Appendix 4E
For the year ended 30 June 2017
(previous corresponding period being the year ended 30 June 2016)
Results for announcement to the market
STAPLING ARRANGEMENT
Stockland was established for the purpose of facilitating a joint quotation of Stockland Corporation Limited
(ABN 43 000 181 733) and its controlled entities (“the Corporation”), and Stockland Trust
(ARSN 092 897 348) and its controlled entities (“the Trust”) on the Australian Stock Exchange. Stockland
Trust Management Limited (ABN 86 001 900 741) is the Responsible Entity of Stockland Trust.
The Financial Report has been prepared based upon a business combination of the parent entity, Stockland
Corporation Limited and its controlled entities, and Stockland Trust and its controlled entities, in accordance
with AASB 3 Business Combinations.
Revenue from ordinary activities
Net profit after tax attributable to securityholders
Funds from operations attributable to securityholders
Dividends and distributions
Up 17.9% to
Up 34.4% to
Up 8.5% to
2017
$M
2,744
1,195
802
Year ended 30 June 2016
Interim dividend/distribution
Final dividend/distribution
Amount per
security
12.6 ¢
12.9 ¢
Franked
amount per
security
Record date
Payment date
– ¢
31 December 2016
28 February 2017
– ¢
30 June 2017
31 August 2017
Securityholders may elect to participate in Stockland’s Dividend and Distribution Reinvestment Plan. The last
date for the receipt of an election notice for participation in the Dividend and Distribution Reinvestment Plan
was 5 July 2017. A discount rate of 1.0% will be applied under the Dividend and Distribution Reinvestment Plan.
Securities issued under the Dividend and Distribution Reinvestment Plan rank equally with other securities for the
final distribution.
Other information
Year ended 30 June
Net tangible assets per security
2017
$4.04
2016
$3.82
This report is based on accounts which have been audited.
The remainder of information requiring disclosure to comply with listing rule 4.3A is contained in the Consolidated
Annual Report that follows.
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
1
3
5
5
18
24
37
53
Consolidated Statements of Profit or Loss and Other Comprehensive Income 54
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
55
56
58
59
124
125
132
135
KEEPING IT SIMPLE…
GLOSSARY
The aim of the text in ‘Keeping it
simple’ boxes is to explain more
complex sections in plain English.
Capitalised terms and acronyms
used in this Report are defined
in the Glossary.
Notes to the financial statements
provide information required by law,
accounting standards or ASX Listing
Rules to explain a particular feature
of the financial statements. The notes
to the financial statements will also
provide explanations and additional
disclosure to assist readers’
understanding and interpretation
of the financial statements.
Front cover features our Cardinal
Freeman The Residences in
Ashfield, Sydney
Letter from
the Chairman
Our focus on delivering
diverse and affordable
housing options for all
Australians, coupled
with positive market
conditions, resulted in
record Residential and
Retirement Living
sales.
_____
TOM POCKETT
CHAIRMAN
Dear Securityholders,
It was a great honour to be invited by
my fellow board directors to become
Chairman last October.
I am pleased to report that Stockland
delivered a strong result across our
diversified portfolio for the 2017 financial
year. This outcome is a result of the
disciplined and consistent
implementation of our strategy.
STRENGTH THROUGH DIVERSITY
Funds from operations (FFO) grew by
8.5% to $802 million and FFO per security
grew 7.4% on the prior year. This was
slightly above our previous guidance range
for the year. Statutory profit was $1,195
million up 34.4%.
In our Commercial Property business,
our Retail Town Centres are the largest
component of our portfolio. We delivered
3.5% comparable FFO growth, and
continued to remix our assets to reflect
changing customer trends.
Our focus remains on owner occupiers and
first home buyers, placing us in a preferred
position for residential lending trends and
government growth initiatives.
Our Retirement Living development
pipeline is also proceeding well and we
remain committed to providing high quality
retirement living options for our residents.
We delivered our Urban Development
Institute of Australia (UDIA) award winning
apartments at Cardinal Freeman The
Residences in Sydney’s inner-west, our
vertical village at Birtinya, Sunshine Coast
is making good progress, and planning is
underway at a number of brownfield
projects.
DISTRIBUTION
As forecast, our full year distribution was
25.5 cents per security, representing a
payout ratio of 77% of funds from operations.
We saw a good take-up of our distribution
reinvestment plan with over 20% of
securities participating, providing funds for
our accretive development pipeline.
We are targeting to increase distributions
by 4% to 26.5 cents per security in FY18,
assuming there is no material change in
market conditions.
Within the financial year we made good
progress on our Commercial Property
development pipeline. The first stage
opening of our $412 million Stockland
Green Hills shopping centre
redevelopment in Maitland, NSW, was well
received by locals, and our customers in
Ballarat eagerly anticipate the opening of
our $37 million redevelopment of Stockland
Wendouree.
Our Logistics and Business Parks portfolio
achieved strong comparable FFO growth
with positive leasing results. Recent
industrial redevelopments in Sydney and
Melbourne were completed on budget and
fully leased.
Our focus on delivering diverse and
affordable housing options for all
Australians, coupled with positive market
conditions, resulted in record Residential
and Retirement Living sales.
Profitability of our Residential business
improved strongly, at 17.4% growth on the
previous year. A record 6,604 lots were
settled in the financial year, with 75% of
sales to owner occupiers and more than
50% of net deposits coming from first
home buyers.
We have made a number of strategic land
acquisitions over the past 12 months to
significantly restock our portfolio, acquiring
9,900 lots. The majority of these are in the
high-performing Melbourne market. Our
landbank now totals over 80,000 future
housing lots nationally.
Letter from the Chairman — 1
We are targeting to
increase distributions
by 4% to 26.5 cents per
security in FY18,
assuming there is no
material change in
market conditions.
_____
TOM POCKETT
CHAIRMAN
Our focus on sustainability remains
with many key achievements during
the year including Aura, our largest
masterplanned community, achieving
the highest ever Green Star Communities
Rating – World Leadership – of any
greenfield community in Australia.
We have also retained our global
sustainability leadership credentials.
We were named Global Real Estate Sector
Leader by both the S&P Dow Jones
Sustainability Indices and GRESB (the
Global Real Estate Sustainability
Benchmark) in the category Diversified –
Retail/Office.
CONCLUSION
Thank you to my Board colleagues and our
employees for their continued enthusiasm
and dedication to delivering exceptional
outcomes. The Board and I are confident
we have the right management and
strategy in place and look forward to
discussing these results with you at our
Annual General Meeting in October.
TOM POCKETT
CHAIRMAN
GOVERNANCE
The expectations being placed on
companies continue to evolve and the
Board closely monitors and engages with
these changing expectations, which go
to the heart of our ability to deliver long
term value.
The Board is committed to an open and
transparent relationship with stakeholders.
We believe we have the right mix of skills
and experience to oversee a high
standard of governance, integrity and
accountability.
In July we were delighted to welcome
Andrew Stevens to the Board. Andrew is
a highly regarded director with extensive
expertise in the technology sector and
significant commercial experience. He has
strengthened the breadth and depth of
knowledge and leadership capabilities on
our Board and we look forward to his
contribution.
As required by the Stockland Constitution,
Andrew will offer himself for election by
securityholders at the 2017 Annual
General Meeting on 25 October 2017.
STRONG CULTURE
The Board recognises and promotes the
importance of a strong culture and the
shared benefits that this can bring to
employees and securityholders.
Our employees have all contributed to the
strong result for the year. It is also pleasing
that we maintained a high employee
engagement score of 82%, with 95% of
respondents saying they are willing to work
above and beyond what is required to help
Stockland succeed. Our safety and
employee turnover metrics improved and
we were recognised by the Workplace
Gender Equity Agency (WGEA) as an
Employer of Choice for Gender Equality.
Letter from the Chairman — 2
Letter from the
Managing Director and CEO
Our disciplined
approach to
acquisitions and our
focus on creating the
most liveable and
connected communities
and their town centres
set us up well for the
future.
_____
MARK STEINERT
MANAGING DIRECTOR AND CEO
Dear Securityholders,
We’ve delivered another positive
performance this financial year across
our diversified business, by reinforcing
our position as the leading creator of
communities in Australia, strategically
repositioning our assets, and
restocking the portfolio.
We continue to see the benefits of our
disciplined approach to implementing our
strategy – to grow our asset returns and
improve customer experiences, deliver
operational excellence, and improve our
capital strength.
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 3.4%
across the portfolio, with 3.5% in Retail,
3.6% in Logistics and Business Parks,
and 2.3% in Office.
In a challenging environment, our retail
business delivered positive income growth,
maintained high occupancy and continued
to focus on remixing our portfolio in line
with our customer needs and trade area
dynamics.
Our leadership in housing affordability
initiatives, and commitment to delivering
a range of options for first home buyers
and families, places us in a preferred
position for residential lending trends
and government growth initiatives.
Our Retirement Living business also
delivered its fourth consecutive year of
double-digit growth. Operating profit was
up 11.1% on FY16, reflecting strong sales,
active management of our portfolio and
improved margins.
Our developments are progressing well
and we are broadening our customer
reach through our new non-deferred
management fee communities for over
55s, called ‘Aspire’, with two projects
underway.
We take pride in our retirement living
business, and we are committed to open,
transparent and respectful relationships
with our residents. Every year, we run
independent surveys of residents to better
understand their satisfaction levels with our
service. Last year, more than 6,800
residents responded to this survey, and
rated their overall satisfaction with
Stockland as 8.4 out of 10.
Our centres combine traditional, everyday
shopping needs with food, entertainment,
lifestyle and services, and are the ‘town
centres’ of their communities. Specialty
store sales productivity grew 1.9% to
$9,072 per square metre, which exceeds
the Urbis sub-regional average by 8.3%.
Our Logistics and Business Parks business
had an outstanding year. Occupancy
increased to 99% and the portfolio now
represents 15% of our total assets.
The Sydney office portfolio also performed
well this year, where the majority of our
assets are located. The Perth and
Canberra markets remain challenging, but
we are seeing positive leasing momentum
at our properties.
Our Residential business settled a record
6,604 lots, up 7.6% on FY16, achieved
significant operating profit (FFO) growth of
17.4%, and lifted return on assets to 20.8%
on the core portfolio. Importantly, strategic
metropolitan acquisitions with strong
transport links added around 9,900 lots to
inventory during the period. We commence
FY18 with record pre-sales of 5,811 lots.
We have continued to expand our medium
density business, with 213 homes settled
this year and close to 600 currently under
construction. Medium density development
is a key growth driver for our residential
business as we extend our focus on
community creation into the important
“missing middle” of our major capital
cities.
Letter from the Managing Director and CEO — 3
CAPITAL STRENGTH
Our focus on maintaining a strong balance
sheet has underpinned this solid result
and sets a good platform for future growth.
Gearing at the end of FY17 was 22.7%,
at the lower end of our 20 – 30% target
range, due to disciplined capital
management and operating cash flows.
We retained an A-/stable credit rating
from Standard and Poor’s and also
obtained a new comparable A3 rating
from Moody’s in August 2017. This
confirms the strength of our balance
sheet and provides access to a broader
range of debt markets, positioning the
business well to continue to grow in the
future.
OPERATIONAL EXCELLENCE
We continue to progress implementation of
new systems, including Salesforce and
SAP, which will improve efficiencies across
our business.
We have also introduced new digital
technology in our assets including
virtual masterplans at some of our
new communities and our Geni app trial at
Stockland Balgowlah. We will continue
to look at ways to introduce technology to
enhance our customers’ experience across
our assets.
Once again, we were recognised as
a global leader for our sustainability
credentials and we remain committed to
excellence in this space. 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
In the year ahead, we expect positive
economic conditions to continue, and
interest rates to remain fairly stable. We
commence the financial year well placed to
meet our goals of sustainable profit growth
on a through the cycle basis, with strong
occupancy and pre-sales.
While lending conditions to investors and
foreign buyers are tightening, owner
occupiers remain our core focus and
represent 75% of our net residential
sales, with less than 3% of total buyers
requiring Foreign Investment Review
Board approval.
We expect FY18 FFO growth to be slightly
lower than FY17 primarily due to non-
Sydney office let-up assumptions, higher
Commercial Property outgoings,
particularly electricity prices, and lower
Retirement Living development profit
reflecting project timing.
Our disciplined approach to acquisitions
and our focus on creating the most liveable
and connected communities and their town
centres set us up well for the future.
Assuming no material change in market
conditions, we are targeting growth in FFO
per security of 5.0 – 6.5% in FY18, with
growth skewed to the first half due to timing
of residential settlements, with distribution
per security growth targeted at 4%,
representing 26.5 cents per security.
MARK STEINERT
MANAGING DIRECTOR AND CEO
Letter from the Managing Director and CEO — 4
Directors’ Report
Year ended 30 June 2017
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 2017 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 $16.6 billion of real estate
assets. We are Australia’s largest community creator and hence 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 with dynamic
town centres 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
Stockland Financial Report — 5
Directors’ Report
Year ended 30 June 2017
We focus on three strategic priorities:
• Grow asset returns and provide great customer experiences – driving returns in our core businesses
• Operational excellence – improving the way we operate across the Group to drive efficiencies, compliance,
sustainability and employee engagement
• Capital strength – actively managing our balance sheet to maintain diverse funding sources and an efficient cost
of capital
Our FY17 progress (1 July 2016 to 30 June 2017) against these priorities is set out below:
Strategic priorities
FY17 progress
Grow asset returns
and our customer base
Operational excellence
•
•
•
•
3.4% growth in comparable FFO across our Commercial Property portfolio
75% Retail tenant satisfaction TenSAT score produced by Monash University
2.9% Retail rental growth on new specialty leases and renewals
$758 million of accretive retail development under construction or completed and
a pipeline of $1.0 billion
• Stable 99.5% occupancy across Retail portfolio
•
•
•
•
89% Logistics and Business Parks tenant satisfaction
99% occupancy across Logistics and Business Parks portfolio
$680 million accretive Logistics and Business Parks development pipeline
17.4% growth in Residential operating profit and 15.3% net operating profit
margin
83% Residential communities liveability score – Stockland Liveability Survey
11.1% growth in Retirement Living operating profit
• Residential core portfolio return on assets lifted to 20.8%
•
•
• Retirement Living cash return on assets increased to 6.2%
•
84% resident satisfaction score in Retirement Living villages
• Recognised as Global Real Estate Sector Leader on the Dow Jones
Sustainability Index (DJSI) for 2016-17 the second consecutive year
• Global Sector Leader on Global Real Estate Sustainability Benchmark (GRESB)
for Diversified – Office/Retail sector
• Recognised by CDP with a position on the Climate A list for leading global
climate performance
• Received Employer of Choice for Gender Equality citation from WGEA three
years in a row
• Successful implementation of Salesforce and SAP SuccessFactors modules with
further deployment of SAP systems over the next year
Improved return on equity (excluding workout assets) from 11.0% to 11.4%
•
Capital strength
• Maintained S&P A-/stable credit rating for over ten years and new equivalent
Moody’s credit rating of A3 (received in August 2017)
22.7% gearing remains within our target range of 20 – 30%
•
• Reduced average cost of debt to 5.5% for FY17
Increased our access to diverse funding sources
•
Stockland Financial Report — 6
Directors’ Report
Year ended 30 June 2017
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. For example, future climate change impacts will place greater demands on our assets and communities and
influence the actions and behaviours of our stakeholders. For the benefit of our stakeholders, and society more
broadly, we are committed to creating climate resilient, energy efficient assets and communities with a greater
ability to endure severe weather impacts and operate without disruption. Climate change risks and opportunities are
reflected in several risks listed above: extreme weather events, changing regulation, and the ability to develop
products that meet anticipated future demand. To manage these risks we have a Climate Change Action Plan (in
place since 2006) and detailed Climate Adaptation Strategy (in place since 2011). For more information on our
climate change action, including governance, strategy, performance and sustainability targets, refer to our
sustainability reporting http://www.stockland.com.au/sustainability. Our FY17 performance and progress will be
released on 22 September 2017.
Our risks include but are not limited to:
Risk
Our response
Short
term –
strategy
execution
Increased
competition and
changing market
conditions impact
our opportunities
for growth
Continue to:
• maintain a diversified business model at scale in each sector
reinvest in our assets to meet changing customer needs
•
focus on retaining a strong balance sheet with appropriate gearing
•
use diverse funding sources
•
•
concentrate on efficiency and cost management
• 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
Systems
enhancements
affect business
process efficiency
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
successful implementation of Salesforce and SAP SuccessFactors. Deployment of further
SAP and Salesforce capabilities will continue during next year. We continue to maintain
two-way engagement with employees to enable a smooth transition.
Housing
affordability is
increasingly
challenging in
Australia
Our Residential business is influenced by the dynamics of the Australian housing market.
Housing affordability remains of key concern for Australians as the price of housing and
rental properties continues to increase. We believe a suite of measures is required to
unlock housing supply and address affordability. These include early planning and
delivery of infrastructure and simplified development controls to enable housing diversity.
Our affordability initiatives in Qld, NSW and Vic have given first home buyers priority to
purchase land and get a foothold in the market.
We will also continue to:
•
•
partner with government and industry to drive solutions
provide 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
•
Extreme weather,
security risks and
price shocks
impact business
continuity and
community
resilience
Continue to:
•
•
•
•
•
train our employees and increase their risk awareness
undertake regular scenario testing
engage with peers and across industries
invest in asset upgrades and adapt community design to improve resilience
assess and implement wholesale energy strategies and renewable energy
installations
Stockland Financial Report — 7
Directors’ Report
Year ended 30 June 2017
Risk
Our response
Change within the
retail sector
impacts rental
growth
Regulatory
changes impact
our business and
customers
Longer
term –
changing
marketplace
Ability to develop
products that meet
anticipated future
customer and
societal demands
Our ability to
harness
opportunities
arising from digital
disruption
Capital market
volatility impacts
our ability to
access suitable
capital
Ability to adapt our
operating model to
meet the changing
nature of the
workforce
Increasing
expectation on
corporates
The retail landscape is constantly evolving. Within the last ten years the sector has seen a
convergence of technical advances, in particular e-commerce, changes in underlying
consumer behaviour, and the entry of new, international retailers. These changes have
challenged some of our retailers.
We have been pro-active and have pre-empted many of the changes. We continue to:
•
•
focus on experiential retail, services, food catering
redevelop our assets to create diverse, walkable town centres that form the social hub
of the community
Leverage deep customer insights and analytics to inform our tenant remixing
•
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 and prepared for
potential regulatory changes
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, Stockland Exchange (our online research
community), Quantium (which provides data-driven customer insights to inform how
we view markets and opportunities) and other data sources
focus on creating sustainable and liveable communities and assets, resilient to
changes in climate
enhance our design excellence, providing greater functionality and value for money
that meet the demands of Australia’s changing demographics, including an aging
population and more socially conscious millennials
Continue to:
•
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
Continue to:
•
Continue to:
•
•
•
•
•
•
•
•
Our 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. Variable economic activity and changing capitalisation rates may impac t the
valuation of our assets.
So that we are able to continue to raise sufficient capital to fund growth, we will continue to:
•
• maintain and increase access to diverse funding sources
• maintain our prudent capital management policies
focus on retaining a strong balance sheet at appropriate levels of gearing
Physical and organisational boundaries are becoming increasingly blurred as new
technology enables greater workplace flexibility, including when and where employees
work and encouraging creative and adaptive teamwork. This year we successfully
deployed Office365, Salesforce and SAP SuccessFactors to improve collaboration and
flexible working. We will continue to:
•
•
encourage flexible work practices supported by our new collaboration platforms
train our senior leaders to be more agile and resilient through programs such as our
Stockland Leadership Experience
Community expectations on the social and behavioural operations of a “good corporate”
are changing. Corporates are increasingly expected to work in partnership with the
community and government on societal issues. We are well placed to meet these
expectations and have a strong reputation for sustainability leadership and community
development.
Stockland Financial Report — 8
Directors’ Report
Year ended 30 June 2017
Stockland results and outlook
Key metrics:
• Full year distribution was 25.5 cents per security
• Statutory profit was $1,195 million, up 34.4% on FY16
• Statutory earnings per security was 49.8 cents, up 33.2% on FY16
• Funds from operations (FFO) was $802 million, up 8.5% on FY16
• FFO per security was 33.4 cents, up 7.4% on FY16
• Adjusted funds from operations (AFFO)1 per security was 28.6 cents up 8.7% on FY16
• Gearing was 22.7%
• Return on equity2 was 11.4%, excluding workout assets
• Net tangible assets (NTA) per security of $4.04 up 5.8%
Stockland delivered another positive performance this financial year across our diversified business, by reinforcing
our position as the leading creator of communities in Australia, strategically repositioning our assets, and restocking
the portfolio.
All of our businesses contributed to this result. Our Residential and Retirement Living businesses achieved record
results and Commercial Property delivered a good performance across the different asset classes, despite
challenging conditions in the retail market.
We continue to see the benefits of a disciplined approach to implementing our strategy – to grow our asset returns
and provide great customer experiences, deliver operational excellence, and improve our capital strength.
Our Residential business delivered double-digit FFO growth again this year, due to new projects commencing,
above forecast sales results, strategic acquisitions and positive market conditions.
We have maintained our position as Australia’s leading creator of new communities, settling 6,604 lots over the
reporting period, with over 50% of net deposits to first home buyers. We have also diversified our Residential
business through medium density development. We remain well placed in the current lending environment with 75%
of our sales to owner occupiers, and ongoing positive market conditions.
Our Retirement Living business delivered its fourth year of double-digit FFO growth. This is underpinned by a
dedicated focus on customer service, open and respectful communication and resident satisfaction. We are
progressing our redevelopment pipeline to provide the highest quality retirement living options for our residents.
Our NTA per security increased by 5.8% to $4.04, with income growth and an average tightening in capitalisation
rates on our Commercial Property portfolio from 6.4% to 6.2%.
Our shopping centres are the heart of communities they serve, and are the town centres of the future. Our
diversified business model enables us to leverage community creation through our centres, which we continue to
enhance by providing lifestyle, food, service, entertainment and leisure precincts to improve customer experience.
Our focus on maintaining a strong balance sheet has underpinned this solid result and sets a good platform for
future growth.
A commitment to actively managing our debt program has seen us improve our weighted average cost of debt,
which has fallen from 5.8% in FY16, to 5.5% in FY17 and increased our weighted average debt maturity.
Gearing at the end of FY17 was 22.7%, at the lower end of our 20 – 30% target range, due to disciplined capital
management and operating cash flows.
We retained an A-/stable credit rating from Standard and Poor’s (S&P) and in August 2017, also obtained a second
rating from Moody’s of A3. This confirms the strength of our balance sheet and provides access to a broader range
of debt markets, positioning the business well to continue to grow in the future.
We are continuing to implement new SAP systems, which will improve efficiencies across our business.
Once again, we were recognised as a global leader for our sustainability credentials and we remain committed to
excellence in this space.
1 AFFO 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. For Stockland, the key differences between FFO and AFFO relate to cash paid
for incentives and leasing costs, and maintenance capital expenditure. These items are deducted from FFO to determine AFFO.
2 Return on Equity accumulates individual business Return on Assets and adjusted for cash interest paid and average drawn debt
for the 12 month period. Excludes residential community workout projects.
Stockland Financial Report — 9
Directors’ Report
Year ended 30 June 2017
Outlook
Our results have been driven by our ongoing commitment to delivering the best communities and vibrant town
centres across the country. We have continued to focus on strategically repositioning our assets and enhancing the
customer experience across our diversified portfolio. A disciplined approach to acquisitions and focus on creating
the most liveable and connected communities will set us up well for the future.
In the year ahead, we expect positive economic conditions to continue, and interest rates to remain fairly stable. We
commence the financial year well placed to meet our goals of sustainable profit growth on a through the cycle basis,
with strong occupancy and pre-sales.
Our Commercial Property business should maintain moderate growth in returns, with comparable FFO growth of 2 –
3% including comparable retail FFO growth of around 3%. We will continue to invest, grow and remix our portfolio,
increasing our focus on convenient and desirable town centres, with selected divestments funding much of this
activity.
In the coming year, we expect residential settlements to again exceed 6,000 lots, including around 350 medium
density homes. While lending conditions to investors and foreign buyers are tightening, owner occupiers remain our
core focus and represent 75% of our net residential sales, with less than 3% of the total to buyers requiring Foreign
Investment Review Board approval.
While current regulatory settings are likely to lead to some moderation in growth rates for residential property prices,
we continue to expect an elongated cycle for the east coast markets. We enter FY18 in a position of leadership in
housing affordability with strong pre-sales.
Our Retirement Living business will continue to grow profits in FY18, but at a more moderate level due to the timing
of development completions.
We expect FY18 FFO growth to be slightly lower than FY17, primarily due to non-Sydney office let-up assumptions,
higher Commercial Property outgoings, particularly electricity prices, and lower Retirement Living development profit
reflecting project timing.
Assuming no material change in market conditions, we are targeting growth in FFO per security of 5.0 – 6.5% in
FY18, with growth skewed to the first half due to timing of residential settlements, with distribution per security
growth targeted at 4%, representing 26.5 cents per security.
Stockland Financial Report — 10
Directors’ Report
Year ended 30 June 2017
Funds from Operations (FFO)
FFO has replaced underlying profit as our primary reporting measure from FY17. 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. It is designed to present the results of the ongoing operating activities of Stockland in a way that
appropriately reflects our underlying performance. FFO is the basis on which the distributions and dividends are determined.
FFO excludes adjustments such as unrealised fair value gains/losses, realised transactions occurring infrequently and
those that are outside the course of our core ongoing business activities.
