2023 Annual Report A2B Australia Limited ABN 99 001 958 390 Contents Executive Chairman’s Report Board of Directors Corporate Governance Operating and Financial Review Directors’ Report Remuneration Report Auditor’s Independence Declaration Consolidated Financial Statements Shareholder Information Corporate Directory 2 5 6 8 17 22 37 38 96 98 A2B Annual Report 2023 Our Vision The leading provider of personal transportation services and solutions, committed to the success of our customers, our people and our stakeholders. Our Strategy Improve profitability Grow core business Expand into new markets Our Purpose Delivering a safe, reliable, sustainable personalised transportation experience. Our Values Caring Collaborative Accountable Authentic Progressive 1 1 Executive Chairman’s Report Dear Shareholders, The 2023 financial year was transformative for A2B. Our strategic and operational focus not only returned the Company to profitability but has also positioned A2B for further sustainable growth going forward. A2B is in a much stronger operational and financial position today than it was this time last year. This has only been possible due to the hard work and strong delivery by the A2B Team. I want to thank every member of our Team, from taxi drivers and operators, to our service, corporate office and our Board, for their dedication and commitment that has underpinned the successful turnaround in the business. Our ‘Better Before Bigger’ strategy has delivered Implementing our ‘Better Before Bigger’ strategy over the past 12 months, that focused on fleet size and fares as the main drivers of A2B’s revenue growth, has underpinned the strong turnaround in the business that has delivered positive financial and operational results for FY23. A2B’s nationwide fleet now centres on two top brands – 13cabs and Silver Service. We have successfully attracted new drivers, and transitioned drivers towards these two well-known higher margin taxi brands. As a result, our total fleet has grown by 972 cars (or 14.2%) during the past 12 months to 7,803 cars as at 30 June 2023. Underlying this, the 13cabs and Silver Service brands experienced even more encouraging growth, up 1,585 cars or 26.7%. A2B serviced an average of 9.0 trips per day per car in its fleets (up from 8.5 in FY22), with an increasing number of trips generated from the 13cabs and Silver Service booking channels. This increase reflected our new app’s convenience and positive user experience, combined with the value proposition these two brands bring. Increasing demand, combined with fare rises in most states during FY23, translated to an increase in fares processed of $247.5 million or 40.8%, with total fares processed reaching $854.4 million (FY22 $606.9 million), roughly 87% of pre-pandemic levels (FY19). Most pleasingly, the increased fares processed and growing fleet improved profitability for our drivers and operators. A2B’s financial performance has significantly turned around 2023 $m 147.3 20.1 42.8 27.1 2022 $m 125.1 (9.4) (22.3) (27.8) Change $m Change % 22.2 29.5 65.1 54.9 18% 314% 292% 197% Financial performance Underlying revenue Underlying EBITDA Statutory EBITDA Statutory net profit after tax 2 A2B Annual Report 2023 A2B is well poised for future growth, building on the Team’s work during the past 12 months and improving industry conditions. Excluding the impact of one-off transactions to reflect the operating performance of the business, revenue is up $22.2 million (or 17.7% to $147.3 million). Both underlying EBITDA and statutory net profit after tax outperformed guidance, with underlying EBITDA up $29.5 million to $20.1 million, and statutory net profit after tax was up $54.9 million to $27.1 million. One-off transactions, reflected in the statutory results, include a pre-tax gain of $21.3 million relating to our property transactions, and $1.6 million in compensation from the NSW Government relating to taxi licence plates. The right decisions, while challenging, have realigned the business In FY23, we focused on our core transportation business and exited peripheral activities. Introducing new technology has streamlined some of our processes, including our contact centre. As a result, efficiency has improved, with booking automation rates reaching 85% in July 2023 (July 2022 51%), reducing our cost base and improving customer experience. While it was challenging to streamline core operations and reduce employee numbers, it was necessary to ensure we laid the foundations for a healthier, more robust business capable of delivering sustainable growth to our drivers, people, customers, and shareholders. Our focus on improving our value proposition for drivers and passengers continues. A key objective for FY24 is to implement further significant enhancements for drivers via a $3.5 million investment to upgrade all in-car technology to ensure the continuity of our payments processing infrastructure (before 3G is switched off in June 2024). This project will simplify our technology platform and further enhance passenger and driver experience. Enhancing shareholder value – dividend declared and capital growth Two of the ‘Better Before Bigger’ strategy’s main goals were for A2B’s core operations to deliver sustainable profits by: 1) creating positive free cash flow; and 2) unlocking value through the return of capital to shareholders from property divestments. The strategy implemented has delivered significant earnings and cash flow improvement. In May 2022, a registered qualified valuer independently valued A2B’s portfolio of three properties (two in Sydney and one in Melbourne) between $102 million and $114 million. During the course of FY23, we entered into contracts to sell the two Sydney properties for a combined value of $97 million and are now working to sell the remaining property in Melbourne. The total net proceeds from the sales of the two Sydney properties (after deal costs and tax) are $92.8 million. In addition to returning capital to shareholders, A2B will use some of the proceeds to repay debt and for working capital purposes. The successful delivery of our strategy has enabled the Board to pay a fully franked dividend of $0.05 per share for FY23. In addition, the Board intends to declare a further special fully franked dividend of $0.55 per share following receipt of proceeds from the sale of the O’Riordan Street property currently scheduled for settlement in mid-December 2023. The Board has set a dividend policy of providing a minimum dividend payout of 50% underlying attributable profit at every reporting period commencing from the second half of FY24. The Board’s ability to make these dividend commitments reflects the success of the operational strategy we have implemented. 3 3 Executive Chairman’s Report (continued) Board and leadership Over the past year, A2B further strengthened its Board and leadership team through the appointments of Brent Cubis (Non-executive Director) and Howard Edelman (General Counsel & Company Secretary). With the Company’s balance sheet repaired, dividends reinstated including a planned special dividend, and successfully returning A2B to profitability by right-sizing its cost structure, we are well placed to continue growing in FY24 and beyond. Mr Cubis joined the Board in October 2022 as an independent non-executive director and Chair of the Audit and Risk Committee. He brings more than 20 years of Board and advisory experience to A2B, having been CFO at Cochlear, Nine Network Australia, and Prime Media Limited. In January 2023, Mr Edelman joined A2B’s senior executive team. He has close to 30 years of corporate experience at leading companies such as Australian Super, Super Retail Group, AUB Group, and Real Pet Food Company. Positive outlook for continued growth We remain committed to our vision to be the leading provider of personalised transportation services and solutions in Australia, dedicated to the success of our customers, people, and stakeholders. A2B is well poised for future growth, building on the Team’s work during the past 12 months and improving industry conditions post COVID-19. As we head into FY24, fleet growth is continuing with 150 cars added since 30 June 2023. Positive factors such as rising migration levels, an improvement in vehicle supply, along with the removal of restrictions on taxi license plates as a result of deregulation in NSW, will assist with further growth. However, some wider economic factors such as the recent decline in consumer spending may soften fares in the near term. Thank you In closing, on behalf of the Board, I would like to thank the A2B Team for its drive, dedication, and continued focus as we complete our reset. Thanks also to the drivers and operators partnering with A2B to deliver a critical service to our communities. And finally, thank you to our shareholders for your ongoing support as we deliver on the Company’s full potential. A2B is well placed to continue growing profitably and be in a position to lead the personal transportation sector in Australia. We have an exciting 12 months ahead as we benefit from upcoming structural and regulatory changes and underlying growth in demand and supply. Yours sincerely, Mark Bayliss Executive Chairman 4 A2B Annual Report 2023 Board of Directors Mark Bayliss Executive Chairman Mark was appointed as Executive Chairman of the Company on 7 March 2022 and is also a non-executive director of Ecofibre Limited. Mark was previously Executive Chairman and CEO of ASX listed business technology group, CSG Ltd. His previous executive roles include being CEO of Grays eCommerce Group Limited, and CEO of Quick Service Restaurants Holdings, a national fast-food chain of 630 restaurants. Mark has spent four years as a Partner at Anchorage Capital, a private equity fund specialising in the turnaround of underperforming businesses. Mark has also performed roles as Executive Chairman of Burger King (NZ), and as Chief Financial Officer of Australian Discount Retail and Chief Financial Officer of Fairfax Media Limited. Mark has a Bachelor of Science from the London School of Economics and is a member of the Institute of Chartered Accountants in England and Wales and the Australian Institute of Company Directors. Brent Cubis Independent Non‑Executive Director Brent was appointed as a Director of A2B on 3 October 2022. He is Chairman of the Audit and Risk Committee. Brent is a highly experienced Non-executive Director, Advisory Board Member and CFO mentor with over 30 years of board level experience in senior finance roles. Brent is currently a Non- executive Director of ARN Media Limited, EML Payments Limited, SilverChain Group, Carbon Cybernetics, and leading youth cancer charity Canteen Australia. His previous roles have included CFO of Cochlear Ltd, CFO of Nine Network Australia and a Non-executive Director of Prime Media Group Limited. Brent has a Bachelor of Commerce (Finance/Accounting and Information Systems) from the University of New South Wales, is a Chartered Accountant and a Graduate Member of the Australian Institute of Company Directors. Jennifer Horrigan Independent Non‑Executive Director Jennifer was appointed as a Director in September 2020. She is Chair of the Remuneration and Nominations Committee and a member of the Audit and Risk Committee. Jennifer brings 25 years of experience across investment banking, financial communications and investor relations and was formerly the Chief Operating Officer in Australia of the independent investment bank Greenhill Australia (previously Greenhill Caliburn). Jennifer is Chairman of Dexus Asset Management Limited (includes Dexus Industria REIT (ASX: DXI) and Dexus Convenience Retail REIT (ASX: DXC)) and a Director of unlisted AMP Capital Funds Management Limited, AMP Investment Services Pty Limited and Yarra Funds Management Limited. Jennifer’s qualifications include a Bachelor of Business (QUT), a Graduate Diploma in Applied Finance (FINSIA) and a Graduate Diploma in Management (AGSM). She is a member of the Australian Institute of Company Directors. Clifford Rosenberg Independent Non‑Executive Director