Includes Financial Report
ANNUAL REPORT
2018
OUR MISSION To provide infrastructure and services to facilitate the marketing of fresh food, flowers and other ancillary products.
COLLECTIVE AMBITION To achieve growth through diversified property ownership, management, development and service delivery on the current site and on off-site locations.
ANNUAL REPORT 2018
OUR FOCUS
Sustaining the business through growth and diversification. Our focus drives everything we do. It unites all of us and focuses our energy. It’s about what we do every day and also about the possibilities we are creating for the future.
TABLE OF CONTENTS Joint Message from the Chairman and CEO
4
Major Projects
8
Future Projects
9
Summary of Financial Results
10
Financial Report
14
Corporate Directory
52
1
2
BRISBANE MARKETS LIMITED
ANNUAL STATISTICS AS AT 30 JUNE 2018
2018
Total assets
361.8m
$
2017
+9.4%
155.5m 10.49m
16.25
$294.2m $243.7m $233.7m
2018
$155.5m
2017
+4.8%
$148.4m
2016
$120.8m
2015
$113.4m
2014
$111.5m
2018
$10.49m
2017
+3.6%
$10.13m
2016
$9.35m
2015
$8.41m
2014
$7.88m
2018
Dividend, fully franked
¢
2016 2014
Net operating profit after tax
$
$330.7m
2015
Net assets
$
$361.8m
16.25¢/share
2017
+4.8%
15.5¢
2016
14.0¢
2015
12.0¢
2014
160,154m
10.75¢
2
Total lettable area
438
Electricity meters
2,608
1,124 Forklift operator permits
Vehicles using LPR
44.2 GWh Electricity purchased
ANNUAL REPORT 2018
146
775
Dock levellers
310
Registered buyers
Fire hose reels
4,584 Access cards
302 Fire hydrants
51,282 kL Water used
717
256 Leases in place
23
Boom gates
33
Fire indicator panels
2.8 GWh Electricity generated
Fire extinguishers
123
Backflow prevention devices
246
Sewage pump stations
Water meters
8,249
Solar panels
14
3,117
Emergency light fittings
3
4
BRISBANE MARKETS LIMITED
JOINT MESSAGE FROM THE CHAIRMAN AND CEO
In a year of consolidation, with a focus on building for the future of our company, we delivered solid financial results, progressed a number of significant site development projects and continued to grow the asset value and profitability of the company. Over the past year, we have laid foundations to build for the future of our business and delivered a solid performance which maintains the company's ongoing growth trajectory. The Board is pleased with the results and financial performance of the group, reporting a net operating profit before tax of $14.99 million, representing growth of 3.6% on the prior year. After including property revaluation impacts, the reported net profit before tax for the year is a healthy $18.61 million. The Board recognises the importance of providing shareholders with a competitive return on their investment. We are therefore pleased to announce, on behalf of the Board, a final dividend of 8.25 cents per share, fully franked, taking the total dividend paid during the year to 16.25 cents per share, fully franked, a 4.8% increase on the prior year.
CAPITAL RAISING The recent capital raising was successful. The entitlement offer take up rate exceeded 76%, and the public offer was heavily oversubscribed. The share allotment process is now complete and the group has seen an increase in shareholder numbers to over 300, while maintaining predominantly fresh fruit and vegetable industry-based ownership of the company. The $38.4 million capital raising will facilitate ongoing growth of the Brisbane Markets® site. Construction of the Montague Warehouse (Building C1) has commenced and progress payments are being made as the project progresses. The initial instalments received from the capital raising, totalling $19.2 million, will be used to reduce debt until required to support the various capital expenditure projects identified for the funds. We have also seen a change within our top 10 shareholders, which has maintained a strong industry-based focus.
CONTRIBUTION OF PERTH MARKETS LIMITED The investment in Perth Markets Limited in 2016 has proven to be fruitful, with the value of this investment increasing by over 50% in the two years since the investment was made. At 30 June 2018, Perth Markets Limited had net tangible assets of $1.52 per stapled security. This is a long-term investment to which we remain fully committed.
CONTINUED STRENGTH IN THE BALANCE SHEET At 30 June 2018, total assets were $361.8 million and net assets were $155.5 million. Total assets grew by 9.4% and net assets by 4.8%. As highlighted in the chart on page 5, our asset growth has continued to exceed debt growth by over $50 million since 2015. An independent property valuation of all BML owned properties was again undertaken as at 30 June 2018, and all properties have been restated to fair value at this date of $314.6 million.
ANNUAL REPORT 2018
ONGOING FUNDING REQUIREMENTS
allocated for parking, such as the construction site for the $17.5 million Building C1 development. It will also facilitate the construction of the proposed Global Fresh Australia Pty Ltd refrigerated warehouse (Building E1), currently undergoing design development.
BML has the ongoing commitment of its financier, Westpac Banking Corporation, and the current debt facility and finance arrangements remain in place until 30 April 2021. Interest rate risk continues to be managed on an ongoing basis, with a combination of interest rate hedges and loans at the variable interest rate.
STRATEGY In November 2017, we unveiled our updated Strategic Plan, which highlights BML’s mission and the Board’s strategic focus over the five-year period of 2017–2022. The plan seeks to build on the growth, direction and success of the organisation since acquiring the Markets in 2002. In line with the plan, BML seeks to identify opportunities to maximise the development potential of the site through the delivery of site upgrading and development projects which meet the needs of tenants and the fresh produce industry. March 2018 saw the group complete the Multi-level Car Park (CP1) development, which is a $12 million strategic investment that has allowed for the repurposing of space previously
These and other major projects reflect BML's commitment to the ongoing development of the site. They are supported by various site improvement projects such as the installation of fire safety infrastructure and an increase in our solar assets across the site. It is this continued commitment to the development of this site that has contributed to strong asset growth.
PROPERTY At 30 June, there were 256 leases in place and 172 tenants leasing tenancies within the Brisbane Markets® site. A revised traffic management plan for the site is being progressed incrementally in conjunction with asphalt resurfacing works. New line marking has been planned and installed to ensure road markings, licensed areas and pedestrian access remain consistent with the larger site plan.
SITE OPERATIONS We continued our focus on securing the site and improving traffic flow at entry points. 2,608 vehicles are now registered for licence plate recognition (LPR) access, with a feasibility study being conducted to consider additional applications for LPR across the site. Our commitment to safety focused on engaging with tenants and their employees to improve the safety culture among Markets users. This engagement has seen a steady decline in the number and severity of forklift incidents across the site. The Site Service Centre issued permits to 1,124 forklift operators and registered 380 forklifts during the course of the financial year. At 30 June, 4,584 active access cards were on issue. The completion of CP1 has allowed for the repositioning, and in many cases removal, of passenger vehicles across the site, reducing congestion and improving traffic flows. Common areas continue to be kept clean by our cleaning and grounds team. Pest management is being effectively controlled, with 1,439 rodent bait stations serviced monthly, contributing to minimal rodent activity across the site.
OCCUPANCY AT 30 JUNE 2018
100%
TOTAL ASSETS TO TOTAL DEBT 400
Industrial property
350 300
$212m
$m
250 200
$152m
150
90.5% Retail property
100 50 0
2014
2015 Total assets
2016
2017 Total debt
This chart depicts the growth of total assets and total debt over the past 4 years.
2018
69.4%
Commercial office space
98.5%
Total occupancy
5
6
BRISBANE MARKETS LIMITED
SITE INFRASTRUCTURE AND MAINTENANCE In August 2017, we completed a project to install new electricity meters and electrical monitoring hardware that has improved our reporting and billing capabilities. This infrastructure records detailed usage data, allowing us to provide enhanced reporting to tenants about their electricity consumption. In all, this project has allowed BML to better and more efficiently manage our embedded electrical network.
• Installation of a Building Occupant Warning System in the Selling Floor buildings, including new smoke and thermal detectors in common areas, offices and coldrooms. • Repairs to epoxy surfaces of loading docks of Buildings A, B, C and D. • Replacement of roofs of Buildings A, K, M, V, W, Y and the vents of Building Q. • Refurbishment of the mezzanine level of Building E.
A number of other major site upgrades were completed during the year including:
• Painting of Central Trading Area columns, internal common areas of the Fresh Centre and external elevations of several buildings.
• Major asphalt resurfacing works totalling $1.2 million.
• Preparation for development projects at Buildings D and N.
• Sluice valves replaced at the Central Trading Area pump station.
• Staged replacement of all common area lighting with LEDs and installation of additional street lighting at Buildings D, J, K and S.
• Completion of Stages 4 and 5 of a project to install a dedicated fire hydrant ring main throughout the Northern Industrial Precinct, providing vital fire safety infrastructure for the site. • Upgrading of distribution boards in Buildings M and Q. • Box gutter replacement and soffit repairs at the Commercial Centre and Building U. • Installation of a roof access stairway to the roof of Building A.
• Emergency lighting repairs in 12 buildings across the site. • Refurbishment of amenities in Buildings L, Q, U and W.
COLLABORATION We have continued to work closely with our Central Market colleagues through the course of this year, and we are encouraged by the work done to promote and represent the Central Market System. BML will continue
to investigate potential synergies, operating efficiencies and opportunities for growth with other Central Markets. A number of Central Markets have entered into a joint initiative with our chamber colleagues through Fresh Markets Australia (FMA) to implement a national retailer program with the launch of "A Better Choice" in June 2018. The new program is designed to achieve national brand recognition and promote the marketing potential and advertising reach of independent retailers to consumers by pooling marketing resources and funding from Australia’s Central Markets and FMA. The existing Your Local Fruit Shop program has incorporated the new branding to run in parallel with the current Queensland brand, with a view to transition fully to the "A Better Choice" branding by December 2019. In June 2018, BML and the industry association, Brismark, also renewed memorandums of understanding (MOUs) with Bowen Gumlu Growers Association and Bundaberg Fruit and Vegetable Growers. It remains a priority of BML to maintain strong, supportive and working relationships with grower associations by providing financial support, industry exposure and effective collaboration for the benefit of the horticulture industry.
ANNUAL REPORT 2018
WEEKEND MARKETS The popularity of Brisbane MarketPlace (BMP) remains evident, with over 600,000 attendees visiting the Saturday Fresh and Sunday Discovery Markets throughout the year. Both Markets were again featured in the Urban List Brisbane’s “Markets to visit this August” and in The Weekend Edition’s list of “Brisbane’s Best Markets”. Eagle Farm Markets moved back to Eagle Farm Racecourse in February 2018, after a short stint at Doomben Racecourse while construction works were being progressed. There have been ongoing difficulties caused by the construction works in and around the Eagle Farm Racecourse site, as well as increasing retail market competition. BML has been reviewing the ongoing viability of this Market, and in October 2018 the joint decision was made with the Brisbane Racing Club to cease operating the Market. BMP has also been busy preparing for an addition to its long-running Retail Markets in early 2019 by launching the Brisbane Night Market, the first fully undercover outdoor Market in Brisbane. Operating between 4-10pm each Friday night, the “Brisbane Night Market” will be an exciting new entrant to Brisbane’s night life. The new Market will feature over 80 stalls to be located in the Central Trading Area of the Brisbane Produce Market, which will be transformed into a must-visit foody hotspot and live entertainment venue.
BRISBANE FLOWER MARKET The traffic management plan for the Flower Market was revised and new line marking was positioned to segregate vehicles and pedestrians
wherever possible. An additional survey of the Flower Market car park was completed in February 2018 with a view to incorporating as many additional parking spaces as possible.
COMMUNICATIONS NETWORKS With confirmation of the arrival of the National Broadband Network at the Markets still outstanding and connection unlikely to be before June 2020, BML has continued its partnership with AUS-IT to provide telephone, network and cloudbased services to tenants. These services offer reliability and performance for businesses that far exceed those currently available through any major telecommunications provider. BML’s CCTV network has increased from 160 to 210 cameras. The new infrastructure has increased coverage across the site, with the added benefits of video processing for image clarity, improved video quality at night and improved site security.
CORPORATE COMMUNICATIONS A new Brisbane Markets® website was launched in August 2017, featuring improved search, accessibility and navigation functionality. BML was involved in a number of industry events, including the June 2018 Hort Connections conference in Brisbane, where the Central Markets Association of Australia and FMA were the major trade show sponsors. The annual Brisbane Produce Market Mango Auction raised over $38,000 for BML’s charity partners, and the third annual Forklift Operator of the Year competition was held over a six-week period to promote safety among the site’s 1,124 licensed forklift operators.
BML partnered with the Museum of Brisbane to deliver the “Tastes Like Sunshine” exhibition. A bespoke piece of artwork was commissioned for the exhibition, which featured carton artwork from the Brisbane Produce Market trading floor arranged in a diorama by artist Sean Rafferty. The artwork was on display in the Arch Martin Brisbane Markets® History Room from December 2017 to June 2018.
