ANNUAL FINANCIAL
REPORT
FOR THE YEAR ENDED 30 JUNE 2016
CELEBRATING 30 YE ARS
SUCCESS THROUGH PROPERT Y
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: villaworld.com.au
Email: info@villaworld.com.au
Shareholder information and enquiries
All enquiries and correspondence
regarding shareholdings should
be directed to Villa World’s share
registry provider:
Computershare Investor Services
Pty Limited
Mailing address: GPO Box 2975EE,
Melbourne VIC 3000
Telephone:
1300 651 684 or
+61 3 9415 4000 (outside Australia)
Fax:
+61 3 9473 2500
(within & outside Australia)
Website:
computershare.com.au
Email:
web.queries@computershare.com.au
Villa World Info line
Inside Australia: 1300 552 434
Outside Australia: +61 7 5588 8851
Company Secretary:
Paulene Henderson
CONTENTS
Key Highlights
4
Chairman’s Report
6
Managing Director and
Chief Executive Officer’s
Review
8
Operating Financial Review
10
Current Portfolio
16
Directors’ Report
26
Auditor’s Independent
Declaration
48
Corporate Governance
Statement
49
Financial Statements
50
Directors’ Declaration
89
Independent Auditor’s
Report to the Members of
Villa World Limited
90
ASX Additional Information
92
Rochedale Grand Display Home - Rochedale
2
VILL A WORLD LIMITED ANNUAL REPORT 2016
VISION
MISSION
Villa World’s vision is to be the
Company of choice for people
to achieve success through
property.
Villa World’s mission is to
create property solutions where
demand meets opportunity as
we deliver value and positive
experiences across all our
relationships.
VALUES
PERFORMANCE
KNOWLEDGE
We efficiently deliver effective
and quality outcomes to achieve
financial objectives.
AGILITY
We are agile in how we run the
business, we adapt quickly and
initiate change.
INTEGRITY
Our people are accountable,
make ethical decisions and are
socially responsible.
Our team applies high level skills
to achieve positive outcomes.
UNITY
We are a team – we care for and
empower our people, support
each other and recognise
achievements.
RESPECT
We value and appreciate our
people, partners and customers.
VILL A WORLD LIMITED ANNUAL REPORT 2016
3
KEY HIGHLIGHTS
REVENUE
UP
20%
32% NET PROFIT
AFTER TAX
EARNINGS
PER SHARE UP
19%
1
13%
DIVIDEND
UP
Portfolio of 5,937 lots
representing 5 years
sales diversified across
and within east coast states
67% 32% 1%
QUEENSLAND
6 CORRIDORS
VICTORIA
3 CORRIDORS
NEW SOUTH
WALES
4
VILLA WORLD LIMITED ANNUAL REPORT 2016 SALES
PER FY
41%
FY
16
FY
14
FY
15
FY
13
FY
12
496
611
831
843
1185
LAND
DELIVERED
26%
FY12
FY13
FY14
FY15
FY16
661
757
618
840
CONSERVATIVE
GEARING OF
25.6%
With headroom / unused capacity
27.6%
24.4%
18.7%
16.9%
1060
Gearing (%)
25.6%
VILL A WORLD LIMITED ANNUAL REPORT 2016
5
CHAIRMAN’S
REPORT
ON OUR 30TH ANNIVERSARY, I AM PROUD TO ANNOUNCE ANOTHER
TREMENDOUS SET OF RESULTS FOR VILLA WORLD.
Our philosophy of success through property not
only reflects our strength in the short-term but
more importantly our commitment to creating
long-term value for shareholders.
land and housing to owner occupiers, first home
buyers and local investors in the affordable to mid-
market range. We will continue to concentrate our
operations in these markets that we know so well.
This year Villa World recorded a statutory after
tax profit of $33.7 million, an increase of 32% on
the previous year. This result flowed from a 20%
increase in revenue to $387 million.
The Board declared total full year dividends of 18
cents per share representing a yield of 7% fully
franked. This is consistent with the Company’s
Dividend Policy distributing 50 percent to 75
percent of annual net profit after tax. We remain
one of the highest yielding stocks on the ASX.
In order to ensure long-term value for
shareholders, the Board paid particular attention
to Villa World’s strategy, risk and governance
during the year.
Refreshed strategies have been put in place to
achieve our goal of being recognised as one
of Australia’s leading property development
companies. We will continue to focus on our teams,
customers, shareholders and our core capabilities.
We will grow our core business with new projects
in our existing markets, enter new geographical
locations and new partnering arrangements. We
will lead through continued strong performance,
strong management and learn from our experience.
This approach builds off our current strengths,
the first of which is our product. The Villa
World portfolio includes an inventory of high
quality projects and completed designer
homes. During the year, we added a number of
strategic acquisitions to the mix, including highly
sought- after land in south east Queensland, at
Logan, Arundel and Strathpine. We now have an
impressive development pipeline in excess of
five years.
Our second strength is our expertise and
continued focus on our core business of providing
Thirdly, the strength, vision and depth of our
management team, which has been in place for a
number of years and capably led by Chief Executive
Officer Craig Treasure, provides a stable anchor for
the Company and strong leadership going forward.
And finally, our financial strength, characterised
by prudent gearing, a healthy cash flow and solid
balance sheet, provides a strong foundation for
Villa World to pursue growth opportunities.
This year, as well as delivering more product for
Villa World families, we did something very special
through an innovative collaboration with the Gold
Coast Project for Homeless Youth. The Company
delivered a new seven-bedroom crisis care facility
built through donations of labour, materials and
money from Villa World, our staff and our business
partners. We look forward to handing over the
keys and making a real difference for young people
faced with living on the streets. I thank all involved
in the project, including the Villa World team who
generously made personal donations in support
of this project.
I would like to acknowledge the valuable contribution
throughout this year from my fellow Independent
Directors, David Rennick and Donna Hardman.
David’s insight across property and legal issues has
served the Company well, particularly in his role as
Chair of the Audit and Risk Committee.
Since joining the Board in February 2016,
Donna’s experience beyond the property sector
has bolstered the skills and diversity of our Board
and has already been marked by a number of
positive changes under her guidance as Chair of
the Remuneration and Nomination Committee.
6
VILL A WORLD LIMITED ANNUAL REPORT 2016
“Refreshed strategies have been put in place to achieve
our goal of being recognised as one of Australia’s leading
property development companies.”
I would like to thank our Chief Executive Officer and
Managing Director, Craig Treasure, his management
team and all the Villa World staff for the exceptional
effort they put in during the past year to achieve
these outstanding results.
Villa World has entered an exciting period in its
history. With a reinvigorated strategic focus,
Villa World will continue to grow the portfolio
characterised by increasing diversity in geography
and product that appeals to the customer market
and performs well in variable market conditions.
I take pleasure in presenting our Annual Report.
It is our demonstration that, both now and into
the future, Villa World is delivering success
through property.
Mark Jewell
Chairman
Bill Hoyer House, Homeless Youth Project - Gold Coast
VILL A WORLD LIMITED ANNUAL REPORT 2016
7
MANAGING DIRECTOR
AND CHIEF EXECUTIVE OFFICER’S REVIEW
VILLA WORLD’S SUCCESS IS NOT FOUNDED ON ONE SET OF GOOD RESULTS.
IT COMES FROM GETTING THE BUSINESS FUNDAMENTALS RIGHT AND
CONSISTENTLY ACHIEVING OR BETTERING WHAT WE SET OUT TO DO.
I am pleased to report that FY16 was a continuation
of our year-on-year growth and the successful
execution of our business strategy.
We exceeded our profit guidance of $46.6 million
with a before tax result of $47.2 million and closed
out the year with a 20% increase in revenue to
$387 million.
Our FY16 Net Profit After Tax result of $33.7
million was up 32% from $25.6 million last year,
and Earnings Per Share increased 19%.
These results exemplify the notion of a ‘step
change’ in our business – a notion we have been
talking about for some years and have delivered
across our four strategic pillars of sales, delivery,
portfolio, and capital management.
SALES
We continued to enjoy strong sales growth,
meeting our sales target for the year with 1,185
contracts to the end of June 2016, compared with
843 in FY15, and almost double the result from
three years ago.
The Queensland market again performed well
and our turn-key delivery model gained traction in
the Victorian market. Our proven experience and
investment in valued relationships with suppliers
and contractors has delivered a smoother passage
to enter new geographic markets, such as New
South Wales.
With $165.6 million in carried forward sales and
new projects contributing to current and future
earnings growth, the Company expects to maintain
sales growth and profit momentum into FY17.
DELIVERY
Our Company’s focus on operational efficiency and
long-term relationships underpinned strength in the
delivery of land and houses, with 47% more product
in FY16 than the previous four-year average.
PORTFOLIO
Growth in the Company’s portfolio reflects
greater geographic and product diversification
enabling us to capitalise on variabilities across
market segments.
The Company will adopt a carefully-managed
approach to the New South Wales market, and will
shortly finalise partnering arrangements for an
initial 90 homes to be built in south west Sydney.
We delivered in line with our strategy of acquiring
land in strategic corridors to support continued
growth in our delivery output. With 5,937 lots, up
from 5,191 last year, we maintain a solid five year
growth pipeline in sought-after locations.
CAPITAL MANAGEMENT
Our operational result was underpinned by a strong
balance sheet and cash flow.
Net debt at year-end was $120 million with $32.7
million of undrawn capacity in debt facilities.
Net tangible assets at year-end were $236.9 million,
up from $220.6 million, representing $2.15 per
share (FY15: $2.00) before the declaration of the
final dividend.
8
VILLA WORLD LIMITED ANNUAL REPORT 2016 “Our FY16 net profit after tax result of $33.7 million
was up 32% from $25.6 million last year, and
earnings per share increased 19%.”
The Company continues to maintain a prudent
gearing level at 25.6%, within the target range
of 15-30%.
Careful financial management over the medium
term has delivered flexibility and increasing
diversity in funding sources, and created a strong,
sustainable balance sheet. This will continue as
we move ahead with our forward plan.
FOCUS, GROW, LEAD
Against the backdrop of continued strong
performance across the Company’s four pillars –
sales, delivery, portfolio and capital management -
Villa World is ideally positioned for the future.
Our 30th year as a listed company afforded us
the opportunity to reflect on our strategy and plot
the course for the next decade. This reflection
has brought into sharper focus the key areas the
Company will concentrate on to achieve its vision.
Our strategy roadmap is clear and the
commitment of our team is unwavering.
We look forward to welcoming more families
to their Villa World home and delivering
success through property.
Craig Treasure
Managing Director and
Chief Executive Officer
VILL A WORLD LIMITED ANNUAL REPORT 2016
9
OPERATING FINANCIAL
REVIEW
FINANCIAL RESULT
During 2016, the Company continued to build
on its previous successes and this year has
delivered continued strong earnings growth,
improved shareholder returns and outstanding
operating performance.
The Company finished the 2016 financial
year with a strong full year result, reporting a
statutory net profit after tax of $33.7 million
(30.6 cps), a 32% increase on net profit after
tax of $25.6 million (25.6 cps) reported for the
period ended 30 June 2015.
The Company reported a profit before tax
of $47.2 million, exceeding guidance of
$46.6 million.
REVENUE FROM LAND
DEVELOPMENT, RESIDENTIAL
BUILDING AND CONSTRUCTION
CONTRACTS
Continued sales momentum combined with
$134.1 million1 of carried-forward sales from
FY15, and an outstanding delivery of land
and housing resulted in 1,073 accounting
settlements2 in FY16 (FY15: 816). As a result,
revenue increased by 20% to $387.0 million
(FY15: $321.6 million).
The revenue mix reflects the Company’s
continued focus on its core capabilities in
house and land, as well as strong land only
sales, particularly in Victoria. In total, 73% of
revenue was generated through house and land
product (FY15: 80%). Queensland remained the
main contributor to revenue at 83% (2015: 90%).
Average revenue per lot was $355.5k down
from $395.2k in the prior year, and is reflective
of product mix. The average revenue per
house and land lot rose 3% to $424.6k. With
a large number of settlements of our land
only product, including a significant portion
of settlements at our affordable land estate,
1 Inclusive of GST.
2 1,073 settlements of Company owned lots (FY15: 814), and nil lots
relating to joint ventures (FY15: 2), which are reflected in Share of
Joint Venture Profits.
10
Cardinia Views, in south east Melbourne, the
average land only revenue was down to $244.1k
per lot. The previous corresponding year had
been positively impacted by the settlement of
premium land only projects Astonbrook, Seaside,
Lacosi and Waterline.
Pleasingly an average of 4.5% revenue growth
was achieved during the year.
PERFORMANCE
FY16
FY15
CHANGE
Number of projects
contributing to profit
Revenue - property sales
($m)
House and Land
Land Only
Revenue - development
and project management
fee ($m)
Settlements (lots)A
- inc. Joint Ventures
Settlements (lots)
- ex. Joint Ventures
House and Land
Land Only
Revenue - property sales
($k/Lot)B
House and Land
Land OnlyC
Gross margin ($m)
Margin (%)
Underlying gross margin
($m)D
Underlying margin (%)
19
20
▼
-5%
387.0 321.6 ▲ 20%
280.9 258.7 ▲ 9%
106.1
1.2
62.9 ▲ 69%
▲ n/m
0.0
1073
816
▲ 31%
1073
814
▲ 32%
662
411
625 ▲ 6%
189
▲
117%
355.5 395.2 ▼
-10%
424.6 414.1 ▲ 3%
244.1 332.7 ▼
-27%
100.6 77.8 ▲ 29%
26.0% 24.2% ▲ 7%
102.5 86.7 ▲
18%
26.5% 27.0% ▼
-2%
▲ 45%
Share of Profits and Other
Income ($m)
4.1
2.8
Sales (lots)E
1185
Mean rate of sale pcm - FY 98.8
843 ▲ 41%
70.3 ▲ 41%
A Accounting Settlements require cash settlement in New South Wales. In
Queensland and Victoria an unconditional sales contract and for land only,
land registration; for house and land, land registration and a certificate of
building completion is required.
B Average revenue per lot = ($387.0m less englobo sale of $6.0m)/
(1073 settlements less 1 englobo lot)
C Average revenue per land only lot = ($106.1m less englobo sale of $6.0m)/
(411 settlements less 1 englobo lot)
D Underlying Gross Margin is exclusive of provision for litigation.
E Sales - executed contracts, not necessarily unconditional.
VILLA WORLD LIMITED ANNUAL REPORT 2016 Era - Capalaba
GROSS MARGIN
The gross margin for FY16 was $100.6 million
or 26.0% (FY15: $77.8 million or 24.2%).
This included a net provision for legacy litigation
issues of $1.9 million (FY15: $8.9 million). An
additional provision of $2.8 million was raised
in 2H16 related to the Silverstone litigation
which is expected to be concluded in FY173.
All outstanding aspects of the Thornleigh
proceedings were concluded in 2H16, with
$0.9 million released back into profit4.
REVENUE – DEVELOPMENT AND
PROJECT MANAGEMENT
During 1H16 the Company progressed its
strategy to grow development and project
management income streams by deploying
development management skills into further
joint venture arrangements. These ventures
delivered $1.2 million in fee income in FY16
and the Company anticipates development
and project management fees will provide an
ongoing revenue stream for the business.
SHARE OF PROFIT FROM EQUITY
ACCOUNTED INVESTMENTS AND
OTHER INCOME
The share of profit from equity accounted
investments and associates of $3.4 million
related largely to the Eynesbury joint venture
which settled the second tranche of the sale
to the Hyde Group in 1H16, with an increase in
selling price and extension fees contributing
$3.6 million to profit.
3 Mediation and trial scheduled for 1H17.
4 Refer Note B4(c) Movement in provisions Financial Statements.
5 Less than 5% of FY16 sales were to international investors.
Other income of $0.7 million was generated
this year, largely made up of bank interest
received and penalty interest on delayed
settlements.
OPERATIONAL PERFORMANCE
The Company achieved its sales target of
between 1,000 and 1,200 sales, with a total of
1,185 sales recorded during FY16 (FY15: 843).
Sales remained weighted to Queensland (74%)
due to the number of projects being marketed
and continued supportive market conditions.
The Company’s strategy of targeting growth
corridors continued to reap excellent results
in Queensland, with the Brisbane bayside
estates contributing 28% of sales, northside
representing 23% of sales, and the Brisbane Gold
Coast corridor on the south side representing
17% of sales. Regional Queensland accounted
for 6% of sales.
Further growth in our Victorian projects
resulted in 26% of sales. The Company’s land
estates continued to sell very strongly in
Melbourne, while sales from the Company’s
turn-key housing model continued to grow.
The Company maintains a solid position in
all customer segments – our core being the
retail market (comprising owner occupier
including first home buyers), as well as builders
and predominantly local investors5.
The Company delivered 1,060 lots of land,
up 26% on the 840 lots delivered in FY15.
The Company’s housing operations delivered
632 homes across both Queensland and
Victoria (FY15: 654).
VILL A WORLD LIMITED ANNUAL REPORT 2016
11
Operating Financial Review (continued)
SALES CONTRACTS CARRIED
FORWARD
At 30 June 2016, the Company carried-forward
464 sales contracts valued at $165.6 million6,
with 72% of contracts (335 lots valued at $120.0
million) due to settle in 1H17, and the balance
in 2H17. These strong carried-forward sales,
when combined with the Company’s continued
sales focus, place the Company in a very strong
position for 2017.
PROPERTY SALES AND MARKETING
COSTS
The sales and marketing strategy introduced
in 2015, which shifted focus onto the Villa
World brand and targeted regional marketing
campaigns, has benefitted both sales, and sales
and marketing costs which were 5.7% of revenue
(FY15: 5.6% of revenue).
These changes to the sales and marketing
strategy included bringing the on-site sales
team in-house. On-site sales staff are contracted
to particular projects and are included in cost
of sales.
LEGAL AND PROFESSIONAL COSTS
Legal and professional costs represented
0.4% of revenue (FY15: 0.4%), and related to
the establishment of the Long Term Incentive
program and supporting employee trust
structure, general accounting and taxation
advice in relation to capital efficient structures
and general consulting to support the
operations team.
EMPLOYEE BENEFITS
The Company finished FY16 with 113 full time
equivalent employees (FY15: 95).
The Company’s focus this year was on generating
and delivering strong sales and expanding its
geographic footprint. Accordingly, a number
of sales and operational roles were added in
Victoria and Queensland. Key management
roles were appointed in New South Wales as the
Company prepared to expand into the greater
Sydney market.
The full year salary contribution of the new
employees hired in FY15, as well as the new
employees hired in FY16 resulted in a 16%
increase in staff costs year-on-year. Employee
costs fell for the third year, as a percentage of
revenue to 4.3% (FY15: 4.5%).
The full year salary contribution of the new
employees hired in FY16 is expected to result in
an increase in employee costs of 15-20%.
TAX POSITION
The effective tax rate for FY16 was 28.6%. The
effective tax rate is expected to be 30% in FY17.
Carried forward unused tax losses of $19.3
million (DTA of $5.8 million) were fully utilised
during the FY16 year. The Company returned to
paying cash tax on an instalment basis in 2H16,
with $1.6 million cash tax payments in 2H16.
ASSETS AND NTA
Gross assets increased to $478.0 million at 30
June 2016 from $432.7 million, as acquisition
momentum continued. The NTA per share
increased by 7.5% to $2.15, prior to the
declaration of the 10 cent fully franked dividend
(FY15: $2.00, prior to the declaration of 10
cent dividend).
CAPITAL MANAGEMENT
During the year, the Company operated a $180
million club facility with Westpac and ANZ.
During FY16, the term of the ANZ facility was
extended. The maturity was staggered, with $80
million extended through to 1 March 2019 and
$50 million to 16 October 2020. At 30 June
2016, the ANZ facility was for $130 million. Post
year end, documentation was finalised raising
the facility limit to $140 million. The further $10
million will assist the Company to implement its
business strategy.
At 30 June 2016, the $50 million Westpac facility
was due to mature on 2 March 2018. Post year
end, documentation will be finalised extending
this facility through to March 2019.
6 Represents gross sales price including GST.
12
VILLA WORLD LIMITED ANNUAL REPORT 2016 At 30 June 2016, the cash on hand and unused
capacity in the facility was $41.0 million (30
June 2015: $98 million). The gearing ratio at year
end was 25.6% (FY15: 16.9%), within the stated
gearing target of 15-30%. Strong sales and
settlements during the year generated $131.5
million (FY15: $75.5 million) in operating cash.
Strong cash flow, combined with headroom
in the debt facility enabled $162.9 million in
acquisitions to be settled. Strategic negotiation
of acquisitions continues to ensure efficient
use of capital. Strong cashflow, the unused
capacity in the facility and capital lite structures
will enable the continued execution of the
acquisition strategy throughout FY17.
The average cost of debt during the year was
8.6% (FY15: 7.8%). A $90 million fixed interest
rate swap of 3.69% remains in place through to
June 2018.
The Company’s funding has been repositioned,
a very strong and sustainable balance sheet has
been created and cash flow has been effectively
managed across the portfolio.
DIVIDENDS
Villa World shareholders have benefited from
the strong financial performance during the year
with the Directors declaring total dividends of 18
cps fully franked in relation to the 2016 financial
year. This represents a 13% growth year on year.
An interim dividend of 8cps was paid in March
2016. A final dividend has been declared post
year end of 10cps and will be paid in
September 2016.
The full year dividend of 18 cps represents an
annual payout of 61% of NPAT (FY15: 69%),
which is within the Company’s stated dividend
policy (payout ratio of 50-75% of NPAT, paid
semi-annually).
ACQUISITION
The Company continued to execute on its
acquisition strategy to replenish land stock
through strategic purchases in proven growth
corridors, and take advantage of opportunities
to diversify our geographic footprint along
the east coast. The Company acquired
2,139 lots, including three sizeable projects
at Logan, Arundel and Strathpine, in south
east Queensland, which will provide product
continuity for four to six years, as our very
successful Park Vista and Mt Cotton projects
complete.
The Company will progress the expansion of its
foot print by re-entering the New South Wales
market through capital efficient partnering
arrangements. The Company will soon finalise
a development agreement with Greenfield
Development Corporation in south west
Sydney, for delivery of an initial 90 homes.
In Victoria, the Company’s Donnybrook joint
venture has entered into a conditional contract
to sell a part of the project7. This has significantly
improved the joint venture’s commercial position
and will free up capital to develop the remainder
of the project and reinvest in new sites.
As at 30 June 2016, the Company had a portfolio
of 5,937 lots, representing approximately 5
years of sales. In the near term, Queensland
remains central to the Company’s business,
however, the portfolio is diversified across the
east coast states, and in strong growth corridors.
