ANNUAL
REPORT
2020
Award Winning Flexible Workspace Providers
We mind your business
Victory Offices Limited Annual Report 2020
CONTENTS
Chairman and Managing Director’s Review
Directors’ Report
Auditor’s Independence Declaration
Financial Statements
Consolidated Statement of Profit and Loss
and Other Comprehensive Income
2
4
15
16
17
Consolidated Statement of Financial Position
18
Consolidated Statement of Changes in Equity 19
Consolidated Statement of Cash Flows
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
Corporate Directory
20
21
53
54
59
61
Victory Offices Limited Annual Report 2020
1
CHAIRMAN AND
MANAGING DIRECTOR’S
REVIEW
For the 2020 Financial Year
2
Victory Offices Limited Annual Report 2020
Chairman and Managing Director's Review
As the economy adjusts to working with COVID-19, so too will
Victory Offices also adjust. International and domestic studies
completed during the COVID era support the view that flexible
workspaces will become more strategically significant. The
service offering from Victory Offices will become a more
attractive and efficient model as businesses decide their future
workplace options.
We are committed to the challenge of navigating through the
remainder of the 2021 financial year with a view to returning to
profitability in the 2022 financial year.
Hon Steve Bracks AC
Chairman
30 September 2020
Dan Baxter
Managing Director / CEO
30 September 2020
Dear shareholders,
We are pleased to present the Victory Offices Limited Annual
Report for the year ended 30 June 2020.
It is no surprise that the 2020 financial year has been a
challenging one for the Company. Victory Offices performed
well up until early March 2020 and was then significantly
impacted by the COVID-19 pandemic. In spite of the COVID
impact, the strong results up until March 2020 meant the
Company only recorded an underlying loss after tax of $0.4
million for the 2020 financial year.
Victory Offices has witnessed a similar impact to what is being
seen across the economy. The pandemic has been particularly
challenging for our team and clients. Although office buildings
remained open in March 2020 when the pandemic first hit, the
government directive to work from home wherever possible,
impacted heavily. This resulted in revenue falling immediately
to approximately 20% of pre-COVID levels.
Pleasingly, the Victory Offices team has managed to adapt
quickly to the changing circumstances that vary across
Australia, according to each state government restrictions.
Since March 2020, COVID-safe practices have been a
high priority in each location. Safe practices have been
implemented across the portfolio effectively and in-line with
regulations. All Victory Offices employees, regardless of
position from top to bottom, have been working for reduced
pay (with most on reduced hours) and we are very grateful for
their support of the business during this period.
In response to the pandemic impact, we ensured that there
was a strong focus on capital management and were pleased
to close a well supported entitlement offer in early July 2020.
The entitlement offer raised $14.6 million (net of costs) and has
strengthened the balance sheet and will fund working capital
requirements as we navigate through continued pandemic
restrictions.
We remain cautiously optimistic of a steady increase in
occupancy during the 2021 financial year. We are cognisant
that this might be a ‘two speed’ increase. States less affected
by the pandemic are witnessing encouraging steady growth as
they slowly return towards normal business. Victorian locations
will most likely open in a meaningful way post-Christmas 2020.
We are anticipating a gradual increase in occupancy in line
with industry studies that draw attention to modified work
environments and flexible employment attitudes.
Victory Offices Limited Annual Report 2020
3
DIRECTORS’
REPORT
For the Year Ended 30 June 2020
4
Victory Offices Limited Annual Report 2020
Directors' Report
MATTERS SUBSEQUENT TO THE END OF THE
FINANCIAL YEAR
On 10 July 2020, the Company settled an entitlement offer to
raise $15,337,500 by issuing 40,900,000 ordinary shares at
37.5 cents per share. Net of costs the entitlement offer raised
$14,558,213.
Since the end of the financial year and up until the date of
this report the consolidated entity has negotiated further
rent relief in relation to its leases. As a result of these
negotiations the following will be impacted within the 2021
financial year pursuant to ‘AASB 2020-4 Covid-19-Related Rent
Concessions’: rent concession income of $413,202 will be
recognised; and lease modifications resulting in an increase to
right-of-use assets of $1,666,258 and corresponding increase
to lease liabilities of $1,253,056 will be recognised.
In response to the ongoing COVID-19 pandemic, the Victorian
Government introduced stage 4 lockdowns in August 2020
forcing the closure of the consolidated entities’ Victorian
locations. The impact of the COVID-19 pandemic remains
ongoing and it is not practicable to estimate and quantify the
potential impact after the reporting date as it is dependent on
many factors outside of the control of the consolidated entity
including the length of the Victorian restrictions.
No other matters or circumstance has arisen since 30 June
2020 that has significantly affected, or may significantly affect
the consolidated entity’s operations, the results of those
operations, or the consolidated entity’s state of affairs in future
financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
OF OPERATIONS
The consolidated entity intends to continue its programme
of offering serviced offices, coworking, hot desks and virtual
offices and facilities for businesses to contract to use on
flexible licence arrangements. Given the impact of COVID-19
there have been delays in the roll-out of new locations, as
noted in the Operating and Financial Review.
The directors present their report, together with the financial
statements, on Victory Offices Limited and its Controlled
Entities (referred to hereafter as the ‘consolidated entity’ or
‘entity’) at the end of, or during, the year ended 30 June 2020.
DIRECTORS
The following persons were directors of the consolidated
entity during the whole of the financial year and up to the date
of this report, unless otherwise stated:
Hon Steve Bracks AC
Dan Baxter
Alan Jones
Tadeusz Chwasta
Shane Tanner
PRINCIPAL ACTIVITIES
The principal activities of the consolidated entity was providing
flexible office solutions. Its associated revenue is driven from
providing comprehensive office serviced packages and other
services to its clients.
OPERATING RESULTS
The operating loss of the consolidated entity for the financial
year after provision for income tax was $8,069,375 (2019:
$9,596,498 profit).
DIVIDENDS
There were no dividends paid during the year ended
30 June 2020.
REVIEW OF OPERATIONS
Refer to the detailed comments in the Operating and Financial
Review.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
The consolidated entity has been significantly impacted by
COVID-19, refer to detailed comments in the Operating and
Financial Review.
There were no other significant changes in the state of
affairs of the consolidated entity during the financial year not
otherwise disclosed in these accounts.
Victory Offices Limited Annual Report 2020
5
Directors' Report
INFORMATION ON DIRECTORS
Hon Steve Bracks AC
Non-Executive Chairman
Dan Baxter
Managing Director/
Chief Executive Officer
Experience and expertise: Hon. Steve
Bracks AC was Premier of Victoria for
eight years. He now advises several
leading Australian finance and service
sector corporations. Mr Bracks also holds
two major honorary positions: as an
Adviser to the Prime Minister of Timor-
Leste and Honorary Chair of The Union
Education Foundation. He is Chairman
of the superannuation fund Cbus; a
non-executive Director of Jardine Lloyd
Thomson Australia and Bank of Sydney
Limited. Former Chairman of AFL Sports
Ready; Former Chairman of the Kardinia
Park Stadium Trust; and a member of
the Monash Business School’s Business
Advisory Board (BAB); The Australian
Republican Movement’s Republican
Advisory Panel (RAP), and the West
Melbourne Alliance Board.
Interests in shares: Nil
Experience and expertise: Dan is the
founder of Victory Offices with more
than 20 years of senior management
experience under his belt. Under his
leadership, the company has emerged
as a prominent player in the flexible work
space market. Dan’s creative thinking,
vision and passion has led to success
of Victory Offices. As the Victory Group
Holdings Executive Director, Dan has
also successfully led Victory Aluminium
to be one of the largest exporters of
aluminium from Australia. Dan is a
current member of AICD, with academic
qualifications in Engineering and
Business Management.
Interests in shares: 25,967,042
Alan Jones
Non-Executive Director
Experience and expertise: With
over 35 years’ experience in various
management roles within the private
and public sector, Alan’s successful
career reflects a strong understanding
of capital and facilities management
and experience in high performing team
environments. Alan is currently the
Managing Director of AML Advisory, a
Melbourne based advisory established
in 2003, delivering capital project
equipment support and commercial
services. Alan has also held senior
roles on committees and boards
with not for profit organisations.
Alan’s commercial career follows an
extensive career serving within the
Australian Defence Force specialising
in operational and strategic logistical
support. He holds graduate and post
graduate qualifications in logistics,
asset management, administration and
strategic studies.
Special responsibilities:
Chairman of the Human Resources &
Remuneration Committee
Member of the Audit Committee
Interests in shares: 50,000
6
Victory Offices Limited Annual Report 2020
Directors' Report
COMPANY SECRETARY
Mr Geoff Hollis
Company Secretary
Geoff previously spent 8 years with
a fast growing ASX listed provider of
residential accommodation for over
50’s. Geoff is experienced in capital
and debt raisings along with ongoing
investor relations function in addition
to other CFO and Company Secretarial
experience required for an ASX listed
entity on a growth journey. Geoff is also
a member of the Corporate Governance
Institute and Chartered Accountants
Australia and New Zealand.
Victory Offices Limited Annual Report 2020
7
Ted Chwasta
Non-Executive Director
Shane Tanner
Non-Executive Director
Experience and expertise: Ted is a
career retailer with over 37 years’
experience with some of Australia’s
largest public and private companies,
including The Brash Group and The
Good Guys. Ted previously served as
the State Chairman for The Good Guys
Victoria and has held positions in various
National Advertising Committees.
Special responsibilities:
Member of the Audit Committee
Member of the Human Resources &
Remuneration Committee
Interests in shares: Nil
Experience and expertise: Shane is
currently Chairman of Paragon Care
Limited (ASX: PGC) and Cronos Australia
Limited (ASX: CAU). Formerly he was
Chairman of Vision Eye Institute (ASX:
VEI), Funtastic Limited (ASX: FUN) and
Rhythm Biosciences Limited (ASX:
RHY), Chief Executive Officer of Mayne
Nickless Diagnostic Services (later
named Symbian Health (ASX: SYB)) and
Chief Financial Officer of Mayne Group.
Shane also has significant strategy and
transaction experience through the
Mayne Group and via his role in the IPO
of Optus Communications. Shane holds
Business and Finance qualifications
from RMIT University and Swinburne
University of Technology.
Other current directorships:
Paragon Care Limited
Cronos Australia Limited
Former directorships (in the last
3 years):
Zenitas Healthcare Limited (delisted
12 December 2018)
Funtastic Limited (resigned 31 July 2019)
Rhythm Biosciences Limited (resigned
25 October 2019)
Special responsibilities:
Chairman of the Audit Committee,
Member of the Human Resources &
Remuneration Committee
Interests in shares: Nil
Directors' Report
MEETINGS OF DIRECTORS
The number of meetings of the company’s Board of Directors (‘the Board’) and of each Board committee held during the year
ended 30 June 2020, and the number of meetings attended by each director were:
FULL BOARD
HR & REMUNERATION
COMMITTEE
AUDIT COMMITTEE
ATTENDED
HELD
ATTENDED
HELD
HELD
ATTENDED
8
8
8
8
8
8
8
8
8
8
n/a
n/a
2
2
2
n/a
n/a
2
2
2
n/a
n/a
2
2
2
n/a
n/a
2
2
2
Steve Bracks
Dan Baxter
Alan Jones
Ted Chwasta
Shane Tanner
CORPORATE GOVERNANCE
Details of the Company’s corporate governance procedures,
policies and practices are at:
https://victoryofficeslimited.com/corporate-governance
OPERATING AND FINANCIAL REVIEW
Revenue from suite services was $42.3 million in the 2020
financial year (2019: $47.0 million). The impact of COVID-19
had a significant impact on revenues in the fourth quarter of
the 2020 financial year. Over 90% of revenues for the 2020
financial year were incurred prior to 31 March 2020.
Net loss after tax for the 2020 financial year was $8.1 million
(2019: $9.6 million profit).
Underlying net loss after tax for the 2020 financial year was
$0.4 million (2019: $9.6 million profit). Underlying net loss
after tax excludes the impact of impairment of receivables
and impairment of assets as well as adjusting for Jobkeeper
subsidy and rent concession income.
A provision for impairment of assets has been identified for
$8.5 million ($6.0 million after tax) across the portfolio after
performing value-in-use calculations. The impairment provision
is non-cash and will result in a reduced depreciation charge
going forward. The impairment provision was required, in part,
due to having reflected a significant right of use asset pursuant
to the requirements of AASB 16 Leases and AASB 136
Impairment. All locations are providing a positive value-in-use
however a very small number of locations have a value not in
excess of the carrying value of the cash generating unit due to,
in part, the current and forecast short-term trading conditions.
Cash balances were $0.7 million as at 30 June 2020. On 10
July 2020, the Company settled an entitlement offer to raise
$15.34 million by issuing 40.9 million ordinary shares at 37.5
cents per share. Net of costs the entitlement offer raised
$14.56 million to strengthen the balance sheet and provide
working capital for the 2021 financial year.
The Board was pleased with the support provided by existing
and new shareholders in the recent entitlement offer. The
entitlement offer has strengthened the balance sheet and
will fund working capital requirements throughout the 2021
financial year.
COVID-19
COVID-19 has had a significant and unprecedented impact on
the flexible workspace industry. While the first three quarters of
the 2020 financial year were profitable the impact of COVID-19
was felt from late March. Since late March occupancy and
revenues have been severely impacted.
The Company has been proactive in managing the impact of
COVID-19 by implementing various measures:
• The Company completed a capital raising providing
funds, net of costs, of $14.56 million on 10 July 2020 to
strengthen the balance sheet and provide working capital;
• The Company took immediate steps to introduce a number
of cost saving measures, including reducing the workforce,
introduction of salary reduction (from the CEO down) of
approximately 40%, reduction in discretionary spending
and a focus on cost control;
• Utilisation of various government legislative support
measures such as Jobkeeper subsidy and waiver and / or
deferrals of lease rentals. Negotiations are continuing with
landlords, with approximately 60% of locations resolved
favorably to date; and
• The Company has delayed any planned capital
expenditure until economic and trading conditions show an
appropriate level of improvement.
The Company has been working closely with our customers
and providing them with the necessary support to manage
through the impacts of COVID-19. Despite the ongoing
challenges of COVID-19 the Company is cautiously optimistic
of a steady increase in occupancy during the remainder of the
2021 financial year.
8
Victory Offices Limited Annual Report 2020
Directors' Report
The Company currently has 23 locations that are (or have
been) open for business. Of these 15 are Victorian locations
that are currently in hibernation due to lockdown measures.