CULTURE BML continues to maintain a focus on meeting the needs of tenants in providing the infrastructure and services to support Market-based businesses and the fresh produce supply chain. The company does have a culture of achievement, built upon a track record of successfully managing and developing this site. We are proud of what we have achieved and the contribution industry-based ownership is making to the fresh produce industry.
ACKNOWLEDGEMENT AND THANKS It has been another strong performance by BML and we enter the new financial year with a clear leadership position and strategy, underpinned by a highly engaged and motivated team. We would like to thank the Board for their support and guidance throughout the year, the executive team, and the talented people who make up BML. We have an exciting year ahead as we continue to make Brisbane Markets® the leading wholesale Market in Australia.
Anthony (Tony) Joseph Chairman
Andrew Young Chief Executive Officer
7
8
BRISBANE MARKETS LIMITED
MAJOR PROJECTS MULTI-LEVEL CAR PARK — CP1 Completed in March 2018, the 14,130m2 Multi-level Car Park accommodates 540 vehicles over four levels, utilises a state-of-the-art car park management system, and incorporates an overhead walkway to provide safe pedestrian access to the Central Trading Area. This parking facility represents a further significant milestone in the development of the Markets. It has freed up space for further development within the site, including Building C1 and the proposed Building E1, and will assist significantly in reducing site congestion and improving site safety.
BUILDING N The new PIR panel warehouse extension to the existing metal clad warehouse was completed in April 2018, increasing the total tenancy area of Building N from 854m2 to 1,516m2. The structure includes a new loading dock with levellers and a raised plant room to house BML’s electrical infrastructure. Alfred E Chave Pty Ltd has leased the warehouse.
This new warehouse was constructed on the site of the original Building N, which was partially demolished following the 2011 flood.
BUILDING D1 This project involved the redevelopment of the eastern end of Building D, resulting in a new 411m2 warehouse, including offices, and public amenities with a compliant PWD facility. The warehouse is being leased by H.E. Heather & Co.
LPG FACILITY Construction of a new LPG Facility was completed in February 2018, and features upgraded services through a 30,000L underground tank, improved access and lighting, three double-sided fuel dispensers, and an emergency dispenser for use during an outage or disruption to supply. It is connected to BML’s SCADA system to enable remote monitoring and early fault detection to reduce the likelihood of downtime.
BUILDING C1 Preliminary works to accommodate the construction of Building C1 commenced
in May 2018 and included the demolition of the old LPG Facility and the partial demolition of the Tropicana Building. Additional works also included the relocation of high voltage power lines to underground conduits and the installation of a new electrical substation. The construction component of this $17.5 million project commenced in July 2018, and will include cold rooms, ripening rooms, a consumer packaging area, battery charging area, loading and finger docks, and offices over two levels. Construction is scheduled for completion in April 2019.
SOLAR PROJECT — STAGE 2 Stage 2 of the solar installation project saw just under 5,000 additional solar panels installed on seven building roofs across the site, bringing the total number of solar panels on site to 8,249. The panel installations were completed in November 2017. BML’s solar assets now generate over 3 Mwh of electricity per annum, which is the equivalent of 600 households and equates to over 6% of the site’s electricity requirements.
DEVELOPMENT TIMELINE Jul 2017
Aug 2017
Sep 2017
Oct 2017
Nov 2017
Dec 2017
Preparation works for the construction of Building D1
Dedicated sprinkler main connection to Building A1 completed
Underground high voltage electrical conduits installed between Site Maintenance and Building B
Construction commenced on Buildings D1 and N
Solar Project Stage 2 completed
Entered into MOU with Global Fresh Australia Pty Ltd to develop design of 5,800m2 Building E1 warehouse
ANNUAL REPORT 2018
FUTURE PROJECTS FIRE RING MAIN
BUILDING E1
This project involved installing a dedicated fire ring main to service the Northern Industrial Precinct of the site, and included the construction of a new pump station, installation of new hydrants, removal of redundant spring hydrants, separation of potable water and fire services, and significant asphalt resurfacing works. Works commenced in 2013 and were completed progressively over five stages.
BML has signed an MOU with Global Fresh Australia Pty Ltd to design the J.H. Leavy & Co. branded warehouse on the corner of Sherwood Road and Martin Taylor Drive. Conceptual designs are being developed to produce a footprint that will include extensive cold rooms, ripening rooms, storage capabilities and an Australian Quarantine Inspection Service-approved fumigation facility, featuring recapture technology. The purpose-built refrigerated warehouse will be approximately 5,800m2, with a final decision as to whether the project proceeds due in early 2019.
The final stages of work also included the installation of a dedicated sprinkler main, which runs from the west of the site across to the eastern side of the site. Over 5km of pipe has been installed across the Northern Industrial Precinct of the site, with the final section being laid in June 2018. This project provides necessary fire safety infrastructure for the Brisbane Markets® and assurance to businesses that we have improved the compliance of the site for the long term.
NIGHT MARKET BMP will be launching the first fully undercover outdoor market in Brisbane, to be known as the “Brisbane Night Market,” on the trading floor of the Brisbane Produce Market. This fully roofed area is currently undergoing structural preparation, and will be transformed into a must-visit foody hotspot and live entertainment venue, offering the perfect stop for people travelling home from work or school, and will be a great social meeting
hub showcasing an array of global street food, free live music and roving entertainment.
SOLAR PROJECT — STAGE 3 The roofs of a number of buildings across the site were replaced this financial year in preparation for the installation of new solar panels and associated infrastructure as part of Stage 3 of the solar installation project. The project to install over 6,800 additional solar panels on the roofs of 12 buildings across the site is currently out to tender, with installation expected to commence in early 2019.
COVERED BUYER UNLOADING BML will be conducting a feasibility study into the construction of a new covered buyer unloading area which will provide a range of parking/ consolidation bays for buyers in a weatherproof environment in close proximity to the Central Trading Area. The proposed location of the new covered buyer unloading area is to the north of Building D.
Jan 2018
Feb 2018
Mar 2018
Apr 2018
May 2018
Jun 2018
Fire services connected for Building N
New LPG Facility commissioned
CP1 opened for use
Completion of Buildings D1 and N
Construction commenced on new Building C1 warehouse
Completion of fire ring main
9
10
BRISBANE MARKETS LIMITED
SUMMARY OF FINANCIAL RESULTS Brisbane Markets® operating profit Perth Markets Limited operating performance proportion Net operating profit before tax Perth Markets Limited property revaluation proportion Brisbane Markets® investment property increase/(decrease) Reported net profit before tax
30 JUNE 2018 ($ MILLION)
30 JUNE 2017 ($ MILLION)
13.58 1.41 14.99 5.41 (1.79) 18.61
13.32 1.15 14.47 8.33 21.42 44.22
1.95%
22.6%
3.6%
ANNUAL REPORT 2018
SHARE PRICE HISTORY 3.80 3.60 3.40 3.20
¢
The financial result for the year ended 30 June 2018 reflects the net operating profit before tax of $14.99 million ($10.49 million after tax), reflecting an earnings per share of 24.67 cents. This is the profit amount that will be considered when determining dividends paid in accordance with the current dividend policy of the group. The movement in the property values does not generate cash to enable an increase in dividends, but it does improve the borrowing profile of the group with our financier, Westpac.
3.00 2.80 2.60 2.40
2015
2016
2017
2018
Volume weighted average sale price
Last sale prior to year end
NTA per share at year end
Capital raising issue price Aug 18
DIVIDEND TOTAL CENTS PER SHARE 17 16 15 14
¢
At 30 June, the net tangible assets (NTA) per share was $3.64; however, there is likely to be a minor decline in the NTA value as a result of the recent capital raising, due to the issue of additional shares that will be partly paid. The chart at the top right identifies that there has been improvement in the NTA per share of 37.3% in the past three years, and that the average share price and last sale price have been within 2% of the NTA across the past two years.
13 12 11 10 2014
The continued sound performance of the group has resulted in a fully franked dividend being paid during the year of 16.25 cents per share, with the declaration of a further dividend of 8.25 cents per share to be paid in October 2018.
2015
2016
2017
2018
2017
2018
2017
2018
TOTAL ASSETS
This continues the impressive dividend growth trend as highlighted in the chart to the right.
380 360 340
$m
320 300 280 260 240 220 2014
2015
2016
NET ASSETS 160 155 150 145
$m
140 135 130 125 120 115 110 2014
2015
2016
11
BRISBANE MARKETS LIMITED
REVENUE
OPERATING REVENUE 43.5
The reported group revenue for the year declined to $50.91 million due to lower valuation improvements this year; however, underlying revenue grew by 3.5% for the year as summarised below.
43 42.5
$m
42 41.5
2018 ($m)
2017 ($m)
Total reported revenue
50.91
73.53
40.5
Investment property movements in Brisbane and Perth
(5.41)
(29.75)
39.5
Perth Markets Limited contribution
(2.23)
(1.97)
Underlying Brisbane Markets® operating revenue
43.27
41.81
41 40 30 2014
2015
2016
2017
2018
2017
2018
2017
2018
• Rental and associated property related revenue has increased by 3.8% as a result of Building A1 being tenanted by Murray Bros for the majority of the year, after being vacant for most of 2017, as well as the completion of the redevelopment of Building N and Building D1. • Service revenue has grown by 3.52% for the year.
EXPENDITURE
OPERATING EBITDA 24
The reported group expenditure increased to $32.30 million for the year, and underlying expenditure increased by 4.2% as summarised below.
23
$m
22 21
2018 ($m)
2017 ($m)
Total reported expenditure
32.30
29.31
20
Perth Markets operating expenses
(0.03)
(0.05)
19
Interest incurred on Perth Markets investment
(0.79)
(0.77)
18
Decrease in value of investment property
(1.79)
0.00
Underlying Brisbane Markets® operating expenditure
29.69
2014
2015
2016
OPERATING NPBT 15.5
28.49
15 14.5
Underlying expenditure comprises: 21.81
21.13
Depreciation
1.05
0.78
Interest
6.83
6.58
14
$m
Operating expenditure
13.5 13 12.5 12 11.5 11
• There has been an increase in direct costs of 3.5%, with the major impact being increased electricity purchase costs.
2014
• Finance costs including interest and bank charges have increased by approximately $0.25 million due to an increase in our drawn bank loans of $20.6 million this year.
2016
54
• Site operations expenditure has marginally reduced again by 0.8% after a reduction last year of 6.65%. • Repairs and maintenance costs have increased by 9.5%, with additional works required across the site this year in addition to the regular ongoing scheduled maintenance and risk mitigation works.
2015
OPERATING EXPENSES AS % OF OPERATING REVENUE 53 52
%
12
51 50 49 48 2014
2015
2016
2017
2018
ANNUAL REPORT 2018
HISTORICAL FINANCIAL RESULTS AIFRS 2018
AIFRS 2017
AIFRS 2016
AIFRS 2015
AIFRS 2014
43,271
41,814
41,009
41,033
39,882
0
21,421
11,638
0
13,836
Revenue Brisbane Markets® operating revenue Brisbane Markets® property value increase Insurance recovery revenue – 2011 flood Perth Markets operating contribution Perth Markets property increase contribution Total revenue
0
0
0
1,652
1,918
2,234
1,970
93
0
0
5,410
8,325
0
0
0
50,915
73,530
52,740
42,685
55,636
21,805
21,132
20,475
21,898
21,172
31
48
25
0
0
Expenses Operating expenses – Brisbane Markets® Operating expenses – Perth Markets Depreciation and amortisation expense
1,058
783
720
897
905
Finance costs
6,832
6,578
6,447
6,225
6,541
790
768
457
0
0
1,789
0
0
184
0
0
0
796
1,105
1,957
Total expenses
32,305
29,309
28,920
30,309
30,575
Net profit before income tax and interest and depreciation
27,290
52,350
31,444
19,498
32,507
Net profit before income tax expense
25,061
Finance costs – Perth Markets investment Decrease in value of investment properties Non-operating expenditure
18,610
44,221
23,820
12,376
Income tax expense
5,589
13,273
7,158
3,715
7,520
Net profit after tax
13,021
30,948
16,662
8,661
17,541
Net profit after tax after excluding Investment property valuation changes
10,486
10,126
8,515
8,790
7,856
Net profit after tax excluding investment property valuation changes and flood insurance adjustments
10,486
10,126
9,346
8,407
7,883
14,980
14,465
13,351
12,010
11,262
6,906
6,588
5,950
5,100
4,569
Total assets
361,801
330,743
294,210
243,736
233,707
Total liabilities
206,304
182,340
173,359
130,356
122,173
Total equity
155,497
148,403
120,851
113,380
111,535
Dividend paid
3.64
3.48
2.83
2.65
2.61
Earnings per share including investment property valuation changes and abnormals
30.64 cents
72.82 cents
39.21 cents
20.38 cents
41.27 cents
Earnings per share adjusted for investment property valuation changes
24.67 cents
23.83 cents
21.35 cents
20.68 cents
18.49 cents
42,500
42,500
42,500
42,500
42,500
Net tangible assets per share ($)
Number of shares as at 30 June
13
BRISBANE MARKETS LIMITED AND CONTROLLED ENTITIES
FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
TABLE OF CONTENTS Directors’ Report
15
Auditor’s Independence Declaration
22
Financial Report
23
Directors’ Declaration
47
Independent Auditor’s Review Report
48
Corporate Governance Statement
50
ANNUAL REPORT 2018
DIRECTORS’ REPORT 30 JUNE 2018
Your Directors present their report on the consolidated entity consisting of Brisbane Markets Limited and the entities it controlled at the end of, or during, the year ended 30 June 2018.