Importantly, the Company has broadened its
7 The Donnybrook joint venture has entered into a conditional contract
to sell ~67.9 ha (~1,000 lots, VLW 51% share being 510 lots) to Satterley
Property Group Pty Ltd. The sale contract is conditional on PSP Approval
being obtained by 6 April 2020, and this process has commenced. The
total sale price for the Property is $34 million (plus GST), subject to
adjustment based on final developable land yield. Cash settlement and
title transfer is to occur in four equal stages, commencing 30 days after
PSP approval and then 12, 24 and 36 months after the first settlement.
The joint venture intends to retain and develop the remaining parcel of
land comprising ~206.1ha (~1,196 lots, VLW 51% share being 610 lots). The
entire property was purchased by the Donnybrook joint venture in late
CY14 for $22.8 million.
Rochedale Grand Display Home - Rochedale
VILL A WORLD LIMITED ANNUAL REPORT 2016
13
Operating Financial Review (continued)
reach across product and price point, adding
to its resilience and providing strong and
sustainable cash flows.
The land acquisition payable at 30 June 2016
is $46.9 million in total, current $37.8 million
and non-current $9.1 million. This payable
will be settled from operating cash flows
and settlement proceeds from third party
settlements. Since year end, $21.6 million
has been paid.
THE VILLA WORLD STRATEGY
Villa World’s continued strong performance in
FY16 reflects the success of its business strategy
and a commitment to achieving its long-term
goal of being recognised as a leading Australian
property group.
The Company has refined its strategy
around three key themes: focus, grow and
lead. These themes provide clear direction for
the Company’s approach to its development
portfolio, sales, operational delivery and
capital management.
Villa World will continue to focus on our teams,
customers, shareholders and core capabilities in
the residential land and housing market.
The Company made a number of strategic
land acquisitions in FY16 and will continue to
grow by taking advantage of new core business
opportunities that complement the Villa World
business model, support geographic diversity of
its market footprint, and leverage strengthened
staff capability.
Villa World’s 30-year history supports the
Company to lead through continued strong
performance and to learn from past experience.
KEY RISKS
While the underlying current is one of strong
and supportive market conditions, the
Company continues to prudently manage sales,
development and finance risk, along with risks
associated with general warranty claims. The
Company continues to monitor government
policies, including macroprudential regulation
and foreign ownership policies.
Consumer confidence will continue to influence
sales. Economic conditions including interest
rates, unemployment and wages directly
impact consumer confidence. The Company
has maintained a diversified portfolio and
prudent gearing position assisted by structured
acquisition deals and a product portfolio that
minimises sales risk.
The Company’s portfolio has well managed
project-based risk. In most cases, development
approvals are either in place prior to acquisitions,
or residential use is allowed and approval risk is
mitigated by appropriate due diligence. Risks
associated with longer-dated projects, with the
opportunity to add value through the planning
process, are mitigated through partnering
arrangements or appropriately structured
acquisition terms. Production-based risk is
further mitigated by the diversified portfolio,
scalable business model, transparency on
development costs and the experience of the
Company’s development team.
Warranty claims and potential litigation
are inherent risks in the development and
construction industry. The Company is
currently defending litigation involving the
following matter at Silverstone:
The Silverstone litigation (refer to the Note
B4(d) Legal claims in the 2016 Financial
statements) relates to alleged defects at a
residential building located in Tweed Heads, New
South Wales. The building comprises 27 units and
was completed in 2009. A Villa World subsidiary,
Villa World Developments Pty Ltd, was the
registered builder. Villa World Developments
Pty Ltd engaged independent subcontractors
to carry out construction.
Based on further developments in the litigation
during 2H16, the Directors have assessed this
provision at approximately $8.5 million as at
30 June 2016 in respect of the Company’s
proportion of the Applicant’s potential claim
amount. This is in addition to the provisions for
legal fees and experts costs which have been
made since 30 June 2015 and expensed through
cost of sales.
Estimating this provision requires the exercising of
significant judgement and it is therefore possible
that actual amounts may differ from this estimate.
14
VILLA WORLD LIMITED ANNUAL REPORT 2016 At 30 June 2016, the Company had in place
a $180 million Club financing arrangement
with ANZ and Westpac. The Club financing
arrangement comprises a facility of $130
million with ANZ with $80 million expiring on
1 March 2017 and $50 million expiring on 30
October 2020, and a facility of $50 million
with Westpac expiring on 2 March 2018. Each
facility is able to be negotiated and extended
independent of the other.
Post year end, the Westpac facility will be
extended through to March 2019 and the ANZ
facility limit has been increased to $140 million.
OUTLOOK
In FY17 the Company’s focus will remain on
delivering and settling carried forward sales and
releasing flagship projects at Killara, Logan and
Arundel Springs, Gold Coast. With 28 projects
at various points in the lifecycle selling during
the FY17 year, the Company expects to better its
FY16 sales performance.
The Company’s strategy of pursuing joint
venture arrangements will begin to contribute to
profit in FY17, initially through the Rochedale JV
with the Donnybrook JV to follow in FY19. The
FY17 contribution from Rochedale will be $3.4
million comprising $1.5 million in development
and project management fees and $1.9 million
share of profit, representing a very strong return
on the investment (30 June 2016: $8.9 million).
In addition, the Company will recognise $0.8
million in revenue from contract building the
homes at the project, which fall outside the
joint venture. The Company anticipates that
development and project management fees
will provide an ongoing and growing revenue
stream, as the Company continues to pursue
opportunities to grow the business in a capital
efficient way, with a strong focus on return
on assets.
The gross margin for the coming year on wholly
owned projects is expected to be 24-26%.
Several existing high margin projects were
recently completed, new flagship projects will
commence contributing to profit in 2H17, and it
is anticipated that margins at these projects will
improve as they mature beyond FY17. Further,
several capital lite projects will contribute to
profit in FY17. While such projects deliver a
lower margin, they provide a strong return
on investment.
GUIDANCE
Assuming general consumer confidence is
maintained, interest rates remain low and first
home buyer grants remain in place, the Company
is targeting statutory profit after tax growth of
at least 5% to $35.4 million in FY17. This result
is underpinned by strong carried forward sales,
continued sales momentum across Queensland
and Victoria, and an increased delivery capability.
It is the intention of the Board to continue the
payment of strong dividends, in accordance with
the stated payout policy of 50-75% of NPAT,
paid semi-annually. The Board anticipates paying
a dividend of at least 18 cents per share fully
franked in FY17.
FY17 ACQUISITION STRATEGY
The Company has a continued commitment
and capacity to acquire development sites. The
near term focus will remain on the continued
replenishment of the portfolio in south east
Queensland, growing the Victorian land bank
with a focus on the south eastern and Northern
growth corridors of Melbourne, and growing a
presence in New South Wales. The Company’s
use of capital efficient means, such as the capital
lite model and joint ventures, will enable it to
progress the expansion of its footprint, with a
longer-term strategy of cementing our place
as a leading east coast residential developer. In
FY17, the Company expects cash outflow for
acquisitions of $60-85 million funded from
existing debt facilities and working capital,
plus $40 million in capital lite transactions.
Circa - Nudgee
VILL A WORLD LIMITED ANNUAL REPORT 2016
15
CURRENT
PORTFOLIO
BRISBANE NORTH
Brisbane North continued to be a strong residential growth corridor of south-east Queensland and a
successful market for the Company during FY16. Our existing projects in the region reached significant
milestones and a number of new projects commenced to ensure continuance of supply.
Master planned for 533 lots in total, Park Vista
at Mango Hill is one of our most successful
projects in the current portfolio. Neighbouring
North Lakes with its town centre and education
facilities, the Park Vista community is now
an established village style neighbourhood
comprising contemporary family homes and park
recreation facilities, surrounded by dedicated
native reserve. FY16 saw the sell-out of the
original precinct of completed homes and the
release of the project’s new land precinct on
the eastern side of Anzac Avenue. The much
anticipated Moreton Bay Rail Link, which includes
a new station just 1km from our new release, is
set to open by the end of 2016.
Adjoining Park Vista is Orana, where 108
townhomes set around recreation facilities,
including a swimming pool and covered outdoor
entertaining areas, reached final sell-out
during FY16.
Haven on Greens is a recently acquired site
for 70 homes in the suburb of Griffin close to
North Lakes. This project, set to commence in
FY17, will further extend our commitment to the
area and fill the demand created by the sell-out
at Park Vista.
Situated beside a nature reserve, just a
short drive from Moreton Bay, Bay Road at
Burpengary is a boutique sized community of
only 143 homes, which sold out during FY16. The
recent purchase of a further 37 lots will see the
continuation of the project in FY17.
Currently under planning is a 291 lot land project
in Upper Caboolture, close to the Caboolture
River and only a short drive west of the
Morayfield retail heart.
Fast approaching sell-out is the marquee 209-home
community of Circa situated in the prestige inner
suburb of Nudgee just 12km from the Brisbane CBD.
Circa has been developed over a number of years
in boutique sized stages and has consequently
achieved a premium price point in a highly sought-
after northside location. FY16 saw the project’s
ultimate release of two-storey designer homes.
During FY16, in recognition of the expanding
small business professionals market, we
launched a new product type called HQ Urban
Business Residences. Located at The Nest in
Fitzgibbon Chase, a precinct planned by the State
Government’s building and development arm
EDQ (Economic Development Queensland), HQ
Urban Business Residences combine a ground
floor professional suite with streetfront commercial
presence, with a contemporary upper level 1 or 2
bedroom residence. Construction and marketing
of these 12 lots has commenced.
Also in FY16 the Company launched Eminence at
Bridgeman Downs which comprises 34 townhomes
and 5 free standing homes. This boutique project, less
than 16km from the CBD, gives us a further presence
in Brisbane’s prestige inner northern suburbs.
Now in the planning stage is a new project located
in Strathpine on a picturesque site with frontage
to an extensive South Pine River reserve. Set to
commence in FY18 and become our new flagship
project in the region, this site will comprise 383
homes targeted at our core customer group of
middle market families.
At nearby Joyner just minutes from Lake Samsonvale,
the Company is currently constructing an 81 lot land
project called Riva, which adjoins a country golf
course in the popular Pine Rivers region 25km from
the CBD. Riva is situated in a prime location close
to Petrie’s train station and local retail district.
16
VILLA WORLD LIMITED ANNUAL REPORT 2016 “ The Company continued to execute its
acquisition strategy to replenish land stock”
CABOOLTURE
C
UPPER CABOOLTURE
BURPENGARY
BAY ROAD
M
1
M
O
T
O
R
W
A
Y
NORTH
LAKES
MANGO HILL
REDCLIFFE
ORANA
PARK VISTA
RIVA
H
HAVEN ON GREENS
S
STRATHPINE
EMINENCE
THE NEST
CIRCA
PETRIE
GRIFFIN
JOYNER
STRATHPINE
BRIDGEMAN
DOWNS
FITZGIBBON
CHASE
NUDGEE
M
1
M
O
T
O
R
W
A
Y
BRISBANE
GLADSTONE
LITTLE CREEK
AUGUSTUS
QLD
HERVEY BAY
BOX HILL
ALLURE
LACOSI HILL ESTATE
SYDNEY
MELBOURNE
DONNYBROOK
LAVINIA &
ROXBURGH PARK
SIENNA
PLUMPTON
CARDINIA VIEWS
CASCADES
ON CLYDE
M
1
M
O
T
O
R
W
A
Y
Y
A
W
R
O
T
O
Y M
A
W
E
T
A
G
ROCHEDALE
LOGAN MOTORWAY
WATERFORD
LOGAN MOTORWAY
LOGAN
RESERVE
PARK
RIDGE
CLEVELAND
CAPALABA
THORNLANDS
VICTORIA POINT
REDLAND BAY
MT COTTON
ERA
WATERLINE
AFFINITY
ROCHEDALE
GRAND
SEASCAPE
ELLABAY
MT COTTON
VILLAGE
THE
SANCTUARY
M
1
M
O
T
O
R
W
A
Y
JACOBS
WELL
SEABRIGHT
KILLARA
C
COTTONWOOD
COOMERA
PARKSIDE
ARUNDEL
ARUNDEL SPRINGS
VILL A WORLD LIMITED ANNUAL REPORT 2016
17
Current Portfolio (continued)
BRISBANE SOUTH
With its freeway connection to the CBD and
ease of access to the Gold Coast, Brisbane’s
southside has for generations been a highly
sought-after residential corridor.
During FY16 the Company launched its new
flagship address, Rochedale Grand. The holistic
approach to the design of this project has
resulted in a stunning master planned community
where modern luxury residences with prestige
tree-lined setting, blend as one. The community
comprises 167 premium priced homes, many with
glimpses of the city skyline. Rochedale today has
a contemporary residential character and this
new designer product range has been developed
to reflect this market positioning.
BRISBANE BAYSIDE
Redlands offers a relaxed bayside lifestyle
some 35km from the Brisbane CBD. The region’s
population continues to grow and the Company
has invested in its future by assembling a
portfolio of projects.
Our original Redlands project Mt Cotton Village
which commenced in 2009, sold out during
FY16. The 572 lot community features intimate
neighbourhoods of designer homes set among
picturesque native bushland with easy access
to community parks with recreation facilities.
It remains a showcase project for the Company.
Era is a 200 home contemporary address set
beside a natural bushland sanctuary in Capalaba
around 32km from the Brisbane CBD. Launched at
the start of FY15 and expected to sell-out during
FY17, this project was the first location to feature
our new range of designer homes.
In the nearby suburb of Redland Bay, the Company
launched Ellabay during FY16. This boutique 84-lot
community just 1km from the waterfront offers a
stunning new range of designer homes and a select
number of land lots.
Construction has now commenced at Seascape,
a residential resort project in Redland Bay, where
187 designer townhomes are set beside a community
garden, residents’ swimming pool and BBQ facilities.
Seascape is well situated in a growth location close
to the proposed Weinam Creek marina development.
Waterline at Thornlands is a 227 lot premium land
project offering prestige level homesites in a bayside
setting complete with its own community park and
nature walk with bicycle and walking paths. A 23
home display village showcasing designs by a range
of leading builders has just opened. We anticipate
sell-out of the project during FY17.
FY16 saw the launch of another land project in
Thornlands. Affinity is centrally located in this
popular area and comprises 118 family sized
elevated blocks just a short walk to the Victoria
Point Shopping Centre. Registration of the first
two stages is complete.
Era - Capalaba
18
VILLA WORLD LIMITED ANNUAL REPORT 2016 Ellabay - Redland Bay
Waterline - Thornlands
VILL A WORLD LIMITED ANNUAL REPORT 2016
19
Current Portfolio (continued)
LOGAN
Logan City, south of Brisbane, is now one
of Queensland’s fastest growing corridors, with
independent research predicting a population
increase of up to 200,000 over the next
two decades.
The Company’s first project in the region, The
Sanctuary, was the final stage of the successful
Woodlands master planned development at
Waterford, 31km from the Brisbane CBD. This
81 home project bordered by 30 hectares of
lush open spaces will be sold out during FY17.
Commencing during FY17 is our signature
development in the region. Killara will be
a master planned 721-lot land project with
extensive parklands and adventure trails situated
on Chambers Flat Road, in Logan Reserve. The
project will offer a wide variety of lot sizes to our
core customer group of middle market families
and ensure several years of land supply for the
Company in a strong growth corridor of south-
east Queensland.
Just a short drive south, in Park Ridge is our
recently purchased Cottonwood project, which
is currently under planning for construction of
160 Villa World homes.
GOLD COAST
During FY16, the Company expanded its foothold
in its foundation market, the Gold Coast. On the
back of sales success at Parkside in Coomera, two
additional site acquisitions were made.
Parkside, which we anticipate will sell-out early in
FY17, comprises 179 contemporary family homes
set around a central park, just minutes from the
future Coomera Town Centre. Just a short drive
north, within a short walk of Tipplers Passage and
its boating facilities, is our newly launched 107-
home Jacobs Well project, Seabright.
At Arundel, just a few minutes from the new
Gold Coast University Hospital and Westfield
Helensvale, our new marquee Gold Coast project
Arundel Springs will launch during FY17. This
represents one of the final ever releases of retail
land in the central Gold Coast corridor. Extensive
planning has been undertaken to ensure the
project’s 386 premium homesites and
townhomes blend harmoniously with the bordering
Coombabah Lakelands Conservation Area.
REGIONAL QUEENSLAND
During FY16, the Company continued to develop
its contemporary lifestyle communities on the
Central Queensland Coast. Little Creek in Gladstone
has been master planned to be the city’s premier
address. Set around the Little Creek parklands, a
network of parks with playgrounds and recreation
facilities, this 688 lot project offers a mix of land
and Villa World homes.
Augustus is located on the picturesque Fraser
Coast 31/2 hours from Brisbane, in the famous
whale watching town of Hervey Bay. Centrally
located within the town, Augustus has been
master planned for a total of 730 contemporary
family homes. The project sold well in FY16 and will
benefit during FY17 from the Fraser Coast Council’s
extension of the $12,000 Destination Hervey Bay
home buyers grant. A limited number of land lots
are also being marketed.
SYDNEY
Western Sydney remains one of Australia’s key
residential growth corridors. The 55 land lots at the
Company’s Lacosi Hill project in Schofields close
to the new Rouse Hill Town Centre, sold out during
FY16. In the neighbouring suburb of Box Hill, our
new Allure project, comprising some 44 Villa World
homes, is now in the planning stages.
Augustus - Hervey Bay
Parkside - Coomera
20
VILLA WORLD LIMITED ANNUAL REPORT 2016 Killara - Logan Reserve
Seabright - Jacobs Well
VILL A WORLD LIMITED ANNUAL REPORT 2016
21
Current Portfolio (continued)
MELBOURNE SOUTH EAST
MELBOURNE NORTH
In the major growth corridor of Melbourne’s
south east around 55km from the CBD, our
1,138 lot Cascades on Clyde project is in its final
stages. Over the past eight years, this master
planned community has been a very successful
land project for the Company. It features 14
hectares of wetlands and parklands as well as
walking tracks, BBQ facilities and children’s
playgrounds. A final 44 lots remain for sale.
Land at Cardinia Views, which launched in
FY15, is selling strongly. This 320 lot land project
located in the semi-rural area of Pakenham some
60km south-east of the CBD, features views
of the rolling countryside. With its variety of
homesite sizes, the project is attracting
family buyers.
MELBOURNE NORTH WEST
With its proximity to the Caroline Springs and
Taylors Hill town centres and freeway access
to the CBD, Melbourne’s North West corridor
continues to experience solid population growth.
In Plumpton, 35km to the CBD’s north west, the
Company now has two projects close to Victoria
University and local facilities. Sienna, comprising
165 Villa World designer homes from a new
range crafted for the Melbourne lifestyle, was
launched in FY16. The neighbouring site, located
on Saric Court, will add a further 254 land lots
and is currently in the planning stages.
Melbourne’s north corridor continues to be in
solid demand among family buyers. Lavinia at
Greenvale, just 10km from Melbourne Airport,
is a master planned project comprising 131
designer homes bordering the Greenvale
Reserve. The community neighbours a park with
playground facilities and is well positioned with
easy access to local amenities. Construction of
30 terrace style urban homes is now underway
at our boutique sized project Roxburgh Park
Central, close to Greenvale and some 20km
north of the CBD.
The Company has a 51% share in a joint
venture to develop a 274 hectare land project
at Donnybrook, an emerging residential area to
the city’s north. A portion of the site is currently
under conditional contract to a third party. The
joint venture intends to retain and develop the
remaining land.
Sienna - Plumpton
Sienna - Plumpton
22
VILLA WORLD LIMITED ANNUAL REPORT 2016 Lavinia - Greenvale
Lavinia - Greenvale
Sienna - Plumpton
VILL A WORLD LIMITED ANNUAL REPORT 2016
23
Rochedale Grand - Rochedale
Villa World Limited ABN 38 117 546 326
Annual report - 30 June 2016
Contents
Director’s report
Corporate governance statement
Financial statements
Independent auditor’s report to the members
Page
26
49
50
90
These financial statements are the consolidated financial statements of the consolidated entity consisting of
Villa World Limited and its subsidiaries. The financial statements are presented in Australian currency.
Villa World Limited is a company limited by shares, incorporated and domiciled in Australia.
Its registered office 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
Directors’ report on page 26, which is not part of these financial statements.
The financial statements were authorised for issue by the Directors on 16 August 2016. The Directors have the
power to amend and reissue the financial statements.
Through the use of the internet, we have ensured that our corporate reporting is timely and complete. All ASX
announcements, financial reports and other information are available on our website: www.villaworld.com.au
VILL A WORLD LIMITED ANNUAL REPORT 2016
25
DIRECTORS’ REPORT
Your Directors present their report on the consolidated entity (referred to hereafter as the Company) comprising
of Villa World Limited and its subsidiaries and the Company’s interest in associates for the year ended 30 June 2016.
Directors
The Directors of Villa World Limited during the year and up to the date of this report were:
Mark Jewell BCom CA (SA), GAICD
Non-Executive Director since 28 November 2013
Chairman since 28 May 2014
Mark is an independent director with more than 25 years senior executive and directorship experience in publicly
listed companies. He brings to the Board a wide range of expertise in the Australian property industry including
strategy, risk, compliance and an in-depth experience in land and housing developments.
Board Committee memberships
•
•
Member of the Audit and Risk Committee (since 28 November 2013)
Member of the Remuneration and Nomination Committee (since 5 February 2015)
Craig Treasure BASc (Surveying) (QUT), FDIA
Executive Director 17 February 2012 – 1 August 2012
Chairman and Executive Director 1 August 2012 – 5 October 2012
Chairman and Managing Director 5 October 2012 – 28 May 2014
Chief Executive Officer and Managing Director since 28 May 2014
Craig Treasure has more than 30 years’ experience in property development, specifically in the residential land and
housing sectors along the eastern seaboard of Australia. Craig has previously held a number of executive roles and
directorships within the property industry.
David Rennick BEc, LLB
Non-Executive Director since 1 September 2014
David is an independent director and senior Melbourne based lawyer with nearly three decades experience in the
property industry, having acted for leading developers and institutions as principal legal advisor and on property
and business strategy. His area of practice in property includes master planned community projects, property
development, corporate real estate, institutional property and retail centre developments and leasing.
He is currently a Partner and Head of Australia, for international law firm Pinsent Masons. Prior to that role, he was
a property partner and then CEO of national law firm Maddocks where he was responsible for leadership, client and
people strategies and management.
Board Committee memberships
•
•
•
•
Chair of the Audit and Risk Committee (since 5 November 2015)
Chair of the Remuneration and Nomination Committee (5 February 2015 – 17 February 2016)
Member of the Audit and Risk Committee (since 1 September 2014)
Member of the Remuneration and Nomination Committee (since 17 February 2016)
Mark Jewell
Craig Treasure
David Rennick
26
VILL A WORLD LIMITED ANNUAL REPORT 2016
Donna Hardman MBA, BCom, GAICD, FAMI
Non-Executive Director since 17 February 2016
Donna is an independent director and brings a broad skill set and strategic acumen which has been gained through
25 years in senior executive and director level roles, particularly within the international financial services sector.
