Includes Financial Report - Brisbane Markets Limited€¦ · 2 BRISBANE MARKETS LIMITED . 256 Leases in place 14 Sewage pump stations 146 ... 51,282 kL Water used 2.8 GWh Electricity

AN

NUA

L REPO

RT20

18Includes Financial Report

OUR MISSION

COLLECTIVE AMBITION

To provide infrastructure and services to facilitate the marketing of fresh food, flowers and other ancillary products.

To achieve growth through diversified property ownership, management, development and service delivery on the current site and on off-site locations.

OUR FOCUSSustaining the business through growth and diversification.

Our focus drives everything we do. It unites all of us and focuses our energy. It’s about what we do every day and also about the possibilities we are creating for the future.

TABLE OF CONTENTS

Joint Message from the Chairman and CEO 4

Major Projects 8

Future Projects 9

Summary of Financial Results 10

Financial Report 14

Corporate Directory 52

1ANNUAL REPORT

2018

160,154m2Total lettable area

2,608Vehicles using LPR438

Electricity meters

44.2 GWhElectricity purchased

1,124Forklift operator permits

ANNUAL STATISTICSAS AT 30 JUNE 2018

2018

2017

2016

2015

2014

$361.8m

$330.7m

$294.2m

$243.7m

$233.7m

$361.8mTotal assets

+9.4%

2018

2017

2016

2015

2014

$155.5m

$148.4m

$120.8m

$113.4m

$111.5m

$155.5mNet assets

+4.8%

2018

2017

2016

2015

2014

$10.49m

$10.13m

$9.35m

$8.41m

$7.88m

$10.49mNet operating profit after tax

+3.6%

2018

2017

2016

2015

2014

16.25¢/share

15.5¢

14.0¢

12.0¢

10.75¢

16.25¢Dividend, fully franked

+4.8%

2BRISBANE MARKETS LIMITED

256Leases in place

14Sewage pump stations

146Dock levellers

33Fire indicator panels

310Fire hose reels

246Water meters

51,282 kLWater used

2.8 GWhElectricity generated

8,249Solar panels

23Boom gates

123Backflow prevention devices

3,117Emergency light fittings

717Fire extinguishers

302Fire hydrants

775Registered buyers

4,584Access cards

3ANNUAL REPORT

2018

JOINT MESSAGE FROM THE CHAIRMAN AND CEO

Over the past year, we have laid foundations to build for the future of our business and delivered a solid performance which maintains the company's ongoing growth trajectory.

The Board is pleased with the results and financial performance of the group, reporting a net operating profit before tax of $14.99 million, representing growth of 3.6% on the prior year. After including property revaluation impacts, the reported net profit before tax for the year is a healthy $18.61 million.

The Board recognises the importance of providing shareholders with a competitive return on their investment. We are therefore pleased to announce, on behalf of the Board, a final dividend of 8.25 cents per share, fully franked, taking the total dividend paid during the year to 16.25 cents per share, fully franked, a 4.8% increase on the prior year.

CAPITAL RAISINGThe recent capital raising was successful. The entitlement offer take up rate exceeded 76%, and the public offer was heavily oversubscribed. The share allotment process is now complete and the group has seen an increase in shareholder numbers to over 300, while maintaining predominantly fresh fruit and vegetable industry-based ownership of the company.

The $38.4 million capital raising will facilitate ongoing growth of the Brisbane Markets® site. Construction of the Montague Warehouse (Building C1) has commenced and progress payments are being made as the project progresses. The initial instalments received from the capital raising, totalling $19.2 million, will be used to reduce debt until required to support the various capital expenditure projects identified for the funds.

We have also seen a change within our top 10 shareholders, which has maintained a strong industry-based focus.

CONTRIBUTION OF PERTH MARKETS LIMITEDThe investment in Perth Markets Limited in 2016 has proven to be fruitful, with the value of this investment increasing by over 50% in the two years since the investment was made. At 30 June 2018, Perth Markets Limited had net tangible assets of $1.52 per stapled security.

This is a long-term investment to which we remain fully committed.

CONTINUED STRENGTH IN THE BALANCE SHEETAt 30 June 2018, total assets were $361.8 million and net assets were $155.5 million. Total assets grew by 9.4% and net assets by 4.8%. As highlighted in the chart on page 5, our asset growth has continued to exceed debt growth by over $50 million since 2015.

An independent property valuation of all BML owned properties was again undertaken as at 30 June 2018, and all properties have been restated to fair value at this date of $314.6 million.

In a year of consolidation, with a focus on building for the future of our company, we delivered solid financial results, progressed a number of significant site development projects and continued to grow the asset value and profitability of the company.

BRISBANE MARKETS LIMITED 4

ONGOING FUNDING REQUIREMENTSBML has the ongoing commitment of its financier, Westpac Banking Corporation, and the current debt facility and finance arrangements remain in place until 30 April 2021.

Interest rate risk continues to be managed on an ongoing basis, with a combination of interest rate hedges and loans at the variable interest rate.

STRATEGYIn November 2017, we unveiled our updated Strategic Plan, which highlights BML’s mission and the Board’s strategic focus over the five-year period of 2017–2022. The plan seeks to build on the growth, direction and success of the organisation since acquiring the Markets in 2002.

In line with the plan, BML seeks to identify opportunities to maximise the development potential of the site through the delivery of site upgrading and development projects which meet the needs of tenants and the fresh produce industry.

March 2018 saw the group complete the Multi-level Car Park (CP1) development, which is a $12 million strategic investment that has allowed for the repurposing of space previously

allocated for parking, such as the construction site for the $17.5 million Building C1 development. It will also facilitate the construction of the proposed Global Fresh Australia Pty Ltd refrigerated warehouse (Building E1), currently undergoing design development.

These and other major projects reflect BML's commitment to the ongoing development of the site. They are supported by various site improvement projects such as the installation of fire safety infrastructure and an increase in our solar assets across the site.

It is this continued commitment to the development of this site that has contributed to strong asset growth.

PROPERTYAt 30 June, there were 256 leases in place and 172 tenants leasing tenancies within the Brisbane Markets® site.

A revised traffic management plan for the site is being progressed incrementally in conjunction with asphalt resurfacing works. New line marking has been planned and installed to ensure road markings, licensed areas and pedestrian access remain consistent with the larger site plan.

SITE OPERATIONSWe continued our focus on securing the site and improving traffic flow at entry points. 2,608 vehicles are now registered for licence plate recognition (LPR) access, with a feasibility study being conducted to consider additional applications for LPR across the site.

Our commitment to safety focused on engaging with tenants and their employees to improve the safety culture among Markets users. This engagement has seen a steady decline in the number and severity of forklift incidents across the site.

The Site Service Centre issued permits to 1,124 forklift operators and registered 380 forklifts during the course of the financial year. At 30 June, 4,584 active access cards were on issue.

The completion of CP1 has allowed for the repositioning, and in many cases removal, of passenger vehicles across the site, reducing congestion and improving traffic flows.

Common areas continue to be kept clean by our cleaning and grounds team.

Pest management is being effectively controlled, with 1,439 rodent bait stations serviced monthly, contributing to minimal rodent activity across the site.

This chart depicts the growth of total assets and total debt over the past 4 years.

400

350

300

250

200

150

100

50

0

TOTAL ASSETS TO TOTAL DEBT

$m

Total assets Total debt

$152m

$212m

2014 2015 2016 2017 2018

100% Industrial property

90.5% Retail property

69.4% Commercial office space

98.5% Total occupancy

OCCUPANCY AT 30 JUNE 2018

ANNUAL REPORT

2018 5

SITE INFRASTRUCTURE AND MAINTENANCEIn August 2017, we completed a project to install new electricity meters and electrical monitoring hardware that has improved our reporting and billing capabilities. This infrastructure records detailed usage data, allowing us to provide enhanced reporting to tenants about their electricity consumption. In all, this project has allowed BML to better and more efficiently manage our embedded electrical network.

A number of other major site upgrades were completed during the year including:

• Major asphalt resurfacing works totalling $1.2 million.

• Sluice valves replaced at the Central Trading Area pump station.

• Completion of Stages 4 and 5 of a project to install a dedicated fire hydrant ring main throughout the Northern Industrial Precinct, providing vital fire safety infrastructure for the site.

• Upgrading of distribution boards in Buildings M and Q.

• Box gutter replacement and soffit repairs at the Commercial Centre and Building U.

• Installation of a roof access stairway to the roof of Building A.

• Installation of a Building Occupant Warning System in the Selling Floor buildings, including new smoke and thermal detectors in common areas, offices and coldrooms.

• Repairs to epoxy surfaces of loading docks of Buildings A, B, C and D.

• Replacement of roofs of Buildings A, K, M, V, W, Y and the vents of Building Q.

• Refurbishment of the mezzanine level of Building E.

• Painting of Central Trading Area columns, internal common areas of the Fresh Centre and external elevations of several buildings.

• Preparation for development projects at Buildings D and N.

• Staged replacement of all common area lighting with LEDs and installation of additional street lighting at Buildings D, J, K and S.

• Emergency lighting repairs in 12 buildings across the site.

• Refurbishment of amenities in Buildings L, Q, U and W.

COLLABORATIONWe have continued to work closely with our Central Market colleagues through the course of this year, and we are encouraged by the work done to promote and represent the Central Market System. BML will continue

to investigate potential synergies, operating efficiencies and opportunities for growth with other Central Markets.

A number of Central Markets have entered into a joint initiative with our chamber colleagues through Fresh Markets Australia (FMA) to implement a national retailer program with the launch of "A Better Choice" in June 2018.

The new program is designed to achieve national brand recognition and promote the marketing potential and advertising reach of independent retailers to consumers by pooling marketing resources and funding from Australia’s Central Markets and FMA.

The existing Your Local Fruit Shop program has incorporated the new branding to run in parallel with the current Queensland brand, with a view to transition fully to the "A Better Choice" branding by December 2019.

In June 2018, BML and the industry association, Brismark, also renewed memorandums of understanding (MOUs) with Bowen Gumlu Growers Association and Bundaberg Fruit and Vegetable Growers. It remains a priority of BML to maintain strong, supportive and working relationships with grower associations by providing financial support, industry exposure and effective collaboration for the benefit of the horticulture industry.


WEEKEND MARKETSThe popularity of Brisbane MarketPlace (BMP) remains evident, with over 600,000 attendees visiting the Saturday Fresh and Sunday Discovery Markets throughout the year. Both Markets were again featured in the Urban List Brisbane’s “Markets to visit this August” and in The Weekend Edition’s list of “Brisbane’s Best Markets”.

Eagle Farm Markets moved back to Eagle Farm Racecourse in February 2018, after a short stint at Doomben Racecourse while construction works were being progressed. There have been ongoing difficulties caused by the construction works in and around the Eagle Farm Racecourse site, as well as increasing retail market competition. BML has been reviewing the ongoing viability of this Market, and in October 2018 the joint decision was made with the Brisbane Racing Club to cease operating the Market.

BMP has also been busy preparing for an addition to its long-running Retail Markets in early 2019 by launching the Brisbane Night Market, the first fully undercover outdoor Market in Brisbane. Operating between 4-10pm each Friday night, the “Brisbane Night Market” will be an exciting new entrant to Brisbane’s night life. The new Market will feature over 80 stalls to be located in the Central Trading Area of the Brisbane Produce Market, which will be transformed into a must-visit foody hotspot and live entertainment venue.

BRISBANE FLOWER MARKETThe traffic management plan for the Flower Market was revised and new line marking was positioned to segregate vehicles and pedestrians

wherever possible. An additional survey of the Flower Market car park was completed in February 2018 with a view to incorporating as many additional parking spaces as possible.

COMMUNICATIONS NETWORKSWith confirmation of the arrival of the National Broadband Network at the Markets still outstanding and connection unlikely to be before June 2020, BML has continued its partnership with AUS-IT to provide telephone, network and cloud-based services to tenants. These services offer reliability and performance for businesses that far exceed those currently available through any major telecommunications provider.

BML’s CCTV network has increased from 160 to 210 cameras. The new infrastructure has increased coverage across the site, with the added benefits of video processing for image clarity, improved video quality at night and improved site security.

CORPORATE COMMUNICATIONSA new Brisbane Markets® website was launched in August 2017, featuring improved search, accessibility and navigation functionality.

BML was involved in a number of industry events, including the June 2018 Hort Connections conference in Brisbane, where the Central Markets Association of Australia and FMA were the major trade show sponsors. The annual Brisbane Produce Market Mango Auction raised over $38,000 for BML’s charity partners, and the third annual Forklift Operator of the Year competition was held over a six-week period to promote safety among the site’s 1,124 licensed forklift operators.

BML partnered with the Museum of Brisbane to deliver the “Tastes Like Sunshine” exhibition. A bespoke piece of artwork was commissioned for the exhibition, which featured carton artwork from the Brisbane Produce Market trading floor arranged in a diorama by artist Sean Rafferty. The artwork was on display in the Arch Martin Brisbane Markets® History Room from December 2017 to June 2018.

CULTUREBML continues to maintain a focus on meeting the needs of tenants in providing the infrastructure and services to support Market-based businesses and the fresh produce supply chain.

The company does have a culture of achievement, built upon a track record of successfully managing and developing this site. We are proud of what we have achieved and the contribution industry-based ownership is making to the fresh produce industry.

ACKNOWLEDGEMENT AND THANKSIt has been another strong performance by BML and we enter the new financial year with a clear leadership position and strategy, underpinned by a highly engaged and motivated team.