DIRECTORS The following persons were Directors of Brisbane Markets Limited during the year or at the date of this report: • Anthony John Joseph • Anthony Robert Kelly • Bruce Miles Hatcher • Stuart Anthony Lummis • Evonne Maree Collier • Noel Anthony Greenhalgh • Peter Gerard Tighe • Andrew Alexander George Young.
PRINCIPAL ACTIVITIES During the year, the principal continuing activities of the consolidated entity consisted of: • Facilitating the efficient and effective operation and growth of the Brisbane Market site; • Providing world-class infrastructure and services to facilitate the marketing and distribution of predominantly fresh produce, together with flowers and other ancillary products, to domestic and international customers; and • Preserving and promoting the role of the Central Market for the benefit of industry stakeholders and consumers. There were no significant changes in the nature of the activities of the consolidated entity during the financial year.
OPERATING RESULTS The net profit of the consolidated entity after income tax for the year ended 30 June 2018 was $13.02 million (12 months to 30 June 2017: $30.95 million). The underlying net operating profit after income tax, excluding the impact of property revaluations of the Brisbane and Perth Markets, was $10.49 million for the 2018 year compared to $10.13 million in the 2017 year.
management, site maintenance and management of the site in accordance with the Brisbane Markets Regulations, with the following being the key highlights. • The ongoing focus on site developments and improvement this year have resulted in the following major achievements:
The net profit after tax includes the following:
-- The completion of the new Multi-level Car Park (CP1) to accommodate 540 vehicles over four levels, which also includes a new steel bridge link for safe pedestrian access to the market trading floors.
• The impact of the Brisbane Markets property valuation reduction in the current year was $1.79 million (increase of $21.42 million for the 2017 year) and the reduction after tax was $1.25 million (increase of $15 million in the 2017 year).
-- Building N redevelopment — the redevelopment of Building N included a new PIR panel warehouse of 1,500m2 which was completed in May 2018. The construction project included a roof structure linking to Building P.
• The share of net profits from Perth Markets Limited for the current year was $7.59 million ($9.68 million for the 2017 year), and the increase after tax was $5.31 million ($6.77 million for the 2017 year). The contribution before tax includes $5.41 million which relates to the increase in the Perth Markets property value ($8.33 million for the 2017 year).
-- Building D East construction — the construction of a new warehouse at the eastern end of Building D and a new public amenities block was completed in May 2018.
At balance date, Brisbane Markets Limited’s drawn down funding facility was hedged under seven long-term interest rate swaps to the extent of 61.63%. Hedging is a requirement of the funding facility provided by the company’s banker.
REVIEW OF OPERATIONS The consolidated entity’s continued operational focus throughout the year was in the areas of property
-- The completion and commissioning of a new LPG refuelling facility, containing a 30,000 litre underground tank and six new dispensers, as well as improved safety. A new toilet amenities block was also constructed adjacent to the new facility. -- The commencement of construction of the new 5,578m2 Montague Warehouse after an 18 months design development and approvals process. -- The creation of the “Moments in Time” display in the Arch Martin Brisbane Markets History Room, showcasing four time eras of Queensland’s largest fruit and vegetable hub.
15
16
BRISBANE MARKETS LIMITED
-- The partial demolition of the Tropicana Building and removal of the remaining overhead electricity wires and poles from the site, to facilitate current and future development opportunities. • Replacement of a further five warehouse roofs across Buildings V, W, M, A and Y. • Perth Markets Limited continues to make a strong contribution, with significant growth in this investment over the last two years. • Consistent with prior years, the Brisbane Markets site continues to maintain an exceptional occupancy rate of 98.61% at 30 June 2018, with the weighted average lease expiry income at 6.32 years. • The Retail Markets operated on weekends by Brisbane MarketPlace from the Rocklea site and the Eagle Farm Racecourse continued to make a strong contribution. This year, over 31,000 markets stalls were operated and sold market products to over 750,000 customers across the three markets on weekends.
DIRECTORS' REPORT – 30 JUNE 2018
• The consolidated entity has continued to recognise the ongoing contribution of the independent retailing sector through the continuing sponsorship of the “Your Local Fruit Shop” campaign and the online trading platform, “Buyfruit”. The land and buildings at the Brisbane Markets site were valued by Charter Keck Cramer Pty Ltd as at 30 June 2018, and the financial accounts of the consolidated entity reflect the movement in the value of this asset. Under the relevant Accounting Standards, any increase or reduction in the value of Brisbane Markets Limited’s property assets must be brought to account through the Statement of profit or loss and other comprehensive income. The decrease in value which has occurred this year reflects the accounting treatment of the adjustment of Brisbane Markets Limited’s property values as assessed by Charter Keck Cramer. The movement is an unrealised adjustment to the consolidated entity’s financial results, which is not included for cash flow or dividend calculation purposes.
Final fully franked ordinary dividend of 8.0 cents per fully paid share paid on 13 October 2017
$3,400,000
Final fully franked special dividend of 0.25 cents per fully paid share paid on 13 October 2017
$106,250
Interim fully franked ordinary dividend of 8.0 cents per fully paid share paid on 28 March 2018
$3,400,000
Total dividends paid during 2017/18 financial year
$6,906,250
Total dividends paid during 2016/17 financial year
$6,587,500
DIVIDENDS Dividends paid to shareholders during the year are detailed in the table below.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of affairs of the parent entity during the financial year.
MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR There are no significant events that have occurred subsequent to the end of the financial year that have not been disclosed in this report, other than as noted below. The consolidated entity finalised a capital raising in September 2018, and raised $38.4 million through this process. A further 12 million partly paid ordinary shares have been issued at a price of $1.60 per share, with a further final instalment of $1.60 per share payable on 15 April 2019.
LIKELY DEVELOPMENTS Information in relation to the likely developments of the consolidated entity include: • The Brisbane Markets Limited Board continues to review its Strategic Priorities on a regular basis, which includes an ongoing focus being given to the operation and development of the existing Brisbane Markets site. • Brisbane Markets Limited has progressed the revision of its development Master Plan during the 2018 financial year, and a number of development opportunities have been identified across the site. These include the construction of a new temperature controlled warehouse, a further stage of solar expansion, as well as other identified opportunities to be progressed concurrently.
ENVIRONMENTAL REGULATIONS The consolidated entity is not subject to any significant environmental regulation.
ANNUAL REPORT 2018
DIRECTORS' REPORT – 30 JUNE 2018
INFORMATION ON DIRECTORS AND COMPANY SECRETARY
Anthony (Tony) Joseph
Anthony (Tony) Kelly
Bruce Hatcher
MAICD, C Dec
LLB, MAICD, JP (Qual)
BCom, FCA, FAICD, FSIA
Non-executive Director and Chairman
Non-executive Director and Deputy Chairman
Non-executive Director
Tony has been a Director of Brisbane Markets Limited since incorporation in 1994. Tony has 50 years’ experience in the fruit and vegetable industry. Since 1975, Tony has been Managing Director of Alfred E Chave Pty Ltd, an established business with a long and successful history of trading in the Markets. Tony is a Director of a number of private companies with interests in fruit and vegetable wholesaling and exporting, including Alfred E Chave Pty Ltd. Tony was on the Board of Brismark from 1982 to 2017, five of those years as President. Tony was also a longstanding member of the Brisbane Market Trust prior to corporatisation by the state government. Currently, Tony is a Director of Brisbane Broncos Limited and the Brisbane Broncos Leagues Club.
Tony is a qualified lawyer having graduated from The University of Queensland in 1984. His work in the legal profession included time as a Judge’s Associate, and commercial law experience with a leading Brisbane law firm. In 1987, he commenced with the Carter & Spencer Group, where he remained until 2004, having been appointed a Director from 1992.
• Chairman
Tony is currently Chairman and coowner of an emerging IT company, Veracity Technology, specialising in cloud-based platforms and services. Tony held previous directorships with Gladstone Ports Corporation, Brisbane Bears – Fitzroy Football Club Limited (Brisbane Lions AFL Football Club) (Chairman) and Brismark (President). Tony also has business interests with First Class Capital and Cruise Holidays Australia. Tony has been a Director of Brisbane Markets Limited since 2001.
• Member of:
Special responsibilities
Special responsibilities
-- Remuneration Committee
• Director
-- (and also attends other committee meetings)
• Member of: -- Finance and Audit Committee -- Legal and Compliance Committee (Chair) -- Remuneration Committee
Bruce has been a Non-executive Director of Brisbane Markets Limited since November 2012. Bruce has extensive experience in Chartered Accounting covering many industry sectors, and consults to and serves on the Boards of several private and/or family-owned businesses. Bruce is currently the Chairman of Queensland Rugby League and a Director of the MTAA Superannuation Fund. Formerly, Bruce was the Chair of BDO Queensland, Managing Partner of Horwath Brisbane, Chairman of Horwath Australia, and the Deputy Chairman and Director of 20 years of the Queensland Academy of Sport. Bruce is a regular speaker at industry conferences and professional development seminars nationally, and has written many articles on a wide range of family business issues. Bruce has a Bachelor of Commerce, is a Fellow Chartered Accountant, a Fellow of the Australian Institute of Company Directors, the Australian Institute of Management and FINSIA, and an Adjunct Professor in Family Business at Bond University. Special responsibilities • Director • Member of: -- Finance and Audit Committee (Chair)
17
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BRISBANE MARKETS LIMITED
DIRECTORS' REPORT – 30 JUNE 2018
Stuart Lummis
Evonne Collier
Noel Greenhalgh
DipConstMan, BEc, GradDipAcc, FAICD, FFin
BA, GradCertAppFin, MBus, GAICD
MAICD
Non-executive Director
Non-executive Director
Evonne is a professional Non-executive Director and an experienced leader in business scale-up and transformation, brand/channel strategy, new to world and category innovation, digital disruption and B2B and B2C customer experience. She has 25 years’ senior executive and operational experience working within blue-chip multinational companies and brands in the FMCG, packaged goods, pharmaceutical and entertainment/technology sectors.
Noel has a comprehensive knowledge of the fruit and vegetable industry, having been Managing Director of RW Pascoe, a leading Brisbane Markets fruit and vegetable wholesaling business since 1989. During this time, he has been involved with all aspects of running this successful business.
Non-executive Director
Stuart was appointed as a Non-executive Director of Brisbane Markets Limited in 2013. Stuart is currently the Chief Executive Officer with Brisbane Housing Company Limited, a Tier 1 community housing provider. Stuart brings 37 years of experience as a senior executive in ASX-listed groups, government agencies and not-for-profit organisations. Prior to working for Brisbane Housing Company Limited, Stuart was the Director of Building, Planning Facilities and Property with the Roman Catholic Archdiocese of Brisbane, where he was directly responsible for the management of the Archdiocese of Brisbane’s complex property portfolio, compromising in excess of 450 individual diverse properties.
She currently serves on the boards of ASX listed and large private companies including 1300SMILES (ASX: ONT), THINK Childcare (ASX: TNK), Winson Group and Motorama Holdings Group (MHPL). She also mentors start-ups and serves on an Advisory Board for Ingredients Plus.
Stuart is Non-executive Director on the board of several organisations, including Bolton Clarke (formerly RSL Care RDNS) and Ipswich City Properties Pty Ltd. Additionally, he is a member of the Property Council of Queensland, sitting on the Retirement Living Committee and Chairing the National Trust of Queensland Advocacy Committee.
Evonne holds a Bachelor of Arts (UQ), Master of Business (QUT), Graduate Certificate in Applied Finance (Macquarie University), and is a graduate member of the Australian Institute of Company Directors. She has also taught at QUT’s postgraduate business school.
Stuart has a Bachelor of Economics, Postgraduate Diploma in Applied Finance and Investment, Diploma in Project and Construction Management, and is also a Fellow of the Australian Institute of Company Directors.