Reconciliation of FFO to statutory profit
Year ended 30 June
Revenue
Cost of property developments sold:
•
Land and development
• Capitalised interest
• Utilisation of inventory impairment provision
Net write-back of inventory impairment
provision
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
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 expense
Profit for the year
FFO
$M
2,695
(1,292)
(142)
103
–
(236)
29
(304)
–
28
–
–
–
4
(83)
802
–
802
2017
2016
Statutory
adjustments
$M
Statutory
profit
$M
FFO
$M
Statutory
adjustments
$M
Statutory
profit
$M
49
2,744
2,359
(31)
2,328
–
–
–
3
(1,292)
(1,049)
(142)
(124)
103
3
67
–
(12)
55
(248)
(227)
84
31
–
–
–
–
(12)
59
(1,049)
(124)
67
–
(239)
90
–
(304)
(270)
(1)
(271)
209
59
(82)
1
(1)
118
–
399
(6)
393
209
87
(82)
1
(1)
122
(83)
1,201
(6)
1,195
–
26
–
–
–
8
(81)
740
–
740
373
45
(85)
4
(2)
–
373
71
(85)
4
(2)
8
(171)
(252)
179
(30)
149
919
(30)
889
Statutory profit increased to $1,195 million for the year end 30 June 2017 underpinned by the strong FFO performance
and growth in our business.
Significant fair value adjustments were excluded from FFO with the largest component comprising the Commercial
Property portfolio with increased valuations driven by continued capitalisation rate compression and income growth.
Mark-to-market derivatives and financial instruments also resulted in a fair value gain of $118 million for the year ended
30 June 2017 compared to a fair value loss of $171 million in the prior year. The net derivative gain reflects the increase
in market interest rate against where we have fixed our interest rates with interest rate hedge benefits.
Dividend income of $71 million from the investment in BGP Holdings Plc is also excluded from FFO as it is considered a
significant one-off item, outside the course of our core ongoing business activities.
Stockland Financial Report — 11
Directors’ Report
Year ended 30 June 2017
Capital management
Financial position
We maintained our focus on prudent balance sheet management, continuing to utilise diverse funding sources
throughout the year. Our gearing level decreased to 22.7% at 30 June 2017 (30 June 2016: 23.8%), driven by
strong operating cash flows allowing continued investment without needing to increase debt and the impact of
revaluation gains across the Commercial Property portfolio. Gearing remains within our target range of 20 – 30%.
We continue to retain our A-/stable credit rating from S&P and obtained a new A3 rating from Moody’s (equivalent
to S&P’s A-), in August 2017.
We manage our exposure to financial markets, including movements in foreign exchange rates and interest rates,
through the use of derivative financial instruments in order to provide greater certainty over future financing costs,
taking advantage of the historically low interest rate environment. The fixed/hedged ratio of 109% at 30 June 2017
(30 June 2016: 96%) represents the proportion of debt that has fixed interest based on drawn debt at 30 June 2017.
The overhedged position resulted from strong operating cash inflows at the end of the financial year and is expected
to revert to around 100%. The weighted average cost of debt for the period has decreased to 5.5% (2016: 5.8%).
Interest cover has increased to 4.8:1 (30 June 2016: 4.5:1) due to stronger performance across the business.
Balance Sheet
($M)
Cash
Real estate assets1:
• Commercial Property
• Residential
• Retirement Living
Other assets
Total assets
Interest bearing loans and borrowings
Retirement Living resident obligations
Other liabilities
Total liabilities
Net assets/total equity
FY17
238
10,255
2,483
3,848
701
17,945
3,529
2,629
1,410
7,568
9,927
Change %
↑14%
↑6%
↓1%
↑7%
↓24%
↓7%
↑8%
↓3%
FY16
208
9,706
2,517
3,589
922
16,942
3,800
2,427
1,461
7,688
9,254
The Commercial Property investment portfolio has increased by $549 million to $10,255 million primarily due to net
valuation uplift across all three asset classes (up $264 million including equity-accounted joint venture investments)
and capital and development expenditure of $333 million.
Retail portfolio values benefited from income growth and capitalisation rate compression, including the following
centres in NSW: Wetherill Park ($43 million), Glendale ($32 million), Shellharbour ($30 million), and Balgowlah
($21 million). Our Office portfolio recorded a net valuation gain of $67 million largely due to an uplift at 135 King
Street, NSW ($52 million), while Logistics and Business Parks similarly delivered valuation gains of $18 million
during the period. Valuation gains across the portfolio saw our weighted average capitalisation rate reduce
marginally from 6.4% to 6.2%.
The increase in capital and development expenditure predominantly reflects continued investment in the Retail
development pipeline including the redevelopment of Green Hills, NSW.
Residential assets, which represent mainly land under development, decreased slightly to $2,483 million at 30 June
2017. Strong settlement volumes in FY17 (up 8% on prior period) and the sale of some previously impaired land and
capital efficient restocking led to a reduction in inventory, while a disciplined approach to development expenditure
throughout the year ensured that production did not exceed sales. Whilst we settled 6,604 lots during the year we have
added approximately 9,900 lots to the pipeline. Finished goods levels remain appropriate. Land acquisitions reflect our
focus on acquiring land on capital efficient terms where possible.
The value of the Retirement Living assets, net of resident loan obligations, was $1,219 million, an increase of
$57 million from June 2016. This primarily reflects capital expenditure on the development pipeline including the
redevelopment of Cardinal Freeman, Sydney, and fair value uplift on the investment property portfolio, partly offset
1 Includes non-current assets held for sale, inventory, investment properties, equity-accounted investments and certain other assets.
Stockland Financial Report — 12
Directors’ Report
Year ended 30 June 2017
by an increase in resident loan obligations created on first sales of development units. We have identified potential
to develop a further 2,970 Retirement Living units in our existing portfolio.
Total debt decreased by $271 million to $3,529 million at 30 June 2017 primarily as a result of favourable fair value
movements on foreign denominated debt due to an appreciation in the AUD against the USD, EUR and HKD and
largely offsets the net unfavourable movements in derivative financial instruments. Movements in other assets and
liabilities mainly reflect the changes in value of the Group’s financial instruments, equity-accounted investments and
intangibles.
Cash flows
($M)
Operating cash flows
Investing cash flows
Financing cash flows
Net change in cash and cash equivalents
Cash at the end of the period
FY17
921
(380)
(511)
30
238
FY16
787
(508)
(241)
38
208
Change %
↑17%
↓25%
↑112%
↓ 21%
↑14%
Operating cash inflows are up $134 million on the prior year, primarily as a result of increased FFO and favourable
movements in working capital, partially offset by increased payments for Residential land.
Net cash outflows from investing activities reflects our continued commitment to growing our asset base and mainly
comprises payments for and development of Commercial Property investment properties ($374 million), with the
largest individual contribution relating to ongoing development at Green Hills. Investment in Retirement living
totalled $133 million with main villages including Cardinal Freeman, Willowdale and Mernda Village. Investing
cash inflows includes $71 million in dividend receipts relating to our investment in BGP Holdings Plc together with
proceeds from sale of investment properties of $74 million.
Net financing cash outflows primarily reflect dividends paid (net of DRP). The prior year included $335 million in net
proceeds from borrowings to fund acquisitions and development expenditure and also included payments to
terminate derivatives ($119 million), with no payments on terminations in the current year.
Equity
Distribution/Dividend Reinvestment Plan (DRP)
On 9 June 2017, Stockland announced that the DRP would operate for the final distribution to 30 June 2017 to
help fund the accretive development pipeline. We achieved a take-up rate of 21.6%.
The DRP security price of $4.20 was determined by the average of the daily volume weighted averages of the
selling price over a 15 day trading period immediately preceding 27 July 2017, with a discount of 1.0% on the
securities acquired under the DRP.
Distributions
The dividend and distribution payable for the year ended 30 June 2017 is 25.5 cents per Ordinary Stapled Security.
Our distribution policy is to pay the higher of 100% of Trust taxable income or 75 – 85% of FFO.
The distribution for the full year comprises:
Stockland
Trust distribution
Corporation dividend, fully franked
Total dividend/distribution
FY17
Cents
25.5
–
25.5
FY16
Cents
24.5
–
24.5
Registers closed at 5.00pm (AEST) on 5 July 2017 to determine entitlement to the half year dividend/distribution,
which will be paid on 31 August 2017.
Stockland Financial Report — 13
Directors’ Report
Year ended 30 June 2017
Business unit performance and priorities
Commercial Property
Our Commercial Property business comprises retail centres, logistics and business parks, and office assets. We are
one of the largest retail property owners, developers and managers in Australia. Our 41 retail centres accommodate
more than 3,500 retailers. The Logistics and Business Parks portfolio comprises 27 properties, encompassing
1.4 million square metres of building area. These properties are strategically positioned in key locations for logistics,
infrastructure and employment. The Office portfolio comprises eight assets, mostly in Sydney, NSW.
Portfolio at 30 June 2017
41 retail centres
27 logistics and business parks
8 office buildings
76 Commercial Property assets
*Stockland’s ownership interest
Performance
Commercial Property
($M, unless otherwise stated)
• Retail
•
Logistics and Business Parks
• Office
Trading profit
Net overheads
Total Commercial Property
Return on Asset (ROA)
Approximate value*
$7.1 billion
$2.0 billion
$0.8 billion
$9.9 billion
Funds from operations
FY17
FY16
Change
Comparable
growth
↑3.5%
↑3.6%
↑2.3%
↑4.1%
↑8.3%
↓13.2%
↑4.2%
↑3.4%
419
143
59
5
(18)
608
402
132
68
–
(18)
584
8.1%
8.3%
Our Commercial Property business continued to deliver solid recurrent earnings with a 3.4% increase in comparable
FFO to $608 million, with strong performance across all asset classes.
Retail
In a challenging environment, we have delivered positive FFO growth of 4.1%, maintained high occupancy and we
continued to focus on remixing our portfolio, in line with our customer needs and trade area dynamics.
Nationally, retail sales have been impacted by low wages growth, some retailer closures in the past year, and mixed
results from major tenants. While trading at some of our centres has been variable, we have seen an improvement
in sales growth in the second half and particularly in the final quarter. Specialty store sales productivity grew 1.9% to
$9,072 per square metre, which exceeds the Urbis sub-regional average of $8,273 per square metre by 8.3%.
We continue to see growth in lifestyle and entertainment tenancies, particularly larger format operators such as
JB Hi-Fi, Hoyts and Harris Scarfe, and we’ve recently confirmed that H&M will open new stores at our Townsville
and Rockhampton centres. Growth in specialty retail sales of 9.7% in retail services and 5.3% in casual dining
and food catering over FY17, reflects the success of our remixing strategy. We also continue to look at ways to
introduce technology to enhance our customers experience across our centres.
Momentum continued in the delivery of the retail development pipeline, with the $412 million transformation of
Stockland Green Hills at East Maitland progressing on schedule, and a $37 million redevelopment underway at
Stockland Wendouree in Ballarat.
Retail strategic priorities
The Retail business maintains its focus on creating market leading town centres, redeveloping its most productive
assets to create community and entertainment hubs and maximise trade area market share. We have $449 million
at cost, of retail development under construction and a future pipeline of $1 billion, targeting incremental IRRs of
9%+1 and stabilised FFO yields of 7%+ from this activity.
Our retail mix continues to evolve, underpinned by supermarkets, mini majors, food catering, fast casual dining,
speciality food, theatre, targeted apparel, health and retail services.
1 Unlevered 10 year IRR on incremental development from completion.
Stockland Financial Report — 14
Directors’ Report
Year ended 30 June 2017
We will continue to focus on tailoring our offering to each 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 business had an outstanding year. Occupancy increased to 99%, following a
period of active leasing and renewals, and the portfolio now represents 15% of our total assets.
We achieved strong comparable FFO growth of 3.6% with positive leasing results, particularly in the Sydney market.
Our development pipeline is also progressing well, with recent redevelopments at Ingleburn (Sydney), Erskine Park
(Sydney) and Oakleigh (Melbourne) all completed on budget and fully leased. A $77 million development project is
underway at Warwick Farm (Sydney), which is majority pre-leased to Daikin, for a 10 year term. The future pipeline
also looks very positive.
Logistics and Business Parks strategic priorities
Our focus is on growing and developing a market leading 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
We achieved solid comparable FFO growth of 2.3%. Our Sydney office portfolio performed well this year, which
represents the majority of our assets. Total FFO growth was lower due to the sale of Waterfront Place and Eagle
Street Pier, Brisbane, in FY15. The Perth and Canberra market remains challenging, but we are seeing positive
leasing momentum at our assets. Several of our Sydney properties also have development opportunities.
Office strategic priorities
In Office we continue to focus on optimising returns. We intend to retain the majority of our residual office portfolio
(strongly weighted to Sydney) whilst we maximise returns and assess development 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
South Wales, Queensland, Victoria and Western Australia. We are focused on delivering a range of masterplanned
communities and medium density housing in growth areas across the country. We hold 80,400 lots in our portfolio,
with a total end value of approximately $21.1 billion1.
Performance
Residential Communities
($M, unless otherwise stated)
Lots settled (lots)
Revenue
– Including superlot revenue2
EBIT (before interest in COGS)
EBIT margin
Operating profit (FFO)3
Operating profit margin
ROA – core portfolio4
ROA – total portfolio
FY17
6,604
FY16
6,135
$1,767m
$1,482m
$91m
$412m
23.3%
$270m
15.3%
20.8%
15.2%
$109m
$354m
23.9%
$230m
15.5%
19.6%
13.8%
Change
↑7.6%
↑19.3%
↓16.3%
↑16.4%
↓
↑17.4%
↓
↑
↑
Our Residential business delivered another year of double-digit operating profit (FFO) growth of 17.4%, and a net
operating profit margin of 16.6% on the core portfolio. We settled a record 6,604 lots in FY17, and we commence
FY18 with record pre-sales.
We made a number of strategic land acquisitions over the past 12 months to significantly restock our portfolio,
acquiring 9,900 lots. The majority of these are in the high-performing Melbourne market. Our landbank now totals
over 80,000 future housing lots nationally.
We have continued to expand our medium density business, with 213 homes settled this year, close to 600
currently under construction and pipeline of over 2,800 across Australia. Medium density development is a key
1 Excluding value on projects identified for disposal and assuming no material change in market conditions.
2 44 superlot settlements in FY17; 33 superlot settlements in FY16.
3 Operating profit is equal to FFO for the Residential business.
4 Core excludes impaired projects.
Stockland Financial Report — 15
Directors’ Report
Year ended 30 June 2017
growth driver for our Residential business as we extend our focus on community creation in the important “missing
middle” of our major capital cities.
We continue to deliver some of the most liveable and desirable new communities in Australia. Our leadership in
housing affordability and commitment to delivering a range of options for first home buyers and families, places us
in a preferred position for residential lending trends and government growth initiatives.
During the year, the Residential business reviewed its application of whole of life (WOL) accounting to ensure
ongoing consistency across our portfolio, ahead of our change in systems, specifically in relation to the allocation
of costs and treatment of superlots consistently with retail lots. There was no net impact to our WOL profitability and
no material change to FFO in FY17.
We regularly review our approach to managing project cost contingencies and potential revenue upside as part of
our WOL accounting within the Residential business. This ensures effective risk management to support our
business performance through the business cycle. The cost contingency and revenue review resulted in no
incremental FFO in FY17.
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:
(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
activating our land through the launch of new projects and working through low margin and impaired stock.
(2) Broaden our market reach – increase revenue by creating a better community value proposition that drives
(3)
high customer referrals and broaden market reach through a medium density/built form offering.
Improving efficiency – continue to manage costs. Project management has been embedded into the business
and is driving significant cost savings.
Retirement Living
Stockland is a top three retirement living operator within Australia, with over 9,600 established units in 65
established villages across five states and the Australian Capital Territory. The portfolio includes a development
pipeline of over 2,900 units.
Performance
Retirement Living
($M, unless otherwise stated)
EBIT
Operating profit (FFO)1
Occupancy
Cash ROA
Established
– Established settlements (units)
– Withheld settlements (units)
Total sales volume (units)
Average re-sale price
Turnover cash per unit
Turnover cash margin
Reservations on hand (units)
Development
Average price per unit
Average margin – excludes Deferred Management Fee (DMF)
Development settlements (units)
Reservations on hand (units)
1 Operating profit is equal to FFO for the Retirement Living business.
FY17
69
63
95.0%
6.2%
731
49
780
$339k
$86k
25.4%
128
$539k
19.1%
270
58
FY16
64
57
94.9%
5.8%
716
19
735
$329k
$81k
24.7%
155
$509k
16.8%
297
67
Change
↑8.3%
↑11.1%
↑
↑
↑2.1%
↑
↑6.1%
↑3.3%
↑6.2%
↑
↓17.4%
↑5.8%
↑
↓9.1%
↓13.4%
Stockland Financial Report — 16
Directors’ Report
Year ended 30 June 2017
Operating profit (FFO) in Retirement Living was up 11.1% on FY16, reflecting strong sales, active management of
our portfolio and improved margins. Reservations on hand reflect the availability of stock in key markets. Cash ROA
increased to 6.2%, from 5.8% in FY16.
This is the fourth consecutive year of double-digit operating profit growth for our business, driven by our focus on
resident satisfaction underpinned by a customer-centric culture.
Our development pipeline is proceeding well, with the delivery of our UDIA award-winning apartments at Cardinal
Freeman The Residences in Sydney’s inner-west. We are also making good progress on our new vertical village at
Birtinya, in the heart of the Sunshine Coast’s new health hub.
We continue to invest in new projects, with planning underway on a number of brownfield redevelopments at
existing villages.
Development margins were high this year at 19.1% due to project delivery mix, but will normalise in FY18 to around
15 – 17%.
We are further extending our reputation for quality villages and broadening our customer reach through our new,
non-deferred management fee communities for over 55s, called ‘Aspire’. We have two projects currently underway,
at our Elara residential community in Sydney and Calleya in Perth, and the initiative will be rolled out at other
locations in our portfolio over the coming years.
We understand there is a lot of focus on the sector at the moment. We take pride in our Retirement Living business,
and we are committed to open, transparent and respectful relationships with our residents. Every year we engage
independent consultants to assess resident satisfaction. Last year, more than 6,800 residents participated in the
survey, and rated their overall satisfaction with Stockland as 8.4 out of 10.
Retirement Living strategic priorities
The business remains focused on being a preferred operator and developer of Retirement Living villages by
creating high quality retirement villages in Australia. 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
(3) Differentiating the customer experience through access to a range of resident care and other services.
Stockland Financial Report — 17
Directors’ Report
Year ended 30 June 2017
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:
Tom Pockett
BComm, FCA
(Non-Executive)
Carolyn Hewson
BEc (Hons), MA (Ec),
FAICD
(Non-Executive)
Barry Neil
BE (Civil)
(Non-Executive)
Mr Pockett was appointed to the Board on 1 September 2014 and became Non-
Executive Chairman on 26 October 2016. He is the Chairman of Autosports Group
Limited (appointed 26 October 2016) and a Non-Executive 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 is a
member of the Stockland Human Resources Committee and Chairman of the
Sustainability Committee. Mr Pockett is former Chair of the Stockland Audit Committee
and the Stockland Capital Partners Limited Audit Committee, and a former member of the
Stockland Risk Committee. 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.
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
None.
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 Chair 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 — 18
Directors’ Report
Year ended 30 June 2017
Stephen Newton
BA (Ec and Acc),
M.Com, MICAA, MAICD
(Non-Executive)
Nora Scheinkestel
LLB(Hons), PhD,
FAICD
(Non-Executive)
Carol Schwartz
BA, LLB, MBA, FAICD
(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 and Viva
Energy REIT Group. 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,
University of Notre Dame Australia and Newcastle Airport Limited.
Mr Newton has extensive 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 spanning almost 23 years included 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. Mr Newton
is the Chair of the Stockland Audit Committee and a member of the Stockland Risk and
Sustainability Committees.
Former Directorships of listed entities in last three years
Mr Newton was a Director of Australand Property Group from December 2007 to October
2014.
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), Ausnet Services Limited and the Victorian Arts Centre
Trust. 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. She previously held positions with CRA Ltd, Macquarie Bank,
Chase AMP and Deutsche Bank, where, as head of the Project Finance Unit, she was
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 Chair of the Risk Committee and a member of
the Stockland Audit 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.
Ms Schwartz was appointed to the Board on 1 July 2010. She has extensive experience in
business, property and community organisations. Ms Schwartz is a Director of the Reserve
Bank of Australia and is on the Board of a number of organisations including Qualitas
Property Partners and the Australian Chamber Orchestra. Her other appointments include
Chair of Our Community and Creative Partnerships Australia, and Chair of Women’s
Leadership Institute Australia. Ms Schwartz is also the former Chair of Temple and
Webster. Ms Schwartz serves on the Risk, Human Resources and Sustainability
Committees.
Former Directorships of listed entities in last three years
Ms Schwartz was Chair of Temple and Webster from 10 December 2015 to 25 October
2016.
Stockland Financial Report — 19
Directors’ Report
Year ended 30 June 2017
Mark Steinert
BAppSc, G Dip App Fin
& Inv (Sec Inst),
F Fin, AAPI
(Managing Director)
Andrew Stevens
BComm, MComm,
FCA, MAICD
(Non-Executive)
Mr Steinert was appointed Managing Director and Chief Executive Officer of Stockland
on 29 January 2013. Mr Steinert was also appointed to the Board 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 a
member of the Stockland Sustainability Committee and a Director of Stockland Capital
Partners Limited, the Responsible Entity for Stockland’s unlisted property funds. He is
the immediate past President and current Director of the Property Council of Australia,
and also served as a Director of the Green Building Council of Australia until 30 June
2016.
Former Directorships of listed entities in last three years
None.
Andrew Stevens was appointed to the Board on 1 July 2017.*
Mr Stevens is currently a Non-Executive Director of MYOB Group Limited and Thorn
Group Limited. He is also Chairman of Advanced Manufacturing Growth Centre Limited
(AMGC), Director of Committee for Economic Development Australia (CEDA), and a
Board Member of the Greater Western Sydney Giants.
Mr Stevens has some 30 years’ experience in business and technology, most notably
holding senior leadership roles at IBM for 12 years. As the Managing Director, Australia
and New Zealand at IBM from 2011 to 2014, Mr Stevens led the transformation of the
business to become a leader in cloud-based computing, helping blue chip clients to
derive business benefits from new and emerging technologies. Prior to this, Mr Stevens
was the COO of PwC Consulting in Asia Pacific.
Mr Stevens is also a member of the Advisory Board of the Australian School of Business
at the University of New South Wales, a Member of the Professional Conduct Oversight
Committee of Chartered Accountants Australia and New Zealand, a Member of the Chief
of Defence’s Gender Equity Advisory Board and a Member of the Male Champions of
Change
Mr Stevens is a Fellow of the Institute of Chartered Accountants and Member of the
Australian Institute of Chartered Accountants. Mr Stevens is a member of the Stockland
Audit and Sustainability Committees.
Former Directorships of listed entities in last three years
None.
*As required by the Stockland Constitution, Mr Stevens will offer himself for election by
securityholders at the 2017 Annual General Meeting to be held in October.
Stockland Financial Report — 20
Directors’ Report
Year ended 30 June 2017
Former Directors
Graham Bradley
BA, LLB (Hons 1),
LLM, FAICD
Chairman
(Non-Executive)
Peter Scott
BE (Hons), MEng Sc,
FIE. Aust, CPEng,
MICE
(Non-Executive)
Mr Bradley was appointed to the Board on 9 February 2004 and retired from the Board
on 26 October 2016. Mr Bradley was Non-Executive Chairman from 25 October 2005 to
26 October 2016. 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), the Hongkong and
Shanghai Banking Corporation Limited (appointed November 2012) and is a Non-
Executive Chairman of GrainCorp Limited (appointed as Chairman in May 2017 and as
a Director in March 2017) 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 2010) and a Director of MBF Australia Limited (November 2003
to November 2007), and Singapore Telecommunications Limited (May 2004 to July
2011). Prior to his resignation, Mr Bradley chaired the Sustainability Committee, and
was a member of the Human Resources Committee. Mr Bradley continues to chair the
Stockland CARE Foundation.
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 Scott was appointed to the Board on 9 August 2005 and retired from the Board on
17 August 2016. Mr Scott is a Director of O’Connell Street Associates Pty Limited
(appointed May 2008) and Transurban Group (appointed 1 March 2016). He is also
Chairman of Igniting Change, a not-for-profit making organisation (appointed 11
October 2005). He was Chairman of Perpetual Limited from July 2005 to May 2017,
Chairman of Perpetual Equity Investment Company Limited from December 2014 to
June 2017, Chairman of Sinclair Knight Mertz Holdings from October 2007 to 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. Prior to his
resignation, Mr Scott was 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.
Former Directorships of listed entities in last three years
Mr Scott was a Director of Perpetual Limited from July 2005 to May 2017 and Perpetual
Equity Investment Company Limited from August 2014 to June 2017.
Stockland Financial Report — 21
Directors’ Report
Year ended 30 June 2017
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
Invigor Group Limited, Equatorial Mining Limited, 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 Secretary
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. Before joining
Stockland, 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.
Stockland Financial Report — 22
Directors’ Report
Year ended 30 June 2017
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
Human
Resources
Committee
Sustainability
Committee
Risk
Committee
A
B
A
B
A
B
A
B
A
B
12
12
12
11
11
10
12
4
2
12
12
12
12
12
12
12
4
2
–
7
5
2
7
–
–
–
–
–
7
5
2
7
–
–
–
–
4
–
–
2
–
4
–
2
–
4
–
–
2
–
4
–
2
–
2
2
2
2
2
1
2
–
–
2
2
2
2
2
2
2
–
–
–
–
3
1
4
4
–
–
1
–
–
3
1
4
4
–
–
1
Director
Ms C Hewson
Mr B Neil
Mr S Newton
Mr T Pockett
Ms N Scheinkestel
Ms C Schwartz
Mr M Steinert
Former Director
Mr G Bradley1
Mr P Scott2
A – Meetings attended / B – Meetings eligible to attend
1 Retired from the Board on 26 October 2016
2 Retired from the Board on 17 August 2016
Stockland Capital Partners
Director
Mr B Neil
Mr T Pockett
Mr S Newton
Mr A Sherlock
Mr M Steinert
Scheduled
Board
Audit
Committee
A
4
–
–
4
4
B
4
–
–
4
4
A
–
1
3
4
–
B
–
1
3
4
–
A – Meetings attended / B – Meetings eligible to attend
Stockland Financial Report — 23
Directors’ Report
Year ended 30 June 2017
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 securityholders;
• oversees the development and implementation of Stockland’s overall framework of governance, risk
management, internal control and compliance which underpins the integrity of management information
systems, financial reporting and fosters high ethical standards throughout Stockland;
• 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 or her direct reports and reviews Senior Executive
and Board succession planning and Board performance;
• approves and monitors the annual budget, business plans, financial statements, financial policies and financial
reporting and major capital expenditure, acquisitions and divestitures;
• determines and adopts dividend and distribution policies for Stockland;
• oversees compliance with laws and regulations which apply to Stockland and its businesses; and
• appoints and monitors the independence of Stockland’s external auditors.
