PEET LIMITED — Interim / Quarterly Report 2014

Feb 26, 2014

Peet Limited

ABN 56 008 665 834

Appendix 4D and Consolidated Financial Statements for the half-year ended 31 December 2013

Appendix 4D

ResultsforAnnouncementtotheMarket	2
ResultsCommentary	3
Half-yearFinancialReport
Directors'Report	7
Auditor'sIndependenceDeclaration	8
ConsolidatedIncomeStatement	9
ConsolidatedStatementofComprehensiveIncome	10
ConsolidatedStatementofFinancialPosition	11
ConsolidatedStatementofChangesinEquity	12
ConsolidatedStatementofCashFlows	13
NotestotheConsolidatedFinancialStatements	14
Directors'Declaration	24
IndependentAuditorReviewReporttotheMembers	25

Results for Announcement to the Market

Entity:	Peet Limited and its controlled entities
Reporting Period:	31 December 2013
Previous Corresponding Period:	31 December 2012

				$'million
Revenue	Up	13%	to	104.1
Statutory profit after tax attributable to ownersof Peet Limited	Up	1,220%	to	13.2
Basic earnings per share (cents)	Up	933%	to	3.1c
Diluted earnings per share (cents)	Up	933%	to	3.1c

Dividends	Cents per security	% Franked per security
Current Year
Interim dividend 2014	NIL	n/a
Previous Year
Final dividend 2013	NIL	n/a
Interim dividend 2013	NIL	n/a

Results Commentary1

Key results

• Operating profit2 after tax of $14.5m for 1H14 compared with $1.0m in 1H13
• Statutory profit2 after tax of $13.2m
• 1,735 lots sold compared with 865 in 1H13
• 1,507 lots settled compared with 814 in 1H13
• 2,184 contracts on hand as at 31 December 2013, compared with 1,956 at 30 June 2013
• EBITDA3 of $27.9m, with a margin of 23%
• Gearing4 of 33%
• Net Tangible Assets5 per share of $1.06

Financial commentary

The Group's operating profit2 after tax for the half-year ended 31 December 2013 was $14.5 million and the indications are positive for further improvements in 2H14.

The half-year result is in line with expectations, and also reflects the first full reporting period in which Peet has held an 86% controlling interest in CIC Australia Limited ("CIC").

The Group's statutory profit2 after tax was $13.2 million, compared to $1.0 million in the previous corresponding period.

The Group's performance during the first half of FY14 also reflects a broadening market improvement after challenging conditions endured through the first half of FY13. On the back of improving markets in the 2H13 and into 1H14, the Group has invested in building its inventory to take advantage of these positive trends as they lead into the second half of FY14.

Margins during 1H13 were reflective of the settlement of sales achieved during 2H13 when pricing strategies were implemented to meet and motivate market demand, facilitating the recycling of capital through the business. The margins are expected to improve in 2H14 as a result of settlements of lots sold in Development projects in improving markets with the benefit of price growth.

Peet is continuing its non-core asset divestment program in an orderly manner as part of its overall strategy to improve performance by better focusing the Group's activities and resources. As at 31 December 2013, another three properties were under contract with a total value of $22.4 million bringing the total asset divestment program to $92.9 million.

Peet remained committed to disciplined cost control in the first half of the year, and continued its proactive approach to investment in development and infrastructure to meet improving market demand for quality, affordable land.

1 AASB 10 Consolidated Financial Statements (AASB 10) and AASB 11 Joint Arrangements were adopted from 1 July 2013. As required by the accounting standards, comparative periods have been restated. Further detail of the restatement is disclosed in note 1 to the Financial Statements. Also, the number of lots sold and settled in comparative periods have, where relevant, been restated to consistently reflect the treatment of superlots.

2 Operating profit is a non-IFRS measure that is determined to present the ongoing activities of the Group in a way that reflects its operating performance. Operating profit includes the effects of non-cash movements in investments in associates and joint ventures totalling $15.3 million in 1H14. Operating profit excludes unrealised fair value gains/(losses) arising from the effect of revaluing assets and liabilities and adjustments for realised transactions outside the core ongoing business activities. For the half-year ended 31 December 2013, operating profit of $14.5 million is calculated as statutory profit attributable to the owners of Peet of $13.2 million, adjusted for write-downs in inventory, after tax, of $1.3 million.

Statutory profit measures profit in accordance with Australian Accounting Standards.

3 Pre write-downs of $1.8 million (before tax) and includes effects of non-cash movements in investments in associates and joint ventures totalling $15.3 million in 1H14.

4 (Total interest bearing liabilities (including land vendor liabilities) less cash) / (Total assets adjusted for market value of inventory less cash, less intangible assets). Excludes CIC and syndicates consolidated under AASB10.

5 Market adjusted NTA is based on independent bank-instructed mortgage valuations, adjusted for development costs and settlements post 30 June 2013.

Operational commentary

The Group achieved 1,735 sales and 1,507 settlements in the first half – an increase of 101% and 85% respectively compared with the previous corresponding period.

