ANNUAL
FINANCIAL
REPORT
FOR THE YEAR ENDED
30 JUNE 2017
SHAREHOLDERS
INFORMATION
VILLA WORLD LIMITED
Shareholder information and enquiries
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
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: Brad Scale
CONTENTS
Key Highlights
Joint Chairman’s and Managing
Director’s Review
Villa World in the Community
Operating Financial Review
Current Portfolio
4
6
8
10
16
Directors’ Report
Corporate Governance Statement
Auditor’s Independence Declaration
Financial Statements
Directors’ Declaration
Independent Auditor’s Report to
the Members of Villa World Limited
ASX Additional Information
32
35
55
56
98
99
104
Killara - Logan Reserve
1
VILLA WORLD LIMITED ANNUAL REPORT 2017 Parkside - Coomera
2
VILL A WORLD LIMITED ANNUAL REPORT 2017
VISION
Villa World’s vision is to be the Company
of choice for people to achieve success
through property
MISSION
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
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.
KNOWLEDGE
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 2017
3
KEY HIGHLIGHTS
REVENUE
($M)
386.8
NET PROFIT
AFTER TAX ($M)
37.8
FY
17
FY
16
SALES
PER FY
FY
13
FY
15
FY
14
JOB
611
831
843
1185
1207
LAND
DELIVERED
JOB
FY
13
FY
14
FY
15
FY
16
FY
17
757
618
840
1060
1117
4
VILL A WORLD LIMITED ANNUAL REPORT 2017
EARNINGS
PER SHARE (CPS)
32.5
DIVIDEND
(CPS)
18.5
JOB
PORTFOLIO
FY
17
FY
16
FY
15
62%
4%
QUEENSLAND
NEW SOUTH WALES
FY
14
34%
VICTORIA
FY
13
Portfolio of 7,832 lots representing
6.5 years sales diversified across and
within east coast states
2647
3925
5191
5937
7832
VILL A WORLD LIMITED ANNUAL REPORT 2017
5
JOINT CHAIRMAN’S
AND MANAGING
DIRECTOR’S REVIEW
VILLA WORLD AND ITS SHAREHOLDERS CONTINUE TO ENJOY
SUCCESS THROUGH PROPERTY. WE HAVE DELIVERED ANOTHER
IMPRESSIVE FINANCIAL PERFORMANCE AND CONTINUE TO
BUILD CONFIDENTLY TOWARD OUR STRATEGY.
NET PROFIT
AFTER TAX UP
12%
For the fourth consecutive year, the Company has
delivered strong growth. This year’s statutory after tax
profit of $37.8 million represents an increase of 12% on
the previous year. It is a result that reflects consistently
strong revenue, gross margin and joint venture
contribution.
The success of the Company’s debt and equity
transactions earlier this year and the strong backing of
our investors has provided an excellent platform for the
next phase of our growth.
Villa World continues to be one of the highest yielding
stocks on the ASX. This year, the Board is pleased to
declare total full year dividends of 18.5 cents per share,
representing a yield of greater than 8% fully franked.
This is consistent with the Company’s Dividend Policy of
distributing 50-75% of annual net profit after tax.
An unsung story of Villa World’s success has been our
cumulative Earnings Per Share (EPS) growth of over
14%pa since FY14. We continue our commitment to
growth with a forward cumulative average EPS target
of greater than 10%.
Our Company strategy continues to guide Villa World
on its growth path.
Our position within the affordable to mid-priced
residential housing and land market continues to provide
a strong buffer against market challenges. We continue
to meet the everyday housing needs of Australians,
particularly first home buyers, owner-occupiers,
domestic investors and builders, through consistent
delivery of high quality, affordably priced, completed
designer homes. The Company has also diversified its
offering through land-only product and joint ventures.
Our success over the medium term is demonstrated
across-the-board in our results. Sales have ramped up
from 831 in FY14 to 1207 in FY17, adding a further 2%
growth to last year’s strong sales figure of 1185.
Company revenue has increased 68% over the four-year
term, from $229.5 million in FY14 to $386.8 million this
year as we continue to deliver more houses and land
than ever before. This has resulted in a near doubling of
profit from $19.1 million in FY14 to $37.8 million this
year, making FY17 another double-digit growth year
for Villa World.
With continued strength in demand for our product,
Villa World has maintained its focus on our core business
and in the markets we know well. As we see new, larger
projects come to market in Victoria, New South Wales
and Queensland, we look forward to further revenue
growth as these projects contribute to increased
earnings in the years ahead.
The outlook for the coming year remains bright, as we
move closer towards our target of a 40/40/20 split with
Victoria and our traditionally strong Queensland market,
and expand further in New South Wales.
Our carried-forward sales of 526 lots, valued at
$175.7 million provide a supportive platform for the
year ahead, with a pipeline of new projects in place
to deliver growth, particularly in FY19.
The Company has provided a profit guidance for FY18 of
$41.6 million, representing growth of 10%, with an even
stronger outlook beyond.
Villa World continues to benefit from the strength and
capability of our management team and our staff, along
with our proven experience and investment in valued
relationships with our suppliers and contractors.
The Board and the Company acknowledge the
contribution of our departing Chief Financial Officer
Paulene Henderson, who leaves a tremendous legacy.
She helped steer Villa World’s financial progress out of
the GFC, and through the significant growth that we’ve
enjoyed in recent years.
In wishing Paulene well for her personal future, we know
that she leaves Villa World in the knowledge that the
Company is in safe hands.
We continue to maintain a strong balance sheet and
cash flow position. Net debt at year-end was $73.8
million. While gearing at 30 June 2017 was 12.9%, due to
the timing of land acquisition payments and operating
cash flows, we will continue to maintain a prudent
gearing target of 15-30%.
6
VILLA WORLD LIMITED ANNUAL REPORT 2017 “
COMPANY REVENUE HAS INCREASED 68% OVER THE FOUR-YEAR
TERM, FROM $229.5 MILLION IN FY14 TO $386.8 MILLION THIS YEAR
”
Net tangible assets at year-end were at $287.7 million,
compared to $236.9 million last year, and representing
$2.27 per share before the declaration of the
final dividend.
Craig Treasure
Managing Director and
Chief Executive Officer
Villa World’s successes are due to the hard work of our
management team and staff. We would like to take this
opportunity to sincerely thank them for their dedication
and their role in the Company’s achievements in FY17.
Acknowledgement is given to fellow directors David
Rennick and Donna Hardman who share our vision for
success through property for all our shareholders.
The Company began this year with the celebration of
our 30th year as a listed company, and we ended the
financial year with our sights firmly set on delivering
against our vision for where we want to be at the
40-year mark.
Mark Jewell
Chairman
Craig Treasure and Mark Jewell inspecting
construction at Seabright, Jacobs Well
7
VILLA WORLD LIMITED ANNUAL REPORT 2017 VILLA WORLD
IN THE COMMUNITY
DURING FY17, THE COMPANY RALLIED THE SUPPORT OF 90
LOCAL BUSINESSES TO BUILD A CRISIS CARE FACILITY FOR
HOMELESS YOUNG PEOPLE ON THE GOLD COAST.
Known as Bill Boyer House, the seven-bedroom facility
at Labrador was built for the Gold Coast Project for
Homeless Youth (GCPHY). It is the second such facility
Villa World has helped to build for the organisation.
The Company’s strong, long-term relationships
with suppliers and subcontractors helped make the
project a reality through donations of labour, materials
and money.
Villa World welcomed the opportunity to deliver a
much needed service as part of its commitment to
the Gold Coast community.
GCPHY president Andrew Antonopoulos said almost
a quarter of the 3,000 homeless people on the Gold
Coast each night were young people.
“In the past 12 months, more than 150 young people
have been turned away due to full capacity which just
demonstrates the timeliness of this project,” he said.
“Kids as young as 12 years old are living on the streets
in danger and this seriously needs to change.”
Villa World CEO and Managing Director, Craig Treasure
said the $550,000 construction cost of Bill Hoyer House
was significantly reduced through donations from Villa
World and its suppliers, contractors and consultants.
“Our project partners share our ethos when it comes to
giving back to the community,” he said.
“In 2010, we built Lawson House, the Gold Coast Project
for Homeless Youth’s first crisis care facility and so when
the opportunity to build another one presented itself,
we jumped on board and so did our subcontractors.”
Davis Brothers Plumbing is one of many companies
to contribute to Bill Hoyer House, giving close to
$25,000. Its suppliers donated around $15,000 and
Davis Brothers provided more than 200 hours in free
labour. Other high level contributors who donated
supplies and labour included Dynamic Bradview Roofing,
Bradnams Windows and Doors, Australian Timber and
Trusses, Acoustics RB and Scorpio Screens and Blinds.
Mary Dupre, Dr Bill Hoyer, Bonita Tyler,
Andrew Antonopoulos and Craig Treasure
World IronMan Champion Shannon Eckstein commenced
his role as a Villa World Ambassador during FY17
8
VILLA WORLD LIMITED ANNUAL REPORT 2017 Bill Hoyer House, handed over to the GCPHY during FY17
Bill Hoyer House - Labrador
9
VILLA WORLD LIMITED ANNUAL REPORT 2017 OPERATING
FINANCIAL REVIEW
FINANCIAL RESULT
Villa World has again delivered double-digit profit
growth as the Company continues to build confidently
toward its strategy.
For the fourth consecutive year, the Company recorded
strong growth, reporting a statutory net profit after tax
of $37.8 million (32.5 cps) for the year to 30 June 2017,
a 12% increase on the $33.7 million (30.6 cps) in FY16.
REVENUE FROM LAND DEVELOPMENT,
RESIDENTIAL BUILDING AND
CONSTRUCTION CONTRACTS
Continued sales momentum combined with
$165.6 million1 of carried forward sales from FY16, and
an outstanding delivery of land and housing resulted
in 11162 wholly owned accounting settlements in FY17
(FY16: 1073). As a result, $386.8 million (FY16: $387.0
million) in revenue was recorded.
The revenue mix reflects the Company’s continued
focus on its core capabilities in house and land, as well
as strong land only settlements, particularly in Bayside
Brisbane, northern Brisbane and Victoria. House and
land product generated 65% of revenue (FY16: 73%),
with Queensland and New South Wales continuing as
the main source of revenue at 80% (FY16: 83%).
Average revenue per lot was $344,900 down from
$355,500 in the previous year, and is reflective of
product mix. The average revenue per house and land
lot rose 2% to $432,100. A large number of settlements
of the Company’s premium land only product in Bayside
Brisbane brought the average land-only revenue up to
$250,800 per lot. The result for the previous year was
impacted by settlements at the affordable land only
project Cardinia Views in Victoria.
Pleasingly, 3 - 6% revenue growth was achieved at select
projects (Augustus, Circa, Era, Lavinia and Cardinia
Views) during the year.
GROSS MARGIN
The reported gross margin was $106.3 million or 27.5%
(FY16: $100.6 million or 26.0%). All aspects of the
Silverstone proceedings were concluded in 1H17, with
$0.6 million released back into reported gross profit3.
The underlying gross margin was $105.7m or 27.3%,
exceeding the targeted range of 24%-26%, due to sales
price increases and cost savings.
NET PROFIT
AFTER TAX ($M)
37.8
REVENUE – DEVELOPMENT AND
PROJECT MANAGEMENT AND SHARE
OF PROFIT FROM EQUITY ACCOUNTED
INVESTMENTS
During FY17 the Company continued to progress its
strategy to grow development and project management
income streams by deploying development
management skills into joint venture arrangements.
These ventures delivered $5.4 million in fee income and
share of profit (FY16: $4.6 million), above forecast of
$3.4 million due to strong sales and settlements at the
Rochedale joint venture project.
The Company anticipates development and project
management fees, and share of profit from equity
accounted investments will provide a growing revenue
stream for the Company.
OTHER INCOME
Other income of $0.8 million (FY16: $0.7 million)
was generated this year and was largely made up of
bank interest received and penalty interest on
delayed settlements.
OPERATIONAL PERFORMANCE
Projects at various points in the lifecycle contributed
to 1207 sales during FY17 (FY16: 1185). The Company
largely sold out of 18 projects mid year, including strong
performing projects in Bayside Brisbane and Melbourne4.
The Company successfully released eight new projects
for sale, predominantly in 2H17, including flagship
projects in the Logan, Gold Coast, Bayside Brisbane and
Melbourne growth corridors5. These projects will make a
full year contribution to sales in FY18.
A further nine projects will commence selling in mid
FY18 across key growth corridors of northern Brisbane,
Logan, north and north-east Melbourne and south-east
Melbourne, including flagship projects The Meadows
(Strathpine), Chambers Ridge (Park Ridge), Covella
(Greenbank), Wollert and Clyde.
1 Inclusive of GST
2 1116 settlements of Company owned lots (FY16: 1073), and 38 lots relating to
joint ventures (FY16: nil), which are reflected in Share of Joint Venture Profits.
3 Refer note B5(d) Financial Statements
4 723 lots in 18 largely sold out projects, including Era, Ellabay, Affinity and
Waterline in Bayside Brisbane, as well as Sienna, Lavinia and Cardinia Views
in Melbourne.
5 Killara, Arundel Springs, Seascape and Sienna Rise respectively.
10
VILLA WORLD LIMITED ANNUAL REPORT 2017 Sales Team - Rochedale Grand
Queensland has continued to perform very well,
contributing 71% of sales (FY16: 74%). Pleasingly, the
Company has experienced continued strength in its
Victorian projects, contributing 21% of sales (FY16:
26%), with New South Wales making up the remaining
8% of sales (FY16: nil). The Company’s strategy of
targeting growth corridors continues to reap excellent
results in Queensland, with strong sales in all south-
east Queensland corridors and in Hervey Bay. Land and
turnkey housing product continued to sell very strongly
in Melbourne. The Company’s land only estate south
of Sydney sold out during the year, and the recently
released housing product in the south-west growth
corridor has been well received by the market.
The Company maintains a solid position in all customer
segments – the core being the retail market (comprising
owner occupiers including first home buyers), as well as
builders and predominantly local investors6.
The Company delivered 1117 lots of land, up 5.4% on
the 1060 lots delivered in FY16. The Company’s
housing operations delivered 548 homes across
New South Wales, Queensland and Victoria (FY16: 632).
SALES CONTRACTS CARRIED FORWARD
At 30 June 2017, the Company carried forward 526
sales contracts valued at $175.7 million7, with 75% of
contracts (392 lots valued at $127.6 million) due to
settle in 1H18, 18% of contracts (96 lots valued at
$38.6 million) in 2H18, with the balance (38 lots valued
at $9.5 million) settling in FY19. These strong carried
forward sales, when combined with the Company’s
continued sales focus, place the Company in a very
strong position.
6 Less than 5% of FY17 sales were to international investors (FY16: less than 5%).
7 Represents gross sales price including GST.
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 continued
to benefit both sales, and sales and marketing costs,
which were 5.6% of revenue (FY16: 5.7% of revenue).
EMPLOYEE BENEFITS
The Company finished FY17 with 146 full time equivalent
employees (FY16: 113). Additional roles were added
primarily in sales and marketing and project delivery,
to support greater operations and strategy delivery.
Some additional support roles were also added to cover
increased transactional volumes.
The full year salary contribution of the new employees
hired in FY16, as well as the new employees hired in
FY17 resulted in a 23% increase in staff costs year on
year. Employee costs represented 5.3% of revenue
(FY16: 4.3%).
In FY18, the Victorian and New South Wales operations
will be expanded to prepare for a step change in
delivery in FY19. Administration roles will also be added
to support the increased business operations. The full
year salary contribution of the new employees hired in
FY17 as well as roles to be added in FY18, are expected
to result in an increase in employee cost of 25-30%.
11
VILLA WORLD LIMITED ANNUAL REPORT 2017 OPERATING FINANCIAL REVIEW CONT.
ASSETS AND NTA
Gross assets increased to $577.7 million at 30 June
2017 from $478.0 million, as acquisition momentum
continued. The NTA per share increased to $2.27,
prior to the declaration of the 10.5 cent fully franked
dividend (FY16: $2.15, prior to the declaration of
10 cent dividend).
CAPITAL MANAGEMENT
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.
During the year, the Company operated a $190 million
club facility with Westpac and ANZ. In 2H17, the term
of the ANZ facility was extended. The maturity was
staggered, with $10 million maturing in August 2018
(unchanged), $80 million extended through to October
2020, $40 million extended through to October 2021
and $10 million to March 2022. The $50 million Westpac
facility is due to mature in March 2019.
At 30 June 2017, the cash on hand was $7.7 million (30
June 2016: $8.4 million) and unused capacity in the
facility was $142.1 million (30 June 2016: $32.7 million).
Gearing at 30 June 2017 was 12.9% (25.6% as at 30 June
2016), due to the timing of land acquisition payments
and operating cash flows. The Company continues to
maintain a prudent gearing target of 15-30%. Net debt
as at 30 June 2017 was $73.8 million.
The Company issued $50 million of simple corporate
bonds during the year. The Bonds were issued in order
to diversify the Company’s capital structure, extend
the debt maturity and support growth objectives.
The Bonds pay a variable interest rate of 4.75% margin
above 3 month BBSW and mature in April 2022.
The Company completed a $30 million equity capital
raising during the year which has been applied towards
acquisitions. The capital raising comprised a $20 million
institutional placement and $10 million share purchase
plan. Both transactions were well oversubscribed at the
issue price of $2.25, which represented a 5.5% discount
to the last close price.
Strong sales and settlements during the year generated
$190.2 million (FY16: $146.9 million) in operating cash.
Strong cash flow, combined with headroom in the debt
facility enabled $123.3 million in acquisitions to be settled.
Continued strong cash flow, the unused capacity in
the facility and the use of joint venture and capital lite
structures will enable the continued execution of the
acquisition strategy throughout FY18. The Company
anticipates acquisition spend during FY18 will be $110 -
130 million plus $45 million in capital lite transactions.
12
The average cost of debt during the year was 9.0%,
consistent with the prior year of 8.6%. A $90 million
fixed interest rate swap of 3.69% remains in place
through to June 2018.
DIVIDENDS
Shareholders have benefited from the strong financial
performance during the year with the Directors declaring
total dividends of 18.5 cps fully franked in relation to the
2017 financial year. This represents 3% growth year on
year. An interim dividend of 8cps was paid in March 2017.
A final dividend has been declared post year end of
10.5 cps and will be paid in September 2017.
The full year dividend of 18.5 cps represents an annual
payout of 59% of NPAT (FY16: 60%), which is within the
Company’s stated dividend policy (payout ratio of
50% - 75% of annual NPAT, paid semi-annually).
ACQUISITIONS
Following the capital raising transactions in March
2017, the Company executed on its acquisition strategy
to replenish land stock through strategic purchases
in proven growth corridors, and to take advantage of
opportunities to diversify its geographic footprint along
the east coast.
In FY17, the Company acquired 3454 lots, including
significant land parcels in growth corridors in northern
Brisbane, Logan, north-west and south-east Melbourne,
which will provide product continuity for several years
into these strong markets.
As at 30 June 2017 the Company had a portfolio of
7832 lots (FY16: 5937 lots), representing approximately
6.5 years of sales8.
In the near term, Queensland remains central to the
Company’s business, however, the portfolio is diversified
across the east coast States, and across strong growth
corridors within each State. Importantly, the Company
has broadened its reach across product and price point
adding to the Company’s resilience and providing strong
and sustainable cash flows.
