Knights Capital Group Limited Consol Financials 2019.pdf · Knights Capital Group Limited...

Knights Capital Group Limited ABN 39 072 769 174

Financial Statement

30 June 2019

Contents Page

Directors’ report 3

Lead auditor’s independence declaration 9

Consolidated statement of profit or loss and comprehensive income 10

Consolidated statement of changes in equity 11

Consolidated statement of financial position 12

Consolidated statement of cash flows 13

Notes to the consolidated financial statements 14-46

Directors’ declaration 47

Audit report

Knights Capital Group Limited Directors’ Report For the year ended 30 June 2019

2

The directors present their report together with the financial statements of Knights Capital Group Limited (‘the Company and/or KCGL’) and of the Group, being the Company and its subsidiaries, for the financial year ended 30 June 2019 and the auditor’s report thereon.

Contents of Directors’ Report Page

Directors 3

Directors’ activity 4

Principal activities 4

Review and results of operations 5

Remuneration Report 6

Dividends 7

Events Subsequent to Reporting Date 7

Likely developments 7

Registered office 7

Directors’ interests 7

Indemnification and insurance of officers and auditors 8

Lead auditor’s independence declaration 8


3

1. Directors

The directors of the Company at any time during or since the end of the financial year are:

Name, qualifications and independence status

Experience, special responsibilities and other directorships

Michael BRITTON B.Juris, LLB, FCIS, GAICD Non-Executive Director, Knights Capital Group Limited (“KCGL”)

• Mr Britton has over 39 years of commercial and financial services experience with a leading reputation in the delivery of independent Responsible Entity services.

• He is a director of Westfield Corporation Limited and Westfield America Management Limited, both now wholly owned subsidiaries of Unibail Rodamco Westfield

• He currently chairs compliance committees of a number of ASX listed and unlisted managed investment schemes operated by the Evans Dixon Group and is a Panel Member for the Financial Complaints Authority.

• He is a member of the NorthWest Healthcare Australia RE Limited and Angas Securities Limited Compliance Committees.

• Director since 1 March 2013.

Grant HODGETTS B.A, Assoc DipVal, AAPI, MAICD Executive Director, KCGL Director, Knights Parks & Properties Pty Ltd (“KP&P”)

• Mr Hodgetts is currently non-executive Chairman of Charter Hall Folkestone Funds Management Limited.

• He is a non-executive Chairman of Charter Hall Social Infrastructure Limited.

• He is a non-executive Director of Cedar Woods Wellard Limited.

• He is a Director of Bethley Group Pty Ltd.

• He is Principal of Hodgetts and Partners.


Gregory PARAMOR AO FAPI, FRICS Non-Executive Director, KCGL

• Mr Paramor has more than 40 years’ experience in the Real Estate and Funds Management Industry.

• He is a Director of Charter Hall Ltd.

• He is a board member of the Sydney Swans.


Grant PRIEST B. Bus, FCA, CTA, Dip.FinSvcs Company Secretary, KCGL Director, KP&P

• Mr Priest is a director of UHY Haines Norton Perth Pty Ltd.

• Mr Priest has more than 37 years’ experience in the financial services industry.

• Mr Priest was Chairman of the charity Life Plan Recreation and Leisure Association for 20 years. He co-founded the charity in 1999.

• Mr Priest sits on the Ethics Committee of Perth Children’s Hospital (formerly Princess Margaret Hospital) since 2013.

• Company Secretary since 14 March 2013.


4

2. Directors’ activity

2.1 Directors’ meetings

The number of directors’ meetings and number of meetings attended by each of the directors of the Company during the financial year are:

Attended Eligible to Attend Held

Michael BRITTON 2 2 2

Grant HODGETTS 2 2 2 Gregory PARAMOR 1 2 2

2.2 Audit Committee Meetings

The number of audit committee meetings and number attended by each of the directors of the Company during the financial year are:


Michael BRITTON 2 2 2 Grant HODGETTS 2 2 2 Grant PRIEST 2 2 2

2.3 Directors’ briefings

The number of directors’ briefings and number attended by each of the directors of the Company during the financial year are:


Michael BRITTON 15 15 15 Grant HODGETTS 15 15 15 Gregory PARAMOR 15 15 15

3. Principal activities

The principal activities of the consolidated entity during the financial year, were its operation (through its fully owned subsidiary Knights Parks & Properties Pty Ltd (“KP&P”)) of the Albany Gardens Holiday Resort and the operation of the Albany Gardens Lifestyle Village; investments in Arbortech Industries Ltd; and its investment in listed and unlisted securities (See Note 16). There were no significant changes in the nature of the activities of the Group during the year.


5

4. Review and results of operations

Company Overview

The consolidated income statement shows a consolidated loss after tax attributable to members of ($2,729,250) compared with a loss after tax of ($340,750) in 2018. The Group’s income has, in prior years, been dependent upon the return from the Company’s various equity investments; the fee income derived through KCM, its wholly owned funds management subsidiary; and the returns derived from its investment in Knights Coastal Land Fund (‘KCLF’) and Knights Tourist Park Fund (“KTPF”). KCLF and KTPF were wound up in 2017 and 2015 respectively and in July 2017 KCM ceased operations and was deregistered on 30 August 2017. As a result, the group no longer receives management fees from KCM or a return on its investments in either KCLF or KTPF this attributing to the consolidated loss for the group in 2019. The Group continued to focus on maximising the returns from the investments it can directly influence, while monitoring, and influencing where possible, the investment performance of the remaining assets in its portfolio. Through its investment in KP&P, the group owns and operates Albany Gardens Lifestyle Village (“the Village”) and Albany Gardens Holiday Resort (“the Resort”). The Village continues to enjoy a reputation for being one of the best villages of its type in Albany. The Field of Light: Avenue of Honour art display brought an increase of visitors to Albany during 2019, resulting in an increase in turnover and profitability of the resort.

As previously disclosed, the Company was advised by the Department of Environment Regulation (“DWER”) in October 2016 that 22 Wellington Street, Centennial Park – Albany Gardens Holiday Resort – was suspected to be possibly contaminated and that investigation was required. Tests were undertaken in 2018 and on-going monitoring has been put in place. The memorial on title has been amended and an Interest Only Deposited Plan has been noted on the title confirming that the affected portion of the site is limited to a small area of the land.

The litigation action between the Company and Bajada & Associates Pty Ltd was settled in late November 2018, with a financial settlement occurring.

The Group’s investment in Cedar Woods Wellard Ltd (“CWWL”) continues to be detrimentally affected by the slowdown in demand for residential lots in the suburban Perth market, particularly markets to the South of Perth. Emerald Park, the CWWL project, is expected to continue until 2022. The Company received $350,000, as a return of capital for the year ended 30 June 2019, bringing the total return of capital to date to $1,400,000. Acquired between 2007 and 2012 at a cost of $248,415, the Group’s holding in Discovery Africa (previously Argosy Minerals and Baru Resources) continues to disappoint with a total market value as at 30 June 2019 of $7,376. The investment held in Greatcell Solar Limited (formerly Dyesol Limited) was voluntarily suspended from the ASX on 9 March 2018 and to date remains suspended. Due to the suspension the shares cannot be traded. As both investments would crystallise significant losses if and when they are sold, and the amount received would not be material, it has been decided to retain them in the hope that they may be sold at a later date and at a better price. A general meeting of shareholders was held on 12 March 2019. The shareholders voted to approve an initial return of capital of $0.1625 per share, future proposed returns of capital and for insertion into the constitution of the company, rule 30.7. The initial return of capital was recommended after the directors had considered the financial impact of the return of capital and they were satisfied that the return of capital would not impede the Company’s operations and ability to meet debts as and when they fall due. Before any future returns of capital are made, the directors will consider the financial impact that such a payment may have on the company and its operations. The initial return of capital totalling $3,914,023.26 was paid to shareholders commencing 15 March 2019. The Company appointed agents on 12 February 2019 to market the Albany Gardens Holiday Resort (‘AGHR”) and Albany Gardens Lifestyle Village (‘AGLV’). An international and domestic marketing campaign took place but there was limited interest in the properties. Eventually, the Company entered into exclusive due diligence with one party but a sale was not concluded due largely to issues arising from the potential contamination of the site. Negotiations with another potential purchaser are underway but no agreement has been reached. The marketing of the assets in Albany has been detrimentally affected by issues associated with the contamination of 22 Wellington Street, Albany WA.


6

4. Review and results of operations (cont’d)

Significant changes in the state of affairs The consolidated entity’s total assets decreased by $7,410,155 to $12,619,566 (2018: $20,029,721) over the year. The decrease in total assets principally comprised:

• The decrease in cash and cash equivalents to $2,279,112 (2018: $7,991,584) (see Note 13) is primarily due to return of capital to unit holders and settlement of the legal dispute;

• The decrease in financial assets to $5,027,087 (2018: $5,272,307) (see Note 16) was primarily a result of the return of capital from CWWL Investment.

