ANNUAL
FINANCIAL REPORT
30 June 2013
SHAREHOLDERS’ INFORMATION
VILLA WORLD LIMITED
Villa World Limited ABN 38 117 546 326
Level 1 Oracle West, 19 Elizabeth Avenue, Broadbeach QLD 4218
Mailing address:
PO Box 1899, Broadbeach QLD 4218
Telephone:
+61 7 5588 8888
Facsimile:
+61 7 5588 8800
Website:
Email:
www.villaworld.com.au
info@villaworld.com.au
Shareholder information and enquiries
All enquiries and correspondence regarding shareholdings should be directed to Villa World Group’s share registry provider:
Computershare Investor Services Pty Limited
Mailing address:
GPO Box 2975EE, Melbourne VIC 3000
Telephone:
1300 580 505 or +61 3 9415 4000 (outside Australia)
Fax:
Website:
Email:
+61 3 9473 2500 (within & outside Australia)
www.computershare.com.au
web.queries@computershare.com.au
Villa World Group Info line
Inside Australia:
1300 552 434
Outside Australia:
+61 7 5588 8851
Villa World Group Annual Report 2013
CONTENTS
CHAIRMAN AND MANAGING DIRECTOR’S REVIEW ................................................................................................................................. 2
DIRECTOR’S REPORT ............................................................................................................................................................................... 4
CORPORATE GOVERNANCE STATEMENT ............................................................................................................................................... 13
CONSOLIDATED INCOME STATEMENT................................................................................................................................................... 18
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME .................................................................................................................. 19
CONSOLIDATED BALANCE SHEET .......................................................................................................................................................... 20
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ........................................................................................................................... 21
CONSOLIDATED CASH FLOW STATEMENT ............................................................................................................................................. 22
CONTENTS OF THE NOTES TO THE FINANCIAL STATEMENTS .................................................................................................................. 23
DIRECTOR’S DECLARATION ................................................................................................................................................................... 54
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF VILLA WORLD LIMITED ......................................................................... 55
ASX ADDITIONAL INFORMATION .......................................................................................................................................................... 57
Villa World Group Annual Report 2013
P a g e | 1
Chairman and Managing Director’s Review
Executive Chairman and Managing Director’s Review
Dividends
Villa World is an ASX listed Australian property development
group. Established in 1986, Villa World creates contemporary
family homes, and also develops and markets
in
communities along Australia’s east coast.
land
The Villa World Difference
This year has seen the successful implementation of five key
strategies which drive our business direction and underpin The
Villa World Difference – a solid financial platform, broad diverse
sales platforms, project pipeline growth, portfolio diversification,
and strong governance and leadership.
Solid financial platform for unlocking shareholder value
The strength of the Villa World Group was demonstrated by our
solid underlying financial performance in FY13.
The statutory financial result for the year was a net loss after tax
of $13.5 million, compared to a net profit after tax of $8.2 million
for the prior year. The results included net impairments of $25.6
million, principally from the Eynesbury Township joint venture in
Victoria ($15.4 million) and Augustus, Hervey Bay ($8.9 million).
Unless there are significant changes in market conditions and
associated development strategies, no further impairments are
anticipated. As reported in the 1H13 interim financial statements,
a review of the strategies associated with a number of projects
resulted in impairments being required. Full details of these
impairments are outlined in the Directors’ Report and FY13
Financial Statements.
Underlying operating profit1 (before tax and impairments) was
$11.2 million, a 17.0% increase from $9.6 million for the previous
corresponding period and the third successive year of growth.
There was a 10.4% increase in accounting settlements to 646
achieved through the carry forward of 251 contracts from FY12
combined with a strong FY13 sales performance.
Our new sales strategy has contributed to a significant growth in
revenue to $169.4 million, a 15.6% increase compared with the
prior year, as well as providing a strong start to the FY14 year
with $80.8 million of carried forward sales (compared to $57.7
million at 30 June 2012). We currently have 12 active projects,
with two projects recently purchased, due to commence in 1H14.
During the year, an extension was negotiated with ANZ to the
primary banking facility of $110 million, due to expire on 1
September 2014. This facility has been extended for a further
two year period and now expires on 1 September 2016.
The financial results for 2013 were achieved while maintaining a
disciplined and conservative approach to debt management, with
a year‐end gearing ratio of 24.7%, compared with 27.6% for the
previous year. Our strong financial position means Villa World is
implementation of our
well placed to continue with the
comprehensive acquisition strategy.
Share buy‐back
During the year, we continued with our on‐market share buy‐
back program, buying back 1.7 million shares at a cost of $1.5
million. Since the start of the share buy‐back in July 2011, 11.8
million shares have been bought back, reducing issued capital by
13.9%.
1 Underlying operating profit before tax (unaudited) reflects the statutory
profit as adjusted in order to present a figure which represents the
Director’s assessment of the results for the ongoing business activities of
the Villa World Group.
No interim dividend was paid and the Board has determined not
to pay a final dividend for 2013.
Broad diverse sales platforms
We have diversified our sales strategy by increasing Villa World’s
presence in the domestic investment market and the first home
buyer market, as well as taking advantage of the strength of
foreign investor interest in Australia. We continued to review our
pricing and product design to meet the specific needs of
individual market segments. While still in the early stages of
implementation, this strategy has proven to be successful. Total
contracts exchanged (net sales) of 610 were recorded in 2013
compared to 496 in the prior year, a 23% increase. Queensland
remained the key market with 525 sales, a 36% increase;
followed by Victoria with 78 sales and New South Wales
achieving 7 sales with the recent release of First Light (Tweed
Coast).
South East Queensland
The Park Vista (North Brisbane) and Mount Cotton (Bayside
Brisbane) developments have achieved consistent, positive sales
results throughout the year. These developments contributed
32.2% of total revenue.
New developments at Bay Road (Burpengary) and Brookside
(Ormeau) have contributed positively to sales this year. Also
contributing to the overall strong sales performance was a
resurgence in buyer interest in The Domain and Augustus
developments (Hervey Bay) in 2H13 due to the new Queensland
and Federal Government home buying incentives implemented at
the beginning of this calendar year.
Sales at Little Creek development in Gladstone were subdued in
FY13, as the Gladstone market reacted to a slowdown in the
broader resource sector. Although Little Creek contributed
strongly to revenue in the year, this was mostly due to carried
forward sales from FY12.
Victoria
While sales in Victoria were strengthened in 2H13 by the
Cascades on Clyde development (South East Melbourne), the
western region of Melbourne where our Eynesbury Township
project is located remained a challenging market. In FY14 we will
grow the business in Victoria, by commencing building operations
and offering our own house and land packages in addition to our
land product.
Growing our project pipeline
Since 1 July 2012, two acquisitions have been made at Thornlands
(Bayside Brisbane, Qld) and Casuarina (Tweed Coast, NSW), and
one at Carindale (East Brisbane, Qld), is unconditional with
completion imminent, adding 215 lots to the Villa World land
bank.
We will continue to grow our pipeline of inventory through our
program of strategic acquisitions, with a number of transactions
currently under consideration. Further expected acquisitions will
ensure our portfolio remains well diversified and that our product
offering will appeal to the downturn‐resilient owner‐occupier
families and first home buyers as well as appealing to both the
domestic and international investor market.
Our strong financial position will enable us to continue to acquire
projects in a targeted and balanced manner. Regions of interest
include south east Queensland, Townsville, Melbourne and
Sydney. Short to medium‐term projects, as demonstrated by
recent acquisitions, as well as long‐term projects funded through
terms and alternative acquisition
joint ventures, vendor
Villa World Group Annual Report 2013
P a g e | 2
Chairman and Managing Director’s Review (continued)
arrangements will be considered, with a view to ensuring capital
efficiency and maximising returns to shareholders.
Villa World has minimal project‐based risk with all developments
having achieved the necessary planning use approvals and no
foreseeable issues restricting our ability to produce the land, and
house and land product in each of our developments.
We are pleased that the sale of the Eynesbury project for $60m is
now unconditional, as recently announced to the ASX. Villa World
holds a 50% interest in the Eynesbury joint venture. The sale will
allow us to re‐deploy resources towards short and medium‐term
projects consistent with our acquisition strategy.
Outlook
There are indications that confidence is gradually returning to the
residential property sector. There is currently improved buyer
interest on a weekly basis at most of our projects. Record low
mortgage rates are currently available to home buyers, together
with government housing grants. These conditions combined
with unemployment levels remaining low and annual wages
rising, support improved affordability for home buyers.
Improved confidence in the residential property sector and the
success of the new sales and marketing strategy have contributed
to the significantly higher number of sales in the second half of
FY13 (average of 59 per month) compared to the first half
(average of 42 per month). We have carried forward $80.8 million
sales (217 lots) into the 2014 financial year. The positive sales
momentum evidenced in the second half of FY13 is continuing,
with 115 sales ($44.2 million) recorded over the first eight weeks
of FY14.
Assuming the positive momentum in general economic and
company specific conditions continues, Villa World is targeting an
operating profit before tax in the range of $12 million to $14
million for FY14, and it is the current intention of the Board to
recommence dividends, with an interim dividend expected to be
paid in April 2014.
Talented team supported by strong governance and leadership
Villa World’s successes are due to the hard work of our executive
team and staff. I would like to take this opportunity to sincerely
thank them for their dedication and their role in Villa World’s
achievements in 2013.
Finally, I wish to thank shareholders for their continued support
during the year.
I look forward to working with the Villa World team to achieve
the goals we have set in our business strategies and demonstrate
the Villa World Difference to customers and investors.
Craig Treasure
Executive Chairman and Managing Director
Villa World Group Annual Report 2013
P a g e | 3
Directors’ Report
Directors’ report
The Directors of Villa World Limited present their report together
with the financial report for the year ended 30 June 2013.
Villa World Group (“the Group”) comprises Villa World Limited
and its subsidiaries and the Group’s interest in associates and
jointly controlled entities.
Directors
The Directors of Villa World Limited during the year, and up to
the date of this report were:
Craig Treasure BASc (Surveying) (QUT), FDIA
Managing Director since 5 October 2012
Chairman from 1 August 2012
Non‐Executive Director February 2012 to July 2012
Craig Treasure has over 28 years’ experience in property
development, specifically in land, housing and apartment
development along the eastern seaboard of Australia. Craig has
previously held a number of executive roles and directorships
within the property sector.
Board Committee Membership
– Member of the Audit and Risk Committee from February –
September 2012.
Alexander (Sandy) Beard BCom (UNSW), FCA, MAICD
Non‐Executive Director (Chairman November 2011 –July 2012)
Alexander Beard is the Managing Director of CVC Limited and an
experienced financier of growth companies. CVC has been an
active participant in the property sector, undertaking investments
ranging from real estate development to passive financing
positions. Alexander has gained considerable industry experience
through his investee board roles.
Other directorships (current and recent)
Alexander is currently an executive director of CVC Limited (since
2000), director of CVC Property Managers Limited as Responsible
Entity for CVC Property Fund (since 2005), non‐executive Chair of
Cellnet Limited (since 2006), and a director of Mnemon Group
Limited. In the past three years Alexander has also served as a
director of Amadeus Energy Limited.
Board Committee membership
– Member of the Audit and Risk Committee
– Appointed non‐executive director in April 2011 and Chairman
from November 2011 – July 2012.
Troy Harry BBus
Independent Director since February 2009
Troy Harry has been involved in stockbroking and investment
management for 21 years. This included experience at several
different stockbroking firms over 10 years before establishing his
own business, Trojan Investment Management, in 2003. Troy is
experienced in financial analysis and structuring and in advising
and managing investment companies.
Other directorships (current and recent)
Troy currently holds no other public company directorships. In
the past 3 years, Troy has served as Managing Director of Trojan
Equity Limited (resigned 18 March 2013) and as a Director of
DMX Corporation Limited (resigned 27 February 2013).
Board Committee memberships
– Chairman of the Audit & Risk Committee
Company Secretary
Paulene Henderson B Bus Acc MBA CA
Chief Financial Officer / Company Secretary
Paulene has 25 years’ experience within the accounting
profession. This experience has been gained through working
within the profession, most recently with Ernst and Young, as
well as senior financial positions within RCI Pacific Pty Ltd and
Wyndham Vacation Resorts South Pacific Ltd as RE for the
Worldmark South Pacific Club, both entities being subsidiaries of
Wyndham Worldwide (a Fortune 500 company listed on the New
York Stock Exchange).
Appointed Company Secretary 19 November 2012.
John Potter was the Managing Director from the beginning of the
financial year until his resignation on 5 October 2012.
Independent Director from the
Richard Anderson was an
beginning of the financial year until his resignation on 25 October
2012.
Directors’ interests
D i r e c t o r s '
I nt e r e s t s
C raig Treasure
A lexand er B eard 1
Tro y Harry
2 0 13
70 0 ,0 0 0
-
1,10 0 ,0 0 0
1
Alexander Beard is the Managing Director of CVC Limited which owns
17,593,604 (2012: 15,162,358 shares)
Directors’ meetings
The number of meetings of Villa World Group’s Board of
Directors and of each Board Committee held during the year
ended 30 June 2013 including the number of meetings attended
by each Director are:
B o a r d
M e e t i n g s
H
A
14
14
14
14
14
14
A u d i t a n d
R i s k
M a n a g e m e n t
H
2
3
3
A
2
3
3
C r a i g T r e a s u r e
A l e x a n d e r B e a r d
T r o y H a r r y
Principal activities
During the year, the principal activities of the Group continued to
be the development and sale of residential land, and the
development, construction and sale of house and land packages.
Review of results of operations
Key highlights for the financial year ended 30 June 2013
Statutory Net Loss after Tax from operations of $13.5 million
(30 June 2012: $8.2 million Net Profit after Tax).
Full year result included impairments of $25.6 million.
Increase
in underlying operating net profit before tax
(unaudited)2 of 17.0% to $11.2 million (30 June 2012:
$9.6million).
Increase in revenue from the sale of property of 15.6% to
$169.4 million (30 June 2012: $146.5 million).
2 Underlying operating profit before tax (unaudited) reflects the statutory
profit as adjusted in order to present a figure which represents the
Directors’ assessment of the result for the ongoing business activities of
the Villa World Group.
Villa World Group Annual Report 2013
P a g e | 4
Directors’ Report (continued)
Accounting settlements of 646 lots3 (including our share of
joint ventures) (30 June 2012: 585 lots).
Earnings / (Loss) per share from continuing operations
decreased to (‐18.2) cps (30 June 2012: 10.4 cps).
Group net sales of 610 lots, inclusive of proportional share
of joint ventures (30 June 2012: 496 lots).
A total of 217 contracts on hand at 30 June 2013 to carry
forward for a gross value of $80.8 million inclusive of
proportional share of joint ventures.
Gearing ratio4 of 24.7% (30 June 2012: 27.6%).
$110 million debt facility extended a further two years to
September 2016, drawn to $71 million plus bank
guarantees of $9.7 million.
NTA per share of $1.85 (30 June 2012: $2.01).
Operational Review
Revenue for the year ended 30 June 2013 grew by 15.6% to
$169.4 million. This was largely due to a 10.4% increase in
accounting settlements to 646 lots (from 585 in the prior year).
These settlements were achieved through the carry forward of
251 contracts from FY12 and a strong sales performance in the
year ended 30 June 2013.
There were 11 Queensland projects and 2 Victorian projects
contributing to profit in the year to 30 June 2013. Queensland
benefited for the first time from Brookside, Ormeau and Bay
Road, Burpengary, as well as the new revenue line of contract
building.
Queensland remained the Group’s key market, with sales
increasing by 35% to 525. Little Creek (Gladstone) and Mount
Cotton (Bayside, Brisbane) performed strongly throughout the
year, whilst the contribution from Park Vista (North Brisbane)
rose significantly in the second half of the year. Cascades on
Clyde in Victoria was the third largest contributor to revenue in
the 2013 financial year, predominantly from revenue in 1H13 as
a result of FY12 sales carried forward.
The Group recorded 610 sales in the year ended 30 June 2013, up
23.0% on the prior period. 12 Queensland projects, 2 Victorian
projects, and a newly acquired project in New South Wales
contributed to this strength in sales.
In Queensland, Park Vista and Mount Cotton sold consistently
throughout the year. Sales in Queensland also benefitted from
contract building and new projects.
Cascades on Clyde recorded strengthening sales in 2H13 due the
success of sales initiatives targeting the international investor
market.
3 Lots are included on the basis of 100% for Villa World Limited projects
and 50% of Joint Venture projects.
4 Gearing Ratio: (Interest bearing liabilities – Cash) / (Total assets – Cash).
Sales were stronger in the second half of FY13 (average of 59 per
month) compared to the first half (average of 42 per month),
resulting from newly released projects at Bay Road, Burpengary
and Brookside, Ormeau.
These projects were successfully
marketed under a zero deposit campaign directed at the first
home buyer market. Augustus in Hervey Bay also performed well
in the second half due to the Hervey Bay Housing Affordability
Incentives Scheme.
The Group will commence the 2014 financial year with 217 lots
under contract worth $80.8 million.
The sales and marketing expense for the year was $12.7 million, a
51.0% increase compared to the prior year. This is due to new
marketing campaigns for recent acquisitions at First Light
(Casuarina) and East Ridge (Thornlands), as well as the costs
associated with pursuing our new investor sales and first home
buyer initiatives. The balance of operating expenses from
ordinary activities (after adjusting for impairments) was relatively
static on prior year, at $14.1 million or a 0.5% increase.
Loan and interest charges have reduced year on year by 27.5% as
a result of a declining cost of debt from 8.5% to 7.7%, the
maintenance of a lower net debt level during the current year,
the write off of borrowing cost associated with the prior financing
facility in the FY12 year, the changes in policy to capitalised line
fee as well as an increase in the unwind of capitalised interest.
As at 30 June 2013, total assets of the Group were $241 million
(30 June 2012: $261 million). The net tangible assets (NTA) of the
Group at 30 June 2013 were $1.85 per share based on 73,538,863
shares compared to $2.01 based on 75,223,332 shares in the
prior year.
Financial commentary for the financial year ended 30 June 2013
The financial result for the full year ended 30 June 2013 was a
statutory net loss after tax of $13.5 million (‐18.2) cps, compared
to a net profit after tax of $8.2 million (10.4 cps) for the full year
ended 30 June 2012. The result for the full year included
impairments of $25.6 million (revised down from $29.2 million at
31 December 2012 as detailed below).
Weak current and forecast trading conditions at Augustus,
Hervey Bay prompted a change in the long term strategy of the
project, and resulted in a write down in inventory of $8.9 million.
The carrying values of three other projects were also impaired in
the first half. No further impairments have been made since 31
December 2012, however, the successful contract renegotiations
in relation to the Burpengary project has enabled the previous
onerous contract provision to written back by $1.4 million.
The Group’s investment in the Eynesbury Township Joint Venture
in Victoria has also been written down by $15.4 million, a
reduction of $2.3 million from the $17.7 million announced at 31
December 2012. The impairment is based on the net present
value of the sale proceeds expected to be received by the Group
from the sale of this asset.
in
impairments whilst disappointing
The $25.6 million
is
necessary to provide an accurate reflection of the value of the
Group’s assets. All projects are reviewed on a semi‐annual basis
to assess recoverability. Inventory is held at the lower of cost and
net realisable value.
in project
feasibilities are supported by regular external valuations. Unless
there is a significant change in market conditions and associated
development strategies, no further impairments are anticipated.
Conservative assumptions
It is important to note that the underlying operating profit
(before tax and impairments) was $11.2 million, representing a
17.0% increase on the prior corresponding period of $9.6 million.
This is detailed in the table below:
Villa World Group Annual Report 2013
P a g e | 5
Directors’ Report (continued)
Table 1.1 – Reconciliation of statutory net profit to underlying operating profit before tax (unaudited)
The underlying operating profit is a financial measure which is not prescribed by Australian Accounting Standards and represents the profit
under Australian Accounting Standards adjusted for certain items. Underlying profit reflects the statutory profit as adjusted in order to
present a figure which represents the Directors’ assessment of the result for the ongoing business activities of the Group. The calculation
of underlying profit before tax is unaudited.
(L o s s ) / P ro fit fro m c o n tin u in g o p e ra tio n s a fte r in c o m e ta x
P ro fit fro m d is c o n tin u e d o p e ra tio n s a fte r in c o m e ta x
Statu to ry n e t (lo ss) / p ro fit afte r tax fro m c o n tin u in g an d d isc o n tin u e d o p e ratio n s
(L o ss) / P ro fit fo r th e h alf ye ar in c lu d e s th e fo llo w in g ite m s th at are u n u su al b e c au se o f th e ir
n atu re , size o r in c id e n c e :
N e t (ga in ) / lo s s o n s a le o f in ve s tm e n t p ro p e rtie s
N e t (ga in ) / lo s s in fa ir va lu e o f in ve s tm e n t p ro p e rtie s
Im p a irm e n t o f d e ve lo p m e n t la n d
Im p a irm e n t o f in ve s tm e n t in e q u ity a c c o u n te d in ve s tm e n ts
Im p a irm e n t o f d e ve lo p e d la n d in jo in t ve n tu re *
H e d ge in e ffe c tive n e s s o n in te re s t ra te s w a p s
R e b a t e s re c e ive d
Su b to tal
In c o m e ta x (e x p e n s e )/b e n e fit
Su b to tal
Un d e rlyin g o p e ratin g p ro fit b e fo re tax (u n au d ite d )
C o n so lid ate d
3 0 ‐J u n ‐1 3
3 0 ‐J u n ‐1 2
$ '0 0 0
$ '0 0 0
(13,494)
‐
(13,494)
‐
‐
10,149
627
14,822
‐
(4 5 8 )
25,140
403
24,737
1 1 ,2 4 3
7 ,9 1 9
2 8 8
8 ,2 0 7
4 3
6 1 0
7 0 0
‐
‐
1 5 7
‐
1 ,5 1 0
1 0 6
1 ,4 0 4
9 ,6 1 1
* The impairment of developed land in joint venture ($15.4 million) is recognised in the statutory profit as part of the share of loss of associated and joint
ventures accounted for using the equity method ($17.4 million). Given this impairment at the joint venture level is an unusual transaction due to nature, size
and incidence; it has been included in this calculation of underlying operating profit before tax (unaudited).
Capital Management
Debt facility
The Group’s $110 million banking facility with the ANZ has been
extended for two years to 1 September 2016. At 30 June, the
cash on hand and headroom5 in this facility was $44.7 million (30
June 2012 $27.7 million). The gearing ratio was 24.7% compared
to 27.6% in the prior year. This will enable the Group to continue
to execute
its targeted yet balanced acquisition strategy
throughout the 2014 financial year.