The land acquisition payable at 30 June 2017 is $139.3
million in total (current $116.0 million and non-current
$23.3 million). Since year end, $30.6 million has been
paid, and the balance will be settled from operating cash
flows, existing debt facilities and settlement proceeds
from third party settlements.
8 At the FY17 sales rate of 1207.
VILLA WORLD LIMITED ANNUAL REPORT 2017 THE VILLA WORLD STRATEGY
Villa World’s continued strong performance in FY17
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 its core capabilities in the
residential land and housing market.
The Company made a number of strategic land
acquisitions in FY17 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.
DIVIDEND
(CPS)
18.5
KEY RISKS
The Company has a risk management framework in
place to identify, understand and manage key strategic,
financial and operational 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.
Villa World’s 30-year history supports the Company
to lead through continued strong performance and to
learn from past experience.
The Company offers well located land, and affordable
to mid-priced housing in the growth corridors of east
coast Australia, providing greater resilience to market
Parkside - Coomera
13
VILLA WORLD LIMITED ANNUAL REPORT 2017 OPERATING FINANCIAL REVIEW CONT.
cycles. 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,
and the Company makes general provision for such
warranty claims (refer to Note B5 in the 2017
financial statements).
OUTLOOK
In FY18 the Company’s focus will remain on delivering
and settling carried forward sales and releasing flagship
projects including The Meadows (Strathpine), Chambers
Ridge (Park Ridge), Covella (Greenbank), Wollert and
Clyde. With in excess of 15 substantial projects selling
during FY18, the Company expects to achieve at least
1400 sales.
The Company continues to progress its strategy of
growing joint venture arrangements. In FY18, these
arrangements are expected to contribute approximately
$7.0 million to profit comprising development and
project management fees, and share of profit, primarily
from the Rochedale and Greenbank joint venture
projects, with the Donnybrook joint venture project
to follow from FY19.
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 FY18 gross margin is expected to be within the
range of 24% to 26%, with an increased proportion of
capital lite projects contributing to profit. While such
projects deliver a lower gross margin, they provide a
strong return on investment.
Seabright - Jacobs Well
14
VILLA WORLD LIMITED ANNUAL REPORT 2017 Seascape - Redland Bay
GUIDANCE
FY18 ACQUISITION STRATEGY
Following the deployment of capital to acquisitions
in FY17, the Company has significantly progressed
the expansion of its project footprint, and is closer
to cementing its longer-term position as a leading
east coast residential developer. The Company will be
selective in acquiring projects to build the pipeline
beyond FY19. Acquisitions will predominantly be on
deferred terms and/or through joint ventures and
partnering arrangements. The Company expects cash
outflow for acquisitions of $110 million to $130 million
in FY18 funded from existing debt facilities and working
capital and $45 million in capital lite transactions.
Assuming general consumer confidence is maintained,
interest rates remain low and first home buyer grants
remain in place, the Company is targeting a 10% growth
in statutory profit after tax to $41.6 million in FY18
(FY17: $37.8 million). This represents EPS of 32.8 cps
(FY17: 32.5 cps). Earnings will be significantly weighted
to 2H18 due to the timing of delivery. 1H18 NPAT is
expected to be $10 - 12 million.
This guidance is underpinned by strong carried
forward sales, continued sales momentum across the
Company’s markets, full year contribution from flagship
projects released in FY17 and nine new project releases
throughout FY18 across key (and historically strong)
growth corridors, including an increased presence in
the Victorian and New South Wales markets, 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% to 75% of annual NPAT, paid
semi-annually. The Board anticipates paying total
dividends of at least 18.5 cents per share fully franked in
FY18. 1H18 dividend is expected to be 8 cps.
Construction Team - Concourse
15
VILLA WORLD LIMITED ANNUAL REPORT 2017 CURRENT
PORTFOLIO
VIC
MELBOURNE NORTH WEST
MELBOURNE NORTH
Melbourne’s North West corridor, centred around
the Caroline Springs and Taylors Hill Town centres,
continues to experience consistent growth and housing
demand. The area boasts easy freeway access to the
CBD and is proving popular with growing families.
In nearby Plumpton, the Company now has a significant
footprint with several projects underway or in planning.
Sienna, a 166-lot mixed land and homes development
which was launched in FY16 is almost complete.
Neighbouring Sienna Rise has sold strongly since it was
released in May 2017. The Company recently purchased
an adjoining site, extending Sienna Rise to 555 land
lots. Complementing the Sienna Rise land offering, the
Company will deliver another Plumpton site for 382
Villa World homes.
Melbourne’s Northern corridor, with its proximity to
Melbourne Airport and ease of access to the CBD,
continues to attract strong interest from family buyers.
Lavinia at Greenvale, comprising 131 designer homes
bordering the Greenvale Reserve is expected to be
completed during FY18, along with 30 terrace style
homes at the boutique Roxburgh Park Central project
close to Greenvale.
The Company’s presence in this market will be
maintained with the sales release in FY18 of a 287-lot
project at Wollert and 1,300 lot joint venture project
Shenstone, at Donnybrook, coming to market in FY19.
The Wollert project has been community master plan
approved under a Precinct Structure Plan (PSP), and
development applications have been lodged. Shenstone
is under the PSP approval process.
Artist’s impression of Sienna Rise - Plumpton
16
VILLA WORLD LIMITED ANNUAL REPORT 2017 Sienna Rise - Plumpton
Donnybrook
Plumpton
EXFORD WATERS
15km
10km
5km
Wollert
South Morang
ROXBURGH PARK
CAROLINE
SPRINGS
MELBOURNE
SIENNA
SIENNA RISE
PLUMPTON
S
SHENSTONE
WOLLERT
ESSENCE
LAVINIA
1445
LOTS ACQUIRED
PAKENHAM
Clyde
North
CARDINIA VIEWS
CLYDE NORTH
CASCADES RESIDENCES
VILL A WORLD LIMITED ANNUAL REPORT 2017
17
CURRENT
PORTFOLIO
VIC
MELBOURNE NORTH EAST
MELBOURNE SOUTH EAST
South Morang has been one of Australia’s fastest
growing suburbs during the past decade. Though
the Metropolitan Ring Road provides direct freeway
links to Melbourne CBD, the Victorian Government’s
MerndaRail project will improve local connectivity
by extending the rail line and walking path network
from South Morang Station some 8km to the planned
Mernda Town Centre. This incorporates a new station
at Marymede, due to open in 2019, located 1.6km from
Villa World’s 59-lot townhome project, Essence. The
project has development approval and construction
will start in FY18.
Pakenham, around 60km south-east of the Melbourne
CBD, offers a distinct semi-rural identity. Land at Villa
World’s 320-lot Cardinia Views project launched in FY15
and neared sell-out in FY17.
All developed land at the 1138 lot Cascades on Clyde
project in Clyde North previously sold out. The balance
of the site, known as Cascades Residences, will be
developed and marketed during FY18. It offers 29
homes located adjacent to parklands and an
existing wetland.
The Company’s foothold in this corridor will be
maintained with the release in FY18 of a 412-lot land
project on Pattersons Road, Clyde North.
Cascades on Clyde - Clyde North
18
VILLA WORLD LIMITED ANNUAL REPORT 2017 Pattersons Road - Clyde North
Artist’s impression of Cascades Residences - Clyde North
Victorian Team
19
VILLA WORLD LIMITED ANNUAL REPORT 2017 CURRENT
PORTFOLIO
NSW
NORTH WEST SYDNEY
Western Sydney remains one of Australia’s fastest
growing residential corridors. The Hills Shire is centrally
located in Sydney’s North West and is home to the
proposed North West Growth Centre, a major growth
area for the Sydney basin. With the new North West
Metro Link currently under construction and due to
open in 2019, Villa World projects in this market are
well placed to take advantage of high demand.
At Box Hill, the Company’s new Allure project with
42 designer homes is under construction and due for
launch early in FY18. In planning on a neighbouring
site is the Hillsbrook project, offering a further 32
designer homes.
New South Wales Team
Artist’s impression of Allure - Box Hill
20
VILLA WORLD LIMITED ANNUAL REPORT 2017 Allure - Box Hill
Box Hill
ROUSE HILL
LACOSI HILL
15km
10km
5km
SYDNEY
Cobbitty
ORAN PARK
CAMPBELLTOWN
WOLLONGONG
Albion Park
ALLURE
H
HILLSBROOK
CONCOURSE
THE CHASE
HARMONY
BELLA VISTA
273
LOTS ACQUIRED
VILL A WORLD LIMITED ANNUAL REPORT 2017
21
CURRENT
PORTFOLIO
NSW
SOUTH WEST SYDNEY
ILLAWARRA
The proposed Western Sydney Airport is driving growth
and demand in this region. The new town of Oran Park
is a major infrastructure development with a network of
interconnected thoroughfares, open space and a variety
of urban residential housing options.
The coastal region of Illawarra remains one of the
nation’s favourite places to live. In Albion Park, south of
the Wollongong CBD, the Company’s 87-lot land project
known as Bella Vista is under construction, with final
sell-out of this project expected in early FY18.
The Company has strategically positioned itself in Oran
Park with a variety of housing products. Concourse,
which comprises 48 homes close to the town centre, is
under construction and selling. Its partner project, The
Chase, is currently in the planning stage and will add a
further 93 townhomes to the Oran Park inventory.
In the adjacent parkland suburb of Cobbitty, the
Company is currently constructing and selling a
boutique collection of 10 homes, called Harmony.
Concourse - Oran Park
Concourse - Oran Park
22
VILLA WORLD LIMITED ANNUAL REPORT 2017 Harmony in Cobbitty, looking towards The Chase & Concourse in Oran Park
VILL A WORLD LIMITED ANNUAL REPORT 2017
23
CURRENT
PORTFOLIO
QLD
Haven on Greens - Griffin
BRISBANE NORTH
Brisbane North has been a highly successful market
for the Company and the Company will continue to
maintain a strong inventory of both land and homes
projects in this region.
Key projects including Park Vista at Mango Hill, Riva at
Joyner, Circa at Nudgee and Eminence at Bridgeman
Downs sold out during FY17. Park Vista yielded more
than 640 lots in a mix of homes, town houses and
land over five years and has set the pace for the next
generation of Villa World developments in this market.
The Company has ensured continuance of supply for
the next five years and beyond with approvals in place
and construction commenced at Strathpine. Set to
commence sales in FY18 and become Villa World’s
signature new address in the Brisbane North region,
this project known as The Meadows, will deliver 402
family sized homes.
Also in this market is a 291-lot land project under
planning in Upper Caboolture, close to the Caboolture
River and a short drive west of the Morayfield retail
heart. To ensure land supply in this market for the
medium term, an additional 450 lots in the neighbouring
suburb of Bellmere is also under planning for release
in FY19.
New homes projects also commenced in Brisbane
North during FY17 including Haven on Greens, a
boutique project of 66 homes in Griffin close to North
Lakes; Emerald Park at Burpengary which will deliver
54 homes during FY18; and Silvan Rise at Dakabin, just
5 minutes from North Lakes, which will comprise 109
designer homes located close to local amenities.
24
VILLA WORLD LIMITED ANNUAL REPORT 2017 Haven on Greens in Griffin, looking towards North Lakes
CABOOLTURE
Bellmere
Upper
Caboolture
Burpengary
15km
10km
5km
Dakabin
PARK VISTA
NORTH
LAKES
RIVA
Griffin
Strathpine
THE NEST
EMINENCE
CIRCA
B
BELLMERE
UPPER CABOOLTURE
EMERALD PARK
1736
LOTS ACQUIRED
SILVAN RISE
HAVEN ON GREENS
THE MEADOWS
VILL A WORLD LIMITED ANNUAL REPORT 2017
25
CURRENT
PORTFOLIO
QLD
BRISBANE SOUTH
Located less than 18km from the Brisbane CBD, the
Upper Mt Gravatt business district centred around
Garden City, is a retail and commercial hub of the
southside. Just minutes away in the blue chip residential
suburb of Rochedale is Villa World’s flagship address,
Rochedale Grand, which comprises 167 prestige
architect-designed homes within walking distance of the
future Rochedale Town Centre. Sales to date have been
strong and the Company anticipates completion of this
project early in FY19.
With development approvals in place and construction
about to commence is a 149-lot project located at
Doolandella on the northern fringe of the Logan
Motorway, called The Orchard. This will comprise land
in the main plus a boutique release of townhomes.
BRISBANE BAYSIDE
Redland, with its bayside lifestyle and family-friendly
infrastructure, has been a highly successful market for
the Company during the past few years. Key projects in
the region including the 200 home Era, at Capalaba, and
the 572 home Mt Cotton Village, at Mt Cotton, both
sold out during FY17, along with a further 84 homes at
Ellabay in Redland Bay.
Villa World plans to maintain a solid inventory of both
land and homes projects in this region, delivering strong,
consistent sales results. The Company’s Redland Bay
project, called Seascape, close to the proposed Weinam
Creek marina development, is the key development
project in this market. During FY17, the Company made
the strategic decision to cater to both land and home
buyers by dividing this 187-lot project into a land project
and a designer townhome address, with a community
garden, residents’ swimming pool and BBQ facilities.
Project completion is expected during FY19.
Two additional bayside land projects, Waterline (227
lots), and Affinity (118 lots), both at Thornlands, are fast
approaching sell out.
Rochedale Grand - Rochedale
Waterline - Thornlands
26
VILLA WORLD LIMITED ANNUAL REPORT 2017 CLEVELAND
ERA
WATERLINE
AFFINITY
REDLAND BAY
SEASCAPE
ELLABAY
MT COTTON VILLAGE
Killara - Logan Reserve
UPPER
MT GRAVATT
15km
Rochedale
10km
5km
FOREST LAKE
Doolandella
BROWNS
PLAINS
ROCHEDALE GRAND
THE ORCHARD
SPRINGFIELD
LOGAN
Logan Reserve
KILLARA
Greenbank
Park Ridge
THE SANCTUARY
CHAMBERS RIDGE
COVELLA
LOGAN
Located in the Brisbane-Gold Coast growth
corridor, the City of Logan is the fifth
largest local government area in Australia,
with a population of more than 310,000.
Villa World has made a significant long-
term commitment in Logan with planned
development of more than 2,500 lots over
the next decade.
FY18 will see the launch of the Company’s
most significant undertaking in the region,
Covella at Greenbank, offering 1,500 lots
in a joint venture. A significant portion of
Covella will be preserved as open green
space, parks and playing fields.
Also designed for a healthy, active
living, Killara (714 lots) is Villa World’s
contemporary master planned address at
Logan Reserve, featuring parkland spaces
with adventure trails, bike tracks and
interactive play areas. Sales of parkland
homesites commenced in mid FY17 and are
progressing very well, with a large builder
display village due to open during FY18.
Launching early in FY18, is our new
300-home project Chambers Ridge, Park
Ridge. Designed around a community park
with playground equipment, picnic shelters
and a barbecue area, Chambers Ridge is
also designed for the family market.
VILL A WORLD LIMITED ANNUAL REPORT 2017
27
CURRENT
PORTFOLIO
QLD
GOLD COAST
With the construction of facilities for the Gold Coast
2018 Commonwealth Games virtually completed and
the new Gold Coast University Hospital precinct already
open, the central Gold Coast is benefitting from a
significant increase in residential development and
employment, resulting in strong economic growth.
FY17 saw the Company’s most significant project
launch in the central Gold Coast in several years, with
the opening of Arundel Springs, a prestige parkland
address beside the protected Coombabah Lakelands
Conservation Area at Arundel. The project comprises
306 premium homesites plus parks, walking and cycling
tracks, exercise and play zones and lush landscapes.
Sales success to date has been excellent. A further
portion of the site has been earmarked for townhome
developments (85 lots).
Now in the planning stage, is a project located in
Hope Island comprising 110 designer townhomes and
15 premium waterfront homesites.
Sales at Seabright at Jacobs Well, which comprises
107 homes within walking distance of the village, have
been strong. We anticipate sell-out being achieved
early in FY18.
Parkside, the 179-home project, just minutes from the
future Coomera Town Centre at Coomera was sold
out during FY17.
Jacobs Well
20km
15km
COOMERA
10km
PARKSIDE
Hope Island
5km
SEABRIGHT
H
HOPE ISLAND
ARUNDEL SPRINGS
Arundel
SOUTHPORT
Artist’s impression of Arundel Springs - Arundel
28
VILL A WORLD LIMITED ANNUAL REPORT 2017
REGIONAL QUEENSLAND
During FY17, the Company continued to market
its contemporary lifestyle projects on the Central
Queensland Coast. Augustus is located in the
picturesque seaside town of Hervey Bay. Master
planned for 763 homes, the project sold consistently
in FY17 offering affordable house and land packages
primarily to first home buyers and downsizers.
Little Creek in Gladstone is a 663-lot project which
offers a mix of land and homes set around the Little
Creek parklands, an established network of parks with
playgrounds and recreation facilities.
GLADSTONE
LITTLE CREEK
AUGUSTUS
HERVEY BAY
Jacobs Well
SEABRIGHT
20km
15km
COOMERA
10km
PARKSIDE
Hope Island
5km
H
HOPE ISLAND
Arundel
SOUTHPORT
ARUNDEL SPRINGS
Augustus - Hervey Bay
VILL A WORLD LIMITED ANNUAL REPORT 2017
29
VILLA WORLD
LIMITED
ABN 38 117 546 326
ANNUAL
REPORT
30 JUNE 2017
CONTENTS
Directors’ report
Corporate governance statement
Financial statements
Independent auditor’s report to
the members of Villa World Limited
32
35
56
99
30
30
VILL A WORLD LIMITED ANNUAL REPORT 2017
VILLA WORLD LIMITED ANNUAL REPORT 2017
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.
A description of the nature of the consolidated entity’s
operations and its principal activities is included in the
Directors’ report on page 34, which is not part of these
financial statements.
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
The financial statements were authorised for issue by
the Directors on 15 August 2017. 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 2017
3131
VILLA WORLD LIMITED ANNUAL REPORT 2017 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 2017.
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 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 has more than 30 years’ experience in property development, specifically in the
residential land and housing sectors along the eastern seaboard of Australia. As a licensed
surveyor and licenced property developer Craig has previously held a number of senior
executive roles and directorships within the property industry. His experience is both as a business proprietor and
at an executive level with publicly listed entities.
As Chief Executive Officer and Managing Director, Craig has been responsible for guiding the Company’s growth
over recent years. In leading an integrated property company Craig displays strong skills in managing challenging
projects with a strong focus on the customers, people and culture of the Company. In 2016 Craig completed a high
performance leadership program with Oxford University.
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 (25 June 2013 - 23 September 2016)
• G&C Mutual Bank (1 September 2016 - 23 September 2016)
• Australian Military Bank (since 1 July 2017)
32
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 DIRECTORS (CONTINUED)
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)
Other directorships (current and recent)
In the past three years David has served as a Non-Executive Director of:
• The Hester Hornbrook Academy, a school of Melbourne City Mission (since 31 August 2016)
COMPANY SECRETARY
Paulene Henderson BBus Acc, MBA, CA, GAICD
Chief Financial Officer 13 April 2010 - 3 July 2017
Company Secretary 19 November 2012 - 3 July 2017
As Chief Financial Officer, Paulene has been responsible for guiding Villa World's capital
management strategy. This has included three highly successful equity raisings and a
restructuring of the Company's debt facilities to provide flexibility, tenure and diversity,
including the issue of a simple corporate bond to 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 on 19 November 2012. Paulene gave notice of resignation as Chief
Financial Officer and Company Secretary on 5 June 2017 effective as at 3 July 2017.