Clifford was appointed as a Director in August 2017. He is a member of the Audit and Risk Committee and the Remuneration and Nominations Committee. Clifford is currently a Non-executive Director of JSE listed Bid Corporation and ASX listed TechnologyOne Limited. Clifford was previously a Non-executive Director of Afterpay Limited (2017–2020) and Nearmap Limited (2011–2022) and has over 25 years of experience in the digital space as an entrepreneur and as an executive, with specific experience in disrupting businesses. His previous executive roles include Managing Director, South-East Asia, Australia & New Zealand for LinkedIn (2009–2017), Managing Director of Yahoo! Australia & New Zealand (2003–2006). Clifford holds a Master of Science in Management (Honours) from the Ben Gurion University of the Negev, and a Bachelor of Business Science (Honours) in Economics and Marketing from the University of Cape Town. 5 Corporate Governance A2B believes that robust corporate governance practices, internal control systems and an effective risk management framework will contribute to the responsible and sustainable creation of long-term value for the Company’s shareholders. CORPORATE GOVERNANCE HIGHLIGHTS The Company continued to focus on corporate governance during FY23, reflecting the Board’s commitment to fostering a strong governance culture. Key highlights included: • • • Succession planning and leadership: A key focus of the Board during FY23 was the management of the leadership at the Company. Mark Bayliss continues in the role as Executive Chairman following the short period of Daniella Fonterra acting as CEO & Managing Director. Mark Bayliss will continue to lead the Company in the role of Executive Chairman, for the foreseeable future. Modern Slavery compliance: Since the enactment of the Modern Slavery Act 2018 (Cth), the Company has continued to review and improve its procurement and supplier management practices with regard to mitigating potential risk areas for modern slavery practices in its operations and supply chain. This has resulted in continued enhancements to certain A2B contracts and supplier on-boarding processes as reflected in the Company’s most recent Modern Slavery Statement. Board and Committee Charters: Updates to the Board and Committee Charters have been approved by the Board. Role of the Board The Board is responsible for the corporate governance of the Group. The Board continually reviews the Company’s governance policies and practices to ensure that they remain appropriate in light of changes in corporate governance expectations and developments. The Board is committed to instilling a culture where its people are expected to behave in a lawful, ethical and socially responsible manner. Details on the standards of ethics and conduct that the Company’s representatives are expected to follow can be found in A2B’s Code of Conduct, available on the A2B website. The Board reviews and approves the strategic direction of the Company and oversees Management’s implementation of the Company’s business model and achievement of the Company’s strategy. The Board has delegated responsibility for overseeing the day-to-day operation of the Company to management. Board Committees The Board also delegates a number of responsibilities to its Committees, as set out in their respective Charters. The Audit and Risk Committee is responsible for overseeing the Company’s financial reporting process, external and internal audit, processes for monitoring compliance with laws, regulations and the Code of Conduct, and processes for identifying and managing risk. The Remuneration and Nomination Committee is responsible for assisting the Board with Director nominations and Board succession planning, and the Company’s remuneration framework. 6 A2B Annual Report 2023 6 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 Board composition and performance The Board currently comprises of three Non-executive Directors and one Executive Chairman. The Board believes that its current composition represents a depth and breadth of skills and experience that will allow it to continue operating effectively. For details about the Directors and their experience, qualifications and Committee memberships, refer to page 5. The Board as a whole discusses and analyses its performance during the year, including suggestions for change or improvement. For more details about the process for the performance evaluation of the Board, as well as its Committees, individual Directors and executive KMPs, refer to page 10 of the 2023 Corporate Governance Statement and the Company’s Performance Evaluation Policy. A2B’s Values and Culture The Company has five core values as set out in A2B’s Code of Conduct. These values underpin all activities of the Group and are embedded in its leadership. Caring Collaborative Authentic Accountable Progressive • We care about our business, our customers, each other. We care about safety, quality, reliability and having fun. • We work together as one connected Team, including our customers and our partners. • We are straight up. We call it as it is with respect for each other. • We keep our • We are word and take responsibility for our work. innovative, we keep moving forward and are goal oriented. Governance policies The Board has put in place a suite of policies, all of which are available on the A2B website. They set out the Company’s governance arrangements in relation to matters such as speaking up, securities trading, shareholder communication, market disclosures, anti-bribery and corruption, and diversity. An overview of some of the key policies of the Company can be found on pages 11 to 16 of the 2023 Corporate Governance Statement. A2B values diversity and inclusiveness in the workforce and recognises that diversity drives the Company’s ability to attract, retain, motivate and develop the best talent and deliver the highest quality services to its customers. Details about the Company’s measurable objectives and its progress in achieving them in FY23 can be found on page 12 of the 2023 Corporate Governance Statement. Approach to risk management The Board, in consultation with the Audit and Risk Committee, is responsible for reviewing, ratifying and monitoring the Company’s systems of risk management. The Audit and Risk Committee advises the Board on high-level risk related matters and oversees processes to ensure that there is an adequate system of internal control and management of business risk, and regular reviews of those controls and relevant policies and procedures are undertaken. The CEO and Managing Director (a role currently performed by the Executive Chairman) and Management are responsible for developing and promoting the appropriate management of risk and the ongoing maintenance of the control environment. Refer to pages 16 to 17 of the 2023 Corporate Governance Statement for additional information about the Company’s risk framework. An overview of the material risks affecting the company can be found on pages 15 to 16. Additional details about the Company’s corporate governance are available in the 2023 Corporate Governance Statement, available on the Company’s website at www.a2baustralia.com/investor- center/corporate-governance/. 7 7 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 Operating and Financial Review Principal activities A2B’s principal activities are to serve Passengers, Drivers and Taxi Operators by facilitating taxi bookings, trips and payments. A2B is a leader in the Australian personal transportation sector under the “13cabs” and “Silver Service” brands. With approximately 8,000 vehicles in its networks across Australia, A2B is a leading participant in Australia’s personal transportation market. A2B has two core revenue streams – network subscription and payment processing. A2B receives a fixed monthly fee from taxi operators for network subscriptions. Payments processing revenue is generated on non-cash taxi payment services based on the value of the fare processed. Basis of preparation The FY23 statutory results, including the prior comparative results in the attached financial statements, are reported in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 including the leasing standard AASB16. The Company believes that its underlying results, while being a non-statutory measure, provide a better indicator of Group performance. As such, unless otherwise stated, the full year results disclosed in this Operating and Financial Review are underlying results on a pre-AASB16 basis excluding significant items and the impact of one-off transactions. Financial Results – return to profitability underpinned by our ‘BETTER BEFORE BIGGER’ strategy The benefits from the focused execution of the Company’s ‘BETTER BEFORE BIGGER’ strategy are reflected in the FY23 results, with A2B delivering a strong turnaround in financial performance, returning to profitability and strengthening its balance sheet. In addition, A2B is successfully executing its property portfolio strategy, selling both of its Alexandria properties in Sydney. In May 2023, A2B completed the sale of its Bourke Road (Alexandria) property for $19.0 million. On 30 March 2023, A2B entered into an agreement for the sale of its O’Riordan Street (Alexandria) property for $78.0 million, and this is expected to settle in December 2023. At 30 June 2023, a 12% deposit ($9.4 million) for the sale of O’Riordan Street had been received and held in escrow. On a statutory basis, A2B recorded an EBITDA of $42.8 million (FY22 EBITDA loss of $22.3 million) and net profit after tax of $27.1 million (FY22 net loss after tax of $27.8 million). These statutory results include the impact of the AASB16 accounting leasing standard, the net gain from the sale of the Bourke Road Alexandria property, the net gain from a land swap transaction in relation to the Alexandria property, and the taxi license plate compensation received from the NSW Government. Further detail relating to these significant items are outlined below. On an underlying basis, A2B recorded positive EBITDA of $20.1 million (FY22 loss of $9.4 million) and a net profit after tax of $5.1 million (FY22 loss of $17.1 million). The $29.5 million year-on-year EBITDA improvement was supported by revenue growth of $22.2 million and cost reductions of $9.7 million, with FY22 including $2.3 million in COVID-19 related Government support that was not received in FY23. 