The impairments would have given rise to a technical breach in
one financial covenant as at 31 December 2012, however the
Group was granted a waiver from ANZ effective 31 December
2012. No restriction has been imposed on the facility by ANZ
during the financial year. All remaining covenants under the
facility were complied with over the course of the year.
The average cost of debt for the year ending 30 June 2013 was
7.7%. A $70 million swap at 3.5%6 fixed remains in place through
to June 2015.
Share buy‐back
The Board first announced a share buy‐back on 28 June 2011.
Since then, 11.8 million shares have been purchased,
representing a 13.9% reduction in issued capital. Of these, 1.7
million shares have been acquired during the 2013 financial year
at an average price of 82 cps. The strategy has significantly
enhanced the Group’s earnings and NTA per share.
Dividends
No interim dividend was paid and the Board has determined not
to pay a final dividend for 2013.
Acquisitions
Since 30 June 2012, two acquisitions have been made at
Thornlands (Bayside Brisbane, Qld) and Casuarina (Tweed Coast,
NSW), and one at Carindale (East Brisbane, Qld), is unconditional
with completion imminent, adding 215 lots to the Villa World
land bank.
A balanced approach to acquisitions is being implemented. The
Group will target both short to medium‐term projects as
demonstrated by its recent acquisitions as well as long‐term
projects that will provide further depth to the Group’s land bank.
The target regions for the acquisition strategy are Queensland
(south‐east coast and Townsville), South West Melbourne and
North West Sydney.
In order to fund the Group’s planned growth, alternative
acquisition and funding models are under consideration including
joint venture arrangements and vendor terms.
Events subsequent to balance date
Options
The grant of options over ordinary shares to the Executive
Chairman was approved by shareholders at a general meeting on
22 July 2013. The Board also approved the grant of option to key
management personnel after the end of the financial year (Refer
Note 30 – events subsequent to balance date).
Eynesbury
The Group is pleased that the sale of the Eynesbury project for
$60m is now unconditional, as recently announced to the ASX.
The Group holds a 50% interest in the Eynesbury joint venture.
The sale will allow the Group to re‐deploy resources toward short
and medium‐term projects consistent with
its acquisition
strategy.
5 Unused capacity in the facility plus cash on hand.
6 Swap interest rate is before margin and other costs.
Villa World Group Annual Report 2013
P a g e | 6
Directors’ Report (continued)
Future development and results
The financial position of the Group at 30 June 2013 provide a
solid financial platform which will enable the Group to create
shareholder value through the implementation of our operational
initiatives, and business plan.
It is envisaged that sales will continue to grow due to indications
of improving confidence in the residential property market,
coupled with our new diversified sales strategy which will
increase our presence in the first home buyer market, and
domestic and international investor market. In FY14 the Group
will grow the business in Victoria, by commencing building
operations and offering our own house and land packages in
addition to our land product.
There is currently improved buyer interest on a weekly basis at
most of the Group’s projects. Record low mortgage rates are
currently available to home buyers, together with government
incentives. These conditions combined with unemployment levels
improved
low and annual wages rising, support
remaining
affordability for home buyers.
The key risk for the forthcoming financial year is sales risk, a risk
which is largely impacted by consumer confidence. Economic
conditions including interest rates, unemployment and wage
increases directly impact consumer confidence. The Group’s
well‐diversified project and product portfolio provides broadened
sales platforms that assist in minimising sales risk.
The Group will continue to efficiently deliver its product, and all
our developments have minimal project‐based risk.
The debt facility has been extended until 1 September 2016
therefore mitigating financing risk. It is anticipated that all
covenants associated with the facility will be complied with.
Guidance
Assuming the positive momentum in general economic and
company specific conditions continues, the Group is targeting an
operating profit before tax in the range of $12 million to $14
million and
intention of the Board to
recommence dividends, with an interim dividend expected to be
paid in April 2014.
is the current
it
Remuneration report
The directors are pleased to present the Remuneration Report for
2013 which sets out the remuneration information for the
Group’s Executive Chairman, non‐executive Directors and other
key management personnel.
The key management personnel comprise the Directors of Villa
World Group and the senior executives being:
–
–
–
–
–
–
–
Craig Treasure
Alexander Beard
Troy Harry
John Potter
Richard Anderson
Scott Payten
Paulene Henderson
Executive Chairman and Managing Director 1
Non‐executive Director
Non‐executive Director
Executive Director2
Non‐executive Director3
Chief Operating Officer
Chief Financial Officer
1 Craig Treasure became an Executive Chairman from 1 August 2012 and
Managing Director on 5 October 2012.
2 John Potter resigned on the 5 October 2012.
3 Richard Anderson resigned on the 25 October 2012.
Remuneration policy and strategy
Villa World Group’s Remuneration Policy
The Group’s remuneration framework is structured to:
– Attract and motivate high quality talent to deliver superior
long‐term returns for shareholders.
– Align shareholders’ and employees’ interests and create
value for shareholders by ensuring a reasonable proportion
of senior employees’ remuneration is based on growth in
total shareholder returns (“TSR”).
– Be fair and consistent.
– Manage total rewards with emphasis on the “at risk”
element as a motivator for senior executives.
Executive directors do not participate in discussions relating to
their own remuneration.
Non‐executive directors
Fees and payments to non‐executive directors reflect the
demands which are made on, and the responsibilities of the
directors. Non‐executive directors receive a fixed fee for their
services. Fees are reviewed annually by the Board having regard
to amounts paid to non‐executive directors with comparative
roles in the external market. Fees are determined within an
aggregate directors’
is periodically
recommended for approval by shareholders.
limit which
fee pool
Executive director and key management personnel
Remuneration for the Executive Chairman and key management
personnel includes a combination of fixed remuneration and
performance related incentives that enable the Group to attract
and retain a suitable calibre of personnel. Performance based
rewards are linked to the achievement of strategic objectives and
the creation of wealth for shareholders. The remuneration
package for the Executive Chairman and key management
personnel is determined by the Board and assessed against the
broader market.
Voting and comments made at Villa World Group’s 2012 Annual
General Meeting
The Group received more than 97.3% of “yes” votes on its
remuneration report for the 2012 financial year. The Group did
not receive any specific feedback at the AGM or throughout the
year on its remuneration practices.
Remuneration strategy for the executive director and key
management personnel
Remuneration mix
Remuneration packages within the Group’s remuneration
framework comprise:
–
–
–
Total Fixed Remuneration (“TFR”) which is a market related
base salary including superannuation contributions. TFR is
determined by reference to the TFRs offered by the average
to top quartile of comparator industry employers and is
subject to annual benchmarking. TFR is reviewed annually
and upon change of role or responsibility.
Short Term Incentives (“STI”). STI are set as a percentage of
TFR and are assessed annually against achievement of Key
Performance Indicators (“KPI”). STI earned are paid as soon
as practicable after the end of the year of assessment.
Long Term Incentives (“LTI”). LTI are provided in the form of
options which vest upon the achievement of KPI linked
completion of service period and to growth in the share
price.
The chart below shows the mix between TFR, STI and LTI for the
executive directors and all key management personnel for the
financial years ending 30 June 2013 and 2012.
Total re m u ne ration pac kage com pon e nts
TFR
2 0 1 3
2 0 1 2
STI – at risk
2 0 1 3
2 0 1 2
LTI
2 0 1 3
2 0 1 2
Exe c utive D ire c tors
Joh n P otte r
Cra ig Tre a s ure
Oth e r Ke y m an age m e nt pe rson ne l of the G rou p
Sco tt P a yte n ^
P a u le n e H e n de rs on ^
1 0 0 %
1 0 0 %
7 7 %
8 3 %
7 6 %
‐
7 5 %
8 7 %
‐
‐
‐
‐
‐
‐
2 4 %
‐
2 3 %
1 7 %
2 5 %
1 3 %
0 %
0 %
0 %
0 %
^Excludes LTI, as the cash settled share base payment lapsed during FY13.
Villa World Group Annual Report 2013
P a g e | 7
Service Agreements
Non‐executive directors
On appointment to the Board, all non‐executive directors enter
into a service agreement with the Group in the form of a letter of
appointment. The letter summarises the Board policies and
terms, including compensation relevant to the office of director.
Consequences of performance on shareholder wealth
In considering the Group’s performance and benefits for
shareholder wealth, the Board have regard to the following
indices in respect of the current financial year and the previous
three financial years.
Consequences of performance on shareholder wealth
FY11
$m
110.8
FY10
$m
272.2
Performance KPI
FY12
$m
146.5
FY13
$m
169.4
Revenue
Underlying operating profit
before tax (unaudited)
Debt
Gearing Ratio
NTA per security (cents)
21.1
9.1
9.6
11.2
93.1
24.3%
174.3
62.4
23.5%
178.1
74.2
27.6%
201.0
71.0
24.7%
185.0
The overall level of key management personnel compensation
takes into account the performance of the Group over a number
of years.
Directors’ Report (continued)
Short Term Incentives
The Board want remuneration being used effectively to attract,
incentivise and appropriately reward key management personnel
consistent with an
The
remuneration incentives adopted relate to both quantitative
financial measures as well as qualitative operational measures
and include, but are not limited to, revenue, EBITDA, sales,
safety, quality and general compliance requirements.
in shareholder wealth.
increase
Under the current reward strategy a target for STI is calculated as
a percentage of TFR. Actual STI awards can range from 0% of TFR
up to 100% of TFR for outstanding performance and any awards
of STI over 100% of TFR must be approved by the Board.
Approval of STI awards for the executive directors and key
management personnel is by the Board.
Long Term Incentives
LTI exist by way of options or share based bonus payments
documented in service agreements or under the Group’s Option
Plan, the details of which are disclosed under the share‐based
payments disclosure section – Note 32 and Note 30‐ Events
subsequent to balance date.
Termination benefits
There are no termination benefits applicable to the current
executive director and other key management personnel.
Service Agreements
Executive director and key management personnel
Remuneration and other terms of employment for the executive
director and key management personnel are also formalised in
service agreements. The key provisions of the agreements for
the year ended 30 June 2013 relating to remuneration are set out
in the table below:
Base fee
inclusive of
superannuation
Term
of
agreement
Notice
P eriod
Review
P eriod
Anticipated
annual cash
bonus as
Executive Director
Craig Treasure
John Potter
Key M anagement P ersonnel
500,000
Rolling
6 months
Annual
600,000
5 October 2012
-
-
Scott Payten
Paulene Henderson
400,000
250,000
Rolling
Rolling
6 months
Annual
3 months
Annual
40%
-
25%
25%
Remuneration strategy for non‐executive directors
Villa World Group’s Policy
The Board make the decisions concerning the remuneration and
Non‐
remuneration structure for non‐executive directors.
executive director remuneration comprises two main elements:
1 Main Board fees; and
2
Superannuation contributions at the statutory
Superannuation Guarantee Levy rate.
There is no difference in workload between non‐executive
directors and there are no committee fees paid over and above
the main Board fees.
Non‐executive remuneration is set by reference to comparable
entities listed on the Australian Securities Exchange.
Review arrangements
Shareholders have approved maximum aggregate Board and
committee fees payable to non‐executive directors of $600,000.
The total of non‐executive directors’ fees paid to non‐executive
directors for the year ended 30 June 2013 was $159,140 (30 June
2012: $198,716).
No directors’ fees are paid to the executive chairman whilst
engaged in the role of Executive Chairman.
Villa World Group Annual Report 2013
P a g e | 8
Directors’ Report (continued)
Remuneration report (continued)
Details of remuneration
Details of the remuneration of the directors, the key management personnel of the Group (as defined in AASB 124 “Related Party
Disclosures”) are detailed below.
Details of remuneration earned or paid during the year ended 30 June 2013
Short term employee
benefits
Post employment
benefits
Long term
benefits
Share based
payments
2013
Non‐executive directors
Alexander Beard 1
Troy Harry
Richard Anderson 2
Subtotal non‐executive directors
Executive directors
Craig Treasure 3
John Potter 4
Subtotal executive directors
Other key management personnel (Group)
Scott Payten
Paulene Henderson
Cash salary
and fees
$
68,670
63,000
20,000
151,670
353,295
157,104
510,399
383,530
221,652
Cash bonus
Superannuation
$
‐
‐
‐
‐
‐
‐
‐
100,000
45,000
$
‐
5,670
1,800
7,470
16,305
5,127
21,432
16,470
16,470
Long service
leave 5
$
Share based
bonus 6
$
Total
$
‐
‐
‐
‐
1,040
‐
1,040
52,870
3,535
‐
‐
‐
‐
‐
‐
‐
(117,311)
(23,462)
(140,773)
(140,773)
68,670
68,670
21,800
159,140
370,640
162,231
532,871
‐
435,559
263,195
698,754
1,390,765
605,182
Subtotal other key management personnel
Total
1 Alexander Beard is the Managing Director of CVC Limited and his director’s fees are paid to CVC Managers Pty Ltd.
2 Richard Anderson resigned on the 25 October 2012.
3 Craig Treasure was appointed Executive Chairman on 1 August 2012, prior to that date he was a non‐executive director.
4 John Potter resigned on the 5 October 2012.
5 Long Service leave represents the total liability to the Group.
6 The cash settled share‐based bonus for Scott Payten and Paulene Henderson lapsed without payment on 1 November 2012.
1,267,251
145,000
57,445
61,842
145,000
56,405
32,940
Details of remuneration earned or paid during the year ended 30 June 2012
Short term employee
benefits
Post employment
benefits
Long term
benefits
Share based
payments
Cash salary
and fees
$
Cash bonus
Superannuation
$
$
Long service
leave 3
$
Share based
bonus
$
Total
$
2012
Non‐executive directors
Cra ig Treasure 1
Alexa nder Bea rd 2
Troy Ha rry
Richa rd Anderson
Subtotal non‐executive directors
Executive directors
John Potter
Subtotal executive directors
Other key management personnel (Group)
Scott Payten
Paulene Henderson
Subtotal other key ma nagement personnel
Total
22,308
54,500
50,000
60,000
186,808
580,589
580,589
‐
‐
‐
‐
‐
‐
‐
373,238
204,753
577,991
1,345,388
138,112
32,775
170,887
170,887
2,008
‐
4,500
5,400
11,908
15,775
15,775
15,775
15,775
31,550
59,234
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
2,750
2,750
192,192
192,192
34,611
1,808
36,419
39,169
‐
‐
‐
24,316
54,500
54,500
65,400
198,716
791,306
791,306
561,736
255,112
816,848
192,192
1,806,870
1 Craig Treasure was appointed Executive Chairman on 1 August 2012, prior to that date he was non‐executive director.
2 Alexander Beard is the Managing Director of CVC Limited and his director’s fees are paid to CVC Managers Pty Ltd.
3 Long Service leave represents the total liability to the Group.
Villa World Group Annual Report 2013
P a g e | 9
Directors’ Report (continued)
Remuneration report (continued)
Share based payments
Employee share scheme
John Potter resigned as Managing Director on 5 October 2012 at
which time he held 2,800,000 options. These options have been
cancelled as a result of them not being exercised pursuant to his
employment agreement.
On 21 December 2012 a Group Executive resigned at which time
he held 400,000 options. These options have been cancelled as a
result of them not being exercised pursuant to the consultancy
agreement with the Group.
There are no other un‐exercised options as at 30 June 2013.
The grant of options over ordinary shares in Villa World Limited
to the Executive Chairman and Managing Director was approved
by shareholders at a general meeting on 22 July 2013. In addition,
key management personnel have also been issued with options
pursuant to board approval on 22 July 2013. Full details of these
options are disclosed in the subsequent events note. Refer Note
30‐Subsequent Events.
Employee cash settled share‐based bonus payment
The employment contracts of Scott Payten and Paulene
Henderson provided for a guaranteed, cash settled share based
bonus (no Board discretion). The value of the bonus is equal to
the volume weighted average price paid for each Villa World
Limited share for the 10 trading days prior to 1 November 2012,
less $1.00 multiplied by 1,000,000 (approved 16 December 2009)
for Scott Payten, and 200,000 (approved 15 November 2010) for
Paulene Henderson. The cash settled share‐based bonus for Scott
Payten and Paulene Henderson lapsed without payment on 1
November 2012. These bonuses were valued at $140,773. Refer
to Note 32‐Share Based Payments.
Expenses arising from share‐based payments
Total expenses arising from share‐based payment transactions
recognised during the year and prior year, as part of the
employee benefit expense, were as follows:
Options issued to Directors
Fair value of cash settled share based payments for key management personnel
30‐Jun‐13
30‐Jun‐12
$
$
‐
219,648
(140,773)
(140,773)
‐
219,648
Environmental regulations
The Group is subject to environmental regulation in respect of its
land development and construction activities as set out below:
(i) Land development approvals
Approvals are required for land development from various
government agencies and councils. The relevant authorities are
provided with regular updates, and to the best of the Directors’
knowledge, all activities have been undertaken in compliance
with the requirements of the approvals.
(ii) House construction/building approvals
Building approvals are obtained for the construction of houses
from the relevant councils. The construction of houses is subject
to strict council requirements regarding environmental impacts
from house construction including noise, silt, dust, run‐off and
drainage.
To the best of the Directors’ knowledge, all
construction activities have been undertaken in compliance with
the requirements of building approvals and
local council
requirements.
Indemnification and insurance of officers and auditors
Indemnification
During the year, the Group paid premiums for contracts insuring
directors and officers of the Group and related parties against
certain liabilities (subject to certain exclusions and to the extent
permitted by law). The directors have not included details of the
nature of the liabilities covered or the amount of the premium
paid in respect of the directors’ and officers’ insurance contracts
as (in accordance with normal practice) such disclosure is
prohibited under the terms of the contracts.
Insurance premiums
Villa World Limited’s constitution provides that it indemnifies, on
a full indemnity basis and to the full extent permitted by law,
officers of the company for all losses and liabilities incurred by
the person in their position as an officer of the company or a
related body corporate.
Villa World Limited has entered into Deeds of Indemnity in favour
of each of the directors referred to in this report who held office
during the year and the company secretary. Additionally,
separate deeds of indemnity cover other officers of controlled
entities who have been requested to act as directors on the
boards of other companies in which Villa World Limited holds an
interest. The indemnities in these deeds operate to the full
extent permitted by law and are not subject to a monetary limit.
Villa World Limited is not aware of any liability having arisen and
no claims have been made during or since the financial year
under the Deeds of Indemnity.
Villa World Limited has not otherwise, during or since the end of
the financial year, except to the extent permitted by law,
indemnified or agreed to indemnity an officer or auditor of the
company or of any related body corporate against a liability
incurred as such an officer or auditor.
Non‐audit services
During the period PricewaterhouseCoopers, the Group’s auditor,
have performed certain other services in addition to their
statutory duties.
The Board has considered the non‐audit services provided during
the period by the auditor and in accordance with written advice
provided by resolution of the Audit and Risk Committee, is
satisfied that the provision of those non‐audit services during the
year by the auditor is comparable with, and did not compromise,
the auditor independence requirements of the Corporations Act
2001 for the following reasons:
–
–
all non‐audit services have been reviewed by the Audit and
Risk Committee to ensure they do not impact the integrity
and objectivity of the auditor; and
the non‐audit services provided do not undermine the
general principles relating to auditor independence as set out
in APES110 Code of Ethics for Professional Accountants, as
they did not involve reviewing or auditing the auditor’s own
work, acting in a management or decision making capacity
for the Group, acting as an advocate for the Group or jointly
sharing risks and rewards.
Details of the amounts paid to the auditors of the Group,
for audit and non‐audit services
PricewaterhouseCoopers
provided during the year are set out in note 7 of the financial
statements.
Lead Auditor’s Independence Declaration
A copy of the auditor’s independence declaration as required
under section 307C of the Corporations Act is set out on page 12.
Villa World Group Annual Report 2013
P a g e | 10
Directors’ Report (continued)
Rounding of amounts
The Villa World Group is of a kind referred to in Class Order
98/100, issued by the Australian Securities and Investments
Commission, relating to the “rounding off” of amounts in the
financial report. Amounts in the financial report have been
rounded off in accordance with that Class Order to the nearest
thousand dollars, or in certain cases, the nearest dollar.
This report is made in accordance with a resolution of directors.
Craig Treasure
Executive Chairman & Managing Director
Gold Coast
26 August 2013
Villa World Group Annual Report 2013
P a g e | 11
Corporate Governance Statement
1.4 Performance and Evaluation of Senior Executives
The Board believes that genuine commitment to good corporate
governance is essential to the performance and sustainability of
the Company’s business.
The Board has given due consideration to the ASX Corporate
Governance Council’s ‘Corporate Governance Principles and
Recommendations’
a
framework for good corporate governance. Copies of the
Company’s key governance policies are available in the Corporate
Governance section of its website at www.villaworld.com.au (the
Company’s website).
(Recommendations), which
offer
1
Laying solid foundations for management and oversight
1.1 Role of the Board
The Board is committed to creating shareholder value within a
framework that protects the rights and interests of shareholders
and ensures that the Company is being properly managed.
The Board’s role and responsibilities,
its relationship with
management, and the key responsibilities of the Board are set
out in the Board Charter, along with delegations to senior
executives and certain committees. There is a departure from the
disclosure requirement under Recommendation 1.1 in that the
matters reserved to the Board are disclosed as “responsibilities”
in the Board Charter. These matters include approving strategy
and direction, approving any significant acquisitions or disposals,
monitoring financial controls, governance and overall risk
management, and appointing the Managing Director and
Company Secretary. The non‐executive directors are also
responsible for reviewing the performance of the Managing
Director.
There is a clear division between the responsibility of the Board
and management. The Board has delegated responsibility for day‐
to‐day management of the Company’s business to the Managing
Director and senior executives, who are required to work within
authority limits and delegations.
The Board Charter is available on the Company’s website.
The Company has established processes of objective setting and
performance review of all staff, which is conducted annually.
Senior executives, who have a discretionary element to their total
remuneration package, have defined key performance indicators
(KPI’s) which are agreed at the commencement of each financial
year. The performance of the Managing Director is reviewed
annually by the non‐executive directors. This review did not
occur during the reporting period because the Managing Director
has been in the role for less than 12 months.
The Managing Director reviews the performance of each senior
executive and reports to the Board on the outcome of these
reviews. Detailed information about executive remuneration is
set out on pages 8 ‐ 11 of the Directors’ Report. A performance
evaluation of all senior executives was undertaken during the
year, save for the Managing Director as described above.
2
Structuring the board to add value
2.1 Composition of the Board
The names of the directors who held office during the year are
detailed in the Directors’ Report, together with details of each
director’s skills, experience and expertise and whether the
director is considered to be independent.