Brad Scale LLB
General Counsel since 29 October 2012
Company Secretary since 3 July 2017
Brad’s legal career spans 30 years, much of which was spent in private practice specialising
in property law. He was a senior partner of a leading Queensland property firm, where he
advised domestic and international developers on major acquisitions and disposals, master-
planned residential communities and mixed-use projects. Prior to joining Villa World, Brad
had a 4 year in-house role as Chief Legal Officer with a large financial services group, specialising in corporate
governance, regulation and compliance, risk management and claims management.
33
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 DIRECTORS’ INTERESTS
Directors’ interests in shares and performance rights of Villa World Limited as at the date of this report
Mark Jewell
Craig Treasure
David Rennick
Donna Hardman
Meetings of directors
Ordinary Shares
Performance Rights
107,127
1,334,864
51,146
28,737
-
704,430
-
-
The number of meetings held by Villa World Limited’s Board of Directors and of each Board Committee during the
year ended 30 June 2017, including the number of meetings attended by each Director are:
Mark Jewell
Craig Treasure
David Rennick
Donna Hardman
Board meetings 1
B
A
16
16
16
16
16
16
16
16
Audit and
Risk Committee
B
A
4
4
4
4
4
4
4
4
Remuneration and
Nomination Committee
A
4
4
4
4
B
4
4
4
4
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 strategy for the Company and during FY17 dedicated three
Board meetings for these purposes.
Principal activities
During the year 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-17
$’000
30-Jun-16
$’000
395,124
392,303
(334,079)
(335,592)
(7,058)
53,987
(16,151)
37,836
(9,464)
47,247
(13,534)
33,713
37,836
33,713
1 Includes revenue from land and development, residential building and construction contracts, development and project management fee,
other income, share of profit/(loss) from equity accounted investments, net reversal of impairment in development land and reversal of
impairment of investment in equity accounted investment. The breakdown of revenue can be found in the Statement of Comprehensive
Income on page 57.
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.
Dividends
The Board declared an interim dividend of 8.0 cents per share fully franked on 14 February 2017. Payment was made
to shareholders on 31 March 2017.
34
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR
Final Dividend
On 15 August 2017, the Board declared a fully franked final dividend of 10.5 cents per share. The ex-dividend
date is 4 September 2017 and the record date for this dividend is 5 September 2017. Payment will be made on
29 September 2017.
The balance of the franking account is $14.4 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.
Investment in the Villa Green Joint Venture
On 28 July 2017, equity contributions totalling $6 million were made by each joint venture partner, with the carrying
value of the investment increasing to $10.9 million. This contribution was recognised as a commitment at 30 June
2017. Refer Note B6(b) - Joint Venture commitments.
Cash settlements for land
Since year end $30.6 million has been paid in relation to settlements of land. These include Hillsbrook, Concourse
and the adjoining parcel to Sienna Rise which were all recognised as a liability at 30 June 2017.
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.
CORPORATE GOVERNANCE STATEMENT 30 JUNE 2017
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 2017, which is available in the Corporate Governance section of its website at
http://www.villaworld.com.au/corporate-governance-statement-2017
35
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 ANNUAL STATEMENT BY THE REMUNERATION AND NOMINATION
COMMITTEE CHAIR
The Villa World Board understands that Shareholders appreciate transparency and simplicity when it comes to
remuneration reporting. Equally important is our demonstration of clear linkages between Company strategy and
performance to remuneration outcomes for our executives. We have maintained this mindset during FY17.
We also believe that remuneration must be aligned to the sustainable growth of our Company and long-term
value creation for Shareholders. This is as important during a strong performance year, such as this one, as it is in
preparing for times when the market becomes potentially more challenging.
The Board, together with Managing Director and CEO Craig Treasure, has continued to focus on building leadership
capability. Achievement of broader, forward-focused people goals remains a key consideration of the Remuneration
and Nomination Committee.
This year, General Manager Sales and Marketing, Robyn Valmadre, was recognised as key management personnel
(KMP). This continued expansion of talent provides enhanced succession options, drives sustainable growth and
strengthens the strategic position of the Company for the future.
Sustained performance results from the strong employee engagement and motivation of all Villa World employees
to perform at their best. This was acknowledged during the Company’s 30th anniversary celebrations with a Board-
approved gift of $1,000 Villa World shares to every staff member. In addition, an Employee Share Acquisition Plan
allowing eligible staff to purchase up to $5,000 in Villa World shares each year on a salary sacrifice basis was also
introduced this year.
The Villa World remuneration framework aims to attract, motivate and retain the best people to achieve the
Company’s strategic and operational objectives. Deliberate attention has been given to driving sustainable,
consistent performance both now and into the future.
Pay for performance FY17
FY17 was a strong performance year with a Net Profit After Tax of $37.8 million, up 12% on the previous period.
The Committee maintained a consistent approach to remuneration, with no material changes to the Villa World
Long Term Incentive Plan (LTIP). We believe the program offers a competitive reward and drives the right outcomes,
being growth in shareholder wealth and the efficient use of assets. The measures remain at:
• 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).
We have continued to encourage the CEO to focus on long term, sustainable performance, increasing the LTI from
100% to 120% in FY17. While we note that Villa World is weighting long term remuneration higher than our sector
peers, the Committee is confident that this structure has the elements set appropriately to drive positive outcomes
for our Shareholders.
Looking forward to FY18
The Villa World Board will continue to advance a competitive remuneration mix based on performance and
optimising Shareholder outcomes. We will also maintain our investment in key leadership talent, encouraging
diverse perspectives and flexibility in thinking. This approach to reward and recognition supports Villa World’s
broader strategic goals, leading to a higher level of creativity, innovation and organisational agility.
I would like to thank the Remuneration and Nomination Committee for their robust challenge and judicious work
this year trusting that together we have produced a Remuneration Report that is useful and informative for you;
our Shareholders.
Donna Hardman
Chair, Remuneration and Nomination Committee
36
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
The Villa World Limited Board is pleased to present the Remuneration Report for FY17. 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.
Structure of this report
The Board is committed to the clear and transparent communication of its remuneration arrangements by
providing an executive remuneration framework that fosters a strong performance culture and links the
remuneration outcomes for executives with the Company’s strategy and forward plan and the creation of long
term shareholder value.
The Report is organised as follows:
SECTION A
Scope of the remuneration report
SECTION B
FY17 Remuneration snapshot
SECTION C
Remuneration strategy and governance
(i) Remuneration governance
(ii) Remuneration framework and link to
business strategy
(iii) Use of remuneration advisors
(iv) Clawback of remuneration
(v) Securities dealing policy
(vi) Remuneration report approval at FY16
Annual General Meeting (AGM)
SECTION D
Our assets: Our people
SECTION E
Remuneration outcomes and corporate
performance
(i) FY17 remuneration of KMP
(ii) KMP remuneration mix
SECTION F
Remuneration framework
SECTION G
Employment agreements
(iii) FY17 STI review
(iv) FY17 LTI outcome
(v) Five year company performance
(i) Total fixed remuneration
(ii) Short-term incentives
(ii) Long-term incentives
(i) KMP employment service agreements
(ii) Termination provisions
SECTION H
Non-Executive Directors' remuneration
(i) Service agreements
SECTION I
Equity instrument disclosures relating
to KMP
(ii) Maximum aggregate NED fee pool
(iii) NED remuneration
(i) KMP shareholdings
(ii) KMP interests in bonds
(iii) KMP performance rights holdings
(iv) Expenses arising from share-based
payment transactions
page 38
page 38
page 40
page 42
page 43
page 47
page 51
page 51
page 52
REMUNERATION REPORT GLOSSARY
AGM
Annual General Meeting
CEO/MD Chief Executive Officer / Managing Director
CFO
EY
FY17
KMP
KPI
LTI
Chief Financial Officer
Ernst and Young
The 2017 fiscal year
Key Management Personnel
Key Performance Indicator, the basis for STI
Long-term incentive
LTIP
NED
NPBT
RNC
ROA
SBP
STI
TSR
Villa World Limited executive long-term incentive plan
Non-Executive Director
Net profit before tax
Remuneration and Nomination Committee
Return on assets
Share based payments
Short-term incentive
Total shareholder return
37
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION A: SCOPE OF THE REMUNERATION REPORT
This Report outlines how the Company’s FY17 performance has been reflected in remuneration outcomes for KMP
as defined in AASB 124 Related Party Disclosures.
The Company’s KMP comprise of NED’s, Executive Directors and senior 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 Hardman
Independent Non-Executive Director
Term
Full Year
Full Year
Full Year
Executive Director
Craig Treasure
Senior Executives
Chief Executive Officer and Managing Director (CEO/MD)
Full Year
Paulene Henderson 1
Chief Financial Officer and Company Secretary
Michael Vinodolac
General Manager Operations
Robyn Valmadre 2
General Manager - Sales & Marketing
Full Year
Full Year
Full Year
1 Paulene Henderson tendered her resignation as CFO and Company Secretary on 5 June 2017 but remained a KMP until 3 July 2017.
2 Robyn Valmadre was recognised as a KMP on 1 July 2016 based on her increased responsibility in driving the strategic delivery
of the Sales and Marketing functions across the business.
SECTION B: FY17 REMUNERATION SNAPSHOT
The RNC noted the Company’s strong performance in FY17 achieving year-on-year growth in revenue and
profitability. The Company’s success was underpinned by strong sales and efficient product delivery, as well as
sustained strength in the balance sheet enabling effective cash flow management across the portfolio.
Continued company growth, complexity and geographical diversification has resulted in greater leadership
capability requirements, leading to the continued expansion of roles and responsibilities for the executive team.
Appropriately, the RNC reviewed salary levels based on performance outcomes associated with the required
capability to deliver on this strategy.
Key remuneration outcomes for FY17 are as follows:
Executives received increases (~5%-17%) in fixed remuneration in recognition
for high performance, increased responsibilities, change in roles and delivery of
business strategy.
Aligned with the success of the Company’s financial performance and to ensure
competitive compensation in relation to peers, fixed remuneration for the CEO/
MD increased by 5% from FY16 to FY17. Total STI remained at 40% of fixed salary.
Total remuneration for the CEO/MD is tabled in Section E.
The STI pool awarded to all employees, including those awarded to executives
totalled $1.5 million in FY17 (FY16: $1.2 million). The increase reflected the
Companys’ strong financial performance in FY17 and the Boards assessment
of performance against individual KPI measures. STI’s for executives remain
between 20-40% of fixed salary.
Villa World Limited Option Plan
During FY17, the Villa World Limited Option Plan was finalised and a fixed number
of options awarded to eligible KMP vested and were exercised.
Fixed Remuneration
CEO/MD Remuneration
STI’s
LTI’s
38
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION B: FY17 REMUNERATION SNAPSHOT (CONT.)
LTI’s (continued)
Employee Share Allocations
NED fees
Villa World Limited Executive Long-Term Incentive Plan
The second allocation of performance rights for the CEO/MD under the The
Villa World Limited Executive Long-Term Incentive Plan was approved at the
2016 Annual General Meeting. The maximum LTI opportunities during FY17 were
equivalent to 120% of fixed remuneration for the CEO and up to 100% 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 TSR and ROA over 3 years.
Employee Share Acquisition Plan
The employee share acquisition plan was introduced on 1 Januay 2017 to provide
eligible employees with the opportunity to purchase up to $5,000 annually,
in Villa World shares using their pre-tax salary. This plan offers employees at
all levels an opportunity to become an active shareholder of the Company,
generating increased motivation to deliver shareholder value and be rewarded
for their contribution towards the long-term sucess of Villa World.
Anniversary Share Grant
The Board aknowledged the dedication and support of existing staff by
approving a special award of $1,000 free shares as part of the Company’s 30th
anniversary celebrations. This grant has a 3 year trading restricition period from
the date of allocation. If employment ceases during the restriction period, the
employee is entitled to keep the shares and the trading restriction ceases at the
time the employment ends.
NED’s received increases (~6%-11%) in base fees to reflect additional workloads
as well as market relativities. Total Board and Committee Fees paid during FY17
were $350k (see Section H) which is within the current maximum aggregate
amount of $600k. NEDs do not receive variable pay.
39
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION C: REMUNERATION STRATEGY AND GOVERNANCE
(i) Remuneration Governance
The Board, RNC, external advisers and management work closely to apply our remuneration principles and ensure
the Company strategy supports long-term sustainable growth in shareholder value. The executive remuneration
strategy demonstrates a strong link between Company strategy, its performance and the remuneration outcomes
for 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 in 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
• CEO and Board performance and development
• Human resource 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 and optimised
shareholder outcomes. 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.
(ii) 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 Company must achieve at least 80% of NPBT target in order for full STI awards to be paid to executives.
40
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION C: REMUNERATION STRATEGY AND GOVERNANCE (CONT.)
(ii) Remuneration framework and link to business strategy (cont.)
The table below explains the linkage between the remuneration components and the Company’s
performance focus.
Component
Design
Purpose and link to strategy
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
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
KPIs and delivering longer term
business plan against target
• Rewards and motivates achievement of Company
annual business plan
• Creates transparent link between performance
and remuneration
• Individual KPIs encourage accountability and
consider a broader view of performance and
specific strategic priorities
LTI
A deferred equity award of
conditional rights or options
subject to performance
conditions measured over a three
year performance period
• Rewards sustainable long-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
(iii) Use of remuneration advisors
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.
The RNC has engaged Ernst & Young (EY) as its external remuneration advisor to ensure that it is fully informed
when making remuneration decisions and to assist with the review of the overall executive remuneration
framework. EY’s global governance guidelines and terms of engagement include specific strict guidelines designed
to protect their independence, as part of this service to existing audit clients.
(iv) 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 clawback 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.
41
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017
REMUNERATION REPORT 2017 (AUDITED)
SECTION C: REMUNERATION STRATEGY AND GOVERNANCE (CONT.)
(v) 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.
(vi) Remuneration report approval at FY16 Annual General Meeting (AGM)
Of the eligible votes cast at the Company’s AGM held on 3 November 2016, 98.3% were in favour of the
remuneration report for FY16. The Company did not receive any specific feedback at the AGM on its
remuneration practices.
SECTION D: 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.
Villa World believes in the importance of providing its people with ownership opportunities and the chance to
share in the Company’s success and recognises the importance of driving the engagement and performance
of all employees. During FY17 the Company introduced the Villa World Employee Share Acquisition Plan. The
Plan is available to all eligible employees giving them the opportunity to purchase up to $5,000 Villa World
shares using their pre-tax salary. Shares acquired under the Plan will be subject to trading restrictions during
the Restriction Period.
42
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION E: REMUNERATION OUTCOMES AND CORPORATE PERFORMANCE
(i) FY17 Remuneration of KMP
Remuneration earned by executive KMP reflects the Company’s strong financial 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 during the year.
Short-term
benefits
Salary
and fees
Cash
Bonus
Non-Executive Directors
Mark Jewell (Chairman)
David Rennick
Donna Hardman 1
Gerald (Gerry) Lambert 2
$
2017
136,986
2016
123,288
2017
2016
2017
2016
2017
2016
91,324
82,192
91,324
30,242
-
28,662
Total Non-Executive Directors
2017
319,634
2016
264,384
Executive Director and KMP
$
-
-
-
-
-
-
-
-
-
-
Post-
employ-
ment
Super-
annuation
contri-
butions
$
13,014
11,712
8,676
7,808
8,676
2,873
-
2,723
30,366
25,116
$
-
-
-
-
-
-
-
-
-
-
Long-
term
benefits
Long
service
leave 5
Share-based
payments 6
Share
options
Perfor-
mance
Rights
TOTAL
$
150,000
135,000
100,000
90,000
100,000
33,115
-
31,385
350,000
289,500
$
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
-
-
Craig Treasure (CEO and MD)
2017
689,306
270,000
19,616
16,402
297,985
1,293,309
2016
655,692
240,000
19,308
18,128
100,000
111,972
1,145,100
Paulene Henderson
2017
305,384
75,000
19,616
11,656
-
(39,812)
371,844
2016
280,692
66,145
19,308
7,930
8,333
39,812
422,220
Michael Vinodolac 3
2017
341,243
60,000
19,616
19,324
11,958
66,745
518,886
2016
210,519
51,395
14,481
11,488
15,375
14,930
318,188
Robyn Valmadre 4
2017
310,384
63,000
19,616
2,237
2016
-
-
-
-
-
-
36,801
432,038
-
-
Total Executive Director and KMP
2017
1,646,317
468,000
78,464
49,619
11,958
361,719
2,616,077
2016
1,146,903
357,540
53,097
37,546
123,708
166,714
1,885,508
TOTAL
2017
1,965,951
468,000
108,830
49,619
11,958
361,719
2,966,077
2016
1,411,287
357,540
78,213
37,546
123,708
166,714
2,175,008
1 Donna Hardman was appointed Non-Executive Director on 17 February 2016.
2 Gerald (Gerry) Lambert resigned as Non-Executive Director 5 November 2015.
3 Michael Vinodolac was appointed a KMP on 1 October 2015.
4 Robyn Valmadre was recognised as a KMP on 1 July 2016 based on her increased responsibility in driving the strategic delivery of the
Sales and Marketing functions across the business.
5 Long service leave represents the amount expensed by the Company for the period.
6 The amount shown in share-based payments represents the amount expensed by the Company.
43
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION E: REMUNERATION OUTCOMES AND CORPORATE PERFORMANCE (CONT.)
(ii) KMP remuneration mix
The Company has achieved a 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 FY17.
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 FY17, this portion was increased, with greater emphasis on long-term incentives for the CEO and
Company executives compared to FY16, with a continued view to increasing shareholder alignment for this key group.
The relative mix of these components for different roles for FY17 is summarised in the table below.
Executive Director
Craig Treasure
Other KMP
Paulene Henderson
Michael Vinodolac
Robyn Valmadre
Total remuneration package components
TFR
STI
LTI
2017
2016
2017
2016
2017
2016
56%
60%
63%
73%
76%
72%
73%
-
21%
15%
12%
15%
21%
23%
19%
16%
17%
-
22% 1
15%
9%
12%
10%
-
1 Paulene Henderson’s LTI component of 22% has been reversed due to the forfeiture of her performance rights allocation.
Fixed remuneration for the CEO and CFO increased in FY17 by 5% and 8.3% respectively. This increase ensures
that KMP remuneration remains competitive with companies of comparable size and complexity. Total fixed
remuneration is in line with the average/median remuneration rewarded to executives in comparable companies
and roles, while maximum total remuneration, which includes STI and LTI awards, continues to support the Company
focus and direction on a competitive higher performance-based remuneration structure compared to industry
peers. Villa World believes this is the right combination to driving greater medium to long-term shareholder value.
Rochedale Grand - Rochedale
44
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION E: REMUNERATION OUTCOMES AND CORPORATE PERFORMANCE (CONT.)
(iii) FY17 STI review
The following table sets out the performance conditions for STI’s and the weighting between these measures for
executives for FY17.