At 31 December 2013, there were 2,184 contracts on hand, with a gross value of $537.7 million, compared with 1,956 contracts on hand as at 30 June 2013 with a gross value of $484.9 million.

Funds management projects

• Revenue6 of $24.5m, compared with $14.1m in the previous corresponding period .
• 839 lots sold (compared with 595 in 1H13, up 41%) for a gross value of $191.7 million (up 17%).
• 751 lots settled (compared with 591 lots in 1H13, up 27%) for a gross value of $175.8 million (up 14%).
• 985 lots under contract as at 31 December 2013 (compared with 897 lots under contract as at 30 June 2013, up 10%) with a total value of $225.9 million (up 8%).
• EBITDA6 of $15.5 million compared with $9.1 million in the previous corresponding period.
• EBITDA margin6 of 63%, compared with 64% for the previous corresponding period.

Development projects

• Revenue of $29.2 million, compared with $55.9 million in the previous corresponding period (down 48%) with 1H13 impacted by the settlement of englobo land sales.
• 271 lots sold (compared with 151 sales in 1H13, up 79%) at a gross value of $82.8 million (up 38%).
• 137 lots settled (compared with 134 settled in 1H13, up 2%) for a gross value of $32.7 million (down 46%).
• 362 lots under contract as at 31 December 2013 (compared with 228 lots under contract as at 30 June 2013, up 59%), for a gross value of $115.8 million (up 77%).
• EBITDA7 of $4.8 million compared with $9.2 million in the previous corresponding period.
• EBITDA margin7 of 16%, unchanged from the previous corresponding period.

Joint venture projects

The positive impact from the acquisition of CIC is evidenced in the results below.

• Revenue6 of $53.5m, compared with $9.1m in the previous corresponding period (up 488%).
• 625 lots sold (compared with 119 sales in 1H13, up 425%) for a gross value of $150.2 million (up 644%).
• 619 lots settled (compared with 89 settled in 1H13, up 596%) for a gross value of $163.1 million (up 728%).
• 837 lots under contract as at 31 December 2013 (compared with 831 lots under contract as at 30 June 2013, up 1%) for a gross value of $196.0 million (down 6%).
• EBITDA6 of $13.1 million compared with $1.2 million in 1H13.
• EBITDA margin6 of 24% compared with 13% in 1H13.

6 Includes effects of movements in investments in associates and joint ventures, where appropriate. Refer to Note 2 Segment Reporting in the Financial Statements for further detail.

7 Pre write-downs

For the half-year ended 31 December 2013

Land portfolio metrics

		1H14	1H13	ChangeUp/(down)
Lot sales		1,735	865	101%
Lot settlements		1,507	814	85%
Contracts on hand (comparison as at 30 June 2013)	Number	2,184	1,956	12%
	Value	$537.7m	$484.9m	11%

Capital management

Important elements of Peet's capital management strategy are the reduction of debt levels via the sale of non-core assets, disciplined cost control across the Group and improving business efficiencies.

The Group's non-core asset divestment program progressed in 1H14 with the sale of a further three land parcels with a total value of $22.4 million. These properties are all due to settle before the end of the 2014 calendar year.

During 1H14 however, Peet has responded to improving market conditions with significant investment in the development and construction of new lots, particularly in Western Australia and Victoria where there has been increased inquiry and an upward trend in sales volumes.

As at 31 December 2013, Gearing8 was 33% (compared to 29% at 30 June 2013) and the Group continues to target gearing of less than 30% by 30 June 2014.

At the end of the period, the Group had interest-bearing debt (including its convertible notes) of $332.9 million, compared with $321.0 million at 30 June 2013. Some 73% of the Group's interest-bearing debt was hedged as at 31 December 2013, (compared with 78% at 30 June 2013).

Peet has been negotiating a new four year syndicated loan facility with its banks and formal documentation is expected to be completed in March 2014.

Dividend payments

The Directors intend to reinstate a full-year dividend for FY14.

Group strategy

The Group will continue with its strategy including:

• the delivery of affordable product to a broad range of homebuyers in Australia's expanding urban areas;
• a market-responsive approach to development investment building inventory in improving markets to meet future demand;
• prudent capital management including continued debt reduction, improved operating cash flow and committed cost control; and
• positioning the Group to take advantage of future growth opportunities.

8 (Total interest bearing liabilities (including land vendor liabilities) less cash) / (Total assets adjusted for market value of inventory less cash, less intangible assets). Excludes CIC and syndicates consolidated under AASB10 Consolidated Financial Statements.

Outlook

The Group is positioned to take advantage of improving markets.

The underlying foundations of the residential sector remain sound, however mixed market conditions are expected to persist throughout FY14. Conditions across the Perth market are expected to remain robust with the price growth anticipated to moderate, Victorian sales volumes are anticipated to remain steady but price sensitive, while activity in the Queensland market is improving. However, affordability, softening labour market conditions and consumer caution is likely to make for a subdued uplift.