The Company’s objective is that the Board should be of a size and
composition that is conducive to effective decision marking,
reflects an appropriate breadth of expertise to oversee the
business, and the roles of its members best utilise that expertise.
The Board reviews its composition annually to ensure that it:
- has an appropriate mix of skills to provide the necessary
breadth and depth of knowledge and experience to meet the
Board’s
the
appointment of a new director/(s) on an as needs basis,
however there is presently no deficiency in the Board’s
breadth of skill and experience. and
the board will consider
responsibilities;
-
is able to effectively deal with current and emerging issues of
the business and can effectively review and challenge the
performance of management and exercise
independent
judgment.
1.2 Board Committees
2.2 Director Independence
The Board has established the following specialist committees:
- Audit and Risk Committee;
- Debt Compliance Committee;
- Workplace Health and Safety Committee;
The composition of these committees is outlined at sections 4
and 8 below. The charter for the Audit & Risk Committee is
available in the Corporate Governance section of the Company’s
website.
Director’s attendance at Board and Audit and Risk Committee
meetings during the past year is set out at page 4 of the
Directors’ Report.
1.3 Board Performance
The Board reviews its performance on an annual basis. The
review process is agreed by the Board and conducted using a
questionnaire, with a written report summarising the results and
recommendations presented to the Board and discussed at a
Board meeting. The review of the Board for 2013 was completed
in accordance with this process.
The Board does not review the performance of individual
directors or committees on an annual basis. Rather, the Board,
mindful of its duties, considers it appropriate to monitor their
performance on an ongoing basis, and conduct a formal review as
necessary. In these respects, there is a departure from the
requirements under Recommendation 2.5.
The Board recognises that independent directors are important in
assuring shareholders that the Board is able to act in the best
interests of the Company, and independently of management.
The Board defines an independent director as a non‐executive
director who is free of any business or other relationship that
could interfere with, or could reasonably be perceived to
interfere with, the exercise of their unfettered and independent
judgment and ability to act in the best interests of security
holders.
The independence of directors is reviewed annually. In assessing
the independent status of a non‐executive director, the Board
considers the ‘relationships affecting independent status’ set out
in the Recommendations and other facts, information and
circumstances that the Board considers relevant. For example,
each non‐executive director is asked to confirm whether they
have any interests or relationships that may impact either on
their ability to act in the best interests of the Company, or
independently of management. The test of whether a business
or other relationship is material7 is assessed from the perspective
of both the Company and the director. The criteria used to assess
7 While the Board believes it is inappropriate to determine materiality solely on the basis of arbitrary
dollar, profit or turnover percentage tests, when assessing materiality, thresholds suggested in
accounting standards are considered and interests equal to more than 5% of revenue, equity or profit are
potentially material, with 10% of consolidated gross revenue in a 12 month period being material. In
certain circumstances, the Board considers that interests of a lesser value might also be relevant.
Villa World Group Annual Report 2013
P a g e | 13
Corporate Governance Statement (continued)
independence, including guidance for determining materiality,
are reviewed annually and are set out in the Board Charter.
There were a number of changes to the roles undertaken by
Board members during the financial period. As at the date of this
statement the Board is comprised of one independent director
(Troy Harry), one non‐executive director (Alexander Beard), and
one executive director (Craig Treasure). Alexander Beard is not
considered independent as he is a nominee of CVC Limited.
The Company notes the following Recommendations:
that the majority of the Board should be independent
directors (2.1);
that the Chair of a listed company be an independent
director (2.2); and
that the roles of Chair and CEO should not be performed by
the same person (2.3).
Craig Treasure (previously an independent director) assumed the
role of an executive director and Chairman on 1 August 2012.
Since that date, the Company has not followed recommendations
2.1 and 2.2. Mr Treasure was appointed Managing Director on 5
October 2012. Since that date, the Company has not followed
recommendation 2.3. Taking into account the high level of
experience that Mr Treasure brings to the role, the size of the
Company, the non‐executive directors believe Mr Treasure is the
fulfil the role of Chairman
most appropriate person to
notwithstanding that he is not an independent director and is the
Managing Director; and considers the present composition of the
Board appropriate to the Company’s needs.
To assist directors to fully meet their responsibilities to bring an
independent view on matters before them, each director has the
right of access to all relevant company information and senior
management and, subject to prior consultation with the
Chairman, may seek independent professional advice at the
Company’s expense.
3
Promotion of Ethical and responsible decision making
3.1 Code of conduct
The Directors’ Code of Conduct summarises the responsibilities of
the Company’s
the Company’s directors
commitment to high standards of ethical conduct. A copy of the
Code of Conduct is available on the Company’s website.
in maintaining
The Directors’ Code of Conduct is one part of a broad framework
of other corporate policies, which apply to directors, employees
and those working on the behalf of the Company. These policies
set out the parameters for ethical behaviour and business
practices expected of those engaging in activity on the Company’s
behalf. They detail standards and expectations relating to:
stakeholders and maintaining high standards of service and a
commitment to fair value;
individual, such as privacy, use of privileged or
the
confidential information, and conflict resolution;
conflicts of interest and prevention of employees taking
advantage of property, information or position for personal
gain; and
reporting of unethical behaviour.
3.2 Trading in company shares
Directors and employees are allowed to acquire shares in the
Company if they comply with the provisions of the Securities
Dealing Policy.
The policy summarises the insider trading provisions contained in
the Corporations Act to be considered at any time a director or
employee is considering trading in Company shares. In addition,
trading windows,
the policy provides
for designated
requirements for pre‐clearance at certain times, exclusions on
other types of dealings (including short‐term trading), and an
obligation on directors and employees to disclose all trades in the
Company’s shares.
The Securities Dealing Policy is available on the Company’s
website.
3.3 Diversity
The Board believes that a diverse and inclusive workforce at all
levels of the organisation makes good business sense and is
committed to fostering a corporate culture that embraces
diversity and where people are encouraged to succeed to the
best of their ability. Diversity includes, but is not limited to,
gender, age, disability, ethnicity, cultural background or any other
characteristic that makes individuals different from each other.
The Company’s Diversity Policy, which is available on its website,
requires the establishment of measurable objectives for diversity
across the Company’s workforce and Board awareness of
progress against these objectives. In developing these objectives,
the initial emphasis has been on gender diversity and seeking to
in executive and
strengthen the representation of women
managerial positions.
The Company’s measurable objectives are summarised below.
Strategic
Goal
Diverse
talent pool
Leadership
development
Measurable Objectives
Increase the number of
females hired in those
areas within where current
female representation is
< 35% by actively seeking
female applicants for the
role and at least one
female on the recruitment
short list where possible.
Equal representation of
males and females
receiving opportunities for
development training
Attraction
and
retention
Target no less than 25%
female representation at
senior management level
Annual
gender audit
Undertake an annual
gender audit to identify
any career or development
hurdles/blocks, and
consider changes required
to overcome hurdles
Outcome as at
30 June 2013
Procedures have
been implemented
and will continue to
be monitored
Procedures have
been implemented
and will continue to
be monitored
Procedures have
been implemented
and will continue to
be monitored
Procedures have
been implemented
and will continue to
be monitored
Female participation in the Company’s workforce
There are currently no women on the Company’s Board. The
Board Charter was amended on 31 May 2012 to include diversity
as one of the considerations in assessing Board composition.
Current gender balance across the Company’s workforce is as
follows:
Senior executives
Senior managers
All employees
Female
33%
14%
45%
Male
67%
86%
55%
Villa World Group Annual Report 2013
P a g e | 14
Corporate Governance Statement (continued)
4
SAFEGUARDING INTEGRITY AND FINANCIAL REPORTING
4.1 Audit and Risk Committee
The primary function of the Audit and Risk Committee is to assist
the Board in establishing and maintaining a framework of
internal controls and ethical
financial risk management,
standards for the management of the Company and to monitor
the quality of financial information released to the market.
The composition of the Company’s Audit and Risk Committee
changed during the year however as the date of this statement
is presently comprised of 2 non‐executive
the committee
directors, one of whom is the independent director and chair of
the committee, Troy Harry, the other is Alexander Beard. In
addition, Mr Treasure (Executive Director) was a member of the
committee until 5 October 2013. In these respects, there is a
departure from Recommendation 4.2, because the non‐executive
directors consider that the committee is of sufficient size and
expertise, having regard to the nature, scale and complexity of
the Company’s business.
Details of the committee’s meetings and attendance of the
members is set out on page 4 of the Directors’ Report. While this
departs from recommendation 4.4, the Board considers
it
appropriate to include this information in one section of the
report to avoid duplication.
The responsibilities of the Audit and Risk Committee include
assisting the Board
its corporate governance
responsibilities related to:
in fulfilling
the appropriateness and effectiveness of the Group’s
accounting policies and the integrity of the Group’s financial
reports and related communications to stakeholders;
the management of internal, external, and compliance audits
including monitoring the implementation of improvements
to identified control deficiencies;
business risk management and internal control systems; and
monitoring corporate conduct and business ethics, including
independence, related party transactions, and
laws and
auditor
performance and ongoing compliance with
regulations.
The Audit and Risk Committee Charter outlines the committee’s
role and responsibilities and is available on the Company’s
website.
4.2
External Auditor
The Audit and Risk Committee meets with the external auditor at
least once each year to review the adequacy of external audit
arrangements. The external auditors have a direct
line of
communication at any time to either the Chairman of the Audit
and Risk Committee or the Chairman of the Board.
If requested by the external auditor, the non‐executive directors
in the absence of
shall meet with the external auditor
management
issues associated with
management controls, the preparation and audit of the financial
reports and the performance of management in relation to such
issues.
to discuss potential
5
Timely and Balanced Disclosure
The Company has a Continuous Disclosure Policy designed to
ensure shareholders and the market are provided with high
quality and accurate information in a timely and widely available
manner, and there are appropriate accountabilities within the
Company for compliance.
It is the Company’s policy that any price‐sensitive material for
public announcement will be reviewed internally before issue,
expressed in a clear and objective manner, and lodged with the
ASX in accordance with the relevant requirements.
The Continuous Disclosure Policy is available on the Company’s
website.
6
Respecting the Rights of Shareholders
The Company
informed of its significant developments and activities.
is committed to keeping shareholders fully
Information is communicated to security holders through the
annual report, half‐yearly report, announcements made to the
ASX, the annual general meeting (‘AGM’) and the Company’s
website which has a dedicated investor relations section.
Shareholders are encouraged to attend the AGM and to use this
opportunity to ask questions and vote on important matters
affecting the Company, including the election of directors, the
receipt of annual financial statements and the advisory vote on
the Remuneration report.
The external auditor also attends the AGM to be available to
answer shareholder questions about the conduct of the audit, the
preparation and content of the auditor’s report, the Company’s
accounting policies and auditor independence.
The Company encourages shareholders to access the annual
report online to assist with our commitment to the environment,
as well as being more cost efficient. A printed copy of the annual
report is only sent to those shareholders who have elected to
receive it. Otherwise shareholders will be notified when the
annual report is available to be accessed via the Company’s
website or sent via email.
The Company works closely with its share registrar to monitor
and review the potential to increase the use of electronic means
of communicating with its shareholders.
7
Recognising and managing Risk
The Audit and Risk Committee assists the Board by monitoring
and reviewing the corporate processes for
identifying and
managing relevant financial risks associated with the Company’s
activities. The Audit and Risk Committee Charter is available on
the Company’s website.
The Company’s overall internal control framework incorporates
policies and procedures that can be described under the
following headings:
7.1
Financial reporting
Comprehensive budgeting process is undertaken with an annual
budget approved by the Board, monthly reporting against this
budget together with an ongoing review of forecasts and
reporting on key metrics and variables.
7.2
Financial reporting ‐ Managing Director and CFO
certifications
The Board has received declarations
from the
Managing Director and Chief Financial Officer
in
connection with the financial statements for the
Group for the year ended 30 June 2013. It has also
received assurances from the Managing Director and
Chief Financial Officer that their declarations (provided
in accordance with section 295A of the Corporations
Act) as to the integrity of the financial statements is
founded on a sound system of risk management and
is operating
internal control and
effectively
in relation to
financial reporting risks.
that system
in all material respects
Senior Management has also reported to the Board on
the effectiveness of the management of material
business risks for the year ended 30 June 2013.
Villa World Group Annual Report 2013
P a g e | 15
Corporate Governance Statement (continued)
7.3
Investment
monitoring
appraisal
and
financial performance
Board defined guidelines for capital expenditure, with
detailed appraisal and review procedures, defined
delegated authority limits, including Board approval
requirements for non‐operational expenditure.
Monthly project review with key executives, including
the Chief Financial Officer and Chief Operations
Officer, to monitor performance and key forecast
assumptions and risks at an individual project level,
and report changes in key assumptions of a material
nature as part of monthly financial reporting to the
Board.
7.4
Financing Compliance
A Debt Compliance Committee comprising the General
Counsel, Chief Financial Officer, Chief Operations
the
Officer and other key managers oversees
compliance
the
to
facility. The committee meets
Company’s debt
quarterly, with risk areas reported to the Board.
reporting
systems
relating
7.5 Corporate responsibility, environment and workplace
safety
A Workplace, Health & Safety Committee, comprising
representatives
from a number of operational
divisions within the Company, monitors compliance
with workplace health and safety regulations across its
operations. The committee meets quarterly, with risk
areas reported to the Board.
The Company’s Environmental Management Policy is
overseen by the Chief Operations Officer, with regular
reporting to the Board in relation to compliance with
environmental regulations.
8
Remunerating Fairly and Responsibly
The Company notes Recommendations 1.2, 1.3 and 1.4, which
contain suggestions regarding the establishment, composition
and role of nomination and remuneration committees. While
departing from these recommendations, the Board considers it
appropriate that these responsibilities (presently set out in the
Nomination and Remuneration Committee charter on the
Company’s website) be assumed by the Board as part of its
broader responsibilities, taking into account the size of the Board
and the senior executive team.
Non‐executive directors are not granted equity, nor are they
entitled to receive bonus payments. Non‐executive directors are
not entitled to receive termination payments on their retirement
from office other than payments accruing from superannuation
contributions comprising part of their remuneration. There are
also no retirement benefit plans available to non‐executive
directors.
For the reporting period, the remuneration of the Managing
Director and other Senior Executives
fixed
remuneration, short term incentives (cash and deferred equity)
and long term equity based incentives. The terms of any options
issued to senior executives do not permit the holder to enter into
involving unvested share entitlements to the
transactions
Company’s shares.
comprised
Full details of directors and executive remuneration are set out in
the Remuneration Report, which commences on page 7.
Villa World Group Annual Report 2013
P a g e | 16
Contents of the financial statements
Financial Statements
Page
Consolidated income statement ........................................................................................................................................................... 18
Consolidated statement of comprehensive income ............................................................................................................................... 19
Consolidated balance sheet .................................................................................................................................................................. 20
Consolidated statement of changes in equity ........................................................................................................................................ 21
Consolidated cash flow statement ....................................................................................................................................................... .22
Notes to the consolidated financial statements .................................................................................................................................... 23
Director’s Declaration ........................................................................................................................................................................... 54
Independent auditor’s report to the shareholders of Villa World Limited .............................................................................................. 55
Villa World Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of
business is:
Villa World Limited
Level 1 Oracle West
19 Elizabeth Avenue
Broadbeach QLD 4218
A description of the nature of the consolidated entity’s operations and its principal activities is included in the review of operations and
activities in the Director’s Report on pages 4 to 11, which are not part of these financial statements.
These financial statements are for the consolidated entity consisting of Villa World Limited and its controlled entities. The financial
statements are presented in Australian currency.
The financial statements were authorised for issue by the Directors on 26 August 2013. The directors have the power to amend and ‐
reissue the financial statements.
Villa World Group Annual Report 2013
P a g e | 17
Consolidated income statement
For the year ended 30 June 2013
Re ve nue from la nd de ve lopm e nt, re s ide ntia l building a nd cons truction contra cts
Cos t of la nd de ve lopm e nt, re s ide ntia l building a nd cons truction contra cts
Gross profit
Othe r re ve nue
Sha re of ne t (los s e s )/profits of a s s ocia te s a nd joint ve nture s a ccounte d for us ing
the e quity m e thod
Im pa irm e nt of inve s tm e nt in e quity a ccounte d inve s tm e nts
Expe ns e s , e xcluding fina nce cos ts
Fina nce cos ts
(Loss)/Profit before income tax from continuing ope rations
Incom e ta x be ne fit / (e xpe ns e )
(Loss)/Profit from continuing operations after income tax
Profit from dis continue d ope ra tions a fte r incom e ta x
Ne t (loss)/Profit for the ye ar
(Loss)/Profit is attributable to:
Equity holders of the company
Earnings pe r share :
Ba s ic e a rnings pe r s ha re from continuing ope ra tions a ttributa ble to e quity holde rs
of the com pa ny
Ba s ic e a rnings pe r s ha re a ttributa ble to e quity holde rs of the com pa ny
Dilute d e a rnings pe r s ha re from continuing ope ra tions a ttributa ble to e quity
holde rs of the com pa ny
Dilute d e a rnings pe r s ha re a ttributa ble to e quity holde rs of the com pa ny
Notes
4
5
4
11
5
6
8
34
3
3
3
3
The above consolidated income statement should be read in conjunction with the accompanying notes.
Consolidated
3 0‐Jun‐1 3
30‐Jun‐12
$'00 0
16 9,39 6
$'000
1 46 ,50 0
(12 2,4 01 )
(10 9,54 8)
4 6,99 5
2,07 7
36 ,95 2
3 ,57 1
(1 7,4 35 )
1 ,43 8
(6 27 )
(3 6,9 20 )
(7,9 87 )
(1 3,8 97 )
40 3
(1 3,4 94 )
‐
(1 3,4 94 )
‐
(2 3,12 7)
(1 1,02 1)
7 ,81 3
10 6
7 ,91 9
28 8
8 ,20 7
(1 3,4 94 )
8 ,20 7
Half‐year
Cents
Half‐ye ar
Ce nts
(1 8.2 )
(1 8.2 )
(1 8.2 )
(1 8.2 )
10 .1
10 .4
10 .1
10 .4
Villa World Group Annual Report 2013
P a g e | 18
Consolidated statement of comprehensive income
For the year ended 30 June 2013
Ne t (loss)/profit for the ye ar
Othe r compre he nsive income
Item s that m ay be reclassified to profit or loss
Cha nge s in the fa ir va lue of ca s h flow he dge s
Incom e ta x re la ting to the s e ite m s
Othe r compre he nsive (loss)/income for the ye ar, ne t of tax
Total compre he nsive (loss)/incom e for the ye ar
Total compre he nsive (loss)/incom e for the ye ar is attributable to:
Equity holde rs of the com pa ny
Equity holde rs of the com pany
Total compre he nsive (loss)/incom e for the ye ar attributable to e quity holde rs of the
company arise s from:
Continuing ope ra tions
Dis countinue d ope ra tions
Notes
21
8 (c), 21
Consolidate d
3 0‐Jun‐1 3
3 0‐Jun‐1 2
$'00 0
(1 3,4 94 )
$ '00 0
8 ,20 7
(1 95 )
5 9
(1 36 )
(1 3,6 30 )
(1 3,6 30 )
(1 3,6 30 )
(70 6)
21 2
(49 4)
7 ,71 3
7 ,71 3
7 ,71 3
(1 3,6 30 )
‐
(1 3,6 30 )
7 ,42 5
28 8
7 ,71 3
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
Villa World Group Annual Report 2013
P a g e | 19
Consolidated balance sheet
As at 30 June 2013
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non current assets
Receivables
Non current inventory
Property, plant and equipment
Investment accounted for using the equity method
Deferred tax assets
Other non current assets
Total non current assets
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non current liabilities
Payables
Borrowings
Provisions
Total non current liabilities
Total liabilities
Net assets
EQUITY
Contributed equity
(Accumulated losses)
Reserves
Consolidated
30‐Jun‐13
30‐Jun‐12
Notes
$'000
$'000
9
10
12
13
10
12
14
11
16
13
17
19
17
18
19
20
21
21
15,350 2,820
27,375 20,269
85,907 84,311
1,921 1,423
130,553
108,823
`
‐
23,121
83,365 106,545
961 1,016
13,701 9,703
11,723 11,258
340 404
110,090 152,047
240,643 260,870
24,986 27,018
6,945 5,169
31,931 32,187
1,069 3,104
71,040 74,166
471 184
72,580 77,454
104,511 109,641
136,132 151,229
382,126
383,592
(245,556)
(232,062)
(438)
(301)
136,132 151,229
Total equity attributable to shareholders
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
Villa World Group Annual Report 2013
P a g e | 20
Consolidated statement of changes in equity
For the year ended 30 June 2013
Contributed
Equity
Hedging
Reserve
Other
Reserves
Retained
Losses
Total
Ope ni ng ba l a nce 1 Jul y 2011
Profi t for th e ful l ‐ye a r
Othe r co mpre he ns i ve (l os s )/i ncome
Total comprehensive (loss)/income for the full‐year
Notes
21
$ '000
392,036
‐
‐
‐
Tra ns a cti ons wi th owne rs i n the i r ca p a ci ty a s owne rs :
$ '000
$ '000
(27) ‐
‐
(494)
(494)
‐
‐
‐ 8,207
‐
$ '000
$ '000
(240,269) 151,740
8,207
(494)
7,713
8,207
Sha re buy ba ck tra ns a cti ons
Sha re ba s e d pa yme nts e xpe ns e
Di s pos a l of tre a s ury s ha re s
Balance as at 30 June 2012
(Los s ) for the ful l ‐ye a r
Othe r co mpre he ns i ve i ncome
20
21
20
(8,520) ‐
‐ ‐
76 ‐
‐
(521)
(8,444)
383,592
‐
‐
220 ‐
‐
‐
(232,062)
‐
220
220
‐
‐
‐
(13,494)
21
‐
(136)
(136)
‐
‐
‐
(13,494)
(8,520)
220
76
(8,224)
151,229
(13,494)
(136)
(13,630)
Total comprehensive (loss)/income for the full‐year
‐
Tra ns a cti ons wi th owne rs i n the i r ca p a ci ty a s owne rs :
Sha re buy ba ck tra ns a cti ons
20
Balance as at 30 June 2013
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
(1,467)
(1,467)
382,125
‐
‐
(657)
‐
‐
220
‐
‐
(245,556)
(1,467)
(1,467)
136,132
Villa World Group Annual Report 2013
P a g e | 21
Consolidated cash flow statement
For the year ended 30 June 2013
Consolidated
30‐Jun‐13
$'000
30‐Jun‐12
$'000
Notes
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
163,483
140,560
Payments to suppliers and employees (inclusive of goods and services tax)
(116,742)
(132,859)
Payments for land acquired
(25,112)
(15,814)
Interest received
Interest paid
Borrowing costs
Net cash inflow / (outfow) from operating activities
31
Cash flows from investing activities
Proceeds from sale of investment properties
Purchase of property plant & equipment
Dividends received
Loans to related parties
Repayment of loans by related parties
Net cash inflow / (outflow) from investing activities
Cash flows from financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of borrowings from related party
Payments in respect of ineffective hedge
Payments for shares bought back
Net cash inflow / (outflow) from financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at the end of the year
Reconciliation to cash at the end of the year:
Cash and cash equivalents
20
9
Cash and cash equivalents at the end of the year
The above consolidated statement of cash flows is to be read in conjunction with the accompanying notes.