Weighting of financial measure
Metric
CEO
CFO
General
Manager
Operations
General
Manager
Sales and
Marketing
Operational performance
• Achieve FY17 financial plan
30%
25%
35%
25%
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
• Develop and build nationally recognised brand
• Develop robust financial, operational and communication
strategies for all new business initiatives
• Define corporate structure to support future performance
and sustainability
People and Culture
• Attract, motivate and retain staff
• Be a preferred employer
• Succession planning and leadership development
• Drive efficiences through cost, time and resource effectiveness
Compliance with financial institutions including review of
cash facility
• Sourcing of financing options & maintaining relationships with banks
Corporate governance & Company Secretarial compliance
• Audit, tax, GST, ASX reporting
15%
15%
15%
25%
20%
20%
20%
20%
15%
20%
15%
10%
5%
Shareholder engagement and support
• 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
10%
10%
Acquisition strategy
• Define, Implement and communicate the Company’s acquisition
strategy and quarterly review processes
• Enhance investment dicipline to ensure Return on
Assets when considering new investments
Sales and Marketing
• Successful completion of marketing budgets for all new projects
as as reflected in board approved feasabilities
• Achieve budgeted sales to meet market demand and profit targets
10%
40%
l
a
i
c
n
a
n
F
i
s
e
r
u
s
a
e
m
s
e
r
u
s
a
e
m
h
t
w
o
r
g
s
s
e
n
i
s
u
B
i
s
e
r
u
s
a
e
m
c
fi
c
e
p
s
n
o
i
t
i
s
o
P
Performance assessment:
Below threshold hurdle
At target
45
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017
REMUNERATION REPORT 2017 (AUDITED)
SECTION E: REMUNERATION OUTCOMES AND CORPORATE PERFORMANCE (CONT.)
(iv) FY17 LTI outcome
Villa World Limited Executive Long-Term Incentive Plan
The Board introduced the Villa World Limited Executive LTI Plan in FY16. The key driver for the LTI Plan is to provide
a variable remuneration component that is competitive and is aligned to shareholder returns over a longer period. It
has been structured to appropriately incentivise executives and promote retention. The first grant of performance
rights under the LTI Plan was made on 30 November 2015. The second allocation of performance rights under the
LTIP was approved at the 2016 AGM.
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 F (iii) for the plans terms and conditions.
No awards have vested during FY17.
The table below sets out the performance rights awarded to KMP:
Perform-
ance
rights
awarded
Value
Value of
perform-
ance rights
at grant
date 2
Expiry
date
Vesting
date
Expected
price
volatility
of shares
Expected
dividend
yield
Risk
free
interest
rate
Vested
FY17
387,528 $1.44 $558,040 23/08/2019 30/06/2019
FY16
316,902
$1.06
$335,916
31/08/2018 30/06/2018
FY17
150,969 $1.44
$217,395
23/08/2019 30/06/2019
FY16
112,676
$1.06
$119,437
31/08/2018 30/06/2018
FY17
97,582
$1.44
$140,518
23/08/2019 30/06/2019
FY16
56,338
$1.06
$59,718
31/08/2018 30/06/2018
FY17
76,669
$1.44
$110,403
23/08/2019 30/06/2019
FY16
-
-
-
-
-
25%
27%
25%
27%
25%
27%
25%
-
8.15%
1.87%
7.6%
2.1%
8.15%
1.87%
7.6%
2.1%
8.15%
1.87%
7.6%
2.1%
8.15%
1.87%
-
-
-
-
-
-
-
-
-
-
For-
feited
-
-
100%
100%
-
-
-
-
KMP
Craig
Treasure
Paulene
Henderson 1
Michael
Vinodolac
Robyn
Valmadre
1 Paulene Henderson tendered her resignation as CFO and Company Secretary on 5 June 2017 but remained a KMP until 3 July 2017.
Her performance rights were forfeited on 14 July 2017 with communication and approval by the Board prior 30 June 2017.
2 The value of performance rights reflects the fair value at the time of grant.
Villa World Limited Option Plan
The Villa World Limited Option Plan was finalised in FY17 with all options vested and exercised by eligible KMP.
To align with market practice and support the Company’s business strategy, it has been replaced by the Villa World
Limited Executive LTI 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.
The following table discloses the number of share options which vested and were exercised 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. As at 30 June 2017 the number of options over unissued ordinary shares in the
Company held by Directors and each of the other KMP is nil.
46
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION E: REMUNERATION OUTCOMES AND CORPORATE PERFORMANCE (CONT.)
Villa World Limited Option Plan (cont.)
KMP
Grant date
Granted
as
compen-
sation
Value of
options
at grant
date 1
Exer-
cise
price
Expected
price
volatility
of shares
Expected
dividend
yield
Risk
free
interest
rate
Vested/
exer-
cised
Vesting
date
Expiry
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%
100%
2.57%
100%
3.10%
100%
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.
(v) Five year company performance
The RNC recognises that remuneration is an area of particular interest to shareholders. Shareholder views are
taken into account in setting and considering changes to remuneration.
The Company has a reward system that ties KMP remuneration to the financial results and, at the same time,
rewards executives for creating shareholder value in both the short term and long-term. Pay-for-performance is
integral to this system. KMP are incentivised within the STI structure to improve key financial results year-on year
and are rewarded according to their achievements against KPI’s that are both measurable and outcome-based.
The table below illustrates the Company’s achievements in the areas that drive shareholder wealth during the past
five years and highlights the correlation between results achieved and STI’s received during FY17.
Performance KPI
Revenue
Net profit after tax
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
FY13
$m
$169.4
($13.5)
$70.0
24.4%
185.0
-
-
(18.2)
$1.13
FY14
$m
FY15
$m
FY16
$m
FY17
$m
$229.5
$321.6
$387.0
$386.8
$19.1
$69.1
18.7%
192.0
6.0
9.0
21.5
$25.6
$92.0
16.9%
200.0
6.0
10.0
25.6
$33.7
$128.6
25.6%
215.0
8.0
10.0
30.6
$37.8
$81.5
12.9%
227.0
8.0
10.5
32.5
$2.02
$2.00
$2.08
$2.25
SECTION F: REMUNERATION FRAMEWORK
Total fixed
remuneration
“TFR”
Short-term
incentives
“STI”
Long-term
incentives
“LTI”
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.
47
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION F: REMUNERATION FRAMEWORK (CONT.)
(i)
Total fixed remuneration
Objective
Provide a level of fixed compensation which is fair, reasonable and appropriate to attract and
retain executives having regard to the seniority of the position.
Composition
Cash, superannuation, insurance, car allowance or lease and other fringe benefits.
Benchmarks
Reviewed annually by the RNC based on the scale and complexity of the role, benchmarked
against comparable industry roles. Fixed compensation is set taking into account the levels of STI
and LTI opportunities. TFR will reflect the core performance requirements and expectations of
the Company.
(ii) Short-term incentives
Executives and eligible employees have a target STI opportunity depending on the accountabilities of their role and
impact on the Company’s performance. The Company’s STI structure is outlined below.
Objective
Link executive remuneration to the achievement of annual operational targets and individual
performance specific KPI's. Designed to create a strong, transparent link between performance
and remuneration.
Eligibility
Executives and eligible employees
Composition
Cash
Opportunity
Actual STI awards can range from 0-40% of TFR
Performance
measures
STI's are awarded based on the successful achievement of pre-determined Board approved KPI's.
KPI's are set at the start of each financial year and are objective and measureable. Performance
is assessed against both Company and individual performance criteria.
Review
Clawback
Each year the Board considers the appropriate targets and KPI's to link to the STI plan and the
weightings if targets are met for executives. This may include setting a maximum payout under
the STI plan and minimum levels of performance to trigger payment of STI.
The clawback 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 STI.
(iii) Long-term incentives
Villa World Limited Executive Long-Term Incentive Plan
The grant of performance rights was introduced as a LTI on 30 November 2015 subsequent to approval of the plan
at the 2015 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.
48
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION F: REMUNERATION FRAMEWORK (CONT.)
Villa World Limited Executive Long-Term Incentive Plan (cont.)
The table below provides a summary of the terms and conditions of the Villa World Limited executive long-term
incentive plan:
Eligibility
Instrument
Executives and other eligible employees of the Company who are considered to have
the capacity to impact the long-term performance of the Company. Non-Executive
Directors are not eligible to participate.
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.
Opportunity
Maximum LTI opportunities are equivalent to 120% of fixed remuneration for the CEO/
MD and up to 100% of fixed remuneration for other executives.
Performance period
The "Base rights" granted during the plan's first three years (FY16-FY18) will begin to
vest on 30 June 2018. All subsequent "Base rights" granted will vest three years after the
respective grant date. The vesting is conditional on the executive remaining employed
with the Company and achievement of performance hurdles.
Rochedale Grand - Rochedale
49
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION F: REMUNERATION FRAMEWORK (CONT.)
Villa World Limited Executive Long-Term Incentive Plan (cont.)
Performance
measures
Vesting conditions may include performance and/or service conditions that must be
satisfied before the performance right vests. After careful consideration of the long-
term financial focus and strategic direction of the Company, the Board has determined
the performance condition 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 TSR for the Company is measured
over three financial years.
The proportion of performance rights that may vest based on TSR performance is
determined based on the following vesting schedule:
Relative TSR performance
Percentage vesting
At or above the 75th percentile
100%
Between 50th and 75th percentile
Straight line vesting between 50-100%
At the 50th percentile
Below the 50th percentile
ROA (25% of LTI allocation)
50%
Nil
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
Percentage vesting
At or above maximum (13.5%)
100%
Between threshold (12%) and maximum (13.5%) Straight line vesting between 50-100%
At threshold (12%)
Below threshold (12%)
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.
Termination /
Forfeiture
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.
50
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017
REMUNERATION REPORT 2017 (AUDITED)
SECTION G: EMPLOYMENT AGREEMENTS
(i) KMP employment service agreements
Remuneration and other terms of employment for KMP 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 2017 are set out in the table below:
Base fee
inclusive of
superannuation
Term of
agreement
Notice
period
Review
period
Maximum
annual cash
bonus (%) 2
Chief Executive Officer
and Managing Director
Craig Treasure
Other KMP
Paulene Henderson 1
Michael Vinodolac
Robyn Valmadre
$695,000
Rolling
6 months
Annual
$325,000
$350,000
$330,000
Rolling
Rolling
Rolling
6 months
3 months
3 months
Annual
Annual
Annual
40%
25%
25%
20%
1 Paulene Henderson tendered her resignation as CFO and Company Secretary on 5 June 2017 but remained a KMP until 3 July 2017.
2 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.
SECTION H: 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.
There is no requirement for NEDs to hold shares in the Company.
Whilst encouraged, the Company has left this choice to the
discretion of each NED.
(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 NEDs fees paid for the year ended 30 June 2017 is
$350,000 (30 June 2016: $289,500).
51
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION H: NON-EXECUTIVE DIRECTORS’ REMUNERATION (CONT.)
(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 Chairman, NEDs receive additional fees if they are appointed Chairman 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 FY17, the Board decided to increase the base fee for NEDs to reflect additional workloads as well as national
benchmarks. The FY18 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
FY17
FY16
$150,000
$135,000
$85,000
$80,000
$15,000
$10,000
SECTION I: EQUITY INSTRUMENT DISCLOSURES RELATING TO KMP
(i) KMP Shareholdings
Balance at the
start of the year
Granted during
the year
Exercise of
options 1
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
Direct
holding
Indirect
holding
Directors
Mark Jewell
Craig Treasure
David Rennick
Donna Hardman
Other KMP
-
103,390
252,432 582,432
- 45,000
-
-
Paulene Henderson
-
86,468
Michael Vinodolac
3,192
-
Robyn Valmadre
-
7,000
-
-
-
-
428
428
428
Total
255,624 824,290
1,284
-
-
- 3,000,000
-
-
-
-
-
-
-
-
250,000
150,000
-
3,400,000
-
-
-
-
-
-
-
-
-
3,737
-
107,127
(2,500,000)
-
752,432 582,432
2,234
3,737
2,234
48,737
-
28,737
-
28,737
(247,766)
(103,766)
-
12,474
2,662
98,942
-
-
49,854
-
428
7,000
(2,849,298)
48,685
807,610
872,975
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.
(ii) KMP Interests in bonds
During the financial year, Paulene Henderson indirectly acquired 300 Villa World Bonds (ASX:VLWHA). The balance
of Ms Henderson’s bond holding as at 30 June 2017 remains at 300.
(iii) KMP performance rights holdings
The number of performance rights over unissued ordinary shares in the Company held during the financial year by
Directors and each of the other KMP is set out over. When exercisable, each performance right is convertible into
one ordinary share of Villa World Limited.
52
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 REMUNERATION REPORT 2017 (AUDITED)
SECTION I: EQUITY INSTRUMENT DISCLOSURES RELATING TO KMP (CONT.)
(iii) KMP performance rights holdings (cont.)
Balance at
the start of
the year
Granted
during
the year
Exercised
during
the year
Lapsed/
forfeited during
the year
Balance at
the end of
the year
Vested and
exercisable at the
end of the year
-
-
316,902
387,528
-
-
112,676
56,338
-
-
-
150,969
97,582
76,669
485,916
712,748
-
-
-
-
-
-
-
-
-
-
-
-
(263,645)
-
-
(263,645)
-
704,430
-
-
-
153,920
76,669
935,019
-
-
-
-
-
-
-
-
Directors
Mark Jewell
Craig Treasure
David Rennick
Donna Hardman
Other KMP
Paulene Henderson
Michael Vinodolac
Robyn Valmadre
Total
(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
Performance rights forfeited by KMP
Options issued to KMP
Consolidated
30-Jun-17
30-Jun-16
$'000
$'000
402
(40)
12
374
166
-
124
290
53
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 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, as nominees for the purposes of
licenses held by the Company, or who are employed in key senior positions. 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.
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 Audit and Risk Committee reviewed all non-audit services to ensure they did not impact the auditor’s impartiality
and objectivity.
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 level of independence required under the Act because none of the services undermine the general
principles relating to auditor independence as set out in APES110 Code of Ethics for Professional Accountants.
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 55.
Rounding of amounts
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
15 August 2017
54
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017 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 2017, 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 2017, I declare
This declaration is in respect of Villa World Limited and the entities it controlled during the financial
to the best of my knowledge and belief, there have been:
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
15 August 2017
Ric Roach
Partner
15 August 2017
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
55
DIRECTORS’ REPORTVILLA WORLD LIMITED ANNUAL REPORT 2017
Annual report - 30 June 2017
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 of Villa World Limited
Page
57
57
58
58
59
59
60
60
61
61
98
98
99
99
56
VILLA WORLD ANNUAL REPORT 2017
| 56
FINANCIAL STATEMENTSVILLA WORLD LIMITED ANNUAL REPORT 2017
Consolidated statement of comprehensive income
For the year ended 30 June 2017
Consolidated statement of comprehensive income
Revenue from continuing operations
For the year ended 30 June 2017
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
Revenue from continuing operations
Other income
Revenue from land development, residential building and construction
Net reversal / (impairment) of development land
contracts
Share of profit / (loss) from associates and joint ventures
Cost of land development, residential building and construction contracts
Reversal of impairment of investment in equity accounted investment
Gross Margin
Other expenses from ordinary activities
Development and project management fee
Property sales and marketing expenses
Other income
Land holding costs
Net reversal / (impairment) of development land
Legal and professional costs
Share of profit / (loss) from associates and joint ventures
Employee benefits
Reversal of impairment of investment in equity accounted investment
Depreciation and amortisation expense
Other expenses from ordinary activities
Administration costs and other expenses
Property sales and marketing expenses
Finance costs
Land holding costs
Legal and professional costs
Profit before income tax
Income tax expense
Employee benefits
Depreciation and amortisation expense
Profit for the period
Administration costs and other expenses
Profit is attributable to:
Finance costs
Owners of Villa World Limited
Profit before income tax
Income tax expense
Profit for the period
Earnings per share for profit attributable to the ordinary equity holders
Profit is attributable to:
of the Company:
Owners of Villa World Limited
Basic earnings per share
Diluted earnings per share
Earnings per share for profit attributable to the ordinary equity holders
of the Company:
Basic earnings per share
Diluted earnings per share
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
Profit for the period
Total comprehensive income for the period, net of tax
Other comprehensive income
Items that may be reclassified to profit or loss
Total comprehensive income for the period is attributable to:
Changes in the fair value of cash flow hedges
Owners of Villa World Limited
Income tax relating to these items
Other comprehensive income for the period, net of tax
Total comprehensive income for the period, net of tax
Total comprehensive income for the period is attributable to:
Owners of Villa World Limited
C3(a)
C3(a), A5(b)
Notes
C3(a)
C3(a), A5(b)
Notes
A1
A1
Notes
A1
A1
D3
A1
D3
A1
D3
D3
C5
A5(a)
C5
A5(a)
A2
A2
A2
Notes
A2
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
386,790
Consolidated
(280,537)
30-Jun-17
$'000
106,253
2,427
754
1,516
386,790
3,010
(280,537)
627
106,253
2,427
(21,730)
754
(4,086)
1,516
(1,693)
3,010
(20,630)
627
(577)
(4,826)
(21,730)
(7,058)
(4,086)
53,987
(1,693)
(16,151)
(20,630)
37,836
(577)
(4,826)
(7,058)
37,836
53,987
(16,151)
Cents
37,836
387,002
(286,400)
30-Jun-16
$'000
100,602
1,159
697
(83)
387,002
3,445
(286,400)
-
100,602
1,159
(22,090)
697
(3,777)
(83)
(1,489)
3,445
(16,705)
-
(607)
(4,441)
(22,090)
(9,464)
(3,777)
47,247
(1,489)
(13,534)
(16,705)
33,713
(607)
(4,441)
(9,464)
33,713
47,247
(13,534)
Cents
33,713
37,836
32.5
32.4
Cents
33,713
30.6
30.1
Cents
Consolidated
30-Jun-17
32.5
$'000
32.4
37,836
30-Jun-16
30.6
$'000
30.1
33,713
Consolidated
1,561
30-Jun-17
(468)
$'000
1,093
37,836
38,929
460
30-Jun-16
(138)
$'000
322
33,713
34,035
1,561
38,929
(468)
1,093
38,929
460
34,035
(138)
322
34,035
38,929
34,035
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying
notes.
VILLA WORLD ANNUAL REPORT 2017
| 57
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying
notes.