There are two locations yet to be opened where fit-out works
have been substantially completed. A further five locations are
leased with minimal or no fit-out works yet to be completed.
The Company has been successful in negotiating some rent
deferrals in relation to these locations however is considering
whether any rationalisation of any of these locations is
appropriate. The Company will take a cautious approach
in commencing any fit-out capital expenditure in the 2021
financial year.
OUTLOOK AND RISKS
OUTLOOK
The 2021 financial year is expected to be challenging.
The current lockdown restrictions in Victoria are having an
adverse effect on short-term revenue both in Victoria and
the rest of Australia as all Australians assess the ‘second
wave’ of COVID-19. Previously, the board was optimistic that
the business will begin to see a recovery (Australia wide)
commencing from October 2020. Recent announcements in
Victoria suggest that there may not be a meaningful return
of workers to office buildings for the remainder of 2020. The
board remains cautiously optimistic that non-Victorian locations
will begin to see a recovery from October 2020. The timing
of the re-opening of Victorian locations remains uncertain
although we are expected to be open prior to December
based on current guidelines.
The board is cognisant that there is likely to be resistance from
some employers and employees to return to ‘the office’ as well
as the impact of social distancing restrictions. The Company
is forecasting a gradual recovery in trading during the 2021
financial year (particularly in the second-half) and is anticipating
that the 2022 financial year will see a return to profitability.
As COVID-19 becomes more manageable and better
controlled, the Directors of Victory Offices Limited are of the
view that flexible workspaces will become more strategically
important to the way the world does business. Victory’s
service offering will become more attractive to businesses
when they decide how to establish a more efficient workplace
environment as workers return from working from home.
KEY RISKS
The Company’s key risks include:
COVID-19
The COVID-19 pandemic has had a significant impact on
Victory Offices business and the serviced offices industry.
The Government’s measures to limit the transmission of the
virus (including social distancing, quarantine and self-isolation
policies and the prohibition on non-essential services) have
had a material adverse impact on Victory Offices’ operations
and will continue to do so in the near future, in that businesses
are unable to utilise Victory Offices services while the
restrictions remain in place.
While the board considers that demand for serviced offices
may increase after the restrictions are lifted and the spread
of the virus is eliminated or contained, on the basis that
businesses may look for more flexible and shorter term rental
options to limited their exposure in future crises, it is also
possible that businesses may seek to promote and utilise
working from home options which could result in decreased
demand for commercial office space.
FUTURE CAPITAL NEEDS
Victory Offices cannot be certain how long the impact of
COVID-19 will continue to limit its ability to operate. Victory
Offices Office’s ability to raise further capital (equity or debt)
within an acceptable time, of a sufficient amount and on terms
acceptable to Victory Offices, will vary according to a number
of factors including the stock market, industry conditions,
government measures to limit the transmission of COVID-19,
Victory Offices’ relationship with customers and the financial
position of Victory Offices’ customers. A consequence of the
current economic downturn is that it is more difficult to access
capital (equity and debt). No assurance can be given that
future funding will be available to Victory Offices on favourable
terms (or at all).
COMPETITION
The Company is subject to competition from well-established
organisations, including but not limited to Servcorp, Regus and
WeWork. Some of the competitors have a long track record of
sustained growth. As well as competing for customers, Victory
Offices also competes for office space from landlords.
Certain market conditions may cause an increase in
competition. For instance, an increase in demand may present
the opportunity for competitors to expand their operations
and markets. The industry is also subject to new entrants
from overseas markets. Increased competition may reduce
the volume and price of the services that the Company
provides, which may have a material and adverse effect on
the Company’s revenue and profitability and, in particular, its
growth.
PERSONNEL RISK
Victory Offices relies upon the performance and expertise of
its key management personnel and employees. Any loss or
changes to the quantity or quality of the operational services
provided by these key personnel, or an inability to attract
qualified and motivated personnel to provide these services,
could adversely affect Victory Offices financial performance.
The COVID-19 pandemic has resulted in a large proportion
of the global workforce working remotely, including Victory
Offices’ employees and executives. In many jurisdictions
in which Victory Offices operates, employees working in
non-essential services have already been mandated to
work from home by government authorities. It is difficult to
determine how long this shift towards working from home
will continue, as this will depend to a large extent on factors
beyond the Company’s control, including the incidence and
spread of COVID-19, government policy, health authority
recommendations and community sentiment. While having
its employee work from home allows Victory Offices to
continue operations during the global pandemic, it can have
Victory Offices Limited Annual Report 2020
9
Directors' Report
implications on productivity, morale, collaboration and ability to
retain and hire staff. The shift to working from home can also
impact Victory Offices’ relationships with its customers.
Any breakout of COVID-19 within the workforce of Victory
Offices or its customers or disruption caused to operations
as a result of the Company’s remote working arrangements
could have an adverse effect on the operating and financial
performance of the Company.
INABILITY TO SECURE NEW LOCATIONS
Victory Offices ability to achieve future growth will depend on
the ability to secure new site locations. There can be various
reasons as to why it may become difficult to secure new
locations such as: increased competition; reputational damage;
onerous lease agreements due to market conditions; and
financial position of Victory Offices.
If the Company is unsuccessful in securing new locations, the
Company’s operating and financial performance could be
adversely affected.
LEASE TERM ASYMMETRY AND EXPOSURE
Victory Offices does not own freehold land, Rather, Victory
Offices through its subsidiaries enters into long term leases
with landlords for office space that the subsidiary then
converts into serviced offices. The subsidiary then licences
the serviced offices on shorter and flexible terms. This
business model gives rise to a potential asymmetry between
the timing and coverage of the obligations under the short-
term licences relative to the overhead long-term lease under
which the subsidiary leases the office space from a landlord.
The subsidiary bears the risk of having to meet its obligations
under the leases regardless of its ability to licence some or
all of the space under licence arrangements. This risk has
materialised as a result of COVID 19 outbreak and could
materialise again in the future as a result of other events or
factors.
REMUNERATION REPORT (AUDITED)
The remuneration report details the key management
personnel remuneration arrangements for the consolidated
entity, in accordance with the requirements of the Corporations
Act 2001 and its Regulations.
Key management personnel are those persons having
authority and responsibility for planning, directing and
controlling the activities of the entity, directly or indirectly,
including all directors.
The remuneration report is set out under the following main
headings:
• Principles used to determine the nature and amount of
remuneration;
• Details of remuneration;
• Service agreements;
• Share-based compensation;
• Additional information; and
• Additional disclosures relating to key management
personnel.
PRINCIPLES USED TO DETERMINE THE NATURE
AND AMOUNT OF REMUNERATION
The objective of the consolidated entity’s executive reward
framework is to ensure reward for performance is competitive
and appropriate for the results delivered. The framework aligns
executive reward with the achievement of strategic objectives
and the creation of value for shareholders, and it is considered
to conform to the market best practice for the delivery of
reward. The Board of Directors (‘the Board’) ensures that
executive reward satisfies the following key criteria for good
reward governance practices:
• competitiveness and reasonableness;
• acceptability to shareholders;
• performance linkage / alignment of executive
compensation; and
•
transparency
The Human Resources and Remuneration Committee is
responsible for determining and reviewing remuneration
arrangements for its directors and executives. The
performance of the consolidated entity depends on the quality
of its directors and executives. The remuneration philosophy
is to attract, motivate and retain high performance and high
quality personnel.
The Human Resources and Remuneration Committee has
structured an executive remuneration framework that is market
competitive and complementary to the reward strategy of the
consolidated entity.
The reward framework is designed to align executive reward
to shareholders’ interests. The Board have considered that it
should seek to enhance shareholders’ interests by:
• having economic profit as a core component of plan
design;
•
focusing on sustained growth in shareholder wealth,
consisting of dividends and growth in share price, and
delivering constant or increasing return on assets as well
as focusing the executive on key non-financial drivers of
value; and
• attracting and retaining high calibre executives.
Additionally, the reward framework should seek to enhance
executives’ interests by:
•
•
rewarding capability and experience;
reflecting competitive reward for contribution to growth in
shareholder wealth; and
• providing a clear structure for earning rewards.
In accordance with best practice corporate governance, the
structure of non-executive director and executive director
remuneration is separate.
10
Victory Offices Limited Annual Report 2020
Directors' Report
NON-EXECUTIVE DIRECTORS REMUNERATION
Fees and payments to non-executive directors reflect the
demands and responsibilities of their role. Non-executive
directors’ fees and payments are reviewed annually by
the Human Resources and Remuneration Committee. The
Human Resources and Remuneration Committee may, from
time to time, receive advice from independent remuneration
consultants to ensure non-executive directors’ fees and
payments are appropriate and in line with the market. The
chairman’s fees are determined independently to the fees
of other non-executive directors based on comparative
roles in the external market. The chairman is not present
at any discussions relating to the determination of his own
remuneration. Non-executive directors do not receive share
options or other incentives.
Under the Constitution, subject to the ASX Listing Rules, the
Directors as a whole (other than Executive Directors) may be
paid or remunerated for their services a total amount or value
not exceeding $400,000 per annum or such other maximum
fixed by the Company in a general meeting. Non-Executive
Directors may not be paid a commission on or a percentage
of profits or operating revenue. All Director’s fees include
superannuation at statutory amounts (currently 9.5%).
EXECUTIVE REMUNERATION
The consolidated entity aims to reward executives based on
their position and responsibility.
Fixed remuneration, consisting of base salary and
superannuation, are reviewed annually by the Human
Resources and Remuneration Committee based on individual
and business unit performance, the overall performance of the
consolidated entity and comparable market remunerations.
CONSOLIDATED ENTITY PERFORMANCE AND LINK
TO REMUNERATION
Whilst there are incentives in place for wider employees,
remuneration for executives is not currently linked to
the performance of the consolidated entity. The HR and
Remuneration Committee has commenced a review of
industry standards and the potential to implement an incentive
plan consistent with practices amongst other ASX companies
of a similar size.
DETAILS OF REMUNERATION
AMOUNTS OF REMUNERATION
Details of the remuneration of key management personnel of
the consolidated entity are set out in the following tables.
The key management personnel of the consolidated entity
consisted of the following directors:
• Stephen Bracks – Non-Executive Chairman
• Dan Baxter – Managing Director & Chief Executive Officer
• Alan Jones – Non-Executive Director
• Ted Chwasta – Non-Executive Director
• Shane Tanner – Non-Executive Director
And the following persons:
• Manisha Angirish – Chief Operating Officer
• Geoff Hollis – Chief Financial Officer
• George Paolucci – Chief Information Officer
SHORT-TERM BENEFITS
POST-
EMPLOYMENT
BENEFITS
LONG-TERM
BENEFITS
CASH SALARY
AND FEES
$
ANNUAL
LEAVE
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
2020
Non-Executive Directors:
S Bracks
A Jones
T Chwasta
S Tanner
Executive Director:
45,662
35,388
35,388
41,096
-
-
-
-
D Baxter *
438,492
18,556
Other Key Management Personnel:
M Angirish *
G Hollis *
G Paolucci *
271,158
222,347
144,716
1,234,247
11,645
(1,450)
(1,289)
27,572
LONG
SERVICE
LEAVE
$
-
-
-
-
TOTAL
$
50,000
38,750
38,750
45,000
4,338
3,362
3,362
3,904
24,782
37,673
519,613
25,760
21,107
13,748
8,587
1,369
5,220
317,150
243,372
162,395
100,363
52,849
1,415,031
-
-
-
-
-
-
-
-
-
*
Remuneration was reduced from 1 April 2020 to 30 June 2020 to provide support to the Company due to the impacts of COVID-19
Victory Offices Limited Annual Report 2020
11
Directors' Report
DETAILS OF REMUNERATION (CONTINUED)
AMOUNTS OF REMUNERATION (CONTINUED)
2019
Non-Executive Directors:
S Bracks
A Jones
T Chwasta
S Tanner *
B Lethborg **
Executive Director:
76,104
-
-
10,274
-
-
-
-
-
-
D Baxter
503,539
26,923
Other Key Management Personnel:
M Angirish
G Hollis ***
G Paolucci
201,416
52,223
154,865
998,421
19,231
3,737
707
50,598
*
Represents remuneration from 1 April 2019
** Represents remuneration from 1 July 2018 to 25 February 2019
*** Represents remuneration from 14 February 2019
SHORT-TERM
BENEFITS
POST-
EMPLOYMENT
BENEFITS
LONG-TERM
BENEFITS
CASH SALARY
AND FEES
$
ANNUAL
LEAVE
$
NON-
MONETARY
$
SUPER-
ANNUATION
$
LONG
SERVICE
LEAVE
$
-
-
-
-
-
-
-
-
-
-
7,230
-
-
976
-
25,000
19,135
6,084
14,712
73,137
-
-
-
-
-
-
-
-
-
-
TOTAL
$
83,334
-
-
11,250
-
555,462
239,782
62,044
170,284
1,122,156
EXECUTIVE REMUNERATION
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
MANAGING DIRECTOR AND CEO
The Company has entered into an employment agreement with Dan Baxter to govern his employment with the Company
as Chief Executive Officer and Managing Director. Dan’s employment agreement does not have a fixed term. Either Victory
Offices or Dan may terminate the employment by giving three months’ notice or, in the case of Victory Offices, by making a
payment in lieu of notice. The Company may terminate Dan’s employment without payment in lieu of notice in circumstances
involving serious or wilful misconduct. Dan is entitled to 4 weeks of annual leave per annum.
OTHER MEMBERS OF SENIOR MANAGEMENT
Each other member of Victory Offices senior management is employed under individual employment agreements. These
agreements establish total compensation including a base salary, superannuation contribution and incentive arrangements
(where applicable), variable notice and termination provisions, confidentiality provisions and leave entitlements, as a minimum,
as per the National Employment Standards.
12
Victory Offices Limited Annual Report 2020
Directors' Report
ADDITIONAL INFORMATION
The results of the consolidated entity for the past three years are summarised below:
Sales revenue
EBITDA
EBIT
Profit (loss) after tax
2020
$
2019
$
2018
$
42,309,916
46,985,383
29,402,818
14,837,822
33,641,546
21,429,159
(2,690,660)
20,737,056
13,531,688
(8,069,375)
9,596,498
5,742,519
ADDITIONAL DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL
SHAREHOLDING
The number of shares in the company held during the financial year by each director and other members of key management
personnel of the consolidated entity, including their personally related parties, is set out below:
Ordinary shares
S Bracks
D Baxter
A Jones
T Chwasta
S Tanner
M Angirish
G Hollis
G Paolucci
BALANCE AT
THE START OF
THE YEAR
ADDITIONS
DISPOSALS/
OTHER
BALANCE AT
THE END OF
THE YEAR
-
-
25,901,500
65,542
50,000
-
-
-
-
29,500
-
-
-
-
-
-
25,981,000
65,542
-
-
-
-
-
-
-
-
-
-
25,967,042
50,000
-
-
-
-
29,500
26,046,542
OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL AND THEIR RELATED PARTIES
Refer to Note 22 to the financial statements for details on transactions with related parties.