We would like to thank the Board for their support and guidance throughout the year, the executive team, and the talented people who make up BML. We have an exciting year ahead as we continue to make Brisbane Markets® the leading wholesale Market in Australia.

Anthony (Tony) Joseph Chairman

Andrew Young Chief Executive Officer

ANNUAL REPORT

2018 7

DEVELOPMENT TIMELINE

Jul2017

Nov2017

Aug2017

Mar2018

Jun2018

Dec2017

Sep2017

Jan2018

Apr2018

Oct2017

May2018

Feb2018

Preparation works for the construction

of Building D1

Solar Project Stage 2 completed

CP1 opened for use

Dedicated sprinkler main connection

to Building A1 completed

Entered into MOU with Global Fresh

Australia Pty Ltd to develop design of 5,800m2 Building

E1 warehouse

Completion of Buildings D1 and N

Underground high voltage electrical conduits installed

between Site Maintenance and

Building B

Fire services connected for

Building N

Construction commenced on new Building C1

warehouse

Construction commenced on

Buildings D1 and N

New LPG Facility commissioned

Completion of fire ring main

MULTI-LEVEL CAR PARK — CP1Completed in March 2018, the 14,130m2 Multi-level Car Park accommodates 540 vehicles over four levels, utilises a state-of-the-art car park management system, and incorporates an overhead walkway to provide safe pedestrian access to the Central Trading Area.

This parking facility represents a further significant milestone in the development of the Markets. It has freed up space for further development within the site, including Building C1 and the proposed Building E1, and will assist significantly in reducing site congestion and improving site safety.

BUILDING NThe new PIR panel warehouse extension to the existing metal clad warehouse was completed in April 2018, increasing the total tenancy area of Building N from 854m2 to 1,516m2. The structure includes a new loading dock with levellers and a raised plant room to house BML’s electrical infrastructure. Alfred E Chave Pty Ltd has leased the warehouse.

This new warehouse was constructed on the site of the original Building N, which was partially demolished following the 2011 flood.

BUILDING D1This project involved the redevelopment of the eastern end of Building D, resulting in a new 411m2 warehouse, including offices, and public amenities with a compliant PWD facility. The warehouse is being leased by H.E. Heather & Co.

LPG FACILITYConstruction of a new LPG Facility was completed in February 2018, and features upgraded services through a 30,000L underground tank, improved access and lighting, three double-sided fuel dispensers, and an emergency dispenser for use during an outage or disruption to supply. It is connected to BML’s SCADA system to enable remote monitoring and early fault detection to reduce the likelihood of downtime.

BUILDING C1Preliminary works to accommodate the construction of Building C1 commenced

in May 2018 and included the demolition of the old LPG Facility and the partial demolition of the Tropicana Building. Additional works also included the relocation of high voltage power lines to underground conduits and the installation of a new electrical substation.

The construction component of this $17.5 million project commenced in July 2018, and will include cold rooms, ripening rooms, a consumer packaging area, battery charging area, loading and finger docks, and offices over two levels. Construction is scheduled for completion in April 2019.

SOLAR PROJECT — STAGE 2Stage 2 of the solar installation project saw just under 5,000 additional solar panels installed on seven building roofs across the site, bringing the total number of solar panels on site to 8,249. The panel installations were completed in November 2017. BML’s solar assets now generate over 3 Mwh of electricity per annum, which is the equivalent of 600 households and equates to over 6% of the site’s electricity requirements.

MAJOR PROJECTS


DEVELOPMENT TIMELINE

Jul2017

Nov2017

Aug2017

Mar2018

Jun2018

Dec2017

Sep2017

Jan2018

Apr2018

Oct2017

May2018

Feb2018

Preparation works for the construction

of Building D1

Solar Project Stage 2 completed

CP1 opened for use

Dedicated sprinkler main connection

to Building A1 completed

Entered into MOU with Global Fresh

Australia Pty Ltd to develop design of 5,800m2 Building

E1 warehouse

Completion of Buildings D1 and N

Underground high voltage electrical conduits installed

between Site Maintenance and

Building B

Fire services connected for

Building N

Construction commenced on new Building C1

warehouse

Construction commenced on

Buildings D1 and N

New LPG Facility commissioned

Completion of fire ring main

FIRE RING MAINThis project involved installing a dedicated fire ring main to service the Northern Industrial Precinct of the site, and included the construction of a new pump station, installation of new hydrants, removal of redundant spring hydrants, separation of potable water and fire services, and significant asphalt resurfacing works. Works commenced in 2013 and were completed progressively over five stages.

The final stages of work also included the installation of a dedicated sprinkler main, which runs from the west of the site across to the eastern side of the site.

Over 5km of pipe has been installed across the Northern Industrial Precinct of the site, with the final section being laid in June 2018. This project provides necessary fire safety infrastructure for the Brisbane Markets® and assurance to businesses that we have improved the compliance of the site for the long term.

BUILDING E1BML has signed an MOU with Global Fresh Australia Pty Ltd to design the J.H. Leavy & Co. branded warehouse on the corner of Sherwood Road and Martin Taylor Drive. Conceptual designs are being developed to produce a footprint that will include extensive cold rooms, ripening rooms, storage capabilities and an Australian Quarantine Inspection Service-approved fumigation facility, featuring recapture technology. The purpose-built refrigerated warehouse will be approximately 5,800m2, with a final decision as to whether the project proceeds due in early 2019.

NIGHT MARKETBMP will be launching the first fully undercover outdoor market in Brisbane, to be known as the “Brisbane Night Market,” on the trading floor of the Brisbane Produce Market. This fully roofed area is currently undergoing structural preparation, and will be transformed into a must-visit foody hotspot and live entertainment venue, offering the perfect stop for people travelling home from work or school, and will be a great social meeting

hub showcasing an array of global street food, free live music and roving entertainment.

SOLAR PROJECT — STAGE 3The roofs of a number of buildings across the site were replaced this financial year in preparation for the installation of new solar panels and associated infrastructure as part of Stage 3 of the solar installation project. The project to install over 6,800 additional solar panels on the roofs of 12 buildings across the site is currently out to tender, with installation expected to commence in early 2019.

COVERED BUYER UNLOADINGBML will be conducting a feasibility study into the construction of a new covered buyer unloading area which will provide a range of parking/consolidation bays for buyers in a weatherproof environment in close proximity to the Central Trading Area.

The proposed location of the new covered buyer unloading area is to the north of Building D.

FUTURE PROJECTS

ANNUAL REPORT

2018 9

SUMMARY OF FINANCIAL RESULTS

30 JUNE 2018 ($ MILLION)

30 JUNE 2017 ($ MILLION)

Brisbane Markets® operating profit 13.58 13.32 1.95%

Perth Markets Limited operating performance proportion 1.41 1.15 22.6%

Net operating profit before tax 14.99 14.47 3.6%

Perth Markets Limited property revaluation proportion 5.41 8.33

Brisbane Markets® investment property increase/(decrease) (1.79) 21.42

Reported net profit before tax 18.61 44.22


The financial result for the year ended 30 June 2018 reflects the net operating profit before tax of $14.99 million ($10.49 million after tax), reflecting an earnings per share of 24.67 cents. This is the profit amount that will be considered when determining dividends paid in accordance with the current dividend policy of the group. The movement in the property values does not generate cash to enable an increase in dividends, but it does improve the borrowing profile of the group with our financier, Westpac.

380

360

340

320

300

280

260

240

220

TOTAL ASSETS

$m

2014 2015 2016 2017 2018

3.80

3.60

3.40

3.20

3.00

2.80

2.60

2.40

SHARE PRICE HISTORY

¢

2015 2016 2017 2018

Volume weighted average sale price Last sale prior to year end

NTA per share at year end Capital raising issue price Aug 18

160

155

150

145

140

135

130

125

120

115

110

NET ASSETS

$m

2014 2015 2016 2017 2018

17

16

15

14

13

12

11

10

DIVIDEND TOTAL CENTS PER SHARE¢

2014 2015 2016 2017 2018

At 30 June, the net tangible assets (NTA) per share was $3.64; however, there is likely to be a minor decline in the NTA value as a result of the recent capital raising, due to the issue of additional shares that will be partly paid. The chart at the top right identifies that there has been improvement in the NTA per share of 37.3% in the past three years, and that the average share price and last sale price have been within 2% of the NTA across the past two years.

The continued sound performance of the group has resulted in a fully franked dividend being paid during the year of 16.25 cents per share, with the declaration of a further dividend of 8.25 cents per share to be paid in October 2018.

This continues the impressive dividend growth trend as highlighted in the chart to the right.

ANNUAL REPORT

2018 11

54

53

52

51

50

49

48

OPERATING EXPENSES AS % OF OPERATING REVENUE

%

2014 2015 2016 2017 2018

15.5

15

14.5

14

13.5

13

12.5

12

11.5

11

OPERATING NPBT

$m

2014 2015 2016 2017 2018

24

23

22

21

20

19

18

OPERATING EBITDA

$m

2014 2015 2016 2017 2018

EXPENDITUREThe reported group expenditure increased to $32.30 million for the year, and underlying expenditure increased by 4.2% as summarised below.

2018 ($m) 2017 ($m)

Total reported expenditure 32.30 29.31

Perth Markets operating expenses (0.03) (0.05)

Interest incurred on Perth Markets investment (0.79) (0.77)

Decrease in value of investment property (1.79) 0.00

Underlying Brisbane Markets® operating expenditure 29.69 28.49

Underlying expenditure comprises:

Operating expenditure 21.81 21.13

Depreciation 1.05 0.78

Interest 6.83 6.58

• There has been an increase in direct costs of 3.5%, with the major impact being increased electricity purchase costs.

• Site operations expenditure has marginally reduced again by 0.8% after a reduction last year of 6.65%.

• Repairs and maintenance costs have increased by 9.5%, with additional works required across the site this year in addition to the regular ongoing scheduled maintenance and risk mitigation works.

• Finance costs including interest and bank charges have increased by approximately $0.25 million due to an increase in our drawn bank loans of $20.6 million this year.

43.5

43

42.5

42

41.5

41

40.5

40

39.5

30

OPERATING REVENUE

$m

2014 2015 2016 2017 2018

REVENUEThe reported group revenue for the year declined to $50.91 million due to lower valuation improvements this year; however, underlying revenue grew by 3.5% for the year as summarised below.

2018 ($m) 2017 ($m)

Total reported revenue 50.91 73.53

Investment property movements in Brisbane and Perth (5.41) (29.75)

Perth Markets Limited contribution (2.23) (1.97)

Underlying Brisbane Markets® operating revenue 43.27 41.81

• Rental and associated property related revenue has increased by 3.8% as a result of Building A1 being tenanted by Murray Bros for the majority of the year, after being vacant for most of 2017, as well as the completion of the redevelopment of Building N and Building D1.

• Service revenue has grown by 3.52% for the year.


AIFRS 2018 AIFRS 2017 AIFRS 2016 AIFRS 2015 AIFRS 2014

Revenue

Brisbane Markets® operating revenue 43,271 41,814 41,009 41,033 39,882

Brisbane Markets® property value increase 0 21,421 11,638 0 13,836

Insurance recovery revenue – 2011 flood 0 0 0 1,652 1,918

Perth Markets operating contribution 2,234 1,970 93 0 0

Perth Markets property increase contribution 5,410 8,325 0 0 0

Total revenue 50,915 73,530 52,740 42,685 55,636

Expenses

Operating expenses – Brisbane Markets® 21,805 21,132 20,475 21,898 21,172

Operating expenses – Perth Markets 31 48 25 0 0

Depreciation and amortisation expense 1,058 783 720 897 905

Finance costs 6,832 6,578 6,447 6,225 6,541

Finance costs – Perth Markets investment 790 768 457 0 0

Decrease in value of investment properties 1,789 0 0 184 0

Non-operating expenditure 0 0 796 1,105 1,957

Total expenses 32,305 29,309 28,920 30,309 30,575

Net profit before income tax and interest and depreciation 27,290 52,350 31,444 19,498 32,507

Net profit before income tax expense 18,610 44,221 23,820 12,376 25,061

Income tax expense 5,589 13,273 7,158 3,715 7,520

Net profit after tax 13,021 30,948 16,662 8,661 17,541

Net profit after tax after excluding Investment property valuation changes 10,486 10,126 8,515 8,790 7,856

Net profit after tax excluding investment property valuation changes and flood insurance adjustments 10,486 10,126 9,346 8,407 7,883

14,980 14,465 13,351 12,010 11,262

Dividend paid 6,906 6,588 5,950 5,100 4,569

Total assets 361,801 330,743 294,210 243,736 233,707

Total liabilities 206,304 182,340 173,359 130,356 122,173

Total equity 155,497 148,403 120,851 113,380 111,535

Net tangible assets per share ($) 3.64 3.48 2.83 2.65 2.61

Earnings per share including investment property valuation changes and abnormals 30.64 cents 72.82 cents 39.21 cents 20.38 cents 41.27 cents

Earnings per share adjusted for investment property valuation changes 24.67 cents 23.83 cents 21.35 cents 20.68 cents 18.49 cents

Number of shares as at 30 June 42,500 42,500 42,500 42,500 42,500

HISTORICAL FINANCIAL RESULTS

ANNUAL REPORT

2018 13

BRISBANE MARKETS LIMITED AND CONTROLLED ENTITIES

FINANCIAL REPORTFOR THE YEAR ENDED 30 JUNE 2018

Directors’ Report 15

Auditor’s Independence Declaration 22

Financial Report 23

Directors’ Declaration 47

Independent Auditor’s Review Report 48

Corporate Governance Statement 50

TABLE OF CONTENTS

Your Directors present their report on the consolidated entity consisting of Brisbane Markets Limited and the entities it controlled at the end of, or during, the year ended 30 June 2018.