The net equity per share for the consolidated entity decreased to 51.60c/share (2018: 81.48c/share), due to a reduction in total net assets. This partially being the result of return of capital to the shareholders of 16.25c/share, settlement of the legal dispute and revaluation decrement of assets now for sale.

The Consolidated entity’s gearing (defined as the ratio of net debt to net debt plus net assets) remained at 0% (2018: 0%) as cash and cash equivalents far exceeded total borrowings for the group at 30 June 2019. 5. Remuneration report

Key management personnel include the executive and non-executive directors of the Company, and the company secretary, together they have the authority and responsibility for planning, directing and controlling the activities of the Company. Mr G Hodgetts was appointed to the Board of Directors of the Company on 1 March 2013 becoming an executive director of the Company at that time. Mr Hodgetts is a director of Bethley Group Pty Ltd, and principal of Hodgetts and Partners, and these entities have been entitled to receive Director’s fees, travel allowances and the reimbursement of expenses, as remuneration for the services provided by Mr. Hodgetts. Of the remuneration listed below for Mr Hodgetts, $50,000 relates to a bonus considered appropriate by the independent non-executive directors and accrued at year end. Mr Hodgetts also receives a per diem allowance which is listed as “other” remuneration.

Details of the nature and amount of each major element of remuneration of each director of the Company are:

Salary & fees

$ Director’s fees

$ Other

$

Non-monetary benefits

$

Total $

Executive director

Mr G Hodgetts 2019 - 230,000 29,140 259,140

2018 - 227,000 38,919 - 265,919

Non-executive directors

Mr G Paramor 2019 24,638 - - - 24,638

2018 24,638 - - - 24,638

Mr M Britton 2019 35,587 - - - 35,587

2018 33,398 - - - 33,398

Company secretary

Mr G Priest 2019 43,200 43,200

2018 43,200 - - - 43,200


7

6. Dividends

No dividends were declared for the financial year ended 30 June 2019 (30 June 2018: nil). 7. Events after the Reporting Period

The directors of “CWWL” resolved a return of capital to the shareholders on 17 September 2019 of 18.75c/share. The Companys’ allocation of the return of capital is $1,050,000 and was before signing of the accounts. This bringing the total return of capital to the company from the investment to $2,450,000. Other than the above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

8. Likely developments

The delay in completing Emerald Park, the development being undertaken by CWWL, and the reduction in expected returns from that project, along with delays in the expected sale of KP&P will detrimentally affect revenue in the coming period.

9. Registered office

The registered office of the Company is:

C/- UHY Haines Norton Perth Chartered Accountants Level 2 35 Havelock Street West Perth WA 6005

10. Directors’ interests

The relevant interest of each director or their associated entities in the share capital of the Company at the date of this report is as follows: Knights Capital Group Limited

Ordinary Shares Mr G Paramor 348,500

11. Indemnification and insurance of officers and auditors

Indemnification

Since the end of the previous financial year, the Company has not indemnified or made a relevant agreement for indemnifying against a liability any person who is or has been made an officer or auditor of the controlled entity, except to the extent permitted by law. Insurance premiums During the financial year the Company paid a premium of $25,262 in respect of Directors’ and Officers’ legal, crime and professional indemnity insurance.

Due to the wind up of Knights Capital Management Pty Ltd the company paid a premium for a seven year policy for Investment Managers Insurance. This policy will expire on 30 November 2024.

Knights Capital Group Limited Consolidated Statement of Profit or Loss and Comprehensive Income For the year ended 30 June 2019

10

Note 2019 2018

Operating activities $ $

Revenue - 1,276,358

Cost of sales - (6,229)

Gross profit

-

1,270,129

Other income 7 25,635 130,614

Administrative expenses (133,820) (197,789)

Impairment of intangible assets 21 - (124,621)

Impairment of investment property 18(a) - 48,836

Other expenses 8 (2,337,717) (1,717,911)

Results from operating activities

(2,445,902)

(590,742)

Discontinued operations

Revenue 6 1,394,746 -

Cost of sales (8,809) -

Gross profit

1,385,937

-

Administrative expenses (57,666) -

Impairment of property, plant and equipment (228,082) -

Impairment of investment property 18(b) (341,731) -

Other expenses 8 (915,728) -

Results from discontinued operations

(157,270)

-

Financial income 11 106,326 152,265

Financial expenses 11 - (3,582)

Net financing income

106,326

148,683

(Loss)/profit before income tax (2,496,846) (442,059)

Income tax benefit/(expense) 12 (232,404) 101,309

(Loss)/profit for the year

(2,729,250)

(340,750)

Other comprehensive income for the period net of tax: Items that may be reclassified subsequently to profit or loss

Net (loss) on revaluation of land and buildings – discontinued operations

(656,986) (20,463)

Net gain on revaluation of financial assets 104,782 41,962

Total other comprehensive income/(loss) for the period

(552,204)

21,499

Total comprehensive (loss)/income for the year

(3,281,454)

(319,251)

(Loss)/profit attributable to equity holders of the parent (2,729,250) (340,750)

Total comprehensive (loss)/income attributable to equity holders of the parent

(3,281,454)

(319,251)

This Statement of Profit and Loss and Comprehensive Income is to be read in conjunction with the accompanying Notes to the financial statements set out on pages 14 to 46.

Knights Capital Group Limited Consolidated Statement of Changes in Equity For the year ended 30 June 2019

11

Issued Capital

$

Fair value Reserve

$

Accumulated Profit/(Losses)

$

Total Equity

$

Balance at 1 July 2017 Transactions with owners in their capacity as owners:

29,281,915 3,499,876 (12,837,718) 19,944,073

Other comprehensive (loss) for the period

- 21,499 - 21,499

Loss for the period - - (340,750) (340,750)

Balance at 30 June 2018

29,281,915

3,521,375

(13,178,468)

19,624,822

Balance at 1 July 2018 Transactions with owners in their capacity as owners: Return of Capital

29,281,915

(3,914,059)

3,521,375

-

(13,178,468) -

19,624,822

(3,914,059) Other comprehensive income for the period

(552,204) (552,204)

Loss for the period - - (2,729,250) (2,729,250)

Balance at 30 June 2019

25,367,856

2,969,171

(15,907,718)

(12,429,309)

The Statement of Changes in Equity is to be read in conjunction with the accompanying Notes to the financial statements set out on pages 14 to 46.

Knights Capital Group Limited Consolidated Statement of Financial Position As at 30 June 2019

12

Note 2019 2018

Assets $ $

Current assets

Cash and cash equivalents 13 2,279,112 7,991,584

Trade and other receivables 14 32,932 31,244

Inventories 15 832 1,185

Investment property available for sale 18(b) 2,381,820 -

Property, plant and equipment available for sale 20(b) 2,821,184 -

Other 76,599 81,349

Total current assets 7,592,479 8,105,362

Non-current assets

Financial assets 16 5,027,087 5,272,307

Investment property 18(a) - 2,700,000

Deferred tax assets 19 - 252,064

Property, plant and equipment 20(a) - 3,699,988

Total non-current assets 5,027,087 11,924,359

Total assets 12,619,566 20,029,721

Liabilities

Current liabilities

Trade and other payables 22 177,588 370,482

Provisions 23 9,471 7,141

Deferred tax liabilities 19 - 19,661

Loans and borrowings 24 3,198 7,615

Total current liabilities 190,257 404,899

Total liabilities 190,257 404,899

Net assets 12,429,309 19,624,822

Equity

Issued capital 25,367,856 29,281,915

Reserves 2,969,171 3,521,375

Accumulated losses (15,907,718) (13,178,468)

Total equity attributable to the equity holders of the company 12,429,309 19,624,822

This Statement of Financial Position is to be read in conjunction with the accompanying Notes to the financial statements set out on pages 14 to 46.

Knights Capital Group Limited Consolidated Statement of Cash Flows For the year ended June 30 2019

13

Note 2019 2018

Cash flows from operating activities $ $

Cash receipts from customers 21,510 1,384,697

Cash paid to suppliers and employees (2,659,567) (1,772,756)

Cash generated from operations (2,638,057) (388,059)

Interest and borrowing costs paid - (3,582)

Net cash from operating activities 29 (2,638,057) (391,641)

Cash flows from discontinued operations $ $

Cash receipts from customers 1,397,182 1,384,697

Cash paid to suppliers and employees (913,386) (1,772,756)

Net cash from discontinued operations 29 483,796 (391,641)

Cash flows from investing activities

Capital proceeds returned on investments 350,000 1,050,000

Interest received 11 74,074 123,883

Dividends received 11 32,252 28,381

Acquisition of property, plant and equipment 20 (96,061) (30,364)

Net cash from investing activities 360,265 1,171,900

Cash flows from financing activities

Repayment of borrowings (4,417) (1,415)

Return of Capital to shareholders (3,914,059)

Net cash used in financing activities (3,918,476) (1,415)

Net decrease in cash and cash equivalents (5,712,472) 778,844

Cash and cash equivalents at 1 July 7,991,584 7,212,740

Cash and cash equivalents at 30 June 13 2,279,112 7,991,584

The Statements of Cash Flows are to be read in conjunction with the Notes to the financial statements set out on pages 14 to 46.