8 A2B Annual Report 2023 8 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 Underlying financial results (excl. AASB16 impact, significant items and one-off transactions) Revenue Other income Expenses EBITDA Depreciation & Amortisation EBIT Finance costs Profit before tax Income Tax NPAT EBITDA margin Earnings per share Reconciliation of underlying profit to statutory profit Underlying profit before tax (excl. AASB16 impact, significant items and one-off transactions) AASB16 impact Net gain on property transactions NSW taxi plate licence compensation Impairments and asset write-offs Termination and restructuring Total items excluded from underlying profit before tax Statutory profit before tax Income Tax Statutory NPAT Statutory earnings per share 2023 2022 Change $m 147.3 0.3 (127.5) 20.1 (9.6) 10.5 (3.1) 7.4 (2.3) 5.1 13.6% 4.2 cents $m 125.1 2.6 (137.1) (9.4) (14.2) (23.6) (0.9) (24.5) 7.3 (17.1) (7.5%) (14.1 cents) over PCP 18% (314%) (145%) (130%) (130%) 2023 $m 2022 Change $m over PCP 7.4 (24.5) - - - - 21.3 1.6 - (9.7) (5.6) (15.3) (39.7) 11.9 (27.8) (22.9 cents) (2.0) 20.9 28.3 (1.2) 27.1 22.4 cents (130%) (238%) (171%) (197%) Revenue – up 17.7% to $147.3 million A2B recorded total revenue of $147.3 million (FY22 $125.1 million), an increase of $22.2 million or 17.7%, reflecting: - Network subscription revenue, +$11.8 million or +27.9% - Payment processing revenue, +$9.6 million or +37.4% Taxi license plate income, +$2.5 million or +96.2% - School taxi and bus route services revenue, +$4.7 million or 73.2% - Taxi equipment hardware sales and rental income, +$5.6 million or 50.7% - Partly offset by: - Vehicle sanitisation income, -$5.6 million, not recurring in FY23 (revenue stream during COVID) - Courier service revenue, -$2.8 million, discontinued in FY23 in line with strategy - Taxi operating income, -$2.8 million, following the rationalisation of the operated fleet as per our strategy - Other revenues, -$0.8 million or -0.6% 9 9 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 A2B’s two core revenue streams, network subscription revenue and payments processing revenue were the main contributors to the year-on-year revenue growth. Network subscription revenue – up 27.9% to $54.2 million Network subscription revenue is A2B’s largest revenue stream and is driven by the number of taxis affiliated with its networks. In line with A2B’s strategy, fleet growth was targeted at its core and higher yield networks – 13cabs and Silver Service. During the past year, a range of initiatives were instigated to attract new drivers to these two leading taxi brands, while also transitioning drivers from the lower-yielding CHAMP brand. A2B’s total fleet grew to 7,803 taxis as of 30 June 2023, an increase of 972 or 14.2% over 12 months. The 13cabs and Silver Service brands experienced even more encouraging growth, up 1,585 taxis or 26.7%. As at 30 June 2023, 96% of the fleet was affiliated with either 13cabs or Silver Service, compared with 86% one year earlier. In addition to fleet growth, A2B also adopted a new pricing strategy for each State that enabled fee increases during the year. Reflecting this, of the $11.8 million in network subscription revenue improvement during FY23, $5.7 million was attributable to fleet growth and $6.1 million was attributable to the improvement in fleet mix and fee increases. Payments processing revenue – up 37.4% to $35.4 million Payment processing revenue is A2B’s second largest revenue stream and is driven by the value of taxi fares processed through A2B’s payment system. Total taxi fares processed ended at $854.4 million in FY23, an increase of $247.5 million or 40.8% on the prior period. Of the year-on-year growth in fares processed, 82% was attributable to an increase in demand (i.e. volume impact) and 18% was attributable to higher average fares (i.e. price impact). The price impact was supported by fare rises in most states throughout the year. The encouraging recovery continued throughout the year with fares processed levels reaching 87% of pre-COVID (FY19) levels. 10 A2B Annual Report 2023 10 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 Fares processed – up 41% to $854.4 million Strong year-on-year growth continued for the period from July 2022 to March 2023. In Q4, the strong growth trend in taxi fares processed softened, as A2B cycled through a full quarter in a post COVID environment and softening macroeconomic conditions started to impact consumer demand. For the full year, all payment channels experienced double-digit growth with the in-app payment channel and Spotto both reaching all-time highs. Recovery in Cabcharge fares continued, supported by more people returning to the office and growth in airline activity. In FY23 Cabcharge fares ended at 72% of pre-COVID levels while the total value of credit and debit cards processed ended at 94% of pre-COVID levels. Other income In FY23 A2B recognised $0.3 million in other income, a decrease of $2.3 million from the comparative period. The reduction in other income relates primarily to the JobSaver payments received in NSW in FY22 which are not recurring. On a statutory basis, other income was $23.2 million, this is an incremental $22.9 million gain compared with the underlying other income mentioned above. This increase includes a net gain on property transactions of $21.3 million and $1.6 million in relation to taxi license plate compensation received from the NSW Government. Further details are included in Note 3 of the consolidated financial statements. Operating Expenses Reflecting A2B’s focus on simplifying and streamlining its operations under the ‘BETTER BEFORE BIGGER’ strategy, total statutory operating expenses (excluding depreciation and amortisation) decreased by $23.4 million or 15.5% to $127.7 million (FY22 $151.1 million). On an underlying basis, total operating expenses decreased by $9.7 million or 7.1% to $127.5 million. Direct mobility and payment related expenses increased by $4.3 million or 13.5%. This increase was driven by an associated revenue growth of $22.2 million or 17.7%. As a result, A2B’s net revenue margin improved from 74.6% in FY22 to 75.5% in FY23. Total indirect expenses were $91.5 million, down by $13.9 million or 13.2% compared with FY22. During the year we completed the restructuring of A2B’s contact centres as part of the drive to streamline its business and improve efficiency going forward. 11 11 A2B Australia Limited and its Controlled Entities Underlying EBITDA waterfall Annual Financial Report Year Ended 30 June 2023 A net revenue improvement of $17.9 million, a $2.3 million reduction in other income coupled with $13.9 million lower indirect expenses resulted in an FY23 EBITDA improvement of $29.5 million compared with FY22, returning an EBITDA margin of 13.6%. Depreciation and amortisation Total depreciation and amortisation charges were reduced by $4.6 million or 32.4% to $9.6 million, primarily due to asset impairments in FY22 and a reduction in internally developed software. On a statutory basis (including the impacts of AASB16), total depreciation and amortisation charges were reduced by $5.2 million or 32.0%. Net finance costs Net finance costs increased by $2.2 million to $3.1 million (FY22 $0.9 million) due to higher interest rates in FY23, and higher average debt levels compared to FY22. A portion of the proceeds from the sale of the Alexandria properties will be used to pay down debt. Income tax expense On a statutory basis, A2B recorded an income tax expense of $1.2 million (FY22 income tax benefit of $11.9 million) after the $28.3 million profit before income tax, adjusted for non-deductible items and utilisation of prior period tax losses. Profit after tax Underlying net profit after tax was $5.1 million (FY22 loss of $17.1 million). A statutory net profit after tax of $27.1 million was recorded in FY23 (FY22 loss of $27.8 million). Cashflow At 30 June 2023, A2B held $29.5 million cash, up by $17.2 million compared with the prior year. On a statutory basis, A2B generated $10.4 million of cash flow from operations in FY23, an improvement of $16.6 million compared with FY22’s operating cash outflow. In addition, FY22 benefited from a $5.3 million tax refund. On a like-for-like basis, cash flow from operations improved by $21.9 million compared with FY22. 12 12 A2B Annual Report 2023 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 Net cash flow from investing activities was $11.8 million, primarily reflecting the sale of A2B’s Bourke Rd property for $19.0 million and Taxi license plate compensation of $1.6 million received from the NSW Government. Excluding the impact of these items, net cash flow from investing activities was a cash outflow of $8.8 million, an increase of $0.5 million compared with FY22. Given the positive cash performance in FY23, A2B reduced its borrowings by $3.3 million. Net cash flow from operations Net cash flow from investing activities Net cash flow from financing activities Net change in cash position Cash and cash equivalents at 1 July Cash and cash equivalents at 30 June 2023 $m 10.4 11.8 (5.0) 17.2 12.3 29.5 2022 $m (6.2) (8.3) 15.0 0.4 11.9 12.3 Change $m 16.6 20.1 (20.0) 16.8 0.4 17.2 On a like-for-like basis, free cash flow improved by $22.0 million during FY23, excluding the impact of AASB 16 treatment and one-off transactions. Including the impact of one-off transactions free cash flow improved by $42.6 million. Further detail is set out in the table below. Free cash flow Net cash flow from operations Net cash flow from investing activities Payment of lease liabilities Free cash flow (excluding AASB16 impact) One-off tax refund (Federal Government COVID relief) Free cash flow excluding AASB16 and COVID relief 2023 $m 10.4 (8.8) (1.5) 0.1 2022 $m (6.2) (8.3) (2.1) (16.6) - (5.3) (21.9) 0.1 YoY improvement in Operational free cash flow One-off transactions (Bourke Road sale and NSW taxi licence compensation YoY improvement in Statutory free cash flow 22.0 20.6 42.6 An improvement in working capital management resulted in a strengthening of A2B’s balance sheet as at 30 June 2023. An increased focus on collections resulted in a material reduction of trade receivables, allowing A2B to rebalance and reduce its trade payables. In addition, $2.3 million in restructuring costs relating to FY22 were paid during the year and $5.9 million in vehicles were financed on behalf of operators who joined the 13cabs and Silver Service networks. At 30 June 2023, net cash was $13.9 million, an improvement of $20.5 million compared with the prior year. Net debt/cash movement Net debt at 30 June 2022 Underlying EBITDA FY23 Sale of Bourke Road NSW taxi plate licence compensation Capital expenditure Vehicle financing Debt repayment Restructuring cost Other working capital movements Total movement Net cash at 30 June 2023 $m (6.6) 20.1 19.0 1.6 (8.8) (5.9) (3.3) (2.3) 0.1 20.5 13.9 13 13 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 A2B’s ability to generate cash is expected to further improve in FY24 on the back of improved profitability, and a stronger working capital position, coupled with the decision to outsource any future vehicle financing. In addition, the Group expects to receive the proceeds from the settlement of O’Riordan Street in December 2023. FY23 Dividends No dividends were paid or declared during FY23. Directors have declared a final FY23 fully franked dividend of $0.05 per share, scheduled for payment on 26 October 2023. The record date for the FY23 final dividend is 29 September 2023. Financial position Balance sheet A2B significantly improved its financial position during FY23. Positive cash generation coupled with a reduction of $14.5 million in receivables, allowed for a reduction in trade and other payables by $17.7 million. As a result, the current ratio (excl. assets held for sale) improved from 1.2 at 30 June 2022 to 1.6 at 30 June 2023. Assets held for sale as at 30 June 2023 relate to the O’Riordan Street property in Alexandria. Sale contracts in relation to this property were exchanged in FY23, with settlement expected in December 2023. In addition, the Company has one property asset remaining on its balance sheet. This property asset has a carrying value of $2.2 million (recorded in non-current assets) and was listed for sale in July 2023. Cash and cash equivalents Trade and other receivables Assets held for sale Other current assets Total current assets Total non-current assets Total assets Trade and other payables Loans and borrowings Other current liabilities Total current liabilities Loans and borrowings Other non-current liabilities Total non-current liabilities Total liabilities Net assets Net cash / (debt) 30 June 2023 $m 29.5 45.8 10.4 6.6 92.3 92.5 184.8 30 June 2022 Change $m $m 12.3 17.2 (14.5) 60.3 - 10.4 (0.3) 7.0 12.8 79.6 (4.5) 98.5 8.3 178.1 38.2 0.6 12.0 50.8 15.0 4.8 19.8 70.6 55.9 1.6 10.2 67.7 17.3 7.0 24.3 92.0 (17.7) (1.0) 1.8 (16.9) (2.3) (2.2) (4.5) (21.4) 114.2 13.9 86.1 (6.6) 27.9 20.5 Non-current borrowings were reduced by $2.3 million to $15.0 million. A2B currently has a working capital facility in place with CBA, expiring in September 2024. In August 2023, post balance date, this facility was extended to September 2026. 