Donna has a strong human capital focus and risk management mindset and her professional experience includes
both senior executive and consultancy roles as a business and IT strategist.
Board Committee memberships
•
•
Chair of the Remuneration and Nomination Committee (since 17 February 2016)
Member of the Audit and Risk Committee (since 17 February 2016)
Other directorships (current and recent)
In the past three years Donna has served as a Non-Executive Director of Quay Credit Union (since June 2013).
Company Secretary
Paulene Henderson BBus Acc MBA CA
Chief Financial Officer / Company Secretary
As Chief Financial Officer since 2010, Paulene has been responsible for guiding Villa World’s capital management
strategy. This has included two highly successful equity raisings and a restructuring of the Company’s debt facilities
to provide flexibility and support the Villa World growth strategy.
Paulene has a wealth of experience, having held roles in strategic finance, financial management and accounting,
primarily in the property and hospitality sectors. She combines technical accounting expertise and commercial
acumen to manage all aspects of Villa World’s financial strategy, including debt and capital market transactions,
treasury, forecasting and planning, and investor relations.
As the leader of our successful Investor Relations and Finance team, Paulene demonstrates excellent leadership
skills as well as her extensive knowledge of corporate funding, risk management and taxation matters. She has
worked with global professional services firm EY and held senior financial roles with two subsidiaries of Fortune
500 Company Wyndham Worldwide.
Paulene was appointed Company Secretary 19 November 2012.
Gerald (Gerry) Lambert BCom (Hnrs), CA, GAICD
Non-Executive Director from 22 January 2015 – 5 November 2015
Gerry is an independent director who has held key financial roles in both listed and unlisted companies in the
building and property development, and mining industries. He has had a 30 year corporate career with expertise
and experience in the financial, strategic, governance, management and human resource areas.
Other directorships (current and recent)
Gerry is currently a Non-Executive Director of yourtown (since February 2011), a national charitable organisation
and served as a Non-Executive Director of CuDeco Limited (27 April 2010 – 18 September 2015), an ASX listed
mining and exploration company. Gerry has previously been an Executive Director of Villa World Limited from
2000 to 2005, at which time he was CFO and General Manager.
Board Committee memberships
•
•
Chair of the Audit and Risk Committee
(18 June 2014 – 5 November 2015)
Member of the Remuneration and
Nomination Committee (5 February 2015 –
5 November 2015)
Donna Hardman
Paulene Henderson
VILL A WORLD LIMITED ANNUAL REPORT 2016
27
Directors’ interests
Directors’ interests in shares of Villa World Limited as of the date of this report
Mark Jewell
Craig Treasure
David Rennick
Donna Hardman
Meetings of Directors
103,390
834,864
45,000
-
The number of meetings held by Villa World Limited’s Board of Directors, including Board Committees and the
number of meetings attended by each Director are listed below:
Mark Jewell
Craig Treasure
David Rennick
Gerry Lambert
Donna Hardman
Board meetings1
B
A
16
16
14
16
4
9
16
16
4
9
Audit and
Risk Committee
B
A
4
4
-
3
2
1
-
4
2
1
Remuneration and
Nomination Committee
A
5
-
5
2
3
B
5
-
5
2
3
A = Number of meetings attended
B = Number of meetings held during the time the Director held office or was a member of the committee during the period
1 = The Board recognises the importance of developing and implementing the Company’s strategy and during FY16 dedicated
three Board meetings for this purpose.
Principal activities
The principal activities of the Company continued to be the development and sale of residential land, and the
development, construction and sale of house and land packages.
Review of operations and consolidated results
Group Financial Summary
Revenue1
Expenses
Finance costs
Profit before income tax
Income tax expense
Profit for the period
Profit is attributable to:
Owners of Villa World Limited
Consolidated
30-Jun-16
$’000
30-Jun-15
$’000
392,303
324,289
(335,592)
(284,713)
(9,464)
47,247
(13,534)
33,713
(10,196)
29,380
(3,743)
25,637
33,713
25,637
1 Includes revenue from land and development, residential building and construction contracts, other income and share of
profit/(loss) from equity accounted investments. The breakdown of revenue can be found in the Consolidated statement of
comprehensive income on page 51.
A review of operations for the financial year and the results of those operations are set out in the Operating and
Financial Review on page 10.
28
VILL A WORLD LIMITED ANNUAL REPORT 2016
Directors’ report
30 June 2016 (continued)
Dividends
The Board declared an interim dividend of 8.0 cents per
share fully franked on 16 February 2016. Payment was made
to shareholders on 31 March 2016.
Matters subsequent to the end of the financial year
Final dividend
On 16 August 2016 the Board declared a fully franked
final dividend of 10.0 cents per share. The ex-dividend date
is 1 September 2016 and the record date for this dividend
is 2 September 2016. Payment will be made on
30 September 2016.
The balance of the franking account is $8.2 million and
includes franking credits that will arise from the payment
of tax recognised as a liability at the reporting date. Refer
note A4(c) - Franking credits on page 59.
Club facility
During August 2016, Villa World and ANZ agreed a credit approved term sheet to extend the ANZ facility to
$140 million. This comprised a further $10 million unsecured facility to expire in August 2018 and will provide the
Company with further financial flexibility to implement its business strategy.
At 30 June 2016 the $50 million Westpac facility was due to mature on 2 March 2018. Post year end, this facility
has been extended with a credit approved term sheet in hand. The formal documentation process is expected to
be completed in September 2016. The facility will be extended through to March 2019.
REMUNERATION REPORT:
ANNUAL STATEMENT BY THE REMUNERATION AND NOMINATION COMMITTEE CHAIR
Villa World strives for excellence across every aspect of our business, with a clear focus on our customers and the
creation of sustained growth in shareholder value.
Since my appointment in February 2016 as Chair of the Remuneration and Nomination Committee, I have consulted
with investors and their representative bodies to ensure that we reflect diversity of thought as a pathway to help
define our strategic approach.
This Remuneration Report responds to feedback for greater transparency and simplicity in the way we demonstrate
the link between our Company’s strategy, its performance and the remuneration outcomes for our executives.
This year’s financial results confirm our view that the Company’s success reflects our greatest asset: our people.
Villa World has invested in the retention, recognition and development of top talent during the past year.
The benefits are evident in our sales, delivery and financial management, and in the senior leadership team’s
contribution to fostering an environment that promotes ownership and accountability for delivery of outcomes.
With the support and encouragement of Chief Executive Officer and Managing Director Craig Treasure,
Villa World’s State Manager Queensland, Michael Vinodolac, was recognised among the key management personnel
in FY16, with a recent further promotion to General Manager Operations. We have also seen Chief Financial Officer
Paulene Henderson taking on an expanded public role during the period as the Company has confirmed its
excellent financial management credentials.
VILL A WORLD LIMITED ANNUAL REPORT 2016
29
Remuneration report (continued)
Pay for performance FY16
The Company’s support and encouragement of its high-calibre senior team has corresponded with an increase in
the executive team’s responsibilities and prompted a review of salary levels based on performance.
As a result, short-term incentives (STIs) were paid during the year. The Committee determined that maximum
weighting outcomes available under STIs were achieved. In addition to financial performance, cash bonuses awarded
to executives in FY16 were determined based on the achievement of individual operational and performance
measures set by the Board and recommended by the Committee.
Consistent with the Company’s commitment to sustained performance, a key priority in FY16 was to review
the structure of long-term incentive plans (LTIPs), and to provide greater transparency to shareholders around
remuneration outcomes.
The Company has two LTIPs: a legacy option plan, due to vest during the period July 2016 to February 2017, and
a new plan effective from 1 July 2016. The new LTIP was confirmed at the 2015 Annual General Meeting and is
intended as the Company’s principal vehicle for granting long-term incentive awards to senior executives and other
eligible employees. It includes performance rights which vest based on ongoing employment and the achievement
of specific performance targets.
The Committee has undertaken a full review of the performance measures and ranges and is satisfied that the
vesting conditions align with the Company’s strategy of providing incentives based on growth and the efficient
use of Villa World’s assets to generate revenue.
The performance conditions of the new LTIP are that:
•
•
75% of the grant will vest based on Villa World’s Relative Total Shareholder Return (TSR) over the
performance period
25% of the grant will vest based on Return on Assets (ROA).
The Committee has been conscious of the importance of benchmarking performance against the external
remuneration environment. For this reason, consultants Ernst and Young (EY) were engaged to assist in providing
advice on implementation of the new LTIP, as well as providing benchmarking analysis of remuneration levels for
executives, in conjunction with the Committees own internal analysis.
Based on this information, the Committee determined that the higher performance-based remuneration mix
achieved during FY16 was appropriate. It reflects competitive reward for meeting the vesting conditions, namely
contribution to growth in shareholder wealth and the efficient use of assets to generate revenue.
Changes for FY17
The Committee has undertaken its regular review of performance measures and has set new targets for FY17.
There are no planned material changes to the way in which the Executive Remuneration Policy will be implemented
in FY17.
The Committee remains focused on maintaining a close link between remuneration and the performance of the
Company, the achievement of individual targets and the creation of shareholder value. This is further supported
by a focus on non-executive performance measures to ensure maximisation of Board effectiveness with alignment
to the strategic objectives of the Company that will ultimately deliver greater value and wealth to its shareholders.
Retaining and attracting a diverse pool of talent is a cornerstone of Villa World’s success. We will continue to offer
a competitive remuneration mix that rewards performance and encourages diverse perspectives and flexibility in
thinking leading to a higher level of creativity, innovation and organisational agility.
I thank the members of the Remuneration and Nomination Committee for their efforts.
Donna Hardman
Chair, Remuneration and Nomination Committee
30
VILL A WORLD LIMITED ANNUAL REPORT 2016
REMUNERATION REPORT 2016 (AUDITED)
Contents
Section A:
Introduction
Section B:
Key management personnel disclosed in this report
Section C:
Summary of FY16 remuneration
Section D:
Approach to remuneration
Section E:
Actual remuneration earned in FY16
Section F:
Our assets: Our people
Section G:
Remuneration framework and link to business strategy
Section H:
FY16 remuneration outcomes
Section I:
Remuneration structure
Section J:
Service agreements for Executive KMP
Section K:
Non-Executive Directors’ remuneration
Section L:
Additional required disclosures
Section A:
Introduction
Page
31
31
32
33
34
35
35
36
38
42
43
44
The Villa World Limited Board is pleased to present the Remuneration Report for FY16. This Report is presented in
accordance with the requirements of the Corporations Act 2001 (the Act) and its regulations. This information has
been audited as required by section 308(3C) of the Act.
The Board is committed to an executive remuneration framework that fosters a strong performance culture and
links the remuneration outcomes for our executives with the Company’s strategy and forward plan.
Section B:
Key management personnel disclosed in this report
This Report outlines how the Company’s FY16 performance has been reflected in remuneration outcomes for key
management personnel (KMP) as defined in AASB 124 Related Party Disclosures.
The Company’s KMP comprise of Non-Executive Directors (NEDs), and Executive Directors and senior executives
(collectively the “executives”), being those persons considered by the Board to have the authority and responsibility
for planning, directing and controlling (either directly or indirectly) the Company’s major objectives.
KMP
Position
Non-Executive Directors
Mark Jewell
David Rennick
Independent Chairman
Independent Non-Executive Director
Donna Hardman1
Independent Non-Executive Director
Gerald (Gerry) Lambert2
Independent Non-Executive Director
Term
Full Year
Full Year
Part Year
Part Year
Executive Director
Craig Treasure
Senior Executives
Chief Executive Officer and Managing Director (CEO/MD)
Full Year
Paulene Henderson
Chief Financial Officer (CFO) and Company Secretary
Michael Vinodolac3
General Manager Operations
Full Year
Part Year
1 Donna Hardman was appointed Non-Executive Director on 17 February 2016.
2 Gerald (Gerry) Lambert resigned as Non-Executive Director on 5 November 2015.
3 Michael Vinodolac became a KMP effective 1 October 2015 after a period of transition into his current role of State Manager -
QLD, with a recent further promotion into the role of General Manager Operations.
VILL A WORLD LIMITED ANNUAL REPORT 2016
31
Section C:
Summary of FY16 remuneration
The Company’s Remuneration and Nomination Committee (RNC) noted strong performance in delivery and sales,
as well as sustained strength in the balance sheet enabling effective cash flow management across the portfolio.
Increased environmental complexity and geographic and product diversity has been accompanied by expanded roles
and responsibilities for the executive team. Appropriately, the RNC reviewed salary levels based on performance.
Key remuneration outcomes are as follows:
Fixed Remuneration
CEO/MD Remuneration
“Short-term incentives
(STI)”
“Long-term incentives
(LTI)”
NED fees
Executives received increases (~9%-10%) in fixed remuneration in recognition for
high performance and delivery of business strategy.
Fixed remuneration for the CEO was revised to $675k for FY16, an increase
of 12.5%. The increase was based on peer comparison and his increased
accountabilities following strong growth and business performance. Total STI
remained at 40% of fixed salary. Total remuneration for the CEO is tabled in
Section E.
The STI pool awarded to all employees, including those awarded to executives
totalled $1.2 million in FY16 (FY15: $1.1 million). The increase reflected the
Companys’ strong financial performance in FY16 and the Boards assessment of
performance against individual KPI measures. STI for executives remain between
20-40% of fixed salary.
A new LTI plan was established in FY16 replacing the legacy Villa World Limited
Option Plan. The maximum LTI opportunities during FY16 were equivalent to
100% of fixed remuneration for the CEO and up to 80% of fixed remuneration
for other executives and eligible employees. Performance hurdles have been
aligned to shareholder wealth and vesting of performance rights are dependent
on achieving target relative TSR and ROA over 3 years.
NEDs received ~12% increase in base fees to reflect additional workloads as well
as market relativities. Total Board and Committee fees paid during FY16 were
$289k (see Section K) which is within the current maximum aggregate amount
of $600k. NEDs do not receive variable pay.
32
VILL A WORLD LIMITED ANNUAL REPORT 2016
Section D:
Approach to remuneration
The Board, RNC, external advisers and management work closely to apply our remuneration principles and ensure
our strategy supports long-term sustainable growth in shareholder value. The executive remuneration strategy
demonstrates a strong link between our Company’s strategy, its performance and the remuneration outcomes
for our executives.
The Company’s approach to setting remuneration, including roles and responsibilities is illustrated below.
Board - Responsible for the overall strategic direction and corporate governance of Villa World Limited
Remuneration and Nomination Committee
External advisers
From time-to-time the Committee and Board
utilise the services of specialist human resources
and remuneration consultants to provide advice
regarding:
• Executive remuneration levels
• Remuneration frameworks
• Succession planning
Protocols have also been established for the
engagement of remuneration consultants and
the provision of recommendations free of
undue influence.
Assist and make recommendations to the
Board by overseeing remuneration policies and
practices to ensure executives are rewarded
fairly and responsibly having regard to the
performance of the Company.
The Committee’s role is to assist and make
recommendations to the Board on the following:
• Board remuneration policies and practices
that enable it to attract and retain executives
and Directors who will create value for
shareholders
• Remuneration packages for the Senior
Executive Team
• Fees for Non-Executive Directors
• Board composition
• Human resources policies aligned to the
overall business strategy
• Policies that promote and support equal
opportunity and diversity within the Company
Management - Make recommendations to the Committee regarding the
Company’s remuneration policies and frameworks
The Company’s remuneration strategy, policies and practices are designed to attract and retain the best people
and reward employees for supporting the strategic and operational objectives of the Company. This is achieved
by setting remuneration levels which are competitive with executives in comparable companies and roles and by
regularly reviewing performance measures and targets.
VILL A WORLD LIMITED ANNUAL REPORT 2016
33
Section E:
Actual remuneration earned in FY16
Remuneration earned by Executive Key Management Personnel (KMP) reflects the Company’s strong FY16
business performance and sustained growth in shareholder value over a number of years. The following table sets
out the actual value of remuneration earned by Executive KMP members during the year.
Non-Executive
Directors
Mark Jewell
(Chairman)
David Rennick
Donna Hardman1
Gerald (Gerry)
Lambert2
Alexander (Sandy)
Beard3
Total Non-Executive
Directors
Executive Director
and KMP
Craig Treasure
(CEO and MD)
Michael Vinodolac4
Scott Payten5
Total Executive
Director and KMP
Long-
term
benefits
Long
service
leave6
Share based payments
Share
options
Perfor-
mance
Rights
Termi-
nation
benefits
Short-term
benefits
Salary
and fees
Cash
Bonus
$
2016
123,288
2015
110,000
2016
2015
2016
2015
2016
2015
2016
82,192
60,000
30,242
-
28,662
31,938
-
2015
13,140
2016
264,384
2015
215,078
$
-
-
-
-
-
-
-
-
-
-
-
-
Post-
employ-
ment
Super-
annuation
contri-
butions
$
11,712
10,450
7,808
5,700
2,873
-
2,723
3,034
-
-
25,116
19,184
$
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
TOTAL
$
135,000
120,450
90,000
65,700
33,115
-
31,385
34,972
-
13,140
289,500
234,262
1,145,100
893,406
422,220
347,442
318,188
-
-
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Paulene Henderson
2016
280,692
66,145
2016
655,692
240,000
19,308
18,128
100,000
111,972
2015
571,963
199,905
18,783
2,755
100,000
-
2015
256,217
59,369
2016
2015
2016
2015
210,519
51,395
-
-
103,921
-
-
-
19,308
18,783
14,481
-
-
7,930
4,740
8,333
8,333
39,812
-
11,488
15,375
14,930
-
-
-
-
-
-
-
2016 1,146,903
357,540
53,097
37,546
123,708
166,714
-
1,885,508
9,392
764
(25,000)
445,692
534,769
2015
932,101
259,274
46,958
8,259
83,333
-
445,692
1,775,617
TOTAL
2016
1,411,287
357,540
78,213
37,546
123,708
166,714
-
2,175,008
2015
1,147,179
259,274
66,142
8,259
83,333
-
445,692
2,009,879
1 Donna Hardman was appointed Non-Executive Director on 17 February 2016.
2 Gerald (Gerry) Lambert resigned 5 November 2015.
3 Alexander (Sandy) Beard resigned 2 September 2014.
4 Michael Vinodolac became a KMP effective 1 October 2015 after a period of transition into his current role of State Manager -
QLD, with a recent further promotion into the role of General Manager Operations.
5 Scott Payten ceased employment 24 September 2014 and received a termination payment inclusive of annual leave
entitlement, long service leave, notice period and redundancy.
6 Long service leave represents the amount expensed by the Company for the period.
34
VILL A WORLD LIMITED ANNUAL REPORT 2016
Section F:
Our assets: Our people
Villa World aims to engage our people over the long-
term by fostering diversity, providing challenging work
and development opportunities, and encouraging strong
delivery through performance. These aims are underpinned
by our values of performance, agility, integrity, knowledge,
unity and respect.
The Company has applied itself to ensuring it has the right
people, systems and structure in place to focus, grow
and lead. Our commitment to sustained performance
is reflected in incentive plans that promote and reward
decision-making with a positive long-term impact, while
avoiding excessive risk.
Section G:
Remuneration framework and link
to business strategy
The Company rewards its executives with a level and mix of
remuneration consistent with the approach outlined above.
As a gateway for each executive to attain their target short-
term incentive, there is a set of overarching Company-
wide specific hurdles that must first be achieved before
consideration is given to financial remuneration.
The table below explains the linkage between the
remuneration components and the Company’s
performance focus.
n
o
i
t
a
r
e
n
u
m
e
R
d
e
x
F
i
n
o
i
t
a
r
e
n
u
m
e
r
k
s
i
r
t
A
Component
Design
Purpose and link to strategy
Total fixed
remuneration
Base salary, superannuation
contributions and other non-
monetary benefits
• Retention and attraction - market competitive,
bench marked against peer company
• Positioned at a level that reflects the
contribution and value to the Company
• Recognises capability, expertise and
performance of the executive
STI Cash
A cash bonus awarded based on
successful achievement of Board
Key Performance Indicators
(KPIs) and delivering longer term
strategic plan against target
• Rewards and motivates achievement of Company
annual strategic plan
• Creates transparent link between performance
and remuneration
• Individual KPIs encourage accountability and
consider a broader view of performance and
specific strategic prorities
LTI
A deferred equity award of
conditional rights or options
subject to performance
conditions measured over a three
year performance period
• Rewards longer-term performance
• Performance measures (ROA and relative TSR)
provide significant link to performance and
strategic goals and are key metrics in aligning
remuneration outcomes with shareholder value
• Retention and shareholder alignment
VILL A WORLD LIMITED ANNUAL REPORT 2016
35
Section H:
FY16 remuneration outcomes
The Company has achieved substantial improvement in overall business performance in relation to the current
financial position, total shareholder returns and operational performance targets during the past 12-24 months.
These achievements were taken into consideration during the annual remuneration review for FY16.
(i)
KMP remuneration mix
Fixed Remuneration, STI and LTI work together to help generate alignment between the successful execution
and management of the Company’s strategy and business objectives to deliver in the interests of shareholders.
The CEO and all Company senior executives have a significant portion of their remuneration linked to performance
and therefore ‘at risk’. For FY16, this portion was increased, with greater emphasis on long-term incentives for the
CEO and Company executives compared to FY15, with a view to increasing shareholder alignment for this
key group.
The relative mix of these components for different roles for FY16 is summarised in the table below.
Executive Director
Craig Treasure
Other KMP
Paulene Henderson
Michael Vinodolac
Total remuneration package components
TFR
STI
LTI
2016
2015
2016
2015
2016
2015
60%
66%
21%
22%
19%
12%
72%
73%
80%
-
16%
17%
17%
-
12%
10%
3%
-
Fixed remuneration for the CEO and CFO increased in FY16 by 12.5% and 9.1% respectively. This increase ensures
that KMP remuneration remains competitive with companies of comparable size and complexity. Total fixed
remuneration is still lower than the average/median remuneration rewarded to executives in comparable companies
and roles, whilst maximum total remuneration, which includes STI and LTI awards, support the Company focus and
direction on a competitive higher performance-based remuneration structure.
36
VILL A WORLD LIMITED ANNUAL REPORT 2016
(ii)
FY16 STI outcome
The following table sets out the performance conditions for STI’s and the weighting between these measures for
executives for FY16.