Knights Capital Group Limited Notes to the Consolidated Financial Statements For the year ended 30 June 2019

14

1. Reporting entity

Knights Capital Group Limited (the “Company” or “KCGL”) is a company domiciled in Australia. The consolidated financial report of the Company for the year ended 30 June 2019 comprises the Company and its subsidiaries (together referred to as the “Group”). The address of the company’s registered office is Level 2, 35 Havelock Street, West Perth WA 6005. The Group’s activities during the course of the financial year were the operation of the Albany Gardens Holiday Resort and the operation and management of the Albany Gardens Lifestyle Village; and its investment in listed and unlisted securities (see Notes 16, 18, 20 and 21). The consolidated financial report was authorised for issue by the directors on the 23rd September 2019.

2. Basis of preparation

(a) Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards and Interpretations of the Australian Accounting Standards Board (“AASB”), the Corporations Act 2001 and International Financial Reporting Standards as issued by the International Accounting Standards Board. The consolidated financial report of the Group and the financial report of the Company comply with the IFRS and interpretations adopted by the International Accounting Standards Board. All amounts are presented in Australian dollars unless otherwise Noted.

(b) Basis of measurement

The consolidated financial report is prepared on the historical cost basis except that the following assets and liabilities are stated at their fair value: financial instruments classified as available-for-sale, and investment property.

(c) Functional and presentation currency

The consolidated financial report is presented in Australian dollars, which is the company’s functional currency and the functional currency of the Group.

(d) Use of estimates and judgements

The preparation of a financial report requires management to make judgements, 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 any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial report are described in the following Notes: Note 21 – measurement of recoverable amounts of cash-generating units, Note 16 and 4(b) – measurement of fair value of unlisted equity securities, Note 18 – determination of fair value of investment property and Note 19 – utilisation of tax losses. The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial statements and have been applied consistently by Group entities.


15

3. Significant accounting policies

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial report from the date that control commences until the date that control ceases.

(ii) Transactions eliminated on consolidation

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

(b) Property, plant and equipment

(i) Recognition and measurement

Plant & equipment

Items of plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of an asset.

Where parts of an item of plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

Property

Freehold land and buildings are shown at their fair value (being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction), based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings.

In the periods when the freehold land and buildings are not subject to an independent valuation, the directors conduct directors’ valuations to ensure the land and buildings’ carrying amount is not materially different to the fair value.

Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation reserve in equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity and other comprehensive income. Other net revaluation increases/decreases are recognised in profit or loss to the extent that it reverses an amount previously recognised in the same manner.

Any accumulated depreciation at the date of the revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of day-to-day servicing of property, plant and equipment are recognised in the statement of comprehensive income as incurred.


16

(i) Initial recognition and measurement

Financial assets and financials liabilities are recognised when the Group becomes a party to the contractual provisions to the instrument. For financial assets, this is the date that the Group commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

Financial instruments (except for trade receivables) are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

Trade receivables are initially measured at the transaction price if the trade receivables do not contain a significant financing component or if the practical expedient was applied as specified in AASB 15.63.

3. Significant accounting policies (continued)

(b) Property, plant and equipment (continued)

(iii) Depreciation Depreciation is recognised in profit or loss on a straight-line basis for buildings and a reducing balance

basis for plant and equipment over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. The estimated useful lives in the current and comparative periods are as follows:

• buildings 20 years

• plant and equipment 5 - 12 years

• fixtures and fittings 5 - 12 years

• motor vehicle 8 years Depreciation methods, useful lives and residual values, if not insignificant, are reassessed at the reporting date.

(c) Intangible assets

Goodwill

All business combinations are accounted for by applying the purchase method. Goodwill arises on the acquisition of subsidiaries and associates and represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired. Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is no longer amortised but is tested annually for impairment. Negative goodwill arising on an acquisition is recognised directly in the statement of comprehensive income.

(d) Financial instruments


17


(d) Financial Instruments (continued)

(ii) Classification and subsequent measurement

Financial liabilities

Financial liabilities are subsequently measured at: - amortised cost; or - fair value through profit or loss. A financial liability is measured at fair value through profit and loss if the financial liability is: - a contingent consideration of an acquirer in a business combination to which AASB 3: Business

Combinations applies; - held for trading; or - initially designated as at fair value through profit or loss.

All other financial liabilities are subsequently measured at amortised cost using the effective interest method. The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest expense in profit or loss over the relevant period. The effective interest rate is the internal rate of return of the financial asset or liability. That is, it is the rate that exactly discounts the estimated future cash flows through the expected life of the instrument to the net carrying amount at initial recognition. A financial liability is held for trading if:

- it is incurred for the purpose of repurchasing or repaying in the near term; - part of a portfolio where there is an actual patter of short-term profit taking; or - a derivative financial instrument (except for a derivative that is in a financial guarantee contract or a

derivative that is in an effective hedging relationships). Any gains or losses arising on changes in fair value are recognised in profit or loss to the extent that they are not part of a designated hedging relationship are recognised in profit or loss. The change in fair value of the financial liability attributable to changes in the issuer’s credit risk is taken to other comprehensive income and are not subsequently reclassified to profit or loss. Instead, they are transferred to retained earnings upon derecognition of the financial liability. If taking the change in credit risk in other comprehensive income enlarges or creates an accounting mismatch, then these gains or losses should be taken to profit or loss rather than other comprehensive income. A financial liability cannot be reclassified.


18



(ii) Classification and subsequent measurement (continued)

Financial assets

Financial assets are subsequently measured at: - amortised cost;

- fair value through other comprehensive income; or - fair value through profit or loss.

Measurement is on the basis of two primary criteria:

- the contractual cash flow characteristics of the financial asset; and - the business model for managing the financial assets.

A financial asset that meets the following conditions is subsequently measure at amortised cost:

- the financial asset is managed solely to collect contractual cash flows; and - the contractual terms within the financial asset give rise to cash flows that are solely payments of

principal and interest on the principal amount outstanding on specified dates. A financial asset that meets the following conditions is subsequently measured at fair value through other comprehensive income:

- the contractual terms within the financial asset give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding on specified dates;

- the business model for managing the financial assets comprises both contractual cash flows collection and the selling of the financial asset.

By default, all other financial assets that do not meet the measurement conditions of amortised cost and fair value through other comprehensive income are subsequently measured at fair value through profit or loss. The Group initially designates a financial instrument as measured at fair value through profit or loss if:

- it eliminates or significantly reduces a measurement or recognition inconsistency (often referred to as “accounting mismatch”) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases;

- it is in accordance with the documented risk management or investment strategy, and information about the groupings was documented appropriately, so that the performance of the financial liability that was part of a group of financial liabilities or financial assets can be managed and evaluated consistently on a fair value basis;

- it is a hybrid contract that contains an embedded derivative that significantly modifies the cash flows otherwise required by the contract.

The initial designation of the financial instruments to measure at fair value through profit or loss is a one-time options on initial classification and is irrevocable until the financial asset is derecognised. Equity instruments At initial recognition, as long as the equity instrument is not held for trading and not a contingent consideration recognised by an acquirer in a business combination to which AASB 3: Business Combinations applies, the Group made an irrevocable election to measure any subsequent changes in fair value of the equity instruments in other comprehensive income, while the dividend revenue received on underlying equity instruments investment will still be recognised in profit or loss. Regular way purchases and sales of financial assets are recognised and derecognised at settlement date in accordance with the Group’s accounting policy.


19



(iii) Derecognition

Derecognition refers to the removal of a previously recognised financial asset or financial liability from the statement of financial position.

Derecognition of financial liabilities A liability is derecognised when it is extinguished (i.e. when the obligation in the contract is discharged, cancelled or expires). An exchange of an existing financial liability for a new once with substantially modified terms, or a substantial modification to the terms of a financial liability is treated as an extinguishment of the existing liability and recognition of a new financial liability. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss. Derecognition of financial assets A financial asset is derecognised when the holder’s contractual rights to its cash flows expires, or the asset is transferred in such a way that all the risks and rewards of ownership are substantially transferred. All of the following criteria need to be satisfied for derecognition of financial asset:-

- the right to receive cash flows from the asset has expired or been transferred; - all risk and rewards of ownership of the asset have been substantially transferred; and - the Group no longer controls the asset (i.e. the Group has no practical ability to make a unilateral

decision to sell the asset to a third party. On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the consideration received and receivable is recognised in profit or loss. On derecognition of a debt instrument classified as at fair value through other comprehensive income, the cumulative gain or loss previously accumulated in the investment revaluation reserve is reclassified to profit or loss. On derecognition of an investment in equity which was elected to be classified under fair value through other comprehensive income, the cumulative gain or loss previously accumulated in the investment revaluation reserve is not reclassified to profit or loss, but is transferred to retained earnings.