14 A2B Annual Report 2023 14 A2B Australia Limited and its Controlled Entities Outlook Annual Financial Report Year Ended 30 June 2023 We have experienced improved trust in our brands in FY23, with a strong increase in the 13cabs and Silver Service fleets and total fares nearing pre-pandemic levels, along with improving efficiency through healthy booking rates. As we head into FY24, fleet growth is continuing with 150 cars added since 30 June 2023. Positive factors such as rising migration levels, an improvement in vehicle supply, along with the removal of restrictions on taxi license plates as a result of deregulation in NSW, will assist with further growth. However, some wider economic factors such as the recent decline in consumer spending may soften fares in the near term. Another key focus for FY24 is improving our value proposition for drivers and passengers. In FY24 we will undertake a major project by upgrading all in-car technology (before 3G is switched off in June 2024) to ensure the continuity and future growth of our payments processing volumes. We are investing $3.5 million through (a one-off capital expenditure) to simplify our technology platform and further enhance passenger and driver experience. With the Company’s balance sheet repaired, dividends reinstated including a planned special dividend, and successfully returning A2B to profitability by right-sizing its cost structure, we are well placed to continue growing in FY24 and beyond. Material business risks The operating and financial performance of A2B is influenced by a variety of general common economic and business conditions, including levels of consumer spending, inflation, interest and exchange rates and access to debt and capital markets. Risks that have the potential to materially affect the performance of the group are reviewed on a regular basis by the Board and are set out in the table below, together with mitigating actions to minimise those risks. The risks are in no particular order and do not include common risks that affect all companies, such as key person risk. Nor do they include general economic risks such as significant changes in economic growth, inflation, interest rates, consumer sentiment and business confidence. 15 15 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 Strategic Risk Nature of Risk Actions / Plans to Mitigate Regulatory changes A2B’s operations are subject to state and territory regulation and control. Continue to work with Taxi Regulators on issues affecting the Taxi Industry. All states and territories have a 5% limit in place on non-cash taxi payment service fees. It is possible that Taxi Regulators may impose lower limits on the level of service fees able to be charged to Cabcharge Customers thereby potentially impacting revenue and earnings. More recently the NSW government introduced a package of reforms for the point-to-point transport industry. These reforms include freeing up the supply of taxis by removing the limit on the number of Taxi licences that are available. These changes took effect from 1 August 2023. Taxi licences will no longer be able to be bought and sold. It is possible that Taxi Regulators may change rules around required standards and quality control aspects of Taxi Networks. Building administration tools that assist with levy collections and ensure Drivers and Operators have the information they require in order to comply with levy requirements. Advocate for and deliver standards and controls that result in maintaining or improving the standards of Customer service and safety that are essential to transport user confidence. Maximise the opportunities for the A2B regulatory Group frameworks, especially by bringing more drivers into our networks. presented by Taxi Regulators may affect the value of Taxi plate licences by setting the supply of new Taxi for plate Government leased Taxi plate licences in those states where restrictions remain in place. licences and setting rates the Changes to competitive landscape / changes to IT environment Existing and new competitors in personal transport who offer alternative service and payment methods, both within and outside the regulatory framework, or who are subject to less stringent regulation. Potential loss of business if the Company fails to keep pace with technological change with respect to Network Operations, bookings, and payments. Be at the forefront of serving technology the personal industry. Develop and development transport integrate bookings and payments. Strategic partnering to bolster existing technology and leverage scale. resources and Standardising, scaling, and raising service standards in the mobility business to be leveraged in Australia and the overseas markets we operate in. In-Vehicle Technology Roll-out In FY24 A2B will undertake a major project by upgrading all in-car technology (before 3G is in June 2024) to ensure the switched off continuity and future growth of our payment processing volumes. An IT project of this nature for any company has inherent risks of delays. Any material delays could affect our ability to process in car payments. Contingency plans are in place to provide for the continued processing of fares with the current system in case of any delays in the roll-out of the new technology platform. 16 A2B Annual Report 2023 16 A2B Australia Limited and its Controlled Entities Directors’ Report Annual Financial Report Year Ended 30 June 2023 The Directors present their report (including the Remuneration Report), together with the financial statements of the consolidated entity being A2B Australia Limited (A2B or the Company) and the entities it controls (the Group) for the financial year ended 30 June 2023. Directors The Directors of the Company at any time during or since the end of the financial year up to the date of this report are: ▪ Mark Bayliss ▪ Jennifer Horrigan ▪ Clifford Rosenberg ▪ Brent Cubis (appointed 3 October 2022) ▪ Daniela Fontana (appointed 1 March 2023 and stepped down on 27 April 2023) ▪ David Grant (stepped down on 3 October 2022) The qualifications, experience and special responsibilities of current Directors of the Company are set out in the Board of Directors section. Directorships of other listed companies The directorships in other listed companies a Director has held at any time in the last three years immediately before the end of the financial year are set out in the table below. Director Name of listed company Appointment date Cessation date Mark Bayliss Jennifer Horrigan EcoFibre Limited Dexus Industria REIT Dexus Convenience Retail REIT QV Equities Limited Clifford Rosenberg Technology One Limited Brent Cubis Bid Corporation Limited Nearmap Limited ARN Media Limited 1 September 2022 3 December 2013 27 July 2017 26 April 2016 27 February 2019 September 2019 - - - 31 March 2023 - - 3 July 2012 1 December 2022 14 June 2023 - - EML Payments Limited 25 November 2022 Prime Media Group Limited 15 April 2021 31 March 2022 Daniela Fontana1 None - Skelton1 David Grant1 Event Hospitality & Entertainment Ltd 25 July 2013 Retail Food Group Limited 25 September 2018 The Reject Shop Ltd 1 May 2020 - - - - 1. Details listed are current as at the date the Director ceased being a Director of the Company. 17 17 A2B Australia Limited and its Controlled Entities Company Secretary Howard Edelman Annual Financial Report Year Ended 30 June 2023 Howard Edelman was appointed Group General Counsel and Company Secretary on 23 January 2023 following the resignation of Adrian Lucchese. Howard has more than 30 years of corporate and commercial experience and has previously worked as General Counsel and Company Secretary at Real Pet Food Company, CSG Limited, AUB Group Limited, CIMB Australia and iSoft Group Limited. He has also held senior roles with AustralianSuper and Super Retail Group. Howard sits on the National Executive Committee for the Australian Association of Corporate Counsel (ACC) and is also Vice President of ACC NSW. Howard holds a Bachelor of Arts degree from Hamilton College and a Doctor of Law from Brooklyn Law School. Dividends No dividends were paid or declared during FY23. In August 2023 the Board declared to pay a fully franked dividend of $0.05 per share for FY23 with a record date of 29 September 2023 and a payment date of 26 October 2023. Principal activities The principal activities of the Group are included in the Operating and Financial Review (“OFR”) set out on pages 8 to 16. Other than those mentioned in the OFR there were no other significant changes to the nature of the activities of the Group during the year. Review of operations A review of the Group’s operations during the year and the results of those operations, together with its financial position, are included in the OFR set out on pages 8 to 16. The Group’s business strategies and prospects for future financial years are also included in the OFR. Significant changes in state of affairs In the opinion of the Directors, there were no significant changes in the state of affairs of the Group during the financial year, other than those changes mentioned in the OFR. Events subsequent to reporting date No other matter or circumstance has arisen since the reporting date that significantly affects or may significantly affect the Group’s operations in future years, the results of those operations in future years, or the Group’s state of affairs in future years. In August 2023 the Board declared to pay a fully franked dividend of $0.05 per share for FY23 with a record date of 29 September 2023 and a payment date of 26 October 2023. Following completion of the A2B property portfolio review, the Board resolved in July 2023 to sell its remaining property located in Melbourne at Downing Street, Oakleigh. Marketing activities commenced in July 2023. Likely developments Information about likely developments in the Group’s operations is included in the “Outlook” section of the OFR on page 15. 18 A2B Annual Report 2023 18 A2B Australia Limited and its Controlled Entities Environmental regulation Annual Financial Report Year Ended 30 June 2023 The Group’s operations are not subject to any particular and significant environmental regulations under a law of the Commonwealth or of a State or Territory. Directors’ interests and benefits The relevant interests and benefits of each current Director as at the date of this report are set out in the table below. Director Mark Bayliss Brent Cubis Jennifer Horrigan1 Clifford Rosenberg2 Interest in shares 800,000 0 102,122 111,307 1. The indirect shares are 102,122 fully paid ordinary shares held by Macdonald Horrigan Family Holdings as trustee for Macdonald Horrigan Family Superannuation Fund. 2. The indirect shares are 111,307 fully paid ordinary shares held by the The Rosenberg Company Pty Ltd as trustee for The Rosenberg Superannuation Fund. Remuneration Report The Remuneration Report is set out on pages 22 to 36 and forms part of this Directors’ Report, has been audited as required by section 308(3C) of the Corporations Act. Directors’ meetings The number of Directors’ meetings and attendance by each Director at those meetings during the financial year are set out in the table below. Director2 Mark Bayliss Jennifer Horrigan Clifford Rosenberg Brent Cubis4 Daniela Fontana5 David Grant6 Board Audit and Risk1 Remuneration and Nominations1 Held3 Attended Held3 Attended Held3 Attended 13 13 13 11 1 2 13 13 13 11 1 2 5 5 5 3 0 2 5 5 5 3 0 2 3 3 3 2 0 1 3 3 3 2 0 1 1. All Directors are invited to and generally attend, Board Committee meetings. The “Attended” columns in the table reflect attendance at meetings. 2. “Director” in the table means a Director who was a director of the Company at any time during the financial year. 3. The “Held” columns in the table reflect the number of meetings held during the period in which the Director held office. 4. Brent Cubis was appointed on 3 October 2022. 5. Daniela Fontana was appointed on 1 March 2023 and resigned on 27 April 2023. 