Metric
CEO
CFO
General
Mananger
Operations
Weighting of financial measure
l
a
i
c
n
a
n
F
i
s
e
r
u
s
a
e
m
l
a
i
c
n
a
n
fi
-
n
o
N
i
s
e
r
u
s
a
e
m
c
fi
c
e
p
s
n
o
i
t
i
s
o
P
s Operational performance
e
r
u
s
a
e
m
• Achieve FY16 financial plan
Financial performance
• Gearing and interest cover within Board policy limit
• NTA/share against target
Business growth and sustainability
• Build, replenish and diversify the Company portfolio
• Develop current pipeline with acceptable level of risk
• Achieve production and supply of inventory measured
against targets
• Develop five year growth and sustainability strategy to
support business
• Define corporate structure to support future
performance and sustainability
Overall efficiency
• Drive efficiences through cost, time and resource
effectiveness
Corporate governance and Company Secretarial
compliance
• Audit, tax, GST, ASX reporting
Compliance with financial institutions including review of
cash facility
• Sourcing of financing options and maintaining
relationships with banks
Investor Relations
• Raise corporate awareness and understanding,
strengthen corporate image through regular,
transparent, two way communication with the financial
community and other stakeholders
• Contribute to Company’s shares achieving a fair valuation
Production and supply of inventory performance -
Queensland
• Achieve production, supply or stock measured against
Queensland targets
40%
20%
35%
20%
15%
15%
30%
15%
20%
10%
10%
10%
20%
10%
10%
20%
Performance assessment:
Below threshold hurdle
At target
VILL A WORLD LIMITED ANNUAL REPORT 2016
37
(iii)
FY16 LTI outcome
Villa World Limited Executive Long-Term Incentive Plan
Under the Villa World Limited Executive LTI plan, which was introduced in FY16, the Company awards performance
rights to executives and other eligible employees with the objective of improving the link between shareholder
returns and executive remuneration.
Awards granted will be tested against the relative TSR & ROA performance measures over three financial years until
the date the performance rights vest and at which time it will be determined whether the rights are exercisable.
Refer to Section I (iii) for the plans terms and conditions.
No awards have vested during FY16.
The table below sets out the performance rights awarded to executives during FY16:
Perform-
ance
rights
awarded
Value
Grant
date
Value of
perform-
ance
rights at
grant date
Expiry
date
Vesting
date
KMP
Craig Treasure
30/11/2015
316,902
$1.06
$335,916
31/08/2018 30/06/2018
Paulene Henderson 30/11/2015
112,676
$1.06
$119,437
31/08/2018 30/06/2018
Michael Vinodolac
30/11/2015
56,338
$1.06
$59,718
31/08/2018 30/06/2018
Expected
price
volatility
of shares
Expected
dividend
yield
Risk
free
interest
rate
27%
27%
27%
7.6%
7.6%
7.6%
2.1%
2.1%
2.1%
Section I:
Remuneration structure
Executives receive fixed remuneration and variable remuneration consisting of short and long term incentive
opportunities. Executive remuneration levels are reviewed annually by the RNC with reference to the remuneration
guiding principles and market movements. Recommendations are submitted for Board approval.
Total fixed
remuneration
“TFR”
Short-term
incentives
“STI”
Long-term
incentives
“LTI”
(i)
Total fixed remuneration
Total Fixed Remuneration (“TFR”) is a market related base salary including
superannuation contributions and other non-monetary benefits (such as
vehicle and parking allowances). It is determined according to industry
standards, relevant laws and regulations, market conditions and the Company’s
business operations with relevance to the employee’s position. TFR will reflect
the core performance requirements and expectations of the Company.
(ii)
Short-term incentives
The Company has implemented a bonus incentive program designed to create
a strong, transparent link between performance and remuneration.
Executives and eligible employees have a target STI opportunity depending on the accountabilities of their role
and impact on the Company’s performance. Actual STI awards can range from 0-40% of TFR. These are awarded
based on the successful achievement of pre-determined Board approved KPIs. Performance is assessed against
both Company and individual performance criteria. Each year the Board considers the appropriate targets and KPIs
to link to the STI plan and the weightings if targets are met for executives. This may include setting any maximum
payout under the STI plan and minimum levels of performance to trigger payment of STI.
The STI award is determined after the end of the financial year following a review of performance over the year
against the STI performance measures by the CEO (and in the case of the CEO, by the Board). The Board approves
the final STI award based on this assessment of performance and it is paid in cash four months after the end of the
performance period. If an executive resigns or is terminated with cause before the STI award payment date, Board
discretion is applied.
38
VILL A WORLD LIMITED ANNUAL REPORT 2016
(iii)
Long-term incentives
The grant of performance rights was introduced as a LTI on 30 November, 2015 subsequent to approval of the plan
at the FY15 Annual General Meeting (AGM). The plan is intended to be the Company’s principal vehicle for granting
LTI awards to executives and other eligible employees.
The primary objectives of the plan are to:
•
•
•
•
assist in the attraction, retention and motivation of key individuals
ensure enhanced focus on the Company’s long-term performance and strategic direction
link the reward of senior executives and other eligible employees to performance and the creation of
shareholder value and
encourage increased alignment between reward outcomes and shareholder interest by providing an
opportunity for executives and other eligible employees to receive an equity interest, build their shareholding
in the Company, and share in the Company’s future growth.
VILL A WORLD LIMITED ANNUAL REPORT 2016
39
The table below provides a summary of the terms and conditions of the Villa World Limited executive long-term
incentive plan:
Who participates?
How is it paid?
The Board may grant Performance Rights to senior executives and other eligible
employees of the Company. In general, the Board will invite those who are considered
to have capacity to impact the long-term performance of the Company. Non-Executive
Directors will not be elegible to participate in the Plan.
Performance rights. On vesting each performance right converts into one share. No
dividends/distributions are paid on unvested LTI awards. This ensures that executives
are only rewarded when performance hurdles have been achieved at the end of the
performance period.
How much can
executives earn?
The maximum LTI opportunities during FY16 were equivalent to 100% of fixed
remuneration for the CEO/MD and 80% of fixed remuneration for other executives.
What is the
performance period?
The vesting conditions will be measured and tested over a three-year vesting period
determined by the Board. For the FY16 grant, performance will be measured from
1 July 2015 to 30 June 2018.
How is performance
measured?
The Board may determine vesting conditions, which may include performance and/
or service conditions that must be satisfied before the performance rights vest. After
careful consideration of the long-term financial focus and strategic direction of the
Company, the Board has determined the performance conditions for the inital grant to
be as follows:
Relative TSR (75% of the LTI allocation)
TSR measures the percentage change in a Company’s share price and dividends paid.
The Company’s TSR is measured relative to a comparator group of ASX-listed companies
ranked 200-300 on the ASX300 Index (excluding companies in the mining and financial
services sectors and A-REITS). These companies were chosen as they are of a similar size
and reflect the Company’s competitors for capital. The relative TSR for the Company is
measured over three financial years.
The proportion of performance rights that may vest based on relative TSR performance
is determined based on the following vesting schedule.
Relative TSR performance
At or above the 75th percentile
Percentage vesting
100%
Between 50th and 75th percentile
Straight line vesting between 50-100%
At the 50th percentile
Below the 50th percentile
50%
Nil
40
VILL A WORLD LIMITED ANNUAL REPORT 2016
How is performance
measured?
(continued)
ROA (25% of LTI allocation)
ROA measures how well the Company has managed its assets to generate earnings. ROA
is calculated by taking the average of the three annual ROA figures (which are calculated
as adjusted earnings of a financial year divided by average monthly operating assets for
the financial year). The proportion of performance rights that may vest based on ROA
performance is determined based on the following vesting schedule.
ROA performance
At or above Maximum (13.5%)
Between Threshold (12%) and
Maximum (13.5%)
At Threshold (12%)
Below Threshold (12%)
Percentage vesting
100%
Straight line vesting between 50-100%
50%
Nil
The performance conditions are independent and will be tested separately. The
applicable TSR and ROA performance targets and relevant vesting schedules will be the
same for all participants in the Plan. The Plan provides the Board with the ability to review
and adjust the performance conditions, targets and vesting schedules on a grant-by-
grant basis, ensuring they remain appropriate and sufficiently challenging.
Clawback?
In the event of fraud, dishonesty or material misstatement of financial statements, the
Board may make a determination, including lapsing unvested performance rights to
ensure that no unfair benefit is obtained by a participant.
What happens if an
executive leaves the
Company?
If an executive resigns or is terminated for cause, any unvested LTI awards are forfeited,
unless otherwise determined by the Board. The treatment of vested and unexercised
awards will be determined by the Board with reference to the circumstances of cessation.
VILL A WORLD LIMITED ANNUAL REPORT 2016
41
Section J:
Service agreements for Executive KMP
(i)
Employment agreements
Remuneration and other terms of employment for executives are formalised in service agreements. The service
agreements provide for base salary inclusive of superannuation, performance related bonuses, other benefits
including car and parking allowances and notice periods.
The key provisions of the agreements relating to terms of employment and notice periods for the year ended
30 June 2016 are set out in the table below:
Base fee
inclusive of
superannuation
Term of
agreement
Notice period
Review period
Chief Executive Officer
and Managing Director
Craig Treasure
Other KMP
Paulene Henderson
Michael Vinodolac
$675,000
Rolling
6 months
Annual
$300,000
$300,000
Rolling
Rolling
6 months
3 months
Annual
Annual
Maximum
annual cash
bonus (%) 1
40%
25%
20%
1 Anticipated cash bonus as a proportion of base salary depending on corporate and individual performance.
(ii)
Termination provisions
Other than statutory entitlements, there are no termination benefits applicable to the current executives.
The Board and the RNC must approve all termination payments.
42
VILL A WORLD LIMITED ANNUAL REPORT 2016
Section K:
Non-Executive Directors’
remuneration
The Company’s NED fee policy is designed to attract and
retain high-calibre Directors who can discharge the roles and
responsibilities required in terms of good governance, strong
oversight, independence and objectivity.
Board and Committee fees are reviewed annually having
regard to the level of fees paid to NEDs of Australian
companies of comparable size and complexity. This approach
reflects the responsibilities and time commitment necessary
for the role.
NEDs receive fees only and do not participate in any
performance-related incentive awards. NED fees reflect the
demands and responsibilities of the Directors.
(i)
Service agreements
On appointment to the Board, all NEDs enter into a letter
of appointment with the Company. The letter of appointment
sets out the terms of appointment, services to be provided,
remuneration, and corporate policies and codes of conduct
to be complied with.
(ii)
Maximum aggregate NED fee pool
Fees are determined within an aggregate Directors’ fee pool limit which is periodically recommended for approval
by shareholders. Shareholders have approved maximum aggregate Board and committee fees payable to NEDs
of $600,000.
The total of Non-Executive Directors’ fees paid for the year ended 30 June 2016 was $289,500 (30 June 2015:
$234,262).
(iii)
NED remuneration
NEDs receive a fixed fee for their services. Fees are reviewed annually by the RNC, taking into account amounts
paid to NEDs with comparable roles in the external market. Recommendations are submitted to the Board for
final approval.
With the exception of the Chair, NEDs receive additional fees if they are appointed the Chair of Committees.
NEDs do not receive termination benefits other than accumulated superannuation. NEDs may be reimbursed for
expenses reasonably incurred in performing their role.
In FY16 the Board decided to increase the base fee for NEDs to reflect additional workloads as well as national
benchmarks. The FY17 base fee for NEDs is expected to be well within the approved $600,000 remuneration
pool for NEDs.
The annual fees paid for the Board and Board Committees are shown in the table below. The amounts shown are
inclusive of applicable statutory superannuation contributions.
Base fees
Chair
Other NEDs
Additional fees
Committee - Chair
FY16
FY15
$135,000
$120,450
$80,000
$78,840
$10,000
-
VILL A WORLD LIMITED ANNUAL REPORT 2016
43
Section L:
Additional required disclosures
(i)
Past financial performance
The measures of the Company’s financial performance over the past five years as required by the Corporations Act
2001 are shown in the table below. These are not necessarily consistent with the measures used in determining the
variable amounts of remuneration awarded to KMP. Consequently, there may not always be a direct correlation
between the statutory key performance measures and the variable remuneration awarded.
Performance KPI
Revenue
Debt
Gearing
NTA per security (cents)
Dividends (relating to the year)
Interim dividend (cents)
Final dividend (cents)
Earnings per share (cents)
Share price at 30 June
FY12
$m
FY13
$m
FY14
$m
FY15
$m
FY16
$m
$145.6
$169.4
$229.5
$321.6
$387.0
$74.2
27.6%
201.0
-
-
10.1
$0.79
$70.0
24.4%
185.0
-
-
(18.2)
$1.13
$69.1
18.7%
192.0
6.0
9.0
21.5
$92.0
16.9%
200.0
$128.6
25.6%
215.0
6.0
10.0
25.6
8.0
10.0
30.6
$2.02
$2.00
$2.08
(ii)
Equity instrument disclosures relating to KMP
Shareholding of KMP for the year ended 30 June 2016
Balance at the start
of the year
Granted during
the 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
Directors
Mark Jewell
Craig Treasure
David Rennick
Donna Hardman
Gerald (Gerry) Lambert 1
Other KMP
Paulene Henderson
Michale Vinodolac
-
103,390
252,432 582,432
-
-
-
-
-
22,500
-
22,432
86,468
-
Total
252,432
817,222
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,192
-
-
103,390
- 252,432 582,432
22,500
-
-
-
-
-
-
-
45,000
-
-
-
86,468
3,192
-
3,192
22,500 255,624
817,290
1 Gerald (Gerry) Lambert resigned as Non-Executive Director on 5 November 2015.
(iii)
Villa World Limited Option Plan
The Villa World Limited Option Plan was introduced in FY14 and was designed to attract and retain key personnel
and align the interest of employees with those of shareholders.
Under the plan, share-based compensation benefits in the form of options are granted to executives and eligible
employees. The options only vest if the participating employees continue their respective service agreements with
the Company for three years from the grant date.
No options were granted or vested during FY16. Options under this plan were last granted on 11 February, 2014 and
will expire on 11 August, 2017. Options will commence vesting on 26 July, 2016. This plan is no longer used and has
been replaced by the Villa World Limited Executive LTI Plan.
The following table discloses the number of share options granted, vested or lapsed during the year. Share options
do not carry any voting or dividend rights, and can only be exercised once the vesting conditions have been met,
until their expiry date.
44
VILL A WORLD LIMITED ANNUAL REPORT 2016
KMP
Grant date
Expiry date
Exercise
price
Granted as
compen-
sation
Value of
options
at grant
date1
Expected
price
volatility
of shares
Expected
dividend
yield
Risk
free
interest
rate
Vesting
date
Craig Treasure
26/07/2013
26/01/2017
$1.25
3,000,000 $300,000 26/07/2016
Paulene Henderson
26/07/2013
26/01/2017
$1.25
250,000
$25,000
26/07/2016
Michael Vinodolac
11/02/2014
11/08/2017
$1.60
150,000
$61,500
11/02/2017
25%
25%
30%
9.0%
9.0%
7.1%
2.57%
2.57%
3.10%
1 The value of options is 10 cents per option for those options granted on 26 July 2013 and 41 cents per option for those options
granted on 11 February 2014. This is calculated in accordance with AASB2 Share-based payments.
(iv)
Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense were as follows:
Performance rights issued to KMP
Options issued to KMP
(v)
Use of remuneration advisors
Consolidated
30-Jun-16
30-Jun-15
$'000
$'000
166
124
290
-
83
83
The Company seeks relevant benchmarking and commentary on a number of remuneration issues from a variety
of independent external consultants. The Company’s remuneration policy is reviewed annually by the RNC.
During FY16, the RNC appointed Ernst & Young (EY) to provide advice in relation to the implementation of the
long-term incentive plan for senior executives as well as providing some benchmarking analysis with regard to
remuneration levels for executives. No remuneration recommendations were provided by EY or any other advisor
during the reporting period.
(vi)
Clawback of remuneration
The Clawback Policy was adopted by the Board during FY16 to align the remuneration outcomes of executives
under the relevant incentive programs (including STI and LTI plans) with the expectations and interests of Company
shareholders. The policy provides the Board with the ability to claw back incentives paid to executives where an
“unfair” benefit has arisen. The Board has discretion to determine the relevant action(s) it deems necessary to
enforce this policy including cancellation or forfeiture of unvested STI and/or LTI awards.
The Clawback Policy is effective from 1 July 2015 and covers only STI and LTI awards made after that date.
(vii)
Securities dealing policy
Consistent with the Corporations Act 2001, executives are prohibited under the Company’s Securities Dealing Policy
from hedging or otherwise reducing or eliminating the risk associated with unvested equity-based incentives. If the
executive hedges in breach of this policy, consequences may involve disciplinary action and could result in dismissal
and the forfeiture of equity-based incentives. Conviction of insider trading can attract criminal and civil liability
under the Corporations Act 2001.
(viii)
Remuneration report approval at FY15 Annual General Meeting (AGM)
Of the eligible votes cast at the Company’s AGM held on 5 November 2015, 96.04% were in favour of the
remuneration report for FY15. The Company did not receive any specific feedback at the AGM on its
remuneration practices.
VILL A WORLD LIMITED ANNUAL REPORT 2016
45
Directors’ report
30 June 2016 (continued)
Environmental regulation
The Company 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 Councils and other government agencies. Those
Councils and agencies will assess environmental factors when issuing approvals and, where applicable, will impose
relevant conditions. To the best of the Directors’ knowledge, all activities have been undertaken in compliance with
the requirements of all development approvals.
(ii)
Dwelling construction / building approvals
Building approvals are obtained for the construction of dwellings from the relevant Councils. The construction of
dwellings is subject to strict requirements regarding environmental impacts 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, Council requirements and other applicable laws.
Indemnification and Insurance of officers and auditors
Indemnification
During the year, the Company paid premiums for policies insuring Directors and officers of the Company and its
related bodies corporate 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 policies as (in accordance with normal practice) such disclosure is
prohibited under the terms of the policies.
Insurance premiums
The Company’s constitution provides that it must indemnify, on a full indemnity basis and to the full extent
permitted by law, officers of the Company and its related bodies corporate for all losses and liabilities incurred by
the person in their position as an officer, unless covered by insurance.
The Company 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 have been
entered into with other persons who have been requested to act as Directors or officers, or as nominees for the
purposes of licenses held by the Company or its related bodies corporate. The indemnities in these deeds operate
to the full extent permitted by law and are not subject to a monetary limit. The Company 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.
The Company has not otherwise, during or since the end of the financial year, except to the extent permitted by
law, indemnified or agreed to indemnify an officer or auditor of the Company or of any related body corporate
against a liability incurred as such an officer or auditor.
Indemnity of auditors
Details of the amounts paid to the auditors of the Company, Ernst & Young for audit and non-audit services
provided during the year are set out in note E3 - Remuneration of auditors. To the extent permitted by law, the
Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement
agreement against claims by third parties arising from the audit (for an unspecified amount). No payment has been
made to indemnify Ernst & Young during or since the financial year.
46
VILL A WORLD LIMITED ANNUAL REPORT 2016
Non-audit services
Details of the amounts paid or payable to the auditor (Ernst & Young) for audit and non-audit services provided
during the year are set out in note E3 - Remuneration of auditors.
The Board has considered the position and, in accordance with the advice received from the Audit and Risk
Committee, is satisfied that the provision of non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the auditor’s
provision of non-audit services did not compromise the Act’s independence requirements because none of the
services undermine the general principles relating to auditor independence as set out in APES110 Code of Ethics
for Professional Accountants.
The Audit and Risk Committee reviewed all non-audit services to ensure they did not impact the auditor’s
impartiality and objectivity.
Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is
set out on page 48.
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts
in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with ASIC
Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 to the nearest thousand dollars, or in
certain cases, to the nearest dollar.
This report is made in accordance with a resolution of Directors.
Craig Treasure
Chief Executive Officer and Managing Director
Gold Coast
16 August 2016
VILL A WORLD LIMITED ANNUAL REPORT 2016
47
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Auditor’s Independence Declaration to the Directors of Villa World
Limited
As lead auditor for the audit of Villa World Limited for the financial year ended 30 June 2016, I declare
to the best of my knowledge and belief, there have been:
Auditor’s Independence Declaration to the Directors of Villa World
Limited
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
As lead auditor for the audit of Villa World Limited for the financial year ended 30 June 2016, I declare
to the best of my knowledge and belief, there have been:
This declaration is in respect of Villa World Limited and the entities it controlled during the financial
year.
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Villa World Limited and the entities it controlled during the financial
year.