This concludes the remuneration report, which has been audited.
Victory Offices Limited Annual Report 2020
13
Directors' Report
SHARES UNDER OPTION
There are no unissued ordinary shares of Victory Offices
Limited under option at the date of this report.
ENVIRONMENTAL REGULATIONS
The consolidated entity is not subject to any significant
environmental regulations in respect to its activities.
PROCEEDINGS ON BEHALF OF THE
CONSOLIDATED ENTITY
No person has applied to the Court under section 237 of
the Corporations Act 2001 for leave to bring proceedings
on behalf of the consolidated entity or to intervene in any
proceedings to which the consolidated entity is a party, for the
purpose of taking responsibility on behalf of the consolidated
entity for all or any part of those proceedings.
INDEMNITY AND INSURANCE OF OFFICERS
The Company has entered into a deed of access, insurance
and indemnity (Deed) with each Director. Under the
Constitution, to the extent permitted by law and subject to the
Corporations Act, the Company indemnifies current and past
directors and secretaries of the Company against a liability
incurred in their position (or as a director or secretary of a
subsidiary of the Company where the Company requested the
person to accept that appointment) and reasonable legal costs
in defending an action for liability incurred against them in that
capacity. The Constitution provides that the Company may
enter into a deed to give effect to these rights.
The Deed provides that, to the extent permitted by the
Corporations Act, the Company indemnifies the Director
against liabilities, costs and expenses (including legal costs
incurred in defending proceedings brought against the
Director) incurred in the Director’s capacity as a director of the
Company or its subsidiaries.
In addition, the Deed requires the Company to take out and
maintain (and pay the premium of) Directors’ and Officers’
insurance during Director’s period of office and for a period
of seven years after a Director ceases to hold office (Access
Period). During the Access Period, the Director also has rights
to access papers, documents and other information relating
to the affairs of the Company for specified purposes during
the period the Director is an officer of the Company and for a
period of seven years after the Director ceases to hold office.
During the financial year the Company has paid insurance
premiums in respect of Directors’ and officers’ liability and
legal expenses insurance contracts, for current and former
Directors, secretaries and officers of the Company and its
controlled entities. The insurance policies prohibit disclosure of
the nature of the liability insured against and the amount of the
premiums.
INDEMNITY AND INSURANCE OF AUDITOR
The consolidated entity has not, during or since the end of the
financial year, indemnified or agreed to indemnify the auditor
of the consolidated entity or any related entity against a liability
incurred by the auditor.
During the financial year, the consolidated entity has not paid
a premium in respect of a contract to insure the auditor of the
consolidated entity or any related entity.
ROUNDING OF AMOUNTS
The consolidated entity is of a kind referred to in Corporations
Instrument 2016/191, issued by the Australian Securities and
Investments Commission, relating to ‘rounding-off’. Amounts
in this report have been rounded off in accordance with that
Corporations Instrument to the nearest dollars.
NON-AUDIT SERVICES
Details of the amounts paid or payable to the auditor for non-
audit services provided during the financial year by the auditor
were $7,000 (2019: $ 81,500) and are outlined in note 23 to the
financial statements.
The directors are satisfied that the provision of non-audit
services during the financial year, by the auditor (or by another
person or firm on the auditor’s behalf), is compatible with the
general standard of independence for auditors imposed by the
Corporations Act 2001.
The directors are of the opinion that the services as disclosed
in note 23 to the financial statements do not compromise
the external auditor’s independence requirements of the
Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed and approved to
ensure that they do not impact the integrity and objectivity
of the auditor; and
• none of the services undermine the general principles
relating to auditor independence as set out in APES 110
Code of Ethics for Professional Accountants issued by
the Accounting Professional and Ethical Standards Board,
including reviewing or auditing the auditor’s own work,
acting in a management or decision-making capacity
for the company, acting as advocate for the company or
jointly sharing economic risks and rewards. Officers of the
company who are former partners of RSM Australia Partners
There are no officers of the company who are former partners
of RSM Australia Partners.
AUDITOR’S INDEPENDENCE DECLARATION
A copy of the Auditor’s Independence Declaration as required
under section 307C of the Corporations Act 2001 is set out on
page 15 and forms part of this Director’s Report.
This report is made in accordance with a resolution of directors,
pursuant to section 298(2)(a) of the Corporations Act 2001.
Hon Steve Bracks AC
Chairman
30 September 2020
Dan Baxter
Managing Director/CEO
14
Victory Offices Limited Annual Report 2020
AUDITOR’S
INDEPENDENCE
DECLARATION
AUDITOR’S INDEPENDENCE DECLARATION
As lead auditor for the audit of the financial report Victory Offices Limited for the year ended 30 June 2020, I
declare that, to the best of my knowledge and belief, there have been no contraventions of:
(i)
(ii)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.
RSM AUSTRALIA PARTNERS
R B MIANO
Partner
Dated: 30 September 2020
Melbourne, Victoria
15
Victory Offices Limited Annual Report 2020
15
FINANCIAL
STATEMENTS
For the year ended 30 June 2020
16
Victory Offices Limited Annual Report 2020
Financial Statements
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 30 June 2020
Revenue
Revenue from continuing activities
Other revenue
Interest income
Service charges
Operating Expenses
Employee benefits expense
Depreciation and amortisation expense
Other administration expenses
Occupancy costs
Impairment of receivables
Impairment of assets
Finance costs
NOTE
2020
$
2019
$
3
3
4
4
4
4
42,309,916 46,985,383
1,433,221
21,005
17,456
35,765
-
584,093
43,764,142 47,622,697
(7,554,493)
(6,898,921)
(17,528,483)
(12,904,490)
(4,661,705)
(3,845,561)
(4,264,176)
(3,200,903)
(3,899,687)
(8,525,253)
-
-
(8,904,306)
(7,292,811)
(55,338,103)
(34,142,687)
Profit (loss) before Income Tax Expense
(11,573,961)
13,480,010
Income tax expense (benefit)
Profit (loss) after Income Tax Expense
8
3,504,586
(3,883,512)
(8,069,375)
9,596,498
Other comprehensive income
-
-
Total Comprehensive Income (loss) for the year Attributable to the Owners
(8,069,375)
9,596,498
Basic earnings (loss) per share
Diluted earnings (loss) per share
CENTS
CENTS
15
15
(19.73)
(19.73)
35.97
35.97
These financial statements should be read in conjunction with the accompanying notes.
Victory Offices Limited Annual Report 2020
17
Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2020
Current Assets
Cash and cash equivalents
Trade and other receivables
Other financial assets
Total Current Assets
Non-Current Assets
Other financial assets
Deferred tax assets
Plant and equipment
Total Non-Current Assets
Total Assets
Current Liabilities
Trade and other payables
Provisions
Other liabilities
Lease liabilities
Current tax liabilities
Total Current Liabilities
Non-Current Liabilities
Trade and other payables
Provisions
Borrowings
Other liabilities
Lease liabilities
Total Non-Current Liabilities
Total Liabilities
Net Assets
Equity
Issued capital
Retained earnings
Total Equity
NOTE
2020
$
2019
$
5
6
7
7
8
9
10
11
13
16
8
10
11
12
13
16
670,702
3,198,805
4,618,626
1,080,232
2,041,864
20,135,903
7,331,192
24,414,940
28,904,258
10,795,496
11,320,992
5,374,869
180,639,619
139,452,193
220,864,869
155,622,558
228,196,061 180,037,498
4,392,682
2,926,458
323,527
336,775
3,207,404
2,911,899
12,371,506
5,888,004
2,598,515
156,978
22,893,634
12,220,114
13,160,127
11,098,263
2,402,984
1,047,108
2,566,085
-
302,257
354,776
150,257,095
110,633,983
168,688,548
123,134,130
191,582,182 135,354,244
36,613,879 44,683,254
14
28,164,585
28,164,585
8,449,294
16,518,669
36,613,879 44,683,254
These financial statements should be read in conjunction with the accompanying notes.
18
Victory Offices Limited Annual Report 2020
Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Balance as at 1 July 2018
Total Comprehensive Income
Transactions with owners in their capacity as owners
ORDINARY
SHARES
$
RETAINED
EARNINGS
$
TOTAL
$
NOTE
2
-
6,922,171
6,922,173
9,596,498
9,596,498
Issued share capital, net of costs
14
28,164,583
-
28,164,583
Balance as at 30 June 2019
28,164,585
16,518,669 44,683,254
Balance as at 1 July 2019
Total Comprehensive Loss
Transactions with owners in their capacity as owners
28,164,585
16,518,669
44,683,254
-
-
(8,069,375)
(8,069,375)
-
-
Balance as at 30 June 2020
28,164,585
8,449,294
36,613,879
These financial statements should be read in conjunction with the accompanying notes.
Victory Offices Limited Annual Report 2020
19
Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2020
Cash Flows from Operating Activities
Receipts from customers (inc GST)
Jobkeeper subsidy
Payments to suppliers and employees (inc GST)
Interest received
Interest paid (includes leases)
NOTE
2020
$
2019
$
39,916,774
52,808,410
667,500
-
(18,670,331)
(19,260,901)
21,005
35,765
(7,024,533)
(5,722,424)
Net cash inflow from operating activities
17
14,910,415 27,860,850
Cash Flows from Investing Activities
Proceeds / (payments) for term deposits
Payments for bank guarantees
Purchase of plant and equipment
Net cash outflow from investing activities
Cash Flows from Financing Activities
Proceeds from shares issued
Payments for capital raising costs
Repayment of related party borrowings
Receipt of funds from related parties
Proceeds from incentives received from landlords
Payment of hire purchase liabilities
Payments for lease liabilities
Net cash inflow (outflow) from financing activities
18,079,314
(20,985,780)
(18,094,037)
(1,371,741)
(17,173,607)
(26,225,730)
(17,188,330)
(48,583,251)
- 30,000,000
-
(1,835,417)
(450,694)
(4,963,531)
5,036,317
1,975,015
-
-
1,755,033
(57,478)
(4,835,810)
(4,399,090)
(250,187) 22,474,532
Net increase (decrease) in cash and cash equivalents
(2,528,103)
1,752,131
Cash and cash equivalents at start of year
3,198,805
1,446,674
Cash and Cash Equivalents at end of year
5
670,702
3,198,805
These financial statements should be read in conjunction with the accompanying notes.
20
Victory Offices Limited Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2020
1 GENERAL INFORMATION
The principal accounting policies adopted in the
preparation of the financial statements are set out below.
These policies have been consistently applied to all the
yearspresented, unless otherwise stated.
The financial statements of Victory Offices Limited &
Controlled Entities (the “consolidated entity”) for 30 June
2020 were authorised for issue by the Directors on
30 September 2020.
A) BASIS OF PREPARATION
These general purpose financial statements have been
prepared in accordance with Australian Accounting
Standards and Interpretations issued by the Australian
Accounting Standards Board (‘AASB’) and the Corporations
Act 2001, as appropriate for for-profit oriented entities.
These financial statements also comply with International
Financial Reporting Standards as issued by the
International Accounting Standards Board (‘IASB’).
(i) Historical cost convention
The financial statements have been prepared under
the historical cost convention, except for, where
applicable, the revaluation of financial assets and
liabilities at fair value through profit or loss, investment
properties, certain classes of property, plant and
equipment and derivative financial instruments.
(ii) Critical accounting estimates
The preparation of the financial statements requires
the use of certain critical accounting estimates. It
also requires management to exercise its judgement
in the process of applying the consolidated entity’s
accounting policies. The areas involving a higher
degree of judgement or complexity, or areas where
assumptions and estimates are significant to the
financial statements, are disclosed in note 2.
(iii) Comparatives
Comparative figures for the prior year have been re-
classified where appropriate to align with current year
disclosures.
Financial Statements
B) GOING CONCERN
The financial statements have been prepared on the going
concern basis, which contemplates continuity of normal
business activities and the realisation of assets and discharge
of liabilities in the normal course of business.
The impact of COVID-19 has resulted in significant restrictions
and impacts on economic activity and the ability for workers to
access offices. There has been a fall in demand for serviced
offices with uncertainty surrounding the timing of the rebound
which has and is continuing to impact the consolidated entity’s
operations.
As disclosed in the financial statements, the consolidated
entity incurred a loss of $8,069,375 for the year ended 30
June 2020. As at that date the consolidated entity had net
current liabilities of $15,562,442.
Whilst the economic impacts of COVID-19 have been
significant and are still uncertain, the Directors remain
confident that the consolidated entity will be able to continue
as a going concern. This assumes that the consolidated entity
will be able to meet its debt as and when they fall due for
a period of 12 months from the date of signing the financial
statements.
The Directors believe that it is reasonably foreseeable that
the consolidated entity will continue as a going concern and
that it is appropriate to adopt the going concern basis in the
preparation of the financial report after consideration of the
following factors:
•
•
•
•
the consolidated entity completed a capital raising
providing funds, net of costs, of $14,598,213 on 10 July
2020;
the consolidated entity has delayed any planned capital
expenditure until economic and trading conditions show an
appropriate level of improvement;
the consolidated entity took immediate steps to introduce
a number of cost saving measures, including reducing the
workforce; introduction of salary reductions in the form of
unpaid leave days; reduction in discretionary spending and
a focus on cost control; and
there have been various government legislative support
measures such as Jobkeeper subsidy and waiver and/
or deferrals of lease liabilities to further assist with their
cashflow management.
C) NEW OR AMENDED ACCOUNTING STANDARDS AND
INTERPRETATIONS ADOPTED
The consolidated entity has adopted all of the new or
amended Accounting Standards and Interpretations issued
by the Australian Accounting Standards Board (‘AASB’) that
are mandatory for the current reporting period. For other
standards not adopted early and the impact of these on
the consolidated entity refer to note 26 for managements
interpretations of the new or amended standards.
