and its controlled entities ( APD ) Appendix 4D Half Year Financial Report for the period ended 31 December Results for announcement to the market Half year ended 31 December Half year ended 31 December 2013 % Revenues from ordinary activities 14,896 14,838 0.4% Profit from ordinary activities after tax attributable to members 8,773 4,337 102% Loss from discontinued operations after tax attributable to members (263) (110) (139)% Net profit for the period attributable to members 8,510 4,227 101% Net tangible assets per share 25.3 cents 21.9 cents Dividends Half year ended 31 December Half year ended 31 December 2013 Interim (cents per share); 100% franked amount 1.25 1.25 Record date for determining entitlement 27 March 2015 Payment date 14 April 2015 The further information required by the listing rules is included in the accompanying Half Year Financial Report. Refer to the Directors Report for an explanation of the operational and financial results of the Group. John Freemantle Company Secretary 23 February 2015
ABN 30 109 846 068 Financial report for the six months ended 31 December
Directors report Directors report The directors of ( APN or the Group ) present herewith their report for the six months ended 31 December. The names of the directors of the company during or since the end of the period are: Christopher Aylward Executive Chairman Timothy Slattery Appointed Executive Director on 12 September Clive Appleton Non-Executive Director Howard Brenchley transitioned from Executive Director to Non-Executive Director on 1 July Review of Results and Operations Summary APN has reported a statutory net profit after tax of $8.5 million for the six-months ended 31 December, up 101% when compared to the prior comparable period (pcp). Diluted statutory earnings per share from continuing and discontinued operations increased 57% from 2.57 cents to 4.03 cents. Total Funds under Management (FuM) increased 5% and 19% from 30 June and 31 December 2013 respectively to $2.1 billion as at 31 December. The Group s balance sheet remains strong with net assets totalling $64.8 million, including cash of $11.1 million and co-investments in the Group s managed funds of $48.6 million. Debt, currently maturing in August 2015, remains modest at $5.0 million. Operating earnings (before tax) increased to $5.4 million, up $0.2 million versus pcp. On a cents per share basis, operating earnings before tax were 2.55 cents per share, down 0.59 cents reflecting a reduction in transaction and performance fees and an expanded capital base following the equity raising completed in December 2013. An analysis of the components of operating earnings before tax is as follows: Dec- Dec-2013 Fund management fees 5,861 4,885 Performance and transaction fees 3,671 6,154 Asset and project management fees 905 647 Registry and other fees 1,165 1,252 Total net funds management income 11,602 12,938 Co-investment income 1,528 512 Total net income 13,130 13,450 Employment costs (4,655) (4,735) Occupancy costs (566) (595) Other costs (1,421) (1,503) Depreciation & amortisation (34) (68) Finance income / (expense) 1 (19) 145 Minority interest (MI) share of operating earnings (before tax) (1,054) (1,526) Operating earnings before tax 2 5,381 5,168 Other non-operating items, including income tax 3,129 (941) Statutory profit after tax 8,510 4,227 1: Previously disclosed as part a non-operating item 2: Operating earnings before tax is an unaudited measurement used by management as the key performance measurement of underlying performance of the Group. It excludes certain items recorded in the income statement including income tax, discontinued operations (Europe) and the fair value movements on the Group s co-investments. Total net income for the 6 months to 31 December declined marginally to $13.1 million from $13.5 million following a $2.5 million reduction in performance and transaction fees. Significantly APN reported strong growth in funds management fees and co-investment income, increasing 20% and 198% respectively, attributable to the continued growth in Funds under Management (FuM), the establishment of Industria REIT in December 2013 and APN s significant co-investment stakes in both Industria REIT and Generation Healthcare REIT. Current period net performance and transaction fees included project initiation fees of $0.8 million from the Newmark APN Auburn Property Fund, performance and disposal fees of $0.8 million following the successful conclusion of the APN 541 St Kilda Road Property Fund and $2.0 million in performance fees from Generation Healthcare REIT following its significant outperformance for investors compared to the S&P/ASX 300 AREIT Accumulation Index. 1