(iv) Impairment

The Group recognises a loss allowance for expected credit losses on: - financial assets that are measured at amortised cost or fair value through other comprehensive

income; - lease receivables; - loan commitments that are not measured at fair value through profit or loss.

Loss allowance is not recognised for:-

- financial assets measured at fair value through profit or loss; or - equity instruments measured at fair value through other comprehensive income.

Expected credit losses are the probability-weighted estimate of credit losses over the expected life of a financial instrument. A credit loss is the difference between all contractual cash flows that are due and all cash flows expected the be received, all discounted at the original effective interest rate of the financial instrument.


20



(iv) Impairment (continued)

The Group uses the following approaches to impairment, as applicable under AASB 9: Financial Instruments: - the general approach - the simplified approach - the purchased or originated credit impairment approach; and - low credit risk operational simplification.

General Approach Under the general approach, at each reporting period, the Group assesses whether the financial instruments are credit impaired, and if:

- the credit risk of the financial instrument has increased significantly since initial recognition, the Group measures the loss allowance of the financial instruments at an amount equal to the lifetime expected credit losses; or

- there is no significant increase in credit risk since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month expected credit losses.

Simplified Approach The simplified approach does not require tracking of changes in credit risk at every reporting period, but instead requires the recognition of lifetime expected credit loss at all times. This approach is applicable to:

- trade receivables or contract assets that result from transactions within the scope of AASB 15: Revenue from Contracts with Customers and which do not contain a significant financing component; and

- lease receivables In measuring the expected credit loss, a provision matrix for trade receivables was used taking into consideration various data to get to an expected credit loss (i.e. diversity of customer base, appropriate groupings of historical loss experience, etc). Purchase or Originated Credit-Impaired Approach For a financial asset that is considered credit-impaired (not on acquisition or origination), the Group measured any change in its lifetime expected credit loss as the difference between the asset’s gross carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. Any adjustment is recognised in profit or loss as an impairment gain or loss. Evidence of credit impairment includes:

- significant financial difficulty of the issuer or borrower; - a breach of contract (e.g. default or past due event); - a lender granting to the borrower a concession, due to the borrower’s financial difficulty, that the

lender would not otherwise consider; - high probability that the borrower will enter bankruptcy or other financial reorganisation; and - the disappearance of an active market for the financial asset because of financial difficulties.

Low Credit Risk Operational Simplification Approach If a financial asset is determined to have low credit risk at the initial reporting date, the Group assumes that the credit risk has not increased significantly since initial recognition and accordingly it can continue to recognise a loss allowance of 12-month expected credit loss. In order to make such a determination that the financial asset has low credit risk, the Group applied its internal credit risk ratings or other methodologies using a globally comparable definition of low credit risk.


21



(iv) Impairment (continued)

A financial asset is considered to have low credit risk if: - there is a low risk of default by the borrower - the borrower has strong capacity to meet its contractual cash flow obligations in the near term; - adverse changes in economic and business conditions in the longer term may, but not necessarily

will, reduce the ability of the borrower to fulfil its contractual cash flow obligations. A financial asset is not considered to carry low credit risk merely due to existence of collateral, or because a borrower has a risk of default lower than the risk inherent in the financial assets, or lower than the credit risk of the jurisdiction in which it operates. Recognition of Expected Credit Losses in Financial Statements At each reporting date, the Group recognises the movement in the loss allowance as an impairment gain or loss in the statement of profit or loss and other comprehensive income. The carrying amount of financial assets measure at amortised cost includes the loss allowance relating to that asset. Assets measured at fair value through other comprehensive income are recognised at fair value, with changes in fair value recognised in other comprehensive income. Amounts in relation to change in credit risk are transferred from other comprehensive income to profit or loss at every reporting period. For financial assets that are unrecognised (e.g. loan commitments yet to be drawn, financial guarantees), a provision for loss allowance is created in the statement of financial position to recognise the loss allowance.

(e) Investment Property

Investment property is property held either to earn rental income or for capital appreciation or for both. Investment property is measured at fair value with any change therein recognised in the statement of profit or loss.

When the use of a property changes such that it is reclassified as property, plant or equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

(f) Inventories

Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.


22


(g) Impairment of assets

At the end of each reporting period, the Group assess whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information, including dividends received from subsidiaries, associates or joint ventures deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value loss costs of disposal and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with other Standard (e.g. in accordance with the revaluation model in AASB 116: Property, Plant and Equipment). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard.

Where it is possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill, intangible assets with indefinite lives and intangible asserts not yet available for use.

When an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

(h) Revenue Recognition

(i) Goods sold and services rendered

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods.

(ii) Rental income

Revenue from the rental of park home sites is recognised when receivable from the tenants.

Revenue from the rental of holiday resort accommodation is recognised when guests arrive.

(iii) Other

Interest revenue is recognised when received.

Dividend revenue and trust distributions are recognised when the right to receive the income has been established.

(i) Income in Advance

Income in advance is classified as current (Note 22) and consists of customer deposits for holiday accommodation at the resort. The amount is recognised as revenue once the booking cancellation period expires and guests arrive at the resort, or deposits are forfeited.


23


(j) Expenses

(i) Operating lease payments

Payments made under operating leases are recognised in the statement of comprehensive income on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the lease term.

(ii) Net financing costs

Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income and gains on the disposal of available-for-sale financial assets.

Interest income is recognised as it accrues in the statement of comprehensive income, using the effective interest method.

Dividend income is recognised in the statement of comprehensive income on the date the Group’s right to receive payments is established which in the case of quoted securities is the ex-dividend date. Finance expenses comprise interest expense on borrowings and impairment losses recognised on financial assets. All borrowing costs are recognised in the statement of comprehensive income using the effective interest method.

(k) Income tax

Income tax comprises current and deferred tax. Income tax is recognised in the statement of comprehensive income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised.


24


(i) Tax consolidation

The Company and its wholly owned Australian resident entity Knights Parks & Properties Pty Ltd have formed a tax-consolidated group and are therefore taxed as a single entity. The head entity within the tax consolidated group is Knights Capital Group Limited.

Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate financial statements of the members of the tax-consolidated group using the separate taxpayer within group approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation.

Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax-consolidated group are recognised by the Company (as head entity in the tax-consolidated group and are recognised by the company as amounts payable/(receivable) to/(from) other entities in the tax consolidated group). Any difference between these amounts is recognised by the company as an equity contribution or distribution. Deferred tax assets and deferred tax liabilities are measured by reference to the carrying amounts of the assets and liabilities in the Company’s statement of financial position and their tax values applying under tax consolidation.

The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised.

Any subsequent period adjustments to deferred tax assets arising from unused tax losses assumed from subsidiaries are recognised by the head entity only.

(l) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In this situation the financial supplies are input taxed and the related acquisitions are not for a creditable purpose as such the GST input tax credit is blocked, except in the case of certain acquisitions that are classed as reduced credit acquisitions. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the statement of financial position. Cash flows are included in the statement of cash flows on a net basis except where the GST incurred is prevented from being recovered in full or partially by the Australian Taxation Office. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(m) Employee benefits - Wages, salaries, annual leave, sick leave and non-monetary benefits

Liabilities for employee benefits for wages, salaries, annual leave and sick leave represent present obligations resulting from employees’ services provided to reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax. Non-accumulating non-monetary benefits, such as medical care and free or subsidised goods and services, are expensed based on the net marginal cost to the consolidated entity as the benefits are taken by the employees.


25


(n) Cash and cash equivalent

Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. Bank overdrafts are reported within short-term borrowings in current liabilities in the statement of financial position.

(o) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

(p) Trade and other receivables

Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected with 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note 1 (g) for further discussion on the determination of impairment losses.

(q) Trade and other payables

Trade and other payables represent the liabilities for goods and services received by the entity that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of the recognition of the liability.

(r) Non Current Assets held for sale

Non-current assets are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less cost of disposal. For non-current assets to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale are presented separately on the face of the statement of financial position, in current assets.