BRENDAN GORE MANAGING DIRECTOR

27 February 2014

Directors' Report

Your directors present their report on the consolidated entity consisting of Peet Limited and the entities it controlled at the end of, or during, the half-year ended 31 December 2013.

Directors

The following persons were directors of Peet Limited during the whole of the half-year and up to the date of this report:

AW Lennon (Chairman) BD Gore SF Higgs GW Sinclair AJ Lennon T J Allen

Review of operations

Net profit after tax for the half-year ended 31 December 2013 was $14,038,000 (2012: $395,000). The review of operations for the Peet Group for the half-year ended 31 December 2013 and the results of those operations are covered in the Results Commentary section on pages 3 to 6.

Auditor's independence declaration

A copy of the Auditor's Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 8.

Rounding of amounts

The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ''rounding off'' of amounts in the directors' report and financial report. Amounts in the directors' report and financial report have been rounded off to the nearest thousand dollars in accordance with that Class Order.

Signed for, and on behalf of, the Board in accordance with a resolution of the Board of Directors.

BRENDAN GORE MANAGING DIRECTOR

27 February 2014

Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au

Auditor's Independence Declaration to the Directors of Peet Limited

In relation to our review of the half-year financial report of Peet Limited for the half-year ended 31 December 2013, to the best of my knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

P McIver Partner 27 February 2014

Peet Limited Consolidated Income Statement

For the half-year ended 31 December 2013

		Consolidated
		31 Dec	31 Dec
		2013	2012
	Notes	$'000	$'000
			Restated
Revenue
Revenue from ordinary activities	3	100,914	89,935
Other revenue	3	3,197	1,878
		104,111	91,813
Expenses
Land and development cost expense	4	(61,180)	(62,450)
Employee benefits expense		(18,045)	(9,081)
Depreciation and amortisation	4	(1,546)	(1,334)
Project management, selling and other operating costs		(8,440)	(6,757)
Office costs		(3,386)	(2,632)
Other expenses		(4,928)	(4,212)
Finance costs	4	(5,094)	(4,138)
Share of net profit/(loss) of associates and joint ventures accounted for using the equity method		15,280	(550)
Write-down in carrying value of inventories and development costs		(1,806)	-
Profit before income tax		14,966	659
Income tax expense	5	(928)	(264)
Profit after tax		14,038	395
Attributable to :
Owners of Peet Limited		13,224	1,020
Non-controlling interests		814	(625)
		14,038	395
Earnings per share for profit attributable to the ordinary equity holders of the company:		Cents	Cents
Basic earnings per share	9	3.1	0.3
Diluted earnings per share	9	3.1	0.3

The above Consolidated Income Statement should be read in conjunction with the accompanying notes.

For the half-year ended 31 December 2013

	Consolidated
	31 Dec	31 Dec
	2013	2012
	$'000	$'000
		Restated
Profit after tax	14,038	395
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Changes in the fair value of cash flow hedges	1,764	381
Share of other comprehensive income of associates	(40)	64
Income tax relating to components of other comprehensive income	(517)	(133)
Other comprehensive income for the half-year, net of tax	1,207	312
Total comprehensive income for the half-year	15,245	707
Total comprehensive income for the half-year is attributable to:
Owners of Peet Limited	14,331	1,292
Non‑controlling interests	914	(585)
	15,245	707

The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

Peet Limited Consolidated Statement of Financial Position

As at 31 December 2013

		Consolidated
		31 Dec	30 Jun
	Notes	2013$'000	2013$'000Restated
Current assets
Cash and cash equivalents		26,555	36,420
Receivables		40,945	46,779
Inventories		162,093	139,016
Current tax assets		69	-
Total current assets		229,662	222,215
Non‑current assets
Receivables		17,737	21,713
Inventories		400,865	403,121
Investments accounted for using the equity method		166,898	147,119
Available for sale financial assets		107	429
Property, plant and equipment		11,477	12,437
Deferred tax assets		19,144	20,453
Intangible assets		2,692	2,805
Total non-current assets		618,920	608,077
Total assets		848,582	830,292
Current liabilities
Payables		47,361	49,417
Land vendor liabilities		11,637	16,737
Borrowings	7	46,537	85,933
Derivative financial instruments		709	1,575
Current tax liabilities		-	4,489
Provisions		7,360	9,914
Total current liabilities		113,604	168,065
Non‑current liabilities
Payables		194	219
Land vendor liabilities		15,666	14,999
Borrowings	7	286,335	235,054
Derivative financial instruments		3,619	4,517
Deferred tax liabilities		27,844	26,524
Provisions		655	584
Total non-current liabilities		334,313	281,897
Total liabilities		447,917	449,962
Net assets		400,665	380,330
Equity
Contributed equity	8	328,609	325,193
Reserves		7,020	4,239
Retained profits		49,224	36,000
Capital and reserves attributable to owners of Peet Limited		384,853	365,432
Non-controlling interests		15,812	14,898
Total equity		400,665	380,330