Directors report The Group has continued with its focus on optimising its operating costs and leveraging its funds management platform, delivering a reduction of $0.2 million to $6.7 million for the period ended 31 December. Other non-operating items totalled $3.1m for the period compared to a loss of $0.9m in the pcp and included coinvestment mark to market gains of $4.7 million, net income tax expense of $1.1 million (partially offset by the recognition of previously unrecognised tax losses totalling $2.4 million) and a $0.3 million loss on continued wind up of APN s legacy European funds (discontinued operations). Real Estate Securities Funds under Management totalled $1.15 billion as at 31 December, up from $1.0 billion at 30 June, reflecting net inflows of approximately $30 million across the product suite and favourable AREIT market movements. The APN AREIT Fund continues to lead APN s Real Estate Securities product suite with net inflows averaging almost $20 million per month for the period. The Fund s market awareness and availability continues to improve and we are pleased to have been advised of its recent addition to the approved product list for ANZ Wealth. The re-opening of the APN Property for Income Funds to daily applications and redemptions from July has resulted in net outflows of approximately $66 million for the period. After its initial peak, redemption levels have continued to progressively reduce over the remaining period. Generation Healthcare REIT Generation Healthcare REIT reported another strong financial result for the half year ended 31 December. Underlying net operating income was up 78% to $8.4 million compared to pcp, with a total return (unit price movements, assuming the reinvestment of distributions) of 18.7% for the period, substantially outperforming the S&P/ASX AREIT Accumulation Index return by 6.0%. FY2015 forecast earnings and distribution guidance has been upgraded by 4.3% to 9.60 cents per unit and 2.0% to 8.58 cents per unit. Funds under Management totalled $341 million, up from $325 million at 30 June. The Fund s organic growth opportunities continues to be an area of focus, with significant efforts expended on activating / converting the Healthscope anchored expansion of the Frankston Private facility and the St John of God Healthcare memorandum of understanding for Casey Stage 2. Committed projects now stand at $45 million, with an identified work in progress pipeline (Casey Stage 2) totalling approximately $50 million. Industria REIT Industria REIT s Funds under Management totalled $405 million at the period end, broadly consistent with 30 June. Active portfolio management has maintained occupancy in a difficult leasing market and improved the property portfolio s weighted average lease term to 5.1 years at 31 December. An interim distribution of 8.36 cents per security has been declared, in line with PDS forecasts. A continuation of subdued leasing conditions, particularly in the Brisbane office market, has resulted in updated full year distribution guidance of 16.20 16.72 cents per security. At a portfolio level, management continues its focus on asset recycling initiatives. In December, 53 Brandl Street, Brisbane was sold for a $10.25 million, a profit compared to its book value. Management s focus remains on intensive asset management to reduce vacancy and improve portfolio WALE, whilst exploring further asset recycling opportunities to improve sector diversification. Direct Funds Funds under Management totalled $231 million at 31 December compared to $252 million at 30 June, following the successful conclusion of the APN 541 St Kilda Road Fund. Development activities have shown good progress for the Newmark APN Auburn Property Fund and subsequent to 31 December the Group has accepted an unsolicited offer from an institutional investor to acquire the asset on its expected completion in early FY2016 resulting in a forecast return ahead of initial expectations. The APN Coburg North Retail Fund was successfully launched during the period (settled in February 2015), capitalising on investor s appetite for quality assets with the potential to deliver sustainable income yields and capital growth over time. The Neighbourhood shopping centre is anchored by a high quality tenant in Woolworths Limited and has a long weighted average lease expiry of 13.9 years. Assets possessing these characteristics have strong appeal to our investor base and are actively being sought for new unlisted fund opportunities. Outlook The transaction market for commercial property remains strong for quality real estate, with demand for investment grade property particularly strong. Capitalisation rates continue to tighten as the low interest rate environment continues to drive investor demand for sustainable and transparent property income yields. However the leasing market remains subdued, reflecting poor consumer sentiment and political uncertainty. Western Australia and Queensland are most affected with both forecast to experience weakness as their economies deal with the conclusion of the mining investment boom and lower commodity prices. 2