57
VILLA WORLD ANNUAL REPORT 2017
| 57
FINANCIAL STATEMENTSVILLA WORLD LIMITED ANNUAL REPORT 2017
Consolidated balance sheet
As at 30 June 2017
Consolidated balance sheet
ASSETS
As at 30 June 2017
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
ASSETS
Total current assets
Current assets
Non-current assets
Cash and cash equivalents
Inventories
Trade and other receivables
Property, plant and equipment
Inventories
Investments accounted for using the equity method
Other current assets
Deferred tax assets
Total current assets
Other non-current assets
Non-current assets
Total non-current assets
Inventories
Total assets
Property, plant and equipment
LIABILITIES
Investments accounted for using the equity method
Current liabilities
Deferred tax assets
Trade and other payables
Other non-current assets
Deferred income
Total non-current assets
Current tax liabilities
Total assets
Employee benefits
LIABILITIES
Service warranties
Current liabilities
Other provisions
Trade and other payables
Total current liabilities
Deferred income
Non-current liabilities
Current tax liabilities
Trade and other payables
Employee benefits
Borrowings
Service warranties
Deferred income
Other provisions
Deferred tax liabilities
Total current liabilities
Employee benefits
Non-current liabilities
Other provisions
Trade and other payables
Total non-current liabilities
Borrowings
Total liabilities
Deferred income
Deferred tax liabilities
Net assets
Employee benefits
EQUITY
Contributed equity
Other provisions
Other reserves
Total non-current liabilities
Accumulated losses
Total liabilities
Capital and reserves attributable to owners of Villa World Limited
Net assets
Total equity
EQUITY
Contributed equity
Other reserves
Accumulated losses
Capital and reserves attributable to owners of Villa World Limited
Total equity
Notes
B2
B1
Notes
B4
B1
B2
B1
D3
B4
A5(c)
B4
B1
D3
A5(c)
B3
B4
A5(a)
B5(a)
B3
A5(a)
B3
C4
B5(a)
A5(c)
B3
C4
A5(c)
C2
C3(a)
C2
C3(a)
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
7,663
Consolidated
52,628
30-Jun-17
206,757
$'000
3,347
270,395
7,663
271,205
52,628
1,195
206,757
24,869
3,347
-
270,395
10,000
307,269
271,205
577,664
1,195
24,869
-
165,435
10,000
467
307,269
10,775
577,664
1,053
4,219
130
165,435
182,079
467
10,775
23,760
1,053
81,457
4,219
84
130
1,972
182,079
496
78
23,760
107,847
81,457
289,926
84
287,738
1,972
496
477,597
78
208,511
107,847
(398,370)
289,926
287,738
287,738
287,738
477,597
208,511
(398,370)
287,738
287,738
8,358
72,363
30-Jun-16
186,037
$'000
3,145
269,903
8,358
187,660
72,363
1,169
186,037
18,482
3,145
795
269,903
-
208,106
187,660
478,009
1,169
18,482
795
79,030
-
527
208,106
4,868
478,009
772
14,392
45
79,030
99,634
527
4,868
11,989
772
128,594
14,392
473
45
-
99,634
375
64
11,989
141,495
128,594
241,129
473
236,880
-
375
444,271
64
190,320
141,495
(397,711)
241,129
236,880
236,880
236,880
444,271
190,320
(397,711)
236,880
236,880
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
VILLA WORLD ANNUAL REPORT 2017
58
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
VILLA WORLD ANNUAL REPORT 2017
| 58
| 58
FINANCIAL STATEMENTSVILLA WORLD LIMITED ANNUAL REPORT 2017
Consolidated statement of changes in equity
For the year ended 30 June 2017
C2
C2
C3(a)
C3(a)
C3(a)
C3(a)
Notes
Notes
C3(a)
A4(a), C3(a)
C3(a)
A4(a), C3(a)
Consolidated statement of changes in equity
Consolidated
For the year ended 30 June 2017
Balance at 1 July 2015
Profit for the year as reported in
the 2016 financial statements
Movement in hedge reserve (net
of tax)
Consolidated
Total comprehensive income
Balance at 1 July 2015
for the period
Profit for the year as reported in
Transfer current year profit to
the 2016 financial statements
profit reserve
Movement in hedge reserve (net
Dividends provided for or paid
of tax)
Share based payments and other
Total comprehensive income
expenses
for the period
Employee Share Scheme tax
Transfer current year profit to
impact
profit reserve
Transaction costs from capital
Dividends provided for or paid
transactions, net of tax
Share based payments and other
expenses
Balance at 30 June 2016
Employee Share Scheme tax
Balance at 1 July 2016
impact
Profit for the year as reported in
Transaction costs from capital
the 2017 financial statements
transactions, net of tax
Movement in hedge reserve (net
of tax)
Balance at 30 June 2016
Total comprehensive income
Balance at 1 July 2016
for the period
Profit for the year as reported in
Securities issued from capital
the 2017 financial statements
raising
Movement in hedge reserve (net
Securities issued under the share
of tax)
purchase plan
Total comprehensive income
Transaction costs from capital
for the period
transactions, net of tax
Securities issued from capital
Dividends provided for or paid
raising
Share based payments and other
Securities issued under the share
expenses
purchase plan
Employee Share Scheme tax
Transaction costs from capital
impact
transactions, net of tax
Transfer current year profit to
Dividends provided for or paid
profit reserve
Share based payments and other
Proceeds from exercise of
expenses
options under the Villa World
Employee Share Scheme tax
Limited Option Plan
impact
Shares acquired by Employee
Transfer current year profit to
Share Scheme Trust
profit reserve
Proceeds from exercise of
Balance at 30 June 2017
options under the Villa World
Limited Option Plan
Shares acquired by Employee
Share Scheme Trust
C3(a)
C2
A4(a)
C2
A4(a)
C2
C3(a)
C2
C2
C3(a)
C2
C3(a)
C3(a)
C3(a)
C2
C2
C2
C2
Balance at 30 June 2017
-
-
-
-
-
-
-
-
-
-
(15)
(15)
-
444,271
444,271
-
(15)
(15)
444,271
444,271
-
-
-
-
20,000
-
9,997
-
(590)
-
20,000
9,997
(590)
-
-
-
-
-
4,303
-
(384)
-
33,326
477,597
4,303
Attributable to owners of Villa World Limited
Contributed
equity
$'000
444,286
Cash flow
hedges
$'000
(2,677)
Other
reserves
$'000
317
Profit
Reserve
$'000
176,550
Accumulated
losses
$'000
(397,878)
Attributable to owners of Villa World Limited
-
-
Contributed
equity
$'000
444,286
-
-
Cash flow
hedges
$'000
(2,677)
322
Other
reserves
$'000
Profit
Reserve
$'000
176,550
33,713
-
Accumulated
losses
$'000
(397,878)
-
Total
-
$'000
220,598
322
Total
$'000
220,598
33,713
-
-
-
-
317
-
-
-
33,713
34,035
-
33,546
(19,862)
-
33,713
33,713
(33,546)
-
-
-
(19,862)
322
322
-
-
-
-
-
322
322
-
-
-
-
-
(2,355)
(2,355)
-
-
-
-
1,093
(2,355)
(2,355)
1,093
-
-
-
-
-
-
-
-
-
1,093
1,093
-
-
-
-
-
-
230
-
-
1,894
-
-
33,546
(19,862)
-
-
-
2,124
230
2,441
2,441
1,894
-
13,684
-
190,234
190,234
-
-
2,124
2,441
2,441
-
-
-
-
-
-
-
-
-
-
-
-
13,684
190,234
190,234
-
-
-
-
-
-
-
-
-
(20,445)
-
405
-
-
(1,357)
-
-
-
(20,445)
-
-
-
-
405
(1,357)
38,495
-
-
-
33,713
-
34,035
230
(33,546)
-
-
1,894
-
(19,862)
-
(33,546)
-
(397,711)
(397,711)
-
(15)
(17,753)
230
236,880
236,880
1,894
37,836
-
(33,546)
(397,711)
(397,711)
(15)
(17,753)
-
236,880
236,880
37,836
1,093
37,836
38,929
37,836
37,836
-
-
-
20,000
1,093
9,997
37,836
38,929
-
-
(590)
(20,445)
20,000
-
9,997
405
-
-
(1,357)
-
(590)
(20,445)
-
-
(38,495)
-
405
-
(1,357)
4,303
-
-
-
-
-
(1,262)
-
-
-
(952)
1,489
-
38,495
-
18,050
208,284
-
(38,495)
-
(38,495)
(398,370)
-
(384)
-
11,929
287,738
4,303
(384)
33,326
477,597
-
-
(1,262)
-
(952)
1,489
-
18,050
208,284
-
(38,495)
(398,370)
(384)
11,929
287,738
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
VILLA WORLD ANNUAL REPORT 2017
| 59
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
59
VILLA WORLD ANNUAL REPORT 2017
| 59
FINANCIAL STATEMENTSVILLA WORLD LIMITED ANNUAL REPORT 2017
Consolidated statement of cash flows
For the year ended 30 June 2017
Consolidated statement of cash flows
Cash flows from operating activities
For the year ended 30 June 2017
Receipts from customers (inclusive of goods and services tax)
Receipts from the transfer of development rights
Payments to suppliers and employees (inclusive of goods and services tax)
Payments for land acquired
Cash flows from operating activities
Interest received
Receipts from customers (inclusive of goods and services tax)
Interest paid
Receipts from the transfer of development rights
Corporate tax paid
Payments to suppliers and employees (inclusive of goods and services tax)
Borrowing costs
GST paid
Payments for land acquired
Net cash inflow / (outflow) from operating activities
Interest received
Cash flows from investing activities
Interest paid
Payments for property, plant and equipment
Corporate tax paid
Payments for equity accounted investments
Borrowing costs
Distributions received from equity accounted investments
GST paid
Net cash (outflow) / inflow from investing activities
Net cash inflow / (outflow) from operating activities
Cash flows from financing activities
Cash flows from investing activities
Proceeds from borrowings
Payments for property, plant and equipment
Repayment of borrowings
Payments for equity accounted investments
Proceeds from issue of Villa World Bonds
Distributions received from equity accounted investments
Transaction costs arising from issue of Villa World Bonds
Net cash (outflow) / inflow from investing activities
Proceeds from share capital issue
Cash flows from financing activities
Proceeds from securities issued under the share purchase plan
Proceeds from borrowings
Transactions costs from capital transactions
Repayment of borrowings
Proceeds from exercise of options under the Villa World Limited Option Plan
Proceeds from issue of Villa World Bonds
Shares acquired by the Employee Share Scheme Trust
Transaction costs arising from issue of Villa World Bonds
Dividends paid to Company's shareholders
Proceeds from share capital issue
Net cash (outflow) / inflow from financing activities
Proceeds from securities issued under the share purchase plan
Net (decrease) in cash and cash equivalents
Transactions costs from capital transactions
Cash and cash equivalents at the beginning of the financial year
Proceeds from exercise of options under the Villa World Limited Option Plan
Cash and cash equivalents at end of period
Shares acquired by the Employee Share Scheme Trust
Dividends paid to Company's shareholders
Reconciliation to cash at the end of the year:
Cash and cash equivalents
Net cash (outflow) / inflow from financing activities
Cash and cash equivalents at the end of the year:
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Cash and cash equivalents at end of period
Reconciliation to cash at the end of the year:
Cash and cash equivalents
Cash and cash equivalents at the end of the year:
Consolidated
Notes
30-Jun-17
$'000
30-Jun-16
$'000
Notes
A6
D3
D3
A6
D3
C4(a)
D3
C4(a)
C2
C2
C2
C2
C4(a)
C2
C4(a)
A4(a)
C2
C2
C2
C2
C2
A4(a)
Consolidated
443,559
-
(253,353)
30-Jun-17
190,206
$'000
(123,294)
316
443,559
(5,764)
-
(9,049)
(253,353)
(249)
190,206
(15,261)
(123,294)
36,905
316
(5,764)
(594)
(9,049)
(5,000)
(249)
2,250
(15,261)
(3,344)
36,905
361,114
26,400
(240,586)
30-Jun-16
146,928
$'000
(162,930)
445
361,114
(6,494)
26,400
(1,616)
(240,586)
(250)
146,928
(7,712)
(162,930)
(31,629)
445
(6,494)
(850)
(1,616)
(11,258)
(250)
13,000
(7,712)
892
(31,629)
175,454
(594)
(270,976)
(5,000)
50,000
2,250
(1,615)
(3,344)
20,000
9,997
175,454
(590)
(270,976)
4,303
50,000
(384)
(1,615)
(20,445)
20,000
(34,256)
9,997
(695)
(590)
8,358
4,303
7,663
(384)
(20,445)
7,663
(34,256)
7,663
(695)
8,358
7,663
193,886
(850)
(157,500)
(11,258)
-
13,000
-
892
-
-
193,886
-
(157,500)
-
-
-
-
(19,862)
-
16,524
-
(14,213)
-
22,571
-
8,358
-
(19,862)
8,358
16,524
8,358
(14,213)
22,571
8,358
7,663
7,663
8,358
8,358
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
VILLA WORLD ANNUAL REPORT 2017
60
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
VILLA WORLD ANNUAL REPORT 2017
| 60
| 60
FINANCIAL STATEMENTSVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017
Contents of the notes to the consolidated financial statements
A
A1
A2
A3
A4
A5
A6
A
A1
A2
A3
A4
A5
A6
B
B1
B2
B3
B4
B5
B6
B
C
C1
C2
C3
C4
C5
C6
B1
B2
B3
B4
B5
B6
D
D1
D2
D3
D4
E
E1
E2
E3
E4
E5
C
C1
C2
C3
C4
C5
C6
D
D1
D2
D3
D4
E
E1
E2
E3
E4
E5
RESULTS FOR THE YEAR
RESULTS FOR THE YEAR
Revenue and gross profit
Earnings per share
Revenue and gross profit
Segment information
Dividends
Taxes
Reconciliation of profit after income tax to net cash inflow from operating activities
Segment information
Earnings per share
Reconciliation of profit after income tax to net cash inflow from operating activities
Dividends
Taxes
OPERATING ASSETS AND LIABILITIES
Inventories
Trade and other receivables
Trade and other payables
Other assets
Provisions and contingencies
Capital and other commitments
OPERATING ASSETS AND LIABILITIES
Inventories
Trade and other payables
CAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT
Trade and other receivables
Capital risk management
Contributed equity
Other reserves
Borrowings
Other assets
Finance costs
Provisions and contingencies
Financial risk management
Capital and other commitments
CAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT
GROUP STRUCTURE
Subsidiaries
Deed of cross guarantee
Investments accounted for using the equity method
Parent entity financial information
Capital risk management
Contributed equity
Borrowings
Other reserves
OTHER INFORMATION
Basis of preparation
Key management personnel disclosures
Remuneration of auditors
Events occurring after the reporting period
Other accounting policies
Financial risk management
Finance costs
GROUP STRUCTURE
Subsidiaries
Deed of cross guarantee
Investments accounted for using the equity method
Parent entity financial information
OTHER INFORMATION
Basis of preparation
Key management personnel disclosures
Remuneration of auditors
Events occurring after the reporting period
Other accounting policies
Page
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63
63
64
65
68
69
69
70
70
71
71
73
75
75
76
77
77
79
80
85
85
85
87
91
92
92
92
94
95
95
62
62
63
63
64
65
68
69
69
70
70
71
71
73
75
75
76
77
77
79
80
85
85
85
87
91
92
92
92
94
95
95
VILLA WORLD ANNUAL REPORT 2017
61
| 61
FINANCIAL STATEMENTSVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
A
RESULTS FOR THE YEAR
A
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 information
Dividends
Taxes
Reconciliation of profit after income tax to net cash inflow from operating activities
A1
A1
A2
A2
A3
A3
A4
A4
A5
A5
A6
A6
A1 Revenue and gross profit
Consolidated
30-Jun-17
$'000
134,551
252,239
386,790
93,086
187,705
(254)
280,537
106,253
27.5%
30-Jun-16
$'000
106,128
280,874
387,002
71,243
213,040
2,117
286,400
100,602
26.0%
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 costs1
Costs of land development, residential building and construction contracts
Gross profit
Gross margin
1.
Includes unused provision of $0.6 million in relation to legal claims settled (2016: $0.9 million). Refer Note B5 (c) - Movements in provisions.
Other income
Rebates received
Other income
Recognition and measurement
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
14
740
754
60
637
697
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 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.
62
VILLA WORLD ANNUAL REPORT 2017
| 62
RESULTS FOR THE YEARAVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (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-17
$'000
37,836
30-Jun-16
$'000
33,713
Number
'000
Number
'000
116,360
110,344
116,798
Cents
32.5
32.4
111,895
Cents
30.6
30.1
Basic earnings per share is calculated on the Company's statutory net profit for the year divided by the weighted
average number of securities outstanding, excluding treasury shares.
Diluted earnings per share
Diluted earnings per share adjusts the basic earnings per share for the dilutive effect of any instrument, such as
performance rights and options,that could be converted into ordinary securities. Refer Note E2 - Key management
personnel disclosures for equity instruments outstanding as at 30 June 2017.
A3 Segment information
(a)
Identification of reportable operating segments
The Company is organised into two reportable segments:
(i) Property development and construction - New South Wales and Queensland
(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
leadership team (chief operating decision makers) in assessing performance and in determining resource allocation.
The Company and its controlled entities develop and sell residential land and buildings predominately in New South
Wales, Victoria and Queensland. 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.
VILLA WORLD ANNUAL REPORT 2017
63
| 63
RESULTS FOR THE YEARAVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
A3 Segment information (continued)
(a)
Identification of reportable operating segments (continued)
The segment information provided to the leadership team for the reportable segments for the year ended 30 June 2017
is as follows:
From continuing operations
Segment revenue from land development, residential building and
construction contracts
New South Wales and Queensland
Victoria
Total segment revenue from land development, residential building and
construction contracts
Segment cost of land development, residential building and construction
contracts
New South Wales and Queensland
Victoria
Total segment cost of land development, residential building and
construction contracts
Segment gross margin
New South Wales and Queensland
Victoria
Total segment gross margin
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
307,939
78,851
330,326
56,676
386,790
387,002
225,054
55,483
240,683
45,717
280,537
286,400
82,885
23,368
106,253
89,643
10,959
100,602
Segment assets and liabilities are not directly reported to the leadership team when assessing the performance of the
operating segments and are therefore not relevant to the disclosure.
(b) Segment information provided to the leadership team
(i) Segment Revenue
The revenue from external parties reported to the leadership team 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 leadership team 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, 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.
64
VILLA WORLD ANNUAL REPORT 2017
| 64
RESULTS FOR THE YEARAVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
A4 Dividends (continued)
Ordinary shares
(a)
Final fully franked ordinary dividend for the year ended 30 June 2016 of 10.0 cents per
fully paid share paid on 30 September 2016 (2015: 10.0 cents per share)
Final franked dividend based on tax paid at 30.0%
Interim dividend for the year ended 30 June 2017 of 8.0 cents per fully paid share (2016:
8.0 cents per fully paid share) paid on 31 March 2017.
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 10.5 cents per fully paid ordinary share (2016: 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 29 September 2017 out of profits
reserve at 30 June 2017, 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%
(2016 - 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-17
$'000
30-Jun-16
$'000
11,359
11,034
9,086
20,445
8,828
19,862
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
13,327
11,359
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
3,641
10,775
14,416
3,354
4,868
8,222
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 and franking
credits that will arise from the payment of income tax liabilities recognised 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.
VILLA WORLD ANNUAL REPORT 2017
65
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RESULTS FOR THE YEARAVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (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% (2016 - 30.0%)
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 included in income tax expense comprises:
Decrease in deferred tax assets
(Decrease) / increase in deferred tax liabilities
Consolidated
30-Jun-17
$'000
53,987
16,196
(111)
66
(45)
(16,151)
16,151
1,357
(2,552)
14,956
4,868
(9,049)
10,775
(53,987)
14,030
2,552
(431)
16,151
7,064
(4,512)
2,552
30-Jun-16
$'000
47,247
14,174
(633)
(7)
(640)
(13,534)
13,534
(1,893)
(6,353)
5,288
1,196
(1,616)
4,868
(47,247)
7,152
6,353
29
13,534
4,188
2,165
6,353
Villa World Ltd 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 expense relating to items of other comprehensive income
Cash flow hedges
Total tax expense relating to items of other comprehensive income
Consolidated
30-Jun-17
$'000
(468)
(468)
30-Jun-16
$'000
(138)
(138)
66
VILLA WORLD ANNUAL REPORT 2017
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RESULTS FOR THE YEARAVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
A5 Taxes (continued)
(c) Deferred tax assets and tax liabilities
The balance comprises temporary differences attributable to:
Deferred tax assets
30-Jun-17
$'000
12,749
500
465
1,328
292
993
418
-
-
16,745
30-Jun-16
$'000
17,116
445
344
4,352
155
1,248
364
-
-
24,024
Inventories
Accruals
Employee benefit
Provisions
Property, plant and equipment
Other
Capital raising costs
Trade debtors
Other current debtors
Tax assets/(liabilities)
Movements
As at 1 July
- to profit or loss
- through equity
As at 30 June
Accounting for deferred tax assets and liabilities
24,024
(7,064)
(215)
16,745
Deferred tax liabilities
30-Jun-16
$'000
(1,611)
-
-
-
-
-
-
(21,022)
(596)
(23,229)
30-Jun-17
$'000
(3,549)
-
-
-
-
(63)
-
(13,681)
(1,424)
(18,717)
Net
30-Jun-17
$'000
9,200
500
465
1,328
292
930
418
(13,681)
(1,424)
(1,972)
30-Jun-16
$'000
15,505
445
344
4,352
155
1,248
364
(21,022)
(596)
795
28,350
(4,188)
(138)
24,024
(23,229)
4,512
-
(18,717)
(21,064)
(2,165)
-
(23,229)
795
(2,552)
(215)
(1,972)
7,286
(6,353)
(138)
795
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 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 at 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.