DIRECTORS The following persons were Directors of Brisbane Markets Limited during the year or at the date of this report:

• Anthony John Joseph

• Anthony Robert Kelly

• Bruce Miles Hatcher

• Stuart Anthony Lummis

• Evonne Maree Collier

• Noel Anthony Greenhalgh

• Peter Gerard Tighe

• Andrew Alexander George Young.

PRINCIPAL ACTIVITIESDuring the year, the principal continuing activities of the consolidated entity consisted of:

• Facilitating the efficient and effective operation and growth of the Brisbane Market site;

• Providing world-class infrastructure and services to facilitate the marketing and distribution of predominantly fresh produce, together with flowers and other ancillary products, to domestic and international customers; and

• Preserving and promoting the role of the Central Market for the benefit of industry stakeholders and consumers.

There were no significant changes in the nature of the activities of the consolidated entity during the financial year.

OPERATING RESULTSThe net profit of the consolidated entity after income tax for the year ended 30 June 2018 was $13.02 million (12 months to 30 June 2017: $30.95 million).

The underlying net operating profit after income tax, excluding the impact of property revaluations of the Brisbane and Perth Markets, was $10.49 million for the 2018 year compared to $10.13 million in the 2017 year.

The net profit after tax includes the following:

• The impact of the Brisbane Markets property valuation reduction in the current year was $1.79 million (increase of $21.42 million for the 2017 year) and the reduction after tax was $1.25 million (increase of $15 million in the 2017 year).

• The share of net profits from Perth Markets Limited for the current year was $7.59 million ($9.68 million for the 2017 year), and the increase after tax was $5.31 million ($6.77 million for the 2017 year). The contribution before tax includes $5.41 million which relates to the increase in the Perth Markets property value ($8.33 million for the 2017 year).

At balance date, Brisbane Markets Limited’s drawn down funding facility was hedged under seven long-term interest rate swaps to the extent of 61.63%. Hedging is a requirement of the funding facility provided by the company’s banker.

REVIEW OF OPERATIONSThe consolidated entity’s continued operational focus throughout the year was in the areas of property

management, site maintenance and management of the site in accordance with the Brisbane Markets Regulations, with the following being the key highlights.

• The ongoing focus on site developments and improvement this year have resulted in the following major achievements:

- The completion of the new Multi-level Car Park (CP1) to accommodate 540 vehicles over four levels, which also includes a new steel bridge link for safe pedestrian access to the market trading floors.

- Building N redevelopment — the redevelopment of Building N included a new PIR panel warehouse of 1,500m2 which was completed in May 2018. The construction project included a roof structure linking to Building P.

- Building D East construction — the construction of a new warehouse at the eastern end of Building D and a new public amenities block was completed in May 2018.

- The completion and commissioning of a new LPG refuelling facility, containing a 30,000 litre underground tank and six new dispensers, as well as improved safety. A new toilet amenities block was also constructed adjacent to the new facility.

- The commencement of construction of the new 5,578m2 Montague Warehouse after an 18 months design development and approvals process.

- The creation of the “Moments in Time” display in the Arch Martin Brisbane Markets History Room, showcasing four time eras of Queensland’s largest fruit and vegetable hub.

DIRECTORS’ REPORT30 JUNE 2018

ANNUAL REPORT

2018 15

- The partial demolition of the Tropicana Building and removal of the remaining overhead electricity wires and poles from the site, to facilitate current and future development opportunities.

• Replacement of a further five warehouse roofs across Buildings V, W, M, A and Y.

• Perth Markets Limited continues to make a strong contribution, with significant growth in this investment over the last two years.

• Consistent with prior years, the Brisbane Markets site continues to maintain an exceptional occupancy rate of 98.61% at 30 June 2018, with the weighted average lease expiry income at 6.32 years.

• The Retail Markets operated on weekends by Brisbane MarketPlace from the Rocklea site and the Eagle Farm Racecourse continued to make a strong contribution. This year, over 31,000 markets stalls were operated and sold market products to over 750,000 customers across the three markets on weekends.

• The consolidated entity has continued to recognise the ongoing contribution of the independent retailing sector through the continuing sponsorship of the “Your Local Fruit Shop” campaign and the online trading platform, “Buyfruit”.

The land and buildings at the Brisbane Markets site were valued by Charter Keck Cramer Pty Ltd as at 30 June 2018, and the financial accounts of the consolidated entity reflect the movement in the value of this asset. Under the relevant Accounting Standards, any increase or reduction in the value of Brisbane Markets Limited’s property assets must be brought to account through the Statement of profit or loss and other comprehensive income. The decrease in value which has occurred this year reflects the accounting treatment of the adjustment of Brisbane Markets Limited’s property values as assessed by Charter Keck Cramer. The movement is an unrealised adjustment to the consolidated entity’s financial results, which is not included for cash flow or dividend calculation purposes.

Final fully franked ordinary dividend of 8.0 cents per fully paid share paid on 13 October 2017 $3,400,000

Final fully franked special dividend of 0.25 cents per fully paid share paid on 13 October 2017 $106,250

Interim fully franked ordinary dividend of 8.0 cents per fully paid share paid on 28 March 2018 $3,400,000

Total dividends paid during 2017/18 financial year $6,906,250

Total dividends paid during 2016/17 financial year $6,587,500

DIVIDENDSDividends paid to shareholders during the year are detailed in the table below.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRSThere were no significant changes in the state of affairs of the parent entity during the financial year.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEARThere are no significant events that have occurred subsequent to the end of the financial year that have not been disclosed in this report, other than as noted below.

The consolidated entity finalised a capital raising in September 2018, and raised $38.4 million through this process. A further 12 million partly paid ordinary shares have been issued at a price of $1.60 per share, with a further final instalment of $1.60 per share payable on 15 April 2019.

LIKELY DEVELOPMENTSInformation in relation to the likely developments of the consolidated entity include:

• The Brisbane Markets Limited Board continues to review its Strategic Priorities on a regular basis, which includes an ongoing focus being given to the operation and development of the existing Brisbane Markets site.

• Brisbane Markets Limited has progressed the revision of its development Master Plan during the 2018 financial year, and a number of development opportunities have been identified across the site. These include the construction of a new temperature controlled warehouse, a further stage of solar expansion, as well as other identified opportunities to be progressed concurrently.

ENVIRONMENTAL REGULATIONSThe consolidated entity is not subject to any significant environmental regulation.

DIRECTORS' REPORT – 30 JUNE 2018BRISBANE MARKETS LIMITED 16

Anthony (Tony) Joseph MAICD, C DecNon-executive Director and Chairman

Tony has been a Director of Brisbane Markets Limited since incorporation in 1994. Tony has 50 years’ experience in the fruit and vegetable industry. Since 1975, Tony has been Managing Director of Alfred E Chave Pty Ltd, an established business with a long and successful history of trading in the Markets.

Tony is a Director of a number of private companies with interests in fruit and vegetable wholesaling and exporting, including Alfred E Chave Pty Ltd. Tony was on the Board of Brismark from 1982 to 2017, five of those years as President. Tony was also a longstanding member of the Brisbane Market Trust prior to corporatisation by the state government. Currently, Tony is a Director of Brisbane Broncos Limited and the Brisbane Broncos Leagues Club.

Special responsibilities

• Chairman

• Member of:

- Remuneration Committee

- (and also attends other committee meetings)

Anthony (Tony) KellyLLB, MAICD, JP (Qual)Non-executive Director and Deputy Chairman

Tony is a qualified lawyer having graduated from The University of Queensland in 1984. His work in the legal profession included time as a Judge’s Associate, and commercial law experience with a leading Brisbane law firm. In 1987, he commenced with the Carter & Spencer Group, where he remained until 2004, having been appointed a Director from 1992.

Tony is currently Chairman and co-owner of an emerging IT company, Veracity Technology, specialising in cloud-based platforms and services. Tony held previous directorships with Gladstone Ports Corporation, Brisbane Bears – Fitzroy Football Club Limited (Brisbane Lions AFL Football Club) (Chairman) and Brismark (President). Tony also has business interests with First Class Capital and Cruise Holidays Australia. Tony has been a Director of Brisbane Markets Limited since 2001.


• Director

• Member of:

- Finance and Audit Committee

- Legal and Compliance Committee (Chair)


Bruce HatcherBCom, FCA, FAICD, FSIANon-executive Director

Bruce has been a Non-executive Director of Brisbane Markets Limited since November 2012. Bruce has extensive experience in Chartered Accounting covering many industry sectors, and consults to and serves on the Boards of several private and/or family-owned businesses.

Bruce is currently the Chairman of Queensland Rugby League and a Director of the MTAA Superannuation Fund. Formerly, Bruce was the Chair of BDO Queensland, Managing Partner of Horwath Brisbane, Chairman of Horwath Australia, and the Deputy Chairman and Director of 20 years of the Queensland Academy of Sport. Bruce is a regular speaker at industry conferences and professional development seminars nationally, and has written many articles on a wide range of family business issues.

Bruce has a Bachelor of Commerce, is a Fellow Chartered Accountant, a Fellow of the Australian Institute of Company Directors, the Australian Institute of Management and FINSIA, and an Adjunct Professor in Family Business at Bond University.


• Director

• Member of:

- Finance and Audit Committee (Chair)

INFORMATION ON DIRECTORS AND COMPANY SECRETARY

DIRECTORS' REPORT – 30 JUNE 2018 ANNUAL REPORT

2018 17

Stuart LummisDipConstMan, BEc, GradDipAcc, FAICD, FFinNon-executive Director

Stuart was appointed as a Non-executive Director of Brisbane Markets Limited in 2013. Stuart is currently the Chief Executive Officer with Brisbane Housing Company Limited, a Tier 1 community housing provider. Stuart brings 37 years of experience as a senior executive in ASX-listed groups, government agencies and not-for-profit organisations. Prior to working for Brisbane Housing Company Limited, Stuart was the Director of Building, Planning Facilities and Property with the Roman Catholic Archdiocese of Brisbane, where he was directly responsible for the management of the Archdiocese of Brisbane’s complex property portfolio, compromising in excess of 450 individual diverse properties.

Stuart is Non-executive Director on the board of several organisations, including Bolton Clarke (formerly RSL Care RDNS) and Ipswich City Properties Pty Ltd. Additionally, he is a member of the Property Council of Queensland, sitting on the Retirement Living Committee and Chairing the National Trust of Queensland Advocacy Committee.

Stuart has a Bachelor of Economics, Postgraduate Diploma in Applied Finance and Investment, Diploma in Project and Construction Management, and is also a Fellow of the Australian Institute of Company Directors.


• Director

• Member of:


- Legal and Compliance Committee

- Strategy and Investment Committee (Chair)

Evonne CollierBA, GradCertAppFin, MBus, GAICDNon-executive Director

Evonne is a professional Non-executive Director and an experienced leader in business scale-up and transformation, brand/channel strategy, new to world and category innovation, digital disruption and B2B and B2C customer experience. She has 25 years’ senior executive and operational experience working within blue-chip multinational companies and brands in the FMCG, packaged goods, pharmaceutical and entertainment/technology sectors.

She currently serves on the boards of ASX listed and large private companies including 1300SMILES (ASX: ONT), THINK Childcare (ASX: TNK), Winson Group and Motorama Holdings Group (MHPL). She also mentors start-ups and serves on an Advisory Board for Ingredients Plus.

Evonne holds a Bachelor of Arts (UQ), Master of Business (QUT), Graduate Certificate in Applied Finance (Macquarie University), and is a graduate member of the Australian Institute of Company Directors. She has also taught at QUT’s postgraduate business school.


• Director

• Member of:



Noel GreenhalghMAICD

Non-executive Director

Noel has a comprehensive knowledge of the fruit and vegetable industry, having been Managing Director of RW Pascoe, a leading Brisbane Markets fruit and vegetable wholesaling business since 1989. During this time, he has been involved with all aspects of running this successful business.

Noel is a Director of Smart Berries Pty Ltd, one of the larger berry producing companies in Australia and New Zealand. He is also a Director of Belmain Fresh Pty Ltd, a table grape growing venture in Euston, Victoria. He has also been a Director of Brismark since 2000.

Noel is a member of the Australian Institute of Company Directors.


• Director

• Member of:

- Tenant Advisory Committee (Chair)

- Strategy and Investment Committee

DIRECTORS' REPORT – 30 JUNE 2018BRISBANE MARKETS LIMITED 18

Peter TigheMAICDNon-executive Director

Peter has been a director of Brisbane Markets Limited since 1999. His family has a long history in the Brisbane Markets, and Peter is a second-generation member with 40 years experience in fruit and vegetable wholesaling. He is currently the CEO of Global Fresh Australia T/a J H Leavy & Co.

Peter has been a Director of Brismark since 1988, and is also a director of a number of private companies with interests in fruit and vegetable wholesaling and marketing. Peter was formerly a Director of the Brisbane Racing Club Limited.

Peter is a member of the Australian Institute of Company Directors.