Victory Offices Limited Annual Report 2020
21
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
D) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements incorporate
the assets and liabilities of all subsidiaries of Victory
Offices Limited as at 30 June 2020 and the results of
all subsidiaries for the year then ended. Victory Offices
Limited and its subsidiaries together are referred to in
these financial statements as the ‘consolidated entity’.
Subsidiaries are all those entities over which the
consolidated entity has control. The consolidated entity
controls an entity when the consolidated entity is exposed
to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns
through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the consolidated entity. They are
de-consolidated from the date that control ceases.
Interconsolidated entity transactions, balances and
unrealised gains on transactions between entities in the
consolidated entity are eliminated. Unrealised losses are
also eliminated unless the transaction provides evidence
of the impairment of the asset transferred. Accounting
policies of subsidiaries have been changed where
necessary to ensure consistency with the policies adopted
by the consolidated entity.
The acquisition of subsidiaries is accounted for using the
acquisition method of accounting. A change in ownership
interest, without the loss of control, is accounted for as
an equity transaction, where the difference between the
consideration transferred and the book value of the share
of the non-controlling interest acquired is recognised
directly in equity attributable to the parent.
E) GOODS AND SERVICES TAX
Revenues, expenses and assets are recognised net of
the amount of GST, except where the amount of GST
incurred is not recoverable from the Australian Tax Office.
In thesecircumstances the GST is recognised as part
ofthecost of acquisition of the asset or as part of an item of
the expense. Receivables and payables in the statement of
financial position are shown inclusive of GST.
Cash flows are presented in the cash flow statement on a
gross basis, except for the GST component of investing.
F) CURRENT AND NON-CURRENT CLASSIFICATION
Assets and liabilities are presented in the statement
of financial position based on current and non-current
classification.
An asset is classified as current when: it is either expected
to be realised or intended to be sold or consumed in the
consolidated entity’s normal operating cycle; it is held
primarily for the purpose of trading; it is expected to be
realised within 12 months after the reporting period; or
the asset is cash or cash equivalent unless restricted from
being exchanged or used to settle a liability for at least
12 months after the reporting period. All other assets are
classified as non-current.
A liability is classified as current when: it is either expected
to be settled in the consolidated entity’s normal operating
cycle; it is held primarily for the purpose of trading; it is due
to be settled within 12 months after the reporting period;
or there is no unconditional right to defer the settlement of
the liability for at least 12 months after the reporting period.
All other liabilities are classified as non-current.
G) IMPAIRMENT OF FINANCIAL ASSETS
The consolidated entity recognises a loss allowance
for expected credit losses on financial assets which are
either measured at amortised cost or fair value through
other comprehensive income. The measurement of the
loss allowance depends upon the consolidated entity’s
assessment at the end of each reporting period as to
whether the financial instrument’s credit risk has increased
significantly since initial recognition, based on reasonable
and supportable information that is available, without
undue cost or effort to obtain.
Where there has not been a significant increase in
exposure to credit risk since initial recognition, a 12-month
expected credit loss allowance is estimated. This
represents a portion of the asset’s lifetime expected credit
losses that is attributable to a default event that is possible
within the next 12 months. Where a financial asset has
become credit impaired or where it is determined that
credit risk has increased significantly, the loss allowance is
based on the asset’s lifetime expected credit losses. The
amount of expected credit loss recognised is measured
on the basis of the probability weighted present value of
anticipated cash shortfalls over the life of the instrument
discounted at the original effective interest rate.
22
Victory Offices Limited Annual Report 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
H) OPERATING SEGMENTS
Identification of reportable operating segments
Identification of reportable operating segments
The consolidated entity is organised into one operating
segment providing comprehensive office serviced
packages and other services to customers in Australia.
One operating segment is consistent with the internal
reports that are reviewed and used by the Board of
Directors (who are identified as the Chief Operating
Decision Makers (‘CODM’)) in assessing performance and
in determining the allocation of resources.
I) FAIR VALUE MEASUREMENT
When an asset or liability, financial or non-financial, is
measured at fair value for recognition or disclosure
purposes, the fair value is based on the price that would
be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the
measurement date; and assumes that the transaction will
take place either: in the principal market; or in the absence
of a principal market, in the most advantageous market.
Fair value is measured using the assumptions that market
participants would use when pricing the asset or liability,
assuming they act in their economic best interests.
For non-financial assets, the fair value measurement is
based on its highest and best use. Valuation techniques
that are appropriate in the circumstances and for which
sufficient data are available to measure fair value, are used,
maximising the use of relevant observable inputs and
minimising the use of unobservable inputs.
Assets and liabilities measured at fair value are classified
into three levels, using a fair value hierarchy that
reflects the significance of the inputs used in making
the measurements. Classifications are reviewed at
each reporting date and transfers between levels are
determined based on a reassessment of the lowest level of
input that is significant to the fair value measurement.
For recurring and non-recurring fair value measurements,
external valuers may be used when internal expertise
is either not available or when the valuation is deemed
to be significant. External valuers are selected based
on market knowledge and reputation. Where there is a
significant change in fair value of an asset or liability from
one period to another, an analysis is undertaken, which
includes a verification of the major inputs applied in the
latest valuation and a comparison, where applicable, with
external sources of data.
No assets are held at fair value.
2 CRITICAL ACCOUNTING ESTIMATES,
ASSUMPTIONS AND JUDGEMENTS
The preparation of the financial statements requires
management to make judgements, estimates and
assumptions that affect the reported amounts in the
financial statements. Management continually evaluates its
judgements and estimates in relation to assets, liabilities,
contingent liabilities, revenue and expenses. Management
bases its judgements, estimates and assumptions on
historical experience and on other various factors,
including expectations of future events, management
believes to be reasonable under the circumstances.
Judgements and estimates will seldom equal the related
actual results. The judgements, estimates and assumptions
that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities (refer to
the respective notes) within the next financial year are
discussed below.
(i) Income tax
The consolidated entity is subject to income taxes in the
jurisdictions in which it operates. Significant judgement is
required in determining the provision for income tax. There
are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate
tax determination is uncertain. The consolidated entity
recognises liabilities for anticipated tax audit issues based
on the consolidated entity’s current understanding of the
tax law. Where the final tax outcome of these matters
is different from the carrying amounts, such differences
will impact the current and deferred tax provisions in the
period in which such determination is made.
Deferred tax assets are recognised for deductible
temporary differences only if the consolidated entity
considers it is probable that future taxable amounts will be
available to utilise those temporary differences and losses
(ii) Make good provisions
A provision has been made for the present value of
anticipated costs for future restoration of leased premises.
The provision includes future cost estimates associated
with closure of the premises. The calculation of this
provision requires assumptions such as application
of closure dates and cost estimates. The provision
recognised for each site is periodically reviewed and
updated based on the facts and circumstances available
at the time. Changes to the estimated future costs for sites
are recognised in the statement of financial position by
adjusting the asset and the provision. Reductions in the
provision that exceed the carrying amount of the asset will
be recognised in the profit or loss statement.
Victory Offices Limited Annual Report 2020
23
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
(iii) Useful lives of plant and equipment
(vii) Employee benefits provision
The liability for employee benefits expected to be
settled more than 12 months from the reporting date are
recognised and measured at the present value of the
estimated future cash flows to be made in respect of
all employees at the reporting date. In determining the
present value of the liability, estimates of attrition rates and
pay increases through promotion and inflation have been
taken into account.
(viii) Coronavirus (COVID-19) pandemic
Judgement has been exercised in considering the impacts
that the Coronavirus (COVID-19) pandemic has had, or
may have, on the consolidated entity based on known
information. This consideration extends to the nature of the
products and services offered, customers, supply chain,
staffing and geographic regions in which the consolidated
entity operates.
(ix) Allowance for expected credit losses
The allowance for expected credit losses assessment
requires a degree of estimation and judgement. It is based
on the lifetime expected credit loss, grouped based on
days overdue, and makes assumptions to allocate an
overall expected credit loss rate for each group. These
assumptions include recent sales experience, historical
collection rates, the impact of the Coronavirus (COVID-19)
pandemic and forward-looking information that is available.
The allowance for expected credit losses, as disclosed in
note 6, is calculated based on the information available at
the time of preparation. The actual credit losses in future
years may be higher or lower.
The consolidated entity determines the estimated useful
lives and related depreciation and amortisation charges
for its plant and equipment and finite life intangible
assets. The useful lives could change significantly as a
result of technical innovations or some other event. The
depreciation and amortisation charge will increase where
the useful lives are less than previously estimated lives, or
technically obsolete or non-strategic assets that have been
abandoned or sold will be written off or written down.
(iv) Interest rate implicit in lease arrangements
A lessor uses the interest rate implicit in the lease for the
purposes of lease classification and to measure the net
investments in a finance lease. The interest rate ‘implicit’
in the lease is the discount rate at which, the sum of
the present value of (i) the lease payments and (ii) the
unguaranteed residual value equals the sum of (i) the fair
value of the underlying asset and (ii) any initial direct costs
of the lessor.
(v) Lease term
The lease term is a significant component in the
measurement of both the right-of-use asset and lease
liability. Judgement is exercised in determining whether
there is reasonable certainty that an option to extend
the lease or purchase the underlying asset will be
exercised, or an option to terminate the lease will not
be exercised, when ascertaining the periods to be
included in the lease term. In determining the lease term,
all facts and circumstances that create an economical
incentive to exercise an extension option, or not to
exercise a termination option, are considered at the
lease commencement date. Factors considered may
include the importance of the asset to the consolidated
entity’s operations; comparison of terms and conditions to
prevailing market rates; incurrence of significant penalties;
existence of significant leasehold improvements; and the
costs and disruption to replace the asset. The consolidated
entity reassesses whether it is reasonably certain to
exercise an extension option, or not exercise a termination
option, if there is a significant event or significant change in
circumstances.
(vi) Impairment of non-financial assets
In assessing impairment an estimate is made of the
recoverable amount of each asset or cash-generating
unit based on a discounted cashflow analysis of expected
cashflows over the life of the asset. Estimation uncertainty
relates to assumptions about future operating results and
the determination of an appropriate discount rate.
As a consequence of COVID-19 significant judgement
has been exercised in determining key assumptions for
impairment testing.
Refer to Note 9 for further discussion and assumptions
relating to impairment of assets.
24
Victory Offices Limited Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3 REVENUE
Revenue from continuing operations:
Suite services
Hire of plant and equipment
Other revenue:
Jobkeeper subsidy
Rent concession income
Other income
DISAGGREGATION OF REVENUE
The disaggregation of revenue from contracts with customers is as follows:
Timing of revenue recognition
Services transferred over time
Services transferred at a point in time
Financial Statements
2020
$
2019
$
42,309,916
46,913,383
-
72,000
42,309,916
46,985,383
667,500
756,834
8,887
1,433,221
-
-
17,456
17,456
43,743,137
47,002,838
2020
$
2019
$
38,755,509
42,148,555
3,554,407
4,836,828
42,309,916 46,985,383
ACCOUNTING POLICY - REVENUE
Revenue is measured based on the consideration specified in a contract with a customer and excluded amounts
collected on behalf of third parties. The consolidated entity recognises revenue when it transfers control over a product
or service to a customer.
In the comparative period, revenue was measured at the fair value of the consideration received or receivable. Revenue
from the sale of goods was recognised when the significant risks and rewards of ownership and been transferred to
the customer, recovery of the consideration was probably, the associated costs and possible return of goods could be
estimated reliably, there was no continuing management involvement with the goods and the amount of revenue could
be measured reliably. Revenue from rendering of services was recognised in proportion to the stage of completion of the
work performed at the reporting date.
The following is a description of the principal activities from which the consolidated entity generates its revenue.
Victory Offices Limited Annual Report 2020
25
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
ACCOUNTING POLICY - REVENUE (CONTINUED)
REVENUE RECOGNITION
Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be
entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated
entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the
transaction price which takes into account estimates of variable consideration and the time value of money; allocates the
transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each
distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a
manner that depicts the transfer to the customer of the goods or services promised.
Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as
discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events.
Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement
of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent
that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The
measurement constraint continues until the uncertainty associated with the variable consideration is subsequently
resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability.
SUITE SERVICE INCOME
Revenue in relation to the rendering of suite services is recognised on a straight line basis over the term of the lease
agreement.
JOBKEEPER SUBSIDY
Jobkeeper subsidy revenue is recognised when it is received.
RENT CONCESSION INCOME
Rent concession income is recorded pursuant to ‘AASB 2020-4 Covid-19-Related Rent Concessions’, which has been
early adopted. The practical expedient in paragraph 46A has been applied to each relevant lease where a rental
concession was agreed prior to 30 June 2020.
OTHER REVENUE
Other revenue is recognised when it is received or when the right relevant performance obligations have been met.
INTEREST INCOME
Interest income is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest
rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset
to the net carrying amount of the financial asset.
26
Victory Offices Limited Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
4 EXPENSES
Depreciation
Right-of-use asset
Motor vehicles
Plant, equipment and other assets
Finance costs
Interest and finance charges
Interest payable on related party loan
Unwinding of the lease liability interest (refer to note 16)
Trade receivables
Impairment of receivables
Plant and equipment
Impairment of assets
Financial Statements
2020
$
2019
$
11,994,206
9,346,429
-
56,359
5,534,277
3,501,703
17,528,483
12,904,490
187,465
246,387
42,326
-
8,674,515
7,046,424
8,904,306
7,292,811
3,899,687
8,525,253
-
-
ACCOUNTING POLICY - EXPENSES
Depreciation, finance costs, impairment of receivables and impairment of assets accounting policies refer to notes
6, 9, 12 and 16 respectively for further details.
5 CASH AND CASH EQUIVALENTS
Cash at bank
Cash on hand
Term deposits
2020
$
2019
$
654,487
3,195,246
8,879
3,559
7,336
-
670,702
3,198,805
ACCOUNTING POLICY - CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand and money market deposits which have a maturity of three months or
less from the date of acquisition, which are readily convertible to cash on hand and are subject to an insignificant risk of
changes in value.
Bank overdrafts (if applicable) are shown as a current liability on the Statement of Financial Position and are shown as a
reduction to the cash balance in the Statement of Cash Flows.
Victory Offices Limited Annual Report 2020
27
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6 TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Allowance for expected credit losses
Sundry debtors and prepayments
2020
$
2019
$
6,933,556
272,660
(3,899,687)
-
1,584,757
807,572
4,618,626
1,080,232
ALLOWANCE FOR EXPECTED CREDIT LOSSES
The consolidated entity has recognised a loss of $3,899,687 in profit or loss in respect of the expected credit losses for the
year ended 30 June 2020. This is the first year the consolidated entity has recognised an allowance for expected credit
losses.