• Director
Special responsibilities • Director • Member of: -- Finance and Audit Committee -- Legal and Compliance Committee -- Strategy and Investment Committee (Chair)
Special responsibilities • Member of: -- Finance and Audit Committee -- Legal and Compliance Committee
Noel is a Director of Smart Berries Pty Ltd, one of the larger berry producing companies in Australia and New Zealand. He is also a Director of Belmain Fresh Pty Ltd, a table grape growing venture in Euston, Victoria. He has also been a Director of Brismark since 2000. Noel is a member of the Australian Institute of Company Directors. Special responsibilities • Director • Member of: -- Tenant Advisory Committee (Chair) -- Strategy and Investment Committee
ANNUAL REPORT 2018
DIRECTORS' REPORT – 30 JUNE 2018
Peter Tighe
Andrew Young
Murray Stewart
MAICD
DipCorpMgmt, BCom, BAgrSc (Hons), FCPA, MAICD
B.Bus, CA, FGIA, C.Dec
Non-executive Director
Peter has been a director of Brisbane Markets Limited since 1999. His family has a long history in the Brisbane Markets, and Peter is a secondgeneration member with 40 years experience in fruit and vegetable wholesaling. He is currently the CEO of Global Fresh Australia T/a J H Leavy & Co. Peter has been a Director of Brismark since 1988, and is also a director of a number of private companies with interests in fruit and vegetable wholesaling and marketing. Peter was formerly a Director of the Brisbane Racing Club Limited. Peter is a member of the Australian Institute of Company Directors. Special responsibilities • Director • Member of: -- Legal and Compliance Committee -- Strategy and Investment Committee -- Safety Advisory Committee (Chair)
Executive Director and CEO
Andrew has a history of employment at a senior management level, with extensive experience in policy and strategy formulation, service development and industry representation. His experience in the fresh produce industry includes engaging with relevant stakeholders at a state and federal level and addressing national issues through his role with Fresh Markets Australia. He has had an active involvement in addressing issues impacting on the marketing sector of the horticultural industry, and has conducted extensive research on Central Markets in Australia, Europe and the USA. He played a leading role as part of the project team responsible for what became the successful bid to purchase the Brisbane Markets site in 2002, and as CEO, coordinated the seamless transition of ownership of the Brisbane Markets site to BML. He has worked to develop and progress the implementation of the Master Plan for the Brisbane Markets site and the strategies contributing to the ongoing growth and success of the Company. Andrew is a Non-executive Director of Perth Markets Limited and an Executive Director of Fresh Markets Australia. He holds a Bachelor of Commerce, a Bachelor of Agriculture Science (Hons) and a Graduate Diploma in Corporate Management. Andrew is also a Fellow of CPA Australia and a member of the Australian Institute of Company Directors. Special responsibilities • CEO and Director • Member of: -- Finance and Audit Committee -- Legal and Compliance Committee -- Remuneration Committee -- Strategy and Investment Committee
Company Secretary
Murray is a Chartered Accountant and Chartered Secretary, with over 25 years’ experience in senior finance roles across a number of industries including retail, manufacturing, franchising, property and freight service industries. Murray’s strengths are in the areas of financial management, accounting, commercial management, dispute resolution, legal interpretation, strategic and operational business, governance, risk, compliance and company secretarial duties. Murray has strong financial acumen and an ability to understand key risks and opportunities, and to see how a business can position itself strategically for changes in the external business environment. Murray has worked for Brisbane Markets Limited for over three years and manages the Finance, Information Technology and Procurement functions of the organisation in addition to overseeing the Brisbane MarketPlace operation. Murray has a Bachelor of Business (Accounting), is a Chartered Accountant, and holds a Graduate Diploma in Company Secretarial Practice. Special responsibilities • Company Secretary
Note: Anthony Joseph, Noel Greenhalgh and Peter Tighe are principals of companies that are also shareholder members of The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited, which is a substantial shareholder of Brisbane Markets Limited. Shareholders of The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited hold one share in the Chamber, with a nominal value of $20.
19
20
BRISBANE MARKETS LIMITED
DIRECTORS' REPORT – 30 JUNE 2018
MEETINGS OF DIRECTORS The number of meetings of the company's Board of Directors and of each Board Committee held during the year ended 30 June 2018, and the number of meetings attended by each Director are detailed below. Full Board Meeting Meetings attended
Meetings held
A Joseph1
9
A Kelly
8
B Hatcher
6
Finance & Audit Meetings attended
Meetings held
9
2
9
3
9
2
3
Legal & Compliance Meetings held
Meetings attended
Meetings held
3
2
3
2
2
3
3
3
S Lummis
8
9
3
3
3
3
E Collier
9
9
2
3
2
3
N Greenhalgh
8
9
P Tighe
8
9
A Young
9
9
3
Strategy & Investment
Meetings attended
3
2
2
1
2
3
3
1
2
3
3
2
2
Remuneration Meetings attended
Meetings held
1
1
1
1
1
1
A Joseph attended Finance & Audit, Legal & Compliance and Strategy & Investment in his capacity as Chairman of the Board. A Joseph is not a member of these committees. 1
The company’s Board of Directors are also involved in Brisbane Markets Advisory Committees as follows: Brisbane Markets Safety Advisory Committee – Peter Tighe (Chair) three meetings held and one attended. Tony Joseph and Andrew Young regularly attend these meetings in their capacity as Brisbane Markets Limited Chairman and CEO respectively. Brisbane Markets Tenant Advisory Committee – Noel Greenhalgh (Chair) one meeting held and attended. Andrew Young attended this meeting in his capacity as Brisbane Markets Limited CEO.
The Board Committees and the membership of those Committees as at 30 June 2018 is:
FINANCE AND AUDIT COMMITTEE: Bruce Hatcher (Chair) Anthony Kelly Stuart Lummis Evonne Collier Andrew Young
LEGAL AND COMPLIANCE COMMITTEE: Anthony Kelly (Chair) Stuart Lummis Evonne Collier Peter Tighe Andrew Young
REMUNERATION COMMITTEE: Anthony Joseph (Chair) Anthony Kelly Andrew Young
STRATEGY AND INVESTMENT COMMITTEE: Stuart Lummis (Chair) Noel Greenhalgh Peter Tighe Andrew Young
The Board also appoints two advisory committees which include tenant representatives. The Directors who are appointed as Chairman of those committees as at 30 June 2018 are:
BRISBANE MARKETS SAFETY ADVISORY COMMITTEE: Peter Tighe (Chair)
BRISBANE MARKETS TENANT ADVISORY COMMITTEE: Noel Greenhalgh (Chair)
OPTIONS No options over unissued shares or interests in the company or a controlled entity were granted during or since the end of the financial year, and there were no options outstanding at the date of this report.
PROCEEDINGS ON BEHALF OF COMPANY No person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.
ANNUAL REPORT 2018
DIRECTORS' REPORT – 30 JUNE 2018
INDEMNIFICATION OF OFFICERS AND AUDITOR During the financial year, Brisbane Markets Limited paid a premium in respect of a contract insuring Directors, Secretaries and Executive Officers of the company and its controlled entities against a liability incurred as Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. 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 any of its controlled entities against a liability incurred as such an officer or auditor.
AUDITOR INDEPENDENCE
The Directors are of the opinion that the services as disclosed above do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons:
Section 307C of the Corporations Act 2001 requires the company's auditors, BDO Audit Pty Ltd, to provide the Directors with a written Independence Declaration in relation to their audit of the financial report ended 30 June 2018. The Auditor's Independence Declaration is attached and forms part of this Directors’ Report.
• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.
NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year are detailed in the table below. The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
ROUNDING OF AMOUNTS TO THE NEAREST THOUSAND DOLLARS
Consolidated 2018 $’000
2017 $’000
73
84
30
33
55
-
Assurance services Audit and review of the financial reports Taxation and advisory services Tax compliance and corporate advisory services, including review of company income tax returns Corporate and advisory services Corporate advising, valuation and other services
This report is made in accordance with a resolution of the Directors.
A J Joseph Chairman 10 September 2018 at Brisbane
A Young Director
The consolidated entity satisfies the requirements of ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 issued by the Australian Securities and Investments Commission relating to “rounding off” of amounts in the Directors’ Report and the financial statements to the nearest thousand dollars. Amounts have been rounded off in the Directors’ Report and financial statements in accordance with that ASIC Instrument.
21
22
BRISBANE MARKETS LIMITED
Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au
Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia
DECLARATION OF INDEPENDENCE BY P A GALLAGHER TO DIRECTORS OF BRISBANE MARKETS LIMITED
As lead auditor of Brisbane Markets Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Brisbane Markets Limited and the entities it controlled during the year.
P A Gallagher Director BDO Audit Pty Ltd
Brisbane,10 September 2018
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
ANNUAL REPORT 2018
FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2018
TABLE OF CONTENTS Statement of profit or loss and other comprehensive income
24
Statement of financial position
25
Statement of changes in equity
26
Statement of cash flows
27
Notes to the financial statements
28
1.
Significant accounting policies
2. Critical accounting judgements, estimates and assumptions Assets and liabilities
29
3. Other current assets 4. Trade and other receivables 5. Investment properties 6. Investment in associates 7. Property, plant and equipment 8. Trade and other payables Taxation 34 9. Tax liability 10. Income tax expense Capital, financing and risk management
36
11. Borrowings 12. Derivatives 13. Financial risk management 14. Fair value measurement 15. Contributed equity 16. Dividends 17. Reserves Group structure
42
18. Interests in subsidiaries 19. Parent entity information Commitments and contingencies
44
20. Commitments 21. Contingent assets and liabilities 22. Events after the reporting period Other disclosures 23. Statement of cash flows 24. Related party transactions 25. Remuneration of auditors
44
23
24
BRISBANE MARKETS LIMITED
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2018
Consolidated 2018 $’000
2017 $’000
28,757
27,709
-
21,421
10,983
10,609
7,590
9,678
2,845
2,818
Other revenue
372
391
Marketing revenue
336
296
Note REVENUE Revenue and other income Rent revenue Increase in value of investment properties
5
Service revenue Share of net profits of associates
6
Entry fees and parking
32
32
-
577
50,915
73,531
Finance costs
7,622
7,346
Direct costs of services provided
7,356
7,105
Employee benefits expenses
6,696
6,316
Site operating costs
4,252
4,286
Interest Gain from disposal of securities Total revenue and other income EXPENSES
Decrease in value of investment properties
5
Repairs and maintenance
1,789
-
1,313
1,199
1,058
783
Other expenses
988
1,165
Defined contribution superannuation expense
545
503
Marketing and promotion - general
480
401
Marketing and promotion - Retail Market
206
206
Total expenses
32,305
29,310
Profit before income tax expense
18,610
44,221
5,589
13,273
13,021
30,948
1,537
5,661
Depreciation and amortisation expense
Income tax expense Profit after income tax for the year
7
10(a)
Other comprehensive income Items that may be reclassified subsequently to profit or loss: Cash flow hedge reserve (movement in interest rate swaps)
-
251
Share of other comprehensive income of associates
(139)
(644)
Income tax relating to cash flow hedge reserve & other comprehensive income of associates
(419)
(1,580)
Recycling of share of other comprehensive income of associates
Other comprehensive income for the year, net of tax Total comprehensive income for the year
979
3,6w88
14,000
34,636
13,021
30,948
14,000
34,636
Profit attributable to: Owners of Brisbane Markets Limited Total comprehensive income attributable to: Owners of Brisbane Markets Limited
The above Statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2018
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2018
Consolidated Note
2018 $’000
2017 $’000
ASSETS Current assets 23(a)
2,488
939
Other current assets
3
1,601
1,393
Trade and other receivables
4
1,756
1,254
27
21
5,872
3,607
Cash and cash equivalents
Inventories Total current assets Non-current assets Investment properties
5
314,600
291,000
Investment accounted using the equity method
6
36,526
31,150
Property, plant and equipment
7
4,160
4,297
643
643
Intangible assets
-
46
Total non-current assets
355,929
327,136
Total assets
361,801
330,743
Trade and other receivables
4
LIABILITIES Current liabilities Trade and other payables
8
7,027
6,452
Current tax liabilities
9
911
146
Employee entitlements
180
139
Total current liabilities
8,118
6,737
Non-current liabilities Borrowings
11
150,100
129,500
Deferred tax liabilities
9
36,286
32,747
Derivatives
12
11,291
12,828
Trade and other payables
8
406
453
103
75
Total non-current liabilities
198,186
175,603
Total liabilities
206,304
182,340
Net assets
155,497
148,403
52,480
Employee entitlements
EQUITY Contributed equity
15
52,480
Reserves
17
(8,772)
(9,751)
Retained profits
111,789
105,674
Total equity
155,497
148,403
The above Statement of financial position should be read in conjunction with the accompanying notes.