The above Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

For the half-year ended 31 December 2013

	Attributable to owners of Peet Limited
Consolidated		Contributedequity	Reserves	Retainedearnings	Total	Non‑controllinginterest	Total equity
	Notes	$'000	$'000	$'000	$'000	$'000	$'000
Balance at 1 July 2012 (as previously reported)		203,713	1,127	43,143	247,983	17,353	265,336
Changes in accounting policies	1	-	-	(8,023)	(8,023)	(11,550)	(19,573)
Balance at 1 July 2012 (Restated)		203,713	1,127	35,120	239,960	5,803	245,763
Profit for the half-year		-	-	1,020	1,020	(625)	395
Other comprehensive income		-	271	-	271	41	312
Total comprehensive income for the half-year		-	271	1,020	1,291	(584)	707
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs and tax		(3)	-	-	(3)	-	(3)
Share based payments		-	609	-	609	-	609
		(3)	609	-	606	-	606
Balance at 31 December 2012 (Restated)		203,710	2,007	36,140	241,857	5,219	247,076

	Attributable to owners of Peet Limited
Consolidated		Contributedequity	Reserves	Retainedearnings	Total	Non‑controllinginterest	Total equity
	Notes	$'000	$'000	$'000	$'000	$'000	$'000
Balance at 1 July 2013 (as previously reported)		325,193	4,239	43,333	372,765	28,456	401,221
Changes in accounting policies	1	-	-	(7,333)	(7,333)	(13,558)	(20,891)
Balance at 1 July 2013 (Restated)		325,193	4,239	36,000	365,432	14,898	380,330
Profit for the half-year		-	-	13,224	13,224	814	14,038
Other comprehensive income		-	1,107	-	1,107	100	1,207
Total comprehensive income for the half-year		-	1,107	13,224	14,331	914	15,245
Transactions with owners in their capacity as owners:
Contributions of equity, net of transaction costs and tax	8	3,416	-	-	3,416	-	3,416
Share based payments		-	1,674	-	1,674	-	1,674
		3,416	1,674	-	5,090	-	5,090
Balance at 31 December 2013		328,609	7,020	49,224	384,853	15,812	400,665

The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Peet Limited Consolidated Statement of Cash Flows

For the half-year ended 31 December 2013

	Consolidated
	31 Dec	31 Dec
	2013	2012
	$'000	$'000
		Restated
Cash flows from operating activities
Receipts from customers (inclusive of goods and services tax)	119,340	112,690
Payments to suppliers and employees (inclusive of goods and services tax)	(124,437)	(85,672)
Payments for purchase of land	(9,257)	(3,000)
Interest and other finance costs paid	(13,850)	(16,069)
Distributions from associates and jointly controlled entities	11,200	10,570
Dividends received	862	806
Income tax (paid)/refund	(3,383)	8,123
Net cash (outflow)/inflow from operating activities	(19,525)	27,448
Cash flows from investing activities
Payments for property, plant and equipment	(464)	(484)
Payments for intangibles	(226)	(519)
Payments for investment in associates and jointly controlled entities	(14,023)	(725)
Loans to related entities	(1,166)	(963)
Repayment of loans by related entities	160	303
Interest received	343	437
Net cash outflow from investing activities	(15,376)	(1,951)
Cash flows from financing activities
Repayment of borrowings	(41,724)	(36,544)
Proceeds from borrowings	63,015	8,984
Proceeds from issue of equity securities (net of equity raising costs)	3,413	-
Transaction costs of share issue	-	(3)
Proceeds from capital returns	332	-
Net cash inflow/(outflow)from financing activities	25,036	(27,563)
Net decrease in cash and cash equivalents	(9,865)	(2,066)
Cash and cash equivalents at the beginning of the half-year	36,420	24,165
Cash and cash equivalents at end of the half-year	26,555	22,099

The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

1. Basis of Preparation of Consolidated Financial Statements

This general purpose condensed financial report for the half-year ended 31 December 2013 is for the Consolidated Entity consisting of Peet Limited and its subsidiaries ("Group"). The condensed financial report has been prepared in accordance with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Act 2001 .

These half-year financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these statements are to be read in conjunction with the annual statements for the year ended 30 June 2013 and any public announcements made by Peet Limited during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001 .

The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period except for changes in accounting policies due to implementation of new and amended standards adopted by the Group as discussed below.

Peet Limited (the Company) is a for profit company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange.

(a) New and amended standards and interpretations adopted by the Group

The Group applied, for the first time, the following standards that require restatement of previous financial statements. These are AASB 10 Consolidated Financial Statements and AASB 11 Joint Arrangements . The application of AASB 119 Employee Benefits (revised 2011) resulted in a change in the accounting policy but did not have a material impact on the financial statements. In addition, the application of AASB 12 Disclosure of Interests in Other Entities and AASB 13 Fair Value Measurement will result in additional disclosures in the consolidated financial statements for the year ended 30 June 2014.