593
(4,356)
(700)
17,166
‐
(323)
860
‐
(580)
(43)
319
(6,278)
(519)
(14,591)
6,950
(608)
750
(2,713)
5,690
10,069
5,874
155,166
(9,000)
(143,404)
‐
‐
(1,467)
(4,593)
12,530
2,820
15,350
15,350
15,350
(571)
(1,193)
(8,520)
1,478
(3,044)
5,864
2,820
2,820
2,820
Villa World Group Annual Report 2013
P a g e | 22
Notes to the Financial Statements 30 June 2013
Contents of the notes to the financial statements
Earnings per share .................................................................................................................................................................................. 31
Summary of significant accounting policies ............................................................................................................................................ 24
Critical accounting estimates and judgements ....................................................................................................................................... 30
1
2
3
4
Revenue.................................................................................................................................................................................................. 32
5
Expenses ................................................................................................................................................................................................. 32
6
Finance costs .......................................................................................................................................................................................... 32
7
Auditor’s remuneration .......................................................................................................................................................................... 33
8
Income tax expense ................................................................................................................................................................................ 33
Cash and cash equivalents ...................................................................................................................................................................... 34
9
10 Trade and other receivables ................................................................................................................................................................... 35
Investments accounted for using the equity method ............................................................................................................................. 35
11
Inventories ............................................................................................................................................................................................. 36
12
13 Other assets ........................................................................................................................................................................................... 36
14 Property, plant and equipment .............................................................................................................................................................. 37
15 Parent entity financial information ........................................................................................................................................................ 37
16 Deferred tax assets / (liabilities) ............................................................................................................................................................ 37
17 Trade and other payables ....................................................................................................................................................................... 39
18 Borrowings ............................................................................................................................................................................................. 40
19 Provisions ............................................................................................................................................................................................... 41
20 Contributed equity ................................................................................................................................................................................. 42
21 Other reserves and retained profits ....................................................................................................................................................... 43
22 Dividends ................................................................................................................................................................................................ 43
23
Financial risk management ..................................................................................................................................................................... 43
24 Key management personnel disclosures ................................................................................................................................................ 46
25 Contingencies ......................................................................................................................................................................................... 48
26 Commitments ......................................................................................................................................................................................... 48
27 Related party transactions ..................................................................................................................................................................... 49
Subsidiaries ............................................................................................................................................................................................ 49
28
29
Interest in joint ventures ........................................................................................................................................................................ 50
30 Events subsequent to balance date ........................................................................................................................................................ 50
31 Reconciliation of profit after income tax to net cash inflow from operating activities ........................................................................... 51
Share‐based payments ........................................................................................................................................................................... 52
32
33
Segment information.............................................................................................................................................................................. 52
34 Discontinued operations ........................................................................................................................................................................ 52
Villa World Group Annual Report 2013
P a g e | 23
Notes to the Financial Statements 30 June 2013 (continued)
1
(a)
Summary of significant accounting policies
Reporting entity
The financial statements are for the consolidated entity Villa
World Group (“the Group”) consisting of Villa World Limited
(“Parent”) and its subsidiaries and the Group’s interest in
associates and jointly controlled entities during the year ended
30 June 2013. Transactions between the entities have been
eliminated in the consolidated financial report of the Group.
(b)
Basis of preparation
The principal accounting policies adopted in the preparation of
these general purpose consolidated financial statements, have
in accordance with Australian Accounting
been prepared
Standards and
the Australian
issued by
interpretations
Accounting Standards Board and the Corporations Act 2001. Villa
World Limited is a for profit entity for the purpose of preparing
the financial statements.
(i)
Compliance with IFRS
The consolidated financial statements of the Group comply with
International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB).
(ii)
Critical accounting estimates
It also
The preparation of financial statements requires the use of
requires
certain critical accounting estimates.
management to exercise its judgement in the process of applying
the Group’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. Estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimates are revised
and in any future periods affected.
(iii) Historical cost convention
These financial statements have been prepared under the
historical cost convention, as modified by the revaluation of
available for sale financial assets, financial assets and liabilities
(including derivative instruments) at fair value through profit or
loss, plant and equipment and investment property.
(iv) New and amended standards adopted by the Group
None of the new standards and amendments to standards that
are mandatory for the first time for the financial year beginning 1
July 2012 affected any of the amounts recognised in the current
period or any prior period, and are not likely to affect future
periods. However, amendments made to AASB 101 Presentation
of Financial Statements effective 1 July 2012 now require the
statement of comprehensive income to show the items of
comprehensive
into those that are not
permitted to be reclassified to profit or loss in a future period and
those that may have to be reclassified if certain conditions are
met.
income grouped
(v)
Early adoption of standards
The Group has not elected to apply any pronouncements before
their operative date in the annual reporting period beginning 1
July 2012.
(vi)
Changes to presentation – classification of expenses
In the prior period, borrowing costs of $519k were included in the
net cash inflow/ (outflow) from operating activities as an inflow,
however this was in error and the amount has been correctly
disclosed as an operating net cash outflow. This resulted in an
overstatement of payment to suppliers hence the net impact of
the operating cash flow is nil.
(c)
Parent entity financial information
The financial information for the parent entity, Villa World
Limited, disclosed in note 15 has been prepared on the same
basis as the consolidated financial statements.
(i)
Investments in subsidiaries, associates and joint venture
entities
Investments in controlled entities are carried in the company’s
financial statements at the lower of cost or recoverable amount.
Dividends received from associates are recognised in the parent
entity’s profit or loss when its right to receive the dividend is
established.
(ii)
Tax consolidation legislation
Villa World Limited and its wholly‐owned Australian controlled
entities have implemented the tax consolidation legislation.
Refer to note 1(s).
(d)
(i)
Principles of consolidation
Subsidiaries
Subsidiaries are all entities over which the Group has the power,
directly or indirectly, to govern their financial and operating
policies so as to obtain benefits from its activities. In assessing
control, potential voting rights that presently are exercisable or
convertible are taken into account.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are de‐consolidated from the
date that control ceases.
Intercompany transactions, balances and unrealised gains on
transactions between entities within the Group are eliminated.
Unrealised losses are eliminated unless the transaction provides
evidence of the impairment of the asset transferred. Investments
in subsidiaries are accounted for at cost in the individual financial
statements of the Group.
(ii)
Joint venture entities
The interest in the joint venture partnership is accounted for in
the consolidated financial statements using the equity method
after initially being recognised at cost. Under the equity method,
the share of the profits or losses of the joint venture is recognised
in the income statement and the share of post‐acquisition
movements in reserves is recognised in other comprehensive
income. Details relating to the joint venture are set out in note
29 ‐ Interests in joint ventures.
Profits or losses on transactions establishing the joint venture
entity and transactions with the joint venture are eliminated to
the extent of the parent entity’s ownership interest until such
time as they are realised by the joint venture entity on
consumption or sale. However, a loss on the transaction is
recognised immediately if the loss provides evidence of a
reduction in the net realisable value of current assets or an
impairment loss.
(iii)
Changes in ownership interests
The Group treats transactions with non‐controlling interests that
do not result in a loss of control as transaction with equity
owners of the Group. A change in ownership interest results in
an adjustment between the carrying amounts of the controlling
and non‐controlling interests to reflect their relative interests in
the subsidiary. Any difference between the amount of the
adjustment to non‐controlling interests and any consideration
paid or received is recognised in a separate reserve within equity
attributable to owners of the Group.
When the Group ceases to have control, joint control or
significant influence, any retained interest in the entity is
remeasured to its fair value with the change in carrying amount
recognised in profit or loss. This fair value becomes the initial
carrying amount for the purposes of subsequently accounting for
Villa World Group Annual Report 2013
P a g e | 24
Notes to the Financial Statements 30 June 2013 (continued)
the retained interest as an associate, jointly controlled entity or
financial asset. In addition, any amounts previously recognised in
other comprehensive income in respect of that entity are
accounted for as if the Group had directly disposed of the related
assets or liabilities. This may mean that amounts previously
recognised in other comprehensive income are reclassified to
profit or loss.
If the ownership interest in a jointly‐controlled entity or an
associate is reduced but joint control or significant influence is
retained, only a proportionate share of the amounts previously
recognised in other comprehensive income are classified to profit
or loss where appropriate.
(e)
Segment Reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker
(CODM). The CODM, who is responsible for allocating resources
and assessing performance of the operating segments and
making strategic decisions, has been identified as the executive
team.
Disclosures concerning the Group’s operating and reportable
segments, as well as they key financial information provided to
the CODM are set out in Note 33 ‐ Segment Information.
(f)
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable. Amounts disclosed as revenue are net of
returns, trade allowances and duties and taxes paid. Revenue is
recognised when the amount can be reliably measured, it is
probable that future economic benefits will flow to the Group
and specific criteria have been met for each of the major business
activities as follows:
(i)
Rental income
Rental income from investment properties is recognised when
the revenue is earned. Rental income not received at reporting
date is reflected in the balance sheet as a receivable, or if paid in
advance as rent in advance. Lease incentives granted are
recognised over the lease term on a straight line basis, as a
reduction of lease income.
(ii)
Construction contracts
Contract revenue includes the initial amount agreed in the
contract plus any variations
in contract work, claims and
incentive payments, to the extent that it is probable that they will
result in revenue and can be measured reliably. As soon as the
outcome of a construction contract can be estimated reliably,
contract revenue is recognised in profit or loss in proportion to
the stage of completion of the contract. Contract expenses are
recognised on accordance with the stage of completion unless
they create an asset to future contract activity.
The stage of completion is assessed internally. When the
outcome of a construction contract cannot be estimated reliably,
contract revenue is recognised only to the extent of contract
costs incurred that are likely to be recoverable. An expected loss
on a contract is recognised immediately in the income statement.
(iii)
Land development and resale
Revenue and costs of sales are brought to account when the
significant risks and rewards of ownership and effective control
over the goods have passed to the buyer. The significant risks and
rewards are considered to be transferred to the buyer when the
Group retains neither continuing managerial involvement to the
degree usually associated with ownership nor effective control
over the units sold. This is considered to be when the contract
becomes unconditional or upon settlement depending on the
terms of the contract and when it is probable that the economic
benefits associated with the transaction will flow to the Group.
(iv)
Interest income
Interest
interest method.
Interest income is recognised in the income statement using the
effective
includes the
amortisation of any discount or premium, transaction costs or
other differences between the initial carrying amount of an
interest‐bearing instrument and its amount at maturity calculated
on an effective interest rate basis. Interest income is recognised
on a gross basis including withholding tax, if any.
income
(v)
Sale of non‐current assets
The net loss or gain on sale of assets is calculated as the
difference between the gross proceeds of sale and the carrying
amount of the asset at the time of disposal (including incidental
costs) and is recognised in other income.
(vi) Dividends and distribution
Dividend revenue is recognised net of any franking credits.
Revenue from distributions from controlled entities is recognised
by the Group when the right to receive the distribution has been
established.
from dividends and distributions
from other
Revenue
investments
is recognised when the right to receive the
distribution has been established. This applies even if they are
paid out of pre‐acquisition profits.
(g)
Expense recognition
Expenses are recognised in the income statement on an accrual
basis.
(h)
Leases
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating
leases. Payments made under operating leases (net of any
incentives received from the lessor) are charged to the income
statement on a straight line basis over the period of the lease.
(i)
Property, plant and equipment
Property, plant and equipment are stated at historical cost less
depreciation. Historical cost includes expenditure that is directly
attributable to the acquisition of the items. Cost may also include
transfer from equity of any gains or losses on qualifying cash flow
hedges of foreign currency purchases of property, plant and
equipment. Subsequent costs are included in the asset’s carrying
amount or recognised as a separate asset, as appropriate, only
when it is probably that future economic benefits associated with
the item will flow to the Group and the cost of the item can be
measured reliably. The carrying amount of any component
accounted for as a separate asset is derecognised when replaced.
All other repairs and maintenance are charged to profit or loss
during the reporting period in which they are incurred.
Land is not depreciated. Depreciation on other assets is
calculated using the straight line and/or diminished value method
to allocate their cost, net of their residual values, over their
estimated useful lives, as follows:
Buildings
Plant and equipment
Leased plant and equipment
40 years
3‐10 years
2‐8 years
The assets’ residual values and useful lives are reviewed and
adjusted if appropriate at each balance sheet date.
An asset’s carrying amount is written down immediately to its
recoverable amount if the asset’s carrying amount is greater than
its estimated recoverable amount.
Villa World Group Annual Report 2013
P a g e | 25
Inventories
Recognition and derecognition
Notes to the Financial Statements 30 June 2013 (continued)
(j)
(i)
Land held for resale and development costs
Land held for resale and development costs are stated at the
lower of cost and net realisable value. Costs include the cost of
acquisition and development, construction and other relevant
expenditure and interest (if the asset is a qualifying asset).
The cost of land and buildings acquired under contracts entered
into but not settled prior to balance date are not taken up as
inventories and as liabilities at balance date unless all contractual
conditions have been fulfilled and there is certainty of completion
of the purchase evident at balance sheet date.
Borrowing costs included in the cost of land for resale and
development costs are those costs that would have been avoided
if the expenditure on the acquisition and development of the
land had not been made. Borrowing costs incurred while active
development is interrupted for extended periods are recognised
as expenses.
(k)
Financial assets
Classification
its financial assets
The Group classifies
in the following
categories: financial assets at fair value through profit or loss and
loans and receivables. The classification depends on the purpose
for which the investments were acquired.
Management determines the classification of its investments at
initial recognition.
(i)
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial
assets held for trading. A financial asset is classified in this
category if acquired principally for the purpose of selling in the
short term. Derivatives are classified as held for trading unless
they are designated as hedges. Assets in this category are
classified as current assets if they are expected to be settled
within 12 months; otherwise they are classified as non‐current
assets.
(ii)
Loans and receivables
Loans and receivables are non‐derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. They are included in current assets, except for those
with maturities greater than 12 months after the reporting period
which are classified as non‐current assets. Loans and receivables
are included in trade and other receivables (note 10) in the
balance sheet.
Financial assets that are classified as loans and receivables
include accounts receivable and are carried at amortised cost
using the effective interest rate (where relevant), less impairment
losses.
Measurement
At initial recognition, the Group measure a financial asset at its
fair value plus transaction costs that are directly attributable to
the acquisition of the financial asset. Transaction costs of
financial assets carried at fair value through profit or loss are
expensed in profit or loss.
Loans and receivables are subsequently carried at amortised cost
using the effective interest method.
Impairment
The Group assesses at the end of each reporting period whether
there is objective evidence that a financial asset or Group
financial assets is impaired. A financial asset or a Group of
financial assets is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of
one or more events that occurred after the initial recognition of
the asset (a ‘loss event’) and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset
or Group of financial assets that can be reliable estimated.
Regular way purchases and sales of financial assets are
recognised on trade‐date, the date on which the Group commits
to purchase or sell the asset. Financial assets are derecognised
when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has
transferred substantially all the risks and rewards of ownership.
(l)
Trade receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost less provision for
Trade receivables are generally due for
doubtful debts.
settlement no more than 120 days from the date of recognition
for land development and resale debtors and no more than 60
days for other debtors. They are presented as current assets
unless collection is not expected for more than 12 months after
the reporting date.
Collectability of trade receivables is reviewed on an ongoing
basis. Debts which are known to be uncollectable are written off.
A provision for doubtful receivables is established when there is
objective evidence that the Group will not be able to collect all
amounts due according to the original terms of receivables. The
amount of the provision is the difference between the asset’s
carrying amount and the present value of estimated future cash
flows, discounted at the original effective interest rate. Cash
flows relating to short –term receivables are not discounted if the
effect of discounting is immaterial. The amount of the provision
is recognised in the income statement.
allowance had been
The amount of the impairment loss is recognised in profit or loss
within other expenses. When a trade receivable for which an
recognised becomes
impairment
uncollectable in a subsequent period, it is written off against the
allowance account.
recoveries of amounts
previously written off are credited against other expenses in
profit or loss.
Subsequent
(m) Trade and other payables
These amounts represent
liabilities for goods and services
provided to the Group prior to the end of the financial year which
are unpaid. The amounts are unsecured and are usually paid
within 30‐60 days of recognition. Trade and other payables are
presented as current liabilities unless payment is not due within
12 months from the reporting date. They are recognised initially
at their fair value and subsequently measured at amortised cost
using the effective interest method.
(n)
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at
call with financial institutions, borrowings, other short‐term,
highly liquid investments with original maturities of three months
or less that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value and
bank overdrafts.
(o)
Impairment
The carrying amounts of the Group’s assets are tested for
impairment at each balance sheet date where there are events or
changes in circumstances that indicate they might be impaired.
An impairment loss is recognised whenever the carrying amount
of an asset exceeds its recoverable amount. Impairment losses
are recognised in the income statement unless the asset has
previously been re‐valued, in which case the impairment loss is
recognised as a reversal to the extent of that previous revaluation
with any excess recognised through the income statement.
The recoverable amount of assets is the greater of their fair value
less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value
using a pre‐tax discount rate that reflects current market
assessments of the time value of money and the risks specific to
the asset.
largely
For an asset that does not generate
Villa World Group Annual Report 2013
P a g e | 26
Notes to the Financial Statements 30 June 2013 (continued)
independent cash inflows, the recoverable amount is determined
for the cash‐generating unit to which the asset belongs.
hedging variable rate borrowings is recognised in profit or loss
within ‘finance costs’.
Reversals of impairment
Impairment losses, other than in respect of goodwill, equity
instruments classified as available for sale and financial assets
carried at amortised cost, are reversed when there is an
indication that the impairment loss may no longer exist and there
has been a change in the estimate used to determine the
recoverable amount.
An impairment loss in respect of a receivable carried at amortised
cost is reversed if the subsequent increase in recoverable amount
can be related objectively to an event occurring after the
impairment loss was recognised.
In respect of other assets, an impairment loss is reversed if there
has been a change in the estimates used to determine the
recoverable amount.
An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised.
(p) Derivatives
The Group uses derivative financial instruments to hedge interest
rate risks. In accordance with its investment strategy, the entity
does not hold or issue derivative financial instruments for trading
purposes.
Derivative financial instruments are recognised initially at fair
value and subsequently remeasured at fair value. The
accounting for subsequent changes in the fair value is dependent
on whether the derivatives are designated as a hedging
instrument.
(i)
Fair value hedge
Changes in fair value of derivatives that are designated and
qualify as fair value are recognised immediately in the income
statement, together with any changes in the fair value of the
hedged asset or liability that are attributable to the hedged risk.
The gain or loss relating to the effective portion of interest rate
swaps hedging fixed rate borrowings is recognised in profit or loss
within finance costs, together with changes in the fair value of
the hedged fixed rate borrowings attributable to the interest rate
risk. The gain or loss relating to the ineffective portion is
recognised in profit or loss within other income or other
expenses. The fair value of hedging instruments is classified as a
non‐current asset or liability when the remaining maturity is
more than 12 months. They are classified as current when the
maturity is less than 12 months. However, where derivatives
qualify for hedge accounting, recognition of any resultant gain or
loss depends on the nature of the item being hedged. The fair
value of interest rate swaps is the estimated amount that the
entity would receive or pay to terminate the swap at the balance
sheet date, taking into account current interest rates and the
current creditworthiness of the swap counterparties. The fair
value of forward exchange contracts is their quoted market price
at the balance sheet date being the present value of the quoted
price.
(ii)
Cash flow hedge
The effective portion of changes in the fair value of derivatives
that are designated and qualify as cash flow hedges are
recognised in other comprehensive income and accumulated in
reserves in equity. The gain or loss relating to the ineffective
portion is recognised immediately in profit or loss within other
income or other expense.
Amounts accumulated in equity are reclassified to profit or loss in
the periods when the hedged item affects profit or loss. The gain
or loss relating to the effective portion of interest rate swaps
When a hedging instrument expires, is sold or terminated, or
when a hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time remains
in equity and is recognised when the forecast transaction is
ultimately recognised in profit or loss. When a forecast is no
longer expected to occur, the cumulative gain or loss that was
reported in equity is immediately reclassified to profit or loss.
(q)
Borrowings
Borrowings are recognised initially at fair value, net of transaction
costs incurred. Subsequent to initial recognition, borrowings are
stated at amortised cost with any difference between cost and
redemption value being recognised in the income statement over
the period of the borrowings on an effective interest basis. Fees
paid on the establishment of loan facilities are recognised as
transaction costs of the loan to the extent that it is probable that
some or all of the facility will be drawn down. In this case, the
fee is deferred until the draw down occurs. To the extent that
there is no evidence that it is probable that some or all of the
facility will be drawn down, the fee is capitalised as a prepayment
for liquidity services and amortised over the period of the facility
to which it relates.
Interest expense is accrued at the effective interest rate.
Borrowings are removed from the balance sheet when the
obligation specified in the contract is discharged, cancelled or
expired. The difference between the carrying amount of a
financial liability that has been extinguished or transferred to
another party and the consideration paid, including any non‐cash
assets transferred or liabilities assumed, is recognised in profit or
loss as other income or finance costs.
Where the terms of a financial liability are renegotiated and the
entity issues equity instruments to a creditor to extinguish all or
part of the liability (debt for equity swap), a gain or loss is
recognised in profit or loss, which is measured as the difference
between the carrying amount of the financial liability and the fair
value of equity instruments issued.
Borrowings are classified as current liabilities unless the Group
has an unconditional right to defer settlement of the liability for
at least 12 months after the reporting period.
(r)
Finance costs
Ancillary costs incurred in connection with the arrangement of
borrowings are capitalised and amortised over the life of the
borrowings.
Borrowing costs incurred for the construction of any qualifying
asset are capitalised during the period of time that is required to
complete and prepare the asset for its intended use or sale.
Other borrowing costs are expensed as incurred.