The Board has delegated certain responsibilities to standing Committees which operate in accordance with the
Charters approved by the Board. The majority of members of each Committee of the Board are required to be
independent Non-Executive Directors. All Non-Executive Directors may attend any meeting of a Committee. The Board
and Committees may meet with external advisors with, or in the absence of management.
The Board has delegated the day to day management of the business of Stockland to management through the
Managing Director and Chief Financial Officer subject to authority limits applicable to the Senior Executives. The Board
has, however, reserved certain matters for the Board of a strategic, sensitive or extraordinary nature or which exceeds
the thresholds set in the delegation of authorities framework to management pursuant to which it has control.
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, Senior Executives and employees are required to maintain high ethical standards of conduct.
Stockland’s Code of Conduct (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.
Stockland Financial Report — 24
Directors’ Report
Year ended 30 June 2017
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 deliver long term sustainable profitable returns to securityholders.
As at the date of this report, the Board comprised one Executive Director and seven Non-Executive Directors.
The Boards of Stockland Corporation Limited and Stockland Trust Management Limited have the same Directors.
Directors’ details are listed on pages 18 to 22, 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, technology
(including digital), 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, capital management, mergers and
acquisitions, 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 2017
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 2017, of the seven
Directors, including the Managing Director, four had tenure of less than six years, two had tenure of between six
and nine years and one had served for more than nine years. In August 2016 and October 2016, Mr Peter Scott and
Mr Graham Bradley retired from the Board respectively and Mr Andrew Stevens was appointed to the Board on 1
July 2017. These changes reflect the ongoing succession planning and renewal programme for the Board.
Stockland Financial Report — 25
Directors’ Report
Year ended 30 June 2017
In defining the Board’s requirements for new Directors, consideration is given to the skills, professional experience,
and educational backgrounds of continuing members of the Board, the organisation’s strategy and any identified
skills required to supplement the Board’s capabilities as the organisation’s strategy evolves. Criteria used includes
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 the Director’s 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.
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 2013, we reached our original 2017 target for women in our management levels of 40% and we have now revised
this target to 50% by 2020. We also set annual progress targets for both Women in Management (47.3% for FY18)
and Women in Senior Management (39% for FY18). 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 2017 Remuneration
Report on pages 41 to 42 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 will 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 2017 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.
Stockland Financial Report — 26
Directors’ Report
Year ended 30 June 2017
Board meetings
The Board currently holds 9 scheduled meetings each financial year. Additional meetings are convened as required.
During the 2017 financial year, the Board held 12 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.
Board and Director performance
The Board has instituted a formal process to review the performance and effectiveness of the Board, the Board
Committees and individual Directors. The Human Resources Committee oversees this process.
On a regular basis an external review is also conducted. An external consultant was engaged to facilitate a review
of Board performance in 2015 and it is intended that a new external review be conducted in 2017. As part of the
external 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 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 as at
August 2015 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 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
and the Sustainability Committee is chaired by an independent Director and has a majority of independent
Directors.
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 charters for each Board Committee located on the Stockland website at https://www.stockland.com.au/about-
stockland/corporate-governance.
Stockland Financial Report — 27
Directors’ Report
Year ended 30 June 2017
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 37 to 51 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) Ms C Schwartz – Non-Executive Director
(3) Mr T Pockett – Non-Executive Director (appointed in October 2016)
(4) Mr G Bradley – Non-Executive Director (retired in October 2016)
The Human Resources Committee meets as frequently as required and held 4 meetings during the 2017
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.
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.
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 control frame work, risk management framework and periodic reporting.
Audit Committee meetings are held at least quarterly and are attended by Stockland’s external auditor and, where
appropriate, by the Managing Director, the Chief Financial Officer 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 twice 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.
Stockland Financial Report — 28
Directors’ Report
Year ended 30 June 2017
The members of the Audit Committee during or since the end of the financial year were:
(1) Mr S Newton (Chair) – Non-Executive Director (appointed October 2016)
(2) Mr T Pockett – Non-Executive Director (Audit Committee Chair until appointment as Chair of the Board in
October 2016)
(3) Mr B Neil – Non-Executive Director
(4) Dr N Scheinkestel – Non-Executive Director
(5) Mr A Stevens – Non-Executive Director (appointed July 2017)
The Audit Committee met 7 times during the 2017 financial year.
Tax Strategy – Our Approach to Tax
Stockland’s tax strategy is to conduct all its tax affairs in a transparent, equitable and commercially responsible
manner, whilst having full regard to all relevant tax laws, regulations and tax governance processes, to demonstrate
good corporate citizenship.
Consistent with the Board approved low tax risk appetite, Stockland maintains a low tax risk profile to ensure we
remain a sustainable business and an attractive investment proposition, in both the short and long term.
Tax Control and Governance Policy Framework
Stockland maintains a Tax Control and Governance Framework (TCGF), reviewed and approved by our Board
Audit Committee, which outlines the principles governing Stockland’s tax strategy and risk management policy.
Our Tax Control and Governance Framework is consistent with the guidelines published by the Australian Taxation
Office (ATO) regarding tax risk management and governance processes for large business taxpayers.
We undertake periodic reviews of the TCGF 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 our TCGF 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.
Voluntary Tax Transparency Code
As part of Stockland’s commitment to tax transparency and demonstrating good corporate citizenship, Stockland
has adopted the Australian Federal Government’s Voluntary Tax Transparency Code (TTC), which provides a set of
principles and minimum standards to guide medium and large businesses on public disclosure of tax information.
Tax Disclosures & Information
For information and detailed reconciliations of Stockland’s tax expense, effective tax rate and deferred tax balances
please refer to Section (B3) in the 2017 Financial Report.
Tax Contribution Summary
As Australia’s largest diversified property group, which owns, develops and manages commercial property assets,
residential and retirement living communities, Stockland contributes to the Australia economy, through the various
taxes levied at the federal, state and local government level.
For 2017 these taxes totalled approximately $2385m, and were either borne by Stockland as a cost of our business
or collected and remitted as part of our broader contribution to the Australian tax system.
Stockland Financial Report — 29
Directors’ Report
Year ended 30 June 2017
The chart below illustrates the types of taxes which contributed to the taxes paid and/or collected and remitted for
the 2017 year:
Total Tax Contribution
FY17 Total Tax
Contribution
$238m
40% Net GST Paid
28% PAYG Withholding
28% State Taxes (includes Land Tax,
Stamp duty & Payroll Taxes)
3% Other Duties & Levies
1% Fringe Benefit Tax
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 2017 financial year to satisfy itself that it continues to be sound and any
material changes are reviewed and resolved at Board level. Further information about 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) Dr N Scheinkestel (Chair) – Non-Executive Director (Chair from August 2016)
(2) Ms C Schwartz – Non-Executive Director
(3) Mr S Newton – Non-Executive Director (appointed October 2016)
(4) Mr P Scott – Non-Executive Director (Chair until retirement in August 2016)
(5) Mr T Pockett – Non-Executive Director (Member until appointment as Chair of the Board in October 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 2017 financial year.
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
Stockland Financial Report — 30
Directors’ Report
Year ended 30 June 2017
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 2 times during the 2017 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.
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.
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 2017 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 about 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 2017, 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 give 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:
(3) 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
(4) 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 2017, 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 — 31
Directors’ Report
Year ended 30 June 2017
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:
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, or putting forward to securityholders a candidate
for election, as a director; and
b) provide securityholders with all material information in its
possession relevant to a decision on whether or not to
elect or re-elect a director.
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
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Financial Report p. 24, and Board
Charter at
https://www.stockland.com.au/about-
stockland/corporate-governance
Financial Report, p. 25 – 26, and at
https://www.stockland.com.au/about-
stockland/corporate-governance
See notice of annual general
meeting and announcements to
securityholders as required from
time to time
https://www.stockland.com.au/about-
stockland/corporate-governance
Financial Report p. 24 and Board
Charter at
https://www.stockland.com.au/about-
stockland/corporate-governance
Financial Report, p. 25 and at
https://www.stockland.com.au/about-
stockland/corporate-governance
https://www.stockland.com.au/about-
stockland/corporate-governance
Financial Report, p. 26 and 42, and at
https://www.stockland.com.au/about-
stockland/corporate-governance
N/A
See 1.5(c)(2) below.
(2) if the entity is a ‘relevant employer’ under the
Yes
Workplace Gender Equality Act (WEGA), the entity’s
most recent ‘Gender Equality Indicators’, as defined
in and published under that Act.
See WGEA Report at
https://www.stockland.com.au/about-
stockland/sustainability
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.
Yes
Financial Report p. 27
Yes
Financial Report p. 27
Yes
Yes
Remuneration report.
Remuneration report.
Stockland Financial Report — 32
Directors’ Report
Year ended 30 June 2017
ASX Principles and Recommendations
Principle 2: Structure the Board to add value
2.1 The board of a listed entity should:
Recommendation
Followed
Reference
a) have a nomination committee which:
Yes
(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.
2.2 A listed entity should have and disclose a board skills matrix
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:
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.
Financial Report p. 28 and at
https://www.stockland.com.au/about-
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.
N/A
Yes
Financial Report p. 25 – 26
Yes
N/A
Yes
Yes
Financial Report p. 18 – 22 and 26
N/A
Financial Report p. 18 – 22
Financial Report p. 26 and Board
Charter at
https://www.stockland.com.au/about-
stockland/corporate-governance
Financial Report p. 26 and Board
Charter at
https://www.stockland.com.au/about-
stockland/corporate-governance
https://www.stockland.com.au/about-
stockland/corporate-governance
2.5 The chair of the board of a listed entity should be an
Yes
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
Yes
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:
a) have a code of conduct for its directors, senior
executives and employees; and
b) disclose that code or a summary of it.
Yes
Yes
Financial Report p. 24 and at
https://www.stockland.com.au/about-
stockland/corporate-governance
https://www.stockland.com.au/about-
stockland/corporate-governance
Stockland Financial Report — 33
Directors’ Report
Year ended 30 June 2017
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:
(1) has at least three members, all of whom are non-
executive directors and a majority of whom are
independent directors; and
Recommendation
Followed
Reference
Yes
Financial Report p. 28 – 29
(2) is chaired by an independent director, who is not the
Yes
Financial Report p. 28 – 29
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
b) if it does not have an audit committee, disclose that fact
and 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
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.
Yes
Yes
Yes
https://www.stockland.com.au/about-
stockland/corporate-governance
Financial Report p. 18 – 22 and 28 –
29
Financial Report p. 23 and 29
N/A
N/A
Yes
Financial Report p. 31
4.3 A listed entity that has an AGM should ensure that its
Yes
external auditor attends its AGM and is available to answer
questions from securityholders relevant to the audit.
https://www.stockland.com.au/about-
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 securityholders
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 securityholders.
6.4 A listed entity should give securityholders the option to
receive communications from, and send communications to,
the entity and its security registry electronically.
Yes
https://www.stockland.com.au/about-
stockland/corporate-governance
Yes
Yes
Yes
Yes
https://www.stockland.com.au/about-
stockland/corporate-governance
https://www.stockland.com.au/about-
stockland/corporate-governance
https://www.stockland.com.au/about-
stockland/corporate-governance
https://www.stockland.com.au/about-
stockland/corporate-governance
Stockland Financial Report — 34
Directors’ Report
Year ended 30 June 2017
ASX Principles and Recommendations
Principle 7: Recognise and manage risk
Recommendation
Followed
Reference
7.1 The board of a listed entity should:
Yes
Financial Report, p. 30
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
(2) is chaired by an independent director,
Yes
Financial Report. p. 30
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/about-
stockland/corporate-governance
Financial Report. p. 30
Financial Report. p. 23 and 30
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:
a) review the entity’s risk management framework at least
annually to satisfy itself that it continues to be sound;
and
b) disclose, in relation to each reporting period, whether
such a review has taken place.
7.3 A listed entity should disclose:
a) if it has an internal audit function, how the function is
structured and what role it performs; or
b) if it does not have an internal audit function, that fact and
the processes it employs for evaluating and continually
improving the effectiveness of its risk management and
internal control processes.
Yes
Yes
Yes
Financial Report. p. 30
and at
https://www.stockland.com.au/about-
stockland/corporate-governance
Financial Report. p. 30
Financial Report. p. 30 and at
https://www.stockland.com.au/about-
stockland/corporate-governance
N/A
N/A
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
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.
and at
https://www.stockland.com.au/about-
stockland/sustainability
Yes
Financial Report. p. 28
Yes
Yes
Yes
Yes
Financial Report. p. 28
https://www.stockland.com.au/about-
stockland/corporate-governance
Financial Report. p. 28
Financial Report. p. 23 and 28
N/A
N/A
Stockland Financial Report — 35
Directors’ Report
Year ended 30 June 2017
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
Yes
scheme 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/about-
stockland/corporate-governance
Stockland Financial Report — 36
Directors’ Report
Year ended 30 June 2017
Remuneration Report – Audited
The Board is pleased to present this Remuneration Report for Stockland for the year ended 30 June 2017
(FY17), 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
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.
In FY17 there was no change to the Fixed Pay for the Managing Director and CEO. There were certain changes to
Stockland’s Remuneration Framework that were announced last year, effective for this year, which are set out in
section 2.3. During the year, two of our nine Senior Executives were awarded modest increases in their fixed pay to
reflect increased scope of responsibilities and market relativities.
Following the continued strong financial and operational performance delivered by the executive team in FY17 as
reflected in the Corporate Balanced Scorecard set out in section 3.3 of this Report as well as the higher maximum
STI opportunity outlined in section 2.3, the aggregate Short Term Incentive (STI) awarded to our Senior Executives
was 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. A portion of the Long Term Incentives (LTI)
awards available to our Senior Executives vested as relevant Earnings Per Share (EPS) hurdles were achieved in
the three years to 30 June 2017.
1.1 Key Messages
(a) Financial Highlights for FY17
Stockland again delivered strong financial and organisational performance with reported FFO of $802 million for the
full year to 30 June 2017 and FFO per security of 33.4 cps, an increase of 7.4% on the prior financial year. Total
Shareholder Return (TSR) for the year to 30 June 2017 was 7.1% and for the three years to 30 June 2017 was 40.0%.
(b) Fixed Pay
In FY17, 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 two Senior Executives was increased to reflect their increased scope of responsibilities and market relativities.
The average increase in Fixed Pay for the Senior Executives was less than 2%. Our considered approach to
remuneration will continue in FY18 with no changes planned for the Fixed Pay of the Managing Director or 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 2017, Stockland delivered a Compound Average Growth in underlying EPS of
6.5%. This was above the maximum vesting target of 6.25% set in FY15. Accordingly all of the EPS component
of the FY15 LTI has vested. Stockland delivered a TSR over the three year performance period of 40.0% which,
while a strong return, was nevertheless below the performance benchmark (the ASX AREIT 200 index excluding
Stockland) of 50.5% and accordingly none of the TSR component of the FY15 LTI has vested. These combined
outcomes resulted in the vesting of 50% of FY15 LTI awards.
2. Remuneration Framework
Stockland is committed to an executive remuneration framework that supports Stockland’s objectives 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 — 37
Directors’ Report
Year ended 30 June 2017
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 FY17 however the basis for determining the number of LTI
performance rights granted has been updated. The number of LTI rights awarded is based on the Volume Weighted
Average Price of Stockland securities for the ten working days post 30 June (face value methodology), this is
consistent with the approach for determining number of Deferred STI awards. Previously the number of LTI rights
awarded was based on the fair value at grant date. 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
25% Fixed Pay
12.5% Cash STI
12.5% Deferred STI
50% LTI
33% Fixed Pay
19% Cash STI
9% Deferred STI
39% LTI
Stockland Financial Report — 38
Directors’ Report
Year ended 30 June 2017
The table below provides a summary of Stockland’s framework and how each component is determined.
Principles and
Philosophy
Remuneration
component
Measure
At Risk Weighting
Fixed Remuneration should
be fair, competitive and
regularly benchmarked to
relevant market levels
Fixed Pay (FP)
Salary and other benefits
(including statutory
superannuation)
External benchmarking
based on surveys sourced
from a number of
organisations including EY,
AON Hewitt and Mercer
A significant portion of
remuneration should be ‘at
risk’ and fairly reward
executives if pre-set
objectives and hurdles are
achieved and/or exceeded
and
Build a sense of business
ownership and alignment
which benefits all
securityholders interests
Short term Incentive (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 Managing
Director & CEO (one-third
for Senior Executives) and
100% awarded as deferred
securities for any
performance above target
Any deferred securities
vest equally subject to
continued service after 1
and 2 years
Long Term Incentive (LTI)
Delivered as Performance
Rights measured against
performance hurdles over a
three year performance
period.
Any rights then convert to
deferred securities if
performance hurdles are
exceeded which vest
equally subject to
continued service after 3
and 4 years
Depends on company and
individual performance
reflecting progress against
a Balanced Scorecard of
Key Performance
Indicators (KPIs) based on
Target
100% of FP
(Managing Director & CEO)
80 – 90% of FP
(Other Senior Executives)
Business/Financial
Maximum
150% of Target
outcomes
Customer/Stakeholder
and Sustainability
performance
Leadership and People
Management
Operational Excellence
and Risk Management
Managing Director & CEO
200% of FP
Other Senior Executives
120% of FP
Earnings per security
(EPS)
Compound Average
Growth Rate in Funds
From Operations (FFO)
(50% weighting)
and
Total Shareholder Return
(TSR)
above a composite
index reflecting AREIT
200 competitors, as
described in section 2.3
with maximum vesting
occurring if Stockland’s
TSR is 10% or more
above this index
(50% weighting)
Minimum
securityholding
requirement
The Managing Director & CEO is required to maintain a
minimum holding of Stockland securities equivalent to at
least two times fixed pay (one times fixed pay for other
Senior Executives) for any securities granted after 1 July
2010
Stockland Financial Report — 39
Directors’ Report
Year ended 30 June 2017
2.3 Enhancements to Remuneration Framework
As outlined in last year’s remuneration report, following a review of the competitiveness of Stockland’s
Remuneration Framework relative to our property industry peers, the Board has made four changes which applied
from FY17. These changes were as follows:
• To make our long-term incentive program simpler and more transparent, we awarded LTI grants based on the face
value of Stockland’s securities at the time of grant, rather than the fair value methodology which we had used for
the past 10 years. 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 compared with our major
competitors we measure our relative TSR performance against a tailored index rather than the ASX AREIT 200
Index excluding Stockland as follows:
AREIT 200 Large Caps equally weighted and forms 80% of the index
DXS
GMG
GPT
MGR
SCG
VCX
DEXUS PROPERTY GROUP
GOODMAN GROUP
GPT GROUP
MIRVAC GROUP
SCENTRE GROUP
VICINITY CENTRES
AREIT 200 Smaller Caps equally weighted and forms 20% of the index
ABP
BWP
CHC
CQR
CMW
GOZ
IOF
NSR
SCP
ABACUS PROPERTY GROUP
BWP TRUST
CHARTER HALL GROUP
CHARTER HALL RETAIL REIT
CROMWELL PROPERTY GROUP
GROWTHPOINT PROPERTIES AUSTRALIA
INVESTA OFFICE FUND
NATIONAL STORAGE REIT
SHOPPING CENTRES AUSTRALASIA PROPERTY GROUP
13.33%
13.33%
13.33%
13.33%
13.33%
13.33%
2.22%
2.22%
2.22%
2.22%
2.22%
2.22%
2.22%
2.22%
2.22%
• Consistent with the focus on Funds From Operations (FFO) as our key financial measure, the Earnings Per
Security component on the LTI awards from FY17 will be based on Growth in FFO per security. LTI awards
made before FY17 will remain based on Underlying Profit.
• Based on benchmarking with our peers, and to further weight short term remuneration towards “at risk”
compensation, we increased 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% of Target to 150% 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.
Stockland Financial Report — 40
Directors’ Report
Year ended 30 June 2017
3. Remuneration Outcomes
3.1 Financial performance over the past 5 years
Underlying Profit, FFO, 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 June3 ($)
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 (%)
FY13
FY14
FY15
FY16
FY17
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
696
802
1,195
4.38
25.5
29.0
33.4
49.8
7.1
(6.7)
1 Underlying Profit was the performance measure used in determining the EPS component of LTI remuneration for periods up to and including
30 June 2016. Performance against this benchmark is set out in section 3.4.
2 FFO replaced 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 11 of the Operating and Financial Review.
3 FY12 closing security price was $3.08.
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 considered 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 2017 financial year, Fixed Pay did not increase for our Managing Director and CEO or for the majority of our
Senior Executives. The average increase across all Key Management Personnel (KMP) in FY17 was less than 2%.
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 Key Performance Indicators (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 FY17 is provided in the
following table.
Corporate Balanced Scorecard
KPI
Commentary
Overall Rating
Business and Financial Performance (75%)
Group performance
• Funds from Operations per security
(FFOps) guidance of 6% to 7%; and
• Return on Equity1 (ROE) of 10%.
Business Performance
• Operating Business performance in line
with plan;
• FFOps growth was 7.4% to 33.4 cps.
Above Target
• ROE was 11.4%.
Business unit profitability was up on FY16:
• Commercial Property FFO of $608 million was up on
Above or
On Target
FY16 and in line with plan.
• Residential Operating Profit of $270 million was well
up on FY16 and above plan.
• Retirement Living profit of $63 million was up on
FY16 and in line plan.
Stockland Financial Report — 41
Directors’ Report
Year ended 30 June 2017
KPI
Commentary
• Average Debt Maturity was over 5 years and Credit
Rating maintained, liquidity buffer increased with
gearing and interest cover all within guidelines
• 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%
Overall Rating
On or
Above Target
• Deliver against Key Business Priorities
• Good progress against our strategic priorities being;
Grow asset returns and our customer base,
Operational excellence and Capital strength
On or
Above Target
Customer, Stakeholder and Sustainability Performance
• Achieve independent customer satisfaction
• The customer satisfaction scores were above target
At Target
ratings goals for each business unit.
for Retirement Living but below target for Commercial
and 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 10.6%;
Above Target
(employees rated good and above) to
12.0% or less
• Achieve employee engagement target –
• Employee engagement score of 82%;
Above Target
80%
• Maintain women as percentage of total
• Women in management was 45.9%
Above Target
•
•
management at 45.2% or better
Increase women as percentage of total
senior management to 36.0% or better
Increase female General Managers to 33%
or better
• Women in senior management was 37.3%
•
34.6% of General Managers were females
• Progress longer term diversity and
• Good progress made including again being
On Target
inclusiveness objectives
recognised as a WGEA Employer of Choice for
Gender Equality for third consecutive year
Operational Excellence & Risk Management
• Continued Process Improvement and
• Good progress with implementation of key systems
On Target
enhanced innovation
as part of Core Systems Program
• Embed strong risk compliance and safety
management practices
• Excellent safety record with no major preventable
injuries with continued embedding of the risk and
compliance framework
On Target
1 Excluding Residential workout projects. ROE was 10.1% including these projects.
The approved STI pool for all employees in FY17 was $37.9 million of which $9.4 million (or 25% 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 FY18 and FY19.
Details of the FY17 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
Funds from Operations
Cash STI1
DSTI2
Total STI pool
1 Includes applicable superannuation.
FY13
FY14
FY15
FY16
FY17
495
472
17.9
3.6
21.5
555
573
21.4
6.0
27.4
608
657
24.0
9.0
33.0
660
740
28.1
8.9
37.0
696
802
28.4
9.5
37.9
Stockland Financial Report — 42
Directors’ Report
Year ended 30 June 2017
(b) STI outcomes – Managing Director and CEO and other Senior Executives
The table below sets out the STI awards for FY17. STI incentives are awarded in both cash and Stockland
securities with deferred vesting. For amounts up to the Target STI awarded, the Managing Director and CEO
receives one-half of STI in cash and one-half in deferred securities and Senior Executives receive two-thirds of STI
in cash and one-third in deferred securities. Any STI above target is awarded as securities with deferred vesting.
Half of the deferred STI securities vest 12 months after award with the remaining half vesting 24 months after
award, provided employment continues to the applicable vesting date.
Target STI
(as % of
Fixed Pay)
Maximum
STI (as % of
Fixed Pay)
STI awarded
(as % of
Maximum STI)
Managing Director
Mark Steinert
Senior Executives
Stephen Bull
Katherine Grace
Tiernan O’Rourke
Darren Rehn
Michael Rosmarin
John Schroder
Simon Shakesheff
Andrew Whitson
%
100
90
80
80
90
80
90
80
90
%
150
135
120
120
135
120
135
120
135
%
88
83
83
81
89
86
76
85
93
STI paid in
cash1
STI deferred
into equity2
DSTIs
granted3
$
%
$
%
750,000
38
1,230,000
62
287,888
420,000
293,333
466,667
450,000
320,000
630,000
320,000
450,000
53
54
55
50
52
58
52
48
368,000 47
252,667 46
380,333 45
86,133
59,138
89,019
448,000 50
104,857
299,000 48
69,983
447,000 42
104,623
294,000 48
68,813
488,000 52
114,219
1 The portion of STI awarded for the FY17 performance year which is paid as cash.
2 The portion of STI awarded for FY17 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 2017.
This price was $4.2725.
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 2017.
Hurdle
Underlying EPS for FY15 – 17
Target/
benchmark
performance
Actual
performance
Out/(Under)
performance
%
Vested Weight
Vesting
outcome
Compound Average Growth Rate EPS1
4.5%
6.5%
2.0%
100%
50%
50%
TSR for FY15 – 17
Relative TSR FY15 – FY172
Total Vesting
50.5%
40.0%
(10.5%)
0%
50%
0%
50%
1 Based on Underlying Profit
2 Benchmark based on ASX AREIT 200 Index excluding Stockland. For LTI awards made in FY17 and future years, the TSR performance
benchmark will be the weighted index of AREIT 200 companies as outlined in section 2.3.