(d) 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 the 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 recognises 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.
There are no revenue tax losses available for utilisation as at 30 June 2017.
VILLA WORLD ANNUAL REPORT 2017
67
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RESULTS FOR THE YEARAVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (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
(Reversal) / impairment of development land
Hedge ineffectiveness on interest rate swaps
Change in operating assets and liabilities:
Decrease / (increase) in trade debtors
Increase in inventories
Increase / (decrease) in trade creditors
Decrease in deferred tax assets / liabilities
(Decrease) / increase in other operating assets and liabilities
(Decrease) / increase in other provisions
Net cash inflow / (outflow) from operating activities
Consolidated
30-Jun-17
$'000
37,836
577
1,131
374
(10)
(3,010)
(1,516)
(312)
19,734
(104,266)
98,180
2,767
(10,814)
(3,766)
36,905
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)
68
VILLA WORLD ANNUAL REPORT 2017
| 68
RESULTS FOR THE YEARAVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
B
OPERATING ASSETS AND LIABILITIES
B
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
Other assets
Provisions and contingencies
Capital and other commitments
B1
B1
B2
B2
B3
B3
B4
B4
B5
B5
B6
B6
B1 Inventories
Current
Acquisition cost of land held for development and resale
Development costs
Capitalised interest
Impairment of development land
Non-current
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-17
$'000
30-Jun-16
$'000
125,794
78,756
3,930
(1,723)
206,757
238,163
30,725
7,693
(5,376)
271,205
477,962
94,909
89,065
3,618
(1,555)
186,037
152,080
36,991
6,224
(7,635)
187,660
373,697
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 during development. When development is completed borrowing costs and other
holding charges 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 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.
Critical accounting estimates of net realisable value of inventories
The Company is required to carry inventory at lower of cost and net realisable value (NRV). The NRV of inventories is
the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated
costs necessary to make the sale. The net realisable value amount has been determined based on future estimated
cash flow of 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 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 a development is suspended for an extended period of time the borrowing costs are recognised
as expenses.
VILLA WORLD ANNUAL REPORT 2017
69
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OPERATING ASSETS AND LIABILITIESBVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
B2 Trade and other receivables
Accounting for trade and other receivables
Trade and other receivables are recognised initially at fair value then subsequently measured at amortised cost using
the effective interest rate method, less any allowance for impairment. Trade receivables are reviewed on an ongoing
basis and at balance date any 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). 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 2017 the balance of trade receivables is $47.3 million and
all 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 these other balances will be received when due.
Accrued income is recognised in accordance with the Company's revenue recognition policy (refer Note A1).
Trade receivables
Trade receivable properties
Other receivables
Accrued Income
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-17
$'000
593
46,735
47,328
2,149
3,151
5,300
52,628
30-Jun-16
$'000
210
70,075
70,285
2,066
12
2,078
72,363
Consolidated
30-Jun-17
$'000
41,026
4,021
2,281
47,328
30-Jun-16
$'000
65,492
3,643
1,150
70,285
As of 30 June 2017, trade receivables of the Company of $nil (30 June 2016: $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.
70
VILLA WORLD ANNUAL REPORT 2017
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OPERATING ASSETS AND LIABILITIESBVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
B3 Trade and other payables (continued)
Current
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
Land acquisitions
Other payables2
Total non-current trade and other payables
Total payables
1.
2.
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
116,024
2,927
118,951
42,586
3,898
46,484
165,435
23,276
484
23,760
189,195
37,791
5,012
42,803
33,694
2,533
36,227
79,030
9,137
2,852
11,989
91,019
Includes derivatives payable of $1.8m (30 June 2016: $1.8m). Refer Note C6(d) - Fair value measurements.
Includes derivatives payable of $nil (30 June 2016: $1.9m). Refer Note C6(d) - Fair value measurements.
B4 Other assets
Accounting for other assets
Current assets include assets held primarily for trading purposes, cash and cash equivalents and assets expected to
be realised in, or intended for sale or use in the course of the Company's operating cycle and within 12 months of the
reporting date. The remaining other assets are classified as non-current.
Current
Prepayments
Advance commissions
Other
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
1,144
1,595
608
3,347
773
1,411
961
3,145
Non-current
Other non-current assets1
Total other assets
1.
-
-
3,145
Villa World has entered into a conditional Development Agreement with the owner of approximately 73 hectares of land at Byron Bay. The land
was rezoned to residential use by the New South Wales Government in November 2014. The Development Agreement remains subject to Villa
World receiving satisfactory development approval and a construction certificate for the proposed development, the outcome of which remains
uncertain. The landowner will retain a number of the approved lots, to be determined following the outcome of the approval process. Villa World
has paid an initial $10 million to the landowner, secured by a first mortgage over the land and fully refundable if the above conditions are not
satisfied. If those conditions are satisfied and the transaction proceeds, Villa World is required to construct dwellings on the lots to be retained by
the landowner, over a period of up to 10 years.
10,000
10,000
13,347
B5 Provisions and contingencies
Accounting for provisions
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.
VILLA WORLD ANNUAL REPORT 2017
71
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OPERATING ASSETS AND LIABILITIESBVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
B5 Provisions and contingencies (continued)
(a) Service warranties
Current
Service warranties
Total current provisions
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
4,219
4,219
14,392
14,392
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:
• New South Wales - 10 years from issue of occupation certificate
•
Victoria - 10 years from issue of occupancy certificate
• Queensland - 6 years 6 months from completion of work
Management estimates the related provision for future warranty claims based on historical warranty claim information,
as well as recent trends that might suggest past cost information may differ from future claims. The Company includes
legal costs in the provision for warranty claims to the extent 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 actual amounts may differ from this estimate. The assumptions made in relation to the current period are
consistent with those in the prior year. There is no longer a specific provision for the Silverstone litigation which was
concluded during the reporting period.
(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 $254,745 (30 June 2016: $164,137) 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 service warranty provisions
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
Current liabilities
Carrying amount at the start of the year
- additional provisions recognised
Amounts incurred and paid
- unused amounts reversed 1
Carrying amount at end of period
1.
14,983
4,554
(4,215)
(930)
14,392
Unused provision reversed in relation to Silverstone litigation. Refer Note (d) - Legal claims. (2016: $0.9 million unused provision reversed in
relation to Thornleigh home warranty claim concluded in 2H16).
14,392
1,310
(10,840)
(643)
4,219
72
VILLA WORLD ANNUAL REPORT 2017
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OPERATING ASSETS AND LIABILITIESBVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
B5 Provisions and contingencies (continued)
(d) Legal claims
Silverstone litigation
The Company has previously made a provision for the Silverstone litigation (refer Note B4 (d) - Provisions, Annual
Financial Report for the period ended 30 June 2016). All outstanding aspects of the Silverstone proceeding were
concluded during 1H17 including payment of the Company's contribution towards settlement of the claim, for amounts
that were within the provision that was assessed at 30 June 2016. No further provision is required for this matter.
(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 2017 (30 June 2016: $nil).
A controlled entity has contractual arrangements that provide for liquidated damages under certain circumstances. It
is impractical to estimate the amount of any liability that may arise from these arrangements. There were no claims
made against the Company at 30 June 2017 (30 June 2016: $nil).
The Company has provided bank guarantees to the total of $14.9 million (30 June 2016: $18.7 million) to authorities
and councils in relation to certain works to be undertaken or maintained or in support of contractual commitments.
Refer Note C4 (a) - Borrowings.
(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
1.
Rochedale Joint Venture2
30-Jun-16
30-Jun-17
$'000
$'000
22,000
11,500
16,039
-
527
743
Donnybrook 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.
For Rochedale joint venture entities, the joint venture parties have agreed that they will share liabilities in the same proportion as their holding in
the joint venture (50% each). If the parties enter into 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.
Donnybrook Joint Venture1
30-Jun-16
$'000
11,220
9,814
-
30-Jun-17
$'000
11,220
10,750
-
2.
B6 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 New South Wales, Victoria and Queensland.
The call option gives Villa World Developments Pty Ltd (or a nominated third party) the option to purchase the lot(s) at
a nominated price by the call option expiry date. The put option gives the vendor the right to sell to the Company at a
nominated price on expiry of the call option. The potential total commitments remaining under the Agreements are
$16.6 million (30 June 2016: $13.2 million). The commitments are crystallised upon the satisfaction of the conditions
under the Agreements and registration of the land by the vendor and will be made available under the terms of the
contract. However, some Agreements are severable by development stage and the commitments may be less than
the total commitments under the Agreements as outlined below.
Capital commitments in relation to put and call arrangements
Opening balance
Crystallised and paid commitments
Arrangements entered into during the year
Total commitments
VILLA WORLD ANNUAL REPORT 2017
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
13,163
(49,402)
52,791
16,552
32,868
(21,276)
1,571
13,163
73
| 73
OPERATING ASSETS AND LIABILITIESBVILLA WORLD LIMITED ANNUAL REPORT 2017
30 June 2017 (continued)
B6 Capital and other commitments (continued)
(b) Joint Venture commitments
As at 30 June 2017, the Company has commitments of $22.5 million (30 June 2016: $nil) which relate to the equity
contributions committed under the Joint Venture agreement with Greenfields Development Company.
(c) Lease commitments
Accounting for leases
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 leases.
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
Consolidated
30-Jun-17
$'000
643
948
1,591
30-Jun-16
$'000
458
715
1,173
74
VILLA WORLD ANNUAL REPORT 2017
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OPERATING ASSETS AND LIABILITIESBVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017(continued)
C
CAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENT
C
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
C1
C2
C2
C3
C3
C4
C4
C5
C5
C6
C6
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 industry peers, 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 2017, the gearing ratio was 12.9% (30 June 2016: 25.6%) due to the timing of land acquisition payments
and operating cash flows.
The Company has complied with the financial covenants of its borrowing facilities during the 2017 and 2016 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-17
$'000
81,457
(7,663)
73,794
577,664
(7,663)
570,001
12.9%
30-Jun-16
$'000
128,594
(8,358)
120,236
478,009
(8,358)
469,651
25.6%
VILLA WORLD ANNUAL REPORT 2017
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CAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENTCVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
C2 Contributed equity
Accounting for contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options
are shown in equity as a deduction, net of tax, from the proceeds.
30-Jun-17
Shares
'000
30-Jun-16
Shares
'000
30-Jun-17
$'000
30-Jun-16
$'000
110,344
110,344
444,271
444,286
3,400
-
4,303
-
Ordinary shares
Opening balance
Proceeds from exercise of options under the Villa World
Limited Option Plan
Shares (acquired) / issued by the Employee Share Scheme
Trust
Treasury shares
Shares issued as part of the capital raising 1
Shares issued as part of the share purchase plan 2
Transaction costs from capital transactions, net of tax
6,689
(6,689)
-
-
(15)
444,271
On 23 March 2017, Villa World Limited announced it had completed a fully underwritten institutional placement to raise $20 million. The placement
was completed at an issue price of $2.25 per share, representing a 5.5% discount to the closing price of the Company's shares on 20 March 2017,
a 6.6% discount to the volume weighted average price for the five trading days prior to the announcement.
On 23 March 2017, the Company announced a non-underwritten Share Purchase Plan, eligible to shareholders in Australia and New Zealand for
up to $15,000 worth of shares, capped at $10 million. The record date for the share purchase plan was 21 March 2017. The share purchase plan
was offered at the same price per share as the institutional placement.
(384)
-
20,000
9,997
(590)
477,597
3,250
(3,250)
-
-
-
110,344
(169)
-
8,889
4,443
-
126,907
1.
2.
(a) Ordinary shares
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 shares 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.
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Notes to the consolidated financial statements
30 June 2017 (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
Performance rights lapsed / forfeited
Employee Share Scheme
Closing balance
Total other reserves
(b)
(i)
Nature and purpose of other reserves
Profits reserve
Notes
A4(a)
A5(b)
E2(c)
E2(c)
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
190,234
38,495
(20,445)
208,284
(2,355)
1,561
(468)
(1,262)
2,441
445
(40)
(1,357)
1,489
208,511
176,550
33,546
(19,862)
190,234
(2,677)
460
(138)
(2,355)
317
230
-
1,894
2,441
190,320
The profits reserve represents opening retained profits and current year profits transferred to a reserve to preserve the
characteristic as a profit. They are not allocated 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 and 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 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 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 some or all of the facility will be drawn down, the fee is capitalised
as a prepayment for liquidity services and amortised over the period of the facility to which it relates.
Interest expense is accrued at the effective interest rate.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged, cancelled
or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred
to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is
recognised in profit or loss as other income or finance costs.
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.
VILLA WORLD ANNUAL REPORT 2017
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Notes to the consolidated financial statements
30 June 2017 (continued)
C4 Borrowings (continued)
(a) Financing arrangements
Access was available at balance date to the following lines of credit:
30 June 2017
Financing arrangements
Bank loans - secured (i)
Villa World Bonds - unsecured (ii)
Facility
amount
$'000
Utilised
amount
$'000
Bank
guarantees
utilised
$'000
Available
amount
$'000
Effective
interest
rate %
33,0051
190,000
48,4522
50,000
240,000 81,457 2
14,860
-
14,860
142,135
-
142,135
9.5%
7.2%
1.
2.
Net of transaction costs as at 30 June 2017.
Net of transaction costs and amortisation as at 30 June 2017. Refer Note (a) (ii) – Villa World Bonds – unsecured.
30 June 2016
Financing arrangements
Bank loans - secured (i)
Net of transaction costs as at 30 June 2016.
1.
(i) Bank Loan - secured
Facility
amount
$'000
Utilised
amount
$'000
Bank
guarantees
utilised
$'000
Available
amount
$'000
Effective
interest
rate %
180,000 128,5941
180,000 128,5941
18,738
18,738
32,668
32,668
8.6%
During the year the Company's Club Financing Arrangement with Australia and New Zealand Banking Group Limited
(ANZ) and Westpac Banking Corporation (Westpac) increased to $190 million (30 June 2016: $180 million). The Club
Financing Arrangement provides funding for the Company's ongoing core business. It comprises a facility of $140
million (30 June 2016: $130 million) with ANZ and a facility of $50 million with Westpac.
The maturity of the ANZ facility has been staggered, with $10 million expiring on 16 August 2018, $80 million expiring
on 31 October 2020, $40 million expiring on 31 October 2021 and $10 million expiring on 31 March 2022. The $50
million Westpac facility expires on 31 March 2019.
As at 30 June 2017 the facility was drawn exclusive of bank guarantees at $33 million (30 June 2016: $128.6 million).
Bank guarantees issued total $14.9 million (30 June 2016: $18.7 million). The bank guarantees are also disclosed in
Note B5 (e) - Contingencies.
No restrictions have been imposed on this facility by the financiers during the year ending 30 June 2017 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.
(ii) Villa World Bonds - unsecured
The Company issued 500,000 Bonds with a face value of $100 per Bond on 21 April 2017 (ASX: VLWHA). The Bonds
are unsecured and interest-bearing at a variable rate of interest of 4.75% margin over the 3 month bank bill swap rate,
paid quarterly in arrears and have a maturity date of 21 April 2022.
The proceeds of the Bond offer provide the Company with additional financial capacity and will be used for the
acquisition of new sites that meet the Company's investment criteria. This transaction diversifies the Company's debt
capital structure and will support the Company's growth objectives whilst maintaining prudent gearing levels and
extending the maturity of borrowings.
Under the terms of the Bonds, the Company is required to maintain two covenants. The negative pledge (secured
gearing ratio) is calculated based on total secured debt divided by total assets. Under the negative pledge the Company
must maintain a secured gearing ratio of not greater than 40%. As at 30 June 2017 the secured gearing ratio is 4.2%.
78
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Notes to the consolidated financial statements
30 June 2017 (continued)
C4 Borrowings (continued)
(a) Financing arrangements (continued)
(ii) Villa World Bonds - unsecured (continued)
The limitation on debt incurrence covenant (gearing 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). For the purposes of the covenant, the Company must maintain a gearing
ratio of no greater than 50%. As at 30 June 2017, the gearing ratio is 12.9%. Refer Note C1 - Capital Risk Management.
The fair value of Villa World Bonds is the quoted market value (ASX: VLWHA) of a Bond which at 30 June 2017 was
$101.50 per bond (Level 1).
The Bonds are presented in the Balance Sheet as follows:
Villa World Bonds
Transaction and finance costs
Amortisation of borrowing costs
Non-current liability
Consolidated
30-Jun-17
$'000
50,000
(1,615)
67
48,452
30-Jun-16
$'000
-
-
-
-
Interest is payable based on a 4.75% margin over the 3 month bank bill swap rate. The first interest instalment is
payable on 21 July 2017 at an interest rate of 6.5%.
Accrued interest expense
(b) Assets pledged as security
The carrying amounts of assets pledged as security are set out below:
Total inventory:
Current inventory
Non-current inventory
Aggregate carrying amount
(c) Guarantors
Consolidated
30-Jun-17
$'000
623
623
30-Jun-16
$'000
-
-
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
206,757
271,205
477,962
186,037
187,660
373,697
Villa World is required to ensure that, so long as any Villa World Bond remains outstanding, each member of the Group
which provides a guarantee of indebtedness of any other member of the Group, under the terms of any of the Group's
external bank debt facilities, is a Guarantor. This requirement as to the Guarantors does not apply to joint venture
entities included in the consolidated financial statements of the Group pursuant to Current Accounting Practice.
C5 Finance costs
Accounting for finance costs
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, subject to detailed review and Board approval, capitalisation of interest
may cease and the borrowing costs will be expensed in the month incurred.
VILLA WORLD ANNUAL REPORT 2017
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Notes to the consolidated financial statements
30 June 2017 (continued)
C5 Finance costs (continued)
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
Loan interest and charges
Financial institutions
Unwind of discount deferred consideration
Interest payable on Villa World Limited Bonds
Borrowing costs
Fair value (gain) / loss on interest swap cash flow hedge
6,655
721
-
355
293
8,024
Amount capitalised1
(4,933)
Unwind of amount capitalised
6,373
9,464
Total finance costs included within the income statement
1. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 9.5% for club facility borrowings (30 June 2016:
7,311
844
623
374
(312)
8,840
(6,105)
4,323
7,058
8.6%) and 7.2% for borrowing costs associated with Villa World Bonds.