The ageing of receivables and allowance for expected credit losses (‘ECL’) provided for above are as follows:
Consolidated - 2020
Current
30-90 days
90+ days
Total
ECL RATE
%
CARRYING
AMOUNT
$
ALLOWANCE
FOR ECL
$
11%
148,450
16,101
35%
197,718
68,535
58%
6,587,388
3,815,051
6,933,556
3,899,687
The consolidated entity has increased its monitoring of debt recovery as there is an increased probability of customers
delaying payment or being unable to pay, due to the Coronavirus (COVID-19) pandemic. There have been no debts written off
in the current of previous financial year.
ACCOUNTING POLICY - TRADE AND OTHER RECEIVABLES
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective
interest method, less any allowance for expected credit losses (impairment). Trade receivables are generally due for
settlement within 30 days.
The consolidated entity has applied the simplified approach to measuring expected credit losses, which uses a lifetime
expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days
overdue.
Other receivables are recognised at amortised cost, less any allowance for expected credit losses.
28
Victory Offices Limited Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
7 OTHER FINANCIAL ASSETS
Current
Term Deposits
Non - current
Financial Statements
2020
$
2019
$
2,041,864
20,135,903
Term Deposits for bank guarantees
28,904,258
10,795,496
ACCOUNTING POLICY - OTHER FINANCIAL ASSETS
Other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement,
except for financial assets at fair value through profit or loss. Such assets are subsequently measured at either amortised
cost or fair value depending on their classification. Classification is determined based on both the business model within
which such assets are held and the contractual cash flow characteristics of the financial asset unless, an accounting
mismatch is being avoided.
Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the
consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable
expectation of recovering part or all of a financial asset, it’s carrying value is written off.
Victory Offices Limited Annual Report 2020
29
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
8 INCOME TAX RECONCILIATION
(a) The major components of tax expense (benefit) comprise:
Current tax expense
Deferred tax expense
(Over) under provision for income tax in prior year
Income Tax expense (benefit)
(b) Reconciliation of income tax to accounting profit (loss)
2020
$
2019
$
2,217,367
4,440,790
(5,946,123)
(235,646)
224,170
(321,632)
(3,504,586)
3,883,512
Profit (loss) before income tax expense
(11,573,961)
13,480,010
Prima facie income tax on profit (loss) before tax @ 30%
(3,472,188)
4,044,003
Add / deduct
Non-deductible expenses
Capital gains
Deferred tax adjustments
(Over) under provision for income tax in prior year
Income Tax expense (benefit)
(c) Recognised deferred tax asset
Employee benefits provision
Make good provision
Lease liability
Impairment of assets
Allowance for expected credit losses
Black hole expenditure
Other
Deferred tax asset balance
(d) Recognised deferred tax liabilities
Right of use asset
Plant and equipment
Deferred tax liabilities balance
Net deferred tax assets
30
Victory Offices Limited Annual Report 2020
1,860
5,325
-
155,816
(258,428)
-
224,170
(321,632)
(3,504,586)
3,883,512
132,451
101,032
685,503
-
47,578,365
34,956,598
2,557,576
1,169,906
-
-
241,821
361,061
357
973
52,365,979
35,419,664
41,044,987
29,401,525
-
643,270
41,044,987
30,044,795
11,320,992
5,374,869
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
8 INCOME TAX RECONCILIATION (CONTINUED)
(e) Deferred tax amounts recognised in income tax expense
Plant and equipment
Right of use asset / Lease liability
Impairment of assets
Financial Statements
TAX
ADJUSTMENT
DTA
DTL
NET
MOVEMENT
NET
MOVEMENT
@ 30%
NET
MOVEMENT
@ 30%
$
$
$
(2,144,233)
-
(643,270)
(499,142)
(13,307,269)
11,643,462
(8,525,253)
(2,557,576)
Allowance for expected credit losses
(3,899,687)
(1,169,906)
Black hole expenditure
Employee benefits provision
Other
397,466
(104,729)
119,240
(31,419)
2,052
616
-
-
-
-
-
Net impact of movements in deferred tax balances on income tax expense (benefit)
(5,946,123)
(16,946,315)
11,000,192
ACCOUNTING POLICY - INCOME TAX RECONCILIATION
The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based
on the national income tax rate adjusted by changes in the deferred tax assets and liabilities attributable to temporary
differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to
unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the
assets are recovered or liabilities settled, based on those tax rates which are enacted or substantively enacted for each
jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences
to measure the deferred tax asset or liability.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that
future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for
the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is
probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable
authority on either the same taxable entity or different taxable entities which intend to settle simultaneously.
Victory Offices Limited Annual Report 2020
31
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9 PLANT AND EQUIPMENT
Office furniture
Cost
Accumulated depreciation
Impairment
Office equipment
Cost
Accumulated depreciation
Impairment
Computer equipment
Cost
Accumulated depreciation
Impairment
Computer software
Cost
Accumulated depreciation
Impairment
Leasehold Improvements
Cost
Accumulated depreciation
Impairment
Artwork
Cost
Accumulated depreciation
Impairment
Right-of-use asset
Cost
Accumulated depreciation
Impairment
2020
$
2019
$
7,301,328
6,528,358
(1,188,551)
(499,815)
(275,490)
-
5,837,287
6,028,543
10,991,908
10,525,955
(2,349,051)
(1,099,050)
(389,515)
-
8,253,342
9,426,905
2,551,341
2,156,859
(782,330)
(377,746)
(79,726)
-
1,689,285
1,779,113
202,722
141,849
(96,502)
(53,863)
(4,787)
-
101,433
87,986
41,265,629
26,773,214
(5,943,190)
(2,967,758)
(1,591,906)
-
33,730,533 23,805,456
405,451
(10,506)
(17,799)
325,414
(6,308)
-
377,146
319,106
167,505,608
116,625,486
(30,688,986)
(18,620,402)
(6,166,030)
-
130,650,592 98,005,084
180,639,619
139,452,193
The consolidated entity leases offices under agreements of between five to eleven years with, in some cases, options to extend.
The leases have various escalation clauses. On renewal (if leases are renewed), the terms of the lease will be renegotiated.
32
Victory Offices Limited Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9 PLANT AND EQUIPMENT (CONTINUED)
IMPAIRMENT OF ASSETS
The total written down value for right-of-use assets (pre-
impairment) is $136.8 million. The total written down value
for all other plant and equipment (pre-impairment) is
$52.3 million.
Cash-generating-units have been identified for the
purposes of impairment testing representing the location
of a lease or a combination of leases (if at the same
address).
Value-in-use calculations have been used as the basis for
the assessment of impairment. Value-in-use calculations
are based on a discounted cashflow analysis of expected
cash inflows and cash outflows over the remaining
expected use of the cash-generating-units (remaining
lease terms with an assessment as to the likelihood of
exercising an option if applicable). No terminal values have
been used.
The key assumptions used in the value-in-use calculations
are:
• no growth in revenue rates in FY2021 and FY2022;
• gradual increase in occupancy in FY2021 growing to
between 55-75% (depending on location) by June 2021
(below pre-COVID levels);
• occupancy between 60% and 85% (depending on
location) in FY2022 (below pre-COVID levels);
• occupancy between 60% and 95% (depending on
location) from FY2023 onwards (pre-COVID levels);
•
revenue growth of 3% per annum from FY2023
onwards;
• growth in lease costs as per lease agreements
(between 3-4% per annum), growth in other costs at
3% per annum; and
• pre-tax discount rates between 4.5% and 6.3%
depending on location.
An impairment loss of $8.5 million (in relation to plant and
equipment) has been recognised in profit or loss during the
year. This is the first reporting period where an impairment
of assets has been evident.
Financial Statements
The impairment loss recognised of $8.5 million relates to
two cash-generating-units being:
•
•
180 St Kilda Road, St Kilda (impairment of $7.6 million);
and
100 Mount St, North Sydney (impairment of
$1.0 million).
The recognition of an impairment loss as both cash-
generating-units is mainly due to the impact on short-term
cash flows of the COVID-19 pandemic.
The recoverable amounts of each cash-generating-
units are: 180 St Kilda Road, St Kilda (recoverable
amount of $9.6 million) and 100 Mount St, North Sydney
($25.3 million).
The discount rates used to determine the value in use
were 4.8% (180 St Kilda Rd, St Kilda) and 4.5% (100 Mount
St, North Sydney).
SENSITIVITIES
Based on the assumptions above the total value-in-use
calculations has a positive (net) amount of $193.3 million.
Impairment in this scenario was $8.5 million relating to the
two locations referred to above. The key input into the
value-in-use models is revenue and sensitivites have been
presented below.
Revenue +10%
If revenues year-on-year were 10% higher (whether due
to occupancy or price increases) the total value-in-use
calculations has a positive (net) amount of $240.6 million.
Impairment in this scenario would be $5.1 million and
confined to the St Kilda location only.
Revenue -10%
If revenues year-on-year were 10% lower (whether due
to occupancy or price decreases) the total value-in-use
calculations has a positive (net) amount of $139.0 million.
Impairment in this scenario would be $14.7 million relating
to the two locations as per above.
Revenue -20%
If revenues year-on-year were 20% lower (whether due
to occupancy or price decreases) the total value-in-
use calculations has a positive (net) amount of $88.2
million. Impairment in this scenario would be $20.9
million. Impairment would be across three locations in this
scenario.
Victory Offices Limited Annual Report 2020
33
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9 PLANT AND EQUIPMENT (CONTINUED)
ACCOUNTING POLICY - PLANT AND EQUIPMENT
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of plant and equipment (excluding
land) over their expected useful lives as follows:
Useful Life (in years)
Useful Life (prior year)
Fixed asset class
Office furniture
Office equipment
Computer equipment
Computer software
10
5 & lease
4 to 5
4
Leasehold Improvements
Life of lease
Artwork
Right-of-use asset
100
Life of lease
10
5
5
3
Life of lease
40
Life of lease
The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting
date. The useful lives were amended during the financial year to better reflect the expected use of the plant and
equipment and to provide more consistency within the fixed asset classes. This results in a lower depreciation charge in
the 2020 financial year.
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease
or the estimated useful life of the assets, whichever is shorter.
An item of plant and equipment is derecognised upon disposal or when there is no future economic benefit. Gains and
losses between the carrying amount and the disposal proceeds are taken to profit or loss.
RIGHT-OF-USE ASSETS
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost,
which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or
before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where
included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the
underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated
useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased
asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to
impairment or adjusted for any remeasurement of lease liabilities.
The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term
leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to
profit or loss as incurred.
34
Victory Offices Limited Annual Report 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
9 PLANT AND EQUIPMENT (CONTINUED)
RECONCILIATION OF CARRYING AMOUNT
The following table shows a reconciliation from the opening balances to the closing balances for the current and prior
financial year.
OFFICE
FURNITURE
$
MOTOR
VEHICLES
$
OFFICE
EQUIPMENT
$
COMPUTER
EQUIPMENT
$
COMPUTER
SOFTWARE
$
LEASEHOLD
IMPROVE-
MENTS
$
ARTWORK
$
RIGHT-OF-
USE ASSET
$
TOTAL
$
1,107,875
300,306
6,361,105
307,845
42,375
11,221,045
259,003
76,907,478 96,507,032
Balance at
1 July 2018
Additions
5,193,611
-
4,012,772
1,658,028
64,071
14,658,186
62,895
30,444,035 56,093,598
-
(243,947)
-
-
-
-
-
-
(243,947)
(272,943)
(56,359)
(946,972)
(186,760)
(18,460)
(2,073,775)
(2,792)
(9,346,429)
(12,904,490)
Disposals -
written down
value
Depreciation
expense
Balance at
30 June 2019
Balance at
1 July 2019
Additions
Disposals -
written down
value
6,028,543
6,028,543
776,500
(3,530)
Impairment
(275,490)
Depreciation
expense
Balance at
30 June 2020
(688,736)
5,837,287
-
-
-
-
-
-
-
9,426,905
1,779,113
87,986 23,805,456
319,106
98,005,084 139,452,193
9,426,905
1,779,113
87,986 23,805,456
319,106
98,005,084
-
475,599
398,800
60,873
14,934,793
80,037
50,805,744
67,532,346
(8,798)
(4,141)
-
(274,715)
-
-
(291,184)
(389,515)
(79,726)
(4,787)
(1,591,906)
(17,799)
(6,166,030)
(8,525,253)
(1,250,849)
(404,761)
(42,639)
(3,143,094)
(4,197)
(11,994,206)
(17,528,483)
8,253,342
1,689,286
101,433
33,730,533
377,146 130,650,592 180,639,619
Victory Offices Limited Annual Report 2020
35
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
10 TRADE AND OTHER PAYABLES
Current
Trade payables
GST and PAYG withholding payable
Accrued expenses
Non-Current
Amounts due to related parties
Related party income tax payable
2020
$
2019
$
3,295,857
2,325,017
779,909
527,006
316,916
74,435
4,392,682
2,926,458
11,109,376
9,067,512
2,050,751
2,030,751
13,160,127
11,098,263
ACCOUNTING POLICY - TRADE AND OTHER PAYABLES
CURRENT
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not
discounted. The amounts are unsecured and are usually paid within 30 days of recognition.
NON-CURRENT
These amounts represent liabilities payable to related parties. Refer to notes 18 ‘Financial Instruments’ and 22 ‘Related
Party Transactions’ for further information.
36
Victory Offices Limited Annual Report 2020
Financial Statements
2020
$
2019
$
323,527
336,775
323,527
336,775
1 1 7,975
-
2,285,009
1,047,108
2,402,984
1,047,108
1,047,108
648,005
659,029
399,103
578,872
-
2,285,009
1,047,108
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
11 PROVISIONS
Current
Provision for annual leave
Non - current
Provision for long service leave
Provision for make good on leased premises
Movement in provision for make good on leased premises
Carrying amount at the start of the year
Additional provisions recognised
Change in discount rates
Carrying amount at the end of the year
ACCOUNTING POLICY - PROVISIONS
PROVISIONS
The provision for make good on leased premises represents the present value of the estimated costs to make good the
premises leased by the consolidated entity at the end of the respective lease terms.
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a
past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding
the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the
liability. The increase in the provision resulting from the passage of time is recognised as a finance cost.
EMPLOYEE BENEFITS
Short-term employee benefits
Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to
be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the
liabilities are settled.