• Director

• Member of:



- Safety Advisory Committee (Chair)

Andrew YoungDipCorpMgmt, BCom, BAgrSc (Hons), FCPA, MAICDExecutive Director and CEO

Andrew has a history of employment at a senior management level, with extensive experience in policy and strategy formulation, service development and industry representation. His experience in the fresh produce industry includes engaging with relevant stakeholders at a state and federal level and addressing national issues through his role with Fresh Markets Australia. He has had an active involvement in addressing issues impacting on the marketing sector of the horticultural industry, and has conducted extensive research on Central Markets in Australia, Europe and the USA.

He played a leading role as part of the project team responsible for what became the successful bid to purchase the Brisbane Markets site in 2002, and as CEO, coordinated the seamless transition of ownership of the Brisbane Markets site to BML.

He has worked to develop and progress the implementation of the Master Plan for the Brisbane Markets site and the strategies contributing to the ongoing growth and success of the Company.

Andrew is a Non-executive Director of Perth Markets Limited and an Executive Director of Fresh Markets Australia. He holds a Bachelor of Commerce, a Bachelor of Agriculture Science (Hons) and a Graduate Diploma in Corporate Management. Andrew is also a Fellow of CPA Australia and a member of the Australian Institute of Company Directors.


• CEO and Director

• Member of:





Murray StewartB.Bus, CA, FGIA, C.DecCompany Secretary

Murray is a Chartered Accountant and Chartered Secretary, with over 25 years’ experience in senior finance roles across a number of industries including retail, manufacturing, franchising, property and freight service industries. Murray’s strengths are in the areas of financial management, accounting, commercial management, dispute resolution, legal interpretation, strategic and operational business, governance, risk, compliance and company secretarial duties.

Murray has strong financial acumen and an ability to understand key risks and opportunities, and to see how a business can position itself strategically for changes in the external business environment. Murray has worked for Brisbane Markets Limited for over three years and manages the Finance, Information Technology and Procurement functions of the organisation in addition to overseeing the Brisbane MarketPlace operation.

Murray has a Bachelor of Business (Accounting), is a Chartered Accountant, and holds a Graduate Diploma in Company Secretarial Practice.


• Company Secretary

DIRECTORS' REPORT – 30 JUNE 2018

Note: Anthony Joseph, Noel Greenhalgh and Peter Tighe are principals of companies that are also shareholder members of The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited, which is a substantial shareholder of Brisbane Markets Limited. Shareholders of The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited hold one share in the Chamber, with a nominal value of $20.

ANNUAL REPORT

2018 19

The company’s Board of Directors are also involved in Brisbane Markets Advisory Committees as follows:

Brisbane Markets Safety Advisory Committee – Peter Tighe (Chair) three meetings held and one attended. Tony Joseph and Andrew Young regularly attend these meetings in their capacity as Brisbane Markets Limited Chairman and CEO respectively.

Brisbane Markets Tenant Advisory Committee – Noel Greenhalgh (Chair) one meeting held and attended. Andrew Young attended this meeting in his capacity as Brisbane Markets Limited CEO.

The Board Committees and the membership of those Committees as at 30 June 2018 is:

FINANCE AND AUDIT COMMITTEE:Bruce Hatcher (Chair) Anthony Kelly Stuart Lummis Evonne Collier Andrew Young

LEGAL AND COMPLIANCE COMMITTEE:Anthony Kelly (Chair) Stuart Lummis Evonne Collier Peter Tighe Andrew Young

REMUNERATION COMMITTEE:Anthony Joseph (Chair) Anthony Kelly Andrew Young

STRATEGY AND INVESTMENT COMMITTEE:Stuart Lummis (Chair) Noel Greenhalgh Peter Tighe Andrew Young

The Board also appoints two advisory committees which include tenant representatives. The Directors who are appointed as Chairman of those committees as at 30 June 2018 are:

BRISBANE MARKETS SAFETY ADVISORY COMMITTEE:Peter Tighe (Chair)

BRISBANE MARKETS TENANT ADVISORY COMMITTEE:Noel Greenhalgh (Chair)

OPTIONSNo options over unissued shares or interests in the company or a controlled entity were granted during or since the end of the financial year, and there were no options outstanding at the date of this report.

PROCEEDINGS ON BEHALF OF COMPANYNo person has applied to the Court under Section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

Full Board Meeting Finance & Audit Legal & Compliance Strategy & Investment Remuneration

Meetings attended

Meetings held

Meetings attended

Meetings held

Meetings attended

Meetings held

Meetings attended

Meetings held

Meetings attended

Meetings held

A Joseph1 9 9 2 3 2 3 2 2 1 1

A Kelly 8 9 3 3 3 3 1 1

B Hatcher 6 9 2 3

S Lummis 8 9 3 3 3 3 2 2

E Collier 9 9 2 3 2 3

N Greenhalgh 8 9 1 2

P Tighe 8 9 3 3 1 2

A Young 9 9 3 3 3 3 2 2 1 11 A Joseph attended Finance & Audit, Legal & Compliance and Strategy & Investment in his capacity as Chairman of the Board. A Joseph is not a member of these committees.


MEETINGS OF DIRECTORSThe number of meetings of the company's Board of Directors and of each Board Committee held during the year ended 30 June 2018, and the number of meetings attended by each Director are detailed below.


INDEMNIFICATION OF OFFICERS AND AUDITORDuring the financial year, Brisbane Markets Limited paid a premium in respect of a contract insuring Directors, Secretaries and Executive Officers of the company and its controlled entities against a liability incurred as Director, Secretary or Executive Officer to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium.

The company has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify an officer or auditor of the company or any of its controlled entities against a liability incurred as such an officer or auditor.

AUDITOR INDEPENDENCE Section 307C of the Corporations Act 2001 requires the company's auditors, BDO Audit Pty Ltd, to provide the Directors with a written Independence Declaration in relation to their audit of the financial report ended 30 June 2018. The Auditor's Independence Declaration is attached and forms part of this Directors’ Report.

NON-AUDIT SERVICESDetails of the amounts paid or payable to the auditor for non-audit services provided during the financial year are detailed in the table below.

The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

Consolidated

2018 $’000

2017 $’000

Assurance services

Audit and review of the financial reports 73 84

Taxation and advisory services

Tax compliance and corporate advisory services, including review of company income tax returns 30 33

Corporate and advisory services

Corporate advising, valuation and other services 55 -

A Young Director

10 September 2018 at Brisbane

A J Joseph Chairman


The Directors are of the opinion that the services as disclosed above do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards.

ROUNDING OF AMOUNTS TO THE NEAREST THOUSAND DOLLARSThe consolidated entity satisfies the requirements of ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 issued by the Australian Securities and Investments Commission relating to “rounding off” of amounts in the Directors’ Report and the financial statements to the nearest thousand dollars. Amounts have been rounded off in the Directors’ Report and financial statements in accordance with that ASIC Instrument.

This report is made in accordance with a resolution of the Directors.

ANNUAL REPORT

2018 21

AUDITOR’S INDEPENDENCE DECLARATION

Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia

Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au

BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

DECLARATION OF INDEPENDENCE BY P A GALLAGHER TO DIRECTORS OF BRISBANE MARKETS LIMITED

As lead auditor of Brisbane Markets Limited for the year ended 30 June 2018, I declare that, to the best of my knowledge and belief, there have been:

1. No contraventions of the auditor independence requirements of the Corporations Act 2001 inrelation to the audit; and

2. No contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Brisbane Markets Limited and the entities it controlled during the year.

P A Gallagher Director

BDO Audit Pty Ltd

Brisbane,10 September 2018


FINANCIAL REPORTFOR THE YEAR ENDED 30 JUNE 2018

Statement of profit or loss and other comprehensive income 24

Statement of financial position 25

Statement of changes in equity 26

Statement of cash flows 27

Notes to the financial statements 281. Significant accounting policies

2. Critical accounting judgements, estimates and assumptions

Assets and liabilities 293. Other current assets

4. Trade and other receivables

5. Investment properties

6. Investment in associates

7. Property, plant and equipment

8. Trade and other payables

Taxation 349. Tax liability

10. Income tax expense

Capital, financing and risk management 3611. Borrowings

12. Derivatives

13. Financial risk management

14. Fair value measurement

15. Contributed equity

16. Dividends

17. Reserves

Group structure 4218. Interests in subsidiaries

19. Parent entity information

Commitments and contingencies 4420. Commitments

21. Contingent assets and liabilities

22. Events after the reporting period

Other disclosures 4423. Statement of cash flows

24. Related party transactions

25. Remuneration of auditors

TABLE OF CONTENTS

ANNUAL REPORT

2018 23

Consolidated

Note 2018 $’000

2017 $’000

REVENUE

Revenue and other income

Rent revenue 28,757 27,709

Increase in value of investment properties 5 - 21,421

Service revenue 10,983 10,609

Share of net profits of associates 6 7,590 9,678

Entry fees and parking 2,845 2,818

Other revenue 372 391

Marketing revenue 336 296

Interest 32 32

Gain from disposal of securities - 577

Total revenue and other income 50,915 73,531

EXPENSES

Finance costs 7,622 7,346

Direct costs of services provided 7,356 7,105

Employee benefits expenses 6,696 6,316

Site operating costs 4,252 4,286

Decrease in value of investment properties 5 1,789 -

Repairs and maintenance 1,313 1,199

Depreciation and amortisation expense 7 1,058 783

Other expenses 988 1,165

Defined contribution superannuation expense 545 503

Marketing and promotion - general 480 401

Marketing and promotion - Retail Market 206 206

Total expenses 32,305 29,310

Profit before income tax expense 18,610 44,221

Income tax expense 10(a) 5,589 13,273

Profit after income tax for the year 13,021 30,948

Other comprehensive income

Items that may be reclassified subsequently to profit or loss:

Cash flow hedge reserve (movement in interest rate swaps) 1,537 5,661

Recycling of share of other comprehensive income of associates - 251

Share of other comprehensive income of associates (139) (644)

Income tax relating to cash flow hedge reserve & other comprehensive income of associates (419) (1,580)

Other comprehensive income for the year, net of tax 979 3,6w88

Total comprehensive income for the year 14,000 34,636

Profit attributable to:

Owners of Brisbane Markets Limited 13,021 30,948

Total comprehensive income attributable to:

Owners of Brisbane Markets Limited 14,000 34,636

The above Statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes.

STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2018


Consolidated

Note 2018 $’000

2017 $’000

ASSETS

Current assets

Cash and cash equivalents 23(a) 2,488 939

Other current assets 3 1,601 1,393

Trade and other receivables 4 1,756 1,254

Inventories 27 21

Total current assets 5,872 3,607

Non-current assets

Investment properties 5 314,600 291,000

Investment accounted using the equity method 6 36,526 31,150

Property, plant and equipment 7 4,160 4,297

Intangible assets 643 643

Trade and other receivables 4 - 46

Total non-current assets 355,929 327,136

Total assets 361,801 330,743

LIABILITIES

Current liabilities

Trade and other payables 8 7,027 6,452

Current tax liabilities 9 911 146

Employee entitlements 180 139

Total current liabilities 8,118 6,737

Non-current liabilities

Borrowings 11 150,100 129,500

Deferred tax liabilities 9 36,286 32,747

Derivatives 12 11,291 12,828

Trade and other payables 8 406 453


Total non-current liabilities 198,186 175,603

Total liabilities 206,304 182,340

Net assets 155,497 148,403

EQUITY

Contributed equity 15 52,480 52,480

Reserves 17 (8,772) (9,751)

Retained profits 111,789 105,674

Total equity 155,497 148,403

The above Statement of financial position should be read in conjunction with the accompanying notes.

STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2018

ANNUAL REPORT

2018 25

RESERVES

Note Issued capital $’000

Cash flow hedge reserve

$’000

Share of other changes in equity

in associate $’000

Retained profits $’000

Totals $’000

Consolidated entity

Balance at 1 July 2016 52,480 (12,943) - 81,314 120,851

Profit after income tax for the year - - - 30,948 30,948

Other comprehensive income for the year, net of tax:

Change in fair value of cash flow hedge 17 - 3,963 - - 3,963

Net change in fair value of cash flow hedge in associate 17 - (275) - - (275)

Total comprehensive income for the year - 3,688 - 30,948 34,636

Transactions with owners, in their capacity as owners:

Share of transaction cost in associate (net of tax) 17 - - (496) - (496)

Dividends paid 16 - - - (6,588) (6,588)

Balance at 30 June 2017 52,480 (9,255) (496) 105,674 148,403

Balance at 1 July 2017 52,480 (9,255) (496) 105,674 148,403

Profit after income tax for the year - - - 13,021 13,021

Other comprehensive income for the year, net of tax:

Change in fair value of cash flow hedge 17 - 1,076 - - 1,076

Net change in fair value of cash flow hedge in associate 17 - (97) - - (97)

Total comprehensive income for the year - 979 - 13,021 14,000

Transactions with owners, in their capacity as owners:

Dividends paid 16 - - - (6,906) (6,906)

Balance at 30 June 2018 52,480 (8,276) (496) 111,789 155,497

The above Statement of changes in equity should be read in conjunction with the accompanying notes.