Directors report The recent move by the Reserve Bank to cut interest rates by a further 0.25% has been required to stimulate the economy and, from a property funds management perspective, further enhance the appeal of strong cash back property yields that are supported by long term leases to quality tenants. Earnings Guidance APN remains well positioned to grow its business in the current economic environment, with its focus on investor products that demonstrate transparent cashflows and sustainable income yields. Operating earnings before tax has been upgraded to 3.30 to 3.60 cents per share for FY2015 following the continued strength in the underlying businesses and a number of successful transactions completed during the period including the establishment of the APN Coburg North Retail Fund and the strong outperformance of Generation Healthcare REIT versus its benchmarks. The upgraded operating earnings before tax guidance remain subject to the continuation of the current economic and regulatory environments. Subsequent events On 9 February 2015, APN Property Group announced that it had completed the acquisition of the Coburg Hill Shopping Centre for the APN Coburg North Retail Fund. The APN Coburg North Retail Fund is a new 7 year unlisted property syndicate that is forecast to deliver investors with a 7.40% distribution yield in FY2015 increasing to 7.60% in FY2016 which will be at least 90% tax deferred. On 20 February 2015, APN Funds Management Limited, the responsible entity of the Newmark APN Auburn Property Fund announced that it had executed a conditional contract of sale and development agreement for The Marketplace, Auburn. Subject to the completion of the redevelopment works on time and budget, investor returns are forecast to be 50% - 60% on their initial investment. APN holds a 5.4% co-investment stake in this fund and is also entitled to a performance fee, based on the projects actual gross profit on completion, currently estimated at approximately $1.1 $1.2 million before tax (~$0.8 million after tax) in FY2016. Dividend Directors have declared an interim dividend of 1.25 cents per share. The dividend will be fully franked and paid on 14 April 2015 to investors registered on 27 March 2015. Except as outlined above, the directors have not become aware of any other significant matter or circumstances that has arisen since 31 December, that has affected or may affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in subsequent years, which has not been covered in this report. Auditor s independence declaration The auditor s independence declaration is included on page 5 of the half-year report. Rounding off of amounts The company is a company of the kind referred to in ASIC Class Order 98/100, dated 10 July 1998, and in accordance with that Class Order amounts in the directors report and the half-year financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. 3
Directors report Signed in accordance with a resolution of directors made pursuant to s.306(3) of the Corporations Act 2001. On behalf of the Directors Christopher Aylward Executive Chairman Melbourne, 23 February 2015 4
Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia Tel: +61 3 9671 7000 Fax: +61 3 9671 7001 www.deloitte.com.au The Board of Directors 101 Collins Street MELBOURNE VIC 3000 23 February 2015 Dear Sirs Independence declaration In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of regarding the half-year financial reports. As lead audit partner for the review of the financial statements of for the half-year ended 31 December, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and (ii) any applicable code of professional conduct in relation to the review. Yours sincerely DELOITTE TOUCHE TOHMATSU Neil Brown Partner Chartered Accountants Melbourne, 23 February 2015 Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited
Deloitte Touche Tohmatsu ABN 74 490 121 060 550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia Tel: +61 3 9671 7000 Fax: +61 3 9671 7001 www.deloitte.com.au Independent Auditor s Review Report to the Members of APN Property Group Limited We have reviewed the accompanying financial report of, which comprises the statement of financial position as at 31 December, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the half-year ended on that date, selected explanatory notes and, the directors declaration of the consolidated entity, comprising the company and the entities it controlled at the end of the half-year or from time to time during the half-year as set out on pages 8 to 19. Directors Responsibility for the Financial Report The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the APN Property Group Limited s financial position as at 31 December and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As the auditor of, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Auditor s Independence Declaration In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of, would be in the same terms if given to the directors as at the time of this auditor s review report. Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited
Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of is not in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the consolidated entity s financial position as at 31 December and of its performance for the half-year ended on that date; and (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. DELOITTE TOUCHE TOHMATSU Neil Brown Partner Chartered Accountants Melbourne, 23 February 2015