Ernst & Young
Ernst & Young
Ric Roach
Partner
16 August 2016
Ric Roach
Partner
16 August 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
48
VILL A WORLD LIMITED ANNUAL REPORT 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
CORPORATE GOVERNANCE STATEMENT
30 June 2016
Corporate governance statement
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 Principles and Recommendations', which
offer a framework for good corporate governance. The Board has approved the Corporate Governance Statement
for the year ended 30 June 2016, which is available in the Corporate Governance section of its website at
http://www.villaworld.com.au/corporate-governance-statement-2016
VILL A WORLD LIMITED ANNUAL REPORT 2016
49
Annual Report - 30 June 2016
Contents
Financial statements
Financial statements
Consolidated statement of comprehensive income
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of changes in equity
Consolidated statement of cash flows
Consolidated statement of cash flows
Notes to the consolidated financial statements
Notes to the consolidated financial statements
Directors' declaration
Directors' declaration
Independent auditor's report to the members
Independent auditor's report to the members
Page
51
51
52
52
53
53
54
54
55
55
89
89
90
90
50
VILL A WORLD LIMITED ANNUAL REPORT 2016
VILLA WORLD ANNUAL REPORT 2016
| 50
FINANCIAL STATEMENTS Consolidated statement of comprehensive income
For the year ended 30 June 2016
Consolidated statement of comprehensive income
For the year ended 30 June 2016
Consolidated
Revenue from continuing operations
Revenue from land development, residential building and construction
Revenue from continuing operations
contracts
Revenue from land development, residential building and construction
Cost of land development, residential building and construction contracts
contracts
Gross Margin
Cost of land development, residential building and construction contracts
Development and project management fee
Gross Margin
Other income
Development and project management fee
Net impairment of development land
Other income
Share of profit from associates and joint ventures
Net impairment of development land
Other expenses from ordinary activities
Share of profit from associates and joint ventures
Property sales and marketing expenses
Other expenses from ordinary activities
Land holding costs
Property sales and marketing expenses
Legal and professional costs
Land holding costs
Employee benefits
Legal and professional costs
Depreciation and amortisation expense
Employee benefits
Administration costs and other expenses
Depreciation and amortisation expense
Finance costs
Administration costs and other expenses
Profit before income tax
Finance costs
Income tax expense
Profit before income tax
Profit for the period
Income tax expense
Profit is attributable to:
Profit for the period
Owners of Villa World Limited
Profit is attributable to:
Owners of Villa World Limited
Earnings per share for profit attributable to the ordinary equity
holders of the Company:
Earnings per share for profit attributable to the ordinary equity
Basic earnings per share
holders of the Company:
Diluted earnings per share
Basic earnings per share
Diluted earnings per share
Profit for the period
Other comprehensive income
Profit for the period
Items that may be reclassified to profit or loss
Other comprehensive income
Changes in the fair value of cash flow hedges
Items that may be reclassified to profit or loss
Income tax relating to these items
Changes in the fair value of cash flow hedges
Other comprehensive income for the period, net of tax
Income tax relating to these items
Total comprehensive income for the period, net of tax
Other comprehensive income for the period, net of tax
Total comprehensive income for the period is attributable to:
Total comprehensive income for the period, net of tax
Owners of Villa World Limited
Total comprehensive income for the period is attributable to:
Owners of Villa World Limited
Notes
Notes
A1
A1
A1
A1
A1
A1
D3
D3
C5
C5
A5(a)
A5(a)
A2
A2
A2
A2
Notes
Notes
C3(a)
C3(a)
C3(a)
C3(a)
Consolidated
30-Jun-16
$'000
30-Jun-16
$'000
30-Jun-15
$'000
30-Jun-15
$'000
387,002
(286,400)
387,002
100,602
(286,400)
1,159
100,602
697
1,159
(83)
697
3,445
(83)
3,445
(22,090)
(3,777)
(22,090)
(1,489)
(3,777)
(16,705)
(1,489)
(607)
(16,705)
(4,441)
(607)
(9,464)
(4,441)
47,247
(9,464)
(13,534)
47,247
33,713
(13,534)
33,713
33,713
33,713
Cents
Cents
30.6
30.1
30.6
30.1
321,550
(243,760)
321,550
77,790
(243,760)
44
77,790
867
44
77
867
1,828
77
1,828
(17,963)
(3,565)
(17,963)
(943)
(3,565)
(14,352)
(943)
(958)
(14,352)
(3,249)
(958)
(10,196)
(3,249)
29,380
(10,196)
(3,743)
29,380
25,637
(3,743)
25,637
25,637
25,637
Cents
Cents
25.6
25.2
25.6
25.2
Consolidated
Consolidated
30-Jun-16
$'000
30-Jun-16
33,713
$'000
33,713
30-Jun-15
$'000
30-Jun-15
25,637
$'000
25,637
460
(138)
460
322
(138)
34,035
322
34,035
34,035
34,035
(1,805)
541
(1,805)
(1,264)
541
24,373
(1,264)
24,373
24,373
24,373
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
VILLA WORLD ANNUAL REPORT 2016
VILL A WORLD LIMITED ANNUAL REPORT 2016
| 51
51
VILLA WORLD ANNUAL REPORT 2016
| 51
FINANCIAL STATEMENTS Consolidated balance sheet
As at 30 June 2016
Consolidated balance sheet
As at 30 June 2016
Consolidated
ASSETS
Current assets
ASSETS
Cash and cash equivalents
Current assets
Trade and other receivables
Cash and cash equivalents
Inventories
Trade and other receivables
Other current assets
Inventories
Total current assets
Other current assets
Non-current assets
Total current assets
Inventories
Non-current assets
Property, plant and equipment
Inventories
Investments accounted for using the equity method
Property, plant and equipment
Deferred tax assets
Investments accounted for using the equity method
Total non-current assets
Deferred tax assets
Total assets
Total non-current assets
LIABILITIES
Total assets
Current liabilities
LIABILITIES
Trade and other payables
Current liabilities
Deferred income
Trade and other payables
Current tax liabilities
Deferred income
Employee benefits
Current tax liabilities
Service warranties
Employee benefits
Other provisions
Service warranties
Total current liabilities
Other provisions
Non-current liabilities
Total current liabilities
Trade and other payables
Non-current liabilities
Borrowings
Trade and other payables
Deferred income
Borrowings
Employee benefits - long service leave
Deferred income
Other provisions
Employee benefits - long service leave
Total non-current liabilities
Other provisions
Total liabilities
Total non-current liabilities
Net assets
Total liabilities
EQUITY
Net assets
Contributed equity
EQUITY
Other reserves
Contributed equity
Accumulated losses
Other reserves
Capital and reserves attributable to owners of Villa World Limited
Accumulated losses
Total equity
Capital and reserves attributable to owners of Villa World Limited
Total equity
Notes
Notes
B2
B1
B2
B1
B1
B1
D3
A5(d)
D3
A5(d)
B3
B3
A5(a)
A5(a)
B4(a)
B4(a)
B3
C4
B3
C4
C2
C3(a)
C2
C3(a)
Consolidated
30-Jun-16
$'000
30-Jun-16
$'000
30-Jun-15
$'000
30-Jun-15
$'000
8,358
72,351
8,358
186,037
72,351
3,157
186,037
269,903
3,157
269,903
187,660
1,169
187,660
18,482
1,169
795
18,482
208,106
795
478,009
208,106
478,009
79,030
527
79,030
4,868
527
772
4,868
14,392
772
45
14,392
99,634
45
99,634
11,989
128,594
11,989
473
128,594
375
473
64
375
141,495
64
241,129
141,495
236,880
241,129
236,880
444,271
190,320
444,271
(397,711)
190,320
236,880
(397,711)
236,880
236,880
236,880
22,571
41,907
22,571
191,318
41,907
3,588
191,318
259,384
3,588
259,384
148,326
898
148,326
16,779
898
7,286
16,779
173,289
7,286
432,673
173,289
432,673
96,452
-
96,452
1,196
-
635
1,196
14,983
635
239
14,983
113,505
239
113,505
5,926
92,044
5,926
-
92,044
339
-
261
339
98,570
261
212,075
98,570
220,598
212,075
220,598
444,286
174,190
444,286
(397,878)
174,190
220,598
(397,878)
220,598
220,598
220,598
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
52
VILL A WORLD LIMITED ANNUAL REPORT 2016
VILLA WORLD ANNUAL REPORT 2016
VILLA WORLD ANNUAL REPORT 2016
| 52
| 52
FINANCIAL STATEMENTS Consolidated statement of changes in equity
For the year ended 30 June 2016
Consolidated statement of changes in equity
For the year ended 30 June 2016
Consolidated
Balance at 1 July 2014
Consolidated
Profit for the year as reported in the
Balance at 1 July 2014
2015 financial statements
Profit for the year as reported in the
Movement in hedge reserve (net of
2015 financial statements
tax)
Movement in hedge reserve (net of
Total comprehensive income for the
tax)
period
Total comprehensive income for the
Contributions of equity, net of
period
transaction costs and tax
Contributions of equity, net of
Securities issued under the share
transaction costs and tax
purchase plan, net of transaction
Securities issued under the share
costs and tax
purchase plan, net of transaction
Transfer current year profit to profit
costs and tax
reserve
Transfer current year profit to profit
Dividends provided for or paid
reserve
Share based payments and other
Dividends provided for or paid
expenses
Share based payments and other
expenses
Balance at 30 June 2015
Balance at 1 July 2015
Balance at 30 June 2015
Profit for the year as reported in the
Balance at 1 July 2015
2016 financial statements
Profit for the year as reported in the
Movement in hedge reserve (net of
2016 financial statements
tax)
Movement in hedge reserve (net of
Total comprehensive income for the
tax)
period
Total comprehensive income for the
Dividends provided for or paid
period
Share based payments and other
Dividends provided for or paid
expenses
Share based payments and other
Employee Share Scheme
expenses
Transfer current year profit to profit
Employee Share Scheme
reserve
Transfer current year profit to profit
Share capital issue costs
reserve
Share capital issue costs
Balance at 30 June 2016
Balance at 30 June 2016
Notes
Notes
Contributed
equity
Contributed
$'000
equity
$'000
413,375
413,375
-
-
-
-
-
-
25,911
25,911
5,000
5,000
-
-
-
-
-
30,911
-
444,286
30,911
444,286
444,286
444,286
-
-
-
-
-
-
-
-
-
-
-
-
-
(15)
-
(15)
(15)
444,271
(15)
444,271
C2
C2
C2
C2
C3(a)
A4(a)
C3(a)
A4(a)
A4(a)
A4(a)
C3(a)
C3(a)
C3(a)
C2
C3(a)
C2
(1,413)
-
-
(1,264)
(1,264)
(1,264)
(1,264)
-
-
-
-
-
-
-
-
-
-
-
(2,677)
-
(2,677)
(2,677)
(2,677)
-
-
322
322
322
-
322
-
-
-
-
-
-
-
-
-
-
(2,355)
-
(2,355)
Attributable to owners of
Villa World Limited
Attributable to owners of
Profit
Other
Villa World Limited
Reserve
reserves
Profit
Other
$'000
$'000
reserves
Reserve
$'000
$'000
174
166,013
Cash flow
hedges
Cash flow
$'000
hedges
$'000
(1,413)
174
-
166,013
-
Accumulated
losses
Accumulated
$'000
losses
(397,904) 180,245
$'000
(397,904) 180,245
25,637
Total
$'000
Total
$'000
25,637
-
-
-
-
-
-
-
-
-
-
-
-
-
143
143
143
317
143
317
317
317
-
-
-
-
-
-
-
-
230
1,894
230
1,894
-
-
-
2,124
-
2,441
2,124
2,441
-
-
-
-
-
-
-
-
25,637
-
-
25,637
25,637
-
-
-
25,637
(1,264)
(1,264)
24,373
24,373
25,911
25,911
5,000
-
25,587
(15,050)
25,587
(15,050)
-
10,537
-
176,550
10,537
176,550
176,550
176,550
-
-
(25,587)
(25,587)
5,000
-
- (15,050)
-
- (15,050)
118
(25)
(25,612)
(25,612)
(25)
15,979
118
(397,878) 220,598
15,979
(397,878) 220,598
(397,878) 220,598
(397,878) 220,598
33,713
33,713
-
-
33,713
-
33,713
322
-
-
(19,862)
-
(19,862)
-
-
-
-
33,546
-
33,546
13,684
-
190,234
13,684
33,713
-
33,713
322
34,035
- (19,862)
34,035
- (19,862)
230
-
1,894
-
230
-
1,894
-
-
(33,546)
(15)
-
(33,546)
-
(33,546) (17,753)
(15)
-
(397,711) 236,880
(33,546) (17,753)
190,234
(397,711) 236,880
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
The above consolidated statement of changes in equity should be read in conjunction with the accompanying
notes.
VILLA WORLD ANNUAL REPORT 2016
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| 53
| 53
53
FINANCIAL STATEMENTS Consolidated statement of cash flows
For the year ended 30 June 2016
Consolidated statement of cash flows
For the year ended 30 June 2016
Consolidated
Consolidated
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)
Cash flows from operating activities
Receipts from the transfer of development rights
Receipts from customers (inclusive of goods and services tax)
Payments to suppliers and employees (inclusive of goods and services
Receipts from the transfer of development rights
tax)
Payments to suppliers and employees (inclusive of goods and services
tax)
Payments for land acquired
Interest received
Payments for land acquired
Interest paid
Interest received
Borrowing costs
Interest paid
Corporate tax paid
Borrowing costs
GST paid
Corporate tax paid
Net cash outflow from operating activities
GST paid
Cash flows from investing activities
Net cash outflow from operating activities
Payments for property, plant and equipment
Cash flows from investing activities
Payments for equity accounted investments
Payments for property, plant and equipment
Distributions received from equity accounted investments
Payments for equity accounted investments
Net cash inflow from investing activities
Distributions received from equity accounted investments
Cash flows from financing activities
Net cash inflow from investing activities
Proceeds from borrowings
Cash flows from financing activities
Repayment of borrowings
Proceeds from borrowings
Proceeds from issue of share capital
Repayment of borrowings
Transactions costs of issue of shares
Proceeds from issue of share capital
Dividends paid to Company's shareholders
Transactions costs of issue of shares
Net cash inflow from financing activities
Dividends paid to Company's shareholders
Net (decrease) / increase in cash and cash equivalents
Net cash inflow from financing activities
Cash and cash equivalents at the beginning of the financial year
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at end of period
Cash and cash equivalents at the beginning of the financial year
Reconciliation to cash at the end of the year:
Cash and cash equivalents at end of period
Cash and cash equivalents
Reconciliation to cash at the end of the year:
Cash and cash equivalents at the end of the year:
Cash and cash equivalents
Cash and cash equivalents at the end of the year:
Notes
Notes
A6
A6
D3
D3
D3
D3
A4(a)
A4(a)
30-Jun-16
$'000
30-Jun-16
$'000
352,402
26,400
352,402
26,400
(247,298)
131,504
(247,298)
(162,930)
131,504
445
(162,930)
(6,494)
445
(250)
(6,494)
(1,616)
(250)
7,712
(1,616)
(31,629)
7,712
(31,629)
(850)
(11,258)
(850)
13,000
(11,258)
892
13,000
892
193,886
(157,500)
193,886
-
(157,500)
-
-
(19,862)
-
16,524
(19,862)
(14,213)
16,524
22,571
(14,213)
8,358
22,571
8,358
8,358
8,358
8,358
8,358
30-Jun-15
$'000
30-Jun-15
$'000
318,436
-
318,436
-
(242,923)
75,513
(242,923)
(102,123)
75,513
575
(102,123)
(6,313)
575
(723)
(6,313)
-
(723)
2,612
-
(30,459)
2,612
(30,459)
(708)
(6,366)
(708)
9,383
(6,366)
2,309
9,383
2,309
211,437
(188,360)
211,437
31,693
(188,360)
(1,117)
31,693
(15,050)
(1,117)
38,603
(15,050)
10,453
38,603
12,118
10,453
22,571
12,118
22,571
22,571
22,571
22,571
22,571
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
54
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FINANCIAL STATEMENTS Notes to the consolidated financial statements
30 June 2016
Contents of the notes to the consolidated financial statements
A
A
A1
A2
A3
A4
A5
A6
A1
A2
A3
A4
A5
A6
B
B
B1
B2
B3
B4
B5
B1
B2
B3
B4
B5
C
C
C1
C2
C3
C4
C5
C6
C1
C2
C3
C4
C5
C6
D
D
D1
D2
D3
D4
D1
D2
D3
D4
E
E
E1
E2
E3
E4
E5
E1
E2
E3
E4
E5
RESULTS FOR THE YEAR
RESULTS FOR THE YEAR
Revenue and gross profit
Revenue and gross profit
Earnings per share
Earnings per share
Segment revenue
Segment revenue
Dividends
Dividends
Taxes
Taxes
Reconciliation of profit after income tax to net cash inflow from operating activities
Reconciliation of profit after income tax to net cash inflow from operating activities
OPERATING ASSETS AND LIABILITIES
OPERATING ASSETS AND LIABILITIES
Inventories
Inventories
Trade and other receivables
Trade and other receivables
Trade and other payables
Trade and other payables
Provisions and contingencies
Provisions and contingencies
Capital and other commitments
Capital and other commitments
CAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT
CAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT
Capital risk management
Capital risk management
Contributed equity
Contributed equity
Other reserves
Other reserves
Borrowings
Borrowings
Finance costs
Finance costs
Financial risk management
Financial risk management
GROUP STRUCTURE
GROUP STRUCTURE
Subsidiaries
Subsidiaries
Deed of cross guarantee
Deed of cross guarantee
Investments accounted for using the equity method
Investments accounted for using the equity method
Parent entity financial information
Parent entity financial information
OTHER INFORMATION
OTHER INFORMATION
Basis of preparation
Basis of preparation
Key management personnel disclosures
Key management personnel disclosures
Remuneration of auditors
Remuneration of auditors
Events occurring after the reporting period
Events occurring after the reporting period
Other accounting policies
Other accounting policies
Page
56
56
56
56
57
57
57
57
58
58
59
59
62
62
63
63
63
63
64
64
64
64
65
65
67
67
68
68
68
68
69
69
70
70
70
70
72
72
72
72
77
77
77
77
77
77
79
79
81
81
83
83
83
83
83
83
85
85
85
85
86
86
VILL A WORLD LIMITED ANNUAL REPORT 2016
55
VILLA WORLD ANNUAL REPORT 2016
| 55
FINANCIAL STATEMENTS Notes to the consolidated financial statements
30 June 2016 (continued)
A
A
A1
A1
A2
A2
A3
A3
A4
A4
A5
A5
A6
A6
RESULTS FOR THE YEAR
This section provides information that is most relevant to explaining the Company's performance during
the year and where relevant, the accounting policies that have been applied and significant estimates
and judgements made.
In this section:
Revenue and gross profit
Earnings per share
Segment revenue
Dividends
Taxes
Reconciliation of profit after income tax to net cash inflow from operating activities
A1 Revenue and gross profit
Revenue from land only development
Revenue from land development, residential building and construction contracts
Revenue from land development, residential building and construction
contracts
Cost of land only development
Cost of land development, residential building and construction contracts
Other direct costs
Costs of land development, residential building and construction contracts
Gross profit
Gross margin
Other income
Rebates received
Other income
Recognition and measurement
Consolidated
30-Jun-16
$'000
106,128
280,874
30-Jun-15
$'000
62,887
258,663
387,002
71,243
213,040
2,117
286,400
100,602
26.0%
321,550
41,730
193,107
8,923
243,760
77,790
24.2%
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
60
637
697
115
752
867
Revenue is measured at the fair value of the consideration received or receivable net of returns, trade
allowances, rebates and amounts collected on behalf of third parties. The Company recognises revenue when
the amount of revenue can be reliably measured, it is probable that the future economic benefits will flow to the
entity and specific criteria have been met for each of the Company's activities as described below.
Land development and residential housing
Revenue is recognised when the risks and rewards of ownership and effective control have passed to the buyer.
In Queensland and Victoria an unconditional sales contract and registration of the land and/or certification of
building completion is required for revenue to be recognised.
Cash settlement is therefore not required in Queensland or Victoria to recognise revenue for land only and house
and land packages. However cash settlement is required in New South Wales due to section 66K of the
Conveyancing Act 1919 which specifies that risk does not pass to the purchaser until the completion of the sale
or possession of the land.
56
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| 56
ARESULTS FOR THE YEAR
Notes to the consolidated financial statements
30 June 2016 (continued)
A1 Revenue and gross profit (continued)
Construction contracts
Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims
and incentive payments. 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. The stage of
completion is assessed internally and based on costs incurred to forecast total costs. 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.
A2 Earnings per share
Profit attributable to the ordinary equity holders of the Company
Weighted average number of ordinary shares used in calculating basic earnings
per share
Weighted average number of diluted shares used in calculating diluted earnings
per share
Basic earnings per share
Diluted earnings per share
Accounting for earnings per share
Basic earnings per share
Consolidated
30-Jun-16
$'000
33,713
30-Jun-15
$'000
25,637
Number
'000
Number
'000
110,344
100,141
111,895
Cents
30.6
30.1
101,630
Cents
25.6
25.2
Basic earnings per share is calculated by dividing the profit attributable to the equity holders of the Company,
excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary
shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year and
excluding treasury shares.
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 ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration.
Share based options and Performance rights
Share based options and Performance rights are granted to employees under Villa World Limited's Legacy Long-
Term Incentive Option Plan and the Villa World Limited's Executive Long-Term Incentive Plan. Both of these
performance based measures are considered to be potential ordinary shares and have been included in the
determination of diluted earnings per share to the extent to which they are dilutive. They have been excluded
when calculating basic earnings per share.
A3 Segment revenue
(a)
Identification of reportable operating segments
The Company is organised into two operating segments:
(i) Property development and construction - Queensland and New South Wales
(ii) Property development and construction - Victoria.
The Company has identified its operating segments based on the internal reports that are reviewed and used by
the executive committee (chief operating decision makers) in assessing performance and in determining resource
allocation.
VILL A WORLD LIMITED ANNUAL REPORT 2016
57
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| 57
ARESULTS FOR THE YEAR Notes to the consolidated financial statements
30 June 2016 (continued)
A3 Segment revenue (continued)
(a)
Identification of reportable operating segments (continued)
The Company and its controlled entities develop and sell residential land and buildings predominately in
Queensland, New South Wales 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 segment information provided to the executive committee for the reportable segments for the year ended 30
June 2016 is as follows:
From continuing operations
Segment revenue from land development, residential building and
construction contracts
Queensland and New South Wales
Victoria
Total segment revenue from land development, residential building and
construction contracts
Segment cost of land development, residential building and construction
contracts
Queensland and New South Wales
Victoria
Total segment cost of land development, residential building and
construction contracts
Segment gross margin
Queensland and New South Wales
Victoria
Total segment gross margin
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
330,326
56,676
303,156
18,394
387,002
321,550
240,683
45,717
231,548
12,212
286,400
243,760
89,643
10,959
100,602
71,608
6,182
77,790
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.
(b) Segment information provided to the strategic executive committee
(i) 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 land development, residential
building and construction contracts.
(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.
A4 Dividends
Accounting for dividends
When determining dividend return to shareholders, the Company considers a number of factors, including the
Company's anticipated cash requirements to fund its growth and operational plans and current and future
economic conditions. According to these anticipated needs, the Company aims to return to shareholders
approximately 50-75% of net profit after income tax (NPAT). 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 end of the reporting period.
58
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| 58
ARESULTS FOR THE YEAR Notes to the consolidated financial statements
30 June 2016 (continued)
A4 Dividends (continued)
(a) Ordinary shares
Final fully franked ordinary dividend for the year ended 30 June 2015 of 10.0
cents per fully paid share paid on 28 September 2015 (2014: 9.0 cents per share)
Final franked dividend based on tax paid at 30.0%
Interim dividend for the year ended 30 June 2016 of 8.0 cents per fully paid share
(2015: 6.0 cents per fully paid share) paid on 31 March 2016.
Interim franked dividend based on tax paid at 30.0%
(b) Dividends not recognised at the end of the reporting period
In addition to the above dividends, since period end the Directors have
recommended the payment of a final dividend of 10.0 cents per fully paid ordinary
share (2015: 10.0 cents per fully paid ordinary share) fully franked based on tax
paid at 30%. The aggregate amount of the proposed dividend expected to be paid
on 30 September 2016 out of profits reserve at 30 June 2016, but not recognised
as a liability at period end, is:
(c) Franking credits
Franking credits available for subsequent reporting periods based on a tax rate of
30.0% (2015 - 30.0%)
Franking credits that will arise from the payment of income tax payable as at the
end of the financial year
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
11,034
8,430
8,828
19,862
6,620
15,050
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
11,359
11,034
Consolidated entity
30-Jun-16
$'000
30-Jun-15
$'000
3,354
4,868
8,222
10,251
-
10,251
The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted
for franking debits that will arise from the payment of dividends recognised as a liability 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.
A5 Taxes
Accounting for taxes
Income tax expense comprises current and deferred tax. It is recognised in profit or loss except to the extent that
it relates to items recognised directly in equity or other comprehensive income.
Current tax expense represents the expense relating to the expected taxable income at the applicable tax rate for
the financial year. Deferred tax expense represents the tax expense in respect of the future tax consequences of
recovering or settling the carrying amount of an asset or liability.
Comparatives have been adjusted to be consistent with the current period.
Tax consolidation legislation
The Company and its wholly-owned Australian controlled entities are part of a tax consolidated group (TCG)
where all members are taxed as if they were part of a single entity. The head entity in the TCG is Villa World
Limited.