25
26
BRISBANE MARKETS LIMITED
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2018
RESERVES Note
Issued capital $’000
Share of other Cash flow hedge changes in equity reserve in associate $’000 $’000
Retained profits $’000
Totals $’000
Consolidated entity Balance at 1 July 2016
52,480
(12,943)
-
81,314
120,851
-
-
-
30,948
30,948
Profit after income tax for the year Other comprehensive income for the year, net of tax: Change in fair value of cash flow hedge
17
-
3,963
-
-
3,963
Net change in fair value of cash flow hedge in associate
17
-
(275)
-
-
(275)
-
3,688
-
30,948
34,636
Total comprehensive income for the year Transactions with owners, in their capacity as owners: Share of transaction cost in associate (net of tax)
17
-
-
(496)
-
(496)
Dividends paid
16
-
-
-
(6,588)
(6,588)
Balance at 30 June 2017
52,480
(9,255)
(496)
105,674
148,403
Balance at 1 July 2017
52,480
(9,255)
(496)
105,674
148,403
-
-
-
13,021
13,021
Profit after income tax for the year Other comprehensive income for the year, net of tax: Change in fair value of cash flow hedge
17
-
1,076
-
-
1,076
Net change in fair value of cash flow hedge in associate
17
-
(97)
-
-
(97)
-
979
-
13,021
14,000
-
-
-
(6,906)
(6,906)
52,480
(8,276)
(496)
111,789
155,497
Total comprehensive income for the year Transactions with owners, in their capacity as owners: Dividends paid Balance at 30 June 2018
16
The above Statement of changes in equity should be read in conjunction with the accompanying notes.
ANNUAL REPORT 2018
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2018
Consolidated Note
2018 $’000
2017 $’000
Cash flows from operating activities
48,273
46,347
(26,104)
(24,620)
22,169
21,727
32
32
Finance costs
(7,070)
(8,199)
Income taxes paid
(1,703)
(2,764)
13,428
10,796
Cash receipts from customers Cash paid to suppliers and employees
Interest received
Net cash provided by operating activities
23
Cash flows from investing activities Proceeds from sale of property, plant and equipment Proceeds from sale of land
2,940
(25,893)
(11,852)
(1,014)
(759)
-
5,432
6
1,522
1,452
Proceeds from sale of securities in associate Distributions from associate
40
-
7
Payments relating to investment properties Purchase of plant and equipment
20
Purchase of investment in equity accounted investment Net cash used in investing activities
-
(3,505)
(25,365)
(6,252)
Cash flows from financing activities Proceeds from borrowings
22,600
8,500
Repayment of borrowings
(2,000)
(7,050)
(6,906)
(6,588)
(208)
-
13,486
(5,138)
Dividends paid
16
Capital raising transaction costs Net cash provided by/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year
23
The above Statement of cash flows should be read in conjunction with the accompanying notes.
1,549
(593)
939
1,532
2,488
939
27
28
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS 1. SIGNIFICANT ACCOUNTING POLICIES Brisbane Markets Limited is an unlisted public company limited by shares, incorporated and domiciled in Australia. (a) BASIS OF PREPARATION These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’) and Interpretations. The general purpose financial report of the Consolidated Entity for the year ended 30 June 2018 was authorised for issue in accordance with a resolution of the directors on 10 September 2018. Working Capital The consolidated entity has an excess of current liabilities over current assets at balance date of $2.2 million. The net current liabilities include a large number of capital work in progress claims and accruals at year end. The consolidated entity has approved borrowings of $160 million as disclosed in Note 11, of which $9.9 million is undrawn at 30 June 2018. The consolidated entity will utilise the undrawn funds to satisfy the payables when the payment is due. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, investment properties, and derivative financial instruments. Unless otherwise stated the financial statements are presented in Australian dollars rounded to the nearest thousand dollars ($’000), in accordance with ASIC Corporations (Rounding in Financial / Directors Report) Instrument 2016/191, which is the functional and presentational currency of the consolidated entity. (b) REVENUE RECOGNITION Rental revenue Rental revenue from investment properties is recognised on a straight-line basis over the lease term. Revenue not received at the reporting date is reflected in the Statement of financial position as a receivable or if paid in advance, as rent in advance (unearned income). Lease incentives granted are considered an integral part of the total rental revenue and are recognised as a reduction in rental income over the term of the lease, on a straight-line basis. Contingent rentals are recognised as income in the periods in which they are earned. Service revenue Service income relates to utility services provided to tenants and is recognised as income in the periods in which services are provided. Service revenue not received at the reporting
date is reflected in the Statement of financial position as a receivable or if paid in advance, as rent in advance (unearned income). All other revenue All other revenue is recognised when it is received or when the right to receive payment is established. (c) NEW, REVISED OR AMENDING ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the AASB that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed below. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: AASB 9 - Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous versions of AASB 9 and IAS 39 “Financial Instruments: Recognition and Measurement”. Under the new hedge accounting requirements: (a) the 80-125% highly effective threshold has been removed; (b) risk components of non-financial items can qualify for hedge accounting provided that the risk component is separately identifiable and reliably measurable; (c) an aggregated position (i.e. combination of a derivative and a non-derivative) can qualify for hedge accounting provided that it is managed as one risk exposure; and (d) when entities designate the intrinsic value of options, the initial time value is deferred in OCI and subsequent changes in time value are recognised in OCI. The consolidated entity currently applies hedge accounting. The consolidated entity has not fully assessed the potential impact of adoption of AASB9 on the financial statements. AASB 15 - Revenue from Contracts with Customers This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard for revenue recognition. An entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This means that revenue will be recognised when control of goods or services is transferred, rather
than on transfer of risks and rewards as is currently the case under IAS 18 Revenue. The consolidated entity has assessed the impact of adoption of AASB 15 and has determined that all material contracts are currently recognised in accordance with the revised standard, therefore, there will be no material impact on the financial statements when adopting AASB 15 in the reporting period beginning 1 July 2018. AASB 16 - Leases This standard is applicable to annual reporting periods beginning on or after 1 January 2019. When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. The consolidated entity has not fully assessed the potential impact of adoption of AASB16 on the financial statements.
2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in future periods affected. Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are discussed in the relevant notes below: • Note 4 - Provision for impairment of receivables; • Note 5 - Estimates of fair value of investment properties; • Note 7 - Estimation of useful lives of assets; • Note 9 and 10 – Tax liability & Income tax expense; and • Note 12 - Estimates of fair value of interest rate derivatives.
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
ASSETS AND LIABILITIES 3. OTHER CURRENT ASSETS Consolidated
Prepayments
2018 $’000
2017 $’000
1,594
1,382
7
11
1,601
1,393
Sundry debtors
ACCOUNTING POLICY Current and non-current classification Assets and liabilities are presented in the Statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current.
4. TRADE AND OTHER RECEIVABLES Consolidated 2018 $’000
2017 $’000
978
1,034
(2)
(25)
976
1,009
780
245
1,756
1,254
-
46
Current Trade debtors Less provision for impairment
Other debtors
Non-current Tenant lease incentives
Total trade and other receivables
-
46
1,756
1,300
910
1,003
At 30 June 2018, the ageing of trade debtors is as follows: Less than 30 days
-
12
30 days
55
-
60 days
11
-
1
-
Less than 30 days - impaired
60 days - impaired 90 days or more 90 days or more - impaired
-
6
1
13
978
1,034
29
30
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICY Trade and other receivables Trade receivables are recognised at original invoice amounts less any provision for impairment and are generally due for settlement within 30 days. Collectability of trade receivables is assessed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. Other receivables are recognised at amortised cost, less any provision for impairment. Provision for impairment of receivables A provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Provision for impairment of receivables The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent revenue billings, the ageing of receivables, historical collection rates and specific knowledge of the individual debtor financial position.
5. INVESTMENT PROPERTIES (a) RECONCILIATION Reconciliations of the carrying amount of investment properties at the beginning and end of the current and previous periods: Consolidated 2018 $’000
2017 $’000
291,000
257,000
Revaluation increment/(decrement)
(1,789)
21,421
Additions
24,977
12,579
Lease costs and incentives
400
-
Amortisation of lease costs and incentives
(59)
-
Freehold land, buildings and improvements Carrying amount at beginning of financial year
Transfers from property, plant & equipment Carrying amount at end of financial year
71
-
314,600
291,000
305,000
280,000
9,600
11,000
314,600
291,000
Summary Freehold land, buildings and improvements – 250-385 Sherwood Road, Rocklea Freehold land - 320 Sherwood Road, Rocklea Total investment properties at fair value
(b) AMOUNTS RECOGNISED IN PROFIT OR LOSS FOR INVESTMENT PROPERTY: Consolidated
Rental and outgoings from investment property Direct operating expense from property that generated rental income
(c) ASSETS PLEDGED AS SECURITY Refer note 11 for details of investment properties pledged as security.
2018 $’000
2017 $’000
42,585
41,137
(19,630)
(18,700)
22,955
22,437
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
(d) LEASES AS A LESSOR Investment properties are generally leased to tenants on long-term operating leases with rentals payable monthly. Minimum lease payments receivable under the non-cancellable operating leases of investment property not recognised in the financial statements are as follows: Consolidated 2018 $’000
2017 $’000
Within one year
22,610
22,215
Later than one year but not later than five years
82,765
70,976
66,582
37,577
171,957
130,768
Later than five years
(e) An independent valuation of investment properties as at 30 June 2018 was carried out by a qualified valuer with relevant experience in the type of property being valued (Ross Farwell - Registered No. 3250, Charter Keck Cramer Pty Ltd). In assessing the value of the investment property, the independent valuer has considered discounted cash flows, capitalisation of net market income methods and direct comparison. Refer to Note 14 for further discussion of fair value measurement of investment properties.
ACCOUNTING POLICY Investment properties Investment properties are properties held either to earn rental income, for capital appreciation or for both. Investment properties are initially measured at cost and are subsequently measured at fair value. As part of the process of determining the fair value of all property, an external independent valuer, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Brisbane Markets property annually. Property under construction held for future use as investment property is also carried at fair value unless fair value cannot yet be reliably determined. If fair value cannot yet be reliably determined, the property will be accounted for at cost until either the fair value can be reliably determined or when construction is complete. Changes to fair values of investment properties are recognised in the profit and loss in the period in which they occur. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates of fair value of investment properties The consolidated entity has investment property with a carrying amount of approximately $314.6 million (30 June 2017: $291 million) representing estimated fair value at balance date. The investment property represents a significant portion of the total assets of the consolidated entity. The fair value adopted for the investment property is based on an independent external valuation of investment property as at 30 June 2018 which was carried out by a qualified valuer with relevant experience in the type of property being valued (Ross Farwell Registered No. 3250, Charter Keck Cramer Pty Ltd). In assessing the value of the investment property, the independent valuer has considered discounted cash flows, capitalisation of net market income methods and direct comparison.
6. INVESTMENT IN ASSOCIATES Brisbane Markets Limited (the parent) holds a 41.73% interest in Perth Markets Limited (2017: 41.73%). This investment is measured in accordance with the equity method of accounting. The principal place of business of Perth Markets Limited is Canning Vale, Perth, Western Australia. Brisbane Markets Limited has been issued with 24,551,501 stapled securities comprising: • 24,551,501 ordinary shares each credited as fully paid in the capital of Perth Markets Limited, subject to the constitution of Perth Markets Limited; and • 24,551,501 units each credited as fully paid in Perth Markets Land Trust, subject to the constitution of Perth Markets Land Trust. The investment in Perth Markets Limited is a strategic investment for the company to diversify the income streams and grow shareholder value. The carrying amount recorded in the consolidated entity accounts at 30 June 2018 is $36.5 million (2017: $31.2 million). Consolidated 2018 $’000
2017 $’000
31,150
25,376
7,590
9,678
Investment in Perth Markets Limited: Carrying amount at beginning of financial year Share of profit/(loss) after tax Net share of other comprehensive income/(loss) after tax
(139)
(393)
Share of distributions received/receivable from associate
(2,075)
(1,452)
Share of associate's capital raising costs
-
(709)
Disposals during the period
-
(4,855)
Acquisitions during the period
-
3,505
36,526
31,150
31
32
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
The table below includes summarised financial information of Perth Markets Limited. Consolidated 2018 $’000
2017 $’000
7,943
5,545
Non-current assets
169,388
156,722
Total assets
177,331
162,267
2,914
1,525
Non-current liabilities
85,165
84,377
Total liabilities
88,079
85,902
Net assets
89,252
76,365
Summarised Statement of financial position Current assets
Current liabilities
Summarised Statement of profit or loss and other comprehensive income Revenue
23,754
22,574
Profit for the period
18,191
26,600
(332)
2,401
17,859
29,001
1,522
1,452
553
-
Other comprehensive income Total comprehensive income Distributions received from associates Distributions receivable from associates
Commitments and contingent liabilities in respect of associates The consolidated entity is liable for the following contractual commitments arising from its interests in associates if and when they arise: Consolidated
Commitment to provide funding if required
2018 $’000
2017 $’000
73
96
There are no material contingent liabilities disclosed by the associate. SIGNIFICANT RESTRICTIONS There are no restrictions on the ability of Perth Markets Limited to transfer funds to the consolidated entity in the form of cash dividends or loans.