6. David Grant retired on 3 October 2022. Share options and Performance Rights There were no options over unissued shares of the Company granted to the Directors or any executives during or since the end of the financial year. 19 19 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 As at the date of this report, there are 2,470,371 Performance Rights over unissued shares which have been granted to senior executives under the Company’s LTI Plan. Further information on the LTI Plan and Performance Rights held by key management personnel are included in the Remuneration Report on pages 22 to 36. Indemnification and insurance of officers and auditors The Company’s Constitution requires it to indemnify current and former Directors (including alternate directors), officers, and auditors (if determined by the directors) of the Company against liabilities incurred by the person as an officer (or auditor if determined by the Directors). The Company has agreed to provide indemnities to and procure insurance for past and present Directors and officers of the Company and its controlled entities. The indemnities provide broad indemnification against liabilities to another person (other than the Company or related body corporate) and for legal costs that may arise from their position as Directors and officers of the Company and its controlled entities. The indemnities are subject to certain exceptions such as where the liability arises out of conduct involving a lack of good faith. The Company has also paid insurance premiums for insurance policies providing the type of cover commonly provided to Directors, officers and senior employees of listed companies such as the Company. As is commonly the case, insurance policies prohibit further disclosure of the nature of the insurance coverage and the amount of the premiums. There has been no indemnification of the current auditors, nor have any insurance premiums been paid in respect of the current auditors since the end of the previous year. Non-audit services by auditors Details of the non-audit services provided by the Group’s auditor, KPMG, during the financial year including fees paid or payable for each service, are set out in Note 26 to the Consolidated Financial Statements. The Board has considered the non-audit services provided during the year by KPMG and in accordance with written advice provided by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act for the following reasons: ▪ ▪ all non-audit services were subject to the corporate governance policies and procedures adopted by the Company and have been reviewed by the Audit and Risk Committee to ensure they do not impact the integrity and objectivity of the auditor; and the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. Lead auditor’s independence declaration The lead auditor’s independence declaration required under section 307C of the Corporations Act is set out on page 37. 20 A2B Annual Report 2023 20 A2B Australia Limited and its Controlled Entities Rounding off Annual Financial Report Year Ended 30 June 2023 A2B is a company of the kind referred to in ASIC Corporation 2016/191 (Rounding in Financial/Directors’ Reports) Instrument. In accordance with that Instrument, amounts in the Consolidated Financial Statements and the Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. This Directors’ Report has been signed in accordance with a resolution of the Directors. Mark Bayliss Executive Chairman 22 August 2023 Brent Cubis Director 22 August 2023 21 21 A2B Australia Limited and its Controlled Entities Remuneration Report Annual Financial Report Year Ended 30 June 2023 Letter from the Chairman of the Remuneration and Nomination Committee Dear Shareholders, Your Board is pleased to present the Remuneration Report for the year ended 30 June 2023. This Report provides an overview of our remuneration structures, policies, and practices. Our remuneration strategy is designed to ensure accountability for performance and to reward outcomes achieved and shareholder value creation. Consistent with this approach, shareholders will remember that, given A2B’s loss-making performance in FY22, no STI or LTI were awarded to executive KMP (other than the LTI incentives approved by shareholders at the EGM on 28 April 2022 for the newly appointed Executive Chairman, Mark Bayliss or the portion of STI paid to departing executives as part of their separation package). Twelve months on, the 2023 financial year has achieved a major turnaround for A2B with the company achieving an underlying EBITDA of $20.1 million, a significant achievement and representing a $29.5 million turnaround from the $9.4 million loss in FY22. The significant effort by the Team has returned the Company to profitability, for the first time since FY19, and also delivered a streamlined and focused business that positions A2B for further sustainable growth in the future. Your Board firmly believes these achievements should be recognised through the FY23 remuneration outcomes. Executive Remuneration The remuneration outcomes for FY23 correctly reflect the significant effort by the executive team to achieve this important turnaround and the significant value created for shareholders. The executive remuneration arrangements are essential in retaining and rewarding key talent and ensuring an aligned team, focused on continuing to deliver value to shareholders. The overall mix between STI and LTI is weighted toward long-term incentives (70% of incentives), to reflect long-term alignment with shareholders and value creation. Of the 30% of incentives available as STI, 60% of the STI opportunity was dependent on the achievement of an EBITDA gateway hurdle. The remaining 40% of the STI opportunity was assessed based on the achievement of individual performance measures. The LTI incentives represent a maximum opportunity of 70% of incentives and were awarded as Performance Rights, subject to the same performance metrics approved by shareholders for the Executive Chairman at the EGM on 28 April 2022 (share price hurdles of $1.70 VWAP, $2.00 VWAP and $2.30 VWAP, with a 3-year sunset date of 30 June 2026). Should all three VWAP hurdles be met, and the 600,000 Performance Rights (of which 358,000 were granted to KMP) convert to Shares, the maximum dilution represents approximately 0.49% (0.30% relating to the KMP component) of the current issued ordinary share capital of the Company, while significant value will have been created for shareholders. Detailed information regarding remuneration outcomes for FY23 are outlined in section 4 of this Remuneration Report. Non-Executive Director Remuneration & Arrangements Given the wider turnaround and cost reduction initiatives across the business during FY23, the Board implemented a 15% reduction to Non-Executive Director Board and Committee fee arrangements for FY23. In addition, the Board agreed to decrease the number of Directors by one – taking the total number of Non-Executive Directors to three and to also reduce the aggregate Non-Executive 22 22 A2B Annual Report 2023 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 Director fee pool from $1.3 million per annum (which was approved by shareholders on 26 November 2014) to $1.0 million per annum. The Board has elected to continue these Non-Executive Director fee arrangements through FY24. Leadership The Board would like to recognise the significant turnaround achieved under the dedicated leadership of Executive Chairman Mark Bayliss during FY23. The Board also recognises that Mr Bayliss consented to continue his role of Executive Chairman for the foreseeable future, following Ms Daniela Fontana stepping down as CEO & Managing Director. In addition to A2B’s stronger operational and financial position, other FY23 highlights include the successful property divestment achieved in line with May 2022 independent valuations, despite sharply deteriorating property market conditions. This transaction will allow significant value to be returned to shareholders via an expected $0.55 cent special fully franked dividend, currently anticipated to be paid on settlement in December 2023. Given these strong results led by Mr Bayliss and his agreement to extend his role as Executive Chairman (and noting that an LTI was not awarded for Mr Bayliss in FY23), the Board has determined to issue an additional cash bonus to Mr Bayliss of $200,000 (above the STI opportunity), to reflect the outperformance achieved in FY23. The total FY23 Remuneration earned by Mr Bayliss is therefore $1,125,112 (excluding Performance Rights and Incentive Shares granted in prior years). FY24 Remuneration Approach The remuneration framework in place for FY23 reflected the significant turnaround required and underway across A2B. Now that a return to profitability has been achieved, the Board has prepared a renewed remuneration framework for FY24 to reflect A2B’s focus on driving continued profitability and growth. The remuneration framework for FY24 will focus on rewarding growth in shareholder returns, while ensuring remuneration outcomes are tied to robust return hurdles. Full details of the FY24 incentives for the Executive Chairman Mark Bayliss will be available in the Notice of Meeting for the 2023 AGM. In conclusion, your Board is confident that the remuneration outcomes for FY23 and the proposals for FY24 are robust, will appropriately reward executives for performance and are designed to achieve long-term value creation and alignment with shareholders. On behalf of the Board, thank you for your on-going support and we look forward to hearing your feedback on this report. Yours faithfully, Jennifer Horrigan Chairman Remuneration & Nominations Committee 23 23 A2B Australia Limited and its Controlled Entities Remuneration Report - Audited Annual Financial Report Year Ended 30 June 2023 This Remuneration Report for the year ended 30 June 2023 outlines the remuneration arrangements of A2B Australia Limited (A2B or Company) and is prepared in accordance with the requirements of the Corporations Act 2001 (Corporations Act) and the Corporations Regulations 2001. The information in sections 1 to 8 has been audited as required by section 308(3C) of the Corporations Act, unless otherwise stated. 1. Overview The Board of Directors present the Remuneration Report for the year ended 30 June 2023 (FY23). This Report provides an overview of our remuneration structures, practices and outcomes and their alignment with the Company’s performance and strategy. Who is covered by this report The Key Management Personnel (KMP) covered by this report are listed in table 1 below. Table 1: KMP included in this report Key Management Personnel Non-Executive Directors Brent Cubis Jennifer Horrigan Clifford Rosenberg David Grant Executive Mark Bayliss Olivia Barry Gary Becus Role Change in FY23 Independent Director Appointed on 3 October 2022 Independent Director Independent Director Independent Director Retired on 3 October 2022 Executive Chairman Chief Operating Officer - B2C Chief Operating Officer - B2B Appointed on 1 July 2022 Ton van Hoof Daniela Fontana Chief Financial Officer Chief Executive Officer & Managing Director Appointed on 1 March 2023 Stepped down on 27 April 2023 Realised remuneration The details of statutory executive KMP remuneration prepared in accordance with the Australian Accounting Standards can be found in table 6 on page 33. Details of statutory Non-executive Director fee arrangements can be found in table 9 on page 34. The table below provides shareholders with an understanding of the actual remuneration earned by executive KMP in FY23. The amounts disclosed in the table below are intended to provide an explanation of the pay for performance relationship in our remuneration framework and are in addition to the information provided in the statutory executive KMP remuneration in table 6 prepared in accordance with the Australian Accounting Standards. 24 A2B Annual Report 2023 24 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 Table 2: Actual executive remuneration earned in FY23 (non-statutory) (unaudited) Executive Mark Bayliss Olivia Barry Gary Becus Ton van Hoof Daniela Fontana Fixed remuneration1 $ 716,612 Termination benefits $ - STI earned for FY23 $ 408,500 LTI vested in FY232 $ - 375,862 351,724 451,724 101,199 - - - 143,750 120,000 80,000 108,000 - - - - - Total $ 1,125,112 495,862 431,724 559,724 244,949 1. Fixed remuneration means contracted remuneration amount for base salary and superannuation during the period the Executive was a KMP. 2. The LTI rights awarded in FY20 were tested in September 2022 and did not vest. Further information on vesting is set out in the LTI section of this report. 