STATEMENT OF CHANGES IN EQUITYFOR THE YEAR ENDED 30 JUNE 2018


Consolidated

Note 2018 $’000

2017 $’000

Cash flows from operating activities

Cash receipts from customers 48,273 46,347

Cash paid to suppliers and employees (26,104) (24,620)

22,169 21,727

Interest received 32 32

Finance costs (7,070) (8,199)

Income taxes paid (1,703) (2,764)

Net cash provided by operating activities 23 13,428 10,796

Cash flows from investing activities

Proceeds from sale of property, plant and equipment 20 40

Proceeds from sale of land - 2,940

Payments relating to investment properties (25,893) (11,852)

Purchase of plant and equipment 7 (1,014) (759)

Proceeds from sale of securities in associate - 5,432

Distributions from associate 6 1,522 1,452

Purchase of investment in equity accounted investment - (3,505)

Net cash used in investing activities (25,365) (6,252)

Cash flows from financing activities

Proceeds from borrowings 22,600 8,500

Repayment of borrowings (2,000) (7,050)

Dividends paid 16 (6,906) (6,588)

Capital raising transaction costs (208) -

Net cash provided by/(used in) financing activities 13,486 (5,138)

Net increase/(decrease) in cash and cash equivalents 1,549 (593)

Cash and cash equivalents at beginning of financial year 939 1,532

Cash and cash equivalents at end of financial year 23 2,488 939

The above Statement of cash flows should be read in conjunction with the accompanying notes.

STATEMENT OF CASH FLOWSFOR THE YEAR ENDED 30 JUNE 2018

ANNUAL REPORT

2018 27

1. SIGNIFICANT ACCOUNTING POLICIES

Brisbane Markets Limited is an unlisted public company limited by shares, incorporated and domiciled in Australia.

(a) BASIS OF PREPARATIONThese general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’) and Interpretations. The general purpose financial report of the Consolidated Entity for the year ended 30 June 2018 was authorised for issue in accordance with a resolution of the directors on 10 September 2018.

Working CapitalThe consolidated entity has an excess of current liabilities over current assets at balance date of $2.2 million. The net current liabilities include a large number of capital work in progress claims and accruals at year end. The consolidated entity has approved borrowings of $160 million as disclosed in Note 11, of which $9.9 million is undrawn at 30 June 2018. The consolidated entity will utilise the undrawn funds to satisfy the payables when the payment is due.

Historical cost conventionThe financial statements have been prepared under the historical cost convention, except for, where applicable, investment properties, and derivative financial instruments.

Unless otherwise stated the financial statements are presented in Australian dollars rounded to the nearest thousand dollars ($’000), in accordance with ASIC Corporations (Rounding in Financial / Directors Report) Instrument 2016/191, which is the functional and presentational currency of the consolidated entity.

(b) REVENUE RECOGNITION

Rental revenueRental revenue from investment properties is recognised on a straight-line basis over the lease term. Revenue not received at the reporting date is reflected in the Statement of financial position as a receivable or if paid in advance, as rent in advance (unearned income). Lease incentives granted are considered an integral part of the total rental revenue and are recognised as a reduction in rental income over the term of the lease, on a straight-line basis. Contingent rentals are recognised as income in the periods in which they are earned.

Service revenueService income relates to utility services provided to tenants and is recognised as income in the periods in which services are provided. Service revenue not received at the reporting

date is reflected in the Statement of financial position as a receivable or if paid in advance, as rent in advance (unearned income).

All other revenueAll other revenue is recognised when it is received or when the right to receive payment is established.

(c) NEW, REVISED OR AMENDING ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED

The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the AASB that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity.

Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed below.

The following Accounting Standards and Interpretations are most relevant to the consolidated entity:

AASB 9 - Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous versions of AASB 9 and IAS 39 “Financial Instruments: Recognition and Measurement”. Under the new hedge accounting requirements: (a) the 80-125% highly effective threshold has been removed; (b) risk components of non-financial items can qualify for hedge accounting provided that the risk component is separately identifiable and reliably measurable; (c) an aggregated position (i.e. combination of a derivative and a non-derivative) can qualify for hedge accounting provided that it is managed as one risk exposure; and (d) when entities designate the intrinsic value of options, the initial time value is deferred in OCI and subsequent changes in time value are recognised in OCI. The consolidated entity currently applies hedge accounting. The consolidated entity has not fully assessed the potential impact of adoption of AASB9 on the financial statements.

AASB 15 - Revenue from Contracts with CustomersThis standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard provides a single standard for revenue recognition. An entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This means that revenue will be recognised when control of goods or services is transferred, rather

than on transfer of risks and rewards as is currently the case under IAS 18 Revenue. The consolidated entity has assessed the impact of adoption of AASB 15 and has determined that all material contracts are currently recognised in accordance with the revised standard, therefore, there will be no material impact on the financial statements when adopting AASB 15 in the reporting period beginning 1 July 2018.

AASB 16 - LeasesThis standard is applicable to annual reporting periods beginning on or after 1 January 2019. When effective, this Standard will replace the current accounting requirements applicable to leases in AASB 117: Leases and related interpretations. AASB 16 introduces a single lessee accounting model that eliminates the requirement for leases to be classified as operating or finance leases. The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases. The consolidated entity has not fully assessed the potential impact of adoption of AASB16 on the financial statements.

2. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in future periods affected. Information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements are discussed in the relevant notes below:

• Note 4 - Provision for impairment of receivables;

• Note 5 - Estimates of fair value of investment properties;

• Note 7 - Estimation of useful lives of assets;

• Note 9 and 10 – Tax liability & Income tax expense; and

• Note 12 - Estimates of fair value of interest rate derivatives.

NOTES TO THE FINANCIAL STATEMENTS


ASSETS AND LIABILITIES3. OTHER CURRENT ASSETS

Consolidated

2018 $’000

2017 $’000

Prepayments 1,594 1,382

Sundry debtors 7 11

1,601 1,393

ACCOUNTING POLICY

Current and non-current classificationAssets and liabilities are presented in the Statement of financial position based on current and non-current classification.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when: it is either expected to be settled in normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

4. TRADE AND OTHER RECEIVABLES

Consolidated

2018 $’000

2017 $’000

Current

Trade debtors 978 1,034

Less provision for impairment (2) (25)

976 1,009

Other debtors 780 245

1,756 1,254

Non-current

Tenant lease incentives - 46

- 46

Total trade and other receivables 1,756 1,300

At 30 June 2018, the ageing of trade debtors is as follows:

Less than 30 days 910 1,003

Less than 30 days - impaired - 12

30 days 55 -

60 days 11 -

60 days - impaired 1 -

90 days or more - 6

90 days or more - impaired 1 13

978 1,034

NOTES TO THE FINANCIAL STATEMENTS ANNUAL REPORT

2018 29

ACCOUNTING POLICY

Trade and other receivablesTrade receivables are recognised at original invoice amounts less any provision for impairment and are generally due for settlement within 30 days.

Collectability of trade receivables is assessed on an ongoing basis. Debts which are known to be uncollectable are written off by reducing the carrying amount directly. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial.

Other receivables are recognised at amortised cost, less any provision for impairment.

Provision for impairment of receivablesA provision for impairment of trade receivables is raised when there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the original terms of the receivables.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Provision for impairment of receivablesThe provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of provision is assessed by taking into account the recent revenue billings, the ageing of receivables, historical collection rates and specific knowledge of the individual debtor financial position.

5. INVESTMENT PROPERTIES(a) RECONCILIATIONReconciliations of the carrying amount of investment properties at the beginning and end of the current and previous periods:

Consolidated

2018 $’000

2017 $’000

Freehold land, buildings and improvements

Carrying amount at beginning of financial year 291,000 257,000

Revaluation increment/(decrement) (1,789) 21,421

Additions 24,977 12,579

Lease costs and incentives 400 -

Amortisation of lease costs and incentives (59) -

Transfers from property, plant & equipment 71 -

Carrying amount at end of financial year 314,600 291,000

Summary

Freehold land, buildings and improvements – 250-385 Sherwood Road, Rocklea 305,000 280,000

Freehold land - 320 Sherwood Road, Rocklea 9,600 11,000

Total investment properties at fair value 314,600 291,000

(b) AMOUNTS RECOGNISED IN PROFIT OR LOSS FOR INVESTMENT PROPERTY:

Consolidated

2018 $’000

2017 $’000

Rental and outgoings from investment property 42,585 41,137

Direct operating expense from property that generated rental income (19,630) (18,700)

22,955 22,437

(c) ASSETS PLEDGED AS SECURITYRefer note 11 for details of investment properties pledged as security.

NOTES TO THE FINANCIAL STATEMENTSBRISBANE MARKETS LIMITED 30

(d) LEASES AS A LESSORInvestment properties are generally leased to tenants on long-term operating leases with rentals payable monthly. Minimum lease payments receivable under the non-cancellable operating leases of investment property not recognised in the financial statements are as follows:

Consolidated

2018 $’000

2017 $’000

Within one year 22,610 22,215

Later than one year but not later than five years 82,765 70,976

Later than five years 66,582 37,577

171,957 130,768

(e) An independent valuation of investment properties as at 30 June 2018 was carried out by a qualified valuer with relevant experience in the type of property being valued (Ross Farwell - Registered No. 3250, Charter Keck Cramer Pty Ltd). In assessing the value of the investment property, the independent valuer has considered discounted cash flows, capitalisation of net market income methods and direct comparison. Refer to Note 14 for further discussion of fair value measurement of investment properties.

ACCOUNTING POLICY

Investment properties Investment properties are properties held either to earn rental income, for capital appreciation or for both. Investment properties are initially measured at cost and are subsequently measured at fair value. As part of the process of determining the fair value of all property, an external independent valuer, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Brisbane Markets property annually.

Property under construction held for future use as investment property is also carried at fair value unless fair value cannot yet be reliably determined. If fair value cannot yet be reliably determined, the property will be accounted for at cost until either the fair value can be reliably determined or when construction is complete.

Changes to fair values of investment properties are recognised in the profit and loss in the period in which they occur.


Estimates of fair value of investment propertiesThe consolidated entity has investment property with a carrying amount of approximately $314.6 million (30 June 2017: $291 million) representing estimated fair value at balance date. The investment property represents a significant portion of the total assets of the consolidated entity. The fair value adopted for the investment property is based on an independent external valuation of investment property as at 30 June 2018 which was carried out by a qualified valuer with relevant experience in the type of property being valued (Ross Farwell - Registered No. 3250, Charter Keck Cramer Pty Ltd). In assessing the value of the investment property, the independent valuer has considered discounted cash flows, capitalisation of net market income methods and direct comparison.

6. INVESTMENT IN ASSOCIATESBrisbane Markets Limited (the parent) holds a 41.73% interest in Perth Markets Limited (2017: 41.73%). This investment is measured in accordance with the equity method of accounting.

The principal place of business of Perth Markets Limited is Canning Vale, Perth, Western Australia. Brisbane Markets Limited has been issued with 24,551,501 stapled securities comprising:

• 24,551,501 ordinary shares each credited as fully paid in the capital of Perth Markets Limited, subject to the constitution of Perth Markets Limited; and

• 24,551,501 units each credited as fully paid in Perth Markets Land Trust, subject to the constitution of Perth Markets Land Trust.

The investment in Perth Markets Limited is a strategic investment for the company to diversify the income streams and grow shareholder value.

The carrying amount recorded in the consolidated entity accounts at 30 June 2018 is $36.5 million (2017: $31.2 million).

Consolidated

2018 $’000

2017 $’000

Investment in Perth Markets Limited:


Share of profit/(loss) after tax 7,590 9,678

Net share of other comprehensive income/(loss) after tax (139) (393)

Share of distributions received/receivable from associate (2,075) (1,452)

Share of associate's capital raising costs - (709)

Disposals during the period - (4,855)

Acquisitions during the period - 3,505

36,526 31,150


2018 31

The table below includes summarised financial information of Perth Markets Limited.

Consolidated

2018 $’000

2017 $’000

Summarised Statement of financial position

Current assets 7,943 5,545

Non-current assets 169,388 156,722

Total assets 177,331 162,267

Current liabilities 2,914 1,525

Non-current liabilities 85,165 84,377


Net assets 89,252 76,365

Summarised Statement of profit or loss and other comprehensive income

Revenue 23,754 22,574

Profit for the period 18,191 26,600

Other comprehensive income (332) 2,401

Total comprehensive income 17,859 29,001

Distributions received from associates 1,522 1,452

Distributions receivable from associates 553 -

Commitments and contingent liabilities in respect of associatesThe consolidated entity is liable for the following contractual commitments arising from its interests in associates if and when they arise:

Consolidated

2018 $’000

2017 $’000

Commitment to provide funding if required 73 96

There are no material contingent liabilities disclosed by the associate.

SIGNIFICANT RESTRICTIONSThere are no restrictions on the ability of Perth Markets Limited to transfer funds to the consolidated entity in the form of cash dividends or loans.

ACCOUNTING POLICY

Investment in associatesAn associate is an entity over which the consolidated entity has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the entity but is not control or joint control of these policies. Investments in associates are accounted for in the consolidated financial statements by applying the equity method of accounting, whereby the investment is initially recognised at cost (including transaction costs) and adjusted thereafter for the post-acquisition change in the consolidated entity’s share of net assets in the associate. In addition, the consolidated entity’s share of the profit or loss is included in the consolidated entity’s profit or loss.

The carrying amount of the investment includes, when applicable, goodwill relating to the associate. Any discount on acquisition, whereby the consolidated entity’s share of the net fair value of the associate exceeds the cost of the investment, is recognised in the profit or loss in the period in which the investment is acquired.

Profits and losses resulting from transactions between the consolidated entity and the associate are eliminated to the extent of the consolidated entity’s interest in the associate.