(a) LTI awarded for FY17
The performance rights that were awarded to the Managing Director and CEO and other Senior Executives under
the Performance Rights Plan in FY17 are outlined in the table below. These awards are subject to a three year
performance period (FY17 – FY19) with the awards measured against two performance hurdles: Relative TSR and
FFO Growth.
As advised at the October 2016 AGM, the maximum vesting hurdle based on the Compound Annual Growth Rate
for FFO for LTI awards granted during FY17 was 6.5% (37.5 cps) for the three years from 1 July 2016 to 30 June
2019, with the threshold or minimum vesting hurdle being 4.75% (35.8 cps).
Stockland Financial Report — 43
Directors’ Report
Year ended 30 June 2017
Executive Director
Mark Steinert
Senior Executives
Stephen Bull
Katherine Grace
Tiernan O’Rourke
Darren Rehn
Michael Rosmarin
John Schroder
Simon Shakesheff
Andrew Whitson
Vesting date1
LTIs Granted2
Fair Value of LTI3
30/06/2019
30/06/2020
30/06/2019
30/06/2020
30/06/2019
30/06/2020
30/06/2019
30/06/2020
30/06/2019
30/06/2020
30/06/2019
30/06/2020
30/06/2019
30/06/2020
30/06/2019
30/06/2020
30/06/2019
30/06/2020
309,790
309,789
619,579
86,742
86,741
173,483
68,154
68,154
136,308
108,427
108,426
216,853
92,937
92,937
185,874
74,350
74,349
148,699
130,112
130,112
260,224
74,350
74,349
148,699
92,937
92,937
185,874
$
607,188
607,186
1,214,374
176,954
176,952
353,906
139,034
139,034
278,068
221,191
221,189
442,380
189,591
189,591
379,182
151,674
151,672
303,346
265,428
265,428
530,856
151,674
151,672
303,346
189,591
189,591
379,182
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 2019. 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 The number of rights granted is based on the Volume Weighted Average Price for the ten business days after 30 June 2016. The price was $4.842.
3 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 section (D7) of the financial statements.
Stockland Financial Report — 44
Directors’ Report
Year ended 30 June 2017
3.5 Executive Remuneration for FY17
Executives received a mix of remuneration during FY17 including Fixed Pay, STI awarded as cash and deferred securities and LTI awarded as performance rights.
The table below outlines the cash remuneration that was received in relation to FY17 which includes Fixed Pay and the non-deferred portion of any FY17 STI. The table also
includes the value of DSTI awards from FY15 and FY16 which vested during FY17 and LTI awards from FY15 which vested during FY17. This information differs from that
provided in the remuneration for executives set out in section 3.5(b) which was calculated in accordance with statutory rules and applicable Accounting Standards.
(a) Executive remuneration (non-statutory presentation)
Executive Director
Mark Steinert
Managing Director and CEO
Senior Executives
Stephen Bull
Group Executive and CEO, Retirement Living
Katherine Grace
General Counsel and Company Secretary
Tiernan O’Rourke
Chief Financial Officer
Darren Rehn
Group Executive and Chief Investment Officer
Michael Rosmarin
Chief Operating Officer
John Schroder
Group Executive and CEO, Commercial Property
Simon Shakesheff
Group Executive, Strategy and Stakeholder Relations
Andrew Whitson
Group Executive and CEO, Residential
Fixed pay1
$
1,500,000
1,500,000
700,000
700,000
550,000
500,000
875,000
850,000
750,000
750,000
600,000
600,000
1,050,000
1,050,000
600,000
600,000
750,000
750,000
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
STI awarded
and received
as cash
$
Total Cash
payments in relation to
financial year
$
Previous years’ DSTI
which were realised3
$
Previous years’ LTI
which were realised3
$
Awards which lapsed
or were forfeited4
$
750,0002
750,0002
420,000
420,000
293,333
266,667
466,667
453,333
450,000
450,000
320,000
320,000
630,000
630,000
320,000
320,000
450,000
450,000
2,250,000
2,250,000
1,120,000
1,120,000
843,333
766,667
1,341,667
1,303,333
1,200,000
1,200,000
920,000
920,000
1,680,000
1,680,000
920,000
920,000
1,200,000
1,200,000
1,080,721
1,177,557
1,889,970
1,077,413
1,776,090
2,154,825
307,708
273,481
176,426
93,743
323,700
295,845
362,664
560,777
214,235
226,673
430,664
440,988
244,763
303,795
362,664
400,571
491,655
280,245
178,485
–
643,860
367,380
499,320
268,470
454,425
259,050
794,970
453,338
434,715
237,855
531,075
302,618
462,090
560,490
356,970
–
604,440
734,760
499,320
536,940
427,050
518,100
746,790
906,675
427,050
475,710
499,320
605,235
1 Fixed Pay includes salary, superannuation and salary sacrificed items.
2 For Mark Steinert this is 50% (two thirds for Senior Executives) of his STI awards. The remaining 50% of his STI (one third for Senior Executives) was deferred in Stockland securities which vests over two years following the
performance year, 50% after year 1 and 50% after year 2 subject to continued employment.
3 This represents the value of all prior years’ deferred STI and LTI which vested during FY17 using the 30 June 2017 closing security price of $4.38.
4 The value shown represents the value of any previous years’ equity awards which lapsed or were forfeited during the financial year. The FY17 values are based on the closing 30 June 2017 security price of $4.38 (FY16: $4.71).
Stockland Financial Report — 45
Directors’ Report
Year ended 30 June 2017
(b) Executive remuneration (statutory presentation)
Short-term
Salary1
$
Non-monetary
benefits2
$
Other
payments
$
Cash
STI3
$
Total
short-term
$
Post-employment
Super-
annuation
benefits
$
Termination
benefits
$
Other long-
term
Long service
leave4
$
Shared-based payments
Total
Performance related
DSTI
$
LTI
$
Total
$
(STI + LTI)
Percent
of Total
%
(DSTI + LTI)
Percent of
Total
%
Executive Director
Mark Steinert
Managing Director and CEO
Senior Executives
Stephen Bull
Group Executive and CEO, Retirement Living
Katherine Grace
General Counsel & Company Secretary
Tiernan O’Rourke
Chief Financial officer
Darren Rehn
Group Executive and Chief Investment Officer
Michael Rosmarin
Chief Operating Officer
John Schroder
Group Executive and CEO, Commercial Property
Simon Shakesheff
Group Executive, Strategy & Stakeholder Relations
Andrew Whitson
Group Executive and CEO, Residential
Total consolidated remuneration
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
1,510,074
1,520,706
698,335
653,474
541,711
484,406
890,878
801,940
737,040
733,579
580,477
563,958
1,012,438
1,045,834
557,967
581,814
743,859
710,610
7,272,779
7,096,321
–
–
12,422
12,326
–
–
–
–
–
–
12,422
12,326
8,217
12,326
–
–
12,422
12,326
45,483
49,304
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
750,000
750,000
2,260,074
2,270,706
420,000
420,000
293,333
266,667
466,667
453,333
450,000
450,000
320,000
320,000
630,000
630,000
320,000
320,000
450,000
1,130,757
1,085,800
835,044
751,073
1,357,545
1,255,273
1,187,040
1,183,579
912,899
896,284
1,650,655
1,688,160
877,967
901,814
1,206,281
19,616
19,308
19,616
19,308
19,616
19,308
19,616
19,308
19,616
19,308
19,616
19,308
19,616
19,308
19,616
19,308
19,616
450,000
4,100,000
1,172,936
11,418,262
4,060,000
11,205,625
19,308
176,544
173,772
1 Includes any change in accruals for annual leave.
2 Comprises salary packaged benefits, including motor vehicle costs, car parking, other salary sacrificed items and FBT payable on these items.
3 Cash STIs are earned in the financial year to which they relate and are paid in August/September of the following financial year.
4 Includes any change in accruals for long service leave.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
11,544
1,150,000
1,353,794
4,795,028
8,990
1,068,750
1,317,587
4,685,341
16,338
31,811
2,307
1,025
5,308
3,440
5,772
4,793
10,045
5,752
24,508
38,862
3,535
2,429
27,759
346,083
295,111
215,099
151,219
352,694
306,660
403,625
308,958
251,917
210,667
439,750
417,667
270,000
253,228
420,292
359,768
314,291
239,505
158,582
454,345
401,004
381,511
229,836
318,161
283,048
556,660
495,212
314,898
275,435
386,767
1,872,562
1,746,321
1,311,571
1,081,207
2,189,508
1,985,685
1,997,564
1,746,474
1,512,638
1,415,059
2,691,189
2,659,209
1,486,016
1,452,214
2,060,715
33,509
107,116
130,611
362,292
3,849,460
338,526
4,365,409
1,926,571
19,916,791
3,374,552
3,813,521
18,698,081
67.9
66.9
60.1
58.9
57.0
53.3
58.2
58.5
61.8
56.6
58.8
57.5
60.4
58.0
60.9
58.4
61.0
59.7
61.8
60.2
52.2
50.9
37.7
34.9
34.7
28.7
36.9
35.6
39.3
30.9
37.7
34.9
37.0
34.3
39.4
36.4
39.2
36.4
41.2
38.4
Stockland Financial Report — 46
Directors’ Report
Year ended 30 June 2017
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 FY17, there were no changes in the base fees for the Chairman, Non-Executive Directors or any of the Board
Committee. The Board decided to cease the Financial Services Compliance Committee as well as the Stockland
Capital Partners Limited Financial Services Compliance Committee given the oversight and responsibilities of the
Audit and Risk Committees.
In FY18, in line with our considered approach to remuneration, there will be 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.
FY18
FY17
$500,000
$175,000
$500,000
$175,000
$40,000
$20,000
$35,000
$17,500
–
–
$35,000
$17,500
$32,700
$32,700
$30,000
$15,260
$8,720
–
–
$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
Stockland Financial Report — 47
Directors’ Report
Year ended 30 June 2017
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 $1,749,156 (70% of the approved limit) were paid to Non-Executive Directors in FY17. This amount
was 9.4% lower than the total fees paid in FY16.
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
Tom Pockett2
Carolyn Hewson
Barry Neil
Stephen Newton
Nora Scheinkestel
Carol Schwartz
Former Non-Executive Directors
Graham Bradley3
Peter Scott4
Duncan Boyle5
Terry Williamson5
Total consolidated
remuneration
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
2017
2016
395,619
246,075
195,987
205,173
212,988
222,873
218,745
–
219,891
160,693
195,987
199,515
186,252
495,173
25,220
205,173
–
57,886
–
77,352
1,650,689
1,869,913
–
–
–
–
–
–
–
–
–
–
–
–
–
4,293
–
–
–
–
–
4,293
–
14,712
4,827
14,013
4,827
14,712
4,827
14,712
–
14,712
4,827
14,013
4,827
4,904
4,827
2,396
4,827
–
4,827
–
4,827
94,174
43,443
Total1
$
410,331
250,902
210,000
210,000
227,700
227,700
233,457
–
234,603
165,520
210,000
204,342
191,156
500,000
31,909
210,000
–
62,713
–
82,179
1,749,156
1,913,356
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).
2 Tom Pockett was appointed Chairman 26 October 2016.
3 Graham Bradley retired 26 October 2016.
4 Peter Scott retired 16 August 2016.
5 Terry Williamson and Duncan Boyle retired 27 October 2015.
Stockland Financial Report — 48
Directors’ Report
Year ended 30 June 2017
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.
The relevant interest of each Director in Stockland securities, 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:
Non-Executive Directors
Carolyn Hewson
Barry Neil
Stephen Newton
Tom Pockett
Nora Scheinkestel
Carol Schwartz
Andrew Stevens1
Executive Director
Mark Steinert2
Stockland
2017
36,778
61,718
20,000
40,000
43,467
40,000
–
2016
35,648
58,510
10,000
30,000
41,207
40,000
–
1,383,960
1,001,364
1 Andrew Stevens was appointed 1 July 2017, pending approval at the 2017 AGM.
2 The Executive Director also holds vested DSTI securities and vested LTI rights which have not been exercised, and unvested DSTI and LTI rights
as detailed in section 5.3 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 CEO 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 Graham Bradley as a Director in October 2016, Tom Pockett joined the Committee
which now comprises three independent Non-Executive Directors: Carolyn Hewson (Chair), Carol Schwartz and
Tom Pockett.
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 FY17, 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 — 49
Directors’ Report
Year ended 30 June 2017
5.3 Stockland Equity held by Key Management Personnel
The table below outlines the number of vested and ordinary holdings (personal) and unvested equity (DSTI and LTI)
held by Managing Director, other Senior Executives and Non-Executive Directors as at the end of FY17. This table
highlights the direct exposure that each executive has to the Stockland security price.
Balance
1 July 2016
Acquired/
(Disposed)
or Granted
Equity
Incentives
which
lapsed
Equity
Incentives
which
vested
Balance
30 June
2017
Maximum
value yet to
vest1
Employee
Holding
Executive Director
Mark Steinert
Securities
1,094,898
289,062
DSTI
358,265
287,888
678,240
2,062,200
$
–
(246,740)
399,413
897,500
–
–
LTI
1,789,750
619,579
(405,500)
(431,500)
1,572,329
1,514,998
Senior Executives
Stephen Bull
Securities
158,277
–
DSTI
LTI
Katherine Grace
Securities
DSTI
LTI
106,251
86,133
–
–
182,503
340,780
–
(70,253)
122,131
272,767
480,500
173,483
(105,500)
(112,250)
436,233
453,333
19,903
60,658
–
59,138
–
–
81,030
100,933
–
(40,280)
79,516
180,278
313,000
136,308
(81,500)
(40,750)
327,058
344,296
Tiernan O’Rourke
Securities
164,362
(20,500)
108,546
89,019
–
–
220,904
364,766
–
(73,904)
123,661
277,772
609,000
216,853
(138,000)
(147,000)
540,853
563,566
Darren Rehn
Securities
250,891
–
121,369
104,857
–
–
196,800
447,691
–
(82,800)
143,426
323,583
Michael Rosmarin
Securities
189,200
(45,127)
71,383
69,983
–
–
152,662
296,735
–
(48,912)
92,454
210,683
510,000
185,874
(114,000)
(114,000)
467,874
486,116
430,000
148,699
(97,500)
(103,750)
377,449
391,523
John Schroder
Securities
607,732
(27,643)
142,563
104,623
–
–
279,825
859,914
–
(98,325)
148,861
332,150
752,250
260,224
(170,500)
(181,500)
660,474
685,113
Simon Shakesheff
Securities
226,481
(56,350)
82,318
68,813
–
–
155,132
325,263
–
(55,882)
95,249
214,167
Andrew Whitson
Securities
201,383
(100,000)
121,369
114,219
–
–
204,050
305,433
–
(82,800)
152,788
346,917
425,500
148,699
(97,500)
(99,250)
377,449
391,523
DSTI
LTI
DSTI
LTI
DSTI
LTI
DSTI
LTI
DSTI
LTI
Non-Executive
Directors
Carolyn Hewson
Barry Neil
Stephen Newton
Tom Pockett
DSTI
LTI
Securities
Securities
Securities
Securities
Nora Scheinkestel
Securities
Carol Schwartz
Securities
517,250
185,874
(114,000)
(121,250)
467,874
486,116
35,648
58,510
10,000
30,000
41,207
40,000
1,130
3,208
10,000
10,000
1,215
–
–
–
–
–
–
–
–
–
–
–
–
–
36,778
61,718
20,000
40,000
43,467
40,000
–
–
–
–
–
–
1 The maximum value of the LTI and DSTI yet to vest has been determined as the amount of the fair value of the rights that is yet to be expensed
over the remaining vesting period. The minimum value of LTI and DSTI yet to vest is nil, as the securities are subject to performance hurdles being
met and the risk of forfeiture until vesting dates.
Stockland Financial Report — 50
Directors’ Report
Year ended 30 June 2017
5.4 Senior Executives’ employment and termination arrangements
The Managing Director and CEO 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 CEO 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 KMPs of Stockland at any time during the financial year are as follows:
Non-Executive Directors
Mr Tom Pockett
Mr Graham Bradley
Ms Carolyn Hewson
Mr Barry Neil
Mr Stephen Newton
Dr Nora Scheinkestel
Ms Carol Schwartz
Mr Andrew Stevens
Mr Peter Scott
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
(appointed Chairman 26 October 2016)
(Chairman until retirement on 26 October 2016)
(appointed 1 July 2017)
(retired 16 August 2016)
Managing Director and Chief Executive Officer
Group Executive and CEO Retirement Living
General Counsel and Company Secretary
Chief Financial Officer
Group Executive and Chief Investment Officer
Group Executive and Chief Operating Officer
Group Executive and CEO Commercial Property
Group Executive and Strategy, Stakeholder Relations and Research
Group Executive and CEO Residential
Stockland Financial Report — 51
Directors’ Report
Year ended 30 June 2017
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, other advisory 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 53 and forms part of the Directors’ Report for the
year ended 30 June 2017.
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:
Tom Pockett
Chairman
Mark Steinert
Managing Director
Dated at Sydney, 16 August 2017
Stockland Financial Report — 52
Lead Auditor’s Independence Declaration under
Section 307C of the Corporations Act 2001
Year ended 30 June 2017
Auditor’s Independence Declaration
As lead auditor for the audit of Stockland Corporation Limited and Stockland Trust for the year ended 30
June 2017, 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
16 August 2017
Stockland Financial Report — 53
Consolidated Statements of Profit or Loss and Other
Comprehensive Income
Year ended 30 June 2017
Year ended 30 June
Revenue
Cost of property developments sold:
•
Land and development
• Capitalised interest
Stockland
Trust
2017
$M
2016
$M
2,744
2,328
2017
$M
762
2016
$M
737
Section
(B1)
(1,292)
(1,049)
(142)
(124)
103
3
67
–
–
–
–
–
–
–
–
–
• Utilisation of inventory impairment provision
Net write-back of inventory impairment provision
(C1a)
Investment property expenses
(248)
(239)
(237)
(230)
Share of profits of equity-accounted investments
(E1)
84
90
Management, administration, marketing and selling expenses
(304)
(271)
Net change in fair value of investment properties:
• Commercial Property
• Retirement Living
Net change in fair value of Retirement Living resident obligations
Net gain on other financial assets
Net (loss)/gain on sale of other non-current assets
Finance income
Finance expense
Profit before income tax
Income tax 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
Other comprehensive (loss)/income, net of tax
Total comprehensive income for the year
Basic earnings per security (cents)
Diluted earnings per security (cents)
(C1b)
(B2c)
(B2c)
(D4)
(D1)
(D1)
(B3a)
(D4)
(D4)
(F2)
(F2)
209
87
(82)
1
(1)
122
(83)
1,201
(6)
1,195
66
(71)
(21)
(4)
(30)
1,165
49.8
49.6
373
71
(85)
4
(2)
8
(252)
919
(30)
889
7
–
23
4
34
923
37.4
37.3
84
(39)
90
(27)
184
329
–
–
1
1
391
(192)
955
–
955
–
–
(21)
(4)
(25)
930
39.8
39.6
–
–
6
(2)
294
(365)
832
–
832
–
–
23
4
27
859
35.0
35.0
The above consolidated statements of profit or loss and other comprehensive income should be read in conjunction
with the accompanying notes.
Stockland Financial Report — 54
Consolidated Balance Sheets
As at 30 June 2017
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)
Stockland
Trust
2017
$M
238
139
756
23
96
1,252
71
1,323
83
1,725
9,283
3,824
574
286
51
156
22
168
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
16,172
17,495
15,531
16,942
585
267
2,444
319
38
125
643
481
2,205
284
19
82
2017
$M
2016
$M
117
22
–
–
71
210
69
279
97
18
–
79
70
264
61
325
3,252
3,510
–
–
9,186
8,702
–
556
278
–
–
–
–
505
432
–
–
–
170
13,442
13,721
152
13,301
13,626
410
267
–
–
38
54
422
481
–
–
19
36
3,778
3,714
769
958
10
3,262
185
109
203
21
3,790
7,568
9,927
8,790
93
1,044
9,927
–
–
–
3,319
3,262
3,319
222
113
297
23
3,974
7,688
9,254
8,681
126
447
9,254
–
–
203
–
3,465
4,234
9,487
7,480
75
1,932
9,487
–
–
297
–
3,616
4,574
9,052
7,374
103
1,575
9,052
The above consolidated balance sheets should be read in conjunction with the accompanying notes.
Stockland Financial Report — 55
Consolidated Statements of Changes in Equity
Year ended 30 June 2017
Attributable to securityholders of Stockland
Section
Opening balance as at 1 July 2015
Profit for the year
Other comprehensive income, net of tax
Total comprehensive income
Dividends and distributions
Securities issued under DRP
(D8)
(D7a)
Expense relating to Share Plans, net of tax
(F7)
Acquisition of treasury securities
Securities vested under
Share Plans
Total of other movements
Balance as at 30 June 2016
Profit for the year
Other comprehensive (loss)/income, net of tax
Total comprehensive income
Dividends and distributions
Securities issued under DRP
(D7b)
(D7b)
(D8)
(D7a)
Expense relating to Share Plans, net of tax
(F7)
Acquisition of treasury securities
Securities vested under
Share Plans
(D7b)
(D7b)
Transfer of lapsed securities under Share
Plans
Total of other movements
Balance as at 30 June 2017
Issued
capital
$M
8,560
–
–
–
–
125
–
(9)
5
121
8,681
–
–
–
–
121
–
(16)
4
–
109
8,790
Reserves
Executive
remuneration
$M
Cash
flow
hedge
$M
35
–
–
–
–
–
13
–
(5)
8
43
–
–
–
–
–
18
–
(4)
(17)
(3)
40
36
–
27
27
–
–
–
–
–
–
63
–
(25)
(25)
–
–
–
–
–
–
–
38
Fair
value
$M
13
–
7
7
–
–
–
–
–
–
20
–
(5)
(5)
–
–
–
–
–
–
Retained
earnings
$M
143
889
–
889
(585)
–
–
–
–
(585)
447
1,195
–
1,195
(615)
–
–
–
–
17
Total
equity
$M
8,787
889
34
923
(585)
125
13
(9)
–
(456)
9,254
1,195
(30)
1,165
(615)
121
18
(16)
–
–
–
15
(598)
1,044
(492)
9,927
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
Stockland Financial Report — 56
Consolidated Statements of Changes in Equity
Year ended 30 June 2017
Attributable to securityholders of Trust
Opening balance as at 1 July 2015
Profit for the year
Other comprehensive income
Total comprehensive income
Distributions
Securities issued under DRP
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
Profit for the year
Other comprehensive (loss)/income
Total comprehensive (loss)/income
Distributions
Securities issued under DRP
Expense relating to Share Plans,
net of tax
Acquisition of treasury securities
Securities vested under Share Plans
Transfer of lapsed securities under Share
Plans
Total of other movements
Balance as at 30 June 2017
Section
Issued
capital
$M
7,255
(D8)
(D7a)
(F7)
(D7b)
(D7b)
(D8)
(D7a)
(F7)
(D7b)
(D7b)
–
–
–
–
123
–
(9)
5
119
7,374
–
–
–
–
118
–
(16)
4
–
106
7,480
Reserves
Executive
remuneration
$M
Cash flow
hedge
$M
Undistributed
income
$M
Total
equity
$M
32
–
–
–
–
–
13
–
(5)
8
40
–
–
–
–
–
18
–
(4)
(17)
(3)
37
36
–
27
27
–
–
–
–
–
–
63
–
(25)
(25)
–
–
–
–
–
–
–
38
1,328
8,651
832
–
832
832
27
859
(585)
(585)
–
–
–
–
(585)
1,575
955
–
955
123
13
(9)
–
(458)
9,052
955
(25)
930
(615)
(615)
–
–
–
–
17
118
18
(16)
–
–
(598)
1,932
(495)
9,487
The above consolidated statements of changes in equity should be read in conjunction with the accompanying notes.
Stockland Financial Report — 57
Consolidated Cash Flow Statements
Year ended 30 June 2017
Stockland
Trust
Section
2017
$M
2016
$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 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 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
2017
$M
879
(403)
–
33
–
–
–
273
(202)
580
2016
$M
854
(398)
–
32
–
–
–
294
(199)
583
3,004
2,496
(1,847)
(1,575)
(283)
(186)
33
–
378
(165)
3
(202)
921
35
1
371
(164)
8
(199)
787
74
11
72
42
(374)
(133)
(38)
20
(1)
72
(431)
(167)
(35)
221
(107)
–
(399)
(475)
–
–
–
(1)
1
–
–
219
(66)
–
(380)
(508)
(327)
(280)
(16)
1,563
(9)
2,589
(16)
1,563
(9)
2,589
(1,582)
(2,254)
(1,582)
(2,254)
–
–
(476)
(511)
30
208
238
–
(119)
(448)
(241)
38
170
208
278
–
(476)
(233)
20
97
117
(54)
(119)
(448)
(295)
8
89
97
The above consolidated cash flow statements should be read in conjunction with the accompanying notes.
Stockland Financial Report — 58
Consolidated Notes
Year ended 30 June 2017
(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 (EPS)
(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
60
62
62
63
67
71
71
83
84
87
87
89
89
92
96
98
104
107
108
108
109
110
113
114
115
115
118
119
120
120
121
122
123
123
123
Stockland Financial Report — 59
Consolidated Notes
Year ended 30 June 2017
(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 2017 were authorised for issue by the Directors on
16 August 2017.
(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 (including non-current assets held for sale), derivative financial instruments, certain financial
assets and liabilities which are stated at their fair value.
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 to the Group’s primary reporting measure
From 1 July 2016, FFO has replaced underlying profit as the Group’s primary reporting measure. 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.
FFO is calculated by adding back tenant incentive amortisation and deducting straight-line rent from underlying
profit in relation to the Commercial Property segment. There is no difference between underlying profit and FFO
for Residential and Retirement Living segments. FFO also excludes non-cash tax benefits/expenses.
Following this change, Stockland has revised the operating segment information presented in section (B2) to
present profit indicators on an FFO basis. Comparative disclosures have been restated to ensure consistency
between the periods.
Stockland Financial Report — 60
Consolidated Notes
Year ended 30 June 2017
(ii) 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 2017.