ACCOUNTING POLICY Investment in associates An associate is an entity over which the consolidated entity has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the entity but is not control or joint control of these policies. Investments in associates are accounted for in the consolidated financial statements by applying the equity method of accounting, whereby the investment is initially recognised at cost (including transaction costs) and adjusted thereafter for the post-acquisition change in the consolidated entity’s share of net assets in the associate. In addition, the consolidated entity’s share of the profit or loss is included in the consolidated entity’s profit or loss. The carrying amount of the investment includes, when applicable, goodwill relating to the associate. Any discount on acquisition, whereby the consolidated entity’s share of the net fair value of the associate exceeds the cost of the investment, is recognised in the profit or loss in the period in which the investment is acquired. Profits and losses resulting from transactions between the consolidated entity and the associate are eliminated to the extent of the consolidated entity’s interest in the associate.
7. PROPERTY, PLANT AND EQUIPMENT Consolidated
Plant and equipment - at cost Less: accumulated depreciation
2018 $’000
2017 $’000
9,621
9,040
(5,461)
(4,743)
4,160
4,297
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
RECONCILIATIONS Reconciliations of the carrying amount of property, plant and equipment at the beginning and end of the current and previous periods: Plant and equipment Consolidated 2018 $’000
2017 $’000
Carrying amount at beginning of financial year
4,297
4,364
Additions
1,014
759
Disposals
(22)
(43)
(71)
-
Depreciation expense
(1,058)
(783)
Carrying amount at end of financial year
4,160
4,297
Transfers to investment property
Refer note 11 for property, plant and equipment pledged as security. ACCOUNTING POLICY Property, plant and equipment Property, plant and equipment not classified as investment properties are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation Depreciation of property, plant and equipment is calculated on a straight-line basis over their estimated useful lives commencing from the time the asset is held ready for use. The useful lives for plant and equipment is 3 to 25 years. Carrying amount The carrying amount of property, plant and equipment (cost less accumulated depreciation and impairment losses) is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from those assets. A formal assessment of recoverable amount is made when impairment indicators are present. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
8. TRADE AND OTHER PAYABLES Consolidated 2018 $’000
2017 $’000
Other creditors and accruals
2,413
2,152
Trade creditors
1,637
2,059
Accrued interest
1,269
969
Income received in advance
Current
1,165
810
Annual leave
427
402
Warehouse deposits held
116
60
7,027
6,452
404
453
2
-
Non-current Warehouse deposits held Tenant lease incentives
Total trade and other payables
406
453
7,433
6,905
Trade and other payables represent liabilities for goods and services provided to the consolidated entity prior to the year end and which are unpaid at the end of the reporting period. These amounts are unsecured and typically have 14 to 60 day payment terms.
33
34
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
TAXATION 9. TAX LIABILITY Consolidated 2018 $’000
2017 $’000
911
146
Deferred tax liability
40,559
37,391
Deferred tax assets
(4,273)
(4,644)
36,286
32,747
Current Current tax liabilities Non-current
Net deferred tax liability
DEFERRED TAX ASSETS The balance comprises temporary differences attributable to: Amounts recognised in the profit or loss:
1
8
Employee entitlements
212
185
Accruals
Provision accounts
476
446
Property, plant and equipment
29
14
Takeover costs
96
143
FBT instalment BAS not taken up
(6)
(5)
Income received in advance Capital raising costs
91
5
(13)
-
886
796
Amounts recognised in other comprehensive income: Cash flow hedge
3,387
3,848
Total deferred tax assets
4,273
4,644
4,644
6,546
(461)
(1,698)
-
-
Movements: Opening balance at 1 July Credited (charged) to other comprehensive income Credited (charged) to Statement of changes in equity Credited (charged) to the profit or loss (Note 10(b)) Closing balance
90
(204)
4,273
4,644
36,171
35,254
DEFERRED TAX LIABILITIES The balance comprises temporary differences attributable to: Property, plant and equipment Prepayments Investment in Perth Markets Limited Total deferred tax liabilities
1
-
4,387
2,137
40,559
37,391
37,391
27,250
(42)
(118)
-
(213)
256
-
Movements: Opening balance at 1 July Charged (credited) to other comprehensive income Charged (credited) to equity Charged (credited) to the profit or loss - under/(over) provision prior years Charged (credited) to the profit or loss (Note 10(b)) Closing balance
2,954
10,472
40,559
37,391
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICY Income tax The income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to profit or loss is the tax payable on taxable income for the current period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss or arising from a business combination. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale. When an investment property that is depreciable is held by the entity in a business model whose objective is to consume substantially all of the economic benefits embodied in the property through use over time (rather than through sale), the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of such property will be recovered entirely through use. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (i) a legally enforceable right of set-off exists; and (ii) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities, where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.
10. INCOME TAX EXPENSE (a) THE PRIMA FACIE TAX ON PROFIT DIFFERS FROM THE INCOME TAX EXPENSE AS FOLLOWS: Consolidated 2018 $’000
2017 $’000
18,610
44,221
5,583
13,266
Non-deductible entertainment
4
6
Other
2
1
5,589
13,273
Profit before income tax expense Income tax at the statutory rate of 30% (2017: 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income
Income tax expense
(b) THE COMPONENTS OF TAX EXPENSE COMPRISE: Current tax
2,725
2,598
Deferred tax arising from origination and reversal of temporary differences
2,864
10,675
Income tax expense
5,589
13,273
Deferred income tax (revenue) expense included in income tax expense comprises: Decrease (increase) in deferred tax assets (Note 9) (Decrease) increase in deferred tax liabilities (Note 9)
Franking credits available for use in subsequent financial year
The above amounts represent the balance of the franking account as at the end of the financial year adjusted for: (i)
franking credits that will arise from payment of the amount of the provision for income tax;
(ii) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and (ii) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.
(90)
203
2,954
10,472
2,864
10,675
6,110
8,011
35
36
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICY Income tax expense The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.
CAPITAL, FINANCING AND RISK MANAGEMENT 11. BORROWINGS Consolidated 2018 $’000
2017 $’000
150,100
129,500
Non-current Loan - Westpac Banking Corporation
Terms and conditions relating to the above loan: (i) The debt facility with Westpac Banking Corporation is $160 million and will expire on 30 April 2021. Bank loans are under a facility with a fixed term which expires on 30 April 2021. Interest rate risks associated with the liabilities are managed with interest rate swap arrangements. As at 30 June 2018, the company had drawn only $150.1 million of this $160 million facility. (ii) Loans are secured by a first registered mortgage over all current and future real property at the Brisbane Markets site and a general security interest over the assets and undertakings of the company. The carrying amount of current real property as per the valuation at 30 June 2018 is $314.6 million. (iii) Under the terms of the loan facility, there is a requirement to report financial undertakings to Westpac on a six monthly basis. These undertakings include: a)
BML must hedge at least 50% of the drawings under the facility for the term,
b)
The total outstanding under the facility cannot exceed 60% of the value of the Brisbane Markets property,
c)
The ratio of EBIT to interest expense cannot exceed 2.25 times in a 12 month period,
d)
Total tangible assets less total liabilities must not be less than 85% of the previous financial year, and
e)
The distributions made in any financial year must not exceed the lesser of; a return of 10% on shareholders equity, or 100% of the net profit after tax (excluding the impact of property valuation movements) as shown in the latest financial accounts.
ACCOUNTING POLICY Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method. Borrowing costs Borrowing costs incurred for the construction of a qualifying asset are capitalised during the period of time that it is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed when incurred.
12. DERIVATIVES Consolidated
Interest rate swap contracts - at fair value
2018 $’000
2017 $’000
11,291
12,828
Interest rate swap contracts - refer to Note 13 for the company's credit risk and hedging policy. In respect of the interest rate swap contracts, the fixed interest rates range between 0.39% above and 5.20% above (2017: 0.74% above and 5.55% above) and the variable rates range between 0.01% below and 0.07% below (2017: nil and 0.08% above) the 30 day and 90 day bank bill rates, which at balance date were 2.01% and 2.10% respectively (2017: 1.67% and 1.76%). The quarterly contracts require settlement of net interest receivable or payable every 90 days. The monthly contracts require settlement of net interest receivable or payable every 30 days. The contracts are settled on a net basis. Swaps currently in place cover approximately 61.63% (2017: 72.97%) of the variable loan principal outstanding and are timed to expire as each loan repayment falls due. During the year ended 30 June 2018, no ineffective portion (2017: nil) has been recognised and transferred to the profit or loss. Refer to Note 14 for further details on fair value measurement.
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT 2018
ACCOUNTING POLICY Derivatives The consolidated entity uses derivative financial instruments such as interest rate swaps to hedge its risk associated with interest rate fluctuations. Such derivatives are stated at fair value. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments. For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to net profit or loss for the year. For derivatives that qualify for hedge accounting, the method for recognising gains and losses on changes in fair value depends on whether the derivative is classified as a fair value hedge or a cash flow hedge. Derivatives are classified as fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability and as cash flow hedges when they hedge exposure to variability in cash flows that are attributable to either a particular risk associated with a recognised asset or liability or to a forecast transaction. The consolidated entity has no fair value hedges as at reporting date. The consolidated entity documents at inception of the hedge the relationship between the hedging instruments (derivatives) and the hedged items, as well as the risk management objective and strategy for undertaking the hedge transaction. The consolidated entity also documents, both at inception of the hedge and on an ongoing basis whether the derivatives that are used in the hedging transactions have been, and will continue to be, highly effective in offsetting changes in fair values or cash flows of hedged items. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts accumulated in other comprehensive income are recognised in profit or loss as a reclassification adjustment in periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in profit or loss as finance costs. Hedge accounting is discontinued when the hedging instrument expires, or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gains or losses on the hedging instrument recognised in other comprehensive income is kept in other comprehensive income until the forecast transaction occurs. If the forecast transaction is no longer expected to occur, the cumulative gain or loss recognised in other comprehensive income is recognised in profit or loss for the year as a reclassification adjustment. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates of fair value of interest rate derivatives The fair value of interest rate derivatives have been determined using a pricing model based on discounted cash flow analysis and incorporating assumptions supported by market data at balance date, including market expectation of future interest rates and discount rates and taking into account estimates prepared by external counterparties.
13. FINANCIAL RISK MANAGEMENT (a) GENERAL OBJECTIVES, POLICIES AND PROCESSES In common with all other businesses, the consolidated entity is exposed to risks that arise from its use of financial instruments. This note describes the consolidated entity’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the consolidated entity’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note. The Board has overall responsibility for the determination of the consolidated entity’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to management. The consolidated entity’s risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the results of the consolidated entity where such impacts may be material. The consolidated entity generally uses derivative financial instruments such as interest rate swap contracts to hedge these risks. The Board receives monthly reports from management through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the consolidated entity’s competitiveness and flexibility. Further details regarding these policies are set out below. (b) CREDIT RISK EXPOSURE The objective of the entity is to minimise risk of loss from credit risk exposure. Credit risk arises principally from cash at bank and trade and other receivables. Credit risk from receivables is measured using days and ageing. The maximum credit risk exposure of financial assets at the reporting date is the carrying amount of these assets as indicated in the Statement of financial position. Provision has been raised in the accounts where doubts as to the full realisation of the assets exists. Credit risk in respect of trade debtors is managed by requiring payment within 14 days of the date of invoice. Credit risk represents the risk of counter party default. The credit risk on financial assets of the consolidated entity which have been recognised in the Statement of financial position is generally the carrying amount, net of any provisions for impairment. Credit risk is managed through the establishment of credit limits with guarantees and other forms of security obtained where required. Limits are determined after taking into account the debtor's financial position, past experience and other factors. Compliance with credit limits is regularly monitored by management. Hedging policy The company uses derivative financial instruments (interest rate swaps) to reduce the exposure to market risks arising from changes in interest rates. The consolidated entity does not enter into derivative contracts for the purposes of trading. Hedging decisions are made based on the consolidated entity’s interest rate risk position. Hedging for the purpose of this policy means a transaction which reduces the calculated interest rate risk on the overall portfolio of interest bearing assets and liabilities using one or more of the interest rate risk measures of value at risk, sensitivity or accrued simulation.