2. Remuneration governance The Board consults with the Remuneration and Nominations Committee (Committee), management, and where necessary, external advisers, when making remuneration decisions. The diagram below illustrates the remuneration decision-making process. Board ➢ Ensures remuneration is fair and competitive, and supports the Company’s strategic and operational goals and alignment with long-term value creation for shareholders ➢ Approves remuneration policies, structures, and arrangements after consideration of recommendations from the Committee ➢ Approves performance measures and outcomes after consideration of recommendations from the Committee Remuneration and Nominations Committee ➢ Comprises at least three members appointed by the Board ➢ Must have an independent chair and a majority of independent Directors ➢ Makes recommendations to the Board regarding remuneration policies, structures and arrangements ➢ Makes recommendations to the Board regarding performance measures and outcomes ➢ The Committee met three times in FY23 Management ▪ CEO proposes individual remuneration arrangements and performance outcomes for his or her direct reports to the Committee is not present when his or her ▪ CEO remuneration is decided External remuneration consultants and advisers ▪ Engaged and appointed by the Board or the Committee as required ▪ Advises the Committee and management is fully to ensure that the Company informed when making decisions ▪ Mandatory disclosure requirements apply to the use of remuneration consultants under the Corporations Act 25 25 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 Use of remuneration consultants and advisors No remuneration recommendations by a remuneration consultant as defined under the Corporations Act were made during FY23. For more detail on the Company’s charters and policies, see: www.a2baustralia.com/investor-center/corporate-governance/ 3. Executive Key Management Personnel remuneration arrangements Remuneration principles and link to Company strategy The Company has adopted the following principles to guide its remuneration strategy: ▪ Align to the business strategy to encourage opportunities to be pursued and executives to be rewarded for the creation of long-term shareholder value ▪ Be supported by a governance framework, to motivate, reward, and retain skilled executives and directors ▪ Align the interests of executive KMP with the long-term interests of the Company and its shareholders with the use of performance-based remuneration ▪ Set short and long-term incentive performance hurdles that are challenging and linked to the creation of sustainable shareholder returns, where incentive plans are offered to executive KMP ▪ Ensure any termination benefits are justified and appropriate. Business objectives Remuneration strategy objectives Remuneration structure ▪ Enhance and expand the operational platform for the creation of a sustainable business model for future growth ▪ Focus on the creation of shareholder value ▪ Attract and retain key talent through balanced remuneration, market competitive pay and performance-focused incentive awards ▪ Focus the executive team on the key strategic business imperatives ▪ Align interests of executive KMP and shareholders Invite executive KMP to participate in incentive plans where appropriate ▪ Fixed annual remuneration (“FAR”) Set with reference to job size and organisations of similar complexity and industry dynamics Variable remuneration Equity-based incentive awards based on the Company’s short- and long-term performance and other vesting conditions Executive arrangements Executive services agreements formalise incentive arrangements, and include termination and post- termination provisions Remuneration structure The Company aims to reward its executive KMP with a level and mix of remuneration appropriate to an individual’s experience, position, responsibilities, and performance. The Board and the Committee regularly review the remuneration level and structure for the Company’s executive KMP and adjust where appropriate to support the strategic initiatives of the business, whilst ensuring that it remains market competitive for recruiting and retaining skilled individuals. In FY22, the Board adopted a new executive KMP structure for FY23. In FY23, the executive KMP remuneration structure consisted of FAR and performance based short term and long-term incentives awarded pursuant to STI and LTI plan rules and individual invitation letters. 26 26 A2B Annual Report 2023 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 How is the Executive Chairman Rewarded? The total reward for the Executive Chairman is comprised of fixed annual reward and short and long term incentives. How are the Executive KMP Rewarded? The total reward for each executive KMP is split across the following elements: • 50% fixed annual reward; • 15% short-term incentive; and • 35% long-term incentive. Remuneration elements and incentive plans Executive KMP FAR Details of executive KMP FAR are disclosed below. What is FAR? FAR is comprised of salary and other benefits provided to an executive on an ongoing basis, such as superannuation contributions. How is FAR determined? FAR is reviewed annually and our standard executive services agreements do not include any guaranteed FAR increases. When reviewing FAR for executives, a number of factors are considered, including the individual’s skills and experience relevant to their role, and internal and external factors. The Company’s policy is to position FAR competitively with reference to companies and roles of similar complexity and industry dynamic to that of A2B. The Board reviewed the FAR for each executive for FY23 and the only change made was to increase Olivia Barry’s FAR from $351,724 to $400,000 to reflect her appointment as Chief Operating Officer B2C & Corporate Transport on 1 January 2023 and the additional responsibilities that role entails. Changes to FAR are typically implemented and take effect on 1 July of each year. The FAR for each executive in FY23 is shown in table 3 on page 31. The STI plan provides participating executives with an opportunity to be rewarded for their individual achievements, as well as the achievements of their business unit and the Company. This further aligns their interests with the strategic priorities of the Company. All executive KMP are eligible to participate in the STI plan in FY23. Were any changes made in FY23? What is the STI plan? What is the format for STI awards? STI awards are delivered annually in the form of a cash payment that is subject to the satisfaction of performance measures that are set at the beginning of each financial year. What is the performance period? What is the maximum opportunity? The performance period for the FY23 STI award is from 1 July 2022 to 30 June 2023. The STI maximum opportunity is set individually and based upon market benchmarks for the remuneration mix. This figure when referenced to FAR is 30% of FAR with the limited exception of the additional STI awarded to Mr Bayliss in FY23. 27 27 A2B Australia Limited and its Controlled Entities What are the STI performance measures? Annual Financial Report Year Ended 30 June 2023 The FY23 STI award vests subject to the achievement of a Group-wide financial performance measure (60%) and individual performance measures (40%). The financial performance measure continues to apply to all executive KMP to ensure their common focus on the achievement of the Company’s financial objectives. The individual performance measures for each executive are directly linked to the strategic imperatives of the Company and the contributions of the relevant executive towards achieving them. 1. Individual performance measures (40% of STI) Role Performance Executive Chair • Property strategy delivery • • Employee Strengthen investor relations engagement and positive corporate culture Other executive KMP Position-specific performance measures tailored for each executive having regard to their role, responsibility, and specific strategic goals over which they have influence. Examples include: • Employee engagement and positive • • • corporate culture Improve the A2B corporate product offering Fleet and fare growth Improved passengers In-vehicle technology replacement for drivers and service • • Risk management/compliance • Improvement in working capital 2. Group-wide financial performance measure (60% of STI) Earnings before interest, tax, depreciation, and amortisation excluding acquisitions, divestments and impairments (‘Gateway Hurdle’). If the Gateway Hurdle is met, 100% of this portion of STI will be paid. If the 90% minimum threshold is not met, no incentive payment will be made. Straight line vesting occurs between 90% and 100% of the Gateway Hurdle. Details regarding the STI outcomes for FY23, based on achievement of the approved performance measures are set out in section 4 of the Remuneration Report. for set The Committee considers the Executive Chairman’s performance against the year and provides a the performance measures recommendation of the STI to be paid (if any) to the Board for approval. The Executive Chairman considers the performance of other executive KMP against the performance measures set for the year and, in consultation with the Committee, provides a recommendation of the STI to be paid (if any) to the Board for approval. The Board may approve, amend, or reject the recommendations in its absolute discretion. 28 How is performance tested? 28 A2B Annual Report 2023 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 What happens on a change of control or other significant events? If a change of control occurs before the end of the performance period, the Board will determine how STI awards will be dealt with. If a change of control occurs before the Board decides, a pro-rata amount of the STI award based on the proportion of the performance period that has elapsed at the time of the change of control will be paid. The Board has the discretion to vary the terms of STI awards so that executives are not unfairly advantaged (or disadvantaged) by factors outside their control. Any variations will be disclosed and explained in the Remuneration Report. Does the plan provide for clawback? A2B has a clawback mechanism in place, which allows for the repayment of STI awards in cases involving fraud, dishonesty, breach of obligations (including a material misstatement of financial information), or any other omissions that result in an STI outcome. The Board may use its discretion to ensure that no unfair benefit is obtained, subject to applicable laws. What happens on termination of employment? Where employment ends prior to the end of the performance period by reason of resignation, fraudulent or dishonest conduct, or termination for cause, any entitlement to the STI award will be forfeited at termination of employment. Where employment ends for any other reason, a pro-rata portion of the STI award will remain on foot and will be tested at the end of the original performance period. The Board retains the discretion to vary the treatment set out above based on the specific circumstances surrounding the termination of employment. Were any changes made in FY23? The FY23 STI incentive plan was adopted by the Board in the last quarter of FY22 and implemented in FY23. The performance framework has been chosen as it more closely aligns with the focus of the Executive team to deliver improved business results and shareholder value. No changes to the plans were made in FY23. FY23 LTI Plan: Details of the executive KMP LTI are disclosed below. What is the LTI plan? The LTI plan provides participating executives with an opportunity to share in the long-term growth of A2B and aligns their interests with those of the Company’s shareholders. All executive KMP are eligible and participated in the LTI plan for FY23. What is the format for LTI awards? LTI awards are delivered in the form of rights which are granted for nil consideration. LTI awards are granted annually. The quantum granted is dependent on the individual performance outcomes for each KMP. Unvested rights will remain on foot until 30 June 2026 (Sunset date) and will vest when the respective vesting conditions (outlined below) are met during the performance period. Any Performance Rights which are unvested on 30 June 2026 will lapse. On vesting, each right converts into one ordinary share. What is the performance period? The performance period for the FY23 LTI award commenced on 1 July 2022 and will end on 30 June 2026. Subject to the satisfaction of the relevant performance measures, the allocated portion of the FY23 awards vest immediately. 