Directors declaration Directors declaration The directors declare that: (a) (b) in the directors opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable; and in the directors opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the Group. Signed in accordance with a resolution of the directors made pursuant to s.303(5) of the Corporations Act 2001. On behalf of the Directors Christopher Aylward Executive Chairman Melbourne, 23 February 2015 8
Condensed consolidated statement of profit or loss and other comprehensive income Condensed consolidated statement of profit or loss and other comprehensive income for the half-year ended 31 December Consolidated Half-year ended Note 31 Dec 31 Dec 2013 Continuing operations Revenue 3 14,896 14,838 Cost of sales (1,766) (1,388) Net revenue 13,130 13,450 Finance income 173 156 Administration expenses 4 (6,676) (6,901) Impairment and fair value adjustments 4 4,667 1,188 Finance costs (192) (11) Profit before tax 11,102 7,882 Income tax expense (1,093) (2,362) Profit for the period from continuing operations 10,009 5,520 Discontinued operation (Loss)/Profit for the period from discontinued operations (271) (123) Profit for the period 9,738 5,397 Other comprehensive income, net of income tax Items that may be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign operations 94 264 Other comprehensive income / (loss) for the period (net of income tax) 94 264 Total comprehensive income for the period 9,832 5,661 Profit / (Loss) attributable to: Equity holders of the parent 8,510 4,227 Non-controlling interests 1,228 1,170 9,738 5,397 Total comprehensive income / (loss) for the period: Equity holders of the parent 8,604 4,491 Non-controlling interests 1,228 1,170 9,832 5,661 Earnings per share From continuing and discontinued operations Basic (cents per share) 4.06 2.57 Diluted (cents per share) 4.03 2.57 From continuing operations Basic (cents per share) 4.18 2.64 Diluted (cents per share) 4.16 2.64 Notes to the financial statements are included on pages 13 to 19. 9
Condensed consolidated statement of financial position Condensed consolidated statement of financial position as at 31 December Consolidated 31 December 30 June Note Current assets Cash and cash equivalents 20,012 6,034 Trade and other receivables 6,951 6,165 Other financial assets 8 48,555 46,077 Other assets 1,492 366 Total current assets 77,010 58,642 Non-current assets Investments in joint venture 4 Other financial assets 87 105 Property, plant and equipment 272 240 Deferred tax assets 5,173 4,643 Intangible assets 6 4,073 4,079 Total non-current assets 9,609 9,067 Total assets 86,619 67,709 Current liabilities Trade and other payables 11,310 2,995 Borrowings 5,000 5,000 Current tax liabilities 239 1,297 Provisions 1,960 1,910 Total current liabilities 18,509 11,202 Non-current liabilities Provisions 516 236 Deferred tax liabilities 2,238 917 Other liabilities 511 551 Total non-current liabilities 3,265 1,704 Total liabilities 21,774 12,906 Net assets 64,845 54,803 Equity Issued capital 7 72,703 72,703 Reserves 997 693 Retained earnings (13,654) (22,164) Equity attributable to equity holders of the parent 60,046 51,232 Non-controlling interests 4,799 3,571 Total equity 64,845 54,803 Notes to the financial statements are included on pages 13 to 19. 10
Condensed consolidated statement of changes in equity Condensed consolidated statement of changes in equity for the half-year ended 31 December Share capital Retained earnings Equitysettled employee benefits reserve Foreign currency translation reserve Total Attributable to equity holders of the parent Noncontrolling interest Total Balance at 1 Jul 2013 57,182 (26,913) 1,917 (1,815) 30,371 748 31,119 Profit for the period 4,227 4,227 1,170 5,397 Translation of foreign subsidiary company 264 264 264 Total comprehensive income for the period 4,227 264 4,491 1,170 5,661 Shares issue 16,077 16,077 16,077 Share issue transaction costs (773) (773) (773) Income tax relating to transaction costs 232 232 232 Recognition of share-based payments 952 952 952 Balance at 31 Dec 2013 72,718 (22,686) 2,869 (1,551) 51,350 1,918 53,268 Balance at 1 Jul 72,703 (22,164) 2,387 (1,694) 51,232 3,571 54,803 Profit for the period 8,510 8,510 1,228 9,738 Translation of foreign subsidiary company 94 94 94 Total comprehensive income for the period 8,510 8,604 1,228 9,832 Recognition of share-based payments 210 210 210 Balance at 31 Dec 72,703 (13,654) 2,597 (1,600) 60,046 4,799 64,845 Notes to the financial statements are included on pages 13 to 19. 11