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 $790 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 the 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 result in actual 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 Deferred Management Fee (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 current Retirement Living resident obligations for existing residents (2017: $2,439 million; 2016: $2,202
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 Accounting Standards, 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 recognition and recoverability
Inventories – assumptions underlying net realisable value and profit margin recognition
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 — 61
Consolidated Notes
Year ended 30 June 2017
(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:
(b) Accounting policies that are relevant for understanding the items recognised in the financial
statements; and
(c) 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 $6 million (2016: $5 million) contingent (turnover) rent billed to tenants.
Contingent rent represents 1% (2016: 1%) of gross lease income.
Deferred Management Fee (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 (B2c).
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
2017
$M
1,787
752
107
71
27
2016
$M
1,484
728
88
4
24
2,744
2,328
2017
$M
–
749
–
–
13
762
2016
$M
–
726
–
3
8
737
Stockland Financial Report — 62
Consolidated Notes
Year ended 30 June 2017
(B2) Operating segments
KEEPING IT SIMPLE…
This section shows a reconciliation from Funds From Operations (FFO) to statutory profit. From 1 July 2016,
FFO replaced underlying profit as the Group’s key profit measure. This reflects the way the business is
managed and how the Directors and Executive Committee assess performance.
FFO is 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 is a non-IFRS measure that is designed to present, in the opinion of the CODM, the results from ongoing
operating activities in a way that appropriately reflects the Group’s underlying performance. FFO 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. FFO also excludes income tax items that do not represent cash payments. Profit or loss items excluded
from FFO are outlined and explained in section (B2b).
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 – 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.
(B2a) Funds From Operations (FFO)
The following table shows the contribution to FFO by each reportable segment:
Stockland
Year ended 30 June 2017
External segment revenue
Total external segment revenue
Segment EBIT
Amortisation of lease incentives and fees
Straight-line rent adjustments
Interest expense in cost of sales
Share of interest expense in joint ventures
Segment FFO3
Interest income
Interest expense
Unallocated corporate and other expenses
FFO for the year
Commercial
Property
$M
Residential
$M
Retirement
Living
$M
Other
$M
Consolidated
$M
8401
840
5451,3
69
(6)
–
–
608
1,773
1,773
412
–
–
(142)
–
270
822
82
692
–
–
(6)
–
63
–
–
–
–
–
–
–
–
2,695
2,695
1,026
69
(6)
(148)
–
941
4
(83)
(60)
802
Stockland Financial Report — 63
Consolidated Notes
Year ended 30 June 2017
(B2a) Funds From Operations (FFO) (continued)
Year ended 30 June 2016
External segment revenue
Total external segment revenue
Segment EBIT
Amortisation of lease incentives and fees
Straight-line rent adjustments
Interest expense in cost of sales
Share of interest expense in joint ventures
Segment FFO3
Interest income
Interest expense
Unallocated corporate and other expenses
FFO for the year
Commercial
Property
$M
Residential
$M
Retirement
Living
$M
Other
$M
Consolidated
$M
7971
797
5251,3
67
(8)
–
(1)
583
1,487
1,487
354
–
–
(124)
–
230
752
75
642
–
–
(7)
–
57
–
–
–
–
–
–
–
–
2,359
2,359
943
67
(8)
(131)
(1)
870
8
(81)
(57)
740
1 External segment revenue and segment EBIT adds back $56 million (2016: $55 million) of amortisation of leases incentives and excludes $6
million (2016: $8 million) of straight-line rent adjustments.
2 External segment revenue and segment EBIT excludes $31 million (2016: $16 million) of unrealised DMF revenue.
3 Includes profits from equity-accounted investments of $29 million (2016: $31 million) in Commercial Property and $nil (2016: $nil) in Residential.
(B2b) Reconciliation of FFO to statutory profit
FFO excludes adjustments such as unrealised fair value gains/losses, realised transactions occurring infrequently
and those that are outside the course of our core ongoing business activities.
Stockland
Year ended 30 June
Note
2017
2016
Statutory
adjustments
$M
Statutory
profit
$M
FFO
$M
FFO
$M
Statutory
adjustments
$M
Statutory
profit
$M
Revenue
A,B,C
2,695
49
2,744
2,359
(31)
2,328
Cost of property developments sold:
•
Land and development
• Capitalised interest
• Utilisation of inventory impairment
provision
Net write-back of inventory impairment provision
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
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 expense
Profit for the year
D
E
E
E
E
F
G
G
H
(1,292
)
(142)
103
–
(236)
29
(304)
–
28
–
–
–
4
(83)
802
–
802
–
–
–
3
(12)
55
(1,292)
(1,049
)
(142)
(124)
103
67
3
–
(248)
(227)
84
31
–
–
–
–
(12)
59
(1,049)
(124)
67
–
(239)
90
–
(304)
(270)
(1)
(271)
209
59
(82)
1
(1)
118
–
399
(6)
393
209
87
(82)
1
(1)
122
(83)
1,201
(6)
–
26
–
–
–
8
(81)
740
–
1,195
740
373
45
(85)
4
(2)
–
(171)
179
(30)
149
373
71
(85)
4
(2)
8
(252)
919
(30)
889
Stockland Financial Report — 64
Consolidated Notes
Year ended 30 June 2017
(B2b) Reconciliation of FFO to statutory profit (continued)
Trust
2017
2016
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 gain/(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
D
E
E
F
G
G
FFO
$M
813
(225)
29
(39)
–
–
–
273
(192)
659
–
659
Statutory
adjustments
$M
Statutory
profit
$M
FFO
$M
784
(218)
31
Statutory
adjustments
$M
Statutory
profit
$M
(47)
(12)
59
737
(230)
90
762
(237)
84
(39)
(27)
–
(27)
(51)
(12)
55
–
184
184
1
1
118
–
296
–
296
1
1
391
(192)
955
–
955
–
–
–
294
(194)
670
–
670
329
329
6
(2)
–
(171)
162
–
162
6
(2)
294
(365)
832
–
832
Explanation of statutory adjustments
A DMF revenue of $29 million (2016: $16 million) has been excluded from FFO until it is realised in cash. The Retirement Living segment result is
reconciled from FFO to statutory profit in section (B2c).
B Straight-line rent adjustments $6 million (2016: $8 million) are excluded from FFO, offset by amortisation of lease incentives of $57 million (2016:
$55 million).
C Non-recurring distribution revenue of $71 million (2016: $nil) relating to the BGP strategic investment has been excluded from FFO.
D Amortisation of lease fees are excluded from FFO.
E FFO 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 is excluded from FFO. Refer to section (C1b)
for further information on fair value adjustments for the Commercial Properties and (C1c) for Retirement Living.
F Net gain/(loss) on sale of other non-current assets predominantly relate to the gain/(loss) on the sale of investment properties.
G Net change in fair value of financial instruments and foreign exchange movements, classified as finance income/expenses, are excluded from FFO.
Refer to section (D1).
H FFO excludes income tax expenses or benefits that do not represent a cash settlement.
(B2c) Retirement Living segment result
KEEPING IT SIMPLE …
Retirement Living residents generally lend Stockland an amount equivalent to the value of the Independent
Living Unit (ILU) or Serviced Apartment (SA) in exchange for a lease to live in the ILU or SA and access to
community facilities, which are Stockland owned and maintained. This loan is recorded as a resident
obligation liability.
During the resident’s tenure, Stockland earns Deferred Management Fees (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 ILU or SA is re-leased
to the next resident. The DMF on an individual ILU or SA 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 FFO when Stockland receives the
accumulated DMF in cash when a resident leaves and a new resident enters the ILU or SA.
The Retirement Living segment result also includes the settled development margin associated with new
villages and village expansions or redevelopments. This settled development margin represents the unit price
realised on first lease less the cost of development and is recognised in FFO on settlement of a newly
developed unit.
Unrealised fair value gains and losses from revaluations of investment property and resident obligations
are excluded from FFO. 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 — 65
Consolidated Notes
Year ended 30 June 2017
(B2c) Retirement Living segment result (continued)
Reconciliation of Retirement Living statutory profit to segment results
Year ended 30 June
Note
A
B
B
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
Management, administration,
marketing and selling expenses
Other expenses
Retirement Living profit/(loss)
2017
2016
Statutory
adjustments
$M
Statutory
profit
$M
FFO
$M
FFO
$M
Statutory
adjustments
$M
Statutory
profit
$M
78
–
78
28
–
28
–
(39)
(4)
63
–
29
29
–
59
59
78
29
107
28
59
87
(82)
(82)
72
–
72
26
–
26
–
–
–
6
(39)
(37)
(4)
69
(4)
57
–
16
16
–
45
45
72
16
88
26
45
71
(85)
(85)
(1)
–
(25)
(38)
(4)
32
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 FFO until the accumulated DMF is realised in cash.
B FFO excludes the net change in fair value for operating villages, villages under development and Retirement Living resident obligations. Refer to
section (C1c).
(B2d) Balance sheet by operating segment
Stockland
30 June 2017
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
–
10,218
–
–
42
10,260
–
–
–
117
117
–
2,453
–
–
135
2,588
–
–
–
569
569
10,143
2,019
–
3,848
76
–
18
3,942
–
2,629
–
15
2,644
1,298
20
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
238
37
80
310
40
705
3,529
–
242
467
4,238
(3,533)
238
16,556
156
310
235
17,495
3,529
2,629
242
1,168
7,568
9,927
–
20
Stockland Financial Report — 66
Consolidated Notes
Year ended 30 June 2017
(B2d) Balance sheet by operating segments (continued)
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
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
1 Includes non-current assets held for sale, inventory, investment properties, equity-accounted investments and certain other assets.
(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, to the extent that there is convincing evidence that a reversal will take place. 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 (OCI) 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.
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.
Stockland Financial Report — 67
Consolidated Notes
Year ended 30 June 2017
(B3) Taxation (continued)
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 expense
Origination and reversal of temporary differences
Total income tax expense
Reconciliation of profit before income tax to income tax expense
Year ended 30 June
Profit before income tax
Less: Trust profit before income tax
Less: Intergroup eliminations
Profit before income tax of Stockland Corporation
Prima facie income tax expense calculated at 30%
Increase/(decrease) in income tax benefit/(expense) due to:
Other assessable income
Other non-assessable income
Non-assessable dividend income
Tax losses recognised during the period
Underprovided in prior years
Income tax expense
Effective tax rate
Effective tax rate (excluding tax losses recognised during the year)
Tax benefit/(expense) relating to items of other comprehensive income
Year ended 30 June
Fair value reserve
Tax benefit/(expense) relating to items of other comprehensive income
Stockland
2017
$M
27
–
27
(33)
(6)
2016
$M
49
(2)
47
(77)
(30)
Stockland
2017
Statutory
profit
$M
2016
Statutory
profit
$M
1,201
(955)
8
254
(76)
–
–
21
49
–
(6)
2%
22%
Stockland
2017
$M
1
1
919
(832)
8
95
(28)
(1)
1
–
–
(2)
(30)
32%
32%
2016
$M
(2)
(2)
Stockland Financial Report — 68
Consolidated Notes
Year ended 30 June 2017
(B3b) Deferred tax
Stockland
A deferred tax asset is recognised to the extent that there is convincing evidence that future taxable profits
will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed for
recoverability at each balance date and the recognised amount is adjusted as required. This is a key area of
accounting estimation and judgement for the Group.
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:
Assets
Liabilities
Net
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
2017
$M
93
10
–
6
13
22
5
9
569
727
(139)
588
(566)
22
2016
$M
116
11
1
7
15
27
5
9
493
684
(139)
545
(518)
27
2017
$M
(177)
(382)
(7)
–
–
–
–
–
–
2016
$M
(170)
(339)
(9)
–
–
–
–
–
–
(566)
(518)
2017
$M
(84)
(372)
(7)
6
13
22
5
9
569
161
2016
$M
(54)
(328)
(8)
7
15
27
5
9
493
166
–
–
(139)
(139)
(566)
(518)
566
–
518
–
22
–
22
27
–
27
Movement in temporary differences during the financial year
Opening
balance
1 July 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
(34)
(237)
(6)
9
17
33
5
7
265
59
(20)
(91)
–
(2)
(2)
(6)
–
2
89
–
–
(2)
–
–
–
–
–
–
(30)
(2)
27
Balance
30 June
2016
$M
(54)
(328)
(8)
7
15
27
5
9
354
Recognised
in profit
or loss
$M
Recognised
in OCI
$M
(30)
(44)
–
(1)
(2)
(5)
–
–
76
(6)
–
–
1
–
–
–
–
–
–
1
Balance
30 June
2017
$M
(84)
(372)
(7)
6
13
22
5
9
430
22
Stockland Financial Report — 69
Consolidated Notes
Year ended 30 June 2017
(B3b) Deferred Tax (continued)
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 has been recognised to the extent that there is convincing
evidence it will be recovered, and accordingly no additional deferred tax asset write-off is required and no additional
tax losses have been 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 (2016: $139 million) of unrecognised deferred tax assets, relating to tax losses of
$463 million (2016: $463 million). This balance consists of $132 million (2016: $133 million) Australian income tax
losses and $7 million (2016: $6 million) Australian capital losses.
Trust
There are no deferred tax assets or liabilities in the Trust.
Stockland Financial Report — 70
Consolidated Notes
Year ended 30 June 2017
(C) Operating assets and liabilities
IN THIS SECTION
This section shows the real estate and operating assets used to generate the Group’s trading performance
and the liabilities incurred as a result.
(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 5.6% during the financial year (2016: 5.2% to 6.4%). Capitalised finance costs
are further disclosed in section (D1).
Allocation of inventory to cost of sales
A Whole of Life (WOL) methodology is applied to calculate the margin percentage for each project. All costs,
including those costs spent to date and those forecast in the future, are allocated proportionally in line with net
revenue for each lot to achieve a WOL margin percentage. The WOL margin percentage and therefore allocation of
costs can change as revenue and cost forecasts are updated.
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. This is a key area of accounting estimation and
judgement for the Group.
Stockland Financial Report — 71
Consolidated Notes
Year ended 30 June 2017
(C1a) Inventories (continued)
Each reporting period, key estimates are reviewed including the costs of completion, dates of completion and
revenue escalations. As a result of this review, a net write-back of $3 million of impairment provisions have been
recognised in the profit or loss for the year ended 30 June 2017 (2016: $nil).
Development cost 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 sale
•
•
•
cost of acquisition
development and other costs
interest capitalised
impairment provision
•
Total finished stock held for sale1
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
Retirement Living projects
•
•
•
•
cost of acquisition
development and other costs
interest capitalised
impairment provision
Total Retirement Living projects
Total inventory
2017
Non-
current
$M
Current
$M
Total
$M
Current
$M
40
150
25
(1)
214
277
204
64
(27)
518
–
–
–
–
–
12
26
7
(21)
24
–
–
–
–
–
–
–
–
–
–
40
150
25
(1)
214
1,052
1,329
430
328
(146)
1,664
634
392
(173)
2,182
–
7
–
–
7
32
8
–
(9)
31
12
10
1
–
23
–
7
–
–
7
44
34
7
(30)
55
12
10
1
–
23
103
196
40
(31)
308
350
125
75
(85)
465
–
2
–
–
2
25
16
7
(21)
27
–
–
–
–
–
2016
Non-
current
$M
–
–
–
–
–
Total
$M
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
–
–
–
–
–
756
1,725
2,481
802
1,713
2,515
1 Included within current finished development stock held for sale are logistics and business parks of $5 million (2016: $7 million). There are no
apartments included in finished development stock held for sale (2016: $nil).
Stockland Financial Report — 72
Consolidated Notes
Year ended 30 June 2017
(C1a) Inventories (continued)
The following impairment provisions are included in the inventory balance with movements for the year recognised
in the profit or loss:
Opening balance as at 1 July 2016
Amounts utilised
Net amounts reversed
Balance as at 30 June 2017
Development cost provisions
Residential
communities
$M
Apartments
$M
Logistics &
business parks
$M
280
(103)
(3)
174
–
–
–
–
30
–
–
30
Total
$M
310
(103)
(3)
204
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
Opening balance as at 1 July 2016
Additional provisions recognised
Amounts used during the financial year
Balance as at 30 June 2017
2017
$M
319
109
428
2016
$M
284
113
397
$M
397
317
(286)
428
(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. The valuation of
Commercial properties is a key area of accounting estimation and judgement for the Group.
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 2017, 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.
Stockland Financial Report — 73
Consolidated Notes
Year ended 30 June 2017
(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
Retail
Logistics & Business Parks
Office
Capital works in progress and sundry properties
Stockland
Trust
2017
$M
7,017
2,035
868
312
2016
$M
6,660
1,962
845
202
2017
$M
6,961
2,035
865
238
2016
$M
6,609
1,962
829
130
Book value of commercial properties
10,232
9,669
10,099
9,530
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
properties 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
(43)
(71)
(218)
(8)
(67)
(13)
(44)
(67)
(200)
(10)
(61)
(13)
–
(69)
(223)
(8)
(71)
(13)
–
(61)
(205)
(10)
(65)
(13)
9,812
9,274
9,715
9,176
(529)
(474)
(529)
(474)
9,283
8,800
9,186
8,702
Carrying amount at the beginning of the financial year
8,800
7,917
8,702
7,840
Acquisitions
Transfers from equity-accounted investments1
Expenditure capitalised
Transfers to non-current assets held for sale
Disposals
Net change in fair value of investment properties
20
–
333
(71)
(8)
209
222
70
287
(67)
(2)
373
20
–
357
(69)
(8)
184
222
70
345
(61)
(43)
329
Balance at the end of the financial year
9,283
8,800
9,186
8,702
1 Transfer of 50% of Stockland Bundaberg. In the prior year, Stockland acquired the remaining 50% of the trust that holds Stockland Bundaberg.
Stockland Financial Report — 74
Consolidated Notes
Year ended 30 June 2017
(C1b) Commercial Properties (continued)
Description
Retail
Directly owned
Stockland Shellharbour, Shellharbour NSW 6
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 Point Cook, Point Cook VIC
Stockland Townsville, Townsville QLD (50%)2
Stockland Cairns, Cairns QLD
Stockland Burleigh Heads, Burleigh Heads QLD
Stockland Baldivis, Baldivis WA
Stockland Hervey Bay, Hervey Bay QLD
Stockland The Pines, Doncaster East VIC
Stockland Forster, Forster NSW
Stockland Balgowlah, Balgowlah NSW
Stockland Jesmond, Newcastle NSW
Stockland Baulkham Hills, Baulkham Hills NSW
Stockland Wendouree, Wendouree VIC
Stockland Gladstone, Gladstone QLD
Stockland Bundaberg, Bundaberg QLD
Stockland Caloundra, Caloundra QLD
Stockland Nowra, Nowra NSW 6
Stockland Cleveland, Cleveland QLD
Stockland Bull Creek, Bull Creek WA
Stockland Traralgon, Traralgon VIC
Stockland Bathurst, Bathurst NSW
Stockland Wallsend, Wallsend NSW
Stockland Tooronga, Tooronga VIC
Stockland Corrimal, Corrimal NSW
Stockland Harrisdale Complex, Harrisdale WA7
Shellharbour Retail Park, Shellharbour NSW
Stockland Cammeray, Cammeray NSW
Stockland Highlands, Craigieburn VIC3
Stockland Kensington, Kensington QLD
North Shore Townsville, Townsville QLD
Stockland Merrylands Court, Merrylands NSW 3
Woolworths Toowong, Toowong QLD3,4
Stockland Townsville Kingsvale Sunvale, QLD (50%)2,5
Stockland Jimboomba Village Shopping Centre,
Jimboomba QLD (50%)2,8
Stockland Vincentia Shopping Centre, Vincentia NSW 8
Owned through equity-accounted investments
Stockland Riverton, Riverton WA (50%)
Total Retail9
Independent valuation
Independent valuers’
cap rate1 %
Book value ($M)
Date
$M
2017
2016
2017
2016
Dec 2016
Dec 2016
Jun 2017
Dec 2016
Dec 2015
Jun 2017
Dec 2015
Dec 2015
Jun 2017
Jun 2017
Dec 2015
Jun 2017
Jun 2017
Dec 2016
Jun 2017
Jun 2017
Jun 2017
Dec 2015
Dec 2016
Jun 2016
Dec 2016
Jun 2017
Dec 2016
Dec 2016
Jun 2017
Dec 2015
Dec 2016
Dec 2016
Jun 2017
Dec 2016
Dec 2016
Dec 2016
Dec 2016
Jun 2017
Dec 2016
Dec 2014
Dec 2015
Dec 2014
–
–
Dec 2016
740
740
555
419
354
336
230
229
211
206
200
185
182
172
170
168
158
148
147
139
140
128
112
107
100
94
79
70
69
55
54
49
39
31
23
10
6
5
–
–
66
5.50
5.50
5.50
5.75
5.75
5.75
6.25
5.75
6.75
5.75
6.00
5.75
6.25
6.25
6.00 – 6.75
6.00 – 6.75
6.25
6.00
6.50 – 7.25
6.75 – 7.50
6.00
6.25
6.00
6.25
5.50
6.25
6.00
6.50
6.50
6.50
5.96
6.00
6.25
6.25
6.50
6.75
6.75
5.75
7.00
6.25
7.75
6.00
6.00
6.00
6.50
7.50
n/a
n/a
–
–
6.25
6.00
6.25
6.25
6.50
6.00
6.50
6.25
6.50
7.00
6.50
6.50
6.50
6.75
6.50
6.75
6.75
7.00
6.00
6.75
–
7.75
6.25
6.50
–
6.75
7.50
n/a
n/a
8.00
8.25
6.50
758
742
555
426
398
336
234
227
211
206
204
185
182
173
170
168
158
150
149
143
141
129
113
107
100
96
80
71
69
55
54
49
39
31
23
10
7
3
–
–
700
685
537
406
354
301
230
227
235
191
200
195
170
167
148
161
145
149
142
139
127
117
103
103
108
95
71
63
75
48
53
45
34
–
23
10
7
2
14
11
67
7,017
64
6,660
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.
4 Property is valued as land.
5 Independent valuation based on 100% ownership.
6 Independent valuation excludes the adjacent property owned by Stockland.
7 The values adopted in the comparative period are a result of a Directors’ valuation.
8 Property was disposed of during the period.
9 Totals may not add due to rounding.
Stockland Financial Report — 75
Consolidated Notes
Year ended 30 June 2017
(C1b) Commercial Properties (continued)
Description
Logistics & Business Parks
Directly owned
Yennora Distribution Centre, Yennora NSW
Triniti Business Campus, North Ryde NSW
Ingleburn Distribution Centre, Ingleburn NSW 6
60-66 Waterloo Road, Macquarie Park NSW
Hendra Distribution Centre, Brisbane QLD
Stockland Mulgrave, Mulgrave VIC6
Port Adelaide Distribution Centre, Port Adelaide SA
Brooklyn Estate, Brooklyn VIC
Forrester Distribution Centre, St Marys NSW
Macquarie Technology Centre, Macquarie Park
NSW
9-11a Ferndell Street, Granville NSW
1090-1124 Centre Road, Oakleigh VIC8
Toll Business Park, Altona VIC
Balcatta Distribution Centre, Balcatta WA10
20-50 & 76-82 Fillo Drive and 10 Stubb Street,
Somerton VIC
16 Giffnock Avenue, Macquarie Park NSW
23 Wonderland Drive, Eastern Creek NSW 6
Altona Distribution Centre, Altona VIC
72-76 Cherry Lane, Laverton North VIC
2 Davis Road, Wetherill Park NSW
2-8 Baker Street, Botany NSW
Erskine Park, Erskine Park NSW 6
Coopers Paddock, Warwick Farm NSW5
40 Scanlon Drive, Epping VIC
Export Park, 9-13 Viola Place, Brisbane Airport
QLD4
M1 Yatala Enterprise Park, Yatala QLD
Owned through equity-accounted investments
Optus Centre, Macquarie Park NSW (51%)
Total Logistics & Business Parks12
Office
Directly owned
Stockland Piccadilly, 133-145 Castlereagh Street,
Sydney NSW (50%)2, 3, 4, 7
Durack Centre, 263 Adelaide Terrace, Perth WA4
601 Pacific Highway, St Leonards NSW
77 Pacific Highway, North Sydney NSW
110 Walker Street, North Sydney NSW
40 Cameron Avenue, Belconnen ACT4
80-88 Jephson Street, Toowong QLD9
23-29 High Street, Toowong QLD9
Garden Square, Mt Gravatt QLD11
Owned through equity-accounted investments
135 King Street, Sydney NSW (50%)3
Total Office12
Independent valuation
Independent valuers’
cap rate1 %
Book value ($M)
Date
$M
2017
2016
2017
2016
Dec 2015
Dec 2015
Dec 2016
Dec 2015
Jun 2017
Dec 2016
Jun 2017
Dec 2015
Dec 2015
Dec 2016
Dec 2015
Jun 2017
Jun 2017
Dec 2016
Dec 2016
Jun 2017
Dec 2016
Jun 2017
Dec 2015
Jun 2016
Dec 2015
Dec 2016
–
Dec 2015
Jun 2017
Jun 2017
381
178
105
95
93
92
92
83
81
56
56
53
53
48
51
51
37
36
32
26
23
22
–
9
6
6
Jun 2017
227
7.00
7.00
6.75
6.50 – 7.00
7.75
7.00
9.00
8.00
7.25
6.98
7.25 – 9.00
6.75
6.25 – 7.25
6.75
7.56
7.00
7.00
–
6.50 – 7.00
8.25
–
9.00
8.00
7.25
7.00-8.25
7.25-9.00
9.25
6.75 – 7.50
7.00
8.25
7.12
6.75
7.50
7.00
7.25
6.25
6.00
–
7.50
10.44
n/a
6.75
7.75
–
8.25
7.00
7.25
6.25
–
–
7.50
9.29
n/a
6.75
Jun 2017
Jun 2017
Dec 2015
Dec 2016
Dec 2015
Jun 2017
Jun 2017
Jun 2017
–
280
106
98
73
30
25
17
7
–
5.50 – 6.00
8.00
7.00
6.50
7.25
10.50
8.00
7.00
–
6.00 – 7.00
8.00
7.00
7.00
7.25
11.00
8.75
7.50
n/a
Jun 2017
256
4.50 – 5.38
4.75 – 6.00
390
180
105
99
93
93
92
82
81
57
56
53
53
52
52
51
37
36
32
26
25
23
19
9
6
6
384
176
78
97
88
93
101
82
81
54
54
40
50
59
45
43
36
31
32
26
24
19
19
9
9
7
227
2,035
227
1,962
259
106
95
73
30
25
17
7
–
256
868
232
116
97
69
30
33
22
6
35
206
845
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 The values adopted above are a result of a Directors’ valuations.