(s)
Income tax
Income tax on the income statement for the year comprises
current and deferred tax. Income tax is recognised in the income
statement except to the extent that it relates to items recognised
directly in equity in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for
the year using tax rates enacted or substantively enacted at the
balance sheet date and any adjustment to tax payable in respect
of previous years. Management periodically evaluates positions
taken in tax returns with respect to situations in which applicable
tax regulation
It establishes
provisions where appropriate on the basis of amounts expected
to be paid to the tax authorities.
interpretation.
is subject to
Deferred tax is provided using the balance sheet liability method
providing for temporary differences between the carrying
Villa World Group Annual Report 2013
P a g e | 27
Notes to the Financial Statements 30 June 2013 (continued)
amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes.
and financing activities which are recoverable from, or payable
to, the ATO are classified as operating cash flows.
Deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill. Deferred income tax is also not
accounted for if it arises from initial recognition of assets or
liabilities that affect neither accounting nor taxable profit or
differences relating to investments in subsidiaries to the extent
that they will probably not reverse in the foreseeable future and
the timing of the reversal can be controlled.
The amount of deferred tax provided is based on the expected
manner of realisation or settlement of the carrying amount of
assets and liabilities using tax rates enacted or substantively
enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced
to the extent that it is no longer probable that the related tax
benefit will be realised.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation
authority. Current tax assets and tax liabilities are offset where
the entity has a legally enforceable right to offset and intends
either to settle on a net basis or to realise the asset and settle the
liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to
the extent that
in other
comprehensive income or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in
equity, respectively.
items recognised
it relates to
Tax consolidation legislation
Villa World Limited and its wholly‐owned Australian controlled
entities have implemented the tax consolidation legislation
forming a tax consolidated Group. The head entity and the
controlled entities in the tax consolidated Group continue to
account for their own current and deferred tax amounts. These
tax amounts are measured as
in the tax
consolidated Group continues to be a stand‐alone taxpayer in its
own right.
if each entity
In addition to its own current and deferred tax amounts, the
Group also recognises the current tax liabilities (or assets) and
the deferred tax assets arising from unused tax losses and unused
tax credits assumed from controlled entitles in the relevant tax
consolidated Group.
Assets or liabilities arising under tax funding agreements with the
tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the Group. Any difference
between the amounts assumed and amounts receivable or
payable under the tax funding agreement are recognised as a
contribution
tax
consolidated entities.
from) wholly‐owned
(or distribution
to
Additional income taxes that arise from the distribution of
dividends are recognised at the same time as the liability to pay
the related dividend.
(t)
Goods and Services tax
Revenues, expenses and assets (other than receivables) are
recognised net of the amount of goods and services tax (GST)
except where the amount of GST incurred is not recoverable from
the Australian Tax Office (ATO). In these circumstances the GST is
recognised as part of the cost of acquisition of the asset or as part
of an item of expense. Receivables and payables are stated with
the amount of GST included. The net amount of GST recoverable
from, or payable to, the ATO is included as a current asset or
liability in the balance sheet.
Cash flows are included in the statement of cash flows on a gross
basis. The GST components of cash flows arising from investing
(u)
Provisions
A provision is recognised when there is a legal, equitable or
constructive obligation as a result of a past event and it is
probable that an outflow of resources will be required to settle
the obligation and the amount has been reliably estimated.
Where there are a number of similar obligations, the likelihood
that an outflow will be required in settlement is determined by
considering the class of obligations as a whole. A provision is
recognised even if the likelihood of an outflow with respect to
any one item included in the same class of obligations may be
small.
Provisions are measured at the present value of management’s
best estimate of the expenditure required to settle the present
obligation at the end of the reporting period. Provisions are
determined by discounting the expected future cash flows at a
pre‐tax rate that reflects current market assessments of the same
time value of money and, where appropriate, the risks specific to
the liability. The increase in the provision due to the passage of
time is recognised as interest expense.
A provision is raised in respect of any dividend to shareholders
unpaid at balance date where the dividend has been declared as
payable prior to balance date.
A provision for onerous contracts is recognised when the
expected benefits to be derived by the consolidated entity from a
contract are lower than the unavoidable cost of meeting its
obligations under the contract.
Provisions for legal claims recognised when the Group has a
present legal or constructive obligation as a result of past events,
it is more likely than not that an outflow of resources will be
required to settle the obligation and the amount has been
reliably estimated.
A provision for warranties is recognised when the underlying
products or services are sold. The provision is based on historical
warranty data and a weighting of all possible outcomes against
their associated possibilities. Where the Group expects some or
all of a provision to be reimbursed, such as under an insurance
contract, the reimbursement is recognised as a separate asset,
but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the income
statement net of any reimbursement.
(v)
(i)
Employee benefits
Short term benefits
Liabilities for salaries and wages, including non‐monetary benefits
and annual leave expected to be settled within 12 months of the
reporting date are recognised as provisions
in respect of
employees’ services up to the reporting date and are measured
at the amounts expected to be paid when the liabilities are
settled.
(ii)
Long service leave
The liability for long service lease is recognised in the provision
for employee benefits and measured as the present value of
expected future payments to be made in respect of services
provided by employees up to the reporting date. Consideration is
given to expected future salary and wage levels, experience of
employee departures and periods of service. Expected future
payments are discounted using market yields at the reporting
date on national government bonds with terms to maturity and
currency that match, as closely as possible, the estimated future
cash outflows.
(iii)
Share‐based payments
Share‐based compensation benefits are provided
to key
personnel via an employee option scheme. Information relating
to these schemes is set out in note 32 – Share‐based payments.
Villa World Group Annual Report 2013
P a g e | 28
Notes to the Financial Statements 30 June 2013 (continued)
The fair value of options granted under the Villa World Limited
Option Plan is recognised an as employee benefits expense with a
corresponding increase in equity. The total amount to be
expensed is determined by reference to the fair value of the
options granted which
includes any market performance
conditions but excludes the impact of any service and non‐market
performance vesting conditions and the impact of any non‐
vesting conditions.
Non‐market vesting conditions are included in assumptions about
the number of options that are expected to vest. The total
expense is recognised over the vesting period which is the period
over which all of the specified vesting conditions are to be
satisfied. At the end of each period, the entity revises its
estimates of the number of options that are expected to vest
based on the non‐market vesting conditions. It recognises the
impact of the revision to original estimates, if any, in profit and
loss, with a corresponding adjustment to equity.
(iv)
Profit‐sharing and bonus plans
The Group recognises a liability and an expense for bonuses and
profit‐sharing based on a formula that takes into consideration
the profit attributable to the Group’s shareholders after certain
adjustments.
The Group recognises a provision where
contractually obliged or where there is a past practice that has
created a constructive obligation.
(v)
Termination benefits
Termination benefits are payable when employment
is
terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these
benefits. The Group recognises termination benefits when it is
demonstrably committed to either terminating the employment
of current employees according to a detailed formal plan without
the possibility of withdrawal or to providing termination benefits
as a result of an offer made to encourage voluntary redundancy.
Benefits falling due more than 12 months after the end of the
reporting period are discounted to present value.
(w)
Contributed equity
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. Incremental costs directly attributable to the issue
of new shares or options for the acquisition of a business are not
included in the cost of the acquisition as part of the purchase
consideration.
If the Group reacquires its own equity instruments, for example
as the result of a share buy‐back, those instruments are deducted
from equity and the associated shares are cancelled. No gain or
loss is recognised in the profit or loss and the consideration paid
including any directly attributable incremental costs (net of
income taxes) is recognised directly in equity.
(x)
Dividends
Provision is made for the amount of any dividend declared, being
appropriately authorised and no longer at the discretion of the
entity, on or before the end of the reporting period but not
distributed at the reporting period.
(y)
Earnings per share
Basic earnings per share
Basic earnings per share is determined by dividing the net profit
from continuing operations attributable to the shareholders of
the Group by the weighted average number of units outstanding
during the year. Basic earnings per share is also determined for
the total profit attributable to shareholders, including any profit
or loss from discontinued operations.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs
associated with dilutive potential shares and the weighted
average number of shares that would have been outstanding
assuming the conversion of all dilutive potential shares.
(z)
Rounding of amounts
The Group is of a kind referred to in Class Order 98/100, issued by
the Australian Securities and Investments Commission, relating to
the “rounding off” of amounts in the financial report. Amounts in
the financial report have been rounded off in accordance with
that Class Order to the nearest thousand dollars or in certain
cases, the nearest dollar.
(aa) New accounting standards and interpretations
Certain new accounting standards and interpretations have been
published that are not mandatory for 30 June 2013 reporting
periods. The Group’s assessment of the impact of these new
standards and interpretations is set out below.
(i) AASB 10 Consolidated Financial Statements, AASB 11 Joint
Arrangements, AASB 12 Disclosure of Interests in Other
Entities, revised AASB 127 Separate Financial Statements,
AASB 128 Investments in Associates and Joint Ventures,
AASB 2011‐7 Amendments to Australian Accounting
Standards arising
from the Consolidation and Joint
Arrangements Standards and AASB 2012‐10 Amendments
to Australian Accounting Standards – Transition Guidance
and Other Amendments (effective 1 January 2013)
In August 2011, the AASB issued a suite of five new and
amended standards which address the accounting for joint
financial statements and
arrangements, consolidated
associated disclosures.
AASB 10 replaces all of the guidance on control and
consolidation in AASB 127 Consolidated and Separate
Financial Statements, and Interpretation 12 Consolidation
– Special Purpose Entities. The core principle that a
consolidated entity presents a parent and its subsidiaries
as if they are a single economic entity remains unchanged,
as do the mechanics of consolidation. However, the
standard introduces a single definition of control that
applies to all entities. It focuses on the need to have both
power and rights or exposure to variable returns. Power is
the current ability to direct the activities that significantly
influence returns. Returns must vary and can be positive,
negative or both. Control exists when the investor can use
its power to affect the amount of its returns. There is also
new guidance on participating and protective rights and on
agent/principal relationships. While the Group does not
expect the new standard to have a significant impact on its
composition, it has yet to perform a detailed analysis of
the new guidance in the context of its various investees
that may or may not be controlled under the new rules.
AASB 11
introduces a principles based approach to
accounting for joint arrangements. The focus is no longer
on the legal structure of joint arrangements, but rather on
how rights and obligations are shared by the parties to the
joint arrangement. Based on the assessment of rights and
obligations, a joint arrangement will be classified as either
a joint operation or a joint venture. Joint ventures are
accounted for using the equity method, and the choice to
proportionately consolidate will no longer be permitted.
Parties to a joint operation will account for their share of
revenues, expenses, assets and liabilities in much the same
way as under the previous standard. AASB 11 also provides
guidance for parties that participate in joint arrangements
but do not share joint control.
The Group is yet to evaluate its joint arrangements in light
of the new guidance.
Villa World Group Annual Report 2013
P a g e | 29
(i)
Income taxes
The Group is subject to income taxes in Australia.
The Group recognises liabilities based on the Group’s current
understanding of the tax law. Where that final tax outcome of
these matters is different from the amounts that were initially
recorded, such differences will impact the current and deferred
tax provisions in the period in which such determination is made.
In addition, the Group has recognised deferred tax assets relating
to carried forward tax losses to the extent there are sufficient
taxable temporary differences (deferred tax liabilities) relating to
the same taxation authority and the same subsidiary against
which the unused tax losses can be utilised.
Utilisation of the tax losses also depends on the ability of the
Group to satisfy certain tests at the time the losses are recouped.
It is believed that The Group will satisfy the continuity of
ownership test and the same business test in order to receive any
tax losses.
(ii)
Inventory
The inventory of Group is stated as the lower of cost and net
realisable value in accordance with the accounting policy stated
in note 1(j).
The net realisable value amount has been
determined based on the current future estimated cash flow of
the projects.
(iii)
Warranty claims
The Group generally offers 6 year 3 month warranty for its
housing products. Management estimates the related provision
for future warranty claims based on historical warranty claim
information, as well as recent trends that might suggest that past
cost information may differ from future claims. The Group
includes legal costs in the provision for warranty claims to the
extent that it has a present obligation to incur these costs at the
end of the reporting period. Estimating this provision requires
the exercise of significant judgement and it is therefore possible
that actual amounts may differ from this estimate. The
assumptions made in relation to the current period are consistent
with those in the prior year.
(iv)
Impairment of equity accounted investments
After application of the equity method, (including recognising the
joint venture’s losses), the Group applies AASB 139 Financial
Instruments: Recognition and Measurement
to determine
whether it is necessary to recognise any additional impairment
loss with respect to its net investment in the joint venture. The
amount of the loss is measured as the difference between the
asset’s carrying amount and the present value of estimated
future cash flows (excluding future credit losses that have not
been
incurred) discounted at the financial asset’s original
effective interest rate. Estimating these future cash flows of the
joint venture requires significant judgement and therefore actual
amounts may differ from this impairment estimate.
Notes to the Financial Statements 30 June 2013 (continued)
AASB 12 sets out the required disclosures for entities
reporting under the two new standards, AASB 10 and AASB
11, and replaces the disclosure requirements currently
found in AASB 127 and AASB 128. Application of this
standard by the Group will not affect any of the amounts
recognised in the financial statements, but will impact the
type of information disclosed in relation to the Group’s
investments.
Amendments to AASB 128 provide clarification that an
entity continues to apply the equity method and does not
remeasure its retained interest as part of ownership
changes where a joint venture becomes an associate, and
vice versa. The amendments also introduce a “partial
disposal” concept. The Group is still assessing the impact of
these amendments.
The Group will adopt the new standards from their
operative date. They will therefore be applied in the
financial statements for the annual reporting period
ending 30 June 2014.
(ii) AASB 13 Fair Value Measurement and AASB 2011‐8
Amendments to Australian Accounting Standards arising
from AASB 13 (effective 1 January 2013).
AASB 13 was released in September 2011. It explains how
to measure fair value and aims to enhance fair value
disclosures. The Group has yet to determine which, if any,
of its current measurement techniques will have to change
as a result of the new guidance. It is therefore not possible
to state the impact, if any, of the new rules on any of the
amounts recognised in the financial statements. However,
application of the new standard will impact the type of
information disclosed
in the notes to the financial
statements. The Group does not intend to adopt the new
standard before its operative date, which means that it
would be first applied in the annual reporting period
ending 30 June 2014.
There are no other standards that are not yet effective and
that are expected to have a material impact on the entity
of the current or future reporting periods and on
foreseeable future transactions.
(ii) AASB 136 Recoverable Amount Disclosures for Non‐
Financial Assets (effective 1 January 2014)
The AASB has made small changes to some of the disclosures that
are required under AASB 136 Impairment of Assets. These may
result in additional disclosures if the group recognises any
impairment loss or the reversal of an impairment loss during the
period. They will not affect any of the amounts recognised in the
financial statements. The group intends to apply the amendment
from 1 July 2014.
2
Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that may have a financial impact on
the Group and that are believed to be reasonable under the
circumstances
(a)
Critical accounting estimates and assumptions
The Group makes estimates and assumption concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Villa World Group Annual Report 2013
P a g e | 30
Notes to the Financial Statements 30 June 2013 (continued)
3
Earnings per share
(a)
Basic and diluted earnings per share
Earnings per share
From continuing operations
From discontinued operations
Total basic and diluted earnings per share attributable to the ordinary equity holders of the
Company
(b)
Reconciliation of earnings used in calculation
Profit attributable to the ordinary equity holders of the company used in calculating basic
From continuing operations
From discontinued operations
(c) Weighted average number of shares
Consolidated
30‐Jun‐13
Cents
30‐Jun‐12
Cents
(18.2)
10.1
‐
0.3
(18.2)
10.4
Consolidated
30‐Jun‐13
30‐Jun‐12
$'000
$'000
(13,494)
7,919
‐
288
(13,494)
8,207
Weighted average number of shares used as the denominator in calculating basic and diluted earnings per share is 74,107,715 (30 June
2012: 78,714,262).
(d) Diluted average number of shares
The Group has not issued any other shares that may result in a dilution of earnings attributed to shareholders. Diluted earnings per share
are therefore the same as basic earnings per share. There were no options granted during the financial year ending 30 June 2013.
4
Revenue
From continuing operations
Revenue from land development, residential building and construction contracts
169,396 146,500
Consolidated
30‐Jun‐13
30‐Jun‐12
$'000
$'000
Other revenue
Revenue from related joint ventures
Rental revenue
Interest revenue
Rebates received
Hedge ineffectiveness on interest rate swaps
Net gain/(loss) on sale of other assets
Net gain/(loss) on sale of depreciable assets
Other revenue
349
3,080
24 94
593
458
‐
‐
‐
653
2,077
319
‐
(157)
(79)
(56)
370
3,571
171,473 150,071
Villa World Group Annual Report 2013
P a g e | 31
Notes to the Financial Statements 30 June 2013 (continued)
5
Expenses
Expenses, excluding finance costs, included in the consolidated income statement
classified by function
Cost of land development, residential building and construction contracts
Other expenses, excluding finance costs
Classification of these expenses by function
Cost of development properties sold
Other expenses from ordinary activities
Property sales and marketing expenses
Employee benefits expense
Land holding costs
Legal and professional costs
Administration costs
Impairment of development land
Information Technology costs
Depreciation and amortisation expense
Other costs
6
Finance costs
Loan interest and charges
Other financial institutions
Unwind of discount deferred consideration
Borrowing costs
Amount capitalised
Unwind of amount capitalised*
Total finance costs included within the income statement
Consolidated
30‐Jun‐13
30‐Jun‐12
$'000
$'000
122,401 109,548
36,920 23,127
159,321 132,675
122,401 109,548
12,661 8,385
7,858 7,797
2,618 2,103
1,049 1,252
406 671
10,149 700
696
363
‐
331
1,120 1,888
36,920
23,127
Consolidated
30‐Jun‐13
30‐Jun‐12
$'000
$'000
4,539 6,436
1,537 1,411
344 1,984
6,420 9,831
(2,697)
(2,336)
4,264 3,526
7,987 11,021
*The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted interest rate applicable to the entity's outstanding
borrowings during the year, including line fees and margins, in this case 7.68% (30 June 2012 8.48%).
Villa World Group Annual Report 2013
P a g e | 32
Notes to the Financial Statements 30 June 2013 (continued)
7
Auditor’s remuneration
(a) A udit se rvice s provide d by PwC A ustralia:
A udit and other assurance services
Audit a nd re vie w of fina ncia l re ports
Other services provided by PwC:
Ta xa tion s e rvice s
Othe r s e rvice s
Total re mune ration of PwC Australia
(b) A udit se rvice s provide d by Non‐PwC audit firm s:
A udit and other assurance services
Audit of prope rty outgoings
Other services provided:
Ta xa tion s e rvice s
Othe r s e rvice s
Total re mune ration of Non‐PwC audit firms
8
(a)
Income tax expense
Income tax expense/(benefit)
Curre nt ta x
De fe rre d ta x
Adjus tm e nts for curre nt ta x of prior pe riods
A ggre gate income tax e xpe nse / (be ne fit)
Incom e tax is attributable to
Profit from continuing ope ra tions
A ggre gate income tax e xpe nse / (be ne fit)
Deferred incom e tax (revenue) / expense included in incom e tax expense com prises
De cre a s e / (incre a s e ) in de fe rre d ta x a s s e ts
(De cre a s e ) / incre a s e in de fe rre d ta x lia bilitie s
Adjus tm e nts for curre nt ta x of prior pe riods
Consolidate d
30‐Jun‐13
30‐Jun‐12
$'0 00
$'000
20 6,0 76
1 23,813
20 6,0 76
1 23,813
1,2 50
44,644
1 4,5 00
11,356
1 5,7 50
56,000
22 1,8 26
1 79,813
‐ 3,000
‐ 3,000
7 2,8 77
90,291
5 9,7 30
1,425
13 2,6 07
91,716
13 2,6 07
94,716
Consolidate d
3 0 ‐Jun‐1 3
$ '0 0 0
3 0 ‐Jun‐1 2
$ '0 0 0
‐
(1 ,1 6 1 )
7 5 8
(4 0 3 )
(4 0 3 )
(4 0 3 )
(7 ,4 1 4 )
7 ,0 1 1
(7 5 8 )
(1 ,1 6 1 )
3
(2 6 9 )
1 6 0
(1 0 6 )
(1 0 6 )
(1 0 6 )
(3 ,2 0 7 )
3 ,0 9 8
(1 6 0 )
(2 6 9 )
Villa World Group Annual Report 2013
P a g e | 33
Notes to the Financial Statements 30 June 2013 (continued)
8
Income tax expense (continued)
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit / (loss) from continuing operations before tax
Profit / (loss) from discontinuing operations before tax
Tax at the Australian tax rate of 30% (2012: 30%)
Tax effect of amounts which are not deductible / (assessable) in calculating taxable
income:
Accounting loss on sale of assets
Property, plant and equipment
Franking credits
Profit/(loss) of equity accounted investments
Derecognition/(recognition) of deferred tax asset for losses
Other
Adjustments for current tax of prior periods
Total income tax expense/(benefit)
(c)
Tax expense (income) relating to items of other comprehensive income
C a s h flo w h e d ge s
Total tax e xpe nse (inc om e ) re lating to ite m s of othe r c om pre he nsive inc om e
(d)
Tax losses
Consolidated
30‐Jun‐13
$'000
(13,897)
‐
(13,897)
(4,169)
30‐Jun‐12
$'000
7,813
288
8,101
2,430
‐
(73)
(258)
461
2,874
4
758
(403)
154
‐
‐
‐
(2,874)
24
160
(106)
C onsolidate d
3 0 ‐Jun‐1 3
$ '0 0 0
3 0 ‐Jun‐1 2
$ '0 0 0
5 9
5 9
2 1 2
2 1 2
During the year a prima facie taxable income of $2.12 million (30 June 2012: $6.5 million taxable loss) was generated by the Group.
Unused tax losses of $21.02 million (30 June 2012: $34.6 million) with a potential tax benefit of $6.31 million (30 June 2012: $10.4 million)
have been recognised at 30 June 2013. The Group has not recognised $28.36 million of tax losses (30 June 2012: $16.34 million) with a
potential tax benefit of $8.51 million (30 June 2012: $4.9 million). Total unused tax losses for the Group at 30 June 2013 are $49.38 million
(30 June 2012: $50.94 million).
(e)
Tax consolidation legislation
The Group and its wholly‐owned Australian controlled entities have implemented the tax consolidation legislation as of 12 December
2006. The accounting policy in relation to this legislation is set out in note 1(r). On adoption of the tax consolidation legislation, the
entities in the tax consolidated group entered into tax sharing agreements which, in the opinion of the Directors, limits the joint and
several liability of the wholly‐owned entities in the case of a default by the head entity, the Group.