Condensed consolidated statement of cash flows Condensed consolidated statement of cash flows for the half-year ended 31 December Consolidated Half-year Ended Cash flows from operating activities Note 31 Dec 31 Dec 2013 Receipts from customers 12,801 8,601 Payments to suppliers and employees (8,339) (7,947) Interest received 175 134 Distributions received 1,302 420 Interest and other costs of finance paid (140) (13) Income tax paid (1,383) (542) Net cash provided by operating activities 4,416 653 Cash flows from investing activities Payment for investment (147) (13,952) Payment for property, plant and equipment (59) (71) Payment for intangible asset (1,700) Amount advanced to a related party (4) Proceeds on sale of investment 2,337 1,214 Deposits paid on behalf of new funds (1,185) Monies received in trust from investors 8,525 Net cash used in investing activities 9,467 (14,509) Cash flows from financing activities Proceeds from issue of shares 15,304 Net cash provided by financing activities 15,304 Net increase / (decrease) in cash and cash equivalents 13,883 1,448 Net effect of foreign exchange translations 95 420 Cash and cash equivalents at the beginning of the period 6,034 7,409 Cash and cash equivalents at the end of the period 20,012 9,277 Notes to the financial statements are included on pages 13 to 19. 12
Notes to the condensed consolidated financial statements Notes to the condensed consolidated financial statements 1. Significant accounting policies Statement of compliance The half-year financial report is a general purpose financial report prepared in accordance with the Corporations Act 2001 and AASB 134 Interim Financial Reporting. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 Interim Financial Reporting. The half-year report does not include notes of the type normally included in an annual financial report and should be read in conjunction with the most recent annual financial report. Basis of preparation The condensed consolidated financial statements have been prepared on the basis of historical cost, except for the revaluation of certain non-current assets and financial instruments. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. The company is a company of the kind referred to in ASIC Class Order 98/100, dated 10 July 1998, and in accordance with that Class Order amounts in the directors report and the half-year financial report are rounded off to the nearest thousand dollars, unless otherwise indicated. The accounting policies and methods of computation adopted in the preparation of the half-year financial report are consistent with those adopted and disclosed in the company s annual financial report for the financial year ended 30 June, except for the impact of the Standards and Interpretations described below. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards. The Group has adopted all the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current reporting period. New and revised Standards and amendments thereof and Interpretations effective for the current reporting period that are relevant to the Group include: Standard AASB 1031 Materiality (2013) AASB 2012-3 Amendments to Australian Accounting Standards Offsetting Financial Assets and Financial Liabilities AASB 2013-3 Amendments to AASB 136 Recoverable Amount Disclosures for Non-Financial Assets AASB 2013-4 Amendments to Australian Accounting Standards Novation of Derivatives and Continuation of Hedge Accounting AASB 2013-5 Amendments to Australian Accounting Standards Investment Entities AASB 2013-9 Amendments to Australian Accounting Standards Part B: Materiality AASB -1 Amendments to Australian Accounting Standards Part A: Annual Improvements 2010-2012 and 2011-2013 Cycles Part B: Defined Benefit Plans: Employee Contributions (Amendments to AASB 119) Part C: Materiality Interpretation 21 Levies The application of these amendments does not have any material impact on the disclosures or the amounts recognised in the Group's condensed consolidated financial statements. 13
Notes to the condensed consolidated financial statements 2. Segment information The Group s reportable segments are aligned to the categories of product managed by the Group and are as follows: Reportable segments Product type Fund Continuing operations Real Estate Securities funds Open ended properties securities funds APN AREIT Fund APN Property for Income Fund APN Property for Income Fund No. 2 APN Unlisted Property Fund APN Asian REIT Fund APN Asia Pacific REIT Fund Open ended offshore fund APN Asian Asset Income Fund Healthcare Real Listed property trust Generation Healthcare REIT Estate Industrial Real Estate Listed property trust Industria REIT Direct Real Estate funds Fixed term Australian funds APN Property Plus Portfolio APN Regional Property Fund Newmark APN Auburn Property Fund APN 541 St Kilda Road Fund Wholesale funds Investment revenue Investment income received or receivable from coinvestment in funds Discontinued operations European Real Estate funds Property trust fund and fixed term European funds APN Development Fund No.2 APN Poland Retail Fund APN Champion Retail Fund APN Euro Property Fund APN Vienna Retail Fund APN European Retail Property Group The Group has simplified its reportable segments in the current year to aggregate the APN Asian Asset Income Fund and APN Development Fund No.2 within the Real Estate Securities funds and Direct Real Estate funds segments respectively. In addition, Registry is no longer reported as a separate segment and instead has been incorporated into each of the Group s reportable segments to which its services are provided. Where applicable the corresponding segment information in the prior period has been restated to reflect these changes. The accounting policies of the new reportable segments are the same as the Group s accounting policies. 14