C6 Financial risk management
The Company's activities are exposed to a variety of financial risks:
Risk
Market risk - interest
rate risk
Credit risk
Exposure arising from
Borrowings at variable rates
Measurement
Cash flow forecasting,
sensitivity analysis
Ageing analysis, credit ratings,
management of deposits
Management
Interest rate swaps
Ongoing management
review, contractual
arrangements
Cash and cash equivalents,
derivative financial
instruments, deposits with
banks and financial
institutions, credit exposure of
outstanding receivables
Borrowings and other
liabilities
Liquidity risk
Management of cash flows
and forecast, gearing analysis
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.
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
Valuation basis
Amortised cost
Amortised cost
Amortised cost
Amortised cost
Fair value
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
7,663
52,628
187,412
81,457
1,783
8,358
72,363
87,363
128,594
3,656
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Notes to the consolidated financial statements
30 June 2017 (continued)
C6 Financial risk management (continued)
(a) Market risk
Market risk is the risk that the fair value or future cash flows of a financial asset or financial liability will fluctuate because
of changes in market prices. 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's current policy is to maintain a minimum of $90 million (2016: $90 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 2017
30 June 2016
Club facility
Villa World Bonds
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
1.7%
1.7%
3.7%
7.1%
Weighted
Average
interest rate
%1
1.9%
-%
3.7%
5.6%
Balance
$'000
33,005
50,000
(90,000)
(6,995)
Balance
$'000
128,594
-
(90,000)
38,594
An analysis by maturities is provided in Note (c).
Sensitivity analysis
At 30 June 2017, 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 $0.1 million lower/higher (30 June 2016: $0.04 million
lower/higher), mainly as a result of higher/lower interest expense from interest bearing liabilities. Other components of
equity would have been $0.2 million lower/higher (30 June 2016: $0.4 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.
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 only 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 sale 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 2016: $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.
VILLA WORLD ANNUAL REPORT 2017
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Notes to the consolidated financial statements
30 June 2017 (continued)
C6 Financial risk management (continued)
(b) Credit risk (continued)
(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 2017, the Company carried forward 526 sales contracts valued at $175.7 million (incl GST) with 75% of
contracts (392 lots valued at $127.6 million) due to settle in 1H18. Further detail is provided in the Operating and
Financial Review on page 10.
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 Company operates a $190 million club facility with Australia and New Zealand Banking Group Limited (ANZ) and
Westpac Banking Corporation (Westpac) which provides funding for the Company's core business. During the year,
the Company issued $50 million simple corporate Bonds for the purpose of diversifying the Company's capital structure,
extending the debt maturity and to support growth objectives
The Company aims at maintaining flexibility in funding by keeping committed credit lines available, minimising the
concentration of risks and mitigating 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 2017 the company had unutilised borrowing facilities of $142.1 million (30 June 2016: $32.7 million).
(i) Maturities of financial liabilities
The following table 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.
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Notes to the consolidated financial statements
30 June 2017 (continued)
C6 Financial risk management (continued)
(c) Liquidity risk (continued)
(i) Maturities of financial liabilities (continued)
Contractual maturities of
financial liabilities
At 30 June 2017
Non-derivatives
Commitments
Trade payables
Club facility
Villa World Bond
Total non-derivatives
Derivatives
Net settled (interest rate swaps)
Total derivatives
At 30 June 2016
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
-
110,180
1,657
1,627
113,464
7,822
8,771
1,643
1,600
19,836
-
6,194
7,809
3,228
17,231
8,730
17,083
32,286
58,887
116,986
919
919
864
864
-
-
-
-
-
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
contrac-
tual
cash
flows
$'000
16,552
142,228
43,395
65,342
267,517
1,783
1,783
13,163
51,940
147,776
212,879
3,656
3,656
Carrying
amount
(assets)/
liabilities
$'000
-
142,228
33,005
48,452
223,685
1,783
1,783
-
51,940
128,594
180,534
3,656
3,656
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 2017, the carrying amounts of the Company’s financial assets and liabilities approximate their fair values.
The fair value of Villa World Bonds is the quoted market value (ASX: VLWHA) of a Bond which at 30 June 2017 was
$101.50 per Bond (Level 1).
(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 Company's borrowings of $240 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.
Total borrowings for the Company bear an average variable interest rate of 9.0% (including line and facility fees).
The interest rate swap contract in place is referred to in the table below:
Amount
hedged
$'000
90,000
Interest rate swap
Total borrowings
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 at 30 June 2017.
Expiry date
12-Jun-18
Loan facility
$'000
240,000
Percent
hedged %1
37.5%
Fixed rate
%2
3.69%
VILLA WORLD ANNUAL REPORT 2017
Variable rate
as at
30-Jun-17 %3
1.7%
Valuation as
at 30-Jun-17
$'000
1,783
83
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CAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENTCVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
C6 Financial risk management (continued)
(d) Fair value measurements (continued)
(ii) Derivative financial instruments (continued)
The fair value of the interest rate swap liability at 30 June 2017 was $1.8 million (30 June 2016: $3.7 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 the 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
remeasured 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 the change in the fair value
of the derivative is recognised in other comprehensive income and accumulated in the hedging reserve. Any ineffective
portion of the change 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 2017.
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 amortised via 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 the interest rate swap liability of $1.8 million (30 June 2016: $3.7 million) has been
categorised as Level 2.
The fair value of Villa World Bonds is the quoted market value (ASX: VLWHA) of a Bond which at 30 June 2017 was
$101.50 per Bond (Level 1).
84
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CAPITAL STRUCTURE, FINANCE COSTS AND FINANCIAL RISK MANAGEMENTCVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
D
GROUP STRUCTURE
D
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
D1
D2
D2
D3
D3
D4
D4
D1 Subsidiaries
Accounting for subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of all subsidiaries at 30 June 2017.
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
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
Villa World Rochedale Pty Ltd
Villa World Realty Pty Ltd
Villa World ESS Pty Ltd as trustee for Villa World Employee
Share Scheme Trust
Villa World Byron Pty Ltd
Villa World Strathpine Pty Ltd1
Villa World Plumpton Pty Ltd
1.
Country of
incorporation
Class of shares
Equity holding
2016
2017
%
%
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
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
100
100
100
100
100
100
100
-
These companies are parties to the Deed of Cross Guarantee and members of the Closed Group as at 30 June 2017. They have been granted
relief from the necessity to prepare financial reports in accordance with ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued
by the Australian Securities and Investments Commission (Refer Note D2 - Deed of cross guarantee).
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.
ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 provides relief to parties to the Deed from the
Corporations Act 2001 requirements for preparation, audit and lodgement of Financial Reports and Directors' reports,
subject to certain conditions as set out therein. This Class Order does not apply to trusts.
VILLA WORLD ANNUAL REPORT 2017
85
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GROUP STRUCTUREDVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
D2 Deed of cross guarantee (continued)
Pursuant to the requirements of this Class Order, a summarised consolidated Statement of Comprehensive Income
for the year ended 30 June 2017, summary of movements in consolidated retained earnings and consolidated Balance
Sheet as at 30 June 2017, comprising the members of the Closed Group after eliminating all transactions between
members is set out below.
(a) Consolidated statement of comprehensive income
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 reversal / (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
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
(b) Summary of movements in consolidated retained earnings
Summary of movements in consolidated retained earnings
Retained earnings at the beginning of the financial year
Profit for the year
Transfer current year profit to profits reserve
Retained earnings at the end of the financial year
Closed Group
30-Jun-17
$'000
30-Jun-16
$'000
386,790
(280,537)
106,253
1,493
753
1,516
387,002
(286,400)
100,602
2,159
697
(83)
(67)
24
(21,454)
(4,086)
(1,667)
(21,022)
(577)
(4,820)
(7,047)
49,275
(14,929)
34,346
(22,090)
(3,777)
(1,483)
(23,405)
(607)
(4,438)
(9,463)
38,136
(13,282)
24,854
Closed Group
30-Jun-17
$'000
34,346
30-Jun-16
$'000
24,854
1,561
(468)
1,093
35,439
460
(138)
322
25,176
Closed Group
30-Jun-17
$'000
30-Jun-16
$'000
(14,447)
34,346
(37,953)
(18,054)
(5,792)
24,854
(33,509)
(14,447)
86
VILLA WORLD ANNUAL REPORT 2017
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GROUP STRUCTUREDVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
D2 Deed of cross guarantee (continued)
(c) Consolidated balance sheet
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
Deferred tax liabilities
Other provisions
Employee benefits
Intercompany loan payable
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Other reserves
Accumulated losses
Total equity
Closed Group
30-Jun-17
$'000
30-Jun-16
$'000
7,652
72,718
206,757
3,280
290,407
241,626
1,195
13,391
-
256,212
546,619
137,344
10,775
1,053
4,219
130
153,521
23,760
81,457
1,403
78
496
4,950
112,144
265,665
280,954
96,347
202,661
(18,054)
280,954
8,346
81,140
186,037
3,142
278,665
187,566
1,169
8,459
1,417
198,611
477,276
78,999
4,868
772
14,392
45
99,076
11,988
128,594
-
64
375
3,975
144,996
244,072
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.
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.
VILLA WORLD ANNUAL REPORT 2017
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GROUP STRUCTUREDVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
D3 Investments accounted for using the equity method (continued)
Impairment of equity accounted investments
Investments in joint ventures are assessed for impairment when indicators or impairment are present and if required,
written down to the recoverable amount. After application of the equity method (including recognising the joint venture's
losses), the Company applies AASB 139 Financial Instruments: Recognition and Measurement to determine whether
it is necessary to recognise any additional impairment loss with respect to its net investment in the joint venture. The
amount of the loss is measured as the difference between the asset's carrying amount and the present value of
estimated future cash flows (excluding future credit losses that have not been incurred). Estimating these future cash
flows of the joint venture requires significant judgement and therefore actual amounts may differ from this impairment
estimate.
The Company has the following interests in jointly controlled entities.
Name of Entity
Notes % Owned Purpose
Eynesbury Holdings Pty Ltd
Eynesbury Pastoral Trust
Eynesbury Golf Pty Ltd
Eynesbury Development Joint
Venture
D3(a)
Expression Homes Pty Ltd
Donnybrook JV Pty Ltd
Villa World Rochedale Pty Ltd
and Ausin Rochedale Pty Ltd as
trustee for Ausin Rochedale Trust D3(c)
D3(d)
Villa Green Pty Ltd
D3(b)
The 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.
The owner of the Eynesbury Development Joint Venture
Land, Victoria. The balance land was sold and settled in two
tranches during FY14 and FY16. The entity will be wound up
in due course.
The golf course and homestead hospitality business were
sold and settled during FY14. The entity will be deregistered
in due course.
Residential 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.
Residential development and construction projects primarily in
Victoria.
Residential development at Donnybrook, Victoria
Residential development at Rochedale, Queensland
Residential development at Greenbank, Queensland
50
50
50
50
50
51
50
50
The carrying amounts of these joint ventures at balance date were:
Eynesbury
Joint Venture
Donnybrook
Joint Venture
Rochedale
Joint Venture
Villa Green
Joint Venture
Total
30-Jun- 17
$'000
1,580
30-Jun-16
$'000
10,902
30-Jun-17
$'000
8,459
30-Jun-16
$'000
5,877
30-Jun-17
$'000
8,443
30-Jun-16
$'000
-
30-Jun-17
$'000
-
30-Jun-16
$'000
-
30-Jun-17
$'000
18,482
30-Jun-16
$'000
16,779
Opening balance
Add: Cash
contribution
Add: Impairment
reversal
Add: Share of net
profit / (loss) of
associates and
joint ventures
Less: Repayment
to Company
Total
-
627
-
-
-
-
2,558
-
-
-
8,700
5,000
-
-
94
3,678
(30)
24
2,983
(257)
(37)
(2,250)
51
(13,000)
1,580
-
8,429
-
8,459
-
11,426
-
8,443
-
4,963
-
-
-
-
-
5,000
11,258
627
-
3,010
3,445
(2,250)
24,869
(13,000)
18,482
88
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GROUP STRUCTUREDVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
D3 Investments accounted for using the equity method (continued)
(a) Eynesbury joint venture
The equity accounted investment in the Company's Eynesbury Township joint venture as at 30 June 2017 is $51,000
(30 June 2016: $1.6 million).
Due to certain changes in management's estimates, the Company has recorded a reversal of impairment loss in the
Eynesbury joint venture during the year ended 30 June 2017.
This impairment reversal of $0.6 million is based on the Board's assessment of the recoverable amount of the
investment at reporting date and as a result of an increase in cash proceeds recovered and expected to be recovered
from the investment.
Payments totalling $2.25 million have been released to the Company for the year ended 30 June 2017. The Company's
share of profit from the Eynesbury joint venture for the year ended 30 June 2017 is $94,000 (30 June 2016: $3.7
million).
(b) Donnybrook joint venture
The equity accounted investment in the Company's Donnybrook joint venture as at 30 June 2017 is $8.4 million (30
June 2016: $8.5 million).
Summarised financial information of the Donnybrook joint venture is set out below:
Villa World's share of assets and liabilities in Donnybrook Joint Venture
Assets including inventories $26.6m (2016: $25.8m); cash and cash equivalents $0.5m
(2016: $0.5m); trade debtors and other receivables $0.4m (2016:$0.5m)
Total assets
Current liabilities including trade and other payables $0.2m (2016: $0.3m)
Non-current liabilities including bill facility $10.7m (2016: $9.8m)
Total liabilities
Equity
Proportion of the Company's ownership
Equity attributable to the investment
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
27,489
27,489
211
10,750
10,961
16,528
51%
8,429
26,745
26,745
344
9,814
10,158
16,587
51%
8,459
Donnybrook 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 Trust
The equity accounted investment in the Company's Rochedale joint venture as at 30 June 2017 is $11.4 million (30
June 2016: $8.4 million).
Summarised statement of financial position of the Rochedale joint venture is set out below:
Villa World's share of assets and liabilities in Rochedale Joint Venture
Assets including inventories $18.4m (2016: $32.4m); cash and cash equivalents $4m
(2016: $0.7m); trade debtors and other receivables $1.6m (2016: $nil)
Total assets
Liabilities including bill facility of $nil (2016: $16.0m); trade and other payables $1.1m
(2016: $0.2m)
Total liabilities
Equity
Proportion of the Company's ownership
Equity attributable to the investment
VILLA WORLD ANNUAL REPORT 2017
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
23,949
23,949
1,096
1,096
22,853
50%
11,426
33,142
33,142
16,256
16,256
16,886
50%
8,443
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GROUP STRUCTUREDVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
D3 Investments accounted for using the equity method (continued)
(c) Villa World Rochedale Pty Ltd and Ausin Rochedale Pty Ltd as trustee for Ausin Rochedale Trust
(continued)
Summarised statement of profit or loss of the Rochedale joint venture is set out below:
Revenue
Cost of sales
Administrative expenses
Finance costs
Profit before income tax
Income tax expense
Profit / (loss) for the period
Proportion of the Company's ownership
Profit / (loss) attributable to the investment
Consolidated
30-Jun-17
$'000
28,027
(19,546)
(1,949)
(566)
5,966
-
5,966
50%
2,983
30-Jun-16
$'000
-
-
(467)
(47)
(514)
-
(514)
50%
(257)
For 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 into 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.
(d) Villa Green joint venture
The Company advised the market on 16 September 2016 it had entered into a joint venture with Greenfields
Development Company and agreed to the unconditional purchase of a 153 hectare site at Greenbank, 34kms south of
the Brisbane CBD.
The purchase price is $50 million (ex GST) with settlement expected to occur in stages during FY18 and FY19. The
joint venture intention is to obtain project specific finance for the development.
Upon acquisition the site had approvals for approximately 1,000 lots with a balance medium density parcel. Since
acquiring the site the joint venture has developed a master plan for 1,502 traditional freehold lots, removing the medium
density product. This will be approved over two development applications. Approval has already been obtained for
1,082 lots by way of an amendment to the existing approval, allowing the joint venture to proceed with the development
in accordance with the masterplan. Application for approval for the remaining 420 lots has now been lodged and is
being assessed by the relevant authorities, with approval expected during 1H18.
The joint venture will deliver a high quality master planned community capitalising on the extensive greenspace
surrounding the site. The project will offer a diverse range of home sites with lots ranging from 300sqm up to 2,000+
sqm. The joint venture is expected to commence contributing to the Company's profit in FY18.
The equity accounted investment in the Company's Villa Green joint venture as at 30 June 2017 is $5.0 million (30
June 2016: $nil).
Summarised financial information of the Villa Green joint venture is set out below:
Villa World's share of assets and liabilities in Villa Green Joint Venture
Assets including inventories $50.2m (2016: $nil); cash and cash equivalents $0.7m (2016:$nil)
Total assets
Liabilities including trade and other payables $41.0m (2016: $nil)
Total liabilities
Equity
Proportion of the Company's ownership
Equity attributable to the investment
Consolidated
30-Jun-17
$'000
50,906
50,906
40,980
40,980
9,926
50%
4,963
In undertaking the land component of the development, the joint venture partners are to contribute equal capital
contributions and share profits on a 50/50 several liability basis. The Company's ownership interest in the development
is a joint arrangement with joint control and is classified as a joint venture under AASB 11 Joint Arrangements. Under
AASB 11, the Company accounts for the investment using the equity method in accordance with AASB 128
Investments in Associates and Joint Ventures.
90
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GROUP STRUCTUREDVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
D4 Parent entity financial information
The 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.
(a) Summary financial information
The individual financial statements for the Parent entity, Villa World Limited, show the following aggregate amounts:
Balance sheet
ASSETS
Current assets
Total assets
LIABILITIES
Current liabilities
Total liabilities
Net assets
EQUITY
Issued capital
Reserves
Retained earnings
Total Equity
Loss for the period
Consolidated
30-Jun-17
$'000
30-Jun-16
$'000
45,299
252,202
11,380
59,329
192,873
160,957
40,076
(8,160)
192,873
(1,113)
31,190
186,547
4,873
4,873
181,674
127,247
61,474
(7,047)
181,674
(6,867)
(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 B5 - Provisions and contingencies.
VILLA WORLD ANNUAL REPORT 2017
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GROUP STRUCTUREDVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
E
OTHER INFORMATION
E
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
E1
E2
E2
E3
E3
E4
E4
E5
E5
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 liabilities
(including derivative instruments) which are measured at fair value through profit or loss.
(iii) Critical accounting estimates and judgements
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. The resulting accounting estimates will by definition, seldom equal the related actual results. 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
Share-based payments
Consolidated
30-Jun-17
$
2,433,951
108,830
49,619
373,677
2,966,077
30-Jun-16
$
1,768,827
78,213
37,546
290,422
2,175,008
Detailed remuneration disclosures are provided in the remuneration report on page 37.
(b) Equity instrument disclosures relating to key management personnel
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.
92
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OTHER INFORMATIONEVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
E2 Key management personnel disclosures (continued)
(b) Equity instrument disclosures relating to key management personnel (continued)
Villa World Limited Option Plan (continued)
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.
During FY17 the options awarded to executives under the plan vested. No further options were awarded to executives
under the plan during FY17.
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.
This plan is no longer used. To align with market practice and support the Company’s business strategy, it has been
replaced by the Villa World Limited Executive Long Term Incentive Plan.