26


(s) Initial application of AASB 9: Financial Instruments

The Group has adopted AASB 9: Financial Instruments with an initial application date of 1 July 2018. As a result, the Group has changed its financial instruments accounting policies as follows. AASB 9 requires retrospective application with some exceptions (i.e. when applying the effective interest method, impairment measurement requirements, and hedge accounting in terms of the Standard). There were no financial assets/liabilities which the Group had previously designated as fair value through profit or loss under AASB 139 that were subject to reclassification/elected reclassification upon application of AASB 9: Financial Instruments: Recognition and Measurement. There were no assets/liabilities which the Group has elected to designate as at fair value through profit or loss at the date of initial application of AASB 9. The Group has applied AASB 9: Financial Instruments (as revised in July 2014) and the related consequential amendments to other Standards. New requirements have been introduced for the classification and measurement of financial assets and financial liabilities, as well as for impairment and general hedge accounting. The date of initial application was 1 July 2018. The Group has applied AASB 9 to instruments that have not been derecognised as at 1 July 2018 and has not applied AASB 9 to instruments that have already been derecognised as at 1 July 2018. Financial assets in terms of AASB 9 need to be measured subsequently at either amortised cost or fair value on the basis of the Group’s business model and the cash flow characteristics for the financial assets:

- debt investments that are held within a business model whose goal is to collect contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measure at amortised cost;

- debt investments that are held within a business model whose goal is both to collect contractual cash and to sell it, and that have contractual cash flows that are purely payments of principal and interest on the principal amount outstanding, are subsequently measured at fair value through other comprehensive income; and

- all other debt investments and equity investments are measured at fair value through profit or loss. Despite the issues mentioned, the Group may make the following irrevocable elections at initial recognition of a financial asset:

- the Group may choose to present in other comprehensive income subsequent changes in the fair value of an equity investment that is not held for trading and is not a contingent consideration in a business combination.

- The Group may choose to present a debt investment that meets the amortised cost or fair value through other comprehensive income criteria as measured at fair value through profit or loss if this choice significantly reduces an accounting mismatch.

When an equity investment at fair value through other comprehensive income has a gain or loss previously recognised in other comprehensive income, it is not reclassified to profit or loss. Debt instruments that are subsequently measured at amortised cost, or at fair value through other comprehensive income are subject to impairment:

- debt investments that are held within a business model whose goal is to collect contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are subsequently measure at amortised cost;

- debt investments that are held within a business model whose goal is both to collect contractual cash and to sell it, and that have contractual cash flows that are purely payments of principal and interest on the principal amount outstanding, are subsequently measured at fair value through other comprehensive income; and

- all other debt investments and equity investments are measured at fair value through profit or loss.


27

3. Significant accounting policies (continued) (s) Initial application of AASB 9: Financial Instruments (continued)

Despite the issues mentioned, the Group may make the following irrevocable elections at initial recognition of

a financial asset: - the Group may choose to present in other comprehensive income subsequent changes in the fair

value of an equity investment that is not held for trading and is not a contingent consideration in a business combination.

- The Group may choose to present a debt investment that meets to amortised cost or fair value through other comprehensive income criteria as measured at fair value through profit or loss if this choice significantly reduces an accounting mismatch.

When an equity investment at fair value through other comprehensive income has a gain or loss previously recoginsed in other comprehensive income, it is not reclassified to profit or loss. Debt instruments that are subsequently measured at amortised cost or at fair value through other comprehensive income are subject to impairment. Impairment As per AASB 9, an expected credit loss model is applied, not an incurred credit loss model as per the previous Standard applicable (AASB 139). To reflect changes in credit risk, this expected credit loss model requires the Group to account for expected credit loss since initial recognition. AASB 9 also determines that a loss allowance for expected credit loss be recognised on debt investments subsequently measured at amortised cost or at fair value through other comprehensive income, lease receivables, contract assets, loan commitments and financial guarantee contracts as the impairment provision would apply to them. If the credit risk on a financial instrument has not shown significant change since initial recognition, an expected credit loss amount equal to 12-month expected credit loss is used. However, a loss allowance is recognised at an amount equal to the lifetime expected credit loss if the credit risk on that financial instrument has increased significantly since initial recognition, or if the instrument is an acquired credit-impaired financial asset. A simple approach is followed in relation to trade receivables, as the loss allowance is measured at lifetime expected credit loss. The Group reviewed and assessed the existing financial assets on 1 July 2018. The assessment was made to test the impairment of these financial assets using reasonable and supportable information that is available to determine the credit risk of the respective items at the date they were initially recognised, and to compare that the credit risk as at 1 July 2017 and 1 July 2018. There has been no impact on the company’s financial statements. Classification and measurement of financial liabilities AASB 9 determines that the measurement of financial liabilities and also the classification relate to changes in the fair value designated as at fair value through profit or loss attributable to changes in the credit risk. AASB 9 further states that the movement in fair value of financial liabilities that is attributable to changes in the credit risk of that liability needs to be shown in other comprehensive income, unless the effect of the recognition constitutes accounting mismatch in profit or loss. Changes in fair value in relation to the financial liability’s credit risk are transferred to retained earnings when the financial liability is derecognised and not reclassified through profit or loss. AASB 139 required the fair value amount of the change of the financial liability designated as at fair value through profit or loss to be presented in profit or loss. The application of AASB 9 Classification and measurement of financial liabilities requirement has had no impact on the results and financial position of the Group for the current year.


28


(t) New Accounting Standards for Application in Future Periods

• AASB 16: Leases A core change under AASB 16: Leases is that most leases will be recognised on the balance sheet by the leases, as the new Standard does not differentiate between operating and finance leases. An asset and a financial liability are recognised in accordance with this new Standard. There are, however, two exemptions allowed. These are short-term and low-value leases. AASB 16 is mandatory from 1 July 2019. As the company only deals with short-term leases, it is expected the company will rely on the exemption allowed. The Directors at this is stage do not anticipate that this will have an impact on the Company’s financial statements and it is also impracticable to provide a reasonable estimate of any such impact.

4. Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods and under guidance of AASB 13. When applicable, further information about the assumptions made in determining fair values is disclosed in the Notes specific to that asset or liability.

(a) Investment property An external, independent valuation company, having appropriate recognised professional qualifications and

recent experience in the location and category of property being valued, values the Group’s investment property portfolio annually. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.

(b) Investment in equity securities The fair value of listed securities is determined by reference to their quoted bid price at the reporting date.

The fair value of the unlisted equity securities investments have been determined with reference to the most recent sale of ordinary shares and/or the net asset backing of the security which is reflective of the fair value at reporting date.


29

(b) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. Obligations with respect to the construction of the park homes is matched to the progress payments received from customers.

5. Financial risk management

Overview The Company and Group have exposure to the following risks from their use of financial instruments:

• credit risk

• liquidity risk

• market risk

This Note presents information about the Company’s and Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board of Directors oversees how management monitors compliance with the Company’s and Group’s risk management and reviews the adequacy of the risk management framework in relation to the risks faced by the Company and Group.

(a) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails

to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. For the Company it arises from receivables due from subsidiaries.

Trade and other receivables

The Company’s and Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry in which customers operate, has less of an influence on credit risk. However, geographically there is no concentration of credit risk. The Group does not require collateral in respect of trade and other receivables.

Investments

The Group has exposure to credit risk by investing in liquid and illiquid securities.

Guarantees

Group policy is to provide financial guarantees only to wholly-owned subsidiaries. There are no outstanding guarantees at present, other than that disclosed in Note 24 Interest bearing loans and borrowings.


30

5. Financial risk management (continued)

(c) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and property and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Interest rate risk

At the reporting date the Group’s financial asset affected by interest rate risks is cash. At 30 June 2019, the Group had an insignificant exposure to interest rate risk. The exposure is limited to changes in future cash flows of the cash equivalents held as term deposits. The risk arising from fluctuations in market interest rates is limited by investing the cash equivalent in term deposits over the shorter term period. Investments in equity securities and short term receivables and payables are not exposed to interest rate risk.

Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as net operating income divided by total shareholders’ equity, excluding non-redeemable preference shares and minority interests. From time to time the Group purchases its own shares; the timing of these purchases depends on market conditions. There were no changes in the Group’s approach to capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.

6. Revenue Note 2019 2018

$ $

Rentals 1,012,400 910,123

Rental income - investment property 357,927 343,102

Shop sales 24,419 23,133

Total revenues 1,394,746 1,276,358

2019 2018

7. Other income $ $

Directors fees received 15,000 15,000

Insurance claim 635 100,000

Telstra Refund - 15,614

Employment subsidy 10,000 -

25,635 130,614

8. Other expenses 2019 2018

$ $

Depreciation 63,984 59,131

Balancing Adjustment on Property, Plant & Equipment 2,266 1,313

Rent expenses 13,520 12,588

Personnel expenses 9 683,523 662,209

Operational and occupancy expenses 425,891 405,164

Professional fees 487,754 419,778

Compliance and licencing fees 32,456 17,275

Travel 67,905 96,832

Dispute settlement 1,450,000 -

General administrative expenses 26,146 43,621

3,253,445 1,717,911


31

9. Personnel expenses

2019 2018

$ $

Directors and management fees 259,140 265,919

Wages and salaries 364,157 340,417

Contributions to complying superannuation funds 60,226 55,873

683,523 662,209

10. Auditors’ remuneration 2019 2018

$ $

Audit services

Auditors of the Company

Accru Perth:

Audit and review of financial reports 35,500 44,818

35,500 44,818

11. Net financing income and expense 2019 2018

$ $

Interest income 74,074 123,894

Dividend income 32,252 28,381

Financial income 106,326 152,265

Interest expense - (3,582)

Financial expenses - (3,582)

Net financing (expense)/income 106,326 148,683

12. Income tax expense

Recognised in the consolidated statement of profit or loss and comprehensive income

2019 2018

$ $

Current tax expense

Current year - -

Under provision in prior years 75 (538)

Deferred tax (benefit)/expense

Current year 12,168 (11,964)

Tax losses (542,048) (88,807)

Losses not brought to account 762,209 -

Total income tax expense/(benefit) 232,404 (101,309)

The balance of franking credits as at 30 June 2019 adjusted for payment of provision for income tax is $735,755 (2018: $735,755).