Other long-term employee benefits
The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are
measured at the present value of expected future payments to be made in respect of services provided by employees
up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and
salary levels, experience of employee departures and periods of service. Expected future payments are discounted using
market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as
possible, the estimated future cash outflows.
Victory Offices Limited Annual Report 2020
37
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12 BORROWINGS
Non-current
Loan payable to related party
2020
$
2019
$
2,566,085
-
ACCOUNTING POLICY - BORROWINGS
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They
are subsequently measured at amortised cost using the effective interest method.
Non-current borrowings are unsecured loans and have been provided to a director related entity and subsidiaries on
an arm’s length basis. The loan has a coupon of 5% p.a. accruing monthly and capitalising until repayment commence.
Quarterly repayments will commence on 1 July 2021 amortising over 24 months. Interest of $42,326 was capitalised
against this loan in FY2020. Loans are unsecured and repayable in cash. The loan of $2,523,759 was provided in March
2020 to fund capital expenditure commitments.
Borrowings are classified as current liabilities unless the consolidated entity has an unconditional right to defer settlement
of the liability for at least 12 months after balance date.
Borrowing costs are recognised as expenses in the period in which they are incurred. Borrowing costs include:
•
interest on bank overdrafts and short-term and long-term borrowings; and
• finance lease charges.
13 OTHER LIABILITIES
Current
Client deposits
Contractual liabilities
Non current
Client deposits
2020
$
2019
$
3,092,015
2,615,540
115,389
296,359
3,207,404
2,911,899
302,257
354,776
302,257
354,776
ACCOUNTING POLICY - OTHER LIABILITIES
CLIENT DEPOSITS
Deposits received are security bonds payable at the commencement of the lease to insure against any potential damage
to properties. Bonds are repayable upon final inspection of the premise at the end of the lease term.
CONTRACTUAL LIABILITIES
Income received in advance is recognised as revenue over the life of the lease as services are rendered in accordance
with the terms of the lease agreement.
38
Victory Offices Limited Annual Report 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14 CONTRIBUTED EQUITY
Ordinary shares
40,900,000 40,900,000
28,164,585
28,164,585
2020
SHARES
2019
SHARES
2020
$
2019
$
Movements in Share Capital
Opening Balance
Share split - 12 June 2019
Shares issued at $2.00 each - IPO
Capital raising costs, net of tax
Closing Balance
40,900,000
2
28,164,585
-
-
-
25,899,998
15,000,000
-
-
-
-
2
-
30,000,000
(1,835,417)
40,900,000 40,900,000
28,164,585
28,164,585
ACCOUNTING POLICY - CONTRIBUTED EQUITY
ORDINARY SHARES
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and
the company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
DIVIDENDS
Provision is made for the amount of any dividend declared on or before the end of the financial year but not distributed at
balance date.
CAPITAL RISK MANAGEMENT
The consolidated entity’s objectives when managing capital is to safeguard its ability to continue as a going concern,
so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is
calculated as total borrowings less cash and cash equivalents.
In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The capital risk management policy remains unchanged from the 30 June 2019 Annual Report.
Victory Offices Limited Annual Report 2020
39
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
15 EARNINGS (LOSS) PER SHARE
Earnings (loss) per share for profit (loss) from continuing operations
Profit (loss) after income tax
(8,069,375)
9,596,498
2020
$
2019
$
Weighted average number of ordinary shares
Basic earnings (loss) per share
Diluted earnings (loss) per share
NUMBER
NUMBER
40,900,000 26,680,822
CENTS
CENTS
(19.73)
(19.73)
35.97
35.97
ACCOUNTING POLICY - EARNINGS (LOSS) PER SHARE
BASIC EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is calculated by dividing the profit attributable to the owners of Victory Offices Limited,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares
outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
DILUTED EARNINGS (LOSS) PER SHARE
Diluted earnings (loss) per share adjusts the figures used in the determination of basic earnings (loss) per share to take
into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation to
dilutive potential ordinary shares.
40
Victory Offices Limited Annual Report 2020
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
16 LEASE LIABILITIES
As a lessee
Right-of-use assets
Financial Statements
2020
$
2019
$
130,650,592 98,005,084
130,650,592 98,005,084
The right-of-use asset comprises 23 leased premieses with varying terms between 5 and 11 years.
Information about leases for which the consolidated entity is a lessee is presented below:
Right-of-use assets
Balance at beginning of financial year
Additions
Lease modifications and discount rate adjustments
Depreciation charge for the year
Impairment
Balance at end of financial year
Lease liabilities
Maturity analysis - contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities
Lease liabilities included in the statement of financial position
Current
Non-current
Amounts recognised in profit or loss
Interest on lease liabilities
Amounts recognised in the statement of cash flows
Total cash outflow for leases
2020
$
2019
$
98,005,084
76,907,478
45,604,781
30,444,035
5,200,963
-
(11,994,206)
(9,346,429)
(6,166,030)
-
130,650,592
98,005,084
21,898,862
13,413,820
107,352,607
80,339,831
98,326,080
76,008,494
227,577,549
169,762,145
162,628,601
116,521,987
12,371,506
5,888,004
150,257,095
110,633,983
8,674,515
7,046,424
(11,632,760)
(10,121,514)
The consolidated entity has committed to leases during the year ended 30 June 2020, which have not been reflected within
right-of-use assets or lease liabilities as at 30 June 2020 as the locations were not open as at 30 June 2020.
One location has opened in July 2020 whilst it is not certain on the opening dates of other locations due to the impact of
COVID-19.
Victory Offices Limited Annual Report 2020
41
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
16 LEASE LIABILITIES (CONTINUED)
The expected future cash outflows to which the consolidated entity is committed to relating to the leases not yet commenced,
that are not reflected in the measurement of the lease liability are as follows:
Less than one year
One to five years
More than five years
Total expected future cash outflows
ACCOUNTING POLICY - LEASE LIABILITIES
LEASED OFFICES
2020
$
2019
$
8,127,968
13,413,820
53,371,890
80,339,831
87,177,382
79,008,494
148,677,240
172,762,145
The consolidated entity has numerous commercial office leases include leases of shared office spaces.
The non-cancellable period of the leases varies between 1 and 11 years and the consolidated entity has an option to
extend the leases up to an additional term of the lease and in many cases it is up to the discretion of the lessor. The lease
payments are adjusted every year, based on either a fixed annual rate increase or a change in the consumer price index
in the preceding year. If the consolidated entity exercises the renewal option, then the lease payments in the renewal
period will reflect the then market rate or an equivalent index dependent on the terms of the lease agreement.
At inception of a contract, the consolidated entity assesses whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in
exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the
consolidated entity assess whether:
•
•
•
the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and should be
physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a
substantive substitution right, then the asset is not identified;
the consolidated entity has the right to obtain substantially all of the economic benefits from use of the asset
throughout the period of use;
the consolidated entity has the right to direct the use of the asset. The consolidated entity has this right when it has
the decision-making rights that are most relevant to changing how and for what purpose the asset is used. In rare
cases where the decision about how and for what purpose the asset is used is predetermined, the consolidated entity
has the right to direct the use of the asset if either:
•
•
the consolidated entity has the right to operate the asset; or
the consolidated entity designed the asset in a way that predetermines how and for what purpose it will be used.
At inception or on reassessment of a contract that contains a lease component, the consolidated entity allocate the
consideration in the contract to each lease component on the basis of their relative stand-alone prices. However, for
the lease of land and buildings in which it is a lessee, the consolidated entity has elected not to separate non-lease
components and account for the lease and non-lease components as a single lease component.
42
Victory Offices Limited Annual Report 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
16 LEASE LIABILITIES (CONTINUED)
ACCOUNTING POLICY - LEASE LIABILITIES (CONTINUED)
AS A LESSEE
The consolidated entity recognise a right-of-use asset and a lease liability at the lease commencement date. The right-
of-use asset is initially measured at cost, which compromises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to
dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any
lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the
earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-
of-use assets are determined on the same basis as those property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be easily determined, the consolidated
entity incremental borrowing rate. Generally, the consolidated entity use its incremental borrowing rate as the discount rate.
LEASE PAYMENTS INCLUDED IN THE MEASUREMENT OF THE LEASE LIABILITY COMPROMISE THE FOLLOWING:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using the index or a rate as at the
commencement date;
• amounts expected to be payable under a residual value guarantee; and
•
the exercise price under a purchase option that the consolidated entity is reasonably certain to exercise, lease
payments in an optional renewal period if the consolidated entity is reasonably to exercise an extension option, and
penalties for early termination of a lease unless the consolidated is reasonably certain to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in an index or rate, if there is a change in the consolidated entity
estimate of the amount expected to be payable under a residual value guarantee, or if the consolidated entity changes its
assessment of whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the
right-of-use asset, or is recorded in profit or loss in the carrying amount of the right-of-use asset has been reduced to
zero.
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index or a rate, initially measured using an index or a rate as at the
commencement date;
• amounts expected to be payable under a residual value guarantee; and
•
the exercise price under a purchase option that the consolidated entity is reasonably certain to exercise, lease pay-
ments in an optional renewal period if the consolidated entity is reasonably certain to exercise and extension option,
and penalties for early termination of a lease unless the consolidated entity is reasonably certain to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a
change in future lease payments arising from a change in an index or a rate, if there is a change in the consolidated
entity’s estimate of the amount expected to be payable under a residual value guarantee, or if the consolidated entity
changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability
is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is
recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
SHORT-TERM LEASES AND LEASES OF LOW-VALUE ASSETS
The consolidated entity has elected not to recognise right-of-use assets and lease liabilities for short-term leases of
machinery that has a lease term of 12 months or less and leases of low-value assets, including IT equipment. The
consolidated entity recognise the lease payments associated with these leases as an expense on a straight-line basis
over the lease term.
Victory Offices Limited Annual Report 2020
43
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
17 RECONCILIATION OF THE NET PROFIT (LOSS) TO THE NET CASH FLOW FROM OPERATIONS
Net Profit (loss) from continuing activities after income tax
Non-cash expense items:
- depreciation
- rent free incentive periods
- rent concession income
- interest
- impairment of receivables
- impairment of assets
Changes to assets and liabilities relating to operating activities:
(Increase)/decrease in trade and other receivables
(Increase)/decrease in prepayments and other assets
(Increase)/decrease in tax assets and liabilities
Increase/(decrease) in trade and other payables
Increase/(decrease) in contractual liabilities
Increase/(decrease) in other liabilities
Increase/(decrease) in provisions
Net Cash Flow from Operating Activities
Non-cash investing and financing activities:
Acquisition of right-of-use lease assets
Disposal of plant and equipment
2020
$
2019
$
(8,069,375)
9,596,498
17,528,483
12,904,490
-
1,570,387
(756,834)
1,879,773
3,899,687
8,525,253
-
-
-
-
(6,660,896)
(130,933)
203,532
(282,561)
(3,504,586)
3,883,512
1,517,663
(416,612)
(180,970)
150,323
423,956
443,394
104,728
142,352
14,910,415
27,860,850
50,765,626
30,444,035
291,184
243,947
ACCOUNTING POLICY - STATEMENT OF CASH FLOWS
The following is the definition of the terms used in the Statement of Cash Flows:
• Operating activities are the principal revenue producing activities of the consolidated entity and other activities that
are not investing or financing activities;
•
Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash
and cash equivalents; and
• Financing activities are activities that result in changes in the size and composition of the contributed equity and
borrowings of the consolidated entity.
44
Victory Offices Limited Annual Report 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
18 FINANCIAL INSTRUMENTS
CREDIT RISK
Credit risk refers to the risk that a counterparty will
default on its contractual obligations resulting in financial
loss to the consolidated entity. The consolidated entity
has a strict code of credit, including obtaining agency
credit information, confirming references and setting
appropriate credit limits. The consolidated entity obtains
guarantees where appropriate to mitigate credit risk. The
maximum exposure to credit risk at the reporting date to
recognised financial assets is the carrying amount, net of
any provisions for impairment of those assets, as disclosed
in the statement of financial position and notes to the
financial statements. The consolidated entity does hold a
security deposit (refer to note 13) which acts as a form of
collateral.
LIQUIDITY RISK
Vigilant liquidity risk management requires the
consolidated entity to maintain sufficient liquid assets
(mainly cash and cash equivalents) and available borrowing
facilities to be able to pay debts as and when they become
due and payable.
The consolidated entity manages liquidity risk by
maintaining adequate cash reserves and available
borrowing facilities by continuously monitoring actual and
forecast cash flows and matching the maturity profiles of
financial assets and liabilities.
REMAINING CONTRACTUAL MATURITIES
The following tables detail the consolidated entity’s
remaining contractual maturity for its financial instrument
liabilities. The tables have been drawn up based on the
undiscounted cash flows of financial liabilities based on the
earliest date on which the financial liabilities are required to
be paid. The tables include both interest and principal cash
flows disclosed as remaining contractual maturities and
therefore these totals may differ from their carrying amount
in the statement of financial position.
FINANCIAL RISK MANAGEMENT OBJECTIVES
The consolidated entity’s activities expose it to a variety of
financial risks: market risk (including price risk and interest
rate risk), credit risk and liquidity risk. The consolidated
entity’s overall risk management program focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance
of the consolidated entity. The consolidated entity uses
different methods to measure different types of risk to
which it is exposed. These methods include sensitivity
analysis in the case of interest rate and price risks
andageing analysisforcreditrisk.
Risk management is carried out by senior finance
executives (‘finance’) under policies approved by the
Board of Directors (‘the Board’). These policies include
identification and analysis of the risk exposure of the
consolidated entity and appropriate procedures, controls
and risk limits. Finance identifies, evaluates and hedges
financial risks within the consolidated entity’s operating
units. Finance reports to the Board on a monthlybasis.
MARKET RISK
FOREIGN CURRENCY RISK
The consolidated entity’s exposure to currency risk is
minimal at this stage of the operations.
INTEREST RATE RISK
Interest rate risk is the risk that the value of a financial
instrument or cash flows associated with the instrument
will fluctuate due to changes in market interest rates.
Interest rate risk arises from fluctuations in interest bearing
financial assets and liabilities that the consolidated entity
uses. Interest bearing assets comprise cash and cash
equivalents which are considered to be short-term liquid
assets and investment decisions are governed by the
monetary policy. Interest bearing liabilities comprise hire
purchase and lease liabilities.