6 The values adopted in the comparative period are a result of a Directors’ valuation.
7 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.
8 Property is currently undergoing redevelopment. An external valuation will be obtained on completion of the redevelopment.
9 Property is not held by the Trust.
10 Independent valuation excludes the adjacent property owned by Stockland.
11 Property was disposed of during the period.
12 Totals may not add due to rounding.
Stockland Financial Report — 76
Consolidated Notes
Year ended 30 June 2017
(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 Discounted Cash Flow (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 2017 30 June 2016
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
2.9% – 3.9%
4.5% – 7.3%
4.8% – 7.5%
6.8% – 8.5%
$56 – $429
2.3% – 3.7%
6.0% – 10.4%
6.5% – 12.0%
7.3% – 9.3%
$304 – $796
2.7% – 4.1%
5.4% – 10.5%
5.6% – 11.3%
7.0% – 11.8%
$117 – $725
5.5% – 6.7%
$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
5.8% – 8.0%
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).
Stockland Financial Report — 77
Consolidated Notes
Year ended 30 June 2017
(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 2001 and ASIC regulations) and the STML Responsible Entity 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 equally between
the capitalisation value (50% weighting) and the DCF valuation (50% 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. 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 — 78
Consolidated Notes
Year ended 30 June 2017
(C1b) Commercial Properties (continued)
External Valuations
The STML Responsible Entity 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 generally 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
Stockland
Trust
2017
$M
608
1,588
1,039
3,235
2016
$M
607
1,575
1,075
3,257
2017
$M
610
1,602
1,038
3,250
2016
$M
609
1,588
1,077
3,274
Stockland Financial Report — 79
Consolidated Notes
Year ended 30 June 2017
(C1c) Retirement Living
For information on results of the Retirement Living business refer to section (B2c).
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
Retirement Living net carrying value movement during the year
Balance at the beginning of the financial year
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
2017
$M
3,622
202
3,824
(2,616)
1,208
1,162
162
–
28
(146)
17
(15)
1,208
2016
$M
3,368
208
3,576
(2,414)
1,162
1,137
168
(12)
26
(152)
(20)
15
1,162
Disposals
During the year, Stockland disposed of five villages located in Western Australia for total proceeds of $12 million. At
30 June 2016, these villages were revalued to their sale price and classified as assets held for sale.
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. The valuation of Retirement Living investment
properties and resident obligations is a key area of accounting estimation and judgement for the Group.
Both the investment properties and resident obligations are considered to be level 3 in the Fair Value Hierarchy.
Refer to section (D5).
The following inputs are used to measure the fair value of the investment properties:
Inputs
Discount rate1
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 2017 30 June 2016
12.5% – 14.5% (Average: 13.0%)
12.5% – 14.0% (Average: 12.9%)
3.6%
10.8 years
3.7%
10.6 years
$0.1 million – $2.1 million
$0.1 million – $1.3 million
$5k – $80k
0% – 100%
$5k – $80k
0% – 100%
1 Discount rate includes a premium to allow for future capital expenditure.
Stockland Financial Report — 80
Consolidated Notes
Year ended 30 June 2017
(C1c) Retirement Living (continued)
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 April 2017. Independent valuations are also obtained from
time to time.
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 (B2c). 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.
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.
Stockland Financial Report — 81
Consolidated Notes
Year ended 30 June 2017
(C1c) Retirement Living (continued)
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
The non-current obligation relates to certain legacy contracts that give Stockland a right to defer settlement for up to
eight years.
As at 30 June
2017
Existing resident obligations
Former resident obligations
Total resident obligations
2016
Existing resident obligations
Former resident obligations
Total resident obligations
Current
$M
Non-Current
$M
2,439
5
2,444
2,202
3
2,205
177
8
185
212
10
222
Total
$M
2,616
13
2,629
2,414
13
2,427
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.
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 impractical to have the resident obligations valued externally, therefore these are valued every six months by
the Directors as described above. Key assumptions used in these valuations are externally reviewed and assessed
for reasonableness each reporting period.
Stockland Financial Report — 82
Consolidated Notes
Year ended 30 June 2017
(C1c) Retirement Living (continued)
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 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%
2017
$M
167
2016
$M
150
2017
$M
(167)
2016
$M
(150)
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
2017
$M
2016
$M
2017
$M
2016
$M
45
(1)
44
95
139
67
16
–
83
54
(2)
52
82
134
62
38
–
100
4
(1)
3
19
22
71
–
2
(1)
1
17
18
65
–
3,181
3,252
3,445
3,510
Stockland Financial Report — 83
Consolidated Notes
Year ended 30 June 2017
(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)
Total current trade and other payables
Non-current
Land purchases
Total non-current trade and other payables
Section
(D8)
Stockland
2017
$M
2016
$M
Trust
2017
$M
237
10
312
26
585
10
10
273
48
295
27
643
–
–
100
–
312
(2)
410
–
–
2016
$M
129
–
295
(2)
422
–
–
The carrying values of trade receivables and payables at balance date represent a reasonable approximation of
their fair values.
(C3) Other non-financial assets and liabilities
(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
Opening balance as at 1 July 2015
Additions
Balance as at 30 June 2016
Additions
Balance as at 30 June 2017
Accumulated amortisation and impairment losses
Opening balance as at 1 July 2015
Amortisation charge
Impairment charge
Balance as at 30 June 2016
Amortisation charge
Impairment charge
Balance as at 30 June 2017
Carrying amounts
As at 30 June 2016
As at 30 June 2017
Goodwill
$M
Software
$M
117
–
117
–
117
(41)
–
–
(41)
–
–
(41)
76
76
80
33
113
44
157
(58)
(9)
–
(67)
(10)
–
(77)
46
80
Total
$M
197
33
230
44
274
(99)
(9)
–
(108)
(10)
–
(118)
122
156
Stockland Financial Report — 84
Consolidated Notes
Year ended 30 June 2017
(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. The determination of the
recoverability of goodwill is a key area of accounting estimation and judgement for the Group.
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 (2016: $nil).
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.
Deferred Repayment (DR) Contracts
The Australian Retirement Communities portfolio acquired in 2007, included a number of DR contracts. These DR
contracts were entered into 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 13.0% (2016: 12.9%) and cash flows beyond the five
year period have been determined by applying a growth rate of 3.6% p.a. (2016: 3.7% 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% (2016: 15.0%). Cash flows beyond the five year period have been
determined by applying a growth rate of 3.6% p.a. (2016: 3.7% 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.
Stockland Financial Report — 85
Consolidated Notes
Year ended 30 June 2017
(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 directly attributable
overhead costs, where the software will generate probable future economic benefits. This is a key area of
accounting estimation and judgement for the Group.
Costs associated with maintaining software are recognised as an expense as incurred.
All software is currently 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 (2016: $nil).
(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
Eagle Street Pier Pty Limited
Total non-current assets held for sale
Stockland
2017
$M
71
–
–
71
2016
$M
67
12
18
97
Trust
2017
$M
69
–
–
69
2016
$M
61
–
–
61
In the prior year, Stockland completed the sale of the property at Eagle Street Pier which were held by Eagle Street
Pier Pty Limited. 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 — 86
Consolidated Notes
Year ended 30 June 2017
(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
securityholders (equity) and how much is borrowed from financial institutions and capital markets (debt), in
order to finance the 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 market value of the Group’s derivative instruments between
the later of inception or 1 July 2016 and 30 June 2017. The market 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 in section (D5).
Stockland Financial Report — 87
Consolidated Notes
Year ended 30 June 2017
(D1) Net financing costs (continued)
Net financing costs can be analysed as follows:
Finance income
Interest income from related parties
Interest income from other parties
Interest income
Net gain on fair value hedges
Net gain on derivatives
Total gain on debt and derivatives
Finance income
Finance expense
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
Stockland
Trust
2017
$M
2016
$M
2017
$M
2016
$M
–
4
4
26
92
118
122
200
9
(113)
(13)
83
–
–
–
83
–
8
8
–
–
–
8
197
12
(116)
(12)
81
15
156
171
252
272
1
273
26
92
118
391
200
–
–
(8)
192
–
–
–
192
293
1
294
–
–
–
294
197
–
–
(3)
194
15
156
171
365
The interest expense relating to interest-bearing financial liabilities includes $82 million (2016: $96 million)
related to interest on financial liabilities carried at amortised cost.
The table below shows the composition of gains/losses on derivatives, including those eligible and ineligible for
hedge accounting:
Net gain/(loss) on fair value hedges
(Loss)/gain on net change in fair value of derivatives
Gain/(loss) on net change in fair value of interest-bearing liabilities
Net gain/(loss) on fair value hedges
Net gain/(loss) on derivatives
Gain/(loss) on foreign exchange movement
Gain/(loss) on fair value movement
Net gain/(loss) on derivatives
Stockland
Trust
2017
$M
(137)
163
26
22
70
92
2016
$M
151
(166)
(15)
(25)
(131)
(156)
2017
$M
(137)
163
26
22
70
92
2016
$M
151
(166)
(15)
(25)
(131)
(156)
In the prior year, financial instruments were closed out by the Group for nil consideration. 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
2017
$M
–
–
–
2016
$M
(119)
112
(7)
2017
$M
–
–
–
2016
$M
(119)
112
(7)
Stockland Financial Report — 88
Consolidated Notes
Year ended 30 June 2017
(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 Statements. As at 30 June 2017, Stockland does not have any bank
overdrafts.
Included in the cash and cash equivalents balance is $110 million (2016: $99 million) in cash that is relating to joint
ventures and/or 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 recognised initially at fair value less attributable transaction costs and
subsequently are stated at amortised cost. Any difference between cost and redemption value are recognised in
profit or loss over the period of the borrowings using the effective interest method. However, where an effective fair
value hedge is in place, borrowings are carried at fair value and changes in the fair value are recognised in profit or
loss.
The table below shows fair value of each of these instruments. Fair value reflects the principal amount and
remaining duration of these notes based on current market interest rates and conditions at balance date.
2017
Foreign medium term notes
Domestic medium term notes
Bank facilities
Total
2016
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)
267
–
–
267
331
150
–
481
2,575
557
130
3,262
2,644
555
120
3,319
2,842
557
130
3,529
2,975
705
120
3,800
3,119
608
130
3,857
3,257
764
120
4,141
The difference of $328 million (2016: $341 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, 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 United
States dollars (USD) and converted back to Australian dollars (AUD) principal and AUD floating coupons through
CCIRS.
In the current year, the Trust settled new US private placement debt which was transacted in the prior year. The
debt is equivalent to $398 million and comprises of four tranches denominated in either USD or AUD with terms of
between 10 and 15 years.
Stockland Financial Report — 89
Consolidated Notes
Year ended 30 June 2017
(D3a) Foreign medium term notes (continued)
During the current year, the Trust also repaid USD 242 million ($277 million) of its notes that were issued in the US
private placement market and matured in July 2016, October 2016 and June 2017.
The fair value of the US private placements as at 30 June 2017 is $2,384 million (2016: $2,482 million). Details of
the foreign medium term notes on issue in the US private placement market are set out below:
Maturity date
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
August 2026
June 2027
August 2027
August 2028
February 2029
August 2030
August 2031
Total
Fixed rate
coupon
Floating
CCIRS2
2017
$M
2016
$M
2017
$M
2016
$M
Face value1
Carrying amount
5.04%
5.87%
5.93%
5.96%
5.98%
6.01%
5.19%
5.24%
4.32%
6.15%
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%
3.09%
6.28%
3.85%
3.19%/4.35%
4.67%
4.00%
3.34%
2.99%
1.62%
–
–
0.87%
1.63%
2.23%/–
1.52%
1.69%
2.27%
–
–
–
61
250
269
71
90
176
28
105
50
156
100
200
20
131
139
141
72
59
62
27
188
61
250
269
71
90
176
28
105
50
156
100
–
20
131
–
141
72
–
–
–
–
53
214
239
72
93
245
39
102
49
163
100
239
31
137
81
182
77
53
65
25
242
57
223
260
75
96
266
41
109
53
181
100
–
32
153
–
209
87
–
Less: attributable transaction costs
Total balance sheet carrying amount
2,118
1,997
2,169
(5)
2,164
2,274
(2)
2,272
1 Face value of the notes in AUD 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 2017 was 1.705% (2016: 1.96%)
Asian and European private placement
The Trust has issued medium term notes into the Asian and European private placement markets with face values
of Hong Kong dollars (HKD) 470 million ($62 million), HKD 400 million ($55 million), HKD 540 million ($100 million)
and Euros (EUR) 300 million ($433 million).
All notes are issued at a fixed coupon payable in HKD and EUR and converted back to AUD floating coupons
through cross currency principal and interest rate swaps.
Stockland Financial Report — 90
Consolidated Notes
Year ended 30 June 2017
(D3a) Foreign medium term notes (continued)
The fair value of the notes as at 30 June 2017 is $735 million (2016: $775 million). Details of the foreign medium
term notes on issue in the Asian and European private placement market are set out below:
CCIRS
Face value1
Carrying amount
Maturity date
November 2021
May 2025
October 2025
January 2026
Total
Fixed rate
coupon
Type
Rate2
1.50%
Floating
1.48%
3.37%
Floating
1.63%
4.00%
Floating
1.63%
3.38%
Fixed
4.90%
2017
$M
433
62
55
100
650
2016
$M
433
62
55
100
650
Less: attributable transaction costs
Total balance sheet carrying amount
2017
$M
445
78
73
86
682
(3)
679
2016
$M
453
85
80
88
706
(3)
703
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 2017 was 1.705% (2016: 1.96%).
(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.
During the year, the Trust repaid $150 million of its medium term domestic notes that matured in July 2016.
The fair value of the notes as at 30 June 2017 is $608 million (2016: $764 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
Fixed rate
coupon
7.50%
5.50%
8.25%
4.50%
2017
$M
–
150
160
250
560
(3)
557
2016
$M
150
150
160
250
710
(5)
705
Stockland Financial Report — 91
Consolidated Notes
Year ended 30 June 2017
(D3c) Bank facilities
Stockland and Trust
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
December 2017
July 2018
August 2018
December 2018
August 2019
January 2019
January 2020
February 2020
November 2020
February 2021
November 2021
2017
2016
Utilised
$M
Facility Limit
$M
Utilised
$M
Facility Limit
$M
–
–
–
–
–
–
–
–
–
–
30
100
130
–
100
100
–
100
120
–
250
–
–
150
100
920
–
–
–
–
–
–
–
–
20
100
–
–
120
100
200
–
120
–
–
250
–
150
100
–
–
920
(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.
The valuation of investments is a key area of accounting estimation and judgement for the Group.
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’.
Stockland Financial Report — 92
Consolidated Notes
Year ended 30 June 2017
(D4) Other financial assets and liabilities (continued)
Investment in BGP Holdings, Plc (BGP)
BGP is a European (predominantly Euro currency denominated) real estate investment company. Stockland holds a
12.4% non-transferrable, non-tradable investment in BGP, which was acquired via an in specie distribution through
its previous investment in the GPT Group. This investment is held as an available for sale investment, in current
Other Financial Assets.
During the year, BGP successfully completed the sale of their property portfolio and have advised their intention to
wind up the BGP group of companies and distribute the proceeds to shareholders through a combination of
distributions and returns of capital. In February 2017, Stockland received $71 million being the first tranche of
proceeds from BGP.
At 30 June 2017, BGP indicated that total cash of approximately €136 million ($202 million based on the spot rate
at the end of the year) will be returned to shareholders as part of the return of capital process, equating to a prima
facie value of $25 million for Stockland’s share of the investment (after deducting for transaction costs and warranty
provisions). There is uncertainty around the timing of receipt of the remaining proceeds, however BGP have
indicated that this distribution is expected within the next 6 months. Stockland have recognised a fair value of
$23 million ($16 million after tax) for this investment. The fair value is now based on an expected cash flow model
after adjusting for risks of further potential delays and liquidation costs by applying a risk premium of 10%. An
increment of 5% to these risk adjusted cash flows would result in a decrease of $1 million in the fair value of this
investment. Similarly, a decrement of 5% would result in an increase of $1 million in the fair value.
Reconciliation from opening balance to closing balance for the fair value of the investment in BGP
Stockland
Opening balance as at 1 July 2016
Net gain recognised in other comprehensive income
Distribution received
Balance as at 30 June 2017
$M
28
66
(71)
23
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 $9
million (2016: $8 million) of donations made by Stockland Trust to the CARE Foundation in the prior years which the
CARE Foundation has invested to fund its ongoing charitable projects.
Derivative financial instruments
Stockland holds a number of derivative instruments including interest rate swaps, foreign exchange contracts and
Cross Currency Interest Rate Swaps (CCIRS).
Derivative financial instruments are recognised initially at fair value and remeasured at each balance date. The
valuation of derivatives is key area of accounting estimation and judgement for the Group.
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 $134 million
(2016: $205 million).
Stockland Financial Report — 93
Consolidated Notes
Year ended 30 June 2017
(D4) Other financial assets and liabilities (continued)
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 — 94
Consolidated Notes
Year ended 30 June 2017
(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
Securities in unlisted entities
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
2017
$M
2016
$M
–
–
–
23
23
9
8
17
168
36
39
26
286
–
72
7
–
79
36
8
44
271
53
64
36
468
2017
$M
(8)
(28)
(2)
–
(38)
–
–
–
(44)
(27)
–
(132)
(203)
2016
$M
(3)
(9)
(7)
–
(19)
–
–
–
(18)
(5)
(7)
(267)
(297)
Other financial assets
Other financial liabilities
2017
$M
2016
$M
–
–
–
–
9
9
168
36
39
26
278
–
72
7
79
8
8
271
53
64
36
432
2017
$M
(8)
(28)
(2)
(38)
–
–
(44)
(27)
–
(132)
(203)
2016
$M
(3)
(9)
(7)
(19)
–
–
(18)
(5)
(7)
(267)
(297)
Stockland Financial Report — 95
Consolidated Notes
Year ended 30 June 2017
(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
2017
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
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
Level 1
$M
Level 2
$M
Level 3
$M
Total
$M
–
–
8
8
–
–
–
8
–
–
8
8
–
–
–
8
269
–
–
269
(241)
–
(241)
28
503
–
–
503
(316)
–
(316)
187
–
32
–
32
–
(2,629)
(2,629)
(2,597)
–
36
–
36
–
(2,427)
(2,427)
(2,391)
269
32
8
309
(241)
(2,629)
(2,870)
(2,561)
503
36
8
547
(316)
(2,427)
(2,743)
(2,196)
Stockland Financial Report — 96
Consolidated Notes
Year ended 30 June 2017
(D5) Fair value hierarchy (continued)
Trust
2017
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
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
Level 1
$M
Level 2
$M
Level 3
$M
–
–
–
–
–
–
–
–
–
–
–
–
269
–
269
(241)
(241)
28
503
–
503
(316)
(316)
187
–
9
9
–
–
9
–
8
8
–
–
8
Total
$M
269
9
278
(241)
(241)
37
503
8
511
(316)
(316)
195
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
Opening balance as at 1 July 2015
Total gains and losses recognised in:
•
•
profit or loss
other comprehensive income
Net cash settled on resident turnover
Disposed / settled
Balance as at 30 June 2016
Total gains and losses recognised in:
•
•
profit or loss
other comprehensive income
Net cash settled on resident turnover
Disposed / settled
Balance as at 30 June 2017
Units in unlisted
entities
$M
Derivatives
$M
Retirement
Living resident
obligations
$M
24
3
9
–
–
36
(70)
66
–
–
32
(13)
(2,211)
–
–
–
13
–
–
–
–
–
–
(3)
–
(213)
–
(2,427)
12
–
(214)
–
(2,629)
Total
$M
(2,200)
–
9
(213)
13
(2,391)
(58)
66
(214)
–
(2,597)
Stockland Financial Report — 97
Consolidated Notes
Year ended 30 June 2017
(D5) Fair value hierarchy (continued)
Trust
Opening balance as at 1 July 2015
Total gains and losses recognised in:
•
profit or loss
Disposed / settled
Balance as at 30 June 2016
Total gains and losses recognised in:
•
profit or loss
Capital distributions
Disposed / settled
Balance as at 30 June 2017
(D6) Financial risk factors
Units in
unlisted entities
$M
5
3
–
8
1
–
–
9
Derivatives
$M
(13)
–
13
–
–
–
–
–
Total
$M
(8)
3
13
8
1
–
–
9
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 (AUD). Stockland has currency
exposures to the Euro (EUR), Hong Kong dollar (HKD) and US dollar (USD).
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.
Stockland Financial Report — 98
Consolidated Notes
Year ended 30 June 2017
(D6a) Market risk (continued)
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.
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.
2017
Borrowings
Other net assets
CCIRS
Foreign exchange contracts
Total exposure
2016
Borrowings
Other net assets
CCIRS
Foreign exchange contracts
Total exposure
Stockland
EUR
€M
HKD
$M
USD
$M
(300)
(1,410)
(1,493)
18
300
(2)
16
–
1,410
–
–
–
1,493
–
–
(300)
(1,410)
(1,469)
23
300
(3)
20
–
1,410
–
–
–
1,469
–
–
EUR
€M
(300)
–
300
–
–
(300)
–
300
–
–
Trust
HKD
$M
USD
$M
(1,410)
(1,493)
–
1,410
–
–
–
1,493
–
–
(1,410)
(1,469)
–
1,410
–
–
–
1,469
–
–
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 AUD exchange rates of 10% at balance date with all other variables held constant.
Stockland
2017
EUR
HKD
USD
Total impact
2016
EUR
HKD
USD
Total impact
Profit or loss
Equity
Increase
$M
Decrease
$M
Increase
$M
Decrease
$M
(3)
–
(3)
(6)
(3)
–
(7)
4
–
4
8
4
–
8
(10)
12
(46)
(9)
(20)
(75)
(47)
(10)
(21)
(78)
46
12
27
85
47
13
26
86
Stockland Financial Report — 99
Consolidated Notes
Year ended 30 June 2017
(D6a) Market risk (continued)
Trust
2017
EUR
HKD
USD
Total impact
2016
EUR
HKD
USD
Total impact
Interest rate risk
Profit or loss
Equity
Increase
$M
Decrease
$M
Increase
$M
Decrease
$M
–
–
(3)
(3)
–
–
(7)
(7)
–
–
4
4
–
–
8
8
(46)
(9)
(20)
(75)
(47)
(10)
(21)
(78)
46
12
27
85
47
13
26
86
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)
2017
$M
3,755
(297)
3,458
2016
$M
3,331
146
3,477
Stockland Financial Report — 100
Consolidated Notes
Year ended 30 June 2017
(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 (2016: 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
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
2017
2016
100bp
higher
$M
2
130
132
33
100bp
lower
$M
(2)
(137)
(139)
(35)
100bp
higher
$M
2
153
155
39
100bp
lower
$M
(2)
(160)
(162)
(42)
2017
100bp
higher
$M
35
130
165
100bp
lower
$M
(35)
(137)
(172)
2016
100bp
higher
$M
35
153
188
100bp
lower
$M
(35)
(160)
(195)
33
(35)
39
(42)
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 Board.
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
2017
2016
10% higher
$M
10% lower
$M
10% higher
$M
10% lower
$M
2
–
–
–
(2)
–
–
–
2
–
–
–
(2)
–
–
–
Stockland Financial Report — 101
Consolidated Notes
Year ended 30 June 2017
(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 Audit
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 2017, these financial institutions had an S&P credit rating of BBB (negative outlook) or above (2016:
BBB stable or above).
Bank guarantees and mortgages over land are held as security over certain trade and other receivables balances.
As at 30 June 2017 and 30 June 2016, 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 5.7 years (2016: 5.3 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
2017
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
(257)
(312)
(3,529)
(2,629)
(134)
(107)
(257)
(312)
(4,279)
(2,629)
(247)
(312)
(418)
(10)
–
–
–
–
–
(357)
(1,622)
(1,882)
(2,444)
(4)
(3)
(178)
(148)
(61)
(41)
(46)
–
646
(798)
296
(332)
Total financial liabilities
(6,969)
(7,777)
(3,518)
239
(281)
(454)
9
(29)
102
(156)
(1,691)
(2,114)
Stockland Financial Report — 102
Consolidated Notes
Year ended 30 June 2017
(D6c) Liquidity risk (continued)
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)
–
–
–
–
–
–
(416)
(1,135)
(2,248)
(2,205)
(3)
(8)
(212)
(302)
(71)
(67)
(118)
(46)
730
(797)
59
(58)
307
(328)
(507)
254
(287)
110
(124)
(1,294)
(2,520)
Total financial liabilities
(7,159)
(7,858)
(3,537)
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, $2,616 million (2016: $2,414
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.
Trust
2017
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
(100)
(312)
(100)
(312)
Interest-bearing loans and borrowings
(3,529)
(4,279)
(100)
(312)
(418)
–
–
–
–
–
–
(357)
(1,622)
(1,882)
Derivative financial liabilities
Interest rate derivatives
CCIRS
•
Inflow
• Outflow
(134)
(107)
(148)
(61)
(41)
(46)
–
Total financial liabilities
(4,182)
(4,991)
2016
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)
646
(798)
296
(332)
(927)
(129)
(295)
(644)
239
(281)
(440)
9
(29)
102
(156)
(1,688)
(1,936)
–
–
–
–
–
–
(416)
(1,135)
(2,248)
Derivative financial liabilities
Interest rate derivatives
CCIRS
•
Inflow
• Outflow
(274)
(42)
(302)
(71)
(67)
(118)
(46)
730
(797)
59
(58)
Total financial liabilities
(4,540)
(5,236)
(1,138)
307
(328)
(504)
254
(287)
110
(124)
(1,286)
(2,308)
Stockland Financial Report — 103
Consolidated Notes
Year ended 30 June 2017
(D7) Issued capital
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.