Numerical reconciliation between tax expense and pre-tax net profit 2019 2018

$ $

(Loss)/profit before tax (2,496,846) (442,059)

Income tax using the domestic corporation tax rate of 27.5% (2018: 27.5%) (686,633) (121,566)

(Decrease)/increase in income tax (benefit)/expense due to:

Non-allowable items 156,753 19,719

Under provision in prior years 75 538

Losses not brought to account 762,209 -

Income tax expense/(benefit) on pre-tax net profit 232,404 (101,309)


32

2019 2018

13. Cash and cash equivalent $ $ Bank balances 2,279,112 7,991,584

Cash and cash equivalents 2,279,112 7,991,584

2019 2018

14. Trade and other receivables $ $ Current Trade receivables 17,319 13,140 Other receivables 15,613 18,104

32,932 31,244

Credit risk The Group always measures the loss allowance for trade receivables at an amount equal to lifetime expected

credit loss. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that are specific to the debtor, general economic conditions of the industry in which the debtor operates and an assessment of both the current and forecast director of conditions at the reporting date. The Group has determined no loss allowance is required for the current or prior year. There has been no change in the estimation techniques used or significant assumptions made during the current reporting period. The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, for example, when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever occurs earlier. None of the trade receivables have been written off are subject to enforcement activities.

2019

$ 2018

$ Financial Assets Measured at Amortised Cost Trade and other receivables: - total current trade receivables 17,319 13,140 - total current other receivables 15,613 18,104 Total financial assets measured at amortised cost 32,932 31,244

15.

Inventories

2019 2018

Current

$ $

Goods available for sale 832 1,185

Carrying amount of inventories stated at cost 832 1,185


33

16. Financial assets Non-current investments 2019 2018 $ $ Listed equity securities designated at fair value through other

comprehensive income 7,376 8,605 Unlisted equity securities designated at fair value through other

comprehensive income 5,019,711 5,263,702

5,027,087 5,272,307

Interests in unlisted equity securities

(a) The Company has a 9.39% interest in Arbortech Industries Ltd (“Arbortech”), an unlisted public company.

Arbortech’s principal activities include the design and manufacture of innovative cutting tools and leisure products such as the Allsaw 170, Woodcarver blades and Airboard, as well as other technologies. The fair value of the investment (being $1,389,501 or $1.08 per Arbortech share), was determined with reference to the net assets of the company as at 30 June 2019 (2018: $1.01 per share). A revaluation gain of $82,328 was recognised in the consolidated statement of profit or loss and other comprehensive income during the period.

(b) The Company has a 35.00% interest in Cedar Woods Wellard Ltd. Based on the Net Assets the fair value of the investment has been determined to be $3,630,210 ($0.65 per share) as at 30th June 2019 compared to $3,956,526 as at 30 June 2018. This reduction was the result of a return of capital during the year of $350,000. A revaluation loss of $23,683 was recognised in the consolidated statement of profit or loss and other comprehensive income for the year ending 30 June 2019.

The fair value of the unlisted equity securities as at 30 June 2019 is considered to be based on significant observable inputs other than Level 1 inputs. There were no transfers between Level 1 and Level 2 during the period. There were also no changes during the period and compared to 2018 in the valuation techniques used by the Company to determine Level 2 fair values.

Interests in listed shares

(a) The Company’s holdings in Discovery Africa Ltd (previously Argosy Minerals Inc.) as at 30 June 2019

totalled 614,637 shares; which were acquired from 2007 to 2012 at a cost of $248,415. The market value of these shares was $0.012 per share at 30 June 2019 (2018: $0.014 per share) for a total market value of $7,376.

(b) The Company’s holdings in Greatcell Solar Limited, previously known as Dyesol Limited at a 30 June 2019

totalled 150,000 shares. The market value of these shares as at 30 June 2019 could not be determined due to the company being suspended from the ASX, (2018: $0.00 per share)

The fair value of listed shares as at 30 June 2019 is considered to be based on Level 1 of the fair value hierarchy. There were no changes during the period and compared to 2018 in the valuation techniques used by the Company to determine Level 1 fair values.

17. Current tax assets and liabilities

2019 2018 $ $ Current tax assets: Income tax - - Current tax liabilities: Income tax - -

- -


34

18(a) Non current asset - Investment property

2019 2018 $ $ Balance at 1 July 2,700,000 2,650,000 Disposals/Depreciation - 1,164 Fair value adjustments - 48,836 Transfer to available for sale (2,700,000) -

Balance at 30 June - 2,700,000

At cost - 3,020,603 Cost additions prior year adjustment - 1,970 Fair value adjustments - (322,573)

- 2,700,000 Investment property comprises land situated at 40 Wellington Street, Albany, WA. This property has been

developed for park home accommodation on a ground lease and service fee delivery model covering 42 individual sites. There are lease and service agreements in place with each of the park home owners. The investment property at 30 June 2018 was not available for sale.

18(b) Current asset - Investment property available for sale 2019 2018 $ $ Balance at 1 July - - Transferred to available for sale 2,700,000 - Disposals/Depreciation 23,551 - Fair value adjustments (341,731) -

Balance at 30 June 2,381,820 -

At cost 3,020,344 - Cost additions prior year adjustment 25,780 - Fair value adjustments (664,304) -

2,381,820 -

The investment property is available for sale at the end of 30 June 2019, this being a change from the 30 June

2018 Financial statements where the investment property was not available for sale. The Company appointed agents on 12 February 2019 to market the Albany Gardens Holiday Resort (‘AGHR”) and Albany Gardens Lifestyle Village (‘AGLV’) as an expression of interest campaign. The fair value reported in the financial statements at 30 June 2019, is the carrying amount of the investment property based on the marketed sale value less estimated selling costs. Any gain or loss arising from a change in fair value is recognised in the statement of comprehensive income.


35

19. Deferred tax assets and liabilities Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following:

Assets Liabilities Net

2019 2018 2019 2018 2019 2018 $ $ $ $ $ $ Other - (105,883) - 19,661 - (86,222) Value of loss carry-forwards

recognised - (146,181) - - - (146,181)

Tax (assets)/liabilities - (252,064) - 19,661 - (232,403)

Net tax (assets)/liabilities - (252,064) - 19,661 - (232,403)

Unrecognised deferred tax assets and liabilities

Deferred tax assets have not been recognised in respect of the following items: 2019 2018 $ $ Tax Losses 689,197 - Capital Losses 2,972,376 2,972,376

3,661,573 2,972,376

20(a) Non current asset - Property, Plant and Equipment Land and

buildings Plant and

equipment Total

$ $ $ Cost Balance at 1 July 2017 3,865,702 350,335 4,216,037 Asset impairment (20,463) - (20,463) Disposals/Written off - (6,379) (6,379) Additions 4,293 23,561 27,854

Balance at 30 June 2018 3,849,532 367,517 4,217,049

Balance at 1 July 2018 3,849,532 367,517 4,217,049 Transfer to current asset available for sale (3,849,532) (367,517) (4,217,049)

Balance at 30 June 2019 - - -

Depreciation and impairment losses

Balance at 1 July 2017 (221,740) (243,916) (465,656) Disposal/Written off - 7,726 7,726 Depreciation charge for the year (22,037) (37,094) (59,131)

Balance at 30 June 2018 (243,777) (273,284) (517,061)

Balance at 1 July 2018 (243,777) (273,284) (517,061)

Transfer to current asset available for sale 243,777 273,284 517,061


Carrying amounts

At 1 July 2017 3,643,962 106,419 3,750,381

At 30 June 2018 3,605,755 94,232 3,699,988

At 1 July 2018 3,605,755 94,232 3,699,988

At 30 June 2019 - - -

The carrying amount of land and buildings is the fair value of the property as determined by the external valuation company, Opteon Property Group. This valuation is based on market value and the valuation methodology uses the capitalisation of net income approach. The land and buildings at 30 June 2018 was not available for sale.


36

The land and buildings along with the property, plant and equipment are available for sale at the end of 30 June 2019, this being a change from the 30 June 2018 financial statements where the assets were not available for sale. The Company appointed agents on 12 February 2019 to market the Albany Gardens Holiday Resort (‘AGHR”) and Albany Gardens Lifestyle Village (‘AGLV’) as an expression of interest campaign.