The entities have also entered into tax funding agreements under which the wholly‐owned entities fully compensate for any current tax
payable assumed and are compensated by the head entities for any current tax receivable and deferred tax assets relating to unused tax
losses or unused tax credits that are transferred to the Group under the tax consolidation legislation. The funding amounts are
determined by reference to the amounts recognised in the wholly‐owned entities’ financial statements.
The amounts receivable/payable under the tax funding agreement are due upon receipt of the funding advice from the head entities,
which are issued as soon as practicable after the end of each financial year. The head entities may also require payment of interim
funding amounts to assist with its obligations to pay tax statements. The funding amounts are recognised as current intercompany
receivables or payments.
(f)
Franking account
An amount of $19.1 million (30 June 2012: $18.6 million) is held as franking credits in the Group.
9
Cash and cash equivalents
Cash at bank and in hand
Cash and cash equivalents
Consolidated
30‐Jun‐13
$'000
30‐Jun‐12
$'000
15,350
15,350
2,820
2,820
Villa World Group Annual Report 2013
P a g e | 34
Notes to the Financial Statements 30 June 2013 (continued)
10
Trade and other receivables
Current assets
Trade receivables
Provision for impairment of receivables
Loans to joint ventures
Other receivables
Total current assets
Non‐current assets
Loan to joint ventures
Provision for impairment loss
Less: Reclassification of non current receivable to equity accounted investments
Consolidated
Notes
30‐Jun‐13
$'000
30‐Jun‐12
$'000
25,557
‐
25,557
‐
18,792
(240)
18,552
1,166
1,818 551
27,375
20,269
28,968
(5,847)
(23,121)
28,968
(5,847)
‐
27
27
27
Total non‐current assets
As a result of a change in the characteristics in the loan to the Eynesbury Group it has prompted its reclassification from receivables to equity accounted
investments as the nature of the loan is now viewed to have more characteristics of equity rather than a loan.
The ageing of current trade receivables is as follows:
‐
23,121
1 to 3 months
3 to 6 months
Over 6 months
(a)
Past due but not impaired
Consolidated
30‐Jun‐13
$'000
30‐Jun‐12
$'000
21,199
266
4,092
25,557
14,056
4
4,732
18,792
As of 30 June 2013, the trade receivables of the Group of $nil (30 June 2012: $4,735,769) were past due but not impaired. For the prior
year these relate to a number of independent customers for whom there is no recent history of default.
(b) Other receivables
These amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at
commercial rates where the terms of repayment exceed six months. Collateral is not normally obtained.
(c)
Fair value
Due to the short term nature of these receivables, their carrying amount is assumed to approximate their fair value.
The fair value of collateral held for trade receivables is $25.6 million. Refer to Note 23 – Financial risk management for more information
on the risk management policy of the Group and the credit quality of the entity’s trade receivables.
11
Investments accounted for using the equity method
Interest in joint ventures
On 29 November 2012 Villa World Developments Pty Ltd acquired the additional 50% interest in Cotton Ventures Pty Ltd and Cornell’s Hill
Pty Ltd to give the Group full ownership of both companies (refer to Note 28 – Subsidiaries and Note 29 – Interests in joint ventures) . The
former ventures are now included in the Group’s Controlled entities.
Villa World Group Annual Report 2013
P a g e | 35
Notes to the Financial Statements 30 June 2013 (continued)
11
Investments accounted for using the equity method (continued)
Joint ve nture inte re sts
Eyne s bury Pa s tora l Trus t
Eyne s bury De ve lopm e nt Joint Ve nture
Eyne s bury Golf Pty Ltd
Plus : Re cla s s ifica tion from non curre nt re ce iva ble to e quity a ccounte d inve s tm e nts
1 0
Le s s : Sha re of ne t (los s )/profits of a s s ocia te s a nd joint ve nture s
Le s s : Im pa irm e nt of inve s tm e nt in Eyne s bury Group
Le s s : Im pa irm e nt of Eyne s bury Golf Pty Ltd
Total inve stme nt accounte d for using the e quity m e thod for the Eyne sbury Group
Corne ll's Hill Pty Ltd
Cotton Ve nture s Pty Ltd
Consolidate d
Note s
3 0 ‐Jun‐13
$ '0 00
3 0‐Jun‐12
$ '0 00
6 ,5 73
2 ,0 82
1 ,0 74
23 ,1 21
(1 7,4 48 )
(6 27 )
(1,0 74 )
13 ,7 01
‐
‐
7 ,0 73
5 22
1 ,0 74
‐
1 ,0 60
‐
(1,0 74 )
8 ,6 55
6 21
4 27
1 3,7 01
9,7 03
The assets available for sale and non‐current receivable from Villa World’s Eynesbury Township joint venture in Victoria have been impaired by $15.4 million
in total. This impairment occurs at two levels. Firstly, at the Eynesbury Joint Venture level impairing the inventory by $14.8 million (50% share) which flows
through to Villa World via the share of loss from assets available for sale. This impairment is based on the net realisable value assessment and is primarily
created as a result of market conditions affecting that project. The total share of loss from equity accounted investments above of $17.4 million also includes
operating losses as well as the impairment. Secondly, a $0.6 million impairment at the Group level based on the Board's assessment of the fair value of the
joint venture investment to be $13.7 million.
12
Inventories
Current assets
Land and developments held for resale
Less: Impairment of development land
Non‐current assets
Land and developments held for resale
Less: Impairment of development land
Consolidated
Notes
30‐Jun‐13
$'000
30‐Jun‐12
$'000
87,069 84,311
(1,162)
‐
85,907
84,311
92,352 106,545
(8,987)
‐
83,365
106,545
Total inventory
Weak current and forecast trading conditions at the Augustus project in Hervey Bay, Queensland, has prompted a change in the long term strategy at this
project, and has resulted in a write down in inventory of around $8.9 million at 30 June 2013. A review of the carrying values of all other the Group projects
resulted in an impairment charge totalling $1.2 million across 3 other projects.
169,272
190,856
13
Other assets
Current assets
Prepayments
Borrowing Costs
Advanced Commissions
Other
Non‐current assets
Capitalised Borrowing Costs
Consolidated
30‐Jun‐13
$'000
30‐Jun‐12
$'000
836 833
344
344
695 203
46 43
1,921
1,423
340 404
340
404
Villa World Group Annual Report 2013
P a g e | 36
Notes to the Financial Statements 30 June 2013 (continued)
14
Property, plant and equipment
Year e nded 30 June 2013
Ope ning ne t book a m ount
Additions
Dis pos a ls
De pre cia tion cha rge
Closing net book amount
At 30 June 2013
Cos t
Accum ula te d de pre cia tion
Net book amount
Year e nded 30 June 2012
Ope ning ne t book a m ount
Additions
Dis pos a ls
De pre cia tion cha rge
Closing net book amount
At 30 June 2012
Cos t
Accum ula te d de pre cia tion
Net book amount
Lease hold
Improvements
Plant and
equipment
Total
$'000
362
31
‐
(61 )
332
492
(160 )
332
$'0 00
6 54
2 90
(13)
(302)
6 29
1,7 54
(1,125)
6 29
$'000
1,016
321
(13)
(3 63)
961
2,246
(1,285)
961
Lease hold
Improvements
$'000
Plant and
equipment
Total
$'0 00
$'000
‐ 7 96
796
393
2 27
620
‐
(31 )
(69)
(300)
(69)
(3 31)
362
6 54
1,016
460
1,6 94
2,154
(98 )
(1,040)
362
6 54
(1,138)
1,016
15
Parent entity financial information
The Group shareholders hold shares in a single holding company, being Villa World Limited (the “Company”).
(a)
Summary financial information
The individual financial statements for the parent entity, Villa World Limited, show the following aggregate amounts:
Balance sheet
Curre nt a s s ets
Total assets
Curre nt lia bilitie s
Total liabilities
Net assets
Shareholders' equity
Is s ue d ca pita l
Re s erve s
Re ta ine d e a rnings
Total equity
(Loss) / profit for the year
Total comprehensive income
(b)
Contingent liabilities of the parent entity
Consolidated
30‐Jun‐13
$'000
30‐Jun‐12
$'000
7,546 6,366
150,120 154,697
4 137
4 137
150,116
154,560
58,413 59,880
220 220
91,483
150,116
94,460
154,560
(2,978)
207,841
‐
212,973
The parent entity has provided financial guarantees in respect of the Bilateral Multi Option Facility (“MOF”) with Australia and New
Zealand Banking Group. Details of the parent entities contingent liabilities are disclosed in Note 25 – Contingencies.
Villa World Group Annual Report 2013
P a g e | 37
Notes to the Financial Statements 30 June 2013 (continued)
16
Deferred tax assets / (liabilities)
The ne t de fe rre d tax asse ts/(liabilitie s) com prise of te m porary diffe re nce s attributable to:
Ta x los s e s
Inve ntorie s
Accrua ls
Em ploye e be ne fits
Provis ions
Prope rty, pla nt a nd e quipm e nt
Othe r
Total de fe rre d tax asse ts
Se t‐off of de fe rre d ta x lia bilitie s purs ua nt to s e t‐off provis ions
Ne t de fe rre d tax asse ts/(liabilitie s)
D e fe rre d ta x a s s e ts e xpe cte d to be re cove re d within 1 2 m onths
D e fe rre d ta x a s s e ts e xpe cte d to be re cove re d a fte r m ore tha n 1 2 m onths
The de fe rre d tax liabilitie s are com prise d of:
Tra de de btors
Inve ntorie s
Othe r curre nt de btors
Pre pa ym e nts
Equity a ccounte d inve s tm e nts
Total de fe rre d tax liabilitie s
Se t‐off by de fe rre d ta x a s s e ts
Ne t de fe rre d tax asse ts
D e fe rre d ta x lia bilitie s e xpe cte d to be re cove re d w ithin 12 m onths
D e fe rre d ta x lia bilitie s e xpe cte d to be re cove re d a fte r m ore tha n 1 2 m onths
Consolidate d
3 0 ‐Jun‐1 3
$ '0 0 0
3 0 ‐Jun‐1 2
$ '0 0 0
6 ,3 0 7
1 7 ,0 5 7
4 9
2 0 8
2 ,1 4 2
2 1 6
4 2 4
2 6 ,4 0 3
(1 4 ,6 8 1 )
1 1 ,7 2 3
6 ,1 8 0
2 0 ,2 2 3
2 6 ,4 0 3
(7 ,7 1 4 )
(6 ,7 8 4 )
(1 8 4 )
‐
‐
(1 4 ,6 8 1 )
2 6 ,4 0 3
1 1 ,7 2 3
(1 ,5 0 0 )
(1 3 ,1 8 1 )
(1 4 ,6 8 1 )
1 0,3 8 3
6 ,4 2 5
4 8 9
1 6 6
1 ,4 4 0
(8 6 )
1 1 1
1 8,9 2 8
(7,6 7 0 )
1 1,2 5 8
2 ,4 9 6
1 6,4 3 2
1 8,9 2 8
(6,5 0 5 )
‐
(2 6 7 )
(4 6 )
(8 5 2 )
(7,6 7 0 )
1 8,9 2 8
1 1,2 5 8
(1,3 5 0 )
(6,3 2 0 )
(7,6 7 0 )
At 1 July 2011
(Charged)/Credited
‐ to profit or loss
‐ to other
‐ to other
comprehensive income
At 30 June 2012
(Charged)/Credited
‐ to profit or loss
‐ to other
‐ to other
comprehensive income
At 30 June 2013
Employee
benefits
$'000
Provisions
PPE
Other
Total
$'000
$'000
$'000
$'000
116
1,728
498
1,720
Tax losses Inventories
Accruals
$'000
5,478
4,905
‐
$'000
$'000
5,830
595
139
350
‐
‐
‐
‐
‐
50
(288)
(584)
‐ ‐ ‐ ‐ ‐ ‐
10,383
6,425
489
166
1,440
(4,076)
‐
10,632
‐
‐
‐
6,307
17,057
(443)
3
‐
49
42
‐
‐
702
‐
‐
208
2,142
(86)
302
‐
‐
216
15,509
‐
3,207
‐
212
18,928
‐
7,414
3
59
26,404
(1,821)
‐
212
111
255
‐
59
425
Villa World Group Annual Report 2013
P a g e | 38
Notes to the Financial Statements 30 June 2013 (continued)
17
Trade and other payables
Current liabilities
Trade payables*
Accrued expenses
Other payables#
Total current payables
Non‐current liabilities
Other payables^
Total non‐current payables
Total Payables
Consolidated
30‐Jun‐13
30‐Jun‐12
$'000
$'000
6,251 12,704
18,115 13,285
620 1,029
24,986
27,018
1,069 3,104
1,069
26,055
3,104
30,122
*
Includes $3.0 million (30 June 2012: 10.7 million) payable for the purchase of inventory, due within 12 months of the reporting date
# Includes deferred finance charge of $0.4 million (30 June 2012: $0.2 million).
^ Includes derivatives payable of $0.9 million
(a)
Derivative financial instruments
The Group is party to derivative financial instruments in the normal course of business in order to hedge exposure to fluctuations in
interest rates in accordance with the Group’s financial risk management policies (refer to Note 23 – Financial Risk Management). The gain
or loss from remeasuring is transferred to the profit and loss when the hedge is ineffective. The $50 million swap which expired on 7 June
2012 was treated as ineffective in the prior year.
Interest rate swap contracts – cash flow hedges
The “Multi‐Option’ bank facility for the Group bears an average variable interest rate of 7.68% (including line and facility fees).
It is policy to protect part of the Bilateral Multi Option Facility of $110 million from exposure to fluctuating interest rates. Accordingly, the
Group has entered into interest rate swap contracts under which it is obliged to receive interest at variable rates and to pay interest at
fixed rates. Interest payments for interest rate swaps are net settled every 30 days.
The interest rate swap contract in place is referred to in the table below:
Interest rate swap
Multi Option facility
ANZ ‐ Swap
Amount
hedged
$’000
Expiry date
Loan facility
$’000
70,000
7‐Jun‐15
110,000
Percent
hedged #
Fixed rate*
%
63.6
%
3.5
Variable rate
as at
30‐Jun‐13^*
%
Valuation
as at
30‐Jun‐13
$’000
3.2
940
^ Variable rate is 30 day BBSY @ 30 June 2013
* The swap rate outlined above does not include any margin and line fees applicable under the loan agreements.
# % of loan facility limit.
At 30 June 2013, the notional principal amounts and period of expiry of the interest rate swap contracts are as follows:
Liabilities
Financial liabilities at fair value through profit and loss:
De riva tive s us e d for he dging
Total liabilities
Le vel 2
30‐Jun‐13
30‐Jun‐12
$'000
$'000
(940 )
(940 )
(744 )
(744 )
At balance date, these contracts were liabilities with fair value of $0.9 million (30 June 2012: $0.7 million).
The gain or loss from remeasuring the hedging instruments at fair value is recognised in other comprehensive income and deferred in
equity in the hedging reserve, to the extent that the hedge is effective. There is no ineffectiveness for the year ended 30 June 2013. In
the prior year the swap the gain or loss from remeasuring is transferred to the profit and loss when the hedge is ineffective. The $50
million swap which expired on 7 June 2012 was treated as ineffective in the prior year.
Villa World Group Annual Report 2013
P a g e | 39
Notes to the Financial Statements 30 June 2013 (continued)
18
Borrowings
Fl o a t i n g R a t e
Ex p i r i n g b e y o n d o n e y e a r
(a)
Financing arrangements
Access was available at balance date to the following lines of credit:
Tota l Fina ncing fa cilitie s
Bila te ra l loa n (s e cure d) (i)
Fa cilitie s utilis e d a t re porting da te
Loa n (s e cure d) (i)
Ba nk gua ra nte e s utilis e d a t re porting da te
Loa n (s e cure d) (i)
Fa cilitie s unutilis e d a t re porting da te
Loa n (s e cure d) (i)
(i)
Bilateral loan facilities
C o n so lid ate d
3 0 ‐J u n ‐1 3
3 0 ‐J u n ‐1 2
N o t e s
$ ' 0 0 0
$ ' 0 0 0
1 8 (a )
2 9 ,3 0 7
2 9 ,3 0 7
2 4 ,9 1 7
2 4 ,9 1 7
Consolidate d
30 ‐Jun‐1 3
30 ‐Jun‐1 2
$ '0 0 0
$'0 0 0
Note s
1 10 ,0 0 0 1 10 ,0 0 0
1 10 ,0 0 0
1 1 0,0 0 0
71 ,0 4 0 74 ,1 6 6
71 ,0 4 0
74 ,1 6 6
9 ,6 5 3 10 ,9 1 7
9 ,6 5 3
10 ,9 1 7
2 3 (c)
29 ,3 0 7 24 ,9 1 7
29 ,3 0 7 24 ,9 1 7
On the 4 June 2013, the Group negotiated an extension of its primary banking facility of $110 million with ANZ, due to expire on 1
September 2014. This facility has been extended for a further two year period and now expires on 1 September 2016.
The facility limit remains at $110 million (inclusive of bank guarantees and working capital). As at 30 June 2013, the facility was drawn
exclusive of bank guarantees at $71.0 million (30 June 2012: $74.2 million). Bank guarantees issued total $9.7 million (30 June 2012: $10.9
million) and are disclosed in Note 25 – Contingencies.
The impairments of $25.6 million would have given rise to a technical breach in one financial covenant as at 31 December 2012 and 30
June 2013, however the Group has been granted a waiver of this breach from ANZ effective 31 December 2012. No restrictions have
been imposed on this facility by the financier during the year ending 30 June 2013 and drawdowns continue to be made in the ordinary
course of business. All remaining covenants under the facility were met within the required timeframes during the year.
Interest is payable based on a margin over bank bill swap rate. During the 2012 financial year the Group entered into interest rate swap
contracts to fix the interest rate at 3.5% (excluding any margin and line fees applicable under the loan agreement) on $70 million of
borrowings. Refer to Note 17(a) – Derivative financial instruments.
The fair value of non‐current borrowings and the bank guarantees equals their carrying amount, as the impact of discounting is not
significant.
(b)
Assets pledged as security
The facility is secured by registered mortgage over the majority of the Group’s property inventories. The facility is also secured by
mortgage debentures over all assets and undertakings of Villa World Limited and all 100% owned subsidiaries. The carrying amounts of
assets pledged as security for current and non‐current borrowings are:
Sec u red b y reg istered m o rtg a g e:
In v e n t o ri e s
P ro p e rt y, p l a n t a n d e q u i p m e n t
C o n so lid ate d
3 0 ‐J u n ‐1 3
3 0 ‐J u n ‐1 2
$ '0 0 0
$ ' 0 0 0
1 6 8 ,3 3 8
1 7 3 ,5 9 1
9 6 1
1 ,0 1 6
1 6 9 ,2 9 9
1 7 4 ,6 0 7
Villa World Group Annual Report 2013
P a g e | 40
Notes to the Financial Statements 30 June 2013 (continued)
19
Provisions
C urrent lia bilities
Se rvice W a rra ntie s
Oth e r provis ions
Em ploye e be ne fits ‐ a nn ua l le a ve a nd long s e rvice le a ve
Total c urre nt provisions
Non ‐c urrent liabilities
Em ploye e be ne fits ‐ long s e rvic e le a ve
Oth e r provis ions
Total non‐c urre nt provisions
Total provisions
(a)
Service warranties
Consolidate d
3 0 ‐Jun‐1 3
3 0 ‐Jun‐1 2
$ '0 0 0
$ '0 0 0
5 ,9 0 0 4 ,5 8 1
6 3 5 2 1 1
4 1 0 3 7 7
6 ,9 4 5
5 ,1 6 9
2 3 8 1 7 7
2 3 3 7
4 7 1
7 ,4 1 6
1 8 4
5 ,3 5 3
Provision is made for the estimated warranty claims in respect of Villa World Developments Pty Ltd built properties which are still under
warranty at balance date. These claims are expected to be settled within the statutory warranty period.
(b) Movements in provisions
Consolidate d 2 0 1 3
Curre nt
Ca rrying a m ount a t s ta rt of ye a r
Cha rge d / (cre dite d) to profit or los s
‐ a dditiona l provis ions re cognis e d
‐ unus e d a m ounts re ve rs e d
Am ounts incurre d a nd cha rge d
Carrying am ount at e nd of ye ar
Consolidate d 2 0 1 3
Non‐ Curre nt Liablitie s
Ca rrying a m ount a t s ta rt of ye a r
Cha rge d / (cre dite d) to profit or los s
‐ a dditiona l provis ions re cognis e d
Carrying am ount at e nd of ye ar
Se rvice
warrantie s
$ '0 0 0
Othe r
provisions
$ '0 0 0
4 ,5 8 1
2 ,9 1 1
‐
(1 ,5 9 2 )
5 ,9 0 0
2 1 1
4 2 4
‐
‐
6 3 5
Se rvice
warrantie s
Othe r
provisions
$ '0 0 0
$ '0 0 0
‐
‐
‐
7
2 2 6
2 3 3
Total
$ '0 0 0
4 ,7 9 2
3 ,3 3 5
‐
(1 ,5 9 2 )
6 ,5 3 5
Total
$ '0 0 0
7
2 2 6
2 3 3
(c)
Amounts not expected to be settled within the next 12 months
The current provision for employee benefits includes accrued annual leave and long service leave. For long service leave it covers all
unconditional entitlements where employees have completed the required period of service. The long service leave provision of $94,456
(30 June 2012: $78,319) is classified as current, since the group does not have an unconditional right to defer settlement for this
obligation. The non‐current long service leave provision covers conditional entitlements where employees have not completed their
required period of service, adjusted for the probability of likely realisation.
(d)
Legal Claim
Home warranty claim – Thornleigh
A claim of $6.78 million has been made against the Group in respect of damages regarding project development defects, concerning a
development in Thornleigh, NSW, known as Wild Ash Grove. This was first disclosed in detail in the annual report for the year ended 30
June 2010 as a contingent liability.
Provisions for the home warranty claim have been raised in the balance sheet based on best estimates. Estimating this provision requires
the exercise of significant judgement and it is therefore possible that actual amounts may differ from this estimate. The information in
relation to provisions usually required by AASB137 Provisions, Contingent Liability and Contingent Assets is not disclosed on the grounds
that it is expected to prejudice the outcome of the potential claim.