The consolidated entity’s cash and cash equivalents
and term deposits were $2,712,566 as at 30 June 2020
(2019: $25,074,483). Borrowings and lease liabilities were
$165,194,686 as at 30 June 2020 (2019: $116,521,987). An
official increase/decrease in interest rates of 100 (2019:
100) basis points would have an (adverse)/favourable effect
on profit before tax of $(1,624,821) (2019: ($914,475)) per
annum. The percentage change is based on the expected
volatility of interest rates using market data and analysts
forecasts.
It is the consolidated entity’s policy to settle trade payables
within the credit terms allowed and therefore not incur
interest on overdue balances.
Victory Offices Limited Annual Report 2020
45
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
18 FINANCIAL INSTRUMENTS (CONTINUED)
INTEREST
RATE
1 YEAR
OR LESS
BETWEEN
1 AND
2 YEARS
BETWEEN
2 AND
5 YEARS
OVER
5 YEARS
REMAINING
CONTRACTUAL
MATURITIES
2020
%
$
$
$
$
$
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing-fixed rate
Borrowings
Lease liability
5.0%
6.3%
4,392,682
2,050,751
11,109,376
3,207,404
302,257
-
-
1,251,065
1,315,020
-
-
-
17,552,809
3,509,661
2,566,085
21,898,862
20,310,368
87,042,239
98,326,080
227,577,549
Total non-derivatives
29,498,948
23,914,441 99,466,635 98,326,080
251,206,104
As at 30 June 2020 the weighted average interest discount rate for lease liabilities was 6.3% (2019: 6.9%)
INTEREST
RATE
1 YEAR
OR LESS
BETWEEN
1 AND
2 YEARS
BETWEEN
2 AND
5 YEARS
OVER
5 YEARS
REMAINING
CONTRACTUAL
MATURITIES
2019
%
$
$
$
$
$
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing-fixed rate
Borrowings
Lease liability
2,926,458
-
9,067,512
2,911,899
354,776
-
-
-
-
-
-
-
11,993,970
3,266,675
-
6.9%
13,413,820
14,786,406
65,553,425
76,008,494
169,762,145
Total non-derivatives
19,252,177
15,141,182
74,620,937
76,008,494
185,022,790
The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value.
46
Victory Offices Limited Annual Report 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
19 CONSOLIDATED ENTITIES
GROUP ACCOUNTING POLICY
The Group consolidation comprises all subsidiaries
controlled by the consolidated entity. Control exists when
the consolidated entity:
• Has the power to direct the relevant activities such as
key operating, financial and investing decisions;
• Has exposure or rights to variable returns from its
involvement with the investee such as dividends, loans
and fees; and
The material subsidiaries of the consolidated entity are
listed below.
PARENT ENTITY
Victory Offices Limited
Subsidiaries:
2020
2019
Victory Management Services Pty Ltd
100%
100%
Victory Equipment & Leasing Pty Ltd
100%
100%
• Has the ability to use its power over the investee to
Victory Offices (420 Collins) Pty Ltd
100%
100%
affect the amount of returns
In assessing control, potential voting rights that are
presently exercisable or convertible are taken into account.
Management uses accounting judgement in determining
whether the consolidated entity controls an entity by
applying the above control criteria and reviewing the
substance of its relationship with the entity.
The financial statements of subsidiaries are included in
the Consolidated Financial Statements from the date that
control commences until the date that control ceases.
The financial statements of subsidiaries are prepared
for the same reporting period as the parent entity, using
consistent accounting policies with adjustments made to
bring into line any dissimilar accounting policies that may
exist.
External non controlling interests are allocated their share
of total comprehensive income and are presented within
equity in the consolidated Statement of Financial Position,
separately from the equity of securityholders.
Victory Offices (35 Collins) Pty Ltd
100%
100%
Victory Offices (600 Bourke) Pty Ltd
100%
100%
Victory Offices (727 Collins) Pty Ltd
100%
100%
Victory Offices (200 George) Pty Ltd
100%
100%
Victory Offices (175 Eagle) Pty Ltd
Victory Offices (Box Hill) Pty Ltd
100%
100%
100%
100%
Victory Offices (Chadstone) Pty Ltd
100%
100%
Victory Offices (Barangaroo) Pty Ltd
100%
100%
Victory Offices (333 Collins) Pty Ltd
100%
100%
Victory Offices (2 Esplanade) Pty Ltd
100%
100%
Victory Offices (Dandenong) Pty Ltd
100%
100%
Victory Offices (Sunshine) Pty Ltd
100%
100%
Victory Offices (420 George) Pty Ltd
100%
100%
Victory Offices (St Kilda) Pty Ltd
100%
100%
Victory Offices (Projects) Pty Ltd
Victory Offices (900 Ann) Pty Ltd
Victory Offices (85 Castlereagh) Pty Ltd
Victory Offices (900 Ann) Pty Ltd
Victory Offices (100 Mount) Pty Ltd
Victory Offices (600 Church) Pty Ltd
Victory Offices (73 Northbourne) Pty Ltd
Victory Offices (254 George) Pty Ltd
Victory Offices (275 George - B) Pty Ltd
100%
100%
100%
100%
100%
100%
100%
100%
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
Victory Offices Limited Annual Report 2020
47
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
20 PARENT ENTITY INFORMATION
Set out below is the supplemented information about the parent entity.
Statement of profit or loss and other comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Total net assets
Total equity
CONTINGENT LIABILITIES
2020
$
2019
$
-
-
-
-
-
-
28,166,097
28,166,097
-
1,512
-
1,512
28,164,585
28,164,585
28,164,585
28,164,585
The parent entity had no contingent liabilities as at 30 June 2020 and 30 June 2019.
CAPITAL COMMITMENTS
The parent entity had no capital commitments as at 30 June 2020 and 30 June 2019.
SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the parent entity are consistent with those of the consolidated entity.
21 KEY MANAGEMENT PERSONNEL DISCLOSURES
Key management personnel remuneration included within employee expenses for the year is shown below:
Short term employee benefits
Other long term benefits
Post employment benefits
For details of other transactions with key management personnel, refer to Note 22.
2020
$
2019
$
1,261,819
1,049,019
52,849
-
100,363
73,137
1,415,031
1,122,156
48
Victory Offices Limited Annual Report 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
22 RELATED PARTIES TRANSACTIONS
PARENT ENTITY
The ultimate parent entity, which exercises control over the group, is Victory Group Holdings which is incorporated in Australia
and owns 63.3% (2019: 63.3%) of Victory Offices Limited & Controlled Entities as at 30 June 2020. Refer to note 19. Upon
completion of a capital raising in July 2020 Victory Group Holdings ownership percentage reduced to 48.0%.
Interests in subsidiaries are set out in note 19.
KEY MANAGEMENT PERSONNEL
Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or
indirectly, including any director (whether executive or otherwise) of that entity are considered key management personnel.
For details of remuneration disclosures relating to key management personnel, refer to note 21.
Other transactions with KMP and their related parties are shown below. Other related parties include close family members of
key management personnel and entities that are controlled.
TRANSACTIONS WITH RELATED PARTIES
The following transactions occurred with related parties of Mr Dan Baxter:
2020
KMP related parties
Dan Baxter - non-interest bearing
Dan Baxter - interest bearing
Controlling entities
Victory Group Holdings Pty Ltd
Other related parties
Victory Petroleum
Victory Realty
2019
KMP related parties
Dan Baxter
Controlling entities
Victory Group Holdings Pty Ltd
Other related parties
Victory Aluminium
Victory Constructions
Victory Realty
Victory Metals Australia
PURCHASES
$
SALES
$
OTHER
$
RECEIVABLE
$
PAYABLE
$
-
-
-
-
-
-
-
-
2,566,085
-
-
9,067,512
2,566,085
-
20,000
-
2,050,751
-
-
2,041,864
450,694
-
-
2,041,864
-
PURCHASES
$
SALES
$
OTHER
$
RECEIVABLE
$
PAYABLE
$
-
-
-
-
-
-
-
-
503,760
150,000
210,000
-
-
-
-
-
-
243,947
-
-
-
-
-
-
9,067,512
2,030,751
-
-
-
-
Victory Offices Limited Annual Report 2020
49
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
22 RELATED PARTIES TRANSACTIONS (CONTINUED)
LOANS FROM RELATED PARTIES - NON-INTEREST
BEARING
Unsecured loans have been provided from the KMP
related parties, controlling entities and other related
parties on an arm’s length basis. There are no set
repayment terms. Loans are unsecured and repayable in
cash. No interest is charged due to: $2,050,751 loan from
Victory Group Holdings relates to tax liabilities when the
consolidated entity was part of the Victory Group Holdings
tax consolidated group and is expected to be repaid
in 1-2 years with the nature of the loan being a parent
subsidiary nature so no interest is considered; $2,041,864
loan from Victory Petroleum relates to working capital and
is expected to be repaid in 1-3 years so interest would
otherwise have been immaterial; and $9,067,512 loan from
Dan Baxter relates to funding of bank guarantees prior
to the IPO of the consolidated entity in June 2019 and is
considered as part of the founders contribution to initial
capital requirements of the consolidated entity with no
interest considered.
LOANS FROM KMP RELATED PARTIES -
INTEREST BEARING
Unsecured loans have been provided to the ultimate
parent entity and subsidiaries on an arm’s length basis.
The loan has a coupon of 5% p.a. accruing monthly
and capitalising until repayment commence. Quaterly
repayments will commence on 1 July 2021 amortising over
24 months. Interest of $42,326 was capitalised against this
loan in FY2020. Loans are unsecured and repayable in
cash. The loan of $2,523,759 was provided in March 2020
to fund capital expenditure commitments.
During the 2020 financial year Dan Baxter paid $nil
(2019: $2,778,907) for Bank Guarantees (included on the
Statement of Financial Position in Note 7) for new leases
with the amount recorded as a related party loan.
OTHER RELATED PARTIES - OTHER TRANSACTIONS
Other transactions during the year with Victory Realty
include a short-term transfer of funds and subsequent
repayment during the period. Funds ($20,000) were
received by the Consolidated entity on behalf of Victory
Group Holdings during the period. Funds ($2,041,864)
were received by the Consolidated entity from Victory
Petroleum to fund cash flow requirements during the year.
There were no other transactions with other related parties
during the year.
LEASES WITH RELATED PARTIES
The consolidated entity has four leases with the lessors
being related entities of Dan Baxter. The consolidated
entity considers that all leases are on arm’s length terms
which reflect customary provisions commonly found in
commercial leases of a similar nature.
Each lease has the following consistent material terms:
on termination the lessee is responsible for make good
of the premises; rent is payable in advance by monthly
instalments; and the lessee is responsible for maintaining
appropriate insurance coverage.
Other material terms of each lease have been disclosed
below:
Ground floor, 416-420 Collins Street, Melbourne - The
lessor is DB CLS-G1 Pty Ltd, a related entity of Dan
Baxter. This lease commenced on 1 July 2018 with an
initial term of ten years plus a five year option.
Level 1, 416-420 Collins Street, Melbourne - The lessor
is DB CLS-1 Pty Ltd, a related entity of Dan Baxter. This
lease commenced on 4 August 2014 with an initial term
of five years plus two, five year options. The first five
year option was exercised on 4 August 2019.
Level 2, 416-420 Collins Street, Melbourne - The
lessor is DB CLS-2 Pty Ltd, a related entity of Dan
Baxter. This lease commenced on 4 August 2014 with
an initial term of five years plus two, five year options.
The first five year option was exercised on 4 August
2019.
Level 9, 416-420 Collins Street, Melbourne - The lessor
is DB CLS-9 Pty Ltd, a related entity of Dan Baxter. This
lease commenced on 1 July 2018 with an initial term of
ten years plus a five year option.
50
Victory Offices Limited Annual Report 2020
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
23 REMUNERATION OF AUDITORS
During the financial year the following fees were paid or payable for services provided by the auditor of the consolidated
entity:
Audit services
Audit or review of the financial statements
Other services
Corporate finance fees related to IPO
Taxation advice
Total fees
24 CAPITAL COMMITMENTS
2020
$
2019
$
165,605
162,280
165,605
162,280
-
77,000
7,000
7,000
4,500
81,500
172,605
243,780
The consolidated entity had capital commitments of $1,400,625 relating to future fit-out expenditure at 30 June 2020 (2019:
$588,438). Refer also to note 16 for lease liability commitments.
25 CONTINGENT LIABILITIES
The consolidated entity has no contingent liabilities at 30 June 2020 or 30 June 2019.
Victory Offices Limited Annual Report 2020
51
Financial Statements
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
27 EVENTS AFTER THE REPORTING PERIOD
On 10 July 2020, the consolidated entity settled an
entitlement offer to raise $15,337,500 by issuing
40,900,000 ordinary shares at 37.5 cents per share. Net of
costs the entitlement offer raised $14,598,213.
Since the end of the financial year and up until the date of
this report the consolidated entity has negotiated further
rent relief in relation to its leases. As a result of these
negotiations the following will be impacted within the 2021
financial year pursuant to ‘AASB 2020-4 Covid-19-Related
Rent Concessions’: rent concession income of $413,202
will be recognised; and lease modifications resulting
in an increase to right-of-use assets of $1,666,258 and
corresponding increase to lease liabilities of $1,253,056
will be recognised.
In response to the ongoing COVID-19 pandemic, the
Victorian Government introduced stage 4 lockdowns
in August 2020 forcing the closure of the consolidated
entities’ Victorian locations. The impact of the COVID-19
pandemic remains ongoing and it is not practicable
to estimate and quantify the potential impact after the
reporting date as it is dependent on many factors outside
of the control of the consolidated entity including the
length of the Victorian restrictions.
No other matters or circumstance has arisen since 30 June
2020 that has significantly affected, or may significantly
affect the consolidated entity’s operations, the results
of those operations, or the consolidated entity’s state of
affairs in future financial years.
26 NEW OR AMENDED ACCOUNTING STANDARDS
AND INTERPRETATIONS ADOPTED
AASB 2018-7 AMENDMENTS TO AUSTRALIAN
ACCOUNTING STANDARDS - DEFINITION OF
MATERIAL
The amendments refine the definition of material in AASB
101 to clarify the definition of material and its application by
improving the wording and aligning the definition across
AASB standards and other publications. The amendment
also includes some supporting requirements in AASB 101
in the definition to give it more prominence and clarifies
the explanation accompanying the definition of material.
The amendment is effective for annual reporting periods
beginning on or after 1 January 2020. This amendment is
unlikely to impact the financial statements.