The fair value reported in the financial statements at 30 June 2019, is the carrying amount of the investment property based on the marketed sale value less estimated selling costs. The cost of the land and buildings including additions is $3,192,547.

Any future gain or loss arising from a change in fair value will be recognised in the statement of comprehensive income.

20(b) Current Asset - Property, Plant and Equipment available for sale Land and

buildings Plant and

equipment Total

$ $ $ Cost Balance at 1 July 2017 - - - Asset impairment - - - Disposals/Written off - - - Additions - - -


Balance at 1 July 2018 - - - Transfer to available for sale 3,849,532 367,517 4,217,049 Asset impairment (885,068) - (885,068) Disposals/Written off - (8,748) (8,748) Additions 60,248 9,486 69,734

Balance at 30 June 2019 3,024,712 368,255 3,392,967

Depreciation and impairment losses

Balance at 1 July 2017 - - - Disposal/Written off - - - Depreciation charge for the year - - -


Balance at 1 July 2018 - - - Transfer to available for sale (243,777) (273,284) (517,061) Disposal/Written off - 9,262 9,262 Depreciation charge for the year (22,168) (41,816) (63,984)

Balance at 30 June 2019 (265,945) (305,838) (571,783)

Carrying amounts

At 1 July 2017 - - -

At 30 June 2018 - - -

At 1 July 2018 - - -

At 30 June 2019 2,758,767 62,417 2,821,184


37

21. Intangible assets Goodwill Total $ $ Year ended 30 June 2018 Balance at beginning of the year 124,621 124,621 Impairment losses (124,621) (124,621)

Closing Value at 30 June 2018 - -

Year ended 30 June 2019 $ $ Balance at beginning of the year 124,621 124,621 Impairment losses (124,621) (124,621) Closing Value at 30 June 2019 - - Impairment tests for cash generating units containing goodwill Goodwill is allocated to the following cash-generating unit;

Albany Gardens Holiday Resort

Goodwill Carrying Amount

$

Initial Balance 318,367 Impairment (318,367) Final value 30 June 2019 - Land & Buildings Carrying

Amount Revaluation

Surplus $ $ Initial Balance 2,981,891 640,205 Revaluation (223,049) (640,205) Final value 30 June 2019 2,758,842 - Plant & Equipment Carrying

Amount Revaluation

Surplus $ $ Initial Balance 67,271 16,781 Revaluation (5,032) (16,781) Final value 30 June 2019 62,239 -

22. Trade and other payables

Current 2019 2018 $ $ Other trade payables and accrued expenses 175,067 367,186 Income in advance 2,521 3,296

177,588 370,482

Financial liabilities at amortised cost classified as trade and other payables Total current 177,588 370,482 Less: Income in advance (2,251) (3,296)

Financial liabilities as trade and other payables 175,067 367,186


38

23. Provisions

2019 2018 $ $ Provision for annual leave 9,471 7,141

9,471 7,141

Movement in provision for annual leave Balance as at 1 July 7,141 4,213 Add: Additional provisions 2,671 11,830 Less: Amounts used or taken (341) (8,902)

Balance as at 30 June 9,471 7,141

24. Interest-bearing loans and borrowings

This Note provides information about the contractual terms of the consolidated entity’s interest-bearing loans

and borrowings. 2019 2018 $ $ Current liabilities Credit card facilities 3,198 7,615 3,198 7,615


Collateral provided

The only remaining borrowing for the group is the National Australia Bank credit card facility maintained by the Company (KCGL), with a facility limit of $10,000.

Financing facilities

2019 2018

$ $

Credit cards 10,000 10,000

10,000 10,000

Facilities utilised at reporting date Credit cards 3,198 7,615

3,198 7,615

Facilities not utilised at reporting date Credit cards 6,802 2,385

6,802 2,385

Financing arrangements

Visa – National Australia Bank $10,000 Interest is charged by the financial institution at a variable rate. The rate as at 30 June 2019 was 12.65%. (2018: 13.99%). The credit card is not secured against any assets of the group.


39

25. Issued capital No. of ordinary shares

2019 2018

On issue at 1 July 24,086,297 24,086,297

On issue at 30 June – fully paid 24,086,297 24,086,297

Effective 1 July 1998, the Company Law Review Act abolished the concept of par value shares and the concept of authorised capital. Accordingly, the Company does not have authorised capital or par value in respect of its issued shares.

The value of ordinary issued shares at balance date is $25,367,856 (2018: $29,281,915), this was a result of a return of capital to shareholders in March 2019 of $3,914,059.

Equity per share 2019 2018

Shares on issue 24,086,797 24,086,797

Equity attributable to shareholders $12,429,309 $19,624,822

Equity per share 51.60c 81.48c

Terms and conditions of ordinary shares

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds of liquidation.

Fair value reserve

The revaluation reserve relates to financial Assets available-for-sale and land and buildings measured at fair value in accordance with applicable Australian Accounting Standards.

Capital management

Management controls the capital of the Group in order to maintain a good debt to equity ratio, provide the shareholders with adequate returns and ensure that the Group can fund its operations and continue as a going concern. The Group’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. There are no externally imposed capital requirements. Management effectively manages the Group’s capital by assessing the Group’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. There have been no changes in the strategy adopted by management to control the capital of the Group since prior year. This strategy is to ensure that the Group’s gearing ratios remains below 50%. The gearing ratios are as follows:

Note 2019 2018

$ $

Total borrowings 24 3,198 7,615

Less cash and cash equivalents 13 (2,279,112) (7,991,584)

Net debt (2,275,914) (7,983,969)

Total equity 12,429,309 19,624,822

Total capital 10,153,395 11,640,853 Gearing ratio 0% 0%


40

26. Dividends

No provisions for dividends have been made for period ending 30 June 2019.

27. Financial risk management The Group’s financial instruments consist mainly of deposits with banks, equity investments, accounts

receivable and payable and loans to and from subsidiaries. The total for each category of financial instruments, measured in accordance with AASB 9: Financial Instruments as detailed in the accounting policies to these financial statements are as follows:

2019 2018

$ $

Financial assets Financial assets at amortised cost:

- Cash and cash equivalents 2,279,112 7,991,584

- Receivables 32,932 31,244

- Investments in equity instruments designated at fair value through other comprehensive income

5,027,087

5,272,307

Total financial assets 7,339,131 13,295,135

Financial liabilities Financial liabilities at amortised cost:

- Trade and other payables 177,588 370,482

- Borrowings 3,198 7,615

Total financial liabilities 180,786 378,097

Financial risk management policies

The directors' overall risk management strategy seeks to assist the Company in meeting its financial targets, whilst minimising potential adverse effects on financial performance. Risk management policies are approved and reviewed by the Board of Directors on a regular basis. These include the credit risk policies and future cash flow requirements.

Specific financial risk exposure and management The primary risks that the Group is exposed to from holding financial instruments is market risk, equity price

risk, liquidity risk and credit risk. Each specific risk exposure and management by the group is identified below.

Market risk - Interest rate risk Exposure to interest rate risk arises on financial assets and financial liabilities recognised at reporting date

whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group is also exposed to earnings volatility on floating rate instruments. Interest rate risk was deemed by the directors to be low due to the current stability of the market and therefore financing arrangements were under variable interest rate terms. Additionally, the Groups exposure to increasing interest rates on financial liabilities has been reduced with the full discharge of long term borrowings.

Floating rate instruments: 2019 2018

$ $

Borrowings 3,198 7,615


41

27. Financial risk management (cont’d)

Liquidity risk

Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms: • preparing forward-looking cash flow analysis in relation to its operational, investing and financing activities; • monitoring undrawn credit facilities; • obtaining funding from a variety of sources; • maintaining a reputable credit profile; • managing credit risk related to financial assets; • only investing surplus cash with major financial institutions; and • comparing the maturity profile of financial liabilities with the realisation profile of financial assets The tables below reflect an undiscounted contractual maturity analysis for financial liabilities. Bank overdrafts have been deducted in the analysis as management does not consider that there is any material risk that the bank will terminate such facilities. The bank does however maintain the right to terminate the facilities without notice and therefore the balances of overdrafts outstanding at year end could become repayable within 12 months. Cash flows realised from financial assets reflect management's expectation as to the timing of realisation. Actual timing may therefore differ from that disclosed. The timing of cash flows presented in the table to settle financial liabilities reflect the earliest contractual settlement dates and do not reflect management's expectations that banking facilities will roll forward.

Within 1 Year 1 to 5 years Total

Financial liabilities due for payment

2019 2018 2019 2018 2019 2018

$ $ $ $ $ $

Credit card facilities 3,198 7,615 - - 3,198 7,615

Trade and other payables 177,588 370,482 - - 177,588 370,482

180,786 378,097 - - 180,786 378,097

Financial assets – cash flows realisable

Cash and cash equivalents 2,279,112 7,991,584 - - 2,279,112 7,991,584

Trade and other receivables 32,932 31,244 - - 32,932 31,244

2,312,044 8,022,828 - - 2,312,044 8,022,828

Credit risk

Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. Credit risk is managed on a Group basis and reviewed regularly by the board. Credit risk is managed through maintaining procedures ensuring, to the extent possible, that customers and counterparties to transactions are of sound credit worthiness.