The entities within the TCG have entered both tax sharing and tax funding arrangements with the head entity.
These arrangements limit the joint and several liability between the head entity and the members, and ensure the
members pay/receive their share of tax payable/receivable settled via an intercompany loan.
VILL A WORLD LIMITED ANNUAL REPORT 2016
59
VILLA WORLD ANNUAL REPORT 2016
| 59
ARESULTS FOR THE YEAR Notes to the consolidated financial statements
30 June 2016 (continued)
A5 Taxes (continued)
(a) Numerical reconciliation of income tax expense to prima facie tax payable
Profit from continuing operations before income tax expense
Tax at the Australian tax rate of 30.0% (2015 - 30.0%)
Tax effect of amounts which are not deductible (taxable)
in calculating taxable income:
Share of loss in equity accounted investments utilised
Recognition of deferred tax asset for losses
Other
Adjustments for current tax of prior periods
Income tax expense
Current tax amounts recognised in equity
Movement in temporary differences
Income tax payable for the financial year
Income taxes payable at the beginning of the financial year
Income taxes paid
Income tax payable at 30 June
Income tax expense
Current tax
Deferred tax
Adjustments for current tax of prior periods
Income tax expense / (benefit) included in income tax expense comprises:
Decrease / (increase) in deferred tax assets
Increase in deferred tax liabilities
Consolidated
30-Jun-16
$'000
47,247
47,247
14,174
30-Jun-15
$'000
29,380
29,380
8,814
-
14,174
-
(633)
(7)
(640)
13,534
(1,893)
(6,353)
5,288
1,196
(1,616)
4,868
7,152
6,353
29
13,534
4,188
2,165
6,353
(461)
8,353
(4,300)
72
(382)
(4,610)
3,743
-
(2,547)
1,196
-
-
1,196
1,196
2,547
3,743
(4,796)
7,343
2,547
Villa World Limited does not recognise a deferred tax asset on its investment in the Eynesbury Pastoral Trust on
the basis that the deferred tax asset represents an unrealised capital loss for which the future use is not
probable.
(b) Tax (income) / expense relating to items of other comprehensive income
Cash flow hedges
Total tax (income) / expense relating to items of other comprehensive
income
(c) Tax losses
Consolidated
30-Jun-16
$'000
(138)
30-Jun-15
$'000
541
(138)
541
During the year prima facie taxable income, before utilisation of losses of $36.7 million (30 June 2015: $20.5
million taxable income) was generated by the Company. Tax losses of $19.3 million as at 30 June 2015 were
fully utilised during the year ended 30 June 2016.
60
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| 60
ARESULTS FOR THE YEAR Notes to the consolidated financial statements
30 June 2016 (continued)
A5 Taxes (continued)
(d) Deferred tax assets and tax liabilities
The balance comprises temporary differences attributable to:
Inventories
Tax losses
Accruals
Employee benefit
Provisions
Property, plant and
equipment
Other
Capital raising costs
Trade debtors
Other
Tax
assets/(liabilities)
Movements
As at 1 July
- to profit or loss
- through equity
As at 30 June
Deferred tax assets
30-Jun-16
$'000
17,116
-
445
344
4,352
30-Jun-15
$'000
15,129
5,806
490
320
4,673
155
1,248
364
-
-
116
1,303
513
-
-
Deferred tax liabilities
Net
30-Jun-16
$'000
(1,611)
-
-
-
-
-
-
-
(21,022)
(596)
30-Jun-15
$'000
(4,427)
-
-
-
-
-
-
-
(15,988)
(649)
30-Jun-16
$'000
15,505
-
445
344
4,352
155
1,248
364
(21,022)
(596)
30-Jun-15
$'000
10,702
5,806
490
320
4,673
116
1,303
513
(15,988)
(649)
24,024
28,350
(23,229)
(21,064)
795
7,286
28,350
(4,188)
(138)
24,024
22,679
4,796
875
28,350
(21,064)
(2,165)
-
(23,229)
(13,721)
(7,343)
-
(21,064)
7,286
(6,353)
(138)
795
8,958
(2,547)
875
7,286
Accounting for deferred tax assets and liabilities
Deferred tax is recognised for temporary differences at the tax rates expected to apply when the assets are
recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for:
• when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits, or
• when the taxable temporary difference is associated with interest in subsidiaries, associates or joint
ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits
will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are
recognised to the extent that it is probable that there are future taxable profits available to recover the asset.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is
probable that future taxable amounts will be available to utilise those temporary differences and losses. The
carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the
same taxable authority on either the same taxable entity or different taxable entities which intend to settle
simultaneously.
(e) Critical accounting estimates and assumptions for income taxes
The Company is subject to income taxes in Australia.
The Company recognises liabilities based on the 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 Company 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.
Utilisation of the tax losses also depends on the ability of the Company to satisfy certain tests at the time the
losses are recouped. It is believed that the Company will satisfy those tests in order to utilise any tax losses.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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ARESULTS FOR THE YEAR Notes to the consolidated financial statements
30 June 2016 (continued)
A6 Reconciliation of profit after income tax to net cash inflow from operating activities
Profit for the year
Depreciation and amortisation
Capitalised interest and fees
Borrowing costs
Net gain on disposal of property, plant and equipment
Share of gain from associate
Impairment of development land
Hedge ineffectiveness on interest rate swaps
Change in operating assets and liabilities:
(Increase) / decrease in trade debtors
(Increase) / decrease in inventories
(Decrease) / increase in trade creditors
Decrease / (increase) in deferred tax assets
Increase / (decrease) in other operating assets and liabilities
Increase / (decrease) in other provisions
Net cash inflow / (outflow) from operating activities
Consolidated
30-Jun-16
$'000
33,713
607
2,067
358
(28)
(3,445)
83
293
(30,442)
(34,136)
(13,427)
6,491
3,373
2,864
(31,629)
30-Jun-15
$'000
25,637
958
3,028
560
(23)
(1,828)
(77)
-
(25,202)
(81,344)
39,662
2,211
(104)
6,063
(30,459)
62
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ARESULTS FOR THE YEAR Notes to the consolidated financial statements
30 June 2016 (continued)
B
B
B1
B1
B2
B2
B3
B3
B4
B4
B5
B5
OPERATING ASSETS AND LIABILITIES
This section shows the assets used to generate the Company's trading performance and the liabilities
incurred as a result.
In this section:
Inventories
Trade and other receivables
Trade and other payables
Provisions and contingencies
Capital and other commitments
B1 Inventories
Current assets
Acquisition cost of land held for development and resale
Development costs
Capitalised interest
Impairment of development land
Non-current assets
Acquisition cost of land held for development and resale
Development costs
Capitalised interest
Impairment of development land
Total inventory
Accounting for inventories
Land held for resale and development costs
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
94,909
89,065
3,618
(1,555)
186,037
152,080
36,991
6,224
(7,635)
187,660
373,697
110,505
76,459
4,958
(604)
191,318
114,451
35,880
6,324
(8,329)
148,326
339,644
Land held for resale is stated at the lower of cost and net realisable value. Cost includes the cost of acquisition,
development and borrowing costs. When development is completed borrowing costs are expensed as incurred.
Other holding costs are expensed as incurred. 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.
Estimates of net realisable value ('NRV') of inventories
The NRV of inventories is the estimated selling price in the ordinary course of business less estimated costs of
completion and cost to sell. The net realisable value amount has been determined based on the current future
estimated cash flow of the projects. Realisation is dependent on the ability to meet forecasted/estimated cash
flows. These estimates take into consideration fluctuation of price or cost directly relating to events occurring after
the end of the period to the extent that such events confirm conditions existing at the end of the period.
Consistent with previous periods, key estimates have been reviewed including the costs of completion and dates
of completion.
Borrowing costs
Borrowing costs included in the cost of land held for resale are those costs that the Company incurs in
connection with the borrowing of funds. Borrowing costs which are directly attributable to the acquisition,
construction or production of a qualifying asset such as inventories are capitalised using the interest incurred
method. In these circumstances, borrowing costs are capitalised to the cost of the assets whilst in active
development until the assets are ready for their intended use or sale. In the event that a development is
suspended for an extended period of time the borrowing costs are recognised as expenses.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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BOPERATING ASSETS AND LIABILITIES
Notes to the consolidated financial statements
30 June 2016 (continued)
B2 Trade and other receivables
Accounting for trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest rate method, less an allowance for impairment. Collectability of trade receivables is
reviewed on an ongoing basis and at balance date, specific impairment losses are recorded for any doubtful
accounts.
Trade receivables are recognised in accordance with the Company's revenue recognition policy (refer note A1 –
Revenue and gross profit). Also considered in this process is the ageing of the trade receivables, the settlement
history of the buyer and any current feedback or other information known regarding the buyer. Collectability of
trade receivables is generally upon settlement or per the terms of the contract. As at 30 June 2016 the balance of
trade receivables is $70.3 million and they are expected to be received when due.
Other receivables generally arise from transactions outside the usual operating activities of the Company.
Interest may be charged at commercial rates where the terms of repayment exceed six months. Collateral is not
normally obtained and settlement is generally no more than 60 days from date of recognition. Separate
negotiated arrangements outside of the standard collection policy are made on occasion when the purchaser
enters into multiple contracts or extensions are required to facilitate settlement. These balances do not contain
impaired assets and based on credit history, it is expected that these other balances will be received when due.
Trade receivables
Trade receivable properties
Trade receivables due from related parties
Other receivables
Total trade and other receivables
The Company’s credit risk management policy is discussed in note C6 (b) - Credit risk.
The ageing of current trade receivables is as follows:
1 to 3 months
3 to 6 months
Over 6 months
Past due but not impaired
Consolidated
30-Jun-16
$'000
210
70,075
-
70,285
2,066
72,351
30-Jun-15
$'000
271
40,156
660
41,087
820
41,907
Consolidated
30-Jun-16
$'000
65,492
3,643
1,150
70,285
30-Jun-15
$'000
37,715
3,372
-
41,087
As of 30 June 2016, the trade receivables of the Company of $nil (30 June 2015: $nil) were past due but not
impaired.
B3 Trade and other payables
Accounting for trade and other payables
Trade and other payables are initially recognised at fair value less transaction costs and subsequently carried at
amortised cost using the effective interest method. Trade and other payables are recognised as current if they
are due within 12 months of the reporting date.
Land acquisitions represent amounts payable for the purchase of inventory secured for the purpose of land
development, residential construction and resale. Trade payables represent the liability for goods and services
provided to the Company prior to the end of financial year which are unpaid. Other payables are unsecured
amounts.
The Company maintains a rolling cash flow to ensure its operational requirements are met within the contractual
terms of the agreements; whilst providing sufficient flexibility to fund growth, working capital requirements and
future strategic opportunities.
64
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BOPERATING ASSETS AND LIABILITIES Notes to the consolidated financial statements
30 June 2016 (continued)
B3 Trade and other payables (continued)
Accounting for trade and other payables (continued)
Current liabilities
Land acquisitions
Sub-contractors and materials
Total trade payables
Other current payables
Accrued expenses
Other payables1
Total current other payables
Total current trade and other payables
Non-current liabilities
Land acquisitions
Other payables2
Total non-current trade and other payables
Total payables
1. Includes derivatives payable of $1.8m (30 June 2015: $1.6m). Refer note C6(d) - Fair value measurements.
2. Includes derivatives payable of $1.9m (30 June 2015: $2.2m). Refer note C6(d) - Fair value measurements.
B4 Provisions and contingencies
Accounting for provisions
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
37,791
5,012
42,803
33,694
2,533
36,227
79,030
9,137
2,852
11,989
91,019
65,627
5,931
71,558
21,671
3,223
24,894
96,452
3,408
2,518
5,926
102,378
Provisions are recognised when the Company has a present (legal or constructive) obligation as a result of a past
event, it is probable the Company will be required to settle the obligation, and a reliable estimate can be made of
the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at the reporting date, taking into account the risks and uncertainties
surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-
tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a
finance cost.
(a) Service warranties
Current liabilities
Service warranties
Total current provisions
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
14,392
14,392
14,983
14,983
A provision for warranties is recognised when the underlying products or services are sold. 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. Where the
Company 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 following statutory warranty periods generally apply to the Company's housing products:
• Queensland - 6 years 6 months from completion of work
•
Victoria - 10 years from issue of occupancy certificate
• New South Wales - 10 years from issue of occupation certificate.
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 Company 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.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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BOPERATING ASSETS AND LIABILITIES Notes to the consolidated financial statements
30 June 2016 (continued)
B4 Provisions and contingencies (continued)
(b) Amounts not expected to be settled within 12 months
The current provision for employee benefits includes accrued annual leave and long service leave. For long
service leave it includes all unconditional entitlements where employees have completed the required period of
service. Included within the long service leave provision is an amount of $164,137 (30 June 2015: $120,505)
classified as current, since the Company 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.
(c) Movements in provisions
Consolidated
Current liabilities
Carrying amount at the start of the year
- additional provisions recognised
Amounts incurred and paid
- unused amounts reversed1
Carrying amount at end of period
1. Unused provision reversed in relation to Home warranty claim - Thornleigh. Refer note (d) below.
(d) Legal claims
Home warranty claim - Thornleigh
Service
warranties
30-Jun-16
$'000
Service
warranties
30-Jun-15
$'000
14,983
4,554
(4,215)
(930)
14,392
10,079
10,213
(5,309)
-
14,983
The Company has previously made provision for the Thornleigh litigation (refer to note B3(d) - Provisions, Interim
Financial Report for the period ended 31 December 2015). All outstanding aspects of the Thornleigh proceedings
were concluded during 2H16, for amounts that were within the provision that was assessed at 31 December
2015. No further provision is required for this matter.
Silverstone Litigation
The Silverstone litigation relates to alleged defects at a residential building located in Tweed Heads, NSW. The
building comprises 27 units and was completed in 2009. A Villa World subsidiary, Villa World Developments Pty
Ltd, was the registered builder. Villa World Developments Pty Ltd engaged independent subcontractors to carry
out construction.
Based on further developments in the litigation during 2H16, the Directors have assessed this provision at
approximately $8.5 million as at 30 June 2016 in respect of the Company’s proportion of the Applicant’s potential
claim amount. This is in addition to the provisions for legal fees and experts costs which have been made since
30 June 2012 and expensed through cost of sales.
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 Liabilities and
Contingent Assets is not disclosed on the grounds that it is expected to prejudice the outcome of the potential
litigation.
(e) Contingencies
(i) Estimates of material amounts of contingent liabilities not provided for in the financial report
The Company has 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 Company’s
building activities. It is impractical to estimate the amount that may arise from these arrangements. There were
no claims made against the Company at 30 June 2016 (30 June 2015: nil).
A controlled entity has contractual arrangements
for liquidated damages under certain
circumstances. It is impractical to estimate the amount of any liability that may arise from these arrangements.
There were no claims made against the Company at 30 June 2016 (30 June 2015: nil).
that provide
The Company has provided bank guarantees to the total of $18.7 million (30 June 2015: $13.0 million) to
authorities and councils in relation to certain works to be undertaken or maintained or in support of contractual
commitments.
66
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BOPERATING ASSETS AND LIABILITIES Notes to the consolidated financial statements
30 June 2016 (continued)
B4 Provisions and contingencies (continued)
(ii) Contingent liabilities in respect of other entities
The Company has provided the following guarantees in respect of its interest in jointly controlled entities.
Total financing facilities
Facilities utilised at reporting date
Bank guarantees utilised at reporting
date
Principal amount recoverable by the
Company in respect of debt facility
Eynesbury
Joint Venture
Donnybrook
Joint Venture
Rochedale
Joint Venture
30-Jun-16
$'000
-
-
30-Jun-15
$'000
10,356
10,000
30-Jun-16
$'000
11,220
9,814
30-Jun-15
$'000
5,100
5,100
30-Jun-16
$'000
22,000
16,039
30-Jun-15
$'000
-
-
-
-%
242
50%
-
-
51%
51%
527
50%
-
-%
B5 Capital and other commitments
(a) 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 within Queensland, New South Wales and
Victoria.
The call 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 put option gives the vendor the right to sell to the Company at a
nominated price on expiry of the call option sunset date. The potential total commitments remaining under the
Agreements are $13.2 million (30 June 2015: $32.9 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.
Capital commitments in relation to put and call arrangements
Opening balance
Crystallised and paid commitments
Agreements entered into during the year
Total commitments
(b) Lease commitments
Accounting for leases
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
32,868
(21,276)
1,571
13,163
38,465
(30,493)
24,896
32,868
Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company as
lessee are classified as operating leases. Payments made under operating leases (net of any incentives received
from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease.
Non-cancellable operating leases
The Company has entered into leases for office space on normal commercial terms with lease terms between
three and five years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the
terms of the lease are renegotiated.
Future 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
Consolidated
30-Jun-16
$'000
458
715
-
30-Jun-15
$'000
357
1,018
-
1,173
1,375
VILL A WORLD LIMITED ANNUAL REPORT 2016
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BOPERATING ASSETS AND LIABILITIES Notes to the consolidated financial statements
30 June 2016 (continued)
C
C
C1
C1
C2
C2
C3
C3
C4
C4
C5
C5
C6
C6
CAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT
This section outlines how the Company manages its capital structure and related financing costs,
including its balance sheet liquidity and access to capital markets.
In this section:
Capital risk management
Contributed equity
Other reserves
Borrowings
Finance costs
Financial risk management
C1 Capital risk management
The Company’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.
In order to maintain or adjust the capital structure, the Company will consider a range of alternatives which may
include:
•
•
•
•
•
raising or reducing borrowings
adjusting the dividend policy
issue of new securities
return of capital to shareholders
sale of assets.
Capital strength remains a strategic focus and allows the Company to:
•
•
•
•
pursue growth opportunities through the development of the existing portfolio
reinvest in the business through value accretive acquisitions
grow dividends
strengthen balance sheet.
Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. This ratio is
calculated as total debt divided by total 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).
The Company's policy is to continue to manage debt levels and maintain the gearing ratio between 15% and
30%. As at 30 June 2016, the gearing ratio was 25.6% (30 June 2015: 16.9%).
The Company has complied with the financial covenants of its borrowing facilities during the 2016 and 2015
reporting periods.
Total borrowings (excluding bank guarantees)
Less: Cash and cash equivalents
Net debt
Total assets
Less: Cash and cash equivalents
Gearing ratio
Notes
C4(a)
Consolidated
30-Jun-16
$'000
128,594
(8,358)
120,236
478,009
(8,358)
469,651
25.6%
30-Jun-15
$'000
92,044
(22,571)
69,473
432,673
(22,571)
410,102
16.9%
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CCAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT
Notes to the consolidated financial statements
30 June 2016 (continued)
C2 Contributed equity
Contributed equity accounting policy
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or
options are shown in equity as a deduction, net of tax, from the proceeds.
Ordinary shares
Opening balance
Shares issued as part of the employee share
scheme
Treasury shares
Shares issued as part of the capital raising
Shares issued as part of the share purchase plan
Transaction costs arising on share issue net of tax
(a) Ordinary shares
Shares
30-Jun-16
'000
Shares
30-Jun-15
'000
30-Jun-16
$'000
30-Jun-15
$'000
110,344
93,664
444,286
413,375
3,250
(3,250)
-
-
-
110,344
-
-
14,050
2,630
-
110,344
6,689
(6,689)
-
-
(15)
444,271
-
-
26,693
5,000
(782)
444,286
Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company 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.
(b) Treasury shares
Treasury shares refer to those shares issued to Villa World Ltd Employee Share Scheme Pty Ltd as trustee for
Villa World Ltd Employee Share Scheme Trust. The shares are fully paid ordinary shares in the capital of the
Company and rank equally with all other existing shares from the date issued. Under the accounting standards,
the Company is deemed to control the Villa World Employee Share Scheme and the shares (and associated
transactions) are eliminated on consolidation, thereby deducting these issued shares from issued capital whilst
held by the Trustee. As these shares are deemed not to have been issued by the consolidated entity, they are
not included in the Company's earnings per share and statements regarding the gross value of dividends, unless
transacted by the Employee Share Scheme outside of the group. No gain or loss on treasury share is recognised
in profit and loss. Upon disposal, any gain will be recognised to a component of equity.
(c) Options and Performance Rights
Information relating to the Company, including details of options and performance rights issued, exercised and
lapsed during the financial year, is set out in the Remuneration report and in note E2(b) - Equity instrument
disclosures relating to key management personnel.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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CCAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT Notes to the consolidated financial statements
30 June 2016 (continued)
C3 Other reserves
(a) Movements in other reserves
(i) Profits reserve
Opening balance
Transfer current year profit
Dividends provided for or paid
Closing balance
(ii) Hedging reserve - cash flow hedges
Opening balance
Revaluation - gross
Deferred tax
Closing balance
(iii) Share-based payments
Opening balance
Share-based payments expense
Employee Share Scheme
Closing balance
Total other reserves
(b) Nature and purpose of other reserves
(i) Profits reserve
Notes
A4(a)
A5(b)
E2(c)
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
176,550
33,546
(19,862)
190,234
(2,677)
460
(138)
(2,355)
317
230
1,894
2,441
190,320
166,013
25,587
(15,050)
176,550
(1,413)
(1,805)
541
(2,677)
174
143
-
317
174,190
The profits reserve represents opening retained profits and current year profits transferred to a reserve to
preserve the characteristic as a profit and not allocate against prior year accumulated losses. Any such profits
are available to enable payment of franked dividends in the future should the Directors declare by resolution.
Profits are determined and transferred on an entity basis. Losses are retained by the entity.
(ii) Cash flow hedges
The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge, considered
an effective hedge, that are recognised in other comprehensive income. Amounts are reclassified to profit or loss
when the associated hedged transaction affects profit or loss (for instance when the forecast transaction that is
hedged takes place).
(iii) Share-based payments
The share-based payments reserve is used to recognise the fair value of options and performance rights issued
to key management personnel and executives. Equity instrument disclosures relating to key management
personnel can be found in note E2 and section L(ii) within the Remuneration report.
C4 Borrowings
Accounting for borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred and are subsequently measured
at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is
recognised in profit or loss over the period of the borrowings using the effective interest method.
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 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.
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CCAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT Notes to the consolidated financial statements
30 June 2016 (continued)
C4 Borrowings (continued)
Accounting for borrowings (continued)
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.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement
of the liability for at least 12 months after the reporting period.
(a) Financing arrangements
Access was available at balance date to the following lines of credit:
Total financing facilities secured (i)
Australia and New Zealand Banking Group
Westpac Banking Corporation
Facilities utilised at reporting date
Loan (secured) (i) - non-current
Bank guarantees utilised at reporting date
Loan (secured) (i)
Facilities unutilised at reporting date
Loan (secured) (i)
(i) Club facility
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
130,000
50,000
180,000
128,594
128,594
18,738
18,738
32,668
32,668
130,000
50,000
180,000
92,044
92,044
12,981
12,981
74,975
74,975
The Company has in place a $180 million Club Financing Arrangement with Australia and New Zealand Banking
Group Limited (ANZ) and Westpac Banking Corporation (Westpac), to provide funding for the Company's
ongoing requirements for its core business. It comprises a facility of $130 million with ANZ and a facility of $50
million with Westpac.