37
38
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
(c) LIQUIDITY RISK Liquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The objective of managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed circumstances. Liquidity risk is measured using liquidity ratios such as working capital. The consolidated entity manages this risk through the following mechanisms: (i)
preparing forward looking cash flow analysis in relation to operational, investing and financing activities;
(ii) monitoring undrawn credit facilities; (ii) maintaining a reputable credit profile; and (iv) managing credit risk related to financial assets. The tables below reflect an undiscounted contractual maturity analysis for financial liabilities. Bank funding amounts have been deducted in the analysis as management does not consider there is any reasonable risk that the bank will terminate such facilities. The bank does however maintain the right to terminate such facilities in the event of a breach of financial undertakings. Financial liability maturity analysis Weighted average interest rate
Total carrying amount $’000
Total contractual outflow $’000
Within 1 year $’000
1 to 5 years $’000
Over 5 years $’000
Trade and other payables (excl. annual leave)
N/A
7,006
7,006
6,600
406
-
Amounts payable to related parties
N/A
36
36
36
-
-
Consolidated entity - 2018 Financial liabilities due for payment
Net settled Interest rate swaps
2.48%
11,291
15,416
2,290
7,996
5,130
Bank loans1
3.83%
150,100
150,100
-
150,100
-
-
8,130
2,909
5,221
-
Total contractual outflows
168,433
180,688
11,835
163,723
5,130
Less bank loans1
150,100
150,100
-
150,100
-
-
-
-
-
150,100
18,333
30,588
11,835
13,623
155,230
Weighted average interest rate
Total carrying amount $’000
Total contractual outflow $’000
Within 1 year $’000
1 to 5 years $’000
Over 5 years $’000
N/A
6,503
6,503
6,050
453
-
Interest on bank loans
2
Expected settlement in the future Total expected outflows
Consolidated entity - 2017 Financial liabilities due for payment Trade and other payables (excl. annual leave)
N/A
-
-
-
-
-
Net settled Interest rate swaps
3.14%
12,828
19,745
2,963
9,233
7,549
Bank loans1
4.07%
129,500
129,500
-
129,500
-
-
7,947
2,210
5,737
-
Total contractual outflows
148,831
163,695
11,223
144,923
7,549
Less bank loans1
129,500
129,500
-
129,500
-
-
-
-
-
129,500
19,331
34,195
11,223
15,423
137,049
Amounts payable to related parties
Interest on bank loans2
Expected settlement in the future Total expected outflows
Note: Bank funding facility has a renewal date of 30 April 2021. Payment of these amounts will not physically occur with the loan balance flowing forward to the new negotiated facility. The Directors are not aware of any reason as to why the funding facility will not be renewed or refinanced in the future. 1
2
Note: 61.63% (2017: 72.97%) of loans are hedged therefore the actual outflow will be less.
Interest risk management Interest rate risks are caused by fluctuations in interest rates which, in turn, are due to market factors. Interest rate sensitivity The consolidated entity’s main interest rate risk arises from cash and cash equivalents, borrowings and interest rate swaps. The following table demonstrates the sensitivity to a possible change in interest rates by 1%, with all other variables held constant, on the consolidated entity’s profit or loss before taxes and other comprehensive income. This sensitivity analysis on the interest rate swap has been prepared on the basis that the swaps are fully effective at year end and reflect an undiscounted analysis.
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
Effect on profit before taxes $’000 Sensitivity - 2018
30-Jun-18
Increase 1%
Decrease 1%
2,488
25
(25)
57,600
(576)
576
Cash and cash equivalents Borrowings (variable loan)
Effect on other comprehensive income 30-Jun-18
Increase 1%
Decrease 1%
Interest rate swap
11,291
5,120
(5,120)
Sensitivity - 2017
30-Jun-17
Effect on profit before taxes Increase 1%
Decrease 1%
Cash and cash equivalents
939
9
(9)
Borrowings (variable loan)
35,000
(350)
350
Effect on other comprehensive income
Interest rate swap
30-Jun-17
Increase 1%
Decrease 1%
12,828
6,051
(6,051)
MARKET RISK Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the entity's income or the value of its holdings of financial instruments. As borrowings are effectively at a fixed interest rate there is no material exposure to any market risks including interest rate risk.
14. FAIR VALUE MEASUREMENT The following assets and liabilities are recognised and measured at fair value on a recurring basis: • investment properties; and • derivatives. There are no assets or liabilities which are measured at fair value on a non-recurring basis. The carrying values of financial assets and financial liabilities approximate their fair values due to their short term nature. Fair value hierarchy All assets and liabilities for which fair value is measured or disclosed are categorised according to the fair value hierarchy as follows. Level 1:
Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3:
Inputs for the assets or liability that are not based on observable market data (unobservable inputs).
Recognised fair value measurements The following table sets out the consolidated entity’s assets and liabilities that are measured and recognised at fair value in the financial statements. Level 1 $
Level 2 $
Level 3 $
Total $
-
-
314,600
314,600
-
11,291
-
11,291
-
-
291,000
291,000
-
12,828
-
12,828
2018 Non-financial assets Investment properties Financial liabilities Derivatives-interest rate swaps 2017 Non-financial assets Investment properties Financial liabilities Derivatives-interest rate swaps
There were no transfers during the year between Level 1 and Level 2 for recurring fair value measurements. The consolidated entity’s policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circumstances that caused the transfer occurred.
39
40
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Valuation techniques used to derive Level 2 and Level 3 fair values recognised in the financial statements The following table sets out the valuation techniques used to measure fair value within Level 2, including a description of the significant inputs used. Description
Valuation approach and inputs used
Derivatives - interest rate swaps
Present value of the estimated future cash flows based on observable yield curves.
The following table sets out the valuation techniques used to measure fair value within Level 3, including details of the significant unobservable inputs used and the relationship between unobservable inputs and fair value. Description
Investment properties
Valuation approaches
Unobservable inputs Range of inputs
Relationship between unobservable inputs and fair value
Capitalisation approach based on current Capitalisation rate market net income generated by the property capitalised at an appropriate market yield to establish the property’s current market value fully leased.
7.0% to 15.00% (average used 7.87%)
The higher the capitalisation rate, the lower the fair value.
Income approach based on estimated Discount rate rental value of the property. Discount rates and terminal yields, are estimated by an external valuer or management based on Terminal yield comparable transactions and industry
8.50%
The higher the discount rate and terminal yield, the lower the fair value.
Market approach based on prices and other relevant information generated by market transactions involving identical or comparable (i.e. similar) assets or a group of assets.
$2,100 to $2,200 per square metre per annum of lettable area.
data.
The dollar rate per square metre per annum of lettable area achieved by comparable assets sold in the current market.
7.25% to 15.00% (average used 8.12%) The higher the dollar rate per square metre per annum of lettable area, the higher the fair value
There were no significant inter-relationships between unobservable inputs that materially affect fair values. Reconciliation of Level 3 fair value movements The following table sets out the movements in Level 3 fair values for recurring measurements. Investment properties $’000 Opening balance 1 July 2017
291,000
Acquisitions
24,977
Fair value movement recognised in profit or loss
(1,789)
Lease costs and incentives
400
Amortisation of lease costs and incentives
(59) 71
Transfers from property, plant & equipment Closing balance 30 June 2018
314,600
Valuation processes for Level 3 fair values Management regularly reviews the Level 3 valuations of investment properties and reports the results of these reviews to the Audit Committee and to the Board. Valuations are fully reviewed every six months to ensure that they are current for the half-year and annual financial statements with the consolidated entity engaging an external, independent and qualified valuer to determine the fair value of the consolidated entity’s investment properties at the end of every annual reporting period. All valuations, including external valuations, are reviewed and approved by the Audit Committee before submission to the Board. Highest and best use The current use of the investment properties equates to their highest and best use.
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICY Fair value Fair values may be used for financial asset and liability measurement and well as for sundry disclosures. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent, knowledgeable and willing market participants at the measurement date. It is based on the presumption that the transaction takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market. The principal or most advantageous market must be accessible to, or by, the consolidated entity. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest. The fair value measurement of a non-financial asset takes into account the market participant's ability to generate economic benefits by using the asset at its highest and best use or by selling it to another market participant that would use the asset at its highest and best use. In measuring fair value, the consolidated entity uses valuation techniques that maximise the use of observable inputs and minimise the use of unobservable inputs. The consolidated entity’s policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circumstances that caused the transfer occurred.
15. CONTRIBUTED EQUITY Consolidated Issued and paid up capital
2018 Number
2017 Number
2018 $
2017 $
Movements in share capital Ordinary shares
42,500,000
42,500,000
52,480,189
52,480,189
42,500,000
42,500,000
52,480,189
52,480,189
Balance at the beginning of financial year
4
4
30
30
Balance at the end of financial year
4
4
30
30
Balance at the beginning of financial year Balance at the end of financial year Industry shares
Terms and conditions of contributed equity: Ordinary shares Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of, and amounts paid up on, shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company. Industry shares The holder of the industry shares shall be entitled to appoint Industry Directors to the Board according to the number of industry shares held, shall be entitled to receive notice of, and attend meetings of the company and to speak on any matter relating to industry shares, but not vote in respect of those shares. The holder of industry shares has no right to participate in the capital or profits of the company, whether on winding up, by way of distribution of capital or otherwise.
ACCOUNTING POLICY Contributed equity Ordinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are included as part of the purchase consideration. Capital management The consolidated entity manages its capital to ensure that entities in the consolidated entity will be able to continue as a going concern while maximising the return to stakeholders through optimisation of the debt and equity balance. The capital structure of the consolidated entity consists of debt which includes the borrowings disclosed in Note 11, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in Notes 16 and 17, and the Statement of changes in equity. There are no externally imposed capital requirements. Management effectively manages the consolidated entity's capital by assessing the consolidated entity's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.
41
42
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
16. DIVIDENDS Consolidated 2018 $’000
2017 $’000
3,400
3,188
Dividends provided for or paid during the year: Final fully franked ordinary dividends (fully paid shares) Final fully franked special dividends (fully paid shares) Interim fully franked ordinary dividends (fully paid shares)
Dividend per share paid for fully paid shares during the financial year
106
-
3,400
3,400
6,906
6,588
16.25 cents
15.50 cents
Dividends paid are fully franked at the tax rate of 30 cents in the dollar. The franking account balance at 30 June 2018 is disclosed at Note 10(b).
ACCOUNTING POLICY Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the company.
17. RESERVES Consolidated
Cash flow hedge reserve - interest rate swap Share of changes in equity in associate – net of tax
2018 $’000
2017 $’000
8,276
9,255
496
496
8,772
9,751
9,751
12,943
(1,076)
(3,963)
97
275
Movement in reserves Opening balance at 1 July (Increase)/decrease in fair value of cash flow hedge (Increase)/decrease in fair value of cash flow hedge of associate
-
496
8,772
9,751
Share of transaction cost in associate - net of tax Closing balance
GROUP STRUCTURE 18. INTERESTS IN SUBSIDIARIES Name
Principal place of business/ country of incorporation
Ownership interest 2018
Brisbane MarketPlace Pty Ltd
Australia
2017
%
%
100%
100%
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
19. PARENT ENTITY INFORMATION The Corporations Act requirement to prepare parent entity financial statements where consolidated financial statements are prepared has been removed and replaced by regulation 2M.3.01 which requires the following limited disclosure in regards to the parent entity. Consolidated 2018 $’000
2017 $’000
Parent entity
5,758
3,572
Non-current assets
355,669
326,851
Total assets
361,427
330,423
8,834
7,769
Non-current liabilities
198,245
175,664
Total liabilities
207,079
183,433
Net assets
154,348
146,990
52,480
52,480
Current assets
Current liabilities
Issued capital
(8,772)
(9,751)
Retained earnings/(accumulated losses)
110,640
104,261
Total shareholders’ equity
154,348
146,990
Profit/(loss) for the year
11,936
29,959
Total comprehensive income
12,915
33,646
Reserves
Profit for the year The operating profit of the parent entity after income tax for the year ended 30 June 2018 was $11.94 million which included a net revaluation decrement after tax of $1.25 million. The net revaluation decrement is a non-operating unrealised variance to the result and as such is not included for purposes of calculating cash flow or dividends. Guarantees No guarantees have been entered into by the parent entity in relation to debts of its subsidiaries. Commitments At 30 June 2018, the entity had no material capital or other expenditure commitments other than as disclosed. Contractual operating commitments Estimated major expenditure of the parent entity contracted for at balance date, but not provided for is as follows: Consolidated 2018 $’000
2017 $’000
payable not later than one year
678
2,109
payable later than one year but not later than five years
421
1,306
payable later than five years
260
-
1,359
3,415
12,642
13,512
Capital project commitments - payable not later than one year
Contingent assets/liabilities As at 30 June 2018, the entity had no significant contingent assets or liabilities.
43
44
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICY Principles of consolidation The consolidated financial statements incorporate the assets, liabilities and results of Brisbane Markets Limited (‘company’ or ‘parent entity’) and the subsidiaries as at 30 June 2018. Brisbane Markets Limited and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’. Subsidiaries are those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. A list of the subsidiaries is provided in Note 18. Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity.
COMMITMENTS AND CONTINGENCIES 20. COMMITMENTS At 30 June 2018, the consolidated entity had no material capital or other expenditure commitments other than as disclosed. Contractual operating commitments Estimated major expenditure contracted for at balance date, but not provided for is as follows: Consolidated 2018 $’000
2017 $’000
- payable not later than one year
749
2,139
- payable later than one year but not later than five years
582
1,306
- payable later than five years
260
-
1,591
3,445
12,642
13,512
Capital project commitments - payable not later than one year
21. CONTINGENT ASSETS AND LIABILITIES As at 30 June 2018, the consolidated entity had no significant contingent assets or liabilities.
