and Executives’ remuneration is provided in the Remuneration Report on
pages 35 to 49 of the Directors’ Report.
Other transactions with KMP
There are transactions between the Group and entities with which Directors have an association. These
transactions do not meet the definition of related parties since the Directors as individuals are not considered to
have control or significant influence over the financial or operating activities of the respective non-Stockland entities.
Furthermore, the terms and conditions of those transactions were no more favourable than those available, or might
reasonably be available, on similar transactions to non-Director related entities on an arm’s length basis.
(F9) Auditor’s remuneration
Stockland
Trust
2016
$’000s
2015
$’000s
2016
$’000s
2015
$’000s
Auditor of Stockland – PricewaterhouseCoopers Australia
Audit services
Audit and review of the Financial Report
Audit of Unlisted Property Fund Financial Reports
Regulatory audit and assurance services
Other audit and assurance services
1,574
1,524
145
675
55
189
561
308
Total remuneration in relation to audit services
2,449
2,582
Other non-audit related services
Taxation compliance services
Other non-audit services
Total remuneration in relation to non-audit services
282
400
682
224
706
930
514
–
387
20
921
157
–
157
476
–
417
–
893
152
–
152
Total auditor remuneration
3,131
3,512
1,078
1,045
Auditor’s fees are paid by Stockland Development Pty Limited on behalf of the Group.
(F10) Events subsequent to the end of the year
Stockland and Trust
Other than disclosed elsewhere in this report, there has not arisen in the interval between the end of the current
financial year and the date of this report any item, transaction or event of a material or unusual nature, likely, in the
opinion of the Directors, to affect significantly the operations, the results of operations, or the state of the affairs in
future years of Stockland and the Trust.
Stockland Financial Report 2016 — 121
121
Consolidated Notes Year ended 30 June 2016 |
Directors’ Declaration
Directors’ Declaration
YEAR ENDED 30 JUNE 2016
Year ended 30 June 2016
(1) In the opinion of the Directors of Stockland Corporation Limited, and the Directors of the Responsible Entity of
Stockland Trust, Stockland Trust Management Limited (collectively referred to as ‘the Directors’):
(a) the Financial Statements and Notes of Stockland Corporation Limited and its controlled entities, including
Stockland Trust and its controlled entities (‘Stockland’) and Stockland Trust and its controlled entities
(‘Trust’), set out on pages 52 to 121, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of Stockland’s and the Trust’s financial position as at 30 June 2016 and of
their performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) there are reasonable grounds to believe that both Stockland and Trust will be able to pay their debts as
and when they become due and payable.
(2) There are reasonable grounds to believe that Stockland Corporation Limited and the Stockland entities
identified in section E3 will be able to meet any obligations or liabilities to which they are or may become
subject to by virtue of the Deed of Cross Guarantee between those Group entities pursuant to ASIC Class
Order 98/1418.
(3) Stockland Trust has operated during the year ended 30 June 2016 in accordance with the provisions of the
Trust Constitution of 24 October 2006, as amended.
(4) The Register of Unitholders has, during the year ended 30 June 2016, been properly drawn up and maintained
so as to give a true account of the unitholders of the Stockland Trust.
(5) The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from
the Managing Director and Chief Financial Officer for the year ended 30 June 2016.
(6) The Directors draw attention to section A to the financial statements, which includes a Statement of
Compliance with International Financial Reporting Standards.