The nature and the impact of each of the new standards and amendments is described below:

AASB 10 Consolidated Financial Statements and AASB 127 Separate Financial Statements

The Group adopted AASB 10 in the current year. The application of AASB 10 affected the accounting for the Group's interests in certain Syndicates. For all financial years up to 30 June 2013, these entities were considered to be associates under the previously existing AASB 128 Investments in Associates and were accounted for using the equity method. At the date of initial application of AASB 10 (1 July 2013), the Group assessed that it controls these entities based on the factors explained in Note 1(b) below which also details the new accounting policy.

The Group has consolidated the financial statements of these entities based on its equity interest and accounted for the balance as non-controlling interests. The assets, liabilities and equity of these entities have been retrospectively consolidated in the financial statements of the Group. Noncontrolling interests have been recognised at a proportionate share of the net assets of the subsidiary. The opening balances at 1 July 2012 and comparative information for half-year ended 31 December 2012 and the year ended 30 June 2013 have been restated in the consolidated financial statements.

AASB 11 Joint Arrangements and AASB 128 Investment in Associates and Joint Ventures

The application of AASB 11 impacted the Group's accounting of its interest in Lightsview Joint Venture. The Group has a 50% interest in Lightsview Joint Venture via the acquisition of CIC Australia Limited in May 2013. Prior to the transition to AASB 11, Lightsview Joint Venture was classified as a jointly controlled entity and was accounted for using the equity method. Upon adoption of AASB 11, the Group has determined its interest in Lightsview Joint Venture to be classified as a joint operation under AASB 11 and discontinued equity method accounting. The Group now accounts for its share of the assets, liabilities, expenses and revenues, including its share of those held or incurred jointly in relation to the Lightsview Joint Venture. The transition from equity method to accounting for assets and liabilities has been applied from the acquisition date and accordingly, the comparative for the immediately preceding period has been restated. The new policy is detailed in Note 1(c) below.

The following tables summarise the material impacts resulting from the changes in the accounting policies on adoption of AASB 10 Consolidated Financial Statements and AASB 11 Joint Arrangements on the Group's assets, liabilities and equity as at 1 July 2012 and 30 June 2013 and net profit after tax for the half-year ended 31 December 2012 and year ended 30 June 2013.

Impact on the Group's assets, liabilities and equity (increase/(decrease) in net assets) as at 30 June 2013 and 1 July 2012:

	Consolidated
	30 Jun	1 Jul
	2013	2012
	$'000	$'000
Current asset	1,181	713
Non-current assets	3,911	16,286
Total assets	5,092	16,999
Current liabilities	26,362	37,489
Non-current liabilities	(379)	(917)
Total liabilities	25,983	36,572
Net assets	(20,891)	(19,573)
Non-controlling interests	(13,558)	(11,550)
Owners of Peet Limited	(7,333)	(8,023)
Total equity	(20,891)	(19,573)

1. Basis of Preparation of Consolidated Financial Statements (continued)

(a) New and amended standards and interpretations adopted by the Group (continued)

Impact on net profit after tax (increase/(decrease))for the half year ended 31 December 2012 and year ended 30 June 2013

	Consolidated
	30 Jun	31 Dec
	2013	2012
	$'000	$'000
Profit/(loss) before tax	(1,093)	(873)
Profit/(loss) after tax	(1,365)	(677)
Attributable to :
Owners of Peet Limited	689	(220)
Non-controlling interests	(2,054)	(457)
	(1,365)	(677)
Impact on earnings per share for profit attributable to the ordinary equity holders of the company:
Basic earnings per share (cents)	0.20	(0.07)

Diluted earnings per share (cents) 0.20 (0.07)

AASB 13 Fair Value Measurement

AASB 13 establishes a single source of guidance under AASB for all fair value measurements. AASB 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under AASB. AASB 13 defines fair value as an exit price. Application of AASB 13 has not materially impacted the fair value measurements of the Group. Additional disclosures where required, will be included in the consolidated financial statements for the year ending 30 June 2014.

AASB 119 Employee Benefits

The revised standard changes the definition of short-term employee benefits. The distinction between short-term and other long-term employee benefits is now based on whether the benefits are expected to be settled wholly within 12 months after the reporting date. This standard resulted in a change in the accounting policy but did not have a material impact on the financial statements.

(b) Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2013. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:

• Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee)
• Exposure, or rights, to variable returns from its involvement with the investee, and
• The ability to use its power over the investee to affect its returns

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

• The contractual arrangement with the other vote holders of the investee
• Rights arising from other contractual arrangements
• The Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the statement of comprehensive income from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies in line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses control over a subsidiary, it:

• Derecognises the assets (including goodwill) and liabilities of the subsidiary
• Derecognises the carrying amount of any non-controlling interests
• Derecognises the cumulative translation differences recorded in equity
• Recognises the fair value of the consideration received
• Recognises the fair value of any investment retained
• Recognises any surplus or deficit in profit or loss
• Reclassifies the parent's share of components previously recognised in OCI to profit or loss or retained earnings, as appropriate, as would be required if the Group had directly disposed of the related assets or liabilities

1. Basis of Preparation of Consolidated Financial Statements (continued)

(c) Investment in Joint arrangements

Joint arrangements are arrangements of which two or more parties have joint control. Joint control is the contractual agreed sharing of control of the arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. Joint arrangements are classified as either a joint operation or joint venture, based on the rights and obligations arising from the contractual obligations between the parties to the arrangement.