The following table provides details of securities issued by the Group:
Stockland and Trust
Stockland
Trust
Number of
securities
2017
Number of
securities
2016
2017
$M
2016
$M
2017
$M
2016
$M
2,418,400,142
2,392,042,302
8,817
8,696
7,507
7,389
(6,002,501)
(3,878,867)
2,412,397,641
2,388,163,435
(27)
8,790
(15)
8,681
(27)
7,480
(15)
7,374
Details
Ordinary securities on issue
Issued and fully paid
Other equity securities
Treasury securities
Total Issued Capital
(D7a) Ordinary securities
The following table provides details of movements in securities issued:
Details
Movement of securities issued
Opening balance as at 1 July 2015
Securities issued under the DRP
Balance as at 30 June 2016
Securities issued under the DRP
Balance as at 30 June 2017
Stockland and Trust
Number of securities
Stockland
$M
2,361,717,862
30,324,440
2,392,042,302
26,357,840
2,418,400,142
8,571
125
8,696
121
8,817
Trust
$M
7,266
123
7,389
118
7,507
Distribution/Dividend Reinvestment Plan (DRP)
In the current year, Stockland issued 26,357,840 securities (2016: 30,324,440) 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 9 June 2017, Stockland announced that the DRP would operate for the final distribution to 30 June 2017 and
that investors participating in the DRP will be entitled to receive a full distribution.
The DRP security price was determined to be $4.20 being the average for 15 daily volume weighted average prices
of Stockland securities for the 15-day trading period immediately preceding Wednesday 26 July 2017, with a
discount of 1.0% on the securities acquired under the DRP.
Stockland Financial Report — 104
Consolidated Notes
Year ended 30 June 2017
(D7b) Other equity securities
Treasury securities
Treasury securities 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 2016
Securities acquired
Securities transferred to employees on vesting
Balance as at 30 June 2017
Stockland and Trust
Number of securities
Stockland
$M
3,878,867
3,937,661
(1,814,027)
6,002,501
(15)
(16)
4
(27)
Trust
$M
(15)
(16)
4
(27)
Securities acquired
During the year, 3,937,661 securities (2016: 2,030,936) were acquired on market at an average price of $4.89 for
the purpose of issuing securities under the Share Plans.
Securities transferred to employees on vesting
During the year, 1,814,027 securities (2016: 773,218) vested and were transferred to employees under the Share Plans.
At 30 June 2017, the Stockland Employee Securities Plan Trust is holding 6,002,501 securities, including 3,163,934
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/or 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
into Stockland securities 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 share options granted under the three Share Plans are held at fair value. The valuation of share options
is a key area of accounting estimation and judgement for the Group.
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
2017
$2.40
$3.42
$2.19
$3.26
$3.04
2016
$2.29
$2.76
$1.75
$3.19
$2.40
Number of
rights/securities
2017
2016
11,783,499
10,990,123
5,897,525
5,996,393
(2,071,939)
(2,240,203)
(4,057,151)
(2,962,814)
11,551,934
11,783,499
Stockland Financial Report — 105
Consolidated Notes
Year ended 30 June 2017
(D7c) Share based payments (continued)
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 2017 was 3,426,525
(2016: 3,986,221).
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
2017
2016
28 September 2016
31 August 2015
$2.04
$4.71
–
5.7%
1.6%
2.8 years
19.0%
16.0%
$2.66
$3.91
–
6.3%
2.0%
2.8 years
20.0%
15.0%
The LTI rights of 8,180,154 (2016: 8,924,633) are outstanding as at 30 June 2017, which have fair values ranging
from $1.50 to $2.04 (2016: $1.45 to $2.08) per right and a weighted average restricted period remaining of 1.5 years
(2016: 1.5 years).
During the year, 2,216,821 rights (2016: 1,060,733) vested and will convert to securities with a weighted average
fair value of $2.25 (2016: $1.59).
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 2017 of $4.27 (2016: $4.84).
The DSTI outstanding as at 30 June 2017, included in the table above, are 3,366,075 (2016: 2,858,866).
The DSTI outstanding have fair values ranging from $4.27 to $4.84 (2016: $3.94 to $4.84) 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.
Stockland Financial Report — 106
Consolidated Notes
Year ended 30 June 2017
(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 amounts 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 2017 is $14 million based on a 30% tax rate
(2016: $13 million). For the current year, the interim and final distributions are paid solely out of the Trust and
therefore the franking percentage is not relevant.
Stockland Trust
2017
Interim distribution
Final distribution
Total distribution
2016
Interim distribution
Final distribution
Total distribution
Cents per
security
Total amount
$M
Date of payment
Tax preferred
%
12.6
12.9
25.5
12.2
12.3
24.5
28 February 2017
31 August 2017
29 February 2016
31 August 2016
303
312
615
290
295
585
27.6
27.6
24.3
24.3
Stockland Financial Report — 107
Consolidated Notes
Year ended 30 June 2017
(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 2017 or 30 June 2016.
(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
2017
$M
574
84
–
84
2016
$M
524
90
–
90
2017
$M
556
84
–
84
2016
$M
505
90
–
90
Stockland Financial Report — 108
Consolidated Notes
Year ended 30 June 2017
(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
The King Trust
Willeri Drive Trust
Changes to Joint Ventures
Eagle Street Pier Pty Limited
Stockland
2017
%
2016
%
Trust
2017
%
2016
%
50
50
50
51
50
50
50
50
50
50
51
50
50
50
–
50
–
51
50
50
50
–
50
–
51
50
50
50
Through a joint venture entity, Stockland held an indirect interest in a property located Eagle Street Pier in Brisbane.
On 19 June 2015, this joint venture entity entered into an agreement to sell the property to an unrelated party. The
sale was settled in the prior year, with the final distribution received in July 2016. Refer to (C3b) for further details.
At 30 June 2015, the joint venture entity was reclassified as an asset held for sale at which point the investment was
no longer equity-accounted. The entity is intended to be voluntarily wound up in the 2018 financial year.
(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 2017, Stockland held a 19.9% interest in SDRT No.1 (2016: 19.9%), valued at $9 million. The
Group’s interest in this fund is included in the ‘Other Financial Assets’ line item on the balance sheet.
The maximum exposure to risk for SDRT No.1 is the carrying value of its investment in the Fund.
(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.
Stockland Financial Report — 109
Consolidated Notes
Year ended 30 June 2017
(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 Industrial No. 1 Property 1 Trust
Stockland Industrial No. 1 Property 4 Trust
Stockland Industrial No. 1 Property 5 Trust
Stockland Industrial No. 1 Property 6 Trust
Stockland Industrial No. 1 Property 7 Trust
Stockland Industrial No. 1 Property 8 Trust
Flinders Industrial Property Subtrust (No. 1)
Stockland Industrial No. 1 Property 9 Trust
Hervey Bay Holding Trust
Hervey Bay Sub Trust
Industrial Property Trust
Jimboomba Village Shopping Centre and Tavern 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 Bayswater Unit Trust2
Stockland Bundaberg Trust
Stockland Castlereagh Street Trust
Stockland Direct Diversified Fund
Stockland Direct Office Trust No. 4
Stockland Direct Retail Trust No. 3
Stockland Eastern Creek Trust
Stockland Finance Holdings Pty Limited1
Stockland Finance Pty Limited1
Stockland Harrisdale Trust
Stockland Industrial No. 1 Property 11 Trust
Stockland Marrickville Unit Trust2
Stockland Mornington Unit Trust2
Stockland Mulgrave Unit Trust
Stockland North Ryde Unit Trust2
Stockland Padstow Unit Trust2
Stockland Parkinson Unit Trust2
Stockland Quarry Road Trust
Stockland Retail Holding Sub-Trust No. 1
Stockland Retail Holding Trust No. 1
Sugarland Shopping Centre Trust
Stockland Wholesale Office Trust No. 1
Stockland Wholesale Office Trust No. 2
Stockland Richlands Unit Trust2
Stockland St Marys Unit Trust2
Stockland Tingalpa Unit Trust2
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 2017.
2 These entities were formed/incorporated or acquired in the current year.
Stockland Financial Report — 110
Consolidated Notes
Year ended 30 June 2017
(E3) Controlled entities (continued)
Controlled entities of Stockland Corporation Limited
ARC Joint Ventures Pty Ltd1
Bayview Road Property Trust
Bellevue Gardens Trust
Endeavour (No. 2) Unit Trust
IOR Friendly Society Pty Limited
Jimboomba Trust
Knowles Property Management Unit Trust
Knox Unit Trust
Mayflower Investments Pty Ltd
Merrylands Court Pty Limited
Nowra Property Unit Trust
Northpoint No. 1 Trust2
Northpoint No. 2 Trust2
Northpoint No. 3 Trust2
Northpoint No. 4 Trust2
Northpoint No. 5 Trust2
Northpoint No. 6 Trust2
Patterson Lakes Unit Trust
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
Retirement Living Holding Trust No. 6
Retirement Living Unit Trust No. 1
Retirement Living Unit Trust No. 2
Rogan’s Hill Retirement Village Trust
SDRT 2 Property 1 Trust
SDRT 2 Property 2 Trust
SDRT 2 Property 3 Trust
SDRT 2 Property 4 Trust
Stockland (Billingham) Limited4
Stockland (Boardwalk Sub2) Pty Limited
Stockland (IH) No. 1 Pty Limited
Stockland (NSW) No. 1 Pty Limited
Stockland (NSW) No. 2 Pty Limited
Stockland (Queen Street) Limited3
Stockland (Queensland) Pty Limited1
Stockland (Russell Street) Pty Limited1
Stockland (Stafford) Limited3
Stockland (UK) Limited4
Stockland (Warminster) Limited3
Stockland A.C.N 116 788 713 Pty Ltd1,5
Stockland Aevum Limited1,5
Stockland Aevum SPV Finance No. 1 Pty Limited5
Stockland Affinity Retirement Village Pty Limited5
Stockland Albert & Co Pty Ltd1,5
Stockland Bellevue Gardens Pty Limited5
Stockland Bells Creek Pty Limited.1
Stockland Birtinya Retirement Village Pty Limited1, 2
Stockland Buddina Pty Limited.1
Stockland Caboolture Waters Pty Limited1
Stockland Caloundra Downs Pty Limited1
Stockland Capital Partners Limited6
Stockland Care Foundation Pty Limited
Stockland Care Foundation Trust
Stockland Castlehaven Pty Limited5
Stockland Castleridge Pty Limited5
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 Limited1
Stockland Farrington Grove Retirement Village Pty Limited5
Stockland Financial Services Pty Limited1
Stockland Golden Ponds Forster Pty Limited5
Stockland Greenleaves Management Services Pty Limited5
Stockland Greenleaves Village Pty Limited5
Stockland Hibernian Investment Company Pty Limited1,5
Stockland Highlands Pty Limited1
Stockland Highlands Retirement Village Pty Limited5
Stockland Holding Trust No. 3
Stockland Holding Trust No. 4
Stockland Holding Trust No. 5
Stockland Holding Trust No. 6
Stockland Holdings Limited4
Stockland IOR Group Pty Limited5
Stockland Kawana Waters Pty Limited1
Stockland Knox Village Pty Limited 1,5
Stockland Lake Doonella Pty Limited1
Stockland Lensworth Glenmore Park Limited1,5
Stockland Lincoln Gardens Pty Limited5
Stockland Long Island Village Pty Limited1,5
Stockland Management Limited6
Stockland Maybrook Manor Pty Limited5
Stockland Financial Report — 111
Consolidated Notes
Year ended 30 June 2017
(E3) Controlled entities (continued)
Controlled entities of Stockland Corporation Limited
Stockland Mernda Retirement Village Pty Limited5
Stockland Miami (Fund) Unit Trust2
Stockland Miami (Non-Fund) Unit Trust2
Stockland Miami (QLD) Pty Limited1, 2
Stockland Midlands Terrace Adult Community Pty Limited1,5
Stockland North Lakes Development Pty Limited1
Stockland North Lakes Pty Limited1
Stockland Oak Grange Pty Limited1,5
Stockland Ormeau Trust
Stockland Patterson Village Pty Limited1,5
Stockland Pine Lake Management Services Pty Limited5
Stockland Pine Lake Village Pty Limited5
Stockland PR1 Trust
Stockland PR2 Trust
Stockland PR3 Trust
Stockland PR4 Trust
Stockland Property Holdings Limited4
Stockland Property Management Pty Limited1
Stockland Property Services Pty Limited1
Stockland Queenslake Village Pty Limited5
Stockland Retail Services Pty Limited1
Stockland Retirement Pty Limited1
Stockland Ridgecrest Village Management Services Pty Limited
Stockland Ridgecrest Village Pty Limited
Stockland Rosebud Village Pty Limited1
Stockland RVG (Queensland) Pty Limited
Stockland Salford Living Pty Limited
Stockland Scrip Holdings Pty Limited
Stockland Selandra Rise Retirement Village Pty Limited
Stockland Services (UK) Limited4
Stockland Services Pty Limited1
Stockland Singapore Pte Limited
Stockland South Beach Pty Limited1
Stockland Syndicate No. 1 Trust
Stockland Templestowe Retirement Village Pty Limited1,5
Stockland The Hastings Valley Parklands Village Pty Limited5
Stockland The Pines Retirement Village Pty Limited1
Stockland Trust Management Limited6
Stockland Tweed Heads Retirement Village Pty Limited1
Stockland Vermont Retirement Village Pty Limited1,5
Stockland WA (Estates) Pty Limited1
Stockland WA Development (Realty) Pty Limited1
Stockland WA Development (Sub 6) Pty Limited
Stockland WA Development (Vertu Sub 1) Pty Limited
Stockland WA Development Pty Limited1
Stockland Wallarah Peninsula Management Pty Limited1
Stockland Wallarah Peninsula Pty Limited1
Stockland Wantirna Village Pty Limited1,5
Stockland Willowdale Retirement Village Pty Limited5
Stockland Willows Retirement Village Services Pty Limited5
Templestowe Unit Trust
The Mount Gravatt Retirement Village Unit Trust
The Pine Lake Management Services Unit Trust
Toowong Place Pty Limited
Vermont Unit Trust
1 These entities are parties to the Deed of Cross Guarantee and members of the Closed Group as at 30 June 2017.
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 are in liquidation at 30 June 2017.
5 These entities changed names during the current financial year to include the word ‘Stockland’. The change was effective from 5 December 2016.
6 These entities were removed from the Deed of Cross Guarantee during the year and are no longer part of the Closed Group as at 30 June 2017.
Refer to section (E4).
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 — 112
Consolidated Notes
Year ended 30 June 2017
(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 Corporations (Wholly-owned Companies) Instrument 2016/785 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 new instrument does not apply to trusts or entities
regulated by the Australian Prudential Regulation Agency (APRA), such as holders of Australian Financial Services
Licences (AFSLs).
On 22 December 2016, the following entities (being holders of AFSLs) were removed from the Closed Group as a
result of requirements of the instrument: Stockland Capital Partners Limited, Stockland Management Limited and
Stockland Trust Management Limited.
Pursuant to the requirements of this instrument, a summarised consolidated Statement of Comprehensive Income
for the year ended 30 June 2017 and consolidated balance sheet as at 30 June 2017, 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
2017
$M
95
104
751
26
976
1
977
4
1,725
2,031
25
38
23
80
22
3,948
4,925
389
2,657
1,147
331
43
4,567
10
38
130
178
4,745
180
20161
$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
1,310
3
(1,133)
180
1,307
3
(1,195)
115
1 2016 balance sheet represents the consolidated balance sheet of the entities that were members of the Closed Group as at 30 June 2016.
Stockland Financial Report — 113
Consolidated Notes
Year ended 30 June 2017
(E4) Deed of Cross Guarantee (continued)
Summarised Statement of Comprehensive Income
Profit/(loss) before income tax benefit
Income tax expense
Profit/(loss) for the year/Total comprehensive income/(expense)
Summary of movements in accumulated losses
Accumulated losses at 1 July
Adjustment for entities removed from the Closed Group during the year
Profit/(loss) for the year
Accumulated losses at 30 June
Closed Group
2017
$M
76
(6)
70
2016
$M
(19)
(30)
(49)
(1,195)
(1,146)
(8)
70
–
(49)
(1,133)
(1,195)
(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 (loss)/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
(Accumulated losses)/ retained earnings
Total equity
1 There were no intangible assets as at 30 June 2017 (2016: $nil).
Parent entity contingencies
Stockland
Corporation Limited
Stockland
Trust
2017
$M
253
–
253
4,167
4,305
3,831
3,831
474
1,310
3
(839)
474
2016
$M
62
–
62
3,910
4,049
3,831
3,831
218
1,307
3
(1,092)
218
2017
$M
950
(21)
929
607
20,076
7,960
10,672
9,404
7,480
70
1,854
9,404
2016
$M
836
13
849
376
16,909
5,402
7,940
8,969
7,374
94
1,501
8,969
There are no contingencies within either parent entity as at 30 June 2017 (2016: $nil).
Parent entity capital commitments
Neither parent entity has entered into any capital commitments as at 30 June 2017 (2016: $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 — 114
Consolidated Notes
Year ended 30 June 2017
(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
Applicable exchange rate
Balance date
Date of transaction
Non-monetary assets and liabilities measured at fair value
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
Stockland Financial Report — 115
Consolidated Notes
Year ended 30 June 2017
(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 securities awarded under the LTI and
DSTI being accounted for as share based payments. The fair value of the rights and deferred securities is
recognised as an employee expense in profit or loss with a corresponding increase in the reserve over the vesting
period. On vesting, the LTI and DSTI awards are settled by allocating treasury securities to the rights holder, the
cost to acquire the treasury securities is recognised in the executive remuneration reserve by a transfer from
treasury securities. Where rights are forfeited due to failure to satisfy a service or performance condition, the
cumulative expense is reversed through profit or loss in the current year. The cumulative expenditure for rights
which lapse due to failure to satisfy a market condition are transferred to retained earnings on expiry.
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 2017. 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. Stockland
does not intend to early adopt this standard.
The key changes to the standard are the classification and measurement of financial assets, the introduction of an
expected credit loss model for impairment of financial assets and amended rules for hedge accounting.
A modified classification has been established for equity instruments which are strategic in nature and that are not
expected to be sold. This removes the profit or loss impact of changes in value of these strategic investments, as
fair value gains and losses are recorded as an increase or reduction in equity through other comprehensive income.
On maturity or disposal, these gains or losses are no longer recycled through profit or loss.
Under the new standard, Stockland does not raise a provision solely for past due loans and debtors balances,
instead a forward looking estimate that reflects current and forecast credit conditions is raised at inception and
considered annually. Amendments to the standard focus on aligning hedge accounting to Stockland’s risk
management strategy. This will expand the range of eligible hedging instruments, ease restrictions on layered items
and allow for a portfolio management approach to hedge accounting.
When adopted, the standard will affect in particular Stockland’s accounting for its available for sale financial assets
under the new classification for equity instruments, but no impact is expected on Stockland’s financial liabilities.
Based on an assessment performed during the year, Stockland does not expect the impact of these changes to
be material.
Stockland Financial Report — 116
Consolidated Notes
Year ended 30 June 2017
(F1) Accounting policies (continued)
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
does not intend to early adopt this standard.
The core principle of AASB 15 is that an entity recognises revenue related to the transfer of promised goods or
services when control of the goods or service passes to the customer. It requires the identification of discrete
performance obligations within a transaction and allocating an associated transaction price to these obligations.
Work to date notes that revenue of the Residential business group would fall within the scope of this standard.
Revenue from the Retirement Living and Commercial Property business groups are generally within the scope of
AASB 16 Leases.
Stockland currently recognises revenue from land and property sales when the risks and rewards of ownership are
transferred to the buyer and the amount of revenue can be reliably measured. Based on our initial assessment, this
is consistent with the point in time that control of the goods or service passes to the customer and, as such, no
material impact is expected from the application of the new standard.
AASB 16 Leases (effective for annual reporting periods beginning on or after 1 January 2019)
AASB 16 Leases 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 does not intend to early adopt this standard.
The revised lease standard sets out a comprehensive model for identifying lease arrangements and subsequent
measurement. Under the new standard, the lessee is required to recognize all right-of-use assets and
corresponding lease liabilities on the balance sheet, with the exception of short term and low value leases. The
right-of-use asset reflects the lease liability, direct costs and any adjustments for lease incentives or restoration. The
lease liability is the net present value of future lease payments for the lease term, which incorporates any options
reasonably expected to be exercised. The contracted cash flows are separated into principal repayments and
interest components, using the effective interest rate method. Depreciation expense on the right-of-use asset and
interest expense on the lease liability will now be recognised instead of a rental expense.
An initial assessment has been performed based on operating leases that exist in the current reporting period.
Based on this assessment, a right-of-use asset and a corresponding lease liability will be recognised on the balance
sheet for each lease arrangement, however no material net balance sheet or profit or loss impact is anticipated.
Lessor accounting remains largely unchanged, and hence there is no material impact anticipated on accounting for
income from Stockland’s Retirement Living and Commercial Property businesses.
Stockland Financial Report — 117
Consolidated Notes
Year ended 30 June 2017
(F2) Earnings per security (EPS)
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. This is highly variable as it includes unrealised fair value movements in investment
properties and financial instruments.
Diluted EPS adjusts the Basic EPS for the dilutive effect of any instruments, such as options, that could be
converted into ordinary securities.
Basic FFO per security is disclosed in the Directors’ Report on page 11 and more directly reflects underlying
income performance of the portfolio.
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
2017
cents
2016
cents
2017
cents
2016
cents
49.8
49.6
37.4
37.3
39.8
39.6
35.0
35.0
Stockland
2017
$M
2016
$M
Trust
2017
$M
2016
$M
Profit attributable to securityholders
1,195
889
955
832
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)
Stockland and Trust
2017
No.
2016
No.
2,401,240,450
2,375,730,846
Weighted average number of securities (basic)
2,401,240,450
2,375,730,846
Effect of rights and securities granted under Share Plans
7,963,712
5,639,783
Weighted average number of securities/units (diluted)
2,409,204,162
2,381,370,629
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.
Stockland Financial Report — 118
Consolidated Notes
Year ended 30 June 2017
(F3) Notes to cash flow statements
Stockland
2017
$M
Trust
2016
$M
2017
$M
2016
$M
Reconciliation of profit to net cash flow from operating activities
Profit for the year
1,195
889
955
Add/(less) items classified as investing/financing activities:
Net (gain)/loss on fair value hedges
Net (gain)/loss on derivatives
Interest capitalised to investment properties
Net loss on sale of non-current assets
Net gain on other financial assets
Dividends and distributions income
Add/(less) non-cash items:
DMF base fee earned, unrealised
Net write-back of inventory impairment provision
Depreciation
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
Decrease/(increase) in receivables
(Increase) in other assets
Decrease in inventories
Increase in deferred tax assets
(Decrease) in payables and other liabilities
Increase in resident obligations
Increase/(decrease) in other provisions
Net cash flow from operating activities
(26)
(92)
(13)
–
–
(71)
(29)
(3)
14
(8)
15
156
(12)
2
(4)
(4)
(16)
–
13
(8)
(26)
(92)
(8)
–
(1)
–
–
–
–
(8)
832
15
156
(3)
2
(6)
(3)
–
–
–
(8)
(295)
(476)
(239)
(387)
4
18
(9)
685
6
(20)
34
1
(10)
202
23
921
4
13
(8)
564
(39)
(1)
52
30
(34)
216
(1)
787
4
–
4
589
(6)
(4)
–
–
1
–
–
580
2
–
(6)
594
6
(1)
–
–
(16)
–
–
583
Stockland Financial Report — 119
Consolidated Notes
Year ended 30 June 2017
(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.
Contingent liabilities at 30 June 2017 comprise bank guarantees and insurance bonds.
Stockland and Trust
2017
$M
2016
$M
Guarantees
Bank guarantees and insurance bonds issued to semi and local government and other
authorities against performance contracts, maximum facility $560 million (2016: $570 million)
413
334
No deficiencies of assets exist in relation to any of the companies to which bank guarantees apply.
(F5) Commitments
Capital expenditure commitments
Commitments for 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
Operating lease commitments
Stockland
Trust
2017
$M
301
283
584
2016
$M
283
298
581
2017
$M
–
239
239
Commitments for 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
28
12
49
9
24
14
47
–
–
–
–
2016
$M
–
240
240
–
–
–
–
During the current financial year, $9 million was recognised as an expense in Stockland’s profit or loss in respect of
operating leases (2016: $8 million).
Stockland Financial Report — 120
Consolidated Notes
Year ended 30 June 2017
(F6) Related party disclosures
Details of arrangements with Stockland and the Trust related party entities are set out below:
Stockland
Trust
2017
$’000s
2016
$’000s
2017
$’000s
2016
$’000s
Revenue
Responsible Entity fees
Management and service fee
Property management, tenancy design and leasing fees
Rental income
Finance income
551
75
2,224
–
–
738
834
3,755
–
9
Total revenue from related parties
2,850
5,336
Expenses
Responsible Entity fees
Property management, tenancy design and leasing fees
Recoupment of expenses
Development management fee capitalised to investment property
Total expenses to related parties
Responsible Entity and other management fees
–
–
–
–
–
–
–
–
–
–
–
–
–
4,709
271,487
276,196
35,457
25,927
64,103
30,952
–
–
–
4,600
292,206
296,806
20,027
25,557
66,782
51,926
156,439
164,292
Stockland received Responsible Entity and other Management Fees from the unlisted property funds managed by
Stockland during the financial year.
The Trust pays Responsible Entity fees to Stockland Trust Management Limited, calculated at 0.3% to 0.35% of
gross assets of the Trust less intercompany loans (2016: 0.2%).
Property management expenses and tenancy design fees 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 a loan facility offer to an unlisted property fund managed by Stockland, SREEF
No.1. This offer was on market terms and conditions available at the date of acceptance of the loan facility offer.
SREEF No.1 was wound up during the prior year, and the loan facility offer was extinguished.
The Trust has an unsecured loan to Stockland Corporation Limited of $3,198 million (2016: $3,437 million) repayable
at call. Interest on the loan is payable monthly in arrears at interest rates within the range of 7.8% to 7.9% during the
year ended 30 June 2017 (2016: 7.7% to 8.9%). The Trust has not called on this loan at 30 June 2017.