22. EVENTS AFTER THE REPORTING PERIOD There are no significant events that have occurred subsequent to the end of the financial year that have not been disclosed in this report, other than as noted below. The consolidated entity finalised a capital raising in September 2018 and raised $38.4 million through this process. A further 12 million partly paid ordinary shares have been issued at a price of $1.60 per share, with a further final instalment of $1.60 per share payable on 15 April 2019.
OTHER DISCLOSURES 23. STATEMENT OF CASH FLOWS (a) RECONCILIATION OF CASH For the purposes of the Statement of cash flows, cash includes cash on hand and in banks and investments where the term of these investments is less than three months. Cash at the end of the reporting period as shown in the Statement of cash flows is reconciled to the related items in the Statement of financial position as follows: Consolidated 2018 $’000 Cash on hand Cash at bank
2017 $’000
6
2
2,482
937
2,488
939
ANNUAL REPORT 2018
NOTES TO THE FINANCIAL STATEMENTS
(b) RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES WITH PROFIT FOR THE YEAR Consolidated 2018 $’000
2017 $’000
13,021
30,948
1
3
1,058
783
(7,590)
(10,254)
1,789
(21,421)
(4,742)
(30,889)
Decrease/(increase) in receivables
608
(70)
Decrease/(increase) in other assets
581
(97)
Decrease/(increase) in inventory
227
(265)
Increase/(decrease) in provisions
93
51
Increase/(decrease) in provision for income tax expense
807
165
Decrease/(increase) in deferred tax assets
(89)
203
Profit (after income tax) for the year Non-cash items included in profit or loss: Profit/(loss) on sale of property, plant and equipment Depreciation and amortisation Profit from investment in associate Change in value of investment properties
Net changes in working capital:
Increase/(decrease) in payables Increase/(decrease) in deferred tax liability
Net cash provided by operating activities
(246)
609
3,168
10,141
5,149
10,737
13,428
10,796
Non-cash Changes $’000
2018 $’000
(C) RECONCILIATION OF CASH FLOWS FROM FINANCING ACTIVITIES FOR THE YEAR Consolidated Cash flows
Borrowings Interest rate swaps
2017 $’000
Inflow $’000
(Outflow) $’000
129,500
22,600
(2,000)
-
150,100
12,828
-
-
(1,537)
11,291
142,328
22,600
(2,000)
(1,537)
161,391
ACCOUNTING POLICY Cash and cash equivalents Cash and cash equivalents include cash on hand and at banks, deposits held at call with financial institutions and, where applicable, bank overdrafts. Bank overdrafts are reported within borrowings in current liabilities on the Statement of financial position.
24. RELATED PARTY TRANSACTIONS Key management personnel compensation Note: Key management personnel includes non-executive Board members. The aggregate compensation made to Directors and other members of key management personnel of the consolidated entity during the year is as set out below: Consolidated
Short term employee benefits Post-employment benefits Other long-term benefits
2018 $’000
2017 $’000
1,419
1,280
109
99
13
12
1,541
1,391
45
46
BRISBANE MARKETS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Transactions with related parties A Director, Andrew Young, holds the position of Chief Executive Officer of The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited. Noel Greenhalgh and Peter Tighe were members of the Board of The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited for the full year, and Anthony Joseph was a member of the board until 17 October 2017. In accordance with Clause 37.1 of the Constitution of Brisbane Markets Limited, The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited as the holder of the four industry shares appoints up to four Directors to the Board of Brisbane Markets Limited. The Directors appointed are Anthony Joseph, Bruce Hatcher, Stuart Lummis and Evonne Collier. The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited lease premises and acquire other services of Brisbane Markets Limited. Brisbane Markets Limited utilises a number of the services provided by The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited. A Director, Anthony Joseph, is also a Director of Alfred E Chave Pty Ltd and BMCSAD Pty Ltd, which lease premises from Brisbane Markets Limited. A Director, Noel Greenhalgh, is also a Director of R W Pascoe Pty Ltd and Protettore Pty Ltd which lease premises from Brisbane Markets Limited. A Director, Peter Tighe, is also a Director of Osric Investments Pty Ltd and Hambleton Investments Pty Ltd, which lease premises from Brisbane Markets Limited. Peter Tighe is also employed in the management team of Global Fresh Australia Pty Ltd, which lease premises from Brisbane Markets Limited. Brisbane Markets Limited receives payments from its associate Perth Markets Limited for Board member remuneration, business travel expenditure and licence fees. All transactions and leases with related parties are based on normal commercial terms and conditions which are no more favourable than those which it is reasonable to expect would be applied if the transaction was at arm's length. Aggregate amount of the above transactions with related parties: Consolidated 2018 $’000
2017 $’000
2,875
2,268
568
965
98
103
134
97
3,675
3,433
Other
484
444
Total purchased
Income: Rental and related charges Utility charges Joint promotion and sponsorship Other Total rent and other revenue received Expenses:
484
444
Balance outstanding in receivables - current assets
94
96
Balance outstanding in payables - current liabilities
36
-
Loans to/from related parties There were no loans to or from related parties at the current or previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates.
25. REMUNERATION OF AUDITORS During the year the following amounts were paid/payable to the auditor of the parent entity and its related practices: Consolidated 2018 $’000
2017 $’000
73
84
30
33
55
-
Assurance services Audit and review of the financial reports Taxation and advisory services Tax compliance and corporate advisory services, including review of company income tax returns Corporate and advisory services Corporate advising, valuation and other services
ANNUAL REPORT 2018
DIRECTORS’ DECLARATION
In the Directors’ opinion: • the attached financial statements and notes thereto comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes thereto comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; • the attached financial statements and notes thereto give a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the financial year ended on that date; and • there are reasonable grounds to believe that Brisbane Markets Limited will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of Directors made pursuant to section 295(5) (a) of the Corporations Act 2001. On behalf of the Directors
A J Joseph Chairman 10 September 2018 at Brisbane
A Young Director
47
48
BRISBANE MARKETS LIMITED Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au
Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia
INDEPENDENT AUDITOR'S REPORT To the members of Brisbane Markets Limited
Report on the Audit of the Financial Report Opinion We have audited the financial report of Brisbane Markets Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration. In our opinion the accompanying financial report of Brisbane Markets Limited, is in accordance with the Corporations Act 2001, including: (i)
Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of its financial performance for the year ended on that date; and
(ii)
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information The directors are responsible for the other information. The other information obtained at the date of this auditor’s report is information included in the director’s report, but does not include the financial report and our auditor’s report thereon.
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
ANNUAL REPORT 2018
Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar3.pdf This description forms part of our auditor’s report.
BDO Audit Pty Ltd
P A Gallagher Director Brisbane,10 September 2018
BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
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BRISBANE MARKETS LIMITED
CORPORATE GOVERNANCE STATEMENT The Board of Directors is responsible on behalf of the shareholders for the overall corporate governance of the company, including direction and oversight of the company's business and affairs.
BOARD COMPOSITION The Board comprises eight Directors, including seven non-executive Directors, being Anthony (Tony) Joseph, Anthony (Tony) Kelly, Bruce Hatcher, Stuart Lummis, Evonne Collier, Noel Greenhalgh and Peter Tighe. The other Director is the Chief Executive Officer, Andrew Young. The constitution states that the number of Directors should be determined by the company, but be not less than three and no more than eight at any time.
ROLE OF DIRECTORS The Board of Directors is responsible for corporate governance matters. It has established principles under which the Board and management operate to ensure that business is carried out in the best interests of shareholders and other stakeholders, with proper sharing of responsibilities between Directors and management. The Board is responsible for adopting business plans, investment strategies, corporate policies, budgets and the approval of longer term strategic plans for the company, delegating management of the business and the implementation of Board strategies and plans to the Chief Executive Officer. The Board also reviews, and if appropriate, approves major capital expenditure, acquisitions and funding issues. It has the responsibilities of overseeing the audit and compliance functions.
FREQUENCY OF MEETINGS AND ATTENDANCE The Board must meet at least six times per year and will hold as many additional meetings as the operations of the company may require. Board meetings are scheduled at the commencement of each calendar year to ensure as many Directors as possible are able to be present at meetings.
PERFORMANCE OF DIRECTORS AND CHIEF EXECUTIVE OFFICER The performance of all Directors, the Board as a whole and the Chief Executive Officer is to be reviewed at least annually in accordance with the company's corporate governance guidelines.
• all areas of significant capital risk and the arrangements in place to contain those risks to acceptable levels • the effectiveness of management information or other systems of internal control • the financial statements of the company with both management and external auditors. The Finance and Audit Committee comprises five Directors, being Bruce Hatcher (Chair), Anthony (Tony) Kelly, Stuart Lummis, Evonne Collier and the CEO, Andrew Young. The Chairman has a standing invitation to attend any or all meetings of Board Committees.
LEGAL AND COMPLIANCE COMMITTEE
INDEPENDENT PROFESSIONAL ADVICE
The key areas of responsibilities for the Legal and Compliance Committee include:
Each Director has the right to seek independent professional advice at the company's cost, subject to the approval of the Chairman.
• monitoring legal and procedural issues to ensure the company is complying with all regulatory requirements
COMMITTEES OF THE BOARD
• advising the Board regarding potential conflicts of interest and related policy matters.
To assist in the execution of the Board's corporate governance responsibilities, the Board has established four committees with a non-executive Director as Chairman of each.
FINANCE AND AUDIT COMMITTEE The key matters which will be dealt with by the Finance and Audit Committee include the review of: • the appointment and continuation of external auditors • the adequacy of existing external audit arrangements, with particular emphasis on the scope and quality of the audit
The Legal and Compliance Committee comprises five Directors, being Anthony (Tony) Kelly (Chair), Stuart Lummis, Evonne Collier, Peter Tighe and the CEO, Andrew Young. The Chairman has a standing invitation to attend any or all meetings of Board Committees.
ANNUAL REPORT 2018
REMUNERATION COMMITTEE The key areas dealt with by the Remuneration Committee include: • reviewing the remuneration policies and practices for the company by taking into account market conditions and comparable market rates to attract, retain and motivate Directors, Executives and employees of the highest calibre and quality. The Remuneration Committee comprises three Directors, being Anthony (Tony) Joseph (Chair), Anthony (Tony) Kelly and Andrew Young.
STRATEGY AND INVESTMENT COMMITTEE The key areas dealt with by the Strategy and Investment Committee include: • reviewing the organisation's investment and expansion strategy in accordance with the Brisbane Markets Limited Strategic Plan and agreed risk appetite • considering potential acquisitions, expansion opportunities and other strategic investments against Brisbane Markets Limited’s growth and risk appetite. The Strategy and Investment Committee comprises four Directors, being Stuart Lummis (Chair), Noel Greenhalgh, Peter Tighe and the CEO, Andrew Young. The Chairman has a standing invitation to attend any or all meetings of Board Committees.
ETHICAL STANDARDS The company recognises the need for Directors and employees to observe the highest standards of behaviour and business ethics when engaging in corporate activity. All Directors and employees are expected to act in accordance with the law and with the highest standards of propriety.
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CORPORATE DIRECTORY SHARE REGISTRY
SHARE TRADING
Link Market Services Level 21 10 Eagle Street Brisbane Qld 4000 Email: registrars@linkmarketservices.com.au Website: www.linkmarketservices.com.au Shareholder inquiries: 1300 554 474
As an unlisted public company, shares in BML are not traded on the Australian Stock Exchange or any other share trading exchange system. BML does, however, maintain a register of parties interested in buying shares in the company and offers guidance in the process.
AUDITORS AND INDEPENDENT ACCOUNTANT BDO Audit Pty Ltd Level 10 12 Creek Street Brisbane Qld 4000
SOLICITORS HopgoodGanim Lawyers Level 8 Waterfront Place 1 Eagle Street Brisbane Qld 4000
BML'S SENIOR MANAGEMENT TEAM Chief Executive Officer Andrew Young Chief Financial Officer Murray Stewart Chief Property Officer Tricia Williams Administration Manager/EA to the CEO Joady Raph Site Infrastructure Manager Steve Cooke Operations Manager Jessie Field
If a shareholder wants to sell shares in the company they can do so by private treaty where they have identified a buyer, or alternatively advise BML and provide information which will be circulated to all parties who have registered an interest in buying shares. The individuals concerned can then negotiate a price and progress the sale. If a sale is finalised, BML’s share registry, Link Market Services, must be sent a copy of the original transfer form and share certificate so that the change of ownership can be recorded on the company’s share register. People interested in buying or selling shares in BML, or who need any information in this regard, may register their interest by emailing shares@brisbanemarkets.com.au or visit the shareholder/investor section of our website www.brisbanemarkets.com.au.
2018 BRISBANE MARKETS LIMITED ACN 064 983 017 | ABN 39 064 983 017 Administration and Registered Office: Level 2, Fresh Centre 385 Sherwood Road, Rocklea PO Box 80, Brisbane Markets 4106 Telephone: (07) 3915 4200 Facsimile: (07) 3915 4291 Email: admin@brisbanemarkets.com.au www.brisbanemarkets.com.au