42


Credit risk (continued)

Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit rating. Credit risk exposures The maximum exposure to credit risk by class of recognised financial assets at balance date, excluding the value of any collateral or other security held, is equivalent to the carrying value and classification of those financial assets (net of any provisions) as presented in the statement of financial position. The Group has no significant concentration of credit risk with any single counterparty or Group of counterparties. Credit risk related to balances with banks and other financial institutions is managed by the Board in accordance with policy. Such policy requires that surplus funds are only invested with counterparties with a Standard and Poor's (S&P) rating of at least AA-.

Market risk – Equity price risk

The Company is not exposed to any material commodity price risk. Equity price risk is the risk that fair value of equities decreases as a result of changes in market prices, whether those factors are caused by factors specific to the individual equity or factors affecting all equities in the market. Equity price risk arises from the Company’s investment portfolio denoted as ‘Financial Assets’ in the financial report. Refer to the sensitivity analysis for details of the profit and loss impact of this specific risk.

Net fair values

Fair value estimation The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying values as presented in the balance sheet. Fair values are those amounts which an asset could be exchanged, or a liability, between knowledgeable willing parties in an arm’s length transaction. Fair values derived may be based on information that is estimated or subject to judgement, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgement and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash flow analysis and other valuation techniques commonly used by market participants. Differences between fair values and carrying values of financial instruments with fixed interest rates are due to the change in discount rates being applied by the market since their initial recognition by the Group. Most of these instruments which are carried at amortised cost (that is loan liabilities) are to be held until maturity and therefore the net fair value figures calculated bear little relevance to the Group.

2019 2018

Net Carrying

Value Net Fair Value

Net Carrying Value

Net Fair Value

$ $ $ $

Financial assets Financial assets at amortised cost:

Cash and cash equivalents (i)

2,279,112 2,279,112 7,991,584 7,991,584

Trade and other receivables (i) 32,932 32,932 31,244 31,244

Investments in equity instruments designated as at fair value through other comprehensive income

5,027,087

5,027,087

5,272,307

5,272,307

Total financial assets 7,339,131 7,339,131 13,295,135 13,295,135

Financial liabilities Financial liabilities at amortised cost:

Trade and other payables (i) 177,588 177,588 370,482 370,482

Bank debt (ii) 3,198 3,198 7,615 7,615

Total financial Liabilities 180,786 180,786 378,097 378,097


43


The fair values disclosed in the above table have been determined based on the following methodologies:

(i) Cash and cash equivalents, trade and other receivables and trade and other payables are short term instruments in nature whose carrying values is equivalent to fair value. Trade and other payables exclude amounts provided for relating to annual leave which is not considered a financial instrument.

(ii) Discounted cash flows models are used to determine the fair values of bank debt and hire purchase liabilities. Discount rates used on the calculations are based on interest rate existing at reporting date for similar types of bank debt and hire purchase liabilities. Differences between fair values and carrying values largely represent movements in the effective interest rate determined on initial recognition and current market rates.

(iii) For listed assets, closing quoted bid prices at reporting date are used. The fair values for unlisted available for sale assets have been based on the net asset position of the respective investments. The net asset position is then adjusted for the most recent valuations of the underlying assets.

Sensitivity analysis

The following table illustrates sensitivities to changes in interest rates and equity prices. The table indicates the impact of how profit and equity values reported at balance date would have been affected by changes in the relevant risk variable that management considers to be reasonably possible.

Profit Equity

Year ended 30 June 2019

+/- 2% in interest rates +/-64 +/-64

+/- 10% in total investments +/-502,709 +/-502,709

Year ended 30 June 2018

+/- 2% in interest rates +/-152 +/-152

+/- 10% in total investments +/- 527,230 +/- 527,230

The above sensitivity analysis has been performed on the assumption that all other variables remain unchanged.

28. Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

2019 2018

$ $

Less than one year 13,520 12,587

Between one and five years - -

13,520 12,587

The Group leases the business premises under an operating lease. The lease terms are on a periodic basis, with no set expiry date.

During the financial year ended 30 June 2019, $13,520 was recognised as an expense in profit or loss in respect of operating leases (2018: $12,587).


44

29. Reconciliation of cash flows from operating activities

Cash flows from operating activities 2019 2018 $ $ Profit for the period (3,057,722) (319,251) Adjustments for: Depreciation 63,984 59,131 Impairment of investment property 341,731 (48,836) Interest income (74,074) (123,883) Revaluation of property, plant and equipment 885,068 20,463 Balancing adjustment on property, plant and equipment 2,264 1,313 Impairment of intangibles - 124,621 Revaluation of financial assets (104,782) (43,275) Dividends Received (32,252) (28,382) Operating loss before changes in working capital

and provisions (1,975,783) (358,099) (Increase)/decrease in trade and other receivables 3,062 (42,167) Decrease/(increase) in inventories 353 18 (Increase)/decrease in deferred tax assets/liabilities 8,671 (101,309) Increase/(decrease) in current tax liability - - Increase/(decrease) in Provisions 2,330 2,928 Increase/(decrease) in trade and other payables (192,894) 106,989 Net cash from operating activities (2,154,261) (391,641)

The net cash flows of the discontinued operation, operating activities has been incorporated into the reconciliation of cash from operating activities.

Related parties

30. The following were key management personnel of the Group at any time during the reporting period and

unless otherwise indicated were key management personnel for the entire period. Movements in shares

Directors’ Interest Balance 30 June 2018

Purchases / Placements

Share Consolidation

Balance 30 June 2019

Gregory Paramor 348,500 - - 348,500 348,500 - - 348,500

Mr Grant Hodgetts is principal of Hodgetts and Partners and director of Bethley Group Pty Ltd. These entities are entitled to receive directors’ fees for Mr Hodgetts role as Executive Director of the Company. During the financial year ended 30 June 2019 these entities became entitled to director fees totalling $259,140 (2018: $265,919) of which $50,000 were accrued at 30 June 2019.

Mr Grant Priest is a Partner at UHY Haines Norton Perth Chartered Accountants (formerly Sothertons). This firm provides accounting and tax services to the Group. All services are provided in the ordinary course of business and on normal commercial terms and conditions. During the financial year UHY Haines Norton Perth Chartered Accountants were paid $132,911 (2018: $199,536). The breakdown of services provided for $132,911 being as follows:

Company Secretarial Fees $43,200

Litigation

Sale of Assets

Accounts Preparation Fees

$22,916

$ 3,200

$53,220

Taxation compliance obligations $10,375


45

30. Related parties (cont’d)

The above fees are exclusive of GST. Directors’ and key management personnel’s compensation Directors fees were paid to Mr Britton $35,587 and Mr Paramor $24,638 as remuneration for their services as non-executive directors.

Non-key management personnel disclosures The Group has a related party relationship with its subsidiaries (see below), associates (see Note 16) and

with its key management personnel (refer to disclosures for key management personnel above). Identity of related parties Subsidiaries Loans are made by the Company to wholly owned subsidiaries for capital purchases. Loans outstanding

between the Company and its controlled entities are repayable on demand, however the Company has not imposed a fixed date of repayment and currently these loans are non-interest bearing. During the financial year ended 30 June 2019 such loans to subsidiaries totalled $4,412,221 (2018: $5,156,347) have been eliminated on consolidation.

Subsidiaries Country of

Incorporation Ownership Interest

2019 2018

Parent entity

Knights Capital Group Limited

Subsidiary

Knights Parks & Properties Pty Ltd Australia 100% 100%


46

31. Parent entity disclosures

Financial position

2019 2018

$ $

Assets

Current assets 1,893,022 7,296,909

Non-current assets 9,649,757 10,635,754

Total assets 11542,779 17,932,663

Liabilities

Current liabilities 96,343 353,076


Net assets 11,446,436 17,579,587

Equity

Issued capital 25,367,856 29,281,915

Retained earnings (16,890,591) (14,566,751)

Revaluation reserve 2,969,171 2,864,423

Total equity 11,446,436 17,579,587

Financial performance 2019 2018

$ $

(Loss)/profit for the year (2,144,663) (552,085) Income tax benefit/(expense) (74,429) 162,932

Total comprehensive (loss)/income (2,219,092) (309,153)

32.

Events after the Reporting Period The directors of “CWWL” resolved a return of capital to the shareholders on 17 September 2019 of 18.75c/share. The Companys’ allocation of the return of capital is $1,050,000 and was received by 20 September 2019. This bringing the total return of capital to the company from the investment to $2,450,000.

Other than the above, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

Knights Capital Group Limited Consol Financials 2019.pdf · Knights Capital Group Limited...

Documents

Transcript of Knights Capital Group Limited Consol Financials 2019.pdf · Knights Capital Group Limited...