Villa World Group Annual Report 2013
P a g e | 41
Notes to the Financial Statements 30 June 2013 (continued)
20
Contributed equity
Issu ed C a p it a l
O r d in ar y sh are s fu lly p aid
B e gi n n i n g o f t h e fi n a n c i a l y e a r
S a l e o f Tr e a s u ry s h a r e s
3 0 ‐J u n ‐1 3
3 0 ‐J u n ‐1 2
3 0 ‐J u n ‐1 3
3 0 ‐J u n ‐1 2
Sh ar e s
S h a r e s
$ ' 0 0 0
$ '0 0 0
7 5 ,2 2 3
‐
8 5 ,3 7 4
5 8
3 8 3 ,5 9 2
‐
3 9 2 ,0 3 6
7 6
S h a r e b u y ‐b a c k
S h a r e s i s s u e d t o u n i t h o l d e rs o f t h e t r u s t 1
S h a r e c o n s o l i d a t i o n 2
En d o f t h e fin an c ial y e ar
1 Share Buy‐back as at 30 June 2012.
2 On 22 November 2011, a special resolution was passed at Villa World Annual General Meeting, approving the Corporatisation Deed which sanctioned the
de‐stapling for the Company and the Trust.
‐
3 8 3 ,5 9 2
7 9 ,4 7 9
‐
‐
‐
‐
(1 0 ,2 0 9 )
(7 9 ,4 7 9 )
3 8 2 ,1 2 6
(8 ,5 2 0 )
(1 ,4 6 6 )
(1 ,6 8 4 )
7 5 ,2 2 3
7 3 ,5 3 9
‐
(a)
Terms and conditions
Ordinary Shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in proportion to the number of
and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is
entitled to one vote and upon a poll each share is entitled to one vote. Ordinary shares have no par value and Villa World Limited does
not have a limited amount of authorised capital.
Dividend reinvestment plan
Villa World Limited has established a Dividend Reinvestment Plan (DRP) and shareholders may elect to have all or part of their dividend
entitlements satisfied by the issue of new shares rather than being paid in cash. The DRP has been suspended since 6 March 2008.
Options
Information relating to the Villa World Limited, including details of options issued, exercised and lapsed during the financial year, is set out
in Note 32 – Share based payments and in the Remuneration report on page 11.
Share buy‐back
On 28 June 2011 the Group announced an on‐market buy‐back of ordinary shares to commence in July 2011. On 25 October 2012 at the
AGM, a resolution was passed to refresh the Group’s flexibility to buy‐back a further 10% of the Group’s shares on‐market. During the
financial year ended 30 June 2013 1,684,469 (30 June 2012: 10,150,368) shares were acquired at an average price of 86.81 (2012: 83.9)
cents per share with prices ranging from 74.5 cents to 105.0 cents per share (30 June 2012: 75.5 cents to 90.0). The total cost of $1.47
million (30 June 2012: $8.5 million), includes $3,512 (30 June 2012: $26,000) of after tax transaction costs was deducted from ordinary
shareholder equity.
(b)
Capital risk management
The Group’s objectives when managing capital is to safeguard the ability to continue as a going concern, continue to provide returns for
shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. Consistent
with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt divided by
total tangible assets adjusted for cash on hand. Total debt is calculated as borrowings (including “interest bearing liabilities” and “other
financial commitments” as shown in the balance sheet). Total tangible assets are calculated as total assets less intangible assets.
During the financial year ended 30 June 2013, the Group continued to manage debt levels and the gearing ratio. As at 30 June 2013, the
gearing ratio was 24.7% (30 June 2012: 27.6%).
The Group has complied with the financial covenants of its borrowing facilities during the 2013 and 2012 reporting periods. The
impairments of $25.6 million would have given rise to a technical breach in one financial covenant as at 31 December 2012 and 30 June
2013, however the Group has been granted a waiver of this breach from ANZ effective 31 December 2012.
C o n so lid ate d
3 0 ‐Ju n ‐1 3
3 0 ‐Ju n ‐1 2
No te s
$ '0 0 0
$ '0 0 0
To ta l b o rro w in gs (e xc lu d in g b a n k gu a ra n te e s )
L e s s c a s h
To ta l a s s e ts
L e s s c a s h
G e a rin g ra tio
1 8
9
9
7 1 ,0 4 0 7 4 ,1 6 6
(2 ,8 2 0 )
(1 5 ,3 5 0 )
5 5 ,6 9 0 7 1 ,3 4 6
2 4 0 ,6 4 3 2 6 0 ,8 7 0
(2 ,8 2 0 )
(1 5 ,3 5 0 )
2 2 5 ,2 9 3
2 4 .7 %
2 5 8 ,0 5 0
2 7 .6 %
Villa World Group Annual Report 2013
P a g e | 42
Notes to the Financial Statements 30 June 2013 (continued)
21
Other reserves and retained profits
Hedging reserve – cash flow hedges
Balance 1 July
Revaluation – gross
Deferred tax
Transfer to net profit – gross
Deferred tax
Balance 30 June
Share‐based payments reserve
Balance 1 July
Options issued to employees
Balance 30 June
Accumulated losses
Balance 1 July
Net profit/(loss) for the year
(i)
Hedging reserve – cash flow hedges
Notes
17(a)
8(c)
8(c)
Consolidated
30‐Jun‐13
30‐Jun‐12
$'000
$'000
(521)
(195)
59
‐
‐
(657)
220
‐
220
(27)
(744)
223
38
(11)
(521)
‐
220
220
(232,062)
(13,494)
(240,269)
8,207
The hedging reserve is used to record gains and losses on an effective hedging instrument in a cash flow hedge that are recognised directly
in equity. Amounts accumulated in equity are reclassified to profit and loss in the period when the associated hedged transaction affects
profit and loss (for instance when the forecast transaction that is hedged takes place).
(ii)
Share‐based payments reserve
The share‐based payments reserve represents the fair value of options issued to executives in the prior financial period. These options
have been cancelled refer Note 32 – Share‐based payments.
22
Dividends
Franked dividends:
Consolidated
30‐Jun‐13
30‐Jun‐12
$'000
$'000
Franking credits available for subsequent financial years based on a tax rate of
30% (30 June 2012: 30%)
19,106 18,570
The above amounts represent the balance of the franked account as at the reporting date, adjusted for:
(i)
(ii)
(iii)
franking credits that will arise from the payment of the amount of the provision for income tax;
franking debits that will arise from the payment of the dividends recognised as a liability at the reporting date; and
franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were
paid as franked dividends.
No dividends were paid or declared to shareholders during the years ending 30 June 2013 and 30 June 2012.
23
Financial risk management
The Group’s activities expose itself to a variety of financial risks:
–
–
–
market risk (including interest rate risk)
liquidity risk
credit risk
It is the responsibility of the Board and management to ensure that adequate risk identification, assessment and mitigation practices are
in place for the effective oversight and management of these risks.
The Group’s overall risk management program focuses on the unpredictability of financial markets, is managed centrally to ensure
alignment of financial risk management with corporate objectives and seeks to minimise potential adverse effects on the financial
performance of the Group.
Villa World Group Annual Report 2013
P a g e | 43
Notes to the Financial Statements 30 June 2013 (continued)
23
Financial risk management (continued)
The Group uses derivative financial instruments such as interest rate swaps to hedge certain risk exposures. Derivatives are exclusively
used for hedging purposes, i.e. not as trading or other speculative instruments. The Group 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 risk, aging analysis for credit risk.
Financial risk management is carried out by the finance department under policies approved by the Board. The Board provides written
principles for overall risk management as well as written policies covering specific items, such as mitigating interest rate and credit risks,
use of derivative financial instruments and investing excess liquidity.
(a) Market risk
Market risk is the risk that the fair value or future cash flows of a financial asset or financial liability will fluctuate because of changes in
market prices. Market risk comprises price risk and interest rate risk.
(i)
Cash flow and fair value interest rate risk
The Group does not have exposure to equity investments publicly traded on the ASX. The Group’s main interest rate risk arises from long
term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group policy is to maintain $70
million of its borrowings fixed by way of interest rate swaps. During the current and prior financial years, the Group’s borrowings at
variable rate were denominated in Australian dollars.
As at the reporting date, the Group had the following variable rate borrowings and interest rate swap contracts outstanding:
30 June 2013
30 June 2012
Weighted
average
interest
rate %
7.68%
3.50%
Weighted
average
interest
rate %
8.48%
3.50%
Balance
$'000
71,040
(70,000)
1,040
Balance
$'000
74,166
(70,000)
4,166
Bilateral loan facilities
Interest rate swaps ‐ syndicated loans 1
Net exposure to cash flow interest rate risk
1 Excludes margin & line fees
An analysis by maturities is provided in (c) below.
The Group manages its cash flow interest rate risk by using floating‐to‐fixed interest rate swaps. Such interest rate swaps have the
economic effect of converting borrowings from floating rates to fixed rates. Generally, the Group raises long‐term borrowings at floating
rates and swaps them into fixed rates that are lower than those available if the Group borrowed at fixed rates directly. Under the interest
rate swaps, the Group agrees with other parties to exchange at specified intervals the difference between fixed contract rates and floating
rate interest amounts calculated by reference to the agreed notional principal amounts.
Group sensitivity
At 30 June 2013, if interest rates had changed by ‐/+ 25 basis points from the year end rates with all other variables held constant, post‐tax
losses for the year rounded to the nearest thousand, would have been $0.50 million lower/higher (30 June 2012: $0.65 million
lower/higher), mainly as a result of higher/lower interest expense from interest bearing liabilities.
(b)
Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits
with banks and financial institutions, as well as credit exposures to wholesale and retail customers, including outstanding receivables and
committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of “AA‐” are
accepted.
If customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, risk control assesses the credit
quality of the customer, taking into account its financial position, past experience and other factors.
The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised on the table
below.
Credit risk is the risk that counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into
with the consolidated entity. The Group’s assets are primarily investment and development properties, it has limited exposure to credit
risks.
The Group has no significant concentrations of credit risk for trade receivables. Trade receivable balances and the credit quality of trade
debtors are consistently monitored on an ongoing basis. Ongoing checks are performed by management to ensure that settlement terms
detailed in individual contracts are adhered to. The Group generally holds collateral in the form of deposits over development assets until
completion. The Group does not pass clear title to properties sold until they have been paid in full.
The Group’s borrowings are concentrated to a single credit provider being the Australian and New Zealand Banking Group. The Board
have considered this risk and believes that the financial benefit obtained from using a single AA‐ rated credit provider outweighs any
exposure to concentration risk.
The credit risk associated with receivables from joint venture entities is monitored through management’s review of project feasibilities
and the Group’s ongoing involvement in the operations of those entities.
Villa World Group Annual Report 2013
P a g e | 44
Notes to the Financial Statements 30 June 2013 (continued)
23
Financial risk management (continued)
Trade receivables
Counterparties without credit rating
Group 1^
Total trade receivables
Consolidated
30‐Jun‐13
30‐Jun‐12
$'000
$'000
25,557
25,557
18,792
18,792
^ Group 1 ‐ This group of receivables is primarily from the sale of house and land packages and land only.
Cash at bank and short‐term bank deposits
AA‐
(c)
Liquidity risk
15,350
15,350
2,820
2,820
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. Prudent liquidity
risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit
facilities. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows.
The Group is reliant on the availability of the financing facilities made available to it by its external provider.
Financing arrangements
The Group has access to the following undrawn borrowing facilities at the reporting date.
Flo ating Rate
Expiring be yond one ye a r
Maturities of financial liabilities
Consolidate d
3 0 ‐Jun‐1 3
3 0 ‐Jun‐1 2
Note s
$ '0 0 0
$ '0 0 0
1 8 (a )
2 9 ,3 0 7
2 9 ,3 0 7
2 4 ,9 1 7
2 4 ,9 1 7
The table below analyses the Group’s financial liabilities and net settles derivative financial instruments into relevant maturity groupings
based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows. For interest rate swaps the cash flows have been estimated using forward interest rates applicable
at the reporting date.
6 months
or less
6‐12
months
1‐2 years
2‐5 years
More than 5
years
Total
contractual
cash flows
Carrying
amount
(assets)/
liabilities
$'000
$'000
$'000
$'000
$'000
$'000
$'000
30‐Jun‐13
Real estate purchases deferred payments
Trade Payables
Bank guarantees 1
Bilateral loan facility
Total non derivatives
6,870
6,251
9,653
2,344
25,118
9,309
‐
19,905
‐
‐
2,344
11,653
‐
4,689
24,594
9,714
‐
‐
71,043
80,757
Derivatives
Net settled (interest rate swaps)
Total derivatives
‐
‐
‐
‐
‐
‐
(940)
(940)
‐
‐
‐
‐
‐
‐
45,798
6,251
9,653
80,420
142,122
3,401
6,251
9,653
71,040
90,345
(940)
(940)
(940)
(940)
1 While the bank guarantees are disclosed as 6 months or less as this is the earliest period in which they could be called, past practice indicates that this is unlikely to occur.
Villa World Group Annual Report 2013
P a g e | 45
Notes to the Financial Statements 30 June 2013 (continued)
6 months
or less
6‐12
months
1‐2 years
2‐5 years
More than 5
years
Total
contractual
cash flows
Carrying
amount
(assets)/
liabilities
$'000
$'000
$'000
$'000
$'000
$'000
$'000
30‐Jun‐12
Real estate purchases deferred payments
Trade Payables
Bank guarantees 1
2,000
12,704
10,917
9,398
‐
2,000
‐
‐
‐
‐
‐
‐
‐
‐
‐
13,398
12,704
10,917
13,148
25,408
10,917
2,507
2,507
5,014 74,584
‐ 84,612
74,166
28,128
11,905
7,014
74,584
Bilateral loan facility
Total non derivatives
Derivatives
‐
‐
121,631
123,639
(744)
(744)
Net settled (interest rate swaps)
‐
‐
‐
(744)
1 While the bank guarantees are disclosed as 6 months or less as this is the earliest period in which they could be called, past practice indicates that this is unlikely to occur.
(d)
Fair value
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
AASB 7 Financial Instruments: Disclosures require disclosure of fair value measurements by level of the following fair value measurement
hierarchy:
(a)
(b)
(c)
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
inputs other than quoted prices included within level 1 that are observed for the asset or liability, either directly (as prices) or
indirectly (derived from prices) (level 2); and
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their
short term nature.
The following summarises the major methods and assumptions used in estimating the fair values of financial instruments reflected in the
tables:
Liabilitie s
Financial liabilities at fair value thro ugh p ro fit and lo ss:
De riva tive s us e d for he dging
Total liabilitie s
Le ve l 2
3 0 ‐Jun‐1 3
3 0 ‐Jun‐1 2
$ '0 0 0
$'0 0 0
(9 4 0 )
(9 4 0 )
(74 4 )
(74 4 )
The fair value of financial instruments that are not traded in an active market (for example, over‐the‐counter derivatives) is determined
using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little
as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is
included in level 2.
The fair value of interest rate swaps are calculated as the present value of the estimated future cash flows.
24
(a)
Key management personnel disclosures
Key management personnel compensation
Short term employee benefits
Long‐term benefits
Post employment benefits
Share‐based payments
Detailed remuneration disclosures are provided in the remuneration report on pages 8 ‐ 11.
30‐Jun‐13
30‐Jun‐12
$
$
1,412,251 1,516,275
57,445
61,842
39,169
59,234
(140,773) 192,192
1,390,765 1,806,870
Villa World Group Annual Report 2013
P a g e | 46
Notes to the Financial Statements 30 June 2013 (continued)
24
Key management personnel disclosures (continued)
(b)
(i)
Equity instrument disclosures relating to key management personnel
Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares on the exercise of such options, together with terms and conditions of the options
are disclosed in Note 32 – Share‐based payments and Note 30 – Subsequent events.
Options holdings
The numbers of options over ordinary shares in the Group held during the financial year by the directors of the Villa World Limited and
other key management personnel of the Group, including their personally related parties, are set out below:
Balance at
start of the
year
Cancelled
Granted as
compensation
Balance at
end of the
year
Vested and
exercisable
Unvested
Directors
John Potter 1
‐
‐ ‐
1John Potter's 2,800,000 options granted during the year ended 30 June 2012 have been cancelled as a result of them not being exercised at the time of his
resignation pursuant to his employment agreement with the Group.
‐
‐
2,800,000
2,800,000
(2,800,000)
(2,800,000)
‐
‐
‐
(ii)
Cash settled share based payments
The remuneration structure of key management personnel includes a cash based bonus payment dependent on the achievement of
certain performance conditions, market and non‐market. This arrangement lapsed without payment on 1 November 2012. Refer to Note
32 – Share‐based payments.
(iii)
Share Holdings
The numbers of shares held during the financial year by each director of the Group and other key management personnel, including their
personally related parties, are set out below:
30‐Jun‐13
Name
Directors
Craig Treasure
Alexander Beard 1
Troy Harry
John Potter 2
Richard Anderson 3
Key Management Personnel
Scott Payten
Paulene Henderson
Balance at the start of the year
Granted during year
Other changes during the year Balance at the end of the year
Direct
Holding
Indirect Holding Direct Holding
Indirect
Holding
Direct Holding
Indirect
Holding
Direct
Holding
Indirect
Holding
‐
‐
‐
‐
‐
760
‐
2,000
‐
1,100,000
2,254,738
51,091
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
200,000
498,000
200,000
‐
‐
‐
‐
‐
‐
‐
‐
(2,254,738)
‐
‐
‐
‐
‐
‐
50,050
760
‐
500,000
‐
1,100,000
‐
51,091
‐
50,050
1Alexander Beard is the Managing Director of CVC Limited, which owns 17,593,604 shares (June 2012:15,162,358).
2 John Potter resigned on the 5 October 2012.
3Richard Anderson resigned on the 25 October 2012.
30‐Jun‐12
Name
Directors
Craig Treasure
Alexander Beard 1
Troy Harry
John Potter 2
Richard Anderson 3
Key Management Personnel
Scott Payten
Paulene Henderson
Balance at the start of the year
Granted during year
Other changes during the year Balance at the end of the year
Direct
Holding
Indirect Holding Direct Holding
Indirect
Holding
Direct Holding
Indirect
Holding
Direct
Holding
Indirect
Holding
‐
‐
‐
‐
‐
760
‐
‐
‐
600,000
6,054,737
51,091
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
2,000
‐
500,000
(3,799,999)
‐
‐
‐
‐
‐
‐
‐
‐
760
‐
2,000
‐
1,100,000
2,254,738
51,091
‐
‐
1 Alexander Beard is the Managing Director of CVC Limited, which owns 15,162,358 shares as at 30 June 2012.
2 Craig Treasure was appointed as a Director during the financial year ended 30 June 2012.
Loans to key management personnel
For the financial year ended 30 June 2013, there were no loans to key management personnel.
Villa World Group Annual Report 2013
P a g e | 47
Notes to the Financial Statements 30 June 2013 (continued)
25
(a)
Contingencies
Estimates of material amounts of contingent liabilities not provided for in the financial report
The Group entities have entered into agreements to indemnify certain employees and former employees against all liabilities that may
arise as a result of any claims against them by third parties as a result of the Group’s building activities. It is impractical to estimate the
amount that may arise from these arrangements.
A controlled entity has contractual arrangements that provide for liquidated damages under certain circumstances. It is impractical to
estimate the amount of any liability that may arise from these arrangements.
The Group has provided bank guarantees to the total of $9.7 million (30 June 2012: $10.9 million) to authorities and councils in relation to
certain works to be undertaken or maintained or in support of contractual commitments.
(b)
Estimates of material amounts of contingent liabilities provided for in the financial report
Other investigation
The Group is currently investigating potential defects relating to a development. Based on investigations to date, the Group believes that
any potential liability may be off‐set by a corresponding claim against a third party supplier and other relevant parties, in addition to
indemnification from the parties’ insurers including those held by the Group itself. This potential claim arising from this investigation is
identified as a contingent liability.
Provisions have been raised in the balance sheet based on best estimates of the ongoing costs to be incurred in progressing this
investigation only. Estimating this provision requires the exercise of significant judgement and it is therefore possible that actual amounts
may differ from this estimate. The information in relation to provisions usually required by AASB137 Provisions, Contingent Liability and
Contingent Assets is not disclosed on the grounds that it is expected to prejudice the outcome of the potential litigation.
(c)
Contingent liabilities in respect of other entities
The Group has provided guarantees in respect of the loan facility for the Eynesbury joint venture. The special conditions of the debt
facility limit the maximum principal amount recoverable from the Group to 50% of the principal outstanding, interest and reasonable
costs. As at 30 June 2013, the Eynesbury facility (at 100%) was drawn to $27 million and $1.2 million of bank guarantees were issued (30
June 2012: $32.8 million and $1.3 million bank guarantee).
26
(a)
Commitments
Capital commitments
Villa World Developments Pty Ltd, a wholly owned subsidiary of Villa World Limited, assumed certain contractual obligations in
conjunction with the execution of Put and Call Option Agreements (the Agreements) in relation to the acquisition of individual subdivided
lots in property developments to the north of Brisbane.
The put option gives Villa World Developments Pty Ltd (or a third party) the option to purchase the lot(s) at a nominated price by a sunset
date. The call option gives the vendor the right to sell to the Group at a nominated price on expiry of the put option sunset date. The
potential total commitments remaining under the agreements are $43.8 million. The commitments are crystallised on registration of the
land by the vendor and will be made available on a stage by stage basis. However, the Agreements are severable by development stage
and the commitments may be less than the total commitments under the Agreements as outlined above.
At reporting date, lots for which registration has taken place has crystallised a commitment payable by the Group of $19.4 million, with a
balance payable of $1.4 million.
(b)
(i)
Lease commitments
Non‐cancellable operating leases
The Group has a lease on office space under a non‐cancellable operating lease expiring 8 January 2019. The lease has varying terms,
escalation clauses and renewal rights. On renewal, the terms of the lease are renegotiated.
Commitments for minimum lease payments in relation to non‐cancellable operating leases
are payable as follows:
Within one year
Later than one year but not later than five years
Later than five years
27
(a)
Related party transactions
Parent entity
Villa World Limited is the parent entity within the Group and is the ultimate Australian parent entity.
(b)
Subsidiaries
Interests in subsidiaries are set out in Note 28 – Subsidiaries.
(c)
Key management personnel
30‐Jun‐13
$'000
30‐Jun‐12
$'000
226 141
1,029 635
111 269
1,366 1,045
Disclosures for key management personnel are set out in the Note 24 – Key management personnel disclosures. There were no
transactions between key management personnel and any related parties.