To the extent the joint arrangement provides the Group with rights to the individual assets and obligations arising from the joint arrangement, the arrangement is classified as a joint operation and as such, the Group recognises' its:

• Assets, including its share of any assets held jointly
• Liabilities, including its share of any liabilities incurred jointly
• Revenue from the sale of its share of the output arising from the joint operation
• Share of the revenue from the sale of the output by the joint operation
• Expenses, including its share of any expenses incurred jointly

To the extent the joint arrangement provides the Group with rights to the net assets of the arrangement, the investment is classified as a joint venture and accounted for using the equity method. Under the equity method, the cost of the investment is adjusted by the post-acquisition changes in the Group's share of the net assets of the venture.

2. Segment reporting

Operating segments are reported in a manner that is consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker has been identified as the executive management group.

The executive management group assesses the performance of the operating segments based on multiple measures including EBITDA, EBIT and profit after tax.

On 17 May 2013, the Company acquired an 83.15% equity interest in CIC Australia Limited ("CIC") for $63.7 million. At 31 December 2013, Group's share had increased to 86.03%. The performance of CIC for the half-year is included in the reportable segments described below and assessed by the executive management group in the same manner as Group's reportable segments.

The executive management group considers the business to have the following three reportable business segments:

Funds Management/Land Syndication

External equity capital raisings are undertaken to fund the acquisition of land across Australia. The Group derives fees from underwriting and capital raising coordination services, as well as asset identification fees from this activity. Ongoing project related fees are then derived by the Group for the duration of a particular project.

Company-owned Projects

Purchase and development of various parcels of land in Australia, primarily for residential purposes. However, certain land holdings will also produce non-residential blocks of land.

Joint Ventures

Joint ventures are formed with government, statutory authorities and private landowners. The joint venturer/operator will normally contribute the land and the Group funds the development costs. The Group is typically entitled to ongoing fees for management of the development project and also a share of the profits.

The Group operates only in Australia.

Inter‑Segment Eliminations and Other Unallocated

Segment revenue, expenses and results include transfers between segments. Such transfers are based on an arm's length basis and are eliminated on consolidation.

The adoption of AASB 10 Consolidated Financial Statements, from 1 July 2013 resulted in certain syndicates being consolidated. These entities however, continue to be managed and reported to the executive management group as part of the funds management/ land syndication business segment. Adjustments are included in "Inter‑Segment Eliminations and Other Unallocated" to reconcile reportable business segment information to the Group's consolidated income statement. The comparative information has been restated accordingly.

2. Segment reporting (continued)

	Funds Management/ LandSyndication		Company‑owned Projects		Joint Ventures		Inter‑Segment Eliminationsand Other Unallocated		Consolidated
Primary Reporting	31 Dec2013$'000	31 Dec2012$'000	31 Dec2013$'000	31 Dec2012$'000	31 Dec2013$'000	31 Dec2012$'000	31 Dec2013$'000	31 Dec2012$'000Restated	31 Dec2013$'000	31 Dec2012$'000Restated
Revenue
Sales to external customers	15,077	12,719	28,473	55,752	44,778	9,072	12,586	12,392	100,914	89,935
Total Sales Revenue	15,077	12,719	28,473	55,752	44,778	9,072	12,586	12,392	100,914	89,935
Other income	112	161	711	182	8	30	281	46	1,112	419
Interest	2,047	2,224	14	-	582	-	(558)	(765)	2,085	1,459
Total revenue	17,236	15,104	29,198	55,934	45,368	9,102	12,309	11,673	104,111	91,813
Share of net profit/(loss) of associates and joint ventures accountedfor using the equity method	7,246	(961)	-	-	8,139	-	(105)	411	15,280	(550)
Total	24,482	14,143	29,198	55,934	53,507	9,102	12,204	12,084	119,391	91,263
Corporate OverheadsResult before write-down in carrying value of inventories,depreciation, financing costs, interest and finance costsexpensed through cost of sales and income tax expense	15,489	9,096	4,843	9,197	13,107	1,176	(5,984)(5,487)	(4,646)(3,913)	(5,984)27,952	(4,646)15,556
Write-down in carrying value of inventories and development costs			(1,806)						(1,806)	-
EBITDA (i)	15,489	9,096	3,037	9,197	13,107	1,176	(5,487)	(3,913)	26,146	15,556
Depreciation and amortisation	(41)	(180)	(531)	(413)	(290)	(87)	(684)	(654)	(1,546)	(1,334)
EBIT (ii)	15,448	8,916	2,506	8,784	12,817	1,089	(6,171)	(4,567)	24,600	14,222
Financing costs (includes interest and finance costs expensed through cost of sales)									(9,634)	(13,563)
Profit before income tax expense									14,966	659
Income tax expense									(928)	(264)
Profit for the half-year									14,038	395

(i) EBITDA: Earnings before interest (including interest and finance costs expensed through cost of sales) tax, depreciation and amortisation.