7. PROPERTY, PLANT AND EQUIPMENT

Consolidated

2018 $’000

2017 $’000

Plant and equipment - at cost 9,621 9,040

Less: accumulated depreciation (5,461) (4,743)

4,160 4,297


RECONCILIATIONSReconciliations of the carrying amount of property, plant and equipment at the beginning and end of the current and previous periods:

Plant and equipment

Consolidated

2018 $’000

2017 $’000


Additions 1,014 759

Disposals (22) (43)

Transfers to investment property (71) -

Depreciation expense (1,058) (783)

Carrying amount at end of financial year 4,160 4,297

Refer note 11 for property, plant and equipment pledged as security.

ACCOUNTING POLICYProperty, plant and equipmentProperty, plant and equipment not classified as investment properties are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. Cost includes expenditure that is directly attributable to the acquisition of the items.

DepreciationDepreciation of property, plant and equipment is calculated on a straight-line basis over their estimated useful lives commencing from the time the asset is held ready for use. The useful lives for plant and equipment is 3 to 25 years.

Carrying amountThe carrying amount of property, plant and equipment (cost less accumulated depreciation and impairment losses) is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from those assets. A formal assessment of recoverable amount is made when impairment indicators are present. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are recognised in profit or loss in the period in which they arise. When revalued assets are sold, amounts included in the revaluation surplus relating to that asset are transferred to retained earnings.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSEstimation of useful lives of assetsThe consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.

8. TRADE AND OTHER PAYABLES

Consolidated

2018 $’000

2017 $’000

Current

Other creditors and accruals 2,413 2,152

Trade creditors 1,637 2,059

Accrued interest 1,269 969

Income received in advance 1,165 810

Annual leave 427 402

Warehouse deposits held 116 60

7,027 6,452

Non-current

Warehouse deposits held 404 453

Tenant lease incentives 2 -

406 453

Total trade and other payables 7,433 6,905

Trade and other payables represent liabilities for goods and services provided to the consolidated entity prior to the year end and which are unpaid at the end of the reporting period. These amounts are unsecured and typically have 14 to 60 day payment terms.


2018 33

TAXATION

9. TAX LIABILITY

Consolidated

2018 $’000

2017 $’000

Current

Current tax liabilities 911 146

Non-current

Deferred tax liability 40,559 37,391

Deferred tax assets (4,273) (4,644)

Net deferred tax liability 36,286 32,747

DEFERRED TAX ASSETSThe balance comprises temporary differences attributable to:

Amounts recognised in the profit or loss:

Provision accounts 1 8


Accruals 476 446

Property, plant and equipment 29 14

Takeover costs 96 143

FBT instalment BAS not taken up (6) (5)

Income received in advance 91 5

Capital raising costs (13) -

886 796

Amounts recognised in other comprehensive income:

Cash flow hedge 3,387 3,848

Total deferred tax assets 4,273 4,644

Movements:

Opening balance at 1 July 4,644 6,546

Credited (charged) to other comprehensive income (461) (1,698)

Credited (charged) to Statement of changes in equity - -

Credited (charged) to the profit or loss (Note 10(b)) 90 (204)

Closing balance 4,273 4,644

DEFERRED TAX LIABILITIESThe balance comprises temporary differences attributable to:

Property, plant and equipment 36,171 35,254

Prepayments 1 -

Investment in Perth Markets Limited 4,387 2,137

Total deferred tax liabilities 40,559 37,391

Movements:


Charged (credited) to other comprehensive income (42) (118)

Charged (credited) to equity - (213)

Charged (credited) to the profit or loss - under/(over) provision prior years 256 -

Charged (credited) to the profit or loss (Note 10(b)) 2,954 10,472



ACCOUNTING POLICY

Income taxThe income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to profit or loss is the tax payable on taxable income for the current period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss or arising from a business combination. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. With respect to non-depreciable items of property, plant and equipment measured at fair value and items of investment property measured at fair value, the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of the asset will be recovered entirely through sale.

When an investment property that is depreciable is held by the entity in a business model whose objective is to consume substantially all of the economic benefits embodied in the property through use over time (rather than through sale), the related deferred tax liability or deferred tax asset is measured on the basis that the carrying amount of such property will be recovered entirely through use.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (i) a legally enforceable right of set-off exists; and (ii) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities, where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

10. INCOME TAX EXPENSE(a) THE PRIMA FACIE TAX ON PROFIT DIFFERS FROM THE INCOME TAX EXPENSE AS FOLLOWS:

Consolidated

2018 $’000

2017 $’000

Profit before income tax expense 18,610 44,221

Income tax at the statutory rate of 30% (2017: 30%) 5,583 13,266

Tax effect of amounts which are not deductible (taxable) in calculating taxable income

Non-deductible entertainment 4 6

Other 2 1

Income tax expense 5,589 13,273

(b) THE COMPONENTS OF TAX EXPENSE COMPRISE:

Current tax 2,725 2,598

Deferred tax arising from origination and reversal of temporary differences 2,864 10,675

Income tax expense 5,589 13,273

Deferred income tax (revenue) expense included in income tax expense comprises:

Decrease (increase) in deferred tax assets (Note 9) (90) 203

(Decrease) increase in deferred tax liabilities (Note 9) 2,954 10,472

2,864 10,675

Franking credits available for use in subsequent financial year 6,110 8,011

The above amounts represent the balance of the franking account as at the end of the financial year adjusted for:

(i) franking credits that will arise from payment of the amount of the provision for income tax;

(ii) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and

(ii) franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date.


2018 35

ACCOUNTING POLICY

Income tax expenseThe income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities.

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSThe consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity recognises liabilities for anticipated tax audit issues based on the consolidated entity's current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

CAPITAL, FINANCING AND RISK MANAGEMENT

11. BORROWINGS

Consolidated

2018 $’000

2017 $’000

Non-current

Loan - Westpac Banking Corporation 150,100 129,500

Terms and conditions relating to the above loan:(i) The debt facility with Westpac Banking Corporation is $160 million and will expire on 30 April 2021. Bank loans are under a facility with a fixed

term which expires on 30 April 2021. Interest rate risks associated with the liabilities are managed with interest rate swap arrangements. As at 30 June 2018, the company had drawn only $150.1 million of this $160 million facility.

(ii) Loans are secured by a first registered mortgage over all current and future real property at the Brisbane Markets site and a general security interest over the assets and undertakings of the company. The carrying amount of current real property as per the valuation at 30 June 2018 is $314.6 million.

(iii) Under the terms of the loan facility, there is a requirement to report financial undertakings to Westpac on a six monthly basis. These undertakings include:

a) BML must hedge at least 50% of the drawings under the facility for the term,

b) The total outstanding under the facility cannot exceed 60% of the value of the Brisbane Markets property,

c) The ratio of EBIT to interest expense cannot exceed 2.25 times in a 12 month period,

d) Total tangible assets less total liabilities must not be less than 85% of the previous financial year, and

e) The distributions made in any financial year must not exceed the lesser of; a return of 10% on shareholders equity, or 100% of the net profit after tax (excluding the impact of property valuation movements) as shown in the latest financial accounts.

ACCOUNTING POLICY

Financial liabilitiesNon-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

Borrowing costsBorrowing costs incurred for the construction of a qualifying asset are capitalised during the period of time that it is required to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed when incurred.

12. DERIVATIVES

Consolidated

2018 $’000

2017 $’000

Interest rate swap contracts - at fair value 11,291 12,828

Interest rate swap contracts - refer to Note 13 for the company's credit risk and hedging policy. In respect of the interest rate swap contracts, the fixed interest rates range between 0.39% above and 5.20% above (2017: 0.74% above and 5.55% above) and the variable rates range between 0.01% below and 0.07% below (2017: nil and 0.08% above) the 30 day and 90 day bank bill rates, which at balance date were 2.01% and 2.10% respectively (2017: 1.67% and 1.76%). The quarterly contracts require settlement of net interest receivable or payable every 90 days. The monthly contracts require settlement of net interest receivable or payable every 30 days. The contracts are settled on a net basis.

Swaps currently in place cover approximately 61.63% (2017: 72.97%) of the variable loan principal outstanding and are timed to expire as each loan repayment falls due.

During the year ended 30 June 2018, no ineffective portion (2017: nil) has been recognised and transferred to the profit or loss. Refer to Note 14 for further details on fair value measurement.


ACCOUNTING POLICY

DerivativesThe consolidated entity uses derivative financial instruments such as interest rate swaps to hedge its risk associated with interest rate fluctuations. Such derivatives are stated at fair value. The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to net profit or loss for the year.

For derivatives that qualify for hedge accounting, the method for recognising gains and losses on changes in fair value depends on whether the derivative is classified as a fair value hedge or a cash flow hedge. Derivatives are classified as fair value hedges when they hedge the exposure to changes in the fair value of a recognised asset or liability and as cash flow hedges when they hedge exposure to variability in cash flows that are attributable to either a particular risk associated with a recognised asset or liability or to a forecast transaction.

The consolidated entity has no fair value hedges as at reporting date.

The consolidated entity documents at inception of the hedge the relationship between the hedging instruments (derivatives) and the hedged items, as well as the risk management objective and strategy for undertaking the hedge transaction. The consolidated entity also documents, both at inception of the hedge and on an ongoing basis whether the derivatives that are used in the hedging transactions have been, and will continue to be, highly effective in offsetting changes in fair values or cash flows of hedged items.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.

Amounts accumulated in other comprehensive income are recognised in profit or loss as a reclassification adjustment in periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in profit or loss as finance costs.

Hedge accounting is discontinued when the hedging instrument expires, or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gains or losses on the hedging instrument recognised in other comprehensive income is kept in other comprehensive income until the forecast transaction occurs. If the forecast transaction is no longer expected to occur, the cumulative gain or loss recognised in other comprehensive income is recognised in profit or loss for the year as a reclassification adjustment.


Estimates of fair value of interest rate derivatives The fair value of interest rate derivatives have been determined using a pricing model based on discounted cash flow analysis and incorporating assumptions supported by market data at balance date, including market expectation of future interest rates and discount rates and taking into account estimates prepared by external counterparties.

13. FINANCIAL RISK MANAGEMENT(a) GENERAL OBJECTIVES, POLICIES AND PROCESSESIn common with all other businesses, the consolidated entity is exposed to risks that arise from its use of financial instruments. This note describes the consolidated entity’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the consolidated entity’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

The Board has overall responsibility for the determination of the consolidated entity’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to management. The consolidated entity’s risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the results of the consolidated entity where such impacts may be material. The consolidated entity generally uses derivative financial instruments such as interest rate swap contracts to hedge these risks. The Board receives monthly reports from management through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.

The overall objective of the Board is to set polices that seek to reduce risk as far as possible without unduly affecting the consolidated entity’s competitiveness and flexibility. Further details regarding these policies are set out below.

(b) CREDIT RISK EXPOSUREThe objective of the entity is to minimise risk of loss from credit risk exposure.

Credit risk arises principally from cash at bank and trade and other receivables. Credit risk from receivables is measured using days and ageing.

The maximum credit risk exposure of financial assets at the reporting date is the carrying amount of these assets as indicated in the Statement of financial position. Provision has been raised in the accounts where doubts as to the full realisation of the assets exists.

Credit risk in respect of trade debtors is managed by requiring payment within 14 days of the date of invoice.

Credit risk represents the risk of counter party default. The credit risk on financial assets of the consolidated entity which have been recognised in the Statement of financial position is generally the carrying amount, net of any provisions for impairment. Credit risk is managed through the establishment of credit limits with guarantees and other forms of security obtained where required. Limits are determined after taking into account the debtor's financial position, past experience and other factors. Compliance with credit limits is regularly monitored by management.

Hedging policyThe company uses derivative financial instruments (interest rate swaps) to reduce the exposure to market risks arising from changes in interest rates. The consolidated entity does not enter into derivative contracts for the purposes of trading. Hedging decisions are made based on the consolidated entity’s interest rate risk position. Hedging for the purpose of this policy means a transaction which reduces the calculated interest rate risk on the overall portfolio of interest bearing assets and liabilities using one or more of the interest rate risk measures of value at risk, sensitivity or accrued simulation.


2018 37

(c) LIQUIDITY RISKLiquidity risk is the risk that the consolidated entity will not be able to meet its financial obligations as they fall due. The objective of managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when they fall due, under both normal and stressed circumstances.

Liquidity risk is measured using liquidity ratios such as working capital. The consolidated entity manages this risk through the following mechanisms:

(i) preparing forward looking cash flow analysis in relation to operational, investing and financing activities;

(ii) monitoring undrawn credit facilities;

(ii) maintaining a reputable credit profile; and

(iv) managing credit risk related to financial assets.

The tables below reflect an undiscounted contractual maturity analysis for financial liabilities. Bank funding amounts have been deducted in the analysis as management does not consider there is any reasonable risk that the bank will terminate such facilities. The bank does however maintain the right to terminate such facilities in the event of a breach of financial undertakings.