Notes to the condensed consolidated financial statements 2. Segment information (cont d) The following is an analysis of the Group s revenue, net revenue and results for the period by reportable operating segment for the periods under review: Segment revenue Segment net revenue 1 Segment profit Half-year ended Half-year ended Half-year ended 31 Dec 31 Dec 2013 31 Dec 31 Dec 2013 31 Dec 31 Dec 2013 Continuing operations Real estate securities funds 5,488 5,060 4,055 3,871 1,292 1,410 Healthcare real estate fund 3,849 5,331 3,849 5,331 2,854 4,425 Industrial real estate fund 1,112 157 1,112 157 395 35 Direct real estate funds 2,919 3,750 2,586 3,551 1,896 2,831 Investment revenue 1,528 512 1,528 512 1,528 512 14,896 14,810 13,130 13,422 7,965 9,213 Unallocated revenue and expenses Sundry income 28 28 28 Finance income 173 156 Central administration (1,477) (2,624) Depreciation and amortisation (34) (68) Finance costs (192) (11) 14,896 14,838 13,130 13,450 6,435 6,694 Gain from impairment, fair value adjustments and business acquisition costs before tax 4,667 1,188 Income tax expense (1,093) (2,362) Minority interest (1,236) (1,183) Total revenue, net revenue and profit after tax and minority interest for the period from continuing operations 14,896 14,838 13,130 13,450 8,773 4,337 Discontinued operations European real estate funds 107 186 107 181 (271) (123) Minority interest 8 13 107 186 107 181 (263) (110) Total revenue, net revenue and profit after tax and minority interest for the period 15,003 15,024 13,237 13,631 8,510 4,227 1 Segment net revenue is segment revenue less direct costs. There were no intersegment sales during the half-year. Segment assets and liabilities Information on assets and liabilities for each reportable segment is not required to be disclosed as such information is not regularly provided to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance. 15
Notes to the condensed consolidated financial statements 3. Revenue Consolidated Half-year ended 31 Dec 31 Dec 2013 Continuing operations Management fees 9,458 7,945 Transaction fees 1,173 2,030 Performance fees 2,737 4,323 Sundry income 28 13,368 14,326 Distribution income 1,528 512 14,896 14,838 Discontinued operations Management fees 107 186 15,003 15,024 4. Results for the period Consolidated Half-year ended 31 Dec 31 Dec 2013 (a) Profit/(loss) for the period has been arrived after charging / crediting the following gains and losses and other expenses: Employee benefits expenses (210) (952) (b) Impairment and fair value adjustments Profit/(loss) for the period includes the following impairment and fair value adjustments:- Change in fair value of financial assets designated as at fair value through profit or loss 4,764 1,188 Loss on disposal of investment (97) 4,667 1,188 5. Dividends Half-year ended 31 Dec 31 Dec 2013 Cents per share Total Cents per share Total Recognised amounts Fully paid ordinary shares Final dividend Unrecognised amounts Fully paid ordinary shares Interim dividend 1.25 2,763 1.25 2,698 Directors have declared a fully franked interim dividend of 1.25 cents per share for the period ended 31 December. This will be paid on 14 April 2015 to all shareholders registered on 27 March 2015. 16
Notes to the condensed consolidated financial statements 6. Intangible assets Consolidated Half-year ended 31 Dec 30 June Software assets 120 126 Management rights (a) 3,953 3,953 4,073 4,079 (a) Management rights Half-year ended Consolidated 31 Dec 30 June Gross carrying amount Balance at beginning of financial period/year 4,127 16,159 Additions 1,700 Derecognised during the period/year (13,732) Balance at end of financial period/year 4,127 4,127 Accumulated amortisation / impairment losses Balance at beginning of financial period/year (174) (13,732) Impairment losses charged to profit or loss (174) Derecognised during the period/year 13,732 Balance at end of financial period/year (174) (174) Net book value At the beginning of the financial period/year 3,953 2,427 At the end of the financial period/year 3,953 3,953 In 2012, the Group acquired 67.5% of the issued share capital of ING Healthcare Pty Ltd (subsequently renamed Generation Healthcare Management Pty Ltd ( GHM )). GHM acts as the asset manager of Generation Healthcare REIT ( GHC ), an ASX listed real estate investment trust that invests exclusively in healthcare property. Management rights of $2,254,000 were recognised representing the business premium paid attributable to the expected future cash flows derived from the management of GHC. In December 2013, the Group recognised an intangible asset of $1,700,000 representing the rights to expected future cash flows derived from the management of Industria REIT ( IDR ), an ASX listed real estate investment trust which owns interests in a workspace focussed portfolio of industrial, technology and business park assets. In 2011 management rights of $174,000 were recognised representing the business premium paid for the acquisition of 100% of the issued share capital of ARA Strategic Capital I Pte Ltd (subsequently renamed as APN Funds Management (Asia) Pte Ltd), the Singapore based fund manager of APN Asian Asset Income Fund ( AAAIF ). The business premium paid represents the fair value attributed to the expected future cash flows derived from the management of AAAIF. At 30 June, the management rights from this asset were fully impaired. 17