(ii) EBIT: Earnings before interest (including interest and finance costs expensed through cost of sales) and tax.

3. Revenue

	Consolidated
	31 Dec	31 Dec
	2013$'000	2012$'000Restated
Revenue from ordinary activities
Revenue from sale of land	64,472	68,770
Project management and performance fees	18,532	10,331
Revenue from Joint Venture operations	14,071	9,001
Syndicate and joint venture administration fees	3,839	1,833
	100,914	89,935
Other revenue
Dividends	112	116
Interest	2,085	1,459
Other	1,000	303
	3,197	1,878

4. Profit before income tax

		Consolidated
	31 Dec	31 Dec
	2013	2012
	$'000	$'000
		Restated
Profit before income tax for the half-year includes the following specific expense items:
Expenses
Land and development cost expense
Land and development cost expense	56,640	53,025
Capitalised interest and finance expense	4,540	9,425
Total land and development cost expense	61,180	62,450
Depreciation and Amortisation
Property, plant and equipment	1,438	1,214
Intangible assets	108	120
Total depreciation and amortisation	1,546	1,334
Finance costs
Interest and finance charges paid/payable	12,943	14,489
Interest on convertible notes	2,861	2,338
Amount capitalised to inventory	(10,711)	(12,689)
Total finance costs expensed	5,094	4,138
Discount on land vendor payments
Change in present value of land vendor payments	556	1,121
Capitalisation of change in present value of land vendor payments	(556)	(1,121)
Total discount on land vendor payments	-	-

5. Income tax

		Consolidated
	31 Dec	31 Dec
	2013	2012
	$'000	$'000
		Restated
(a) Income tax expense
Current tax	-	645
Deferred tax	888	(331)
Adjustments for income tax of prior periods	40	(50)
	928	264
(b) Numerical reconciliation of income tax expense to prima facie tax payable
Profit before income tax expense	14,966	659
Tax at the Australian tax rate of 30% (2012 ‑ 30%)	4,490	198
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Share of net (profit)/loss of associates and joint ventures	(1,340)	166
Employee benefits	502	182
Rebateable dividends	(3,010)	(237)
Sundry items	246	5
Under/(over) provision in prior years	40	(50)
	928	264

6. Dividends

(a) Dividends paid

No dividends were provided or paid during the half-year ended 31 December 2013 (31 December 2012: Nil).

(b) Dividend Reinvestment Plan (DRP)

The Company operates a Dividend Reinvestment Plan (DRP) that provides shareholders with an opportunity to acquire additional shares in the Company on the payment of dividends.

7. Borrowings

		Consolidated
	31 Dec	30 Jun
	2013	2013
	$'000	$'000
		Restated
Current
Bank loan facilities	20,638	49,943
Other loans	602	826
Other loan facilities from equity accounted investee	25,297	35,164
	46,537	85,933
Non- current
Bank loan facilitiesOther loans	238,602	187,561850
Convertible Notes	626	46,643
	47,107286,335	235,054
A summary of the Group's financing facilities are below:
Total facilities
Bank loan facilities	347,376	382,436
Bank guarantees	33,462	32,650
Credit cards	75	102
Surety bond facility	30,000	35,000
Other loan facilities from equity accounted investee	36,600	36,600
	447,513	486,788
Used at balance date
Bank loan facilities	260,468	239,180
Bank guarantees	15,248	25,798
Credit cards	15	23
Surety bond facility	11,985	3,679
Other loan facilities from equity accounted investee	25,297	35,164
	313,013	303,844
Unused at balance date
Bank loan facilities	86,908	143,256
Bank guarantees	18,214	6,852
Credit cards	60	79
Surety bond facility	18,015	31,321
Other loan facilities from equity accounted investee	11,303	1,436
	134,500	182,944

8. Contributed equity

	Consolidated	Consolidated
	31 Dec	30 Jun	31 Dec	30 Jun
	2013	2013	2013	2013
Ordinary shares	Shares	Shares	$'000	$'000
Opening Balance	429,008,507	320,170,604	325,193	203,713
Capital Raising	2,978,261	-	3,424	-
Vested performance rights	1,402,580	842,537	-	-
Institutional placement	-	101,038,844	-	116,195
Conditional placement	-	6,956,522	-	8,000
Less: Transaction costs arising on placements	-	-	(11)	(3,879)
Deferred tax credit recognised directly in equity	-	-	3	1,164
	433,389,348	429,008,507	328,609	325,193

9. Earnings per share

		Consolidated
	31 Dec2013	31 Dec2012Restated
	Cents	Cents
Basic earnings per share	3.1	0.3
Diluted earnings per share	3.1	0.3
(a) Reconciliation of earnings used in calculating earnings per share	$'000	$'000
Basic and diluted earnings per share
Profit attributable to the ordinary equity holder of the company used in calculating basic and diluted earnings per share	13,224	1,020
	Number	Number
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share	432,607,648	320,779,612
Adjustments for calculation of diluted earnings per share:
Options	-	1,200,000
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculatingdiluted earnings per share	432,607,648	321,979,612