Villa World Group Annual Report 2013
P a g e | 48
Notes to the Financial Statements 30 June 2013 (continued)
27
Related party transactions (continued)
(d)
Loans to/from related parties
Loans to joint ve nture s
Ba la nc e a t the be ginning of the ye a r
Adva nce s
Re pa ym e nts
Equity c on tribution to joint ve nture
L e s s : Re c la s s ifica tion of Non Curre nt Re ce ive a ble to Equity Accounte d Inve s tm e nts
Balanc e at the e nd of the ye ar
Loans from joint ve nture s
Ba la nc e a t the be ginning of the ye a r
Re pa ym e nts
Balanc e at the e nd of the ye ar
Ne t balanc e at the e nd of the ye ar
Loans to / from joint ve nture s
L oa ns to joint ve nture s ‐ curre nt a s s e t
L oa ns to joint ve nture s ‐ non‐ curre nt a s s e t
P rovis ion for im pa irm e nt los s
L e s s : Re c la s s ifica tion of Non Curre nt Re ce ive a ble to Equity Accounte d Inve s tm e nts
Ne t loans to joint ve nture s
28
Subsidiaries
Note s
Consolidate d
3 0 ‐Jun‐1 3
3 0 ‐Jun‐1 2
$ '0 0 0
2 4 ,2 8 7
‐
(1 ,1 6 6 )
‐
(2 3 ,1 2 1 )
‐
‐
‐
‐
‐
‐
2 8 ,9 6 8
(5 ,8 4 7 )
(2 3 ,1 2 1 )
$ '0 0 0
2 7 ,1 2 8
8 8 5
(6 ,4 3 9 )
2 ,7 1 3
‐
2 4 ,2 8 7
5 7 1
(5 7 1 )
‐
2 4 ,2 8 7
1 ,1 6 6
2 8 ,9 6 8
(5 ,8 4 7 )
‐
‐
2 4 ,2 8 7
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the
accounting policy described in note 1(c). All subsidiaries are incorporated in Australia.
Name of Entity
Parent entity
Villa World Limited
Controlled entities
Villa World Trus t 1
Villa World Developments Pty Ltd
Villa World Ma na gement Limited 2
GEO Pla nning Pty Ltd 2
GEO Rea lty Pty Ltd 2
Villa World (Vic) Pty Ltd
GPDQ Pty Ltd
Hervey Ba y (JV) Pty Ltd
Cornell's Hill Pty Ltd 3
Cotton Ventures Pty Ltd 3
Country of
incorporation
Equity holding
Class of shares
30‐Jun‐13
30‐Jun‐12
%
%
Aus tra lia
Aus tra lia
Aus tra lia
Aus tra lia
Aus tra lia
Aus tra lia
Aus tra lia
Aus tra lia
Aus tra lia
Aus tra lia
Ordina ry
Ordina ry
Ordina ry
Ordina ry
Ordina ry
Ordina ry
Ordina ry
Ordina ry
Ordina ry
Ordina ry
‐
100
‐
‐
‐
100
100
100
100
100
100
100
100
100
100
100
100
100
50
50
1 The trust was wound up 10 March 2013.
2
Villa World Management Pty Ltd, GEO Planning Pty Ltd and GEO Realty Pty Ltd were de‐registered on the 7 November 2012, 27 March 2012 and 11 January
2012 respectively.
3
On the 29 November 2012 Villa World Developments Pty Ltd purchased the remaining 50% in Cotton Ventures Pty Ltd and Cornell’s Hill Pty Ltd to give the
Group full ownership of both companies (Refer Note 29).
Villa World Group Annual Report 2013
P a g e | 49
Notes to the Financial Statements 30 June 2013 (continued)
29
Interest in joint ventures
The Group has the following interests in jointly controlled entities.
Nam e of Entity
Eyne s b u ry H o ld in gs P ty L td
Eyne s b u ry P a s tora l Trus t
Eyne s b u ry G o lf P ty L td
Eyne s b u ry D e ve lo p m e n t J o int Ve n ture
Expre s s ion H o m e s P ty L td
% Owne d
Purpose
5 0
5 0
5 0
5 0
5 0
The o w ne r o f the Eyn e s b u ry D e ve lop m e n t J o in t Ve n tu re L a n d, Vic toria , a s Tru s te e
The o w ne r o f the Eyn e s b u ry D e ve lop m e n t J o in t Ve n tu re L a n d, Vic toria .
The o p e ra tio n of th e go lf c o urs e a nd h o m e s te a d h o s p ita lity fa c ilitie s a t Eyn e s b ury, Vic to ria .
Re s id e n tia l d e ve lo p m e n t a t Eyn e s b u ry, Vic to ria .
Re s id e n tia l d e ve lo p m e n t a nd c o n s tru c tion p ro je c ts p rim a rily in Victo ria .
The carrying amounts of these joint ventures at balance date were:
C o n so lid ate d
No te s
3 0 ‐J u n ‐1 3
$ '0 0 0
3 0 ‐J u n ‐1 2
$ '0 0 0
J o in t ve n tu re in te re sts
Eyn e s b u ry P a s to ra l Tru s t
Eyn e s b u ry D e ve lo p m e n t J o in t Ve n tu re
Eyn e s b u ry G o l f P ty L td
P lu s : R e c la s s ific a tio n fro m n o n c u rre n t re c e iva b l e to e q u i ty a c c o u n te d in ve s tm e n ts
1 0
L e s s : Sh a re o f n e t (lo s s )/p ro fi ts o f a s s o c ia te s a n d jo in t ve n tu re s
L e s s : Im p a irm e n t o f in ve s tm e n t in Eyn e s b u ry G ro u p
L e s s : Im p a irm e n t o f Eyn e s b u ry G o lf P ty L td
To tal in ve stm e n t ac c o u n te d fo r u sin g th e e q u ity m e th o d fo r th e Eyn e sb u ry G ro u p
C o rn e ll's H il l P ty L td
C o tto n Ve n tu re s P ty L td
V illa W o rld 's aggre gate sh are o f jo in t ve n tu re s' asse ts an d liab ilitie s
C u rre n t a s s e ts
N o n ‐c u rre n t a s s e ts
To tal asse ts
C u rre n t lia b ilitie s
N o n ‐c u rre n t lia b ilitie s
To tal liab ilitie s
Ne t asse ts
V illa W o rld 's aggre gate sh are o f jo in t ve n tu re s' re ve n u e , e xp e n se s an d re su lts
Re ve n u e s
Ex p e n s e s
P ro fit / (lo ss) b e fo re in c o m e tax
6 ,5 7 3
2 ,0 8 2
1 ,0 7 4
2 3 ,1 2 1
(1 7 ,4 4 8 )
(6 2 7 )
(1 ,0 7 4 )
1 3 ,7 0 1
‐
‐
1 3 ,7 0 1
3 1 ,0 4 5
2 ,2 4 6
3 3 ,2 9 1
3 ,4 3 0
4 1 ,4 0 3
4 4 ,8 3 3
(1 1 ,5 4 2 )
5 ,6 8 7
2 3 ,1 3 5
(1 7 ,4 4 8 )
7 ,0 7 3
5 2 2
1 ,0 7 4
‐
1 ,0 6 0
‐
(1 ,0 7 4 )
8 ,6 5 5
6 2 1
4 2 7
9 ,7 0 3
2 0 ,2 4 6
3 8 ,2 7 9
5 8 ,5 2 5
9 ,7 7 3
4 4 ,6 2 0
5 4 ,3 9 3
4 ,1 3 2
2 4 ,2 5 0
2 2 ,5 9 1
1 ,6 5 9
V illa W o rld 's aggre gate sh are o f jo in t ve n tu re s' c o n tin ge n t liab ilitie s
Ban k gu aran te e s
1 ,2 4 7
1 ,7 9 3
Each of the venturers in the joint venture are jointly and severally liable for the debts of the joint venture, except for the Eynesbury
Pastoral Trust and Eynesbury Joint Venture, which are severally liable to the extent of the venture interest.
In relation to the Eynesbury Joint Venture, where an agreement involves the venturers in joint or joint and several liability, each venturer
must indemnify and keep indemnified the other party for any liabilities incurred by that venturer under the Venture Agreement in excess
of that proportion of the total liabilities under the Venture Agreement which corresponds to the other venturer’s venture interest.
30
(a)
Events subsequent to balance date
Sale of the Underlying Assets in the Eynesbury Group
Villa World advised the market, via an ASX announcement on 20 August 2013, that contracts for the sale of the Eynesbury project, in
which Villa World holds a 50% interest, are now unconditional.
The sale to Hyde Property Group Pty Ltd includes all undeveloped land, as well as the Eynesbury golf course land and business, for a total
sale price of $60 million (plus GST). Completion is due in two tranches, the first on 1 March 2014 and the second on 1 March 2015.
The purchaser has paid a non‐refundable deposit of $1 million, with a further $5 million payable by 18 November 2013.
As a result of the sale becoming unconditional, the carrying value of Villa World’s investment in Eynesbury Joint Venture as at 30 June
2013 has been assessed at $13.7 million (compared to $12.8 million at 31 December 2012).
The carrying value represents the net present value of the sales proceeds expected to be received by Villa World from this transaction.
The timing of distribution of those proceeds to Villa World and its JV partner is subject to completion of the contracts occurring when
scheduled, and further discussions with the Joint Venture’s financier.
The completed inventory at the Eynesbury project will be retained by the Joint Venture and will continue to be sold to end users.
Villa World Group Annual Report 2013
P a g e | 50
Notes to the Financial Statements 30 June 2013 (continued)
30
Events subsequent to balance date (continued)
(b)
Employee Option Plan
The grant of options over ordinary shares in Villa World Limited to the Executive Chairman and Managing Director, Craig Treasure, was
approved by shareholders at a general meeting on 22 July 2013. The issue of options is designed to provide long term incentives for the
Executive Chairman and Managing Director to deliver long term shareholder returns.
Subsequent to the financial year end, the board have also approved the issue of options over ordinary shares in Villa World Limited to key
management personnel. Under the plan, granted options will only vest if the executive chairman and key management personnel
continue their respective service agreements with the Group for three years from grant date.
The assessed fair value at grant date of options is 10 cents per option. The fair value at grant date is independently determined using a
Binomial Option Price Valuation Model that takes into account the exercise price, the term of the option, the impact of dilution, the share
price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the
term of the option.
The model inputs for options granted include:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
options are granted for no consideration and vested options are exercisable for a period of 6 months after vesting
exercise price: $1.25
grant date: 26 July 2013
expiry date: 26 January 2017
share price at grant date: $1.25
expected price volatility of shares: 25%
expected dividend yield: 9%
risk free rate: 2.57%
The volatility assumption is representative of the level of uncertainty expected in the movements of the share price over the life of the
award. The historic volatility of the market price of the share and the mean reversion tendency of volatilities are the two factors which are
assessed when determining the expected volatility.
Set out below is a summary of the terms and conditions of each grant of options under the plan which will effect remuneration in the
future reporting period:
Grant
Date
Expiry
Date
Exercise
Price
Granted as
compensation
Value of
options at
grant date^
Craig Treasure
Scott Payten
Paulene Henderson
^ The value of options at grant date calculated in accordance with AASB2 Share‐based Payment of options granted 26 July 2013 is 10 cents per option.
$1.25 3,000,000
$1.25 750,000
$1.25 250,000
Executive Chairman
Chief Operating Officer
Chief Financial Officer
26/07/2013
26/07/2013
26/07/2013
26/01/2017
26/01/2017
26/01/2017
$300,000
$75,000
$25,000
No other matters have arisen in the interval between the end of the financial year and the date of this report, any item, transaction or
event of a material and unusual nature likely, in the opinion of the Group, to affect significantly the operations of the Group, the results of
those operations, or the state of affairs, in future financial years.
31
Reconciliation of profit after income tax to net cash inflow from operating activities
P ro fit/ (lo ss) fo r th e ye ar
D e p re c ia t io n a n d a m o rt i s a t i o n
C a p i t a l is e d in t e re s t & fe e s
B o rro w in g c o s t s
N e t (ga in )/lo s s o n d is p o s a l o f in v e s t m e n t p ro p e rt ie s
N e t (ga in )/lo s s i n fa ir v a lu e o f i n v e s t m e n t p ro p e rt ie s a n d o t h e r a s s e t s
N e t (ga in )/lo s s o n d is p o s a l o f p ro p e rt y , p la n t a n d e q u i p m e n t
Sh a re o f (ga in )/l o s s fro m a s s o c ia t e
Im p a i rm e n t o f in v e s t m e n t i n e q u i t y a c c o u n t e d i n ve s t m e n t s
H e d ge i n e ffe c t iv e n e s s o n i n t e re s t ra t e s w a p s
Im p a i rm e n t o f d e ve l o p m e n t la n d
(In c re a s e )/d e c re a s e i n t ra d e d e b t o rs
D e c re a s e /(i n c re a s e ) i n in v e n t o rie s
(D e c re a s e )/in c re a s e i n p a ya b l e s
(In c re a s e )/d e c re a s e i n n e t d e fe rre d t a x a s s e t s
D e c re a s e /(i n c re a s e ) i n o t h e r o p e ra t in g a s s e t s a n d l i a b i l i t i e s
In c re a s e /(d e c re a s e ) i n o t h e r p ro v is i o n s
N e t c ash in flo w / (o u tflo w ) fro m o p e ratin g ac tivitie s
C o n so lid ate d
3 0 ‐J u n ‐1 3
3 0 ‐J u n ‐1 2
$ ' 0 0 0
(1 3 ,4 9 4 )
3 6 3
3 ,1 0 5
3 4 4
‐
‐
1 4
$ ' 0 0 0
8 ,2 0 7
3 3 1
2 ,6 0 1
1 ,9 8 4
4 1
6 1 0
5 6
1 7 ,4 3 5
(1 ,4 3 8 )
6 2 7
‐
1 0 ,1 4 9
(7 ,8 8 6 )
1 1 ,4 3 5
(5 ,3 7 9 )
(4 0 6 )
7 6 5
9 4
‐
(1 ,0 2 4 )
7 0 0
(1 1 ,4 9 7 )
(1 6 ,6 8 0 )
5 9 3
(9 9 )
8 5 5
1 6 7
1 7 ,1 6 6
(1 4 ,5 9 1 )
Villa World Group Annual Report 2013
P a g e | 51
Notes to the Financial Statements 30 June 2013 (continued)
32
(a)
Share‐based payments
Employee option plan
John Potter resigned as Managing Director on the 5 October 2012 at which time he held 2,800,000 options. These options have been
cancelled as a result of them not being exercised pursuant to his employment agreement.
A Group Executive resigned on the 21 December 2012 at which time he held 400,000 options. These options have been cancelled as a
result of them not being exercised pursuant to the consultancy agreement with the Group.
(i)
Options issued during and subsequent to this financial year
No options were granted during the financial year.
The grant of options over ordinary shares to the Executive Chairman was approved by shareholders at a general meeting on 22 July 2013.
The Board also approved the grant of option to key management personnel after the end of the financial year. (Refer Note 30 – Events
subsequent to balance date).
(b)
Expenses arising from share‐based payment transactions
The employment contracts of Scott Payten and Paulene Henderson provide for guaranteed cash settled share based bonus (no Board
discretion). The value of the bonus is equal to the volume weighted average price paid for each Villa World share for the 10 trading days
prior to 1 November 2012 less $1.00 multiplied by 1,000,000 (approved 16 December 2009) for Scott Payten, and 200,000 (approved 15
November 2010) for Paulene Henderson. The value of this bonus was $140,773. The cash settled share‐ based bonus for Scott Payten and
Paulene Henderson lapsed without payment on the 1 November 2012.
Total expenses arising from share‐based payment transactions recognised during the year as part of employee benefit expenses were as
follows:
Options issued to Directors
Fair value of cash settled share based payments for key management personnel
30‐Jun‐13
$
‐
(140,773)
(140,773)
30‐Jun‐12
$
219,648
‐
219,648
33
Segment information
Description of segments
Management has determined the segments based on the reports reviewed by the executive committee that are used to make strategic
decisions.
The Group and its controlled entities develop and sell residential land and buildings predominately in Queensland and Victoria. The
individual operating segments of each geographical area have been aggregated on the basis that they possess similar economic
characteristics and are similar in nature of the product and production processes.
The committee considers the business from both a product, and within Australia, a geographical perspective and has identified two
reportable segments:
– Property development and construction – Queensland
– Property development – Victoria
The executive team considers a range of information relating to the reportable segments including:
– Historical results of the segment, using both revenue and gross margin;
–
Future forecasts of the segment for the remainder of the year; and
– Key risks and opportunities facing the segments.
(a)
(i)
Segment information provided to the executive committee
Segment revenue
The revenue from external parties reported to the executive committee is measured in a manner consistent with that in the income
statements. Revenues from external customers are derived from the sale of residential house and land products.
(ii)
Segment gross margin
The executive committee assesses the performance of the operating segments based on a measure of gross margin. This
measurement basis consists of revenue less land, development, construction and sundry costs. It excludes the effects of non‐
recurring expenditure from the operating segments such as fair value impairments on inventory and other assets.
The segment information provided to the executive committee for the reportable segments for the year ended 30 June 2013 is as follows:
Villa World Group Annual Report 2013
P a g e | 52
Notes to the Financial Statements 30 June 2013 (continued)
33
Segment information (continued)
From continuing operations
Segment revenue from land development, residential building and construction
contracts
Queensland
Victoria
Other
Total segment revenue from land development, residential building and construction
contracts
Consolidated
30‐Jun‐13
$'000
30‐Jun‐12
$'000
Notes
143,224 115,364
31,136
‐
26,172
‐
4
169,396
146,500
Segment cost of land development, residential building and construction contracts
Queensland
Victoria
Other
Total segment cost of land development, residential building and construction
contracts
103,429
18,098
874
89,494
18,782
1,272
5
122,401
109,548
Segment gross margin
Queensland
Victoria
Other
Total segment gross margin
39,795
8,074
(874)
46,995
25,871
12,354
(1,272)
36,952
Segment assets and liabilities are not directly reported to the executive committee when assessing the performance of the operating
segments and are therefore not relevant to the disclosure.
34
Discontinued operations
Description
In 2009, the Group announced through several ASX announcements of its intention to sell down the assets in the Trust to reduce the
level of debt for the Group and to concentrate on the land development, residential building and construction contracts. As a result, the
Trust segment was classified as a disposal group held for sale in the income statement and balance sheet.
During the 2012 financial year the last remaining asset was sold. No further assets in relation to discontinued operations are now held,
hence there is no change to the investment properties classified as a disposal group since the 2012 annual report.
Financial information relating to the disposal group for the period is set out further below:
(a) Financial performance and cash flow information
Revenue
Expenses
Net income from discontinued operations
Net gain / (loss) on disposal of investment properties
Net gain / (loss) in fair value of investment properties
Net profit before income tax
Profit from discontinued operations after income tax
Net cash inflow / (outflow) from operating activities
Net cash inflow / (outflow) from investing activities
Net increase / (decrease) in cash generated by the discontinued operation
Consolidated
30‐Jun‐13
30‐Jun‐12
$'000
‐
‐
‐
‐
‐
‐
‐
‐
‐
‐
$'000
1,040
(99)
941
(43)
(610)
288
288
952
6,950
7,902
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Villa World Limited
Directors Declaration
30 June 2013
In the directors’ opinion,
(a)
the financial statements and notes, set out on pages 18 to 53 are in accordance with the Corporations Act 2001, including:
(i)
(ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting
requirements; and
giving a true and fair view of the consolidated Group’s financial position as at 30 June 2013 and of its performance, for
the financial year ended on that date; and
(b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and
payable.
Note 1(b) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board.
The directors have been given the declarations by the executive chairman and managing director and chief financial officer required by
section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Craig Treasure
Executive Chairman and Managing Director
Gold Coast
26 August 2013
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ASX additional information
Additional information requested by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report are
set out below:
Shareholdings (as at 26 August 2013)
The following holds were listed in the register of substantial shareholders;
CVC Limited
John Leaver and related interests
On‐market buy‐back
No of shares held
17,593,104
9,798,774
On 25 October 2012, shareholders gave approval for the Company to buy‐back up to 15,000,000 shares in the 12 month period following
that date. During the financial year, 1.7 million shares were purchased up to 26 August 2013 for a consideration of $1.5 million.
Distribution of shareholders (as at 26 August 2013)
Category
1 ‐ 1,000
1,001 ‐ 5,000
5,001 ‐ 10,000
10,001 ‐ 100,000
100,001 and over
Total
No of shareholders
Total 695
1,660
392
452
64
3,263
The total number of shareholders with less than a marketable parcel of 397 shares is 83.
Unquoted equity securities:
Options issued under the Villa World Option Plan to take up ordinary shares, as part of an employee incentive plan, as at 26 August 2013 is
4,500,000.
Classes of units and voting rights
As at 30 June 2013 there were 3,289 shareholders (30 June 2012: 3,773). The voting rights attaching to the shares, as set out in section
253C of the Corporations Act were:
Subject to any rights or restrictions for the time being attached to any class or classes of share:
(a)
(b)
at an adjourned meeting the holders with voting rights who are present either in person or by proxy constitute a quorum and are
entitled to pass the resolution; and
on a show of hands every person present who is a shareholder has one vote and on a poll every present in person or by proxy or
attorney has one vote for each share held.
Options:
There are not voting rights attached to the options.
For details of registered office and share registry details refer to page 2 – Shareholder Information.
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20 largest shareholders (as at 26 August 2013)
CVC LIMITED
LEAGOU FUNDS MANAGEMENT PTY LIMITED
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
WENOLA PTY LIMITED
J K M SECURITIES PTY LIMITED
CITICORP NOMINEES PTY LIMITED
CONTEMPLATOR PTY LTD
HORRIE PTY LTD
MANDEL PTY LTD
ABN AMRO CLEARING SYDNEY NOMINEES PTY LTD
CITICORP NOMINEES PTY LIMITED
ROCKET SCIENCE PTY LTD
LEITHNER & COMPANY PTY LTD
ATKONE PTY LTD
DEBUSCEY PTY LTD
PLANETTE THOROUGHBRED TRADING PTY LTD
MR RICHARD SCHEINBERG
TRACIE'S FUTURE PTY LTD
CRAIG G TREASURE PTY LTD
J P MORGAN NOMINEES AUSTRALIA LIMITED
Shares held
17,593,104
5,060,358
3,650,000
3,171,306
2,050,000
1,946,453
987,804
850,000
850,000
844,388
807,610
750,000
600,000
590,000
567,037
561,000
560,000
503,370
500,000
430,107
42,872,537
% of capital
held
23.92
6.88
4.96
4.31
2.79
2.65
1.34
1.16
1.16
1.15
1.10
1.02
0.82
0.80
0.77
0.76
0.76
0.68
0.68
0.58
58.30
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