Financial liability maturity analysis

Consolidated entity - 2018Weighted

average interest rate

Total carrying amount

$’000

Total contractual

outflow $’000

Within 1 year $’000

1 to 5 years $’000

Over 5 years $’000

Financial liabilities due for payment

Trade and other payables (excl. annual leave) N/A 7,006 7,006 6,600 406 -

Amounts payable to related parties N/A 36 36 36 - -

Net settled Interest rate swaps 2.48% 11,291 15,416 2,290 7,996 5,130

Bank loans1 3.83% 150,100 150,100 - 150,100 -

Interest on bank loans2 - 8,130 2,909 5,221 -

Total contractual outflows 168,433 180,688 11,835 163,723 5,130

Less bank loans1 150,100 150,100 - 150,100 -

Expected settlement in the future - - - - 150,100

Total expected outflows 18,333 30,588 11,835 13,623 155,230

Consolidated entity - 2017Weighted

average interest rate

Total carrying amount

$’000

Total contractual

outflow $’000

Within 1 year $’000

1 to 5 years $’000

Over 5 years $’000

Financial liabilities due for payment

Trade and other payables (excl. annual leave) N/A 6,503 6,503 6,050 453 -

Amounts payable to related parties N/A - - - - -

Net settled Interest rate swaps 3.14% 12,828 19,745 2,963 9,233 7,549

Bank loans1 4.07% 129,500 129,500 - 129,500 -

Interest on bank loans2 - 7,947 2,210 5,737 -

Total contractual outflows 148,831 163,695 11,223 144,923 7,549

Less bank loans1 129,500 129,500 - 129,500 -

Expected settlement in the future - - - - 129,500

Total expected outflows 19,331 34,195 11,223 15,423 137,0491 Note: Bank funding facility has a renewal date of 30 April 2021. Payment of these amounts will not physically occur with the loan balance flowing forward to the new negotiated facility. The Directors are not aware of any reason as to why the funding facility will not be renewed or refinanced in the future.2 Note: 61.63% (2017: 72.97%) of loans are hedged therefore the actual outflow will be less.

Interest risk managementInterest rate risks are caused by fluctuations in interest rates which, in turn, are due to market factors.

Interest rate sensitivityThe consolidated entity’s main interest rate risk arises from cash and cash equivalents, borrowings and interest rate swaps. The following table demonstrates the sensitivity to a possible change in interest rates by 1%, with all other variables held constant, on the consolidated entity’s profit or loss before taxes and other comprehensive income. This sensitivity analysis on the interest rate swap has been prepared on the basis that the swaps are fully effective at year end and reflect an undiscounted analysis.


Sensitivity - 2018

Effect on profit before taxes $’000

30-Jun-18 Increase 1% Decrease 1%

Cash and cash equivalents 2,488 25 (25)

Borrowings (variable loan) 57,600 (576) 576

Effect on other comprehensive income


Interest rate swap 11,291 5,120 (5,120)

Effect on profit before taxes

Sensitivity - 2017 30-Jun-17 Increase 1% Decrease 1%

Cash and cash equivalents 939 9 (9)

Borrowings (variable loan) 35,000 (350) 350

Effect on other comprehensive income


Interest rate swap 12,828 6,051 (6,051)

MARKET RISKMarket risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the entity's income or the value of its holdings of financial instruments.

As borrowings are effectively at a fixed interest rate there is no material exposure to any market risks including interest rate risk.

14. FAIR VALUE MEASUREMENTThe following assets and liabilities are recognised and measured at fair value on a recurring basis:

• investment properties; and

• derivatives.

There are no assets or liabilities which are measured at fair value on a non-recurring basis. The carrying values of financial assets and financial liabilities approximate their fair values due to their short term nature.

Fair value hierarchyAll assets and liabilities for which fair value is measured or disclosed are categorised according to the fair value hierarchy as follows.

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs for the assets or liability that are not based on observable market data (unobservable inputs).

Recognised fair value measurementsThe following table sets out the consolidated entity’s assets and liabilities that are measured and recognised at fair value in the financial statements.

Level 1 $

Level 2 $

Level 3 $

Total $

2018

Non-financial assets

Investment properties - - 314,600 314,600

Financial liabilities

Derivatives-interest rate swaps - 11,291 - 11,291

2017

Non-financial assets

Investment properties - - 291,000 291,000

Financial liabilities

Derivatives-interest rate swaps - 12,828 - 12,828

There were no transfers during the year between Level 1 and Level 2 for recurring fair value measurements.

The consolidated entity’s policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circumstances that caused the transfer occurred.


2018 39

Valuation techniques used to derive Level 2 and Level 3 fair values recognised in the financial statementsThe following table sets out the valuation techniques used to measure fair value within Level 2, including a description of the significant inputs used.

Description Valuation approach and inputs used

Derivatives - interest rate swaps Present value of the estimated future cash flows based on observable yield curves.

The following table sets out the valuation techniques used to measure fair value within Level 3, including details of the significant unobservable inputs used and the relationship between unobservable inputs and fair value.

Description Valuation approaches Unobservable inputs Range of inputsRelationship between unobservable inputs and fair value

Investment properties

Capitalisation approach based on current market net income generated by the property capitalised at an appropriate market yield to establish the property’s current market value fully leased.

Capitalisation rate 7.0% to 15.00% (average used 7.87%)

The higher the capitalisation rate, the lower the fair value.

Income approach based on estimated rental value of the property. Discount rates and terminal yields, are estimated by an external valuer or management based on comparable transactions and industry data.

Discount rate 8.50% The higher the discount rate and terminal yield, the lower the fair value.

Terminal yield 7.25% to 15.00% (average used 8.12%)

Market approach based on prices and other relevant information generated by market transactions involving identical or comparable (i.e. similar) assets or a group of assets.

The dollar rate per square metre per annum of lettable area achieved by comparable assets sold in the current market.

$2,100 to $2,200 per square metre per annum of lettable area.

The higher the dollar rate per square metre per annum of lettable area, the higher the fair value

There were no significant inter-relationships between unobservable inputs that materially affect fair values.

Reconciliation of Level 3 fair value movementsThe following table sets out the movements in Level 3 fair values for recurring measurements.

Investment properties

$’000

Opening balance 1 July 2017 291,000

Acquisitions 24,977

Fair value movement recognised in profit or loss (1,789)

Lease costs and incentives 400

Amortisation of lease costs and incentives (59)

Transfers from property, plant & equipment 71

Closing balance 30 June 2018 314,600

Valuation processes for Level 3 fair valuesManagement regularly reviews the Level 3 valuations of investment properties and reports the results of these reviews to the Audit Committee and to the Board. Valuations are fully reviewed every six months to ensure that they are current for the half-year and annual financial statements with the consolidated entity engaging an external, independent and qualified valuer to determine the fair value of the consolidated entity’s investment properties at the end of every annual reporting period. All valuations, including external valuations, are reviewed and approved by the Audit Committee before submission to the Board.

Highest and best useThe current use of the investment properties equates to their highest and best use.


ACCOUNTING POLICY

Fair value Fair values may be used for financial asset and liability measurement and well as for sundry disclosures.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent, knowledgeable and willing market participants at the measurement date. It is based on the presumption that the transaction takes place either in the principal market for the asset or liability or, in the absence of a principal market, in the most advantageous market. The principal or most advantageous market must be accessible to, or by, the consolidated entity.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their best economic interest.

The fair value measurement of a non-financial asset takes into account the market participant's ability to generate economic benefits by using the asset at its highest and best use or by selling it to another market participant that would use the asset at its highest and best use.

In measuring fair value, the consolidated entity uses valuation techniques that maximise the use of observable inputs and minimise the use of unobservable inputs.

The consolidated entity’s policy is to recognise transfers into and out of the different fair value hierarchy levels at the date the event or change in circumstances that caused the transfer occurred.

15. CONTRIBUTED EQUITY

Consolidated

Issued and paid up capital 2018 Number

2017 Number

2018 $

2017 $

Movements in share capital

Ordinary shares

Balance at the beginning of financial year 42,500,000 42,500,000 52,480,189 52,480,189

Balance at the end of financial year 42,500,000 42,500,000 52,480,189 52,480,189

Industry shares

Balance at the beginning of financial year 4 4 30 30

Balance at the end of financial year 4 4 30 30

Terms and conditions of contributed equity:

Ordinary sharesOrdinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of, and amounts paid up on, shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

Industry sharesThe holder of the industry shares shall be entitled to appoint Industry Directors to the Board according to the number of industry shares held, shall be entitled to receive notice of, and attend meetings of the company and to speak on any matter relating to industry shares, but not vote in respect of those shares. The holder of industry shares has no right to participate in the capital or profits of the company, whether on winding up, by way of distribution of capital or otherwise.

ACCOUNTING POLICY

Contributed equityOrdinary shares are classified as equity. Costs directly attributable to the issue of new shares or options are shown as a deduction from the equity proceeds, net of any income tax benefit. Costs directly attributable to the issue of new shares or options associated with the acquisition of a business are included as part of the purchase consideration.

Capital managementThe consolidated entity manages its capital to ensure that entities in the consolidated entity will be able to continue as a going concern while maximising the return to stakeholders through optimisation of the debt and equity balance.

The capital structure of the consolidated entity consists of debt which includes the borrowings disclosed in Note 11, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in Notes 16 and 17, and the Statement of changes in equity.

There are no externally imposed capital requirements.

Management effectively manages the consolidated entity's capital by assessing the consolidated entity's financial risks and adjusting its capital structure in response to changes in these risks and in the market. These responses include the management of debt levels, distributions to shareholders and share issues.


2018 41

16. DIVIDENDS

Consolidated

2018 $’000

2017 $’000

Dividends provided for or paid during the year:

Final fully franked ordinary dividends (fully paid shares) 3,400 3,188

Final fully franked special dividends (fully paid shares) 106 -

Interim fully franked ordinary dividends (fully paid shares) 3,400 3,400

6,906 6,588

Dividend per share paid for fully paid shares during the financial year 16.25 cents 15.50 cents

Dividends paid are fully franked at the tax rate of 30 cents in the dollar. The franking account balance at 30 June 2018 is disclosed at Note 10(b).

ACCOUNTING POLICY

DividendsDividends are recognised when declared during the financial year and no longer at the discretion of the company.

17. RESERVES

Consolidated

2018 $’000

2017 $’000

Cash flow hedge reserve - interest rate swap 8,276 9,255

Share of changes in equity in associate – net of tax 496 496

8,772 9,751

Movement in reserves


(Increase)/decrease in fair value of cash flow hedge (1,076) (3,963)

(Increase)/decrease in fair value of cash flow hedge of associate 97 275

Share of transaction cost in associate - net of tax - 496


GROUP STRUCTURE

18. INTERESTS IN SUBSIDIARIES

Name Principal place of business/ country of incorporation Ownership interest

2018%

2017%

Brisbane MarketPlace Pty Ltd Australia 100% 100%


19. PARENT ENTITY INFORMATIONThe Corporations Act requirement to prepare parent entity financial statements where consolidated financial statements are prepared has been removed and replaced by regulation 2M.3.01 which requires the following limited disclosure in regards to the parent entity.

Consolidated

2018 $’000

2017 $’000

Parent entity

Current assets 5,758 3,572

Non-current assets 355,669 326,851

Total assets 361,427 330,423

Current liabilities 8,834 7,769

Non-current liabilities 198,245 175,664


Net assets 154,348 146,990

Issued capital 52,480 52,480

Reserves (8,772) (9,751)

Retained earnings/(accumulated losses) 110,640 104,261

Total shareholders’ equity 154,348 146,990

Profit/(loss) for the year 11,936 29,959

Total comprehensive income 12,915 33,646

Profit for the yearThe operating profit of the parent entity after income tax for the year ended 30 June 2018 was $11.94 million which included a net revaluation decrement after tax of $1.25 million. The net revaluation decrement is a non-operating unrealised variance to the result and as such is not included for purposes of calculating cash flow or dividends.

GuaranteesNo guarantees have been entered into by the parent entity in relation to debts of its subsidiaries.

CommitmentsAt 30 June 2018, the entity had no material capital or other expenditure commitments other than as disclosed.

Contractual operating commitmentsEstimated major expenditure of the parent entity contracted for at balance date, but not provided for is as follows:

Consolidated

2018 $’000

2017 $’000

payable not later than one year 678 2,109

payable later than one year but not later than five years 421 1,306

payable later than five years 260 -

1,359 3,415

Capital project commitments

- payable not later than one year 12,642 13,512

Contingent assets/liabilitiesAs at 30 June 2018, the entity had no significant contingent assets or liabilities.


2018 43

ACCOUNTING POLICY

Principles of consolidationThe consolidated financial statements incorporate the assets, liabilities and results of Brisbane Markets Limited (‘company’ or ‘parent entity’) and the subsidiaries as at 30 June 2018. Brisbane Markets Limited and its subsidiaries together are referred to in these financial statements as the ‘consolidated entity’.

Subsidiaries are those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. A list of the subsidiaries is provided in Note 18.

Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity.

COMMITMENTS AND CONTINGENCIES

20. COMMITMENTSAt 30 June 2018, the consolidated entity had no material capital or other expenditure commitments other than as disclosed.

Contractual operating commitmentsEstimated major expenditure contracted for at balance date, but not provided for is as follows:

Consolidated

2018 $’000

2017 $’000

- payable not later than one year 749 2,139

- payable later than one year but not later than five years 582 1,306

- payable later than five years 260 -

1,591 3,445

Capital project commitments

- payable not later than one year 12,642 13,512

21. CONTINGENT ASSETS AND LIABILITIESAs at 30 June 2018, the consolidated entity had no significant contingent assets or liabilities.

22. EVENTS AFTER THE REPORTING PERIODThere are no significant events that have occurred subsequent to the end of the financial year that have not been disclosed in this report, other than as noted below.

The consolidated entity finalised a capital raising in September 2018 and raised $38.4 million through this process. A further 12 million partly paid ordinary shares have been issued at a price of $1.60 per share, with a further final instalment of $1.60 per share payable on 15 April 2019.