Set out below is a summary of the terms and conditions of each grant of options to key management personnel and
other senior employees:
Balance as
at 30 June
2016
Expiry
Date
3,250,000 26/01/2017 26/07/2016
150,000 11/08/2017 11/02/2017
Vesting
date
Grant Date
26/07/2013
17/02/2014
Weighted
average
share
price at
date of
exercise
$2.47
$2.49
Value of
options at
grant date1
$325,000
$61,500
Exercise
Price
$1.25
$1.60
Expected
price
volatility of
shares
25%
30%
Expected
dividend
yield
9.0%
7.1%
Risk free
interest
rate
2.57%
3.10%
Vested and
exercised
100%
100%
1. The value of options at grant date is 10 cents per option for those issued on 26 July 2013 and 41 cents per option for those issued 17 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 in FY16 subsequent to approval of the Plan
at the FY15 Annual General Meeting. The second allocation of performance rights was approved at the FY16 Annual
General Meeting.
The key driver for the Plan is to provide a variable remuneration component that is competitive and is aligned to
shareholder returns over a longer period. It has been structured to appropriately incentivise executives and promote
retention. 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.
The remaining 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.
The volatility assumption is based on annualised historical daily volatility over the 3 year period to the valuation date.
No awards have vested during FY17.
The following table sets out the terms of performance rights awarded to key management personnel and other senior
employees.
VILLA WORLD ANNUAL REPORT 2017
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OTHER INFORMATIONEVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (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)
Grant Date
30/11/2015
30/11/2016
Granted as
compensation
485,916
778,962
Forfeited/
lapsed
during
year1
112,676
150,969
Balance as
at 30 June
2017
373,240
627,993
Vesting
date
Expiry Date
31/08/2018 30/06/2018
31/08/2019 30/06/2019
Weighted
average
price of
Rights
$1.06
$1.44
Expected
price
volatility of
shares
27%
25%
Expected
dividend
yield
7.6%
8.15%
Risk free
interest
rate
2.1%
1.87%
1. Performance Rights were forfeited on 14 July 2017 with communication and approval by Board prior 30 June 2017.
(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:
Performance rights issued to key management personnel
Performance rights forfeited by key management personnel
Options issued to key management personnel
Performance rights issued to senior employees
Options issued to senior employees
Consolidated
30-Jun-17
$'000
402
(40)
12
31
-
405
30-Jun-16
$'000
166
-
124
6
(66)
230
(d)
Loans to KMP
For the financial year ended 30 June 2017, there were no loans to key management personnel (2016: $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
Other assurance services
Total remuneration for audit and other assurance services
Other non-audit services
Other corporate advisory services
Taxation services
Total remuneration for other non-audit services
Total remuneration of Ernst & Young
Consolidated
30-Jun-17
$
30-Jun-16
$
184,404
55,750
240,154
343,441
29,369
372,810
612,964
130,000
-
130,000
81,054
159,334
240,388
370,388
The statutory audit requirements for the Company vary from year to year and can have an impact on the level of audit
fees. The Company may decide to engage the auditor on assignments additional to their statutory audit duties where
the auditor's expertise and experience with the Company is important. These assignments relate to other non-audit
services including accounting advice, tax advice and capital debt market advice.
The majority of non-audit fees in FY17 relate to services provided during the issuance of the Simple Corporate Bond.
The costs associated with this assignment were paid to the Ernst & Young Capital and Debt Advisory Team. The
auditor has provided an independence declaration and the Committee is satisfied that the work performed on non-audit
services was conducted by a team separate from the audit team and does not impact the independence of the auditor.
94
VILLA WORLD ANNUAL REPORT 2017
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OTHER INFORMATIONEVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
E4 Events occurring after the reporting period
Final dividend
On 15 August 2017 the Board declared a fully franked final dividend of 10.5 cents per share. The ex-dividend date is
4 September 2017 and the record date for this dividend is 5 September 2017. Payment will be made on 29 September
2017.
The balance of the franking account is $14.4 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.
Investment in the Villa Green Joint Venture
On 28 July 2017, equity contributions totalling $6 million were made by each joint venture partner, with the carrying
value of the investment increasing to $10.9 million. This contribution was recognised as a commitment at 30 June
2017. Refer Note B6 (b) - Joint Venture commitments.
Cash settlements for land
Since year end $30.6 million has been paid in relation to settlements of land. These include Hillsbrook, Concourse and
the adjoining parcel to Sienna Rise which were all recognised as a liability at 30 June 2017.
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.
VILLA WORLD ANNUAL REPORT 2017
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OTHER INFORMATIONEVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (continued)
E5 Other accounting policies (continued)
(c)
Impairment of assets (continued)
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.
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 non-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. Remeasurements 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.
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OTHER INFORMATIONEVILLA WORLD LIMITED ANNUAL REPORT 2017
Notes to the consolidated financial statements
30 June 2017 (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 2017. 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 is in the process of assessing the impact of the following
new standards and interpretations.
(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 recognise 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 recognised at the date of initial application, with no restatement of
comparatives presented.
The Company continues to evaluate the potential impact of AASB15 on its consolidated financial statements. It is likely
that revenue from land development and residential housing will be recognised on cash settlement, this being the point
in time that the customer controls the related asset. This will potentially represent a change from the existing accounting
policy for Queensland and Victoria sales whereby revenue is currently recognised when there is an unconditional sales
contract and registration of the land and/or certification of building completion. The Company intends to adopt AASB15
for the first time for the financial year ended 30 June 2019 and is in the process of determining which transition method
to adopt. The impact will be quantified when the assessment has been fully completed, as the results of the complete
assessment and the resultant impact on revenue will invariably impact the transition method adopted.
(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 that 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.
VILLA WORLD ANNUAL REPORT 2017
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OTHER INFORMATIONEVILLA WORLD LIMITED ANNUAL REPORT 2017
Directors' declaration
30 June 2017
In the Directors' opinion:
(a)
the financial statements and notes set out on pages 56 to 97 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 2017 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
15 August 2017
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VILLA WORLD ANNUAL REPORT 2017
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VILLA WORLD LIMITED ANNUAL REPORT 2017
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
INDEPENDENT AUDITOR’S REPORT
To the Members of Villa World Limited
INDEPENDENT AUDITOR’S REPORT
Report on the Audit of the Financial Report
Opinion
To the Members of Villa World Limited
Report on the Audit of the Financial Report
We have audited the financial report of Villa World Limited (the Company), and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30
Opinion
June 2017, the consolidated statement of comprehensive income, consolidated statement of changes
in equity and consolidated statement of cash flows for the year then ended, notes to the financial
We have audited the financial report of Villa World Limited (the Company), and its subsidiaries
statements, including a summary of significant accounting policies, and the directors’ declaration.
(collectively the Group), which comprises the consolidated statement of financial position as at 30
June 2017, the consolidated statement of comprehensive income, consolidated statement of changes
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
in equity and consolidated statement of cash flows for the year then ended, notes to the financial
Act 2001, including:
statements, including a summary of significant accounting policies, and the directors’ declaration.
giving a true and fair view of the consolidated financial position of the Group as of 30 June
(i)
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
2017 and of its consolidated financial performance for the year ended on that date; and
Act 2001, including:
(ii)
(i)
complying with Australian Accounting Standards and the Corporations Regulations 2001.
giving a true and fair view of the consolidated financial position of the Group as of 30 June
2017 and of its consolidated financial performance for the year ended on that date; and
Basis for Opinion
complying with Australian Accounting Standards and the Corporations Regulations 2001.
(ii)
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
Basis for Opinion
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
independence requirements of the Corporations Act 2001 and the ethical requirements of the
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Accounting Professional and Ethical Standards Board’s APES110 Code of Ethics for Professional
Report section of our report. We are independent of the Group in accordance with the auditor
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
independence requirements of the Corporations Act 2001 and the ethical requirements of the
fulfilled our other ethical responsibilities in accordance with the Code.
Accounting Professional and Ethical Standards Board’s APES110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
fulfilled our other ethical responsibilities in accordance with the Code.
for our opinion.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
Key Audit Matters
for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in
Key Audit Matters
our audit of the financial report of the current year. These matters were addressed in the context of
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
our audit of the financial report of the current year. These matters were addressed in the context of
a separate opinion on these matters. For each matter below, our description of how our audit
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
addressed the matter is provided in that context.
a separate opinion on these matters. For each matter below, our description of how our audit
addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
included the performance of procedures designed to respond to our assessment of the risks of
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
material misstatement of the financial report. The results of our audit procedures, including the
included the performance of procedures designed to respond to our assessment of the risks of
procedures performed to address the matters below, provide the basis for our audit opinion on the
material misstatement of the financial report. The results of our audit procedures, including the
accompanying financial report.
procedures performed to address the matters below, provide the basis for our audit opinion on the
accompanying financial report.
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
99
VILLA WORLD LIMITED ANNUAL REPORT 2017
1. Net Realisable Value (“NRV”) of inventories
Refer to Note B1 of the financial report
Why significant
How our audit addressed the key audit matter
We obtained the assessment of NRV for the Group’s
inventory portfolio. In obtaining sufficient audit
evidence, we:
►
How our audit addressed the key audit matter
Compared the Group’s current cash flow
forecast assumptions to recent actual project
performance (i.e. sales prices, sales rates and
We obtained the assessment of NRV for the Group’s
margins achieved) during the period;
inventory portfolio. In obtaining sufficient audit
evidence, we:
►
Compared the Group’s current cash flow
forecast assumptions to recent actual project
performance (i.e. sales prices, sales rates and
margins achieved) during the period;
Enquired of the development managers to
understand changes in key feasibility
assumptions since the NRV assessment in the
prior year and original feasibility, changes in
strategy adopted in the revised feasibilities and
examined supporting documentation for these
changes;
Enquired of the development managers to
understand changes in key feasibility
assumptions since the NRV assessment in the
prior year and original feasibility, changes in
strategy adopted in the revised feasibilities and
examined supporting documentation for these
changes;
For higher risk and a sample of new projects, we
assessed the key assumptions in the feasibilities
by agreeing to supporting documentation such
as development approvals and sales data to
support sales prices. We also involved our real
estate specialists to assist with the assessment
of the feasibilities and key assumptions for a
sample of higher risk projects;
For higher risk and a sample of new projects, we
assessed the key assumptions in the feasibilities
by agreeing to supporting documentation such
as development approvals and sales data to
For projects which had a reversal of previous
support sales prices. We also involved our real
NRV write-downs during the period, we
estate specialists to assist with the assessment
considered the underlying changes in the
of the feasibilities and key assumptions for a
feasibilities by evaluating recent actual
sample of higher risk projects;
performance of the project and agreeing to
supporting documentation and calculations
provided by the Group; and
For projects which had a reversal of previous
NRV write-downs during the period, we
considered the underlying changes in the
feasibilities by evaluating recent actual
performance of the project and agreeing to
supporting documentation and calculations
provided by the Group; and
For a sample of inventory costs capitalised
during the year we agreed these to supporting
documentation.
►
►
►
For a sample of inventory costs capitalised
during the year we agreed these to supporting
documentation.
Refer to Note B1 of the financial report
1. Net Realisable Value (“NRV”) of inventories
The NRV of inventories is heavily influenced by
movements in the property market in Australia
and other uncertain elements such as availability
of finance for home-owners and investors. The
Why significant
Group undertakes a review of its inventories to
ensure each individual project is valued at the
The NRV of inventories is heavily influenced by
lower of cost or NRV in accordance with
movements in the property market in Australia
Australian Accounting Standards.
and other uncertain elements such as availability
This is significant to our audit, given the
of finance for home-owners and investors. The
estimation process, and the judgments made in
Group undertakes a review of its inventories to
the assumptions used in the process. The NRV is
ensure each individual project is valued at the
based on future cash flows, which depend on key
lower of cost or NRV in accordance with
assumptions relating to sales rates, land pricing,
Australian Accounting Standards.
the expected date of completion, the level of
This is significant to our audit, given the
debt used to finance the project and the
estimation process, and the judgments made in
estimation of future development costs.
the assumptions used in the process. The NRV is
based on future cash flows, which depend on key
assumptions relating to sales rates, land pricing,
the expected date of completion, the level of
debt used to finance the project and the
estimation of future development costs.
►
►
►
►
►
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
100
VILLA WORLD LIMITED ANNUAL REPORT 2017
2. Revenue recognition
Refer to Note A1 of the financial report
Why significant
How our audit addressed the key audit matter
Refer to Note A1 of the financial report
2. Revenue recognition
Revenue is a key audit matter because judgment
is involved in determining at what point in time
there is sufficient certainty for revenue to be
recognised. This is particularly important for
Why significant
cases when revenue is recognised prior to
settlement of the land or house and land sale.
Revenue is a key audit matter because judgment
is involved in determining at what point in time
there is sufficient certainty for revenue to be
recognised. This is particularly important for
cases when revenue is recognised prior to
settlement of the land or house and land sale.
►
►
►
►
►
►
In obtaining sufficient audit evidence, we:
Assessed the design and operating effectiveness
of relevant controls over the timing of revenue
recognition;
How our audit addressed the key audit matter
In obtaining sufficient audit evidence, we:
Tested revenue cut-off by selecting a sample of
sales transactions taking place before and after
the balance sheet date and checked whether
Assessed the design and operating effectiveness
those transactions were recognised in the
of relevant controls over the timing of revenue
correct period by agreeing to supporting
recognition;
documentation such as sales contract, proof of
Tested revenue cut-off by selecting a sample of
land registration and proof of building
sales transactions taking place before and after
completion performed by an independent party;
the balance sheet date and checked whether
Assessed revenue recognised prior to
those transactions were recognised in the
settlement to evaluate whether the recognition
correct period by agreeing to supporting
complied with Australian Accounting Standards
documentation such as sales contract, proof of
and interpretations issued by the Australian
land registration and proof of building
Accounting Standards Board by agreeing a
completion performed by an independent party;
sample to supporting documentation;
Assessed revenue recognised prior to
settlement to evaluate whether the recognition
complied with Australian Accounting Standards
and interpretations issued by the Australian
Accounting Standards Board by agreeing a
sample to supporting documentation;
Tested key reconciliations and revenue journal
entries that have been posted to the system
manually and checked that revenue journals
were appropriately approved and had supporting
evidence; and
►
Tested key reconciliations and revenue journal
Assessed the adequacy of the Group’s
entries that have been posted to the system
disclosures in respect of the accounting policies
manually and checked that revenue journals
on revenue recognition.
were appropriately approved and had supporting
evidence; and
Assessed the adequacy of the Group’s
disclosures in respect of the accounting policies
on revenue recognition.
►
►
►
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
101
VILLA WORLD LIMITED ANNUAL REPORT 2017
Information Other than the Financial Report and Auditor’s Report
The directors are responsible for the other information. The other information comprises the
information in the Group’s 2017 Annual Report, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
Information Other than the Financial Report and Auditor’s Report
express any form of assurance conclusion thereon.
The directors are responsible for the other information. The other information comprises the
information in the Group’s 2017 Annual Report, but does not include the financial report and our
In connection with our audit of the financial report, our responsibility is to read the other information
auditor’s report thereon.
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
If, based upon the work we have performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing to report in this regard.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
Responsibilities of the Directors for the Financial Report
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
The directors of the Company are responsible for the preparation of the financial report that gives a
If, based upon the work we have performed, we conclude that there is a material misstatement of this
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
other information, we are required to report that fact. We have nothing to report in this regard.
and for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
Responsibilities of the Directors for the Financial Report
fraud or error.
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
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
and for such internal control as the directors determine is necessary to enable the preparation of the
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
financial report that gives a true and fair view and is free from material misstatement, whether due to
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
fraud or error.
operations, or have no realistic alternative but to do so.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
Auditor’s Responsibilities for the Audit of the Financial Report
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
operations, or have no realistic alternative but to do so.
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
Auditor’s Responsibilities for the Audit of the Financial Report
an audit conducted in accordance with Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is
if, individually or in the aggregate, they could reasonably be expected to influence the economic
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
decisions of users taken on the basis of this financial report.
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with Australian Auditing Standards will always detect a material
A further description of our responsibilities for the audit of the financial report is located at the
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf.
if, individually or in the aggregate, they could reasonably be expected to influence the economic
This description forms part of our auditor’s report.
decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_files/ar2.pdf.
This description forms part of our auditor’s report.
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
102
VILLA WORLD LIMITED ANNUAL REPORT 2017
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30
June 2017.
Report on the Remuneration Report
In our opinion, the Remuneration Report of Villa World Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Opinion on the Remuneration Report
We have audited the Remuneration Report included in the directors' report for the year ended 30
Responsibilities
June 2017.
The directors of the Company are responsible for the preparation and presentation of the
In our opinion, the Remuneration Report of Villa World Limited for the year ended 30 June 2017,
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
complies with section 300A of the Corporations Act 2001.
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Ernst & Young
Ernst & Young
Ric Roach
Partner
Brisbane
15 August 2017
Ric Roach
Partner
Brisbane
15 August 2017
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
103
VILLA WORLD LIMITED ANNUAL REPORT 2017
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 31 July 2017)
The following holdings were listed in the register of substantial shareholders:
UniSuper Limited
Brazil Farming Pty Ltd
Distribution of Shareholders (as at 31 July 2017):
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
6,490,184
7,097,286
Total holders
1,075
1,965
946
1,269
78
5,333
There were 236 shareholders with less than a marketable parcel of 223 shares.
Unquoted equity securities
As at 31 July 2017, there were 1,001,233 performance rights (with the potential to take up ordinary shares) issued to
4 participating employees under the Villa World Limited Executive Long Term Incentive Plan.
There are no voting rights attached to the performance rights.
Quoted equity securities
As at 31 July 2017 there were 5,333 shareholders (30 June 2016: 4,244).
The voting rights attaching to the ordinary shares are:
(a)
(b)
On a show of hands, each shareholder present has one vote and
on a poll, one vote for each fully paid share held.
For details of registered office and share registry details refer to inside front cover – Shareholder Information.
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VILLA WORLD ANNUAL REPORT 2017
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VILLA WORLD LIMITED ANNUAL REPORT 2017
Top 20 Shareholders (as at 31 July 2017)
Name
Units
% of
Units
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
18,691,085
14.73
NATIONAL NOMINEES LIMITED
J P MORGAN NOMINEES AUSTRALIA LIMITED
BRAZIL FARMING PTY LTD
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMS PTY LTD
BNP PARIBAS NOMS PTY LTD
PERSHING AUSTRALIA NOMINEES PTY LTD
BRISPOT NOMINEES PTY LTD
MR MALCOLM JOHN ROSS + MRS JUNE ROSS
8,993,577
7,303,438
7,287,286
7,013,471
6,887,028
2,443,291
2,000,000
1,333,957
1,260,133
RBC INVESTOR SERVICES AUSTRALIA NOMINEES PTY LIMITED A/C>
920,949
CVC LIMITED
TOBAKA PTY LTD
DEBUSCEY PTY LTD
HORRIE PTY LTD
GEOMAR SUPERANNUATION PTY LTD
BRAZIL FARMING PTY LIMITED
CRAIG G TREASURE PTY LTD
NATIONAL NOMINEES LIMITED
CVC LIMITED
889,000
656,898
644,235
616,169
610,935
600,000
582,432
571,212
503,737
7.09
5.75
5.74
5.53
5.43
1.92
1.58
1.05
0.99
0.73
0.70
0.52
0.51
0.49
0.48
0.47
0.46
0.45
0.40
Totals: Top 20 holders of FULLY PAID ORDINARY SHARES (TOTAL)
69,808,833
55.02
VILLA WORLD ANNUAL REPORT 2017
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VILLA WORLD LIMITED ANNUAL REPORT 2017 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