The maturity of the ANZ facility has been staggered, with $80 million expiring on 1 March 2019 and $50 million
expiring on 30 October 2020. The facility of $50 million with Westpac expires on 2 March 2018.
As at 30 June 2016 the facility was drawn exclusive of bank guarantees at $128.6 million (30 June 2015: $92.0
million). Bank guarantees issued total $18.7 million (30 June 2015: $13.0 million). The bank guarantees are also
disclosed in note B4(e) - Contingencies.
No restrictions have been imposed on this facility by the financiers during the year ending 30 June 2016 and
drawdowns continue to be made in the ordinary course of business. All 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. The Company entered into interest rate swap
contracts to fix the interest rate at 3.69% (excluding the margin and line fees applicable under the loan
agreement) on $90 million of borrowings. Refer to note C6(d)(ii) - Derivative financial instruments. The swap
contract matures on 12 June 2018.
The fair value of non-current borrowings and the bank guarantees equals their carrying amount, as the impact of
discounting is not significant.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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CCAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT Notes to the consolidated financial statements
30 June 2016 (continued)
C4 Borrowings (continued)
(b) Assets pledged as security
All of the consolidated entity's assets are pledged as security for the Company's finance facilities. The carrying
amounts of assets pledged as security are set out below:
Total inventory:
Current inventory
Non-current inventory
Aggregate carrying amount
C5 Finance costs
Accounting for finance costs
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
186,037
187,660
373,697
191,318
148,326
339,644
The interest incurred method is currently utilised for all Villa World projects. 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.
Interest allocation which relates to non-qualifying assets is expensed. For each accounting settlement the actual
capitalised interest is then expensed / (unwound) on a per lot basis through finance costs. Once an asset has
been impaired or development activity has ceased, then subject to detailed review and Board approval,
capitalisation of interest may cease and the borrowing costs will be expensed in the month incurred.
Consolidated
30-Jun-16
$'000
30-Jun-15
$'000
Loan interest and charges
Financial institutions
Unwind of discount deferred consideration
Borrowing costs
Fair value loss on interest swap cash flow hedge - transfer from equity
6,748
721
355
293
8,117
(3,203)
4,550
9,464
6,616
1,436
551
-
8,603
(3,096)
4,689
10,196
Amount capitalised1
Unwind of amount capitalised
Total finance costs included within the income statement
1. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 8.6% (30 June 2015: 7.80%).
C6 Financial risk management
The Company's activities are exposed to a variety of financial risks:
Risk
Exposure arising from
Measurement
Management
Market risk - interest
rate risk
Credit risk
Borrowings at variable rates
Cash and cash equivalents,
derivative financial instruments,
deposits with banks and financial
institutions, credit exposure of
outstanding receivables
Liquidity risk
Borrowings and other liabilities
Cash flow forecasting,
sensitivity analysis
Interest rate swaps
Ageing analysis, credit
ratings, management of
deposits
Management of cash
flows and forecast,
gearing analysis
Ongoing management
review, contractual
arrangements
Availability and
flexibility of financing
facilities
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 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. Risk
management is carried out by the finance department under oversight from the Board.
72
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CCAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT Notes to the consolidated financial statements
30 June 2016 (continued)
C6 Financial risk management (continued)
The Company’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 Company.
The Company holds the following financial instruments:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Borrowings
Derivative payable
(a) Market risk
Valuation basis
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Fair value
Consolidated
30-Jun-16
30-Jun-15
$'000
$'000
8,358
72,351
91,019
128,594
3,656
22,571
41,907
102,378
92,044
3,823
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. The Company’s market risk arises from its interest rate risk.
Interest rate risk
The Company’s main interest rate risk arises from borrowings issued at variable interest rates. Borrowings issued
at variable rates expose the Company to cash flow interest rate risk.
The Company manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. The
Company agrees to exchange, at specified intervals, the difference between fixed and variable interest rate
interest amounts calculated by reference to an agreed notional principal amount. These swaps are designated to
hedge interest costs associated with underlying debt obligations.
The Company policy is to maintain a minimum of $90.0 million (2015: $90.0 million) of its borrowings fixed by way
of interest rate swaps.
As at the end of the reporting period, the Company had the following variable rate borrowings and interest rate
swap contracts outstanding:
Consolidated
30 June 2016
30 June 2015
Club facility
Interest rate swaps - syndicated loans
Net exposure to cash flow interest rate risk
1. Does not include any margin and line fees applicable under the loan agreement.
-%
Weighted
average
interest rate
%1
1.9%
3.7%
Weighted
average
interest rate
%1
2.1%
3.7%
-%
Balance
$'000
128,594
(90,000)
38,594
Balance
$'000
92,044
(90,000)
2,044
An analysis by maturities is provided in note (c).
Sensitivity analysis
At 30 June 2016, if interest rates had changed by -/+ 25 basis points from the year end rates with all other
variables held constant, post-tax profits for the year, would have been $0.04 million lower/higher (30 June 2015:
$0.02 million lower/higher), mainly as a result of higher/lower interest expense from interest bearing liabilities.
Other components of equity would have been $0.4 million lower/higher (30 June 2015: $0.6 million lower/higher)
mainly as a result of an increase/decrease in the fair value of the cash flow hedges of borrowings.
(b) Credit risk
Credit risk is the risk that a contracting entity will not complete its obligation under a financial instrument or
contractual arrangement. Credit risk is managed on a consolidated basis.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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CCAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT Notes to the consolidated financial statements
30 June 2016 (continued)
C6 Financial risk management (continued)
(b) Credit risk (continued)
The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of
financial assets mentioned above.
Credit risk arises primarily from trade receivables relating to the sale of properties (including the sale of house
and land packages or land only) but also from the Company’s cash and deposits with financial counterparties.
(i) Trade and receivables
This group of receivables is primarily from the sale of land or house and land packages.
The Company’s revenue recognition policy is set out in note A1 - Revenue and gross profit and in note B2 -
Trade and other receivables.
The Company has no significant concentrations of credit risk to any single counterparty for trade receivables. The
Company also has policies to ensure that sales of properties are made to customers with an appropriate credit
history. Trade receivables are secured against those properties until the proceeds are received.
The credit risk associated with trade receivables from joint venture entities is monitored through management’s
review of project feasibilities and the Company’s ongoing involvement in the operations of those entities.
The Company did not recognise any trade receivable impairment losses in the current year (30 June 2015: nil).
Overall, the trade receivable balance is low relative to the scale of the balance sheet and, owing to the short-term
nature of the ageing of the balance and balances secured against property, the credit risk of trade receivables is
considered to be low.
(ii) Cash and deposits
For cash and deposits held with banks and financial institutions, only independently rated parties with a minimum
rating of "AA-" are accepted.
(c) Liquidity risk
This is the risk that suitable funding for the Company’s activities may not be available. The Company addresses
this risk through review of rolling cash flow forecasts throughout the year to assess and monitor the current and
forecast availability of funding, and to ensure sufficient headroom against facility limits and compliance with
banking covenants.
At 30 June 2016, the Company carried forward 464 sales contracts worth $165.6 million (incl GST). Of these 335
contracts worth $120.0 million will settle in 1H17. Further detail is provided in the Operating and Financial Review
on page 12.
Furthermore, the Company’s policy is to minimise its exposure to liquidity risk by managing its refinancing risk.
Refinancing risk may be reduced by reborrowing prior to the contracted maturity date, effectively switching
liquidity risk for market risk. This is subject to credit facilities being available at the time of the desired refinancing.
The Company’s gearing policy is discussed in note C1 - Capital risk management and the Company’s borrowings
are set out in note C4 - Borrowings.
The Club Financing Arrangement with Australia and New Zealand Banking Group Limited (ANZ) and Westpac
Banking Corporation (Westpac) is the Company's primary banking facility and provides funding for the
Company's core business.
The Board considers that the use of two credit providers will minimise the concentration of risks and therefore
mitigate financial loss through potential counterparty failure. Each facility with ANZ and Westpac is able to be
negotiated and extended with the consent of that lender, independent of the other. Refer note C4 - Borrowings.
At 30 June 2016 the company had unutilised borrowing facilities of $32.7 million (30 June 2015: $75.0 million).
(i) Maturities of financial liabilities
The table below analyses the Company’s financial liabilities including derivatives into relevant maturity groupings
based on the period remaining to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows and therefore may not reconcile with the amounts disclosed on the Balance
Sheet. For interest rate swaps the cash flows have been estimated using forward interest rates applicable at the
reporting date.
74
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CCAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT Notes to the consolidated financial statements
30 June 2016 (continued)
C6 Financial risk management (continued)
(i) Maturities of financial liabilities (continued)
Contractual maturities of
financial liabilities
At 30 June 2016
Non-derivatives
Commitments
Trade payables
Club facility
Total non-derivatives
Derivatives
Net settled (interest rate swaps)
Total derivatives
At 30 June 2015
Non-derivatives
Commitments
Trade payables
Club facility
Total non-derivatives
Derivatives
Net settled (interest rate swaps)
Total derivatives
Less than
6 months
$'000
6 - 12
months
$'000
Between
1 and 2
years
$'000
Between
2 and 5
years
$'000
Over 5
years
$'000
-
42,803
3,149
45,952
13,163
-
3,107
16,270
-
9,137
5,908
15,045
-
-
135,612
135,612
861
861
925
925
1,870
1,870
-
-
1,628
47,313
2,872
51,813
-
19,985
2,847
22,832
18,077
7,668
60,362
86,107
13,163
-
36,841
50,004
835
835
753
753
1,325
1,325
910
910
Total
contrac-
tual
cash
flows
$'000
Carrying
amount
(assets)/
liabilities
$'000
13,163
51,940
147,776
212,879
-
51,940
128,594
180,534
3,656
3,656
3,656
3,656
32,868
74,966
102,922
210,756
-
74,966
92,044
167,010
3,823
3,823
3,823
3,823
-
-
-
-
-
-
-
-
-
-
-
-
The Company expects to meet its financial liabilities through the various available liquidity sources, including sale
contracts carried forward, cash deposits, undrawn committed borrowing facilities and, in the longer-term, debt
refinancings.
(d) Fair value measurements
(i) Carrying amounts versus fair values
At 30 June 2016, the carrying amounts of the Company’s financial assets and liabilities approximate their fair
values.
(ii) Derivative financial instruments
The Company 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 Company's financial risk management policies,
the Company does not hold or issue derivative financial instruments for trading purposes.
It is policy to protect part of the Club Facility of $180.0 million from exposure to fluctuating interest rates.
Accordingly the Company has entered into an interest rate swap contract 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 is designated as a cash flow hedging instrument.
The Club facility for the Company bears an average variable interest rate of 8.6% (including line and facility fees).
The interest rate swap contract in place is referred to in the table below:
Amount
hedged
$'000
Expiry date
Loan facility
$'000
Percent
hedged
%1
Fixed rate
%2
Variable rate
as at
30-Jun-16
%3
Valuation as
at
30-Jun-16
$'000
90,000
12-Jun-18
180,000
50.0%
3.69%
1.9%
$3,656
Interest rate
swap
Club Facility -
Swap
1. % of loan facility limit.
2. The swap rate outlined above does not include any margin and line fees applicable under the loan agreement.
3. Variable rate is 30 day BBSY @ 30 June 2016.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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CCAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT Notes to the consolidated financial statements
30 June 2016 (continued)
C6 Financial risk management (continued)
(ii) Derivative financial instruments (continued)
The fair value of the interest rate swap liability at 30 June 2016 was $3.7 million (30 June 2015: $3.8 million).
The fair value of the interest rate swap 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, forward interest yield curves and
the current creditworthiness of the swap counterparties. The fair value of interest rate swap is calculated as the
present value of the estimated future cash flows.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently re-measured to their fair value at the end of each reporting period. The accounting for subsequent
changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair
value of the derivative is recognised in other comprehensive income and accumulated in the hedging reserve.
Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss
within finance costs. There is no material ineffectiveness for the year ended 30 June 2016.
The amount accumulated in equity is retained in other comprehensive income and reclassified to profit or loss in
the same period or periods during which the hedged item affects profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or
exercised, or the designation is revoked, the hedge accounting is discontinued prospectively. If the forecast
transaction is no longer expected to occur, then the amount accumulated in equity is reclassified to profit and
loss.
Fair value hierarchy
All financial instruments for which fair value is recognised or disclosed are categorised within the fair value
hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement
as a whole:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1),
(b)
(c)
inputs other than quoted prices included within Level 1 that are observable 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).
During the year, there were no transfers between Level 1, Level 2 and Level 3 fair value categories.
The fair value measurement of interest rate swap liability of $3.7 million (30 June 2015: $3.8 million) has been
categorised as Level 2. This is the Company’s only financial instrument included on the balance sheet measured
at fair value.
76
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CCAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT Notes to the consolidated financial statements
30 June 2016 (continued)
D
D
D1
D1
D2
D2
D3
D3
D4
D4
GROUP STRUCTURE
This section provides information which will help users understand how the group structure affects the
financial position and performance of the Company as a whole.
In this section:
Subsidiaries
Deed of cross guarantee
Investments accounted for using the equity method
Parent entity financial information
D1 Subsidiaries
Accounting for subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of all subsidiaries at 30 June
2016. Subsidiaries are all entities (including structured entities) over which the Company has control. The
Company controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power to direct the entity's activities. Subsidiaries are
fully consolidated from the date on which control is transferred to the Company. They are de-consolidated from
the date that control ceases.
Intercompany transactions, balances and unrealised gains on transactions between entities within the Company
are eliminated. Unrealised losses are also 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 Company. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Company.
Significant investments in subsidiaries
Name of entity
incorporation Class of shares
Equity holding
Country of
2016
%
2015
%
-
-
Parent entity
Villa World Limited1
Controlled entities of Villa World Limited
Villa World Developments Pty Ltd1
Villa World (Vic) Pty Ltd
GPDQ Pty Ltd1
Hervey Bay (JV) Pty Ltd1
Villa World Thornlands Pty Ltd1
Villa World Redlands Pty Ltd1
Villa World Seascape Pty Ltd1
Villa World Properties Pty Ltd1, 2
Villa World Rochedale Pty Ltd
Villa World Realty Pty Ltd3
Villa World ESS Pty Ltd as trustee for Villa World
-
Employee Share Scheme Trust
-
Villa World Byron Pty Ltd
Villa World Strathpine Pty Ltd1
-
1. These companies are parties to the Deed of Cross Guarantee and members of the Closed Group as at 30 June 2016. They have been granted
relief from the necessity to prepare financial reports in accordance with ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument
98/1418 issued by the Australian Securities and Investments Commission (Refer note D2 Deed of cross guarantee).
2. Formerly known as Villa World Greenacre Pty Ltd.
3. Formerly known as Villa World Pinelands Pty Ltd.
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
100
100
100
D2 Deed of cross guarantee
Villa World Limited, and certain wholly-owned companies (the 'Closed Group'), identified in note D1, are parties
to a Deed of Cross Guarantee (the 'Deed'). The effect of the Deed is that the members of the Closed Group
guarantee to each creditor, payment in full of any debt, in the event of winding up of any of the members under
certain provisions of the Corporations Act 2001.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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DGROUP STRUCTURE
Notes to the consolidated financial statements
30 June 2016 (continued)
D2 Deed of cross guarantee (continued)
ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 98/1418 (as amended) dated 13 August
1998, provides relief to parties to the Deed from the Corporations Act 2001 requirements for preparation, audit
and lodgement of Financial Reports and Directors' reports, subject to certain conditions as set out therein. This
Class Order does not apply to trusts.
Pursuant to the requirements of this Class Order, a summarised consolidated Statement of Comprehensive
Income, for the year ended 30 June 2016 and consolidated Balance Sheet as at 30 June 2016, comprising the
members of the Closed Group after eliminating all transactions between members are set out below. The Deed of
Cross Guarantee was not in place at 30 June 2015.
(a) Consolidated statement of comprehensive income
Set out below is a consolidated statement of comprehensive income for the year ended 30 June 2016 of the
closed group.
Revenue from continuing operations
Revenue from land development, residential building and construction contracts
Cost of land development, residential building and construction contracts
Gross Margin
Development and project management fee
Other income
Net impairment of development land
Share of net profits of associates and joint venture partnership accounted for using the equity
method
Other expenses from ordinary activities
Property sales and marketing expenses
Land holding costs
Legal and professional costs
Employee benefits
Depreciation and amortisation expense
Administration costs and other expenses
Finance costs
Profit before income tax
Income tax expense
Profit for the period
Other comprehensive income
Items that may be reclassified to profit or loss
Changes in the fair value of cash flow hedges
Income tax relating to these items
Other comprehensive income for the period, net of tax
Total comprehensive income for the period
30-Jun-16
$'000
387,002
(286,400)
100,602
2,159
697
(83)
24
(22,090)
(3,777)
(1,483)
(23,405)
(607)
(4,438)
(9,463)
(65,263)
38,136
(13,282)
24,854
460
(138)
(322)
25,176
78
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DGROUP STRUCTURE Notes to the consolidated financial statements
30 June 2016 (continued)
D2 Deed of cross guarantee (continued)
(b) Consolidated balance sheet
Set out below is a consolidated balance sheet as at 30 June 2016 of the closed group.
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Inventories
Property, plant and equipment
Investments accounted for using the equity method
Deferred tax assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Employee benefits
Service warranties
Other provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Borrowings
Other provisions
Employee benefits
Intercompany loan payable
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Other reserves
Accumulated losses
Total equity
30-Jun-16
$'000
8,346
81,127
182,350
3,155
274,978
189,267
1,169
8,459
1,417
200,312
475,290
77,013
5,992
772
14,392
45
98,214
11,988
128,594
64
375
2,851
143,872
242,086
233,204
62,637
185,014
(14,447)
233,204
D3 Investments accounted for using the equity method
A joint venture is either a venture or operation over whose activities the Company has joint control established by
contractual agreement. Investments in joint venture entities are accounted for on an equity accounted basis.
Under the equity method, the share of profits or losses of the joint venture are recognised in the income
statement. The share of post-acquisition movements in reserves is recognised in other comprehensive income.
Investments in joint ventures are assessed for impairment when indicators or impairment are present and if
required, written down to the recoverable amount. Transactions with the joint venture are eliminated to the extent
of the Company's interest in the joint venture until such time as they are realised by the joint venture on
consumption or sale.
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DGROUP STRUCTURE 80
VILL A WORLD LIMITED ANNUAL REPORT 2016
VILLA WORLD ANNUAL REPORT 2016|80Notes to the consolidated financial statements30 June 2016(continued)D3Investments accounted for using the equity method(continued)The Company has the following interests in jointly controlled entities.Name of EntityNotes% OwnedPurposeEynesbury Holdings Pty Ltd50The owner of the Eynesbury Development Joint Venture Land, Victoria, as Trustee. The balance land was sold and settled in two tranches during FY14 and FY16. The entity will be deregistered in due course.Eynesbury Pastoral Trust50The owner of the Eynesbury Development Joint Venture Land, Victoria. The balanceland was sold and settled in twotranches during FY14 and FY16. The entity will be wound up in due course.Eynesbury Golf Pty Ltd50The golf course and homestead hospitality business were sold and settled during FY14. The entity will be deregistered in due course.Eynesbury Development Joint VentureD3(a)50Residential development at Eynesbury has ceased and the final lots settled during FY15. The entity will be wound up once the remaining assets and liabilities are cleared.Expression Homes Pty Ltd50Residential development and construction projects primarily in Victoria.Donnybrook JV Pty LtdD3(b)51Residential development at Donnybrook, VictoriaVilla World Rochedale Pty Ltd and Ausin Rochedale Pty Ltd as trustee for Ausin Rochedale TrustD3(c)50Residential development at Rochedale, QueenslandThe carrying amounts of these joint ventures at balance date were:Eynesbury Joint VentureDonnybrook Joint VentureRochedale Joint VentureTotal30-Jun-16$'00030-Jun-15$'00030-Jun-16$'00030-Jun-15$'00030-Jun-16$'00030-Jun-15$'00030-Jun-16'00030-Jun-15'000Opening balance10,90217,9685,877---16,77917,968Add: Cash contribution--2,5586,3668,700-11,2586,366Add: Share of net profit / (loss) of associates and joint ventures3,6781,93424(106)(257)-3,4451,828Less: Repayment to Company(13,000)(9,000)-(383)--(13,000)(9,383)Total1,58010,9028,4595,8778,443-18,48216,779(a)Eynesbury joint ventureThe equity accounted investment in the Company's Eynesbury Township joint venture as at 30 June 2016 is $1.6 million (30 June 2015: $10.9 million).On 7 December 2015, the Company announced that settlement of the second tranche (comprising the balance of the land) was completed at a sale price of $34.5million (plus GST). The sale price was increased from $30 million (plus GST) as part of the arrangements to extend settlement.Payments totalling $13 million have been released to the joint venture for the year ended 30 June 2016. The Company's share of profit from the Eynesbury joint venture for the year ended 30 June 2016 is $3.7 million (30 June 2015: $1.9 million).(b)Donnybrook joint ventureThe equity accounted investmentin the Company's Donnybrook joint venture as at 30 June 2016 is $8.5 million (30 June 2015: $5.9 million). DGROUP STRUCTURE VILL A WORLD LIMITED ANNUAL REPORT 2016
81
VILLA WORLD ANNUAL REPORT 2016|81Notes to the consolidated financial statements30 June 2016(continued)D3Investments accounted for using the equity method (continued)(b)Donnybrook joint venture(continued)Summarised financial information of the Donnybrook joint venture is set out below:Consolidated 30-Jun-16$'00030-Jun-15$'000Villa World's share of assets and liabilities in Donnybrook Joint VentureAssets including inventories $25.8m (2015: $24.9m); cash and cash equivalents $0.5m (2015: $0.5m); trade debtors and other receivables $0.5m (2015:$0.05m)26,74525,390Total assets26,74525,390Current liabilities including trade and other payables $0.3m (2015: $8.8m) and bill facility of nil (2015: $5.1m).34413,866Non-current liabilities including bill facility9,814-Total liabilities10,15813,866Equity16,58711,524Proportion of the Company's ownership51%51%Equity attributable to the investment8,4595,877Donnybrook joint venture is jointly controlled as the parties contractually share the agreed control of the arrangement including the unanimous consent of the parties sharing control for decision making.(c)Villa World Rochedale Pty Ltd and Ausin Rochedale Pty Ltd as trustee for Ausin Rochedale TrustThe Company advised the market on 19 October 2015 that it had entered into a joint venture with Ausin Rochedale Pty Ltd ATF Ausin Rochedale Trust for the right to develop the land component.This joint venture will free up a significant amount of capital for the Company to recycleinto other projects, while participating in profits on the land component as well as generating acquisition fees, development management fees and construction profits for the 167 premium house builds outside the joint venture.The development will be marketed as a premium price point house and land community, starting at approximately $650,000. These premium houses will be built exclusively by the Company under the capital efficient split contract method where the buyer progressively pays for the house build.Summarised financial information of the Rochedale joint venture is set out below:Consolidated 30-Jun-16$'000Villa World's share of assets and liabilities in Rochedale Joint VentureAssets including inventories $32.4m; cash and cash equivalents $0.7m33,142Total assets33,142Liabilities including bill facility of $16.0m (2015: nil)16,256Total liabilities16,256Equity16,886Proportion of the Company's ownership50%Equity attributable to the investment8,443For the Rochedale joint venture entities, the joint venture parties have agreed that they will share liabilities in the same proportion as their holdings in the joint venture (50% each). If the parties have entered an agreement which creates on each of them a joint and several (unlimited) liability to a third party, they have agreed to indemnify each other to the extent that one of them is required to pay more than 50% of the liability to a third party.D4Parent entity financial informationThe financial information for the Parent entity, Villa World Limited has been prepared on the same basis as the consolidated financial statements. Investments in controlled entities are carried in the Company's financial statements at the lower of cost or recoverable amount. Villa World Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation.Refer note A5 -Taxes. DGROUP STRUCTURE Notes to the consolidated financial statements
30 June 2016 (continued)
D4 Parent entity financial information (continued)
(a) Summary financial information
The individual financial statements for the parent entity, Villa World Limited, show the following aggregate
amounts:
Balance sheet
Current assets
Net assets
Shareholders' equity
Issued capital
Reserves
Retained earnings
Total equity
(Loss) / profit for the period
30-Jun-16
$'000
30-Jun-15
$'000
32,313
181,674
(454,174)
17,835
199,605
(434,880)
127,247
61,474
(7,047)
181,674
(6,867)
120,573
79,212
(180)
199,605
4,018
(b) Contingent liabilities of the parent entity
The parent entity has provided a financial guarantee in respect of the Club Facility with Australia and New
Zealand Banking Group and Westpac Banking Corporation. Details of the parent entity's contingent liabilities are
disclosed in note B4 - Provisions and contingencies.