29 29 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 What is the maximum opportunity? The maximum LTI opportunity is set individually and based upon market benchmarks for the remuneration mix. This figure when compared to FAR is 70% of FAR. What are the LTI performance measures? Performance Rights will vest upon satisfaction of the following vesting conditions: - - - First tranche: 1/3 of Performance Rights will vest on A2B achieving a 20 day volume-weighted average price (VWAP) of at least $1.70, Second Tranche: 1/3 of Performance Rights will vest on A2B achieving a 20 day VWAP of at least $2.00, and Third Tranche: 1/3 of Performance Rights will vest on A2B achieving a 20 day VWAP of at least $2.30. These performance conditions have been chosen because they incentivise management to achieve increases in the Company’s share price, thereby aligning their interests with the creation of shareholder value. A 20-day VWAP method has been chosen for assessing the achievement of these performance conditions because impact of daily fluctuations in the Company’s share prices and ensures that vesting would only occur where sustained increases in the Company’s share price are achieved. reduces the it Unvested rights will remain on foot until 30 June 2026 and will vest when the respective vesting conditions are met. Any Performance Rights which are unvested on 30 June 2026 will lapse (Sunset Date). The target VWAP specified above will be reduced by the amount of any dividend or return of capital paid per share paid prior to the Sunset Date. Decisions regarding the level of performance achieved and the relevant remuneration outcomes will be made by the Board, in its absolute discretion, with the outcomes communicated to shareholders in the Remuneration Report. Where a change of control event occurs, the Board has the discretion to determine the proportion of LTI awards to vest and may have regard to the executive’s tenure, the proportion of the performance period that has elapsed, the extent to which the performance conditions have been satisfied and the time of the change of control and the interests of the Company’s shareholders. If a change of control occurs before the Board exercises its discretion, a pro-rata number of unvested LTI awards will vest based on the extent to which the performance conditions are satisfied (or are estimated to have been satisfied) and the proportion of the performance period that has elapsed at the time of the change of control. The Board may adjust the terms of the LTI awards in exceptional situations where participants may be unfairly advantaged (or disadvantaged) by external factors outside of their control. The Board in all circumstances will ensure any variation takes into account the purpose of the LTI plan and achievement against the relevant performance conditions up until the relevant time. Any variations will be disclosed and explained in the Remuneration Report. With respect to Mr Bayliss’ existing Performance Rights, on a change of control, any unvested Performance Rights will vest. 30 What happens on a change of control or other significant event? 30 A2B Annual Report 2023 A2B Australia Limited and its Controlled Entities Does the plan provide for clawback? What happens on termination of employment? Were any changes made in FY23? Annual Financial Report Year Ended 30 June 2023 The Company has a clawback mechanism in place, which allows for the lapsing and/or clawback of LTI awards in cases involving fraud, dishonesty, breach of obligations (including a material misstatement of financial information), or any other act or omission that result in an inappropriate LTI outcome. The Board may use its discretion to ensure that no unfair benefit is obtained by a participant, subject to applicable laws. Where employment ends prior to the end of the performance period due to resignation, termination for cause or poor performance, unvested LTI awards will lapse. Where the employment ends for any other reason, unvested LTI awards will continue on-foot and be tested at the end of the original performance period against the relevant performance conditions. However, the Board has an overriding discretion to apply another treatment if it deems it appropriate. With respect to Mr Bayliss, on his resignation of his role or termination of his appointment agreement by A2B for cause, any unvested Performance Rights currently granted will lapse. Change to performance measures and period The FY23 LTI incentive plan was adopted by the Board in the last quarter of FY22 and implemented in FY23. The performance framework chosen aligns with the metrics approved by shareholders at the EGM for the Performance Rights granted to the Executive Chairman. Additionally, it more closely aligns the focus of the Executive team to deliver improved business results and shareholder value. No changes to the plans were made in FY23. For the terms applicable to prior-year STI and LTI grants, please refer to our Remuneration Report for the relevant year, which is available at https://www.a2baustralia.com/investor-center/reports/. Executive KMP contracts The Company has a contemporary standard executive service agreement. The remuneration arrangements for executive KMP are formalised in these agreements. Table 3: Executive KMP contract terms Executive Mark Bayliss Olivia Barry Gary Becus Ton van Hoof Daniela Fontana Contract term Notice period1 Ongoing Ongoing Ongoing Ongoing Stepped down on 27 April 2023 6 months 6 months 6 months 6 months 3 months FAR 720,296 400,000 351,724 451,724 575,000 1. The Board has the discretion to make payments to executive KMP in lieu of notice. No other termination payments are provided for under any KMP contract. 31 31 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 4. Executive KMP remuneration outcomes for FY23 FAR The fixed annual remuneration of executive KMP for FY23 is set out at table 3 on page 31. STI performance and outcomes The Executive Chairman assessed the performance of each executive KMP against their individual FY23 STI performance measures with recommendations presented to the Committee. The Committee also assessed the performance of the Executive Chairman with reference to his STI performance measures and made recommendations to the Board. The Board considered the material provided to the Committee, its recommendations, and the annual financial results. The Board determined that the financial performance was in line with the minimum threshold for the Gateway Hurdle. The Board also agreed with the recommendations in relation to the individual performance of each executive KMP and the applicable value payable. The individual FY23 STI outcomes for each executive KMP, including percentages and values payable are detailed in the table below. Table 4: STI award outcomes Executive Mark Bayliss * Olivia Barry Gary Becus Ton van Hoof Maximum FY23 STI opportunity $ 208,500 STI earned in FY23 $ 208,500 120,000 105,000 135,000 120,000 80,000 108,000 % of maximum opportunity achieved 100% % of maximum STI opportunity forfeited 0% 100% 76% 80% 0% 24% 20% * The Board determined to issue an additional cash bonus to Mr Bayliss of $200,000 (above the maximum STI opportunity), to reflect the outperformance achieved in FY23. Long Term Incentive Plan approved in 2014 The Company’s shareholders approved an earlier LTI plan in November 2014. The sixth tranche of Performance Rights under the LTI plan was granted for the performance periods 1 July 2019 – 30 June 2022. The rights were tested in September 2022 and did not vest and lapsed immediately as the performance conditions attached to the rights, being an absolute TSR and an indexed TSR hurdle, were not achieved. Further details are shown in table 7 on page 33. Snapshot of Group performance Table 5: Performance outcomes for the last five years Profit (Loss) after tax from continuing operations ($M) Profit (Loss) attributable to owners of the Company ($M) Dividend paid ($M) Dividend paid per share fully franked (cents) Closing share price at 30 June ($) Note: Opening share price in FY19 was $2.40 32 A2B Annual Report 2023 FY23 FY22 FY21 FY20 FY19 27.1 (27.8) (18.1) (23.7) 26.8 - - 1.49 (28.1) - - 1.10 (18.3) - - 1.26 (23.8) 9.6 8 0.81 11.9 11.8 9.6 8 1.77 32 A2B Australia Limited and its Controlled Entities Executive remuneration in FY23 Annual Financial Report Year Ended 30 June 2023 The statutory remuneration of each executive KMP in FY23 is set out in the table below. Table 6: FY23 executive KMP remuneration (statutory) Salary and fees $ Non-cash benefits2 $ Super contributions $ Termination benefits $ STI $ Other long term employee benefits3 $ Non-cash Fair value Performance Rights4 $ Non-cash Fair value Incentive Shares4 $ Performance related rem % of total rem5 Total $ 350,570 120,000 13,850 25,292 Executives: Mark Bayliss1 2023 695,000 408,500 Olivia Barry 2022 2023 2022 231,668 - 38,502 - Gary Becus6 2023 326,432 80,000 Ton van Hoof 2023 426,432 108,000 2022 426,432 Former executives: Daniela Fontana7 2023 90,066 - - - - 21,612 17,624 3,431 25,292 25,292 30,069 2,962 3,234 - - - - - - - - - - - - 304,553 607,377 2,037,042 64.82% 101,518 424,623 775,433 67.85% 1,285 18,682 642 - 8,200 12,277 10,972 59,036 14,051 80,015 - - - - - 529,679 26.18% 45,537 0.00% 455,435 20.26% 629,732 26.52% 550,567 14.53% 11,133 143,750 - - - 244,949 0.00% Total 2023 1,888,500 716,500 17,084 108,621 143,750 20,457 394,548 607,377 3,896,837 44.10% 2022 696,602 - 2,962 51,124 - 14,693 181,533 424,623 1,371,537 44.20% 1. Of the total remuneration recognised in FY23, $911,910 relates to Performance Rights and Incentive Shares earned from prior periods. 2. Movements in accruals for annual leave and reportable fringe benefits are disclosed as non-cash benefits. 3. Other long-term employee benefits represent provisions for long service leave. 4. Amounts disclosed in the table above for remuneration relating to Performance Rights and Incentive Shares are non-cash benefits and represent fair value calculations in accordance with AASB 2 Share-based Payment. Further details are set out in Note 34 to the consolidated financial statements. Total cash remuneration is shown in Table 2 above. 5. This represents the percentage of the total remuneration that relates to performance. 6. 2023 relates to the period from 1 July 2022 (being the date of Mr Becus' appointment as KMP) to 30 June 2023. 7. 2023 relates to the period from 1 March 2023 to 27 April 2023 (being the period of Ms Fontana's tenure as KMP). Incentive awards held by executive KMP Details of all outstanding share-based incentive awards granted to executive KMP are set out in the table below. The maximum possible total value of each grant is the number of instruments granted multiplied by the market value of shares in the Company. The minimum possible total value of each grant is nil. Table 7: Incentive awards held by executive KMP Executive Mark Bayliss Olivia Barry Gary Becus Ton van Hoof Type of award Incentive shares1 Performance Rights Performance Rights Performance Rights Performance Rights Performance Rights Grant date 28 April 2022 28 April 2022 Performance period 1 July 2022 - 30 June 2026 1 July 2022 - 30 June 2026 1 September 2022 1 July 2022 - 30 June 2026 1 September 2022 1 July 2022 - 30 June 2026 1 September 2022 1 July 2022 - 30 June 2026 26 April 2021 1 July 2020 - 30 June 2023 Number granted 200,000 Performance conditions Service Vesting date July 2023 1, 500,000 Share price 140,000 Share price 92,000 Share price 126,000 Share price 185,185 Absolute TSR hurdle and indexed TSR June 2026 sunset date June 2026 sunset date June 2026 sunset date June 2026 sunset date September 2023 1. Mr Bayliss’ incentive shares vested on 1 July 2023. 