OTHER DISCLOSURES

23. STATEMENT OF CASH FLOWS (a) RECONCILIATION OF CASHFor the purposes of the Statement of cash flows, cash includes cash on hand and in banks and investments where the term of these investments is less than three months. Cash at the end of the reporting period as shown in the Statement of cash flows is reconciled to the related items in the Statement of financial position as follows:

Consolidated

2018 $’000

2017 $’000

Cash on hand 6 2

Cash at bank 2,482 937

2,488 939


(b) RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES WITH PROFIT FOR THE YEAR

Consolidated

2018 $’000

2017 $’000

Profit (after income tax) for the year 13,021 30,948

Non-cash items included in profit or loss:

Profit/(loss) on sale of property, plant and equipment 1 3

Depreciation and amortisation 1,058 783

Profit from investment in associate (7,590) (10,254)

Change in value of investment properties 1,789 (21,421)

(4,742) (30,889)

Net changes in working capital:

Decrease/(increase) in receivables 608 (70)

Decrease/(increase) in other assets 581 (97)

Decrease/(increase) in inventory 227 (265)

Increase/(decrease) in provisions 93 51

Increase/(decrease) in provision for income tax expense 807 165

Decrease/(increase) in deferred tax assets (89) 203

Increase/(decrease) in payables (246) 609

Increase/(decrease) in deferred tax liability 3,168 10,141

5,149 10,737

Net cash provided by operating activities 13,428 10,796

(C) RECONCILIATION OF CASH FLOWS FROM FINANCING ACTIVITIES FOR THE YEAR

Consolidated

Cash flows

2017 $’000

Inflow $’000

(Outflow) $’000

Non-cash Changes

$’000

2018 $’000

Borrowings 129,500 22,600 (2,000) - 150,100

Interest rate swaps 12,828 - - (1,537) 11,291

142,328 22,600 (2,000) (1,537) 161,391

ACCOUNTING POLICY

Cash and cash equivalentsCash and cash equivalents include cash on hand and at banks, deposits held at call with financial institutions and, where applicable, bank overdrafts. Bank overdrafts are reported within borrowings in current liabilities on the Statement of financial position.

24. RELATED PARTY TRANSACTIONSKey management personnel compensationNote: Key management personnel includes non-executive Board members.

The aggregate compensation made to Directors and other members of key management personnel of the consolidated entity during the year is as set out below:

Consolidated

2018 $’000

2017 $’000

Short term employee benefits 1,419 1,280

Post-employment benefits 109 99

Other long-term benefits 13 12

1,541 1,391


2018 45

Transactions with related partiesA Director, Andrew Young, holds the position of Chief Executive Officer of The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited. Noel Greenhalgh and Peter Tighe were members of the Board of The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited for the full year, and Anthony Joseph was a member of the board until 17 October 2017. In accordance with Clause 37.1 of the Constitution of Brisbane Markets Limited, The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited as the holder of the four industry shares appoints up to four Directors to the Board of Brisbane Markets Limited. The Directors appointed are Anthony Joseph, Bruce Hatcher, Stuart Lummis and Evonne Collier.

The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited lease premises and acquire other services of Brisbane Markets Limited.

Brisbane Markets Limited utilises a number of the services provided by The Queensland Chamber of Fruit and Vegetable Industries Co-operative Limited.

A Director, Anthony Joseph, is also a Director of Alfred E Chave Pty Ltd and BMCSAD Pty Ltd, which lease premises from Brisbane Markets Limited.

A Director, Noel Greenhalgh, is also a Director of R W Pascoe Pty Ltd and Protettore Pty Ltd which lease premises from Brisbane Markets Limited.

A Director, Peter Tighe, is also a Director of Osric Investments Pty Ltd and Hambleton Investments Pty Ltd, which lease premises from Brisbane Markets Limited. Peter Tighe is also employed in the management team of Global Fresh Australia Pty Ltd, which lease premises from Brisbane Markets Limited.

Brisbane Markets Limited receives payments from its associate Perth Markets Limited for Board member remuneration, business travel expenditure and licence fees.

All transactions and leases with related parties are based on normal commercial terms and conditions which are no more favourable than those which it is reasonable to expect would be applied if the transaction was at arm's length.

Aggregate amount of the above transactions with related parties:

Consolidated

2018 $’000

2017 $’000

Income:

Rental and related charges 2,875 2,268

Utility charges 568 965

Joint promotion and sponsorship 98 103

Other 134 97

Total rent and other revenue received 3,675 3,433

Expenses:

Other 484 444

Total purchased 484 444

Balance outstanding in receivables - current assets 94 96

Balance outstanding in payables - current liabilities 36 -

Loans to/from related partiesThere were no loans to or from related parties at the current or previous reporting date.

Terms and conditionsAll transactions were made on normal commercial terms and conditions and at market rates.

25. REMUNERATION OF AUDITORSDuring the year the following amounts were paid/payable to the auditor of the parent entity and its related practices:

Consolidated

2018 $’000

2017 $’000

Assurance services

Audit and review of the financial reports 73 84

Taxation and advisory services

Tax compliance and corporate advisory services, including review of company income tax returns 30 33

Corporate and advisory services

Corporate advising, valuation and other services 55 -


DIRECTORS’ DECLARATION

A J Joseph Chairman

A Young Director

10 September 2018 at Brisbane

In the Directors’ opinion:

• the attached financial statements and notes thereto comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes thereto comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements;

• the attached financial statements and notes thereto give a true and fair view of the consolidated entity’s financial position as at 30 June 2018 and of its performance for the financial year ended on that date; and

• there are reasonable grounds to believe that Brisbane Markets Limited will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001.

On behalf of the Directors

ANNUAL REPORT

2018 47

INDEPENDENT AUDITOR’S REVIEW REPORT

Level 10, 12 Creek St Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia

Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au

INDEPENDENT AUDITOR'S REPORT

To the members of Brisbane Markets Limited

Report on the Audit of the Financial Report

Opinion

We have audited the financial report of Brisbane Markets Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2018, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies and the directors’ declaration.

In our opinion the accompanying financial report of Brisbane Markets Limited, is in accordance with the Corporations Act 2001, including:

(i) Giving a true and fair view of the Group’s financial position as at 30 June 2018 and of itsfinancial performance for the year ended on that date; and

(ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001.

Basis for opinion

We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.

We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Other information

The directors are responsible for the other information. The other information obtained at the date of this auditor’s report is information included in the director’s report, but does not include the financial report and our auditor’s report thereon.


Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar3.pdf

This description forms part of our auditor’s report.

BDO Audit Pty Ltd





Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the Financial Report

The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

Auditor’s responsibilities for the audit of the Financial Report

Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report.

A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: http://www.auasb.gov.au/auditors_responsibilities/ar3.pdf

This description forms part of our auditor’s report.

BDO Audit Pty Ltd




ANNUAL REPORT

2018 49

CORPORATE GOVERNANCE STATEMENT

The Board of Directors is responsible on behalf of the shareholders for the overall corporate governance of the company, including direction and oversight of the company's business and affairs.

BOARD COMPOSITIONThe Board comprises eight Directors, including seven non-executive Directors, being Anthony (Tony) Joseph, Anthony (Tony) Kelly, Bruce Hatcher, Stuart Lummis, Evonne Collier, Noel Greenhalgh and Peter Tighe. The other Director is the Chief Executive Officer, Andrew Young.

The constitution states that the number of Directors should be determined by the company, but be not less than three and no more than eight at any time.

ROLE OF DIRECTORSThe Board of Directors is responsible for corporate governance matters. It has established principles under which the Board and management operate to ensure that business is carried out in the best interests of shareholders and other stakeholders, with proper sharing of responsibilities between Directors and management.

The Board is responsible for adopting business plans, investment strategies, corporate policies, budgets and the approval of longer term strategic plans for the company, delegating management of the business and the implementation of Board strategies and plans to the Chief Executive Officer.

The Board also reviews, and if appropriate, approves major capital expenditure, acquisitions and funding issues. It has the responsibilities of overseeing the audit and compliance functions.

FREQUENCY OF MEETINGS AND ATTENDANCEThe Board must meet at least six times per year and will hold as many additional meetings as the operations of the company may require. Board meetings are scheduled at the commencement of each calendar year to ensure as many Directors as possible are able to be present at meetings.

PERFORMANCE OF DIRECTORS AND CHIEF EXECUTIVE OFFICERThe performance of all Directors, the Board as a whole and the Chief Executive Officer is to be reviewed at least annually in accordance with the company's corporate governance guidelines.

INDEPENDENT PROFESSIONAL ADVICEEach Director has the right to seek independent professional advice at the company's cost, subject to the approval of the Chairman.

COMMITTEES OF THE BOARDTo assist in the execution of the Board's corporate governance responsibilities, the Board has established four committees with a non-executive Director as Chairman of each.

FINANCE AND AUDIT COMMITTEEThe key matters which will be dealt with by the Finance and Audit Committee include the review of:

• the appointment and continuation of external auditors

• the adequacy of existing external audit arrangements, with particular emphasis on the scope and quality of the audit

• all areas of significant capital risk and the arrangements in place to contain those risks to acceptable levels

• the effectiveness of management information or other systems of internal control

• the financial statements of the company with both management and external auditors.

The Finance and Audit Committee comprises five Directors, being Bruce Hatcher (Chair), Anthony (Tony) Kelly, Stuart Lummis, Evonne Collier and the CEO, Andrew Young. The Chairman has a standing invitation to attend any or all meetings of Board Committees.

LEGAL AND COMPLIANCE COMMITTEEThe key areas of responsibilities for the Legal and Compliance Committee include:

• monitoring legal and procedural issues to ensure the company is complying with all regulatory requirements

• advising the Board regarding potential conflicts of interest and related policy matters.

The Legal and Compliance Committee comprises five Directors, being Anthony (Tony) Kelly (Chair), Stuart Lummis, Evonne Collier, Peter Tighe and the CEO, Andrew Young. The Chairman has a standing invitation to attend any or all meetings of Board Committees.


REMUNERATION COMMITTEEThe key areas dealt with by the Remuneration Committee include:

• reviewing the remuneration policies and practices for the company by taking into account market conditions and comparable market rates to attract, retain and motivate Directors, Executives and employees of the highest calibre and quality.

The Remuneration Committee comprises three Directors, being Anthony (Tony) Joseph (Chair), Anthony (Tony) Kelly and Andrew Young.

STRATEGY AND INVESTMENT COMMITTEEThe key areas dealt with by the Strategy and Investment Committee include:

• reviewing the organisation's investment and expansion strategy in accordance with the Brisbane Markets Limited Strategic Plan and agreed risk appetite

• considering potential acquisitions, expansion opportunities and other strategic investments against Brisbane Markets Limited’s growth and risk appetite.

The Strategy and Investment Committee comprises four Directors, being Stuart Lummis (Chair), Noel Greenhalgh, Peter Tighe and the CEO, Andrew Young. The Chairman has a standing invitation to attend any or all meetings of Board Committees.

ETHICAL STANDARDSThe company recognises the need for Directors and employees to observe the highest standards of behaviour and business ethics when engaging in corporate activity.

All Directors and employees are expected to act in accordance with the law and with the highest standards of propriety.

ANNUAL REPORT

2018 51

CORPORATE DIRECTORY

SHARE TRADING As an unlisted public company, shares in BML are not traded on the Australian Stock Exchange or any other share trading exchange system. BML does, however, maintain a register of parties interested in buying shares in the company and offers guidance in the process.

If a shareholder wants to sell shares in the company they can do so by private treaty where they have identified a buyer, or alternatively advise BML and provide information which will be circulated to all parties who have registered an interest in buying shares. The individuals concerned can then negotiate a price and progress the sale.

If a sale is finalised, BML’s share registry, Link Market Services, must be sent a copy of the original transfer form and share certificate so that the change of ownership can be recorded on the company’s share register.

People interested in buying or selling shares in BML, or who need any information in this regard, may register their interest by emailing [email protected] or visit the shareholder/investor section of our website www.brisbanemarkets.com.au.

SHARE REGISTRY Link Market Services Level 21 10 Eagle Street Brisbane Qld 4000 Email: [email protected] Website: www.linkmarketservices.com.au Shareholder inquiries: 1300 554 474

AUDITORS AND INDEPENDENT ACCOUNTANT BDO Audit Pty Ltd Level 10 12 Creek Street Brisbane Qld 4000

SOLICITORS HopgoodGanim Lawyers Level 8 Waterfront Place 1 Eagle Street Brisbane Qld 4000

BML'S SENIOR MANAGEMENT TEAMChief Executive Officer Andrew Young

Chief Financial Officer Murray Stewart

Chief Property Officer Tricia Williams

Administration Manager/EA to the CEO Joady Raph

Site Infrastructure Manager Steve Cooke

Operations Manager Jessie Field

2018BRISBANE MARKETS LIMITEDACN 064 983 017 | ABN 39 064 983 017

Administration and Registered Office:

Level 2, Fresh Centre

385 Sherwood Road, Rocklea

PO Box 80, Brisbane Markets 4106

Telephone: (07) 3915 4200

Facsimile: (07) 3915 4291

Email: [email protected]

www.brisbanemarkets.com.au

Documents

Includes Financial Report - Brisbane Markets Limited€¦ · 2 BRISBANE MARKETS LIMITED . 256 Leases in place 14 Sewage pump stations 146 ... 51,282 kL Water used 2.8 GWh Electricity