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DGROUP STRUCTURE Notes to the consolidated financial statements
30 June 2016 (continued)
E
E
E1
E1
E2
E2
E3
E3
E4
E4
E5
E5
OTHER INFORMATION
This section provides the remaining information relating to the Company that must be disclosed to
comply with the Accounting Standards, the Corporations Act 2001 or the Corporations Regulations.
In this section:
Basis of preparation
Key management personnel disclosures
Remuneration of auditors
Events occurring after the reporting period
Other accounting policies
E1 Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting
Standards and interpretations issued by the Australian Accounting Standards Board 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 Villa World Limited also comply with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
(ii) Historical cost convention
These financial statements have been prepared under the historical cost convention, except for financial assets
and liabilities (including derivative instruments) which are measured at fair value through profit or loss.
(iii) Critical accounting estimates
The preparation of financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Company'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 within the relevant note. 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.
(iv) Functional and presentation currency
The consolidated financial statements are presented in Australian dollars, which is the functional and
presentation currency of Villa World Limited.
E2 Key management personnel disclosures
(a) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
Detailed remuneration disclosures are provided in the remuneration report.
Consolidated
30-Jun-16
$
1,768,827
78,213
37,546
-
290,422
2,175,008
30-Jun-15
$
1,406,453
66,142
8,259
445,692
83,333
2,009,879
VILL A WORLD LIMITED ANNUAL REPORT 2016
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EOTHER INFORMATION
Notes to the consolidated financial statements
30 June 2016 (continued)
E2 Key management personnel disclosures (continued)
(b) Equity instrument disclosures relating to key management personnel
Villa World Limited Option Plan
The Villa World Ltd Option Plan was introduced in FY14 and was designed to attract and retain key personnel
and align the interest of employees with those of shareholders.
Under the plan, share-based compensation benefits in the form of options are granted to executives and eligible
employees. The options only vest if the participating employees continue their respective service agreements
with the Company for three years from the grant date.
No options were granted or vested during FY16. Options under this plan were last granted on 17 February, 2014
and will expire on 11 August, 2017. Options will commence vesting on 26 July, 2016. This plan is no longer used
and has been replaced by the Villa World Limited Executive Long Term Incentive Plan.
The total amount to be expensed is determined by reference to the fair value of the options granted, which
includes any market performance conditions and the impact of any non-vesting conditions but excludes the
impact of any service and non-market performance vesting conditions. 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. It
recognises the impact of the revision to original estimates, if any, in the profit or loss, with a corresponding
adjustment to equity.
The volatility assumption is representative of the level of uncertainty expected in the movements of the share
price over the life of the option. The historic volatility of the market price of the Company's shares 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 to key management personnel
and other senior employees under the Villa World Ltd Option Plan which will effect remuneration in the future
reporting period:
Grant Date
26/07/2013
05/11/2013
11/02/2014
Balance as at
1 July 2016
3,750,000
250,000
150,000
Forfeited /
lapsed
during year
500,000
250,0001
-
Balance as
at 30 June
2016
Vesting
date
Expiry
Date
3,250,000 26/01/2017 26/07/2016
05/05/2017 05/11/2016
11/08/2017 11/02/2017
-
150,000
Exercise
Price
$1.25
$1.60
$1.60
Expected
price
volatility
of shares
25%
30%
30%
Expected
dividend
yield
9.0%
5.5%
7.1%
Risk free
interest
rate
2.57%
3.15%
3.10%
1. Options were forfeited on 8 July 2016 with communication and approval by Board prior 30 June 2016.
* The value of options at grant date is 10 cents per option for those issued on 26 July 2013, 27 cents per option for those issued on 5 November
2013 and 41 cents per option for those issued 11 February, 2014. The value of options are calculated in accordance with AASB2 Share-based
Payments.
Villa World Limited Executive Long Term Incentive Plan
The grant of performance rights were introduced as a Long Term Incentive (LTI) in FY16 on 30 November 2015
subsequent to approval of the plan at the FY15 Annual General Meeting. The plan is intended to be the
Company's principal vehicle for granting LTI awards to executives and other eligible employees.
Under the Plan, awards granted will be tested against relative performance measures over three financial years
until the date the performance rights vest and at which time it is determined whether rights are exercisable.
A portion of the Rights are subject to Relative Total Shareholder Return performance hurdles (75%). The
percentage of Rights that Vest is determined by references to the percentile ranking achieved by the Company
as compared to nominated peer companies over the period. These Rights vest independently of those Rights
issued with Non-market Vesting Conditions.
A portion of the Rights are subject to Absolute Return on Assets performance hurdles (25%). These Rights vest
independently of those Rights issued with Market Vesting Conditions.
The fair value at grant date is estimated using a binomial pricing model, taking into account the terms and
conditions upon which the Rights were granted.
No awards have vested during FY16.
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EOTHER INFORMATION Notes to the consolidated financial statements
30 June 2016 (continued)
E2 Key management personnel disclosures (continued)
(b) Equity instrument disclosures relating to key management personnel (continued)
Villa World Limited Executive Long Term Incentive Plan (continued)
The table below sets out the terms of performance rights awarded to executives during the period ended 30 June
2016.
Grant Date
30/11/2016
Granted as
compensation
485,916
Balance as at
30 June 2016
485,916
Expiry
Date
Vesting
date
31/08/2018 30/06/2018
Weighted
average price
of Rights
$1.06
Expected
price
volatility of
shares
27%
Expected
dividend
yield
7.6%
Risk free
interest
rate
2.1%
(c) Expenses arising from share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employee
benefit expense were as follows:
Options issued to key management personnel
Performance rights issued to key management personnel
Options issued to senior employees
Performance rights issued to senior employees
(d) Loans to KMP
Consolidated
30-Jun-16
$'000
124
166
(66)
6
230
30-Jun-15
$'000
83
-
60
-
143
For the financial year ended 30 June 2016, there were no loans to key management personnel (2015: $nil).
E3 Remuneration of auditors
During the year, the following fees were paid or payable for services provided by the Lead Auditor, Ernst & Young
of the consolidated entity and its related practices:
Audit and other assurance services
Audit and review of financial statements
Total remuneration for audit and other assurance services
Other services:
Taxation services
Other services
Total remuneration for other services
Total remuneration of Ernst & Young
E4 Events occurring after the reporting period
Final Dividend
Consolidated
30-Jun-16
$
30-Jun-15
$
130,000
130,000
159,334
81,054
240,388
370,388
130,000
130,000
29,547
74,064
103,611
233,611
On 16 August 2016 the Board declared a fully franked final dividend of 10.0 cents per share. The ex-dividend
date is 1 September 2016 and the record date for this dividend is 2 September 2016. Payment will be made on
30 September 2016.
The balance of the franking account is $8.2 million and includes franking credits that will arise from the payment
of tax recognised as a liability at the reporting date. Refer note A4(c) - Franking credits.
Club facility
During August 2016, Villa World and ANZ agreed a credit approved term sheet to extend the ANZ facility to $140
million. This comprised a further $10 million unsecured facility to expire in August 2018 and will provide the
Company with further financial flexibility to implement its business strategy.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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EOTHER INFORMATION Notes to the consolidated financial statements
30 June 2016 (continued)
E4 Events occurring after the reporting period (continued)
Club Facility (continued)
At 30 June 2016 the $50 million Westpac facility was due to mature on 2 March 2018. Post year end, this facility
has been extended with a credit approved term sheet in hand. The formal documentation process is expected to
be completed in September 2016. The facility will be extended through to March 2019.
E5 Other accounting policies
The principal accounting policies adopted in the preparation of these consolidated financial statements are set
out below unless disclosed within the individual notes. These policies have been consistently applied to all the
periods presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of
Villa World Limited and its subsidiaries.
(a) Expense recognition
Expenses are recognised in the income statement on an accrual basis.
(b) Property, plant and equipment
(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less accumulated depreciation and any
accumulated impairment losses. Any gain or loss on disposal of an item of property, plant and equipment is
recognised in profit or loss.
(ii) Depreciation
Depreciation is calculated on a straight-line or diminishing value basis to write off the net cost of each item of
property, plant and equipment, including leased equipment, over its expected useful life to the consolidated
entity. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is
reasonably certain that the Company will obtain ownership by the end of the lease term. The expected useful
lives of property, plant and equipment are:
-
-
-
-
Vehicles
Plant and equipment
Leasehold improvements
Information technology
3 - 5 years
3 - 10 years
2 - 8 years
4 years
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each
reporting period.
(c)
Impairment of assets
The carrying amounts of the Company’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. For an
asset that does not generate largely independent cash inflows, the recoverable amount is determined for the
cash-generating unit to which the asset belongs.
An assessment is made at each reporting date to determine whether there is an indication that previously
recognised impairment losses no longer exist or have decreased. If such indication exists, the Company
estimates the asset's recoverable amount. A previously recognised impairment loss is reversed only if there has
been a change in the assumptions used to determine the asset's recoverable amount since the last impairment
loss was recognised.
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EOTHER INFORMATION Notes to the consolidated financial statements
30 June 2016 (continued)
E5 Other accounting policies (continued)
(c)
Impairment of assets (continued)
The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor
exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the
asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.
(d) Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes
cash on hand, deposits held at call with financial institutions, 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. Bank overdrafts are shown within
borrowings in current liabilities in the consolidated balance sheet.
(e) Employee benefits
(i) Short-term obligations
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 as the amounts expected to be paid when the liabilities are settled.
(ii) Other long-term employee benefit obligations
The Company's net obligation in respect of long-term employee benefits is the amount of future benefits that
employees have earned in return for their service in the current and prior periods. That benefit is discounted to
determine its present value. Re-measurements are recognised in profit or loss in the period in which they arise.
The obligations are presented as current liabilities in the consolidated balance sheet if the entity does not have
an unconditional right to defer settlement for at least twelve months after the reporting date, regardless of when
the actual settlement is expected to occur.
(iii) Bonus plans
The Company recognises a liability and an expense for bonuses. The Company recognises a liability where it is
contractually obliged or where there is a past practice that has created a constructive obligation.
(iv) Termination benefits
Termination benefits are expensed at the earlier of when the Company can no longer withdraw the offer of those
benefits and when the Company recognises costs for a restructuring. If benefits are not expected to be settled
wholly within 12 months of the end of the reporting period, then they are discounted.
(f) Goods and Services Tax (GST)
Revenues, expenses and assets/liabilities (other than receivables) are recognised net of the amount of
associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is
recognised as part of the cost of acquisition of the asset or as part of the 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 presented on a gross basis. The GST components of cash flows arising from investing or
financing activities which are recoverable from, or payable to the taxation authority, are presented as operating
cash flows.
(g) Rounding of amounts
The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors' Report) Instrument
2016/191, issued by the Australian Securities and Investments Commission, relating to the 'rounding off' of
amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance
with Instrument 2016/191 to the nearest thousand dollars, or in certain cases, the nearest dollar.
VILL A WORLD LIMITED ANNUAL REPORT 2016
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EOTHER INFORMATION Notes to the consolidated financial statements
30 June 2016 (continued)
E5 Other accounting policies (continued)
(h) New accounting standards and interpretations
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the Company for the annual reporting period ended 30 June 2016.
The Company's assessment of the impact of these new or amended Accounting Standards and Interpretations,
most relevant to the Company are set out below.
New standards and amendments to standards that are mandatory for the first time for the financial year
beginning 1 July 2016 have been adopted by the Company. The Company has assessed the impact of the
following new standards and interpretations and has determined there is no material impact.
(i) AASB9 Financial Instruments and its consequential amendments
AASB9 Financial Instruments includes requirements for the classification, measurement and derecognition of
financial assets. These requirements improve and simplify the approach for classification and measurement of
financial assets compared with the requirements of AASB 139. The standard is not applicable to the Company
until 1 July 2018 but is available for early adoption. The Company is currently assessing the impact of the new
guidance.
(ii) AASB15 Revenue from Contracts with Customers
AASB15 Revenue from Contracts with Customers supersedes nearly all existing revenue recognition guidance
under Australian Accounting Standards. The core principle of AASB15 is to recognize revenues when promised
goods or services are transferred to customers in an amount that reflects the consideration that is expected to be
received for those goods or services. AASB15 defines a five step process to achieve this core principle and, in
doing so, it is possible more judgment and estimates may be required within the revenue recognition process
than required under existing Australian Accounting Standards. These include, but are not limited to, identifying
performance obligations in the contract, estimating the amount of variable consideration to include in the
transaction price and allocating the transaction price to each separate performance obligation.
AASB15 will be required to be applied by the Company for the financial year ended 30 June 2019, however is
available for early adoption. On application, the standard will be applied using either of two methods: (i)
retrospective to each prior reporting period presented with the option to elect certain practical expedients as
defined in AASB15; or (ii) the cumulative effect of initially applying AASB15 recognized at the date of initial
application, with no restatement of comparatives presented. The Company is currently evaluating the potential
impact on its consolidated financial statements resulting from the application of AASB15.
(iii) AASB16 Leases
AASB16 Leases introduces a single lessee accounting model and requires a lessee to recognise assets and
liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. A lessee
is required to recognise a right-of-use asset representing its right to use the underlying leased asset and a lease
liability representing its obligations to make lease payments.
AASB16 substantially carries forward the lessor accounting requirements in AASB117 Leases. Accordingly a
lessor continues to classify its leases as operating leases, and to account for those two types of leases
differently.
AASB16 requires enhanced disclosures for both lessees and lessors to improve information disclosed about an
entity's exposure to leases.
This new standard is applicable to annual reporting periods beginning on or after 1 January 2019, with early
application permitted. The Company is currently assessing the impact of the new guidance.
There are no other standards that are not yet effective and that are expected to have a material impact on the
Company.
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EOTHER INFORMATION Directors' declaration
30 June 2016
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 50 to 88 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 entity's financial position as at 30 June 2016 and of
its performance for the 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 E1 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 Chief Executive Officer and Chief Financial Officer
required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of Directors.
Craig Treasure
Chief Executive Officer and Managing Director
Gold Coast
16 August 2016
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Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Independent auditor's report to the members of Villa World Limited
Ernst & Young
111 Eagle Street
Brisbane QLD 4000 Australia
GPO Box 7878 Brisbane QLD 4001
Tel: +61 7 3011 3333
Fax: +61 7 3011 3100
ey.com/au
Report on the financial report
We have audited the accompanying financial report of Villa World Limited, which comprises the
consolidated balance sheet as at 30 June 2016, the consolidated statement of comprehensive income,
Independent auditor's report to the members of Villa World Limited
the consolidated statement of changes in equity and the consolidated statement of cash flows for the
year then ended, notes comprising a summary of significant accounting policies and other explanatory
Report on the financial report
information, and the directors' declaration of the consolidated entity comprising the company and the
entities it controlled at the year's end or from time to time during the financial year.
We have audited the accompanying financial report of Villa World Limited, which comprises the
consolidated balance sheet as at 30 June 2016, the consolidated statement of comprehensive income,
Directors' responsibility for the financial report
the consolidated statement of changes in equity and the consolidated statement of cash flows for the
year then ended, notes comprising a summary of significant accounting policies and other explanatory
The directors of the company are responsible for the preparation of the financial report that gives a
information, and the directors' declaration of the consolidated entity comprising the company and the
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
entities it controlled at the year's end or from time to time during the financial year.
and for such internal controls as the directors determine are necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error. In Note E1,
Directors' responsibility for the financial report
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
Auditor's responsibility
and for such internal controls as the directors determine are necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error. In Note E1,
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
Statements, that the financial statements comply with International Financial Reporting Standards.
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
Auditor's responsibility
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgement, including the
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
In making those risk assessments, the auditor considers internal controls relevant to the entity's
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
preparation and fair presentation of the financial report in order to design audit procedures that are
reasonable assurance about whether the financial report is free from material misstatement.
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting
the financial report. The procedures selected depend on the auditor's judgement, including the
policies used and the reasonableness of accounting estimates made by the directors, as well as
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
evaluating the overall presentation of the financial report.
In making those risk assessments, the auditor considers internal controls relevant to the entity's
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
preparation and fair presentation of the financial report in order to design audit procedures that are
our audit opinion.
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as
Independence
evaluating the overall presentation of the financial report.
In conducting our audit we have complied with the independence requirements of the Corporations Act
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
our audit opinion.
copy of which is included in the directors’ report.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
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VILL A WORLD LIMITED ANNUAL REPORT 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Opinion
In our opinion:
a.
the financial report of Villa World Limited is in accordance with the Corporations Act 2001,
including:
Opinion
i
In our opinion:
giving a true and fair view of the consolidated entity's financial position as at 30 June
2016 and of its performance for the year ended on that date; and
a.
b.
complying with Australian Accounting Standards and the Corporations Regulations
ii
the financial report of Villa World Limited is in accordance with the Corporations Act 2001,
2001; and
including:
the financial report also complies with International Financial Reporting Standards as
i
disclosed in Note E1.
giving a true and fair view of the consolidated entity's financial position as at 30 June
2016 and of its performance for the year ended on that date; and
Report on the remuneration report
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
ii
b.
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
the financial report also complies with International Financial Reporting Standards as
2016. The directors of the company are responsible for the preparation and presentation of the
disclosed in Note E1.
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
Report on the remuneration report
accordance with Australian Auditing Standards.
We have audited the Remuneration Report included in the directors' report for the year ended 30 June
2016. The directors of the company are responsible for the preparation and presentation of the
Opinion
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
In our opinion, the Remuneration Report of Villa World Limited for the year ended 30 June 2016,
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
complies with section 300A of the Corporations Act 2001.
accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Villa World Limited for the year ended 30 June 2016,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Ernst & Young
Ric Roach
Partner
Brisbane
16 August 2016
Ric Roach
Partner
Brisbane
16 August 2016
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
VILL A WORLD LIMITED ANNUAL REPORT 2016
91
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 8 August 2016)
The following holds were listed in the register of substantial shareholders:
UniSuper Limited
Westpac Banking Corporation
Brazil Farming Pty Ltd
Industry Super Holdings Pty Ltd
Distribution of Shareholders (as at 31 July 2016):
Range
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total
No of shares held
6,989,481
6,216,610
5,567,286
5,549,979
Total holders
771
1,718
742
943
77
4,251
The total number of shareholders with less than a marketable parcel of 211 shares is 189.
Unquoted equity securities
Options issued under the Villa World Limited Option Plan to take up ordinary shares, as part of an employee
incentive plan, as at 8 August 2016 is 3,400,000.
Classes of units and voting rights
As at 30 June 2016 there were 4,244 shareholders (30 June 2015: 3,911). The voting rights attaching to the
shares, as set out in section 253C of the Corporations Act were:
(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 resolutions; 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 inside front cover – Shareholder Information.
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ASX Additional Information (continued)
Top 20 Shareholders (as at 8 August 2016)
Name
Units
% of
Units
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
19,408,872
17.09
J P MORGAN NOMINEES AUSTRALIA LIMITED
BNP PARIBAS NOMINEES PTY LTD
BRAZIL FARMING PTY LTD
NATIONAL NOMINEES LIMITED
CITICORP NOMINEES PTY LIMITED
VILLA WORLD ESS PTY LTD
BNP PARIBAS NOMS PTY LTD
9,458,508
6,989,481
6,617,286
6,453,363
4,894,909
3,250,000
1,752,694
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
1,722,914
BRISPOT NOMINEES PTY LTD
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED
MR MALCOLM JOHN ROSS + MRS JUNE ROSS
CITICORP NOMINEES PTY LIMITED
DEBUSCEY PTY LTD
HORRIE PTY LTD
GEOMAR SUPERANNUATION PTY LTD
CRAIG G TREASURE PTY LTD
ZERO NOMINEES PTY LTD
MAYHAMPTON PTY LTD
SHAYANA PTY LTD
998,678
819,710
813,880
704,264
644,235
612,432
607,198
582,432
550,000
464,568
434,593
8.33
6.15
5.83
5.68
4.31
2.86
1.54
1.52
0.88
0.72
0.72
0.62
0.57
0.54
0.53
0.51
0.48
0.41
0.38
Totals: Top 20 holders of FULLY PAID ORDINARY SHARES (TOTAL)
67,780,017
59.67
VILL A WORLD LIMITED ANNUAL REPORT 2016
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VILL A WORLD LIMITED ANNUAL REPORT 2016
Villa World Limited ABN 38 117 546 326
Level 1 Oracle West, 19 Elizabeth Avenue, Broadbeach QLD 4218
PO Box 1899, Broadbeach QLD 4218
+61 7 5588 8888 villaworld.com.au
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