Notes to the condensed consolidated financial statements 7. Issued capital Consolidated No of shares 000 Balance at 1 Jul 215,824 72,703 Share options issued under APN Property Group Employee Performance Securities Plan 5,250 Balance at 31 Dec 221,074 72,703 Consolidated No of shares 000 Balance at 1 Jul 2013 161,541 57,182 Share issue 64,308 16,077 Share issue transaction costs (773) Income tax relating to transaction costs 232 Share options buy-back under the APN Property Group Employee Share Plan (10,000) Balance at 31 Dec 2013 215,849 72,718 Changes in issued capital occurred during the period, as follows:- In September, the Company issued 5,250,000 shares (5,000,000 shares at 26 cents per share and 250,000 shares at 30 cents per share) pursuant to APN Employee Performance Securities Plan. At 31 December, included in fully paid ordinary shares of 221,073,965 (2013: 215,848,965) are 11,361,885 (2013: 6,138,662) treasury shares relating to the employee share option plan. 8. Fair value of financial instruments The directors consider that the carrying amount of financial assets and financial liabilities that are not measured at fair value in the financial statements approximate their fair value. (a) Fair value measurements recognised in the statement of financial position Level 1 Level 2 Level 3 Total 31 December Financial assets at fair value through profit or loss Investment in related parties 46,118 2,437 48,555 30 June Financial assets at fair value through profit or loss Investment in related parties 41,206 4,871 46,077 There were no transfers between Level 1, 2 and 3 during the period. (b) Reconciliation of Level 3 fair value measurements Fair value through profit or loss Consolidated 31 Dec 30 Jun Opening balance 4,871 4,000 - Realised loss in profit or loss (note 4) (97) 485 Purchases 2,350 Settlements (2,337) (1,964) Closing balance 2,437 4,871 Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1 include listed property securities traded on the Australian Securities Exchange (ASX). 18
Notes to the condensed consolidated financial statements 8. Fair value of financial instruments (cont d) Financial instruments that trade in markets that are not considered active but where values are based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. Classified within level 3 are investments in unlisted funds whose primary investments are direct property assets. The fair value of these investments is determined using the latest available prices (net tangible asset values) provided by the product issuer. These prices may have been calculated using models with unobservable inputs and assumptions that may not necessarily be supported by prices from observable current market transactions. In particular, in recent times the liquidity of both unlisted funds and their underlying investments has decreased thereby limiting the availability of observable market transactions for similar financial instrument. Accordingly, the valuation of these investments is subject to greater uncertainty and requires greater judgement than would be the case for level 1 and 2 financial instruments. 9. Contingent assets and liabilities There is no change to contingent assets and liabilities during the period. 10. Subsequent events On 9 February 2015, APN Property Group announced that it had completed the acquisition of the Coburg Hill Shopping Centre for the APN Coburg North Retail Fund. The APN Coburg North Retail Fund is a new 7 year unlisted property syndicate that is forecast to deliver investors with a 7.40% distribution yield in FY2015 increasing to 7.60% in FY2016 which will be at least 90% tax deferred. On 20 February 2015, APN Funds Management Limited, the responsible entity of the Newmark APN Auburn Property Fund announced that it had executed a conditional contract of sale and development agreement for The Marketplace, Auburn. Subject to the completion of the redevelopment works on time and budget, investor returns are forecast to be 50% - 60% on their initial investment. APN holds a 5.4% co-investment stake in this fund and is also entitled to a performance fee, based on the projects actual gross profit on completion, currently estimated at approximately $1.1 $1.2 million before tax (~$0.8 million after tax) in FY2016. Dividend Since the balance date, the directors have declared a fully franked interim dividend of 1.25 cents per share for the period ended 31 December, to be paid on 14 April 2015 to all shareholders registered on 27 March 2015. Other than the matter advised above, the directors have not become aware of any other significant matter or circumstances that has arisen since 31 December, that has affected or may affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in subsequent years, which has not been covered in this report. 19