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 based on a fixed 4.0% of total development costs in line with recent changes to
benchmark methodologies (in the prior year, the fee was 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.
Stockland Financial Report — 121
Consolidated Notes
Year ended 30 June 2017
(F6) Related party disclosures (continued)
Stockland has trade receivables of $861 thousand (2016: $469 thousand) due from the unlisted property funds.
As at 30 June 2017, the carrying amount of Stockland’s investment in the unlisted property funds was $8,747 thousand
(2016: $8,575 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
2017
$M
198
18
13
2
231
2016
$M
192
14
13
1
220
2017
$M
2016
$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.
Personnel expenses
The total personnel expenses for the year was $231 million (2016: $220 million), which includes $18,304 thousand
of equity-settled share based payment transactions (2016: $13,664 thousand).
Annual leave
Accrued annual leave of $9 million (2016: $8 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.
Stockland Financial Report — 122
Consolidated Notes
Year ended 30 June 2017
(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
2017
$’000s
12,972
270
107
–
8,215
21,564
2016
$’000s
13,075
217
131
–
7,188
20,611
Information regarding individual Directors’ and Executives’ remuneration is provided in the Remuneration Report on
pages 37 to 51 of the Directors’ Report.
Other transactions with Key Management Personnel
There are transactions between the Group and entities with which Key Management Personnel have an
association. These transactions do not meet the definition of related parties since the Key Management Personnel
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-Key Management
Personnel related entities on an arm’s length basis.
From time to time Key Management Personnel acquire Residential land lots from the Group. These purchases are
at market rates and on an arm’s length basis. For FY17 this amounted to $279 thousand.
(F9) Auditor’s remuneration
Stockland
Trust
2017
$’000s
2016
$’000s
2017
$’000s
2016
$’000s
Auditor of Stockland – PricewaterhouseCoopers Australia
Audit services
Audit and review of the Financial Report
1,583
1,574
Audit of Unlisted Property Fund Financial Reports
Regulatory audit and assurance services
Other audit and assurance services
119
724
9
145
675
55
536
–
479
–
Total remuneration in relation to audit services
2,435
2,449
1,015
Other non-audit related services
Taxation compliance services
Other non-audit services
Total remuneration in relation to non-audit services
–
466
466
282
400
682
–
–
–
514
–
387
20
921
157
–
157
Total auditor remuneration
2,901
3,131
1,015
1,078
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 — 123
Directors’ Declaration
Year ended 30 June 2017
(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’):
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 54 to 123, 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 2017 and of their
performance, for the financial year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;
there are reasonable grounds to believe that both Stockland and the 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
Corporations (Wholly-owned Companies) Instrument 2016/785.
(3) Stockland Trust has operated during the year ended 30 June 2017 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 2017, 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 2017.
(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:
Tom Pockett
Chairman
Mark Steinert
Managing Director
Dated at Sydney, 16 August 2017
Stockland Financial Report — 124
Independent Auditor’s Report
Independent auditor’s report
To the stapled securityholders of Stockland and the unitholders of Stockland Trust Group
Report on the audit of the financial report
Our opinion
In our opinion:
The accompanying financial reports of Stockland, being the consolidated stapled entity (‘Stockland’), which comprises
Stockland Corporation Limited and its controlled entities, and Stockland Trust and its controlled entities (together the
Stockland Trust Group or the Trust) is in accordance with the Corporations Act 2001, including:
(a) giving a true and fair view of the financial positions of Stockland and the Stockland Trust Group as at 30 June 2017
and of their financial performance for the year then ended; and
(b) complying with Australian Accounting Standards and the Corporations Regulations 2001.
What we have audited
The financial reports of Stockland and the Stockland Trust Group (the financial report) comprise:
the consolidated balance sheets as at 30 June 2017
the consolidated statements of profit or loss and other comprehensive income for the year then ended
the consolidated statements of changes in equity for the year then ended
the consolidated cash flow statements for the year then ended
the notes to the consolidated financial statements, which include summaries of significant accounting policies
the directors’ declaration
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the financial report section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of Stockland and the Stockland Trust Group in accordance with the auditor independence
requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the
financial reports in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial report is free from material
misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
reports as a whole, taking into account the geographic and management structure of Stockland and the Trust, their accounting
processes and controls and the industry in which they operate.
PricewaterhouseCoopers, ABN 52 780 433 757
One International Towers Sydney, Watermans Quay, Barangaroo, GPO BOX 2650, SYDNEY NSW 2001
T: +61 2 8266 0000, F: +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation.
Stockland Financial Report — 123
Independent Auditor’s Report
The structure of Stockland is commonly referred to as a 'stapled group.' In a stapled group the securities of two or more
entities are 'stapled' together and cannot be traded separately. In the case of Stockland, the shares in Stockland Corporation
Limited ("SCL") have been stapled to the units in Stockland Trust. For the purposes of consolidation accounting, Stockland
Trust is 'deemed' the parent and the consolidated report reflects the consolidation of SCL and its controlled entities and
Stockland Trust and its controlled entities.
Materiality
Audit scope
Key audit matters
Our audit focused on where Stockland
and the Stockland Trust Group made
subjective judgements; for example,
significant accounting estimates
involving assumptions and inherently
uncertain future events.
The audit of Stockland and the
Stockland Trust Group was performed
by a team primarily based in Sydney.
We ensured that the audit team
possessed the appropriate skills and
competencies needed for the audits,
and this included industry expertise in
real estate, as well as IT specialists,
valuation, tax and treasury
professionals.
Amongst other relevant
topics, we communicated the
following key audit matters to
the Audit Committee:
Valuation of Investment
properties - Commercial
Property
Valuation of Investment
properties - Retirement
Living
Carrying value of inventory
and costs of goods sold
Recoverability of deferred
tax assets
These are further described in
the Key audit matters section
of our report.
For the purpose of our audit of
Stockland and the Stockland
Trust Group, we used overall
materiality of $40.2 million and
$32.9 million, respectively, which
represents 5% of Funds from
Operations. The metric is defined
in note B2 of the financial report.
We applied these thresholds,
together with qualitative
considerations, to determine the
scope of our audit and the nature,
timing and extent of our audit
procedures and to evaluate the
effect of misstatements on the
financial reports as a whole.
We chose Funds from Operations
because, in our view, it is the
primary metric against which the
performance of Stockland and
the Stockland Trust Group is
most commonly measured in the
industry.
We chose 5% based on our
professional judgement, noting
that it is within the common
range relative to profit-based
benchmarks.
Stockland Financial Report — 126
Independent Auditor’s Report
Key audit matters
Key audit matters (“KAM”) are those matters that, in our professional judgement, were of most significance in our audit of
the financial reports for the current period and were determined separately for Stockland and the Trust. Relevant amounts
listed for each part of the stapled group represent balances as they are presented in the financial reports and should not be
aggregated. The key audit matters were addressed in the context of our audit of the financial reports as a whole, and in
forming our opinions thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the
outcomes of a particular audit procedure are made in that context.
Key audit matter
How our audit addressed the key audit matter
Valuation of Investment Properties – Commercial Property
(Refer to Note C1b)
Stockland - $9,283 million
Stockland Trust Group - $9,186 million
Stockland and the Trust’s Commercial Property portfolio
(“Commercial Property”) is comprised of retail, office, and
logistics and business park investment properties, as well
as properties under development.
Commercial Properties are valued at fair value as at
reporting date using a combination of the income
capitalisation method and the discounted cash flow
method. The value of Commercial Properties is dependent
on the valuation methodology adopted and the inputs into
the valuation model. Factors such as prevailing market
conditions, the individual nature, condition and location of
each property and the expected future income for each
property, directly impact fair values. Amongst others, the
following assumptions are key in establishing fair value:
net market rent
discount rate
average market rental growth
capitalisation rate
terminal yield.
At the end of each reporting period the directors
determine the fair value of the Commercial Properties in
accordance with their valuation policy. The policy requires
all properties to be externally valued by an independent
valuation expert at least once every 3 years. If a property is
not externally valued at balance date, the fair value
adopted is supported by an internal tolerance check. If this
internal tolerance check differs from the book value (most
recent external valuation plus capital expenditure
incurred) by 5% or more, an independent valuation is
required for the current period.
We focused on this matter because of the:
relative size of the Commercial Property portfolio to
net assets and related valuation movements
inherent subjectivity of the key assumptions that
underpin the valuations.
We obtained a sample of publicly available independent
property market reports to understand the prevailing
market conditions and trends in the markets in which
Stockland and the Trust invest, and we compared those
factors against current year valuations.
We met with management and discussed the specifics of
selected individual properties including, amongst other
things, any significant new leases entered into during the
year, lease expiries, expectations for future leases, capital
expenditure and vacancy rates.
For a sample of leases we agreed the underlying lease
terms to the tenancy schedule and, for a sample of
properties, we compared the rental income used in the
independent valuation and internal tolerance check
models to the tenancy schedule. We found that the data
used in the samples tested was consistent with tenant
leases.
We compared market capitalisation rates and discount
rates by location and asset grade to a reasonable range
determined by us based on benchmark market data.
Where capitalisation rates and discount rates adopted
were outside our anticipated ranges, we discussed with
management the rationale supporting the rate applied in
the valuation and the reasons to support the adopted
metric.
Independent valuations
For a sample of independent valuations we also:
evaluated the competence and capabilities of the
relevant independent valuer
read the valuers’ terms of engagement - we did not
identify any terms that might have affected their
objectivity or imposed limitations on their work
relevant to their valuation
inspected the final valuation reports and compared
the valuations to the fair value listed in the accounting
records of Stockland and the Trust.
Stockland Financial Report — 127
Independent Auditor’s Report
Key audit matter
How our audit addressed the key audit matter
Internal tolerance checks
We verified that the capitalisation and discounted cash
flow models used for the internal tolerance checks were
consistent with market practice.
Stockland and the Trust used an off-the-shelf software
package for the internal tolerance checks. We assessed the
design of the key controls over the valuation system, and
for a sample of valuations we tested the mathematical
accuracy of the system’s calculations noting no material
exceptions.
Valuation of Investment properties - Retirement Living
(Refer to note C1c)
Stockland - $3,824 million
Stockland Trust Group – the KAM is not applicable as the Trust does not invest in Retirement Living assets
Stockland’s Retirement Living portfolio (“Retirement
Living”) comprises retirement village investment
properties, as well as properties under development.
Retirement Living investment properties are valued at fair
value at the reporting date using a discounted cash flow
analysis. The value of investment properties in this
segment is dependent on the terms of the residents’
contracts and the inputs to the valuation model. Factors
such as prevailing market conditions, the individual
nature, condition and location of each property and the
expected future income for each property directly impact
fair values. Amongst others, the following assumptions are
key in establishing fair value:
discount rates
growth rates
average length of stay of existing and future residents
current market value of units
renovation / reinstatement costs
renovation recoupment.
The Stockland valuation policy requires that all key
valuation assumptions be externally appraised by an
independent valuation expert each reporting period. In
addition, at each reporting period a selection of properties
are individually valued by an independent valuation
expert.
We focused on this matter because of the:
relative size of the Retirement Living portfolio to net
assets and related valuation movements
inherent subjectivity of the key assumptions that
underpin the valuations.
We obtained a sample of publicly available independent
property market reports to understand the prevailing
market conditions and trends in the markets which
Stockland invests, and we compared those factors against
current year valuations.
We met with management and discussed the specifics of
selected individual properties including, amongst other
things, vacancy rates, growth rates, discount rates, unit
values, and capital expenditure.
For a sample of resident contracts across the portfolio, we
compared the terms used in the valuations to underlying
contracts. We found that the data used in the samples
tested was materially consistent with the sampled resident
contracts.
We compared the key assumptions by property and
location to a reasonable range determined by us based on
benchmark market data for these assumptions. Where
assumptions were outside our anticipated ranges, we
discussed with management the rationale supporting the
rate applied in the valuation and the reasons to support
the adopted metric.
Independent review of assumptions
For the independent review of key valuation assumptions
obtained by management, we:
Assessed the competency and capabilities of the
relevant independent expert.
Read the expert’s terms of engagement - we did not
identify any terms that might affect their objectivity or
impose limitations on their work relevant to their
valuation.
Inspected the final valuation report and compared the
assumptions to those used in Stockland’s valuation
model.
Stockland Financial Report — 128
Independent Auditor’s Report
Key audit matter
How our audit addressed the key audit matter
Property valuations
For a sample of Retirement Living property valuations we:
Compared the resident information used in the
valuation model to a sample of resident contracts.
Assessed the design of the controls over the valuation
model and the associated key assumptions used by
Stockland to satisfy ourselves that the model was
operating effectively.
Examined independent property valuations undertaken by
management’s expert and compared them with the
outputs from the valuation model.
Inventory
(Refer to note C1a)
Stockland - $2,481 million
Stockland Trust Group – the KAM is not applicable as the Trust does not hold inventory assets
(a) Carrying value of inventory
Stockland has a portfolio of residential development
projects that it develops for future sale, which are
classified as inventory. Stockland’s inventory is accounted
for at the lower of the cost and net realisable value for each
inventory project, as assessed at each reporting date.
The cost of the inventory is calculated using actual land
acquisition costs, construction costs, development related
costs and interest capitalised for eligible projects.
Net realisable value is calculated based on the estimated
selling price of the inventory, less the estimated costs of
completion, including forecast capitalised interest, and
associated selling costs. Each of these factors is impacted
by expected future market and economic conditions which
include sales prices, sales rates, interest rates and
construction costs.
Where an inventory project’s net realisable value is lower
than its cost, the inventory project is written down
(impaired) to its net realisable value under Australian
accounting standards.
(b) Cost of goods sold
When inventory is sold by Stockland the carrying amount
of the relevant inventory is recognised as an expense in the
same period that the sale is recognised. The expense
recognised is based directly upon the forecast profit
margin for the relevant project as a whole, and results in
the recognition of a profit margin in the period the
inventory is sold. To the extent that expected future costs
exceed expected future revenues the inventory is written
down to its net realisable value.
We obtained a sample of the publicly available
independent property market reports to understand the
prevailing market conditions and trends in the markets in
which Stockland invests, and we compared those factors
against the assumptions adopted in the current year’s
assessment of net realisable value of inventory.
For each project we discussed with management matters
such as the overall project strategy and forecast profitability.
Using the information gained from these discussions and
our existing knowledge of the business, we used a risk-
based approach to select a sample of projects on which to
perform further procedures over the net realisable value.
For the sample of projects selected we:
Further discussed with management the life cycle of the
project, key project risks, changes to project strategy,
current and future estimated sales prices, construction
progress and costs and any new and previous write
downs.
Obtained Stockland’s model of the project’s forecast
future returns, known as feasibility models, and tested
the mathematical accuracy of the model to satisfy
ourselves that it was operating effectively.
Compared the estimated selling prices to market sales
data in similar locations or, where available, to recent
sales in the project.
Compared the forecast costs to complete the project to
the relevant construction contracts (if applicable) or the
construction contract proposals.
Compared the carrying value to the project’s net
realisable value (NRV).
Stockland Financial Report — 129
Independent Auditor’s Report
Key audit matter
How our audit addressed the key audit matter
We focused on these matters because of the:
relative size of the inventory balance
inherent subjectivity of the key assumptions that
underpin net realisable value and the related
assessments of whether a project is impaired, and the
profit margin recognised.
In addition we:
Traced a sample of additions to the cost of the project
(e.g. construction costs) to invoices and verified that
they were valid costs that could be capitalised.
Checked that interest was capitalised for qualifying
assets and recalculated the interest capitalised during
the period
Traced a sample of sales recorded to the underlying
sale documents and the receipt of cash.
Recalculated the cost of goods sold recognised for the
sample of sales recorded based on the relevant
project’s forecast profit margin.
Recoverability of deferred tax asset
(Refer to note B3b)
Stockland - $22 million
Stockland Trust Group – the KAM is not applicable as while the Trust generates taxable profits each year, this
Trust income is distributed each year in full and is taxed in the hands of the unitholders as a Trust Distribution.
Stockland recognised a net deferred tax asset (“DTA”) of
$22 million at 30 June 2017, comprising a deferred tax
asset of $588 million and a deferred tax liability of $566
million. An additional future tax benefit of $139 million
relating to carried forward tax losses was not recognised
by Stockland at 30 June 2017.
The recognition of the DTA is dependent on the
satisfaction of either the continuity of ownership test
(“COT”) or, where this fails, the same business test (“SBT”)
under the Income Tax Assessment Act 1997. Where either
of these tests is satisfied, a DTA is recognised for the
unused tax losses to the extent that there is convincing
evidence that it is probable that future taxable profit will
be available against which the unused tax losses can be
utilised.
Stockland estimates the likely forecast taxable profits each
year based on current and approved Board strategies to
assess the utilisation period of recognised tax losses.
The recoverability of the DTA and carried forward tax
losses, and the period over which they will be used,
depends upon the forecast profitability of the Stockland
Corporation Limited tax consolidated group.
Our audit work focussed on the review of the Board
approved forecast which support the strategic and
operational plans of Stockland, including SCL. We then
examined SCL’s taxable profit forecasts to assess whether
key assumptions were consistent with Stockland’s board
approved forecast. In addition, we used our internal tax
experts to assist in our consideration of Stockland’s
assessment that tax losses would be available for the
relevant periods.
We focused on this matter because of the:
relative size of the gross DTA and DTL and the carry
forward tax losses not recognised at reporting date
inherent subjectivity and sensitivity of the key
assumptions that underpin the recognition and
valuation of the net DTA.
Other information
The directors of Stockland Corporation Limited and the directors of Stockland Trust Management Limited, the
Responsible Entity for Stockland Trust (collectively referred to as “the directors”), are responsible for the other
information. The other information comprises the Letter from the Chairman, Letter from the Managing Director and CEO,
the Directors Report, Security Information and key dates, and the Glossary included in Stockland and the Stockland Trust
Group’s annual report for the year ended 30 June 2017 but does not include the financial reports and our auditor’s report
thereon.
Our opinions on the financial reports do not cover the other information and accordingly we do not express any form of
assurance conclusion thereon.
Stockland Financial Report — 130
Independent Auditor’s Report
In connection with our audit of the financial reports, our responsibility is to read the other information identified above
and, in doing so, consider whether the other information is materially inconsistent with the financial reports or our
knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors are responsible for the preparation of the financial reports that give a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine
is necessary to enable the preparation of the financial reports that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
In preparing the financial reports, the directors are responsible for assessing the ability of Stockland and the Stockland
Trust Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate Stockland or the Stockland Trust Group or to
cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial reports as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian
Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial report.
A further description of our responsibilities for the audit of the financial reports is located at the Auditing and Assurance
Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of
our auditor's reports.
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 37 to 51 of the Directors’ Report for the year ended 30 June 2017.
In our opinion, the remuneration report of Stockland and the Stockland Trust Group for the year ended 30 June 2017
complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors are responsible for the preparation and presentation of the remuneration report in accordance with section
300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our
audit conducted in accordance with Australian Auditing Standards.
PricewaterhouseCoopers
S J Hadfield
Partner
N R McConnell
Partner
Sydney
16 August 2017
Stockland Financial Report — 131
Security Information and Key Dates
Securityholders
As at 31 July 2017, there were 2,418,400,142 Securities on issue and the top 20 securityholders as at 31 July 2017
is as set out in the table below. There is no on-market buy-back currently.
Top 20 securityholders as at 31 July 2017
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd
Citicorp Nominees Pty Limited
AMP Life Limited
IOOF Investment Management Limited
National Nominees Limited
RBC Investor Services Australia Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
E G Holdings Pty Limited
HSBC Custody Nominees (Australia) Limited-GSCO ECA
Bond Street Custodians Limited
RBC Investor Services Australia Nominees Pty Limited
CPU Share Plans Pty Ltd
Custodial Services Limited
Peter & Lyndy White Foundation Pty Ltd
BNP Paribas Noms (NZ) Ltd
Number of
Securities held
Percentage (%) of
total Securities
923,372,531
436,719,352
293,499,387
169,379,997
83,568,676
33,180,752
31,712,901
13,225,929
12,154,437
9,744,048
7,972,308
7,105,946
6,411,632
5,495,218
4,662,659
4,372,427
4,312,967
4,015,201
3,755,093
3,645,382
38.18
18.06
12.14
7.00
3.46
1.37
1.31
0.55
0.50
0.40
0.33
0.29
0.27
0.23
0.19
0.18
0.18
0.17
0.16
0.15
Distribution of securityholders as at 31 July 2017
Number of
securityholders
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – over
11,817
24,101
9,385
6,353
202
Number of
Securities
5,542,206
65,035,303
67,456,728
128,922,203
2,151,443,702
Percentage
(%) of total
securityholders
0.23
2.69
2.79
5.33
88.96
There were 2,006 securityholders holding less than a marketable parcel (120) at close of trading on 31 July 2017.
Substantial securityholders as at 31 July 2017
Number of Securities held
Vanguard Investments Australia Limited/Vanguard Group Inc.
BlackRock Group (BlackRock Inc. and subsidiaries)
State Street Corporate and subsidiaries
219,630,399
209,276,672
136,943,104
Stockland Financial Report — 132
Security Information and Key Dates
Annual Tax Statement
After 30 June each year you will receive a comprehensive tax statement. This statement summarises the
distributions and dividends paid to you during the year, and includes information required to complete your
tax return.
Shareholder Review and Financial Report
Members have a choice of whether they receive:
• a printed copy of the Shareholder Review only;
• a printed copy of this Report only;
• printed copies of the Shareholder Review and this Report; or
• electronic versions of the Shareholder Review and this Report.
Registry
Computershare Investor Services Pty Limited operates a freecall number on behalf of Stockland.
Contact Computershare on 1800 804 985 for:
• change of address details;
•
•
• provision of tax file numbers; or
• general queries about your securityholding.
request to receive communications online;
request to have payments made directly to a bank account;
Distribution/Dividend Periods
1 July – 31 December
1 January – 30 June
Key Dates
25 October 2017
Annual General Meeting
The Westin Sydney, 1 Martin Place, Sydney, NSW 2000 at 2.30pm
29 December 2017
Record date
21 February 2018
Half-year results announcement
29 June 2018
Record date
23 August 2018
Full-year results announcement
Stockland Financial Report — 133
Security Information and Key Dates
Unit/Share registry
Computershare Investor Services Pty Limited
Level 4, 60 Carrington Street
Sydney NSW 2000
Freecall: 1800 804 985
Telephone: (61 3) 9415 4000
Email: stockland@computershare.com.au
Auditor
PricewaterhouseCoopers
Your securityholding
If you would like to update your personal
details or change the way you receive
communications from Stockland, please
contact Computershare on the detail provided.
Computershare will also be able to provide
you with information on your holding.
Further information
For more information about Stockland,
including the latest financial information,
announcements, property news and corporate
governance information, visit our website at
www.stockland.com.au
Head Office
Level 25, 133 Castlereagh Street
Sydney NSW 2000
Toll free: 1800 251 813
Telephone: (61 2) 9035 2000
Stockland Entities
Stockland Corporation Limited
ACN 000 181 733
Stockland Trust Management Limited
ACN 001 900 741
AFSL 241190
As responsible entity for Stockland Trust
ARSN 092 897 348
Custodian
The Trust Company Limited
ACN 004 027 749
Level 13, 123 Pitt Street
Sydney NSW 2000
Directors
Non-Executive
Tom Pockett – Chairman
Carolyn Hewson
Barry Neil
Stephen Newton
Nora Scheinkestel
Carol Schwartz
Graham Bradley1
Peter Scott2
Andrew Stevens3
Executive
Mark Steinert – Managing Director
Company Secretary
Katherine Grace
1 Graham Bradley retired as a Non-Executive Director and Chairman at the 2016 Annual General Meeting 26 October 2016.
2 Peter Scott retired as a Non-Executive Director 16 August 2016.
3 Andrew Stevens was appointed as a Non-Executive Director 1 July 2017.
Stockland Financial Report — 134
Glossary
AASB
AFFO
A-REIT
ASIC
ASX
CCIRS
CODM
DCF
DMF
DRP
DSTI
EBIT
EPS
FFO
GST
IRR
KPI
LTI
NED
NRV
Report
ROA
ROE
SCPL
SDRT No. 1
Security
Share Plans
SREEF No.1
Australian accounting standards as issued by the Australian Accounting Standards
Board
Adjusted funds from operations
Australian Real Estate Investment Trust
The Australian Securities Investment Commission
Australian Securities Exchange or ASX Limited
Cross-currency interest rate swap
Chief Operating Decision Makers as defined by AASB8 Operating Segments
Discounted cash flow
Deferred Management Fees earned from Residents’ within the Retirement Living
business
Distribution and Dividend Reinvestment Plan
Deferred Short Term Incentives
Earnings before interest and income tax
Earnings per share
Funds from operations
Goods and services tax
Internal Rate of Return
Key Performance Indicators
Long Term Incentives
Non-Executive Director
Net Realisable Value
This Stockland 2017 Financial Report
Return on Assets
Return on Equity
Stockland Capital Partners Limited (ACN 078 081 722)
Stockland Direct Retail Trust No. 1 (ARSN 121 832 086)
A stapled security in Stockland comprising one share in Stockland Corporation and one
unit in Stockland Trust
Employee share plans which comprises the LTI, DSTI and $1,000 employee plans
Stockland Residential Estates Equity Fund No. 1
Statutory Profit
Profit as defined by Australian Accounting Standards
STI
STML
Stockland Corporation
Group
Stockland Corporation or
the Company
Stockland or Group
Short Term Incentives
Stockland Trust Management Limited (ACN 001 900 741, AFSL 241190), the
Responsible Entity of Stockland Trust
Stockland Corporation Limited and its controlled entities
Stockland Corporation Limited (ACN 000 181 733)
The stapled entity, comprising of the combination of Stockland Corporation Group and
Stockland Trust Group
Stockland Trust
Stockland Trust (ARSN 092 897 348)
Stockland Trust Group
or Trust
TSR
Underlying Profit
Stockland Trust and its controlled entities
Total Securityholder Return
A non-IFRS measure used to measure the Group’s underlying performance. From 1
July 2016, this measure has been replaced by FFO.
WALE
Weighted average lease expiry
Stockland Financial Report — 135