10. Contingencies

Contingent liabilities

Details of the estimated maximum amounts of contingent liabilities (for which no amounts are recognised in the financial statements) are as follows:

		Consolidated
	31 Dec	30 Jun
	2013$'000	2013$'000Restated
Underwriting obligations outstanding	-	197
Bank guarantees outstanding	27,233	29,477
	27,233	29,674

The directors are not aware of any circumstances or information, which would lead them to believe that these contingent liabilities will eventuate and consequently no provisions are included in the accounts in respect of these matters.

11. Financial instruments

Set out below is an overview of financial instruments, other than cash and short-term deposits, held by the Group as at 31 December 2013:

		Consolidated
			Fair value other
	Loans and		Available-for comprehensive
	receivables	sale	income
	$'000	$'000	$'000
Financial assets:
Receivables (excluding prepayments)	40,242	-	-
Total current	40,242	-	-
Other receivables (excluding prepayments)	17,737	-	-
Equity instruments	-	107	-
Total non-current	17,737	107	-
Total	57,979	107	-
Financial liabilities:
Interest bearing loans and borrowings	46,537	-	-
Land vendor liabilities	11,637	-	-
Payables	44,053	-	-
Derivative financial instruments	-	-	709
Total current	102,227	-	709
Interest bearing loans and borrowings	286,335	-	-
Land vendor liabilities	15,666	-	-
Payables	194	-	-
Derivative financial instruments	-	-	3,619
Total non-current	302,195	-	3,619
Total	404,422	-	4,328

Fair value measurements

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

o quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);

o inputs other than quoted prices included within level 1 that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices) (level 2); and

o inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

11 Financial instruments (continued)

Recognised Fair value measurements

The following tables present the Group's assets and liabilities measured and recognised at fair value at 31 December 2013.

	Consolidated
	Level 1	Level 2	Level 3	Total
	$'000	$'000	$'000	$'000
At 31 December 2013
Assets
Available for sale financial assets	-	-	107	107
Total assets	-	-	107	107
Liabilities
Derivative financial instruments	-	4,328	-	4,328
Total liabilities	-	4,328	-	4,328

Any change in level 3 instruments relating to fair value adjustments would be recognised in the statement of comprehensive income.

For financial instruments not quoted in active markets, the Group uses valuation techniques such as present value techniques, comparison to similar instruments for which market observable prices exist and other relevant models used by market participants. These valuation techniques use observable market inputs to the extent available. These instruments are included in level 2.

Fair value disclosures

Except for the convertible notes, the carrying value of financial assets and liabilities is considered to approximate fair values.

Peet Limited issued 500,000 convertible notes at a face value of $100 per note for $50 million on 16 June 2011. The notes are convertible into ordinary shares of Peet Limited, at the option of the holder, or repayable on 16 June 2016. The conversion rate is 44.44 shares for each note held, which is based on a fixed conversion price of $2.25 (subject to adjustment for certain dilutionary and other capital transactions). The quoted market value (on ASX) of a convertible note as at 31 December 2013 is $103.90. At 31 December 2013, the carrying value of the Convertible note debt is $47 million.

12. Events occurring after the reporting period

No matter or circumstance has occurred subsequent to the half-year end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group in subsequent financial half-years.

For the half-year ended 31 December 2013

Directors' Declaration

In the directors' opinion:

• (a) the financial statements and notes set out on pages 9 to 23 are in accordance with the Corporations Act 2001, including:
  • (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and
  • (ii) giving a true and fair view of the consolidated entity's financial position as at 31 December 2013 and of its performance for the halfyear ended on that date; and
• (b) there are reasonable grounds to believe that Peet Limited will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

BRENDAN GORE MANAGING DIRECTOR

27 February 2014

Ernst & Young 11 Mounts Bay Road Perth WA 6000 Australia GPO Box M939 Perth WA 6843 Tel: +61 8 9429 2222 Fax: +61 8 9429 2436 ey.com/au

To the members of Peet Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Peet Limited, which comprises the consolidated statement of financial position as at 31 December 2013, the consolidated income statement, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration of the consolidated entity comprising the company and the entities it controlled at the half-year end or from time to time during the half-year.

Directors' Responsibility for the Half-Year Financial Report

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

Auditor's Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity's financial position as at 31 December 2013 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Peet Limited and the entities it controlled during the half-year, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. We have given to the directors of the company a written Auditor's Independence Declaration, a copy of which is included in the Directors' Report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Peet Limited is not in accordance with the Corporations Act 2001, including:

• a) giving a true and fair view of the consolidated entity's financial position as at 31 December 2013 and of its performance for the half-year ended on that date; and
• b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001.

Ernst & Young

P McIver Partner Perth 27 February 2014