AASB 2019-1 AMENDMENTS TO AUSTRALIAN
ACCOUNTING STANDARDS - REFERENCES TO THE
CONCEPTUAL FRAMEWORK
The revised conceptual framework: reintroduces the
terms stewardship and prudence; introduces a new
asset definition that focuses on rights and a new liability
definition that is likely to be broader than the definition
it replaces but does not change the distinction between
a liability and an equity instrument; removes from the
asset and liability definitions references to the expected
flow of economic benefits - this lowers the hurdle for
identifying the existence of an asset or liability and puts
more emphasis on reflecting uncertainty in measurement;
discussed historical cost and current value measures
and provides some guidance on how the IASB would go
about selecting a measurement basis for a particular asset
or liability; states that the primary measure for financial
performance is profit or loss, and that only in exceptional
circumstances will the IASB use other comprehensive
income and only for income or expenses that arise from
a change in the current value of an asset or liability; and
discussed uncertainty, derecognition, unit of account, the
reporting entity and combined financial statements. The
amendments are effective for annual reporting periods
beginning on or after 1 January 2020. The consolidated
entity has not yet assessed the impact of the amendments.
AASB 2020-4 AMENDMENTS TO AUSTRALIAN
ACCOUNTING STANDARDS - COVID-19 RELATED
RENT CONCESSIONS
This standard amends AASB 16 to provide a practical
expedient that permits lessees not to assess whether
rent concessions that occur as a direct consequence of
the Covid-19 pandemic and meet specified conditions
are lease modifications and, instead, to account for those
rent concessions as if they were not lease modifications.
The amendment is effective for annual reporting periods
beginning on or after 1 June 2020. The consolidated
entity has adopted this amendment early within the 2020
financial year.
52
Victory Offices Limited Annual Report 2020
DIRECTORS’
DECLARATION
For the year ended 30 June 2020
In the directors’ opinion:
•
•
•
•
the attached financial statements and notes and the remuneration disclosures that are contained
within the Remuneration report within the Directors’ report comply with the Corporations Act 2001, the
Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements;
the attached financial statements and notes comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board as described in note 1 to the financial
statements;
the attached financial statements and notes give a true and fair view of the consolidated entity’s
financial position as at 30 June 2020 and of its performance for the financial year ended on that date;
and
there are reasonable grounds to believe that the company will be able to pay its debts as and when
they become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the
Corporations Act 2001.
Hon Steve Bracks AC
Chairman
30 September 2020
Dan Baxter
Managing Director/CEO
Victory Offices Limited Annual Report 2020
53
INDEPENDENT
AUDITOR’S REPORT
For the year ended 30 June 2020
RRSSMM AAuussttrraalliiaa PPaarrttnneerrss
Level 21, 55 Collins Street Melbourne VIC 3000
PO Box 248 Collins Street West VIC 8007
T +61 (0) 3 9286 8000
F +61 (0) 3 9286 8199
www.rsm.com.au
INDEPENDENT AUDITOR’S REPORT
To the Members of Victory Offices Limited
Opinion
We have audited the financial report of Victory Offices Limited (the Company) and its subsidiaries (the
Consolidated entity), which comprises the consolidated statement of financial position as at 30 June 2020, the
consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes
in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies, and the directors' declaration.
In our opinion the accompanying financial report of the Consolidated entity is in accordance with the Corporations
Act 2001, including:
I.
giving a true and fair view of the Consolidated entity's financial position as at 30 June 2020 and of its
financial performance for the year then ended; and
II.
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of
the Consolidated entity in accordance with the auditor independence
our report. We are independent of
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 report in Australia. We have also fulfilled our other ethical responsibilities in accordance
with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's
report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
TTHHEE PPOOWWEERR OOFF BBEEIINNGG UUNNDDEERRSSTTOOOODD
AUDIT | TAX | CONSULTING
54
RSM Australia Partners is a member of the RSM netw ork and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the
RSM network is an independent accounting and consulting firm w hich practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction.
RSM Australia Partners ABN 36 965 185 036
Liability limited by a scheme approved under Professional Standards Legislation
54
Victory Offices Limited Annual Report 2020
Independent Auditor's Report
Emphasis of Matter
We draw attention to Note 27 of the financial report, which describes the effect on the operations of the company
of the COVID-19 virus and the actions taken by governments and others to contain its spread. Our opinion is not
modified in respect of this matter.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the financial report of the current period. These matters were addressed in the context of our audit of the financial
report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter
How our audit addressed this matter
the revenue contracts include rent
Recognition of Revenue
Refer to Note 3 in the financial statements
The Consolidated entity generates income from
providing a range of services with the main revenue
driver being the licencing of serviced and coworking
offices with a typical licence term of 12 to 18 months.
Some of
free
periods.
There is a risk that inappropriate revenue recognition
will lead to a material misstatement of income and
related receivables. The risk is heightened due to the
timing of
invoicing and contracts having several
complexities attached to them.
Furthermore, there is a fraud risk as management
has an incentive or is under pressure to engage in
financial reporting to meet board and
fraudulent
shareholder expectations.
Our audit procedures in relation to the recognition of
revenue included:
• Reviewing the Group’s terms and conditions of
sales;
• Ensuring that revenue has been recognised over
the correct financial period;
substantive
• Performing
procedures on suite revenue;
analytical
review
• Assessing the recognition and measurement of
the requirements of AASB 15
revenue against
Revenue from Contracts with Customers; and
• Reviewing any large or unusual transactions near
if cut-off has been applied
year-end to test
appropriately.
55
Victory Offices Limited Annual Report 2020
55
Independent Auditor's Report
Key Audit Matters (continued)
Valuation of Lease Liability and Right-of-Use Asset
Refer to Note 16 in the financial statements
Victory Offices Limited currently hold 23 material
leases for each of their leased office spaces across
Australia. As a result,
the relevant accounting
standard AASB 16 Leases, has a material impact on
the Consolidated entity.
Whilst the Consolidated entity adopted this standard
early, applying it from the year ended 30 June 2017,
the complexity of the standard, and the extent of
judgements and estimates involved means that the
application of AASB 16, and the valuation of both the
lease liability and right-of-use asset are considered a
significant risk.
The International Accounting Standards Board
(Board) on 28 May 2020 issued an amendment to
IFRS 16 Leases to make it easier for lessees to
account for COVID-19 related rent concessions such
as rent holidays and temporary rent reductions.
Management have negotiated rent concessions for
the Group’s leased properties in response to COVID-
19. These rent concessions needed to be assessed
to determine if they are considered to be a lease
modification under AASB 16, as either a change in
the scope of the lease or change in the consideration
for a lease, and ensure the rent concessions are
appropriately treated in accordance with AASB 16 as
at 30 June 2020.
There is a complex process involved inensuring that
each lease amendment has been applied correctly by
management as at 30 June 2020.
The current economic environment, and the
restrictions imposed (particularly in Victoria) has had
a detrimental effect on Victory’s operations in the
latter part of the financial year. As a result, this has
triggered indicators of impairment in relation to value
of the right- of-use assets for each of the individual
leases.
Consequently, management have prepared value-in-
use calculations for each of the leases, representing
the smallest cash generating unit
the
values held in the statement of financial position as
at 30 June 2020.
to support
Our audit procedures in relation to the leases included:
• Reviewing
the
leasing model
by
management to calculate the right-of-use assets
and lease liabilities,
including reviewing the
accuracy of key inputs used in the model, and the
operation of the model;
used
any
incentives
• Reviewing any new lease agreements entered into
during the year and ensure that all clauses
and make-good
including
provisions have been correctly captured in the
leasing model;
• Reviewing all
leasing disclosures within the
financial statements to ensure the completeness
and accuracy and overall compliance with AASB
16; and
• Reviewing
rental
concessions Victory obtained in the financial
period to ensure they have been accounted for in
line with AASB 16.
financial
impact
the
of
Our audit procedures in relation to management's
assessment of impairment of the right-of use assets
included:
• Assessing the valuation methodology used;
• Challenging
of
key
assumptions, including the cash flow projections,
discount rates, and sensitivities used;
reasonableness
the
• Checking the mathematical accuracy of
the
cashflow model, and reconciling input data to
supporting evidence, such as approved budgets
and considering the reasonableness of
these
budgets; and
• Reviewing the accuracy of disclosures of critical
estimates and assumptions in the financial report
in relation to the valuation methodologies.
56
Victory Offices Limited Annual Report 2020
56
Independent Auditor's Report
Key Audit Matters (continued)
Recoverability of Accounts receivable as a Result of COVID-19
Refer to note 6 of the financial statements
Given the scale of the impact of COVID-19 and the
resulting financial crisis, there is a hightened risk that
suite revenue will decrease significantly and a risk
that customers may not be able to pay their debts to
Victory as and when they fall due.
Management have assessed the recoverability of the
receivable balances and recognised a provision for
expected credit losses as at 30 June 2020.
There is a risk that the expected credit loss provision
calculated by management is not in compliance with
AASB 9 Financial Instruments.
Our audit procedures in relation to trade receivables
included:
• Reviewing management’s expected credit
loss
to ensure compliance against AASB 9
model
including all relevant disclosures;
• Reviewing the accuracy of management’s
well
calculations
reasonableness
assumptions applied within the model; and
assessing
the
the
significant
as
of
the
as
of
• Reviewing a sample of accounts receivable
balances to test for both existence and valuation of
a debt by agreeing to subsequent receipts testing
and any other relevant documentation as proof of
debt.
Other Information
The directors are responsible for the other information. The other information comprises the information included
in the Consolidated entity's annual report for the year ended 30 June 2020 but does not include the financial report
and the auditor's report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial report or our knowledge
obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the Directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that gives a true and fair
view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal
control as the directors determine is necessary to enable the preparation of the financial report that gives a true
and fair view and is free from material misstatement, whether due to fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Consolidated entity
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the Consolidated entity or to cease
operations, or have no realistic alternative but to do so.
57
Victory Offices Limited Annual Report 2020
57
Independent Auditor's Report
Auditor's Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from
material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the Auditing and
Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2.pdf.
This description forms part of our auditor's report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30 June 2020.
In our opinion, the Remuneration Report of Victory Offices Limited, for the year ended 30 June 2020, complies
with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.
RSM AUSTRALIA PARTNERS
R B MIANO
Partner
Dated: 30 September 2020
Melbourne, Victoria
58
58
Victory Offices Limited Annual Report 2020
SHAREHOLDER
INFORMATION
The shareholder information set out below was applicable as at 18 September 2020.
DISTRIBUTION OF EQUITABLE SECURITIES
Analysis of number of equitable security holders by size of holding:
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a
marketable parcel
NUMBER OF
HOLDERS OF
ORDINARY SHARES
59
146
72
229
45
551
101
EQUITY SECURITY HOLDERS
TWENTY LARGEST QUOTED EQUITY SECURITY HOLDERS
The names of the twenty largest security holders of quoted equity securities are listed below:
Victory Group Holdings Pty Ltd
National Nominees Limited
CS Third Nominees Pty Ltd
Sandhurst Trustees Limited
BNP Paribas Noms Pty Ltd
HSBC Custodian Nominees (Australian) Pty Ltd
NDPM Pty Ltd
BNP Paribas Nominees Pty Ltd
Mr Gregory Wayne Brown
R & R Brown Pty Ltd
Seno Investments Pty Ltd
BNP Paribas Nominees Pty Ltd HUB24 Custodial Serv Ltd
Mr Tyler John McMillan
Citicorp Nominees Pty Ltd
JP Morgan Nominees Australia Pty Ltd
Woodtop Pty Ltd
Jacoby Management Services Pty Ltd
Beebee Holdings Pty Ltd
Morgans Investments (NSW) Pty Ltd
Riverlee Family Pty Ltd
ORDINARY SHARES
NUMBER
HELD
% OF TOTAL
SHARES
ISSUED
39,233,334
47.96
7,802,108
7,188,214
6,400,000
2,509,581
1,432,080
730,000
690,471
674,275
617,777
600,000
334,540
278,000
275,877
266,767
250,000
240,000
235,000
200,000
200,000
9.54
8.79
7.82
3.07
1.75
0.89
0.84
0.82
0.76
0.73
0.41
0.34
0.34
0.33
0.31
0.29
0.29
0.24
0.24
70,158,024
85.77
Victory Offices Limited Annual Report 2020
59
Shareholder Information
SUBSTANTIAL HOLDERS
Substantial shareholders in the company registered as at 18 September 2020 are set out below:
Victory Group Holdings Pty Ltd
Perennial Value Management
Regal Funds Management Pty Ltd
Collins St Asset Management
VOTING RIGHTS
The voting rights attached to ordinary shares are set out below:
ORDINARY SHARES
ORDINARY SHARES
NUMBER
HELD
39,233,334
11,033,802
8,000,000
6,400,000
% OF TOTAL
SHARES
ISSUED
47.96
13.49
9.78
7.80
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each
share shall have one vote.
There are no other classes of equity securities.
RESTRICTED SECURITIES – ESCROW ARRANGEMENTS
Victory Group Holdings Pty Ltd and Dan Baxter as a controller of Victory Group Holdings Pty Ltd (Escrowed Persons) agreed to
enter into a voluntary restriction deed in respect of the Shares they own or control for a maximum period of two years following
completion of the IPO. This deed prevents them from dealing with their escrowed Shares for the applicable escrow periods.
19.4 million Shares (75% of the holding) will be escrowed until lodgement with the ASX the Appendix 4E for FY2021. 6.5 million
shares (25% of the holding) were released from escrow upon lodgement with the ASX of the Appendix 4E for FY2020.
CLASS
Ordinary shares
EXPIRY
DATES
NUMBER OF
SHARES
As described
above.
19,425,000
60
Victory Offices Limited Annual Report 2020
CORPORATE
DIRECTORY
DIRECTORS
Hon Steve Bracks AC
Dan Baxter
Alan Jones
Ted Chwasta
Shane Tanner
(Chairman, Non-Executive Director)
(Chief Executive Officer, Managing Director)
(Non-Executive Director)
(Non-Executive Director)
(Non-Executive Director)
COMPANY SECRETARY
Geoff Hollis
REGISTERED OFFICE
Level 2, Victory Tower
416-420 Collins Street
Melbourne VIC 3000
ACN: 616 150 022
LEGAL ADVISORS
Hall & Wilcox
Level 11
525 Collins Street
Melbourne VIC 3000
AUDITOR
RSM Australia Partners
Level 21
55 Collins Street
Melbourne VIC 3000
SHARE REGISTRY
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Website: www.linkmarketservices.com.au
ACN 616 150 022
www.victoryoffices.com.au