Signed in accordance with a resolution of the Directors:
Graham Bradley
Chairman
Mark Steinert
Managing Director
Dated at Sydney, 17 August 2016
122
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 122
Independent Auditor’s Report
Independent
Auditor’s Report
Independent Auditor’s Report
Independent auditor’s report to the stapled securityholders of
Independent auditor’s report to the stapled securityholders of
Stockland Consolidated Group and the unitholders of Stockland
Stockland and the unitholders of Trust
Trust Group
Report on the financial report
Report on the financial report
We have audited the accompanying financial report which comprises:
We have audited the accompanying financial report which comprises:
the Consolidated Balance Sheet as at 30 June 2016, the Consolidated Statement of Profit or Loss and Other
the Consolidated Balance Sheet as at 30 June 2015, the Consolidated Statement of Profit or Loss and Other
Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Cash Flow Statement
Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Cash Flow Statement
for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the
for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the
directors’ declaration for Stockland, being the consolidated stapled entity (‘Stockland’). The consolidated stapled
directors’ declaration for Stockland Consolidated Group, being the consolidated stapled entity (“Stockland
entity, as disclosed in section A of the financial report, comprises Stockland Corporation Limited and the entities it
Consolidated Group”). The consolidated stapled entity, as disclosed in Note A of the financial report, comprises
controlled at year’s end or from time to time during the financial year, including Stockland Trust and the entities it
Stockland Corporation Limited and the entities it controlled at year’s end or from time to time during the financial
controlled at year’s end or from time to time during the financial year, and
year, including Stockland Trust and the entities it controlled at year’s end or from time to time during the financial
the Consolidated Balance Sheet as at 30 June 2016, the Consolidated Statement of Profit or Loss and Other
year, and
Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Cash Flow Statement
the Consolidated Balance Sheet as at 30 June 2015, the Consolidated Statement of Profit or Loss and Other
for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the
Comprehensive Income, Consolidated Statement of Changes in Equity and Consolidated Cash Flow Statement
directors’ declaration for the Trust, being the consolidated entity (‘Trust’). The consolidated entity comprises
for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the
Stockland Trust and the entities it controlled at year’s end or from time to time during the financial year.
directors’ declaration for Stockland Trust Group, being the consolidated entity (“Stockland Trust Group”). The
consolidated entity comprises Stockland Trust and the entities it controlled at year’s end or from time to time
during the financial year.
Directors’ responsibility for the financial report
The directors of Stockland Corporation Limited and the directors of Stockland Trust Management Limited, the
Responsible Entity of Stockland Trust, (collectively referred to as ‘the directors’) are responsible for the preparation of
Directors’ responsibility for the financial report
the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the
The directors of Stockland Corporation Limited and the directors of Stockland Trust Management Limited, the
Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation
Responsible Entity of Stockland Trust, (collectively referred to as “the directors”) are responsible for the preparation of
of the financial report that is free from material misstatement, whether due to fraud or error. In Note A, the directors
the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation
statements comply with International Financial Reporting Standards.
of the financial report that is free from material misstatement, whether due to fraud or error. In Note A, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial
Auditor’s responsibility
statements comply with International Financial Reporting Standards.
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical
Auditor’s responsibility
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in
the financial report is free from material misstatement.
accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether
the financial report is free from material misstatement.
PricewaterhouseCoopers, ABN 52 780 433 757
PricewaterhouseCoopers, ABN 52 780 433 757
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Liability limited by a scheme approved under Professional Standards Legislation.
Liability limited by a scheme approved under Professional Standards Legislation.
123
Stockland Financial Report 2015 — 131
Independent Auditor’s Report |
Stockland Financial Report 2016 — 123
Independent Auditor’s Report
Independent Auditor’s Report
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to Stockland and the Trust’s preparation and fair presentation of the financial report
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 Stockland and the Trust’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors,
as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinions.
Independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
a)
the financial report of Stockland and the Trust is in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of Stockland and the Trust’s financial positions as at 30 June 2016 and of their
performance for the year ended on that date; and
ii.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
b)
the financial report also complies with International Financial Reporting Standards as disclosed in section A.
Report on the Remuneration Report
We have audited the remuneration report included in pages 35 to 49 of the directors’ report for the year ended 30 June
2016. The directors of Stockland are responsible for the preparation and presentation of the remuneration report in
accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Stockland for the year ended 30 June 2016, complies with section 300A of
the Corporations Act 2001.
PricewaterhouseCoopers
S J Hadfield
Partner
N R McConnell
Partner
Sydney
17 August 2016
124
| Stockland Financial Report 2016
Stockland Financial Report 2016 — 124
Security Information
Security Information and Key Dates
and Key Dates
Securityholders
As at 31 July 2016, there were 2,392,042,302 Securities on issue and the top 20 securityholders as at 31 July 2016
is as set out in the table below. There is no on-market buy-back currently.
Top 20 securityholders as at 31 July 2016
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd
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