33 33 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 5. Non-executive Director fee arrangements Fees in FY23 During FY23, Non-Executive Director (NED) fees were paid out of an aggregate fee pool of $1.0 million. The fee pool is inclusive of statutory entitlements (including superannuation). NED fees consist of Board fees and committee fees. The payment of additional fees for serving on a committee recognises the additional time commitment required by NEDs. The Chairman of the Board is not eligible for additional fees for serving on committees. Fees are not linked to performance and no STI or LTI is provided to NEDs. In June 2022, the Board reviewed the NED fees for FY23 and implemented a 15% reduction to Non- Executive Director Board and Committee fee arrangements. The table below summarises NED fees payable in respect of FY23. Table 8: Board and Committee fees Board Audit and Risk Committee Remuneration and Nominations Committee Chairman $ Member $ 200,000 20,000 20,000 90,000 10,000 10,000 No fees were paid for the Board Chairman role in FY23 given that Mr Bayliss was Executive Chairman during FY23 and separately remunerated as highlighted in this Remuneration Report. The Board and committee fees outlined in the table above include statutory superannuation contributions. NEDs do not receive retirement benefits other than statutory superannuation. Fees in FY24 For FY24, the Board has decided to leave the Board and Committee fees unchanged. Non-executive Director remuneration in FY23 The statutory remuneration of each NED for FY23 is set out in the table below. Table 9: FY23 NED remuneration (statutory) Executive Brent Cubis1 Non-executive Director Jennifer Horrigan2 Non-executive Director Clifford Rosenberg3 Non-executive Director David Grant Non-executive Director Total fees 2023 2023 2022 2023 2022 2023 2022 2023 2022 Short term benefits Post-employment benefits Salary and fees $ Superannuation benefits $ 90,000 120,000 134,509 110,000 130,342 32,485 177,973 352,485 442,824 - - - - - 3,411 15,490 3,411 15,490 Total $ 90,000 120,000 134,509 110,000 130,342 35,896 193,463 355,896 458,314 1. Mr Cubis' fees were invoiced and paid monthly to Cubes Advisory Pty Ltd. 2. Ms Horrigan's fees were invoiced and paid monthly to Scarp Consulting Pty Ltd as trustee for The MacDonald Horrigan Family Trust. 3. Mr Rosenberg’s fees were invoiced and paid monthly to Rosenberg Trading Pty Ltd, a personal services company nominated by him. 34 A2B Annual Report 2023 34 A2B Australia Limited and its Controlled Entities Annual Financial Report Year Ended 30 June 2023 6. Additional disclosures relating to securities Shares In order to align the interests of NEDs with the Company’s shareholders, the Board has adopted a policy that requires each NED to accumulate a minimum shareholding equivalent to their annual base fee. NEDs have three years from their appointment date to meet the expected level of share ownership. Executive KMP’s are granted Performance Rights which convert into shares on the achievement of performance measures. As indicated on page 36, no rights were vested during FY23. The relevant interests of each KMP (and their related parties) in the share capital of the Company for FY23 are detailed in the table below. Table 10: Shareholdings of KMP and their related parties Balance 1 July 2022 Received as remuneration Net other change Balance 30 June 2023 Direct interest Indirect interest Direct interest Indirect interest Direct interest Indirect interest Direct interest Indirect interest Non-executive Director Brent Cubis Jennifer Horrigan1 Clifford Rosenberg2 - - - - - 111,307 David Grant 35,000 Executive Mark Bayliss Olivia Barry Gary Becus Ton van Hoof3 800,000 3,807 - - - - - - 14,139 - - - - - - - - - - - - - - - - - - - - - - - - - 102,122 - - - - - - - - - - 102,122 111,307 35,000 800,000 3,807 - - - - - - 14,139 1. The indirect shares are 102,122 fully paid ordinary shares held by Macdonald Horrigan Family Holdings as trustee for Macdonald Horrigan Family Superannuation Fund. 2. The indirect shares are 111,307 fully paid ordinary shares held by The Rosenberg Company Pty Ltd as trustee for The Rosenberg Superannuation Fund. 3. The indirect shares are 14,139 fully paid ordinary shares held by MLC Wrap Super Series 2 Fund. 35 35 A2B Australia Limited and its Controlled Entities Rights Annual Financial Report Year Ended 30 June 2023 The table below details the rights and incentive shares granted to executive KMP as part of their remuneration during FY23 and LTI rights from an earlier LTI plan (2014) which lapsed during FY23. Table 11: Rights granted to executive KMP Balance 1 July 2022 1,500,000 - Number of rights granted in FY23 - Value of rights granted in FY231 - 140,000 $85,867 - 92,000 $56,427 Mark Bayliss Olivia Barry Gary Becus Ton van Hoof2 323,116 126,000 $77,280 Net other change Vested - - Value of rights vested - Lapsed Balance 30 June 2023 - 1,500,000 - - - - - - - - - - 140,000 92,000 - 137,931 311,185 1. The fair values of the Performance Rights granted are detailed in Note 34 to the consolidated financial statements. 2. Includes Performance Rights under the earlier LTI Plan approved in November 2014. 3. As at the end of the reporting period, no member of the KMP was holding any vested and exercisable or vested and unexercisable rights. 7. Transactions with KMP and their related parties No loans were made, guaranteed, or secured, to KMP or any of their related parties. There were no transactions between the Company (or any of its controlled entities) and any KMP (or their related parties) other than those within the normal employee, customer or supplier relationship on terms no more favourable than arms’ length. Information about these transactions would not adversely affect investment decisions by shareholders, or the discharge of accountability by KMP. 8. Shareholder voting for the 2022 Remuneration Report The Company received a “yes” vote on 95% of votes cast on its Remuneration Report for the 2022 financial year. The Board is committed to ongoing and transparent engagement with all stakeholders. It will continue to review the effectiveness of the Company’s remuneration practices and their alignment with strategic performance objectives to appropriately reward its executives and deliver shareholder value. 36 A2B Annual Report 2023 36 Auditor’s Independence Declaration Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of A2B Australia Limited I declare that, to the best of my knowledge and belief, in relation to the audit of A2B Australia Limited for the financial year ended 30 June 2023 there have been: i. ii. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. KPM_INI_01 PAR_SIG_01 PA_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 Yours faithfully KPMG Cameron Slapp Partner Sydney 22 August 2023 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used unde r license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legisl ation. 37 37 Consolidated Financial Statements Table of Contents Consolidated statement of comprehensive income ............................................................................. 40 Consolidated statement of financial position ......................................................................................... 41 Consolidated statement of cash flows .................................................................................................... 42 Consolidated statement of changes in equity ....................................................................................... 43 Notes to the consolidated financial statements ..................................................................................... 44 1. Reporting entity...................................................................................................................................... 44 2. Basis of preparation .............................................................................................................................. 44 3. Revenue and other income ................................................................................................................ 47 4. Finance income ..................................................................................................................................... 50 5. Direct mobility and payment related expenses.............................................................................. 51 6. Income tax expense ............................................................................................................................. 52 7. Trade and other receivables ............................................................................................................... 53 8. Inventories ............................................................................................................................................... 55 9. Assets held for sale ................................................................................................................................ 55 10. Property, plant and equipment ...................................................................................................... 55 11. Taxi plate licences ............................................................................................................................. 57 12. Goodwill ............................................................................................................................................... 60 13. Intellectual property .......................................................................................................................... 62 14. Net deferred tax assets ..................................................................................................................... 64 15. Financial assets ................................................................................................................................... 66 16. Trade and other payables ............................................................................................................... 66 17. Loans and borrowings ....................................................................................................................... 66 18. Provisions .............................................................................................................................................. 67 19. Share capital and Reserves ............................................................................................................. 69 20. Dividends ............................................................................................................................................. 70 21. Earnings per share .............................................................................................................................. 71 22. Dividend franking balance .............................................................................................................. 71 23. Parent entity disclosures ................................................................................................................... 72 24. Deed of Cross Guarantee ................................................................................................................ 72 25. Related Party and Key Management Personnel disclosures .................................................... 75 26. Remuneration of auditors ................................................................................................................. 75 27. Particulars relating to controlled entities ....................................................................................... 76 28. Capital expenditure commitments ................................................................................................ 77 38 A2B Annual Report 2023 38 29. Contingencies .................................................................................................................................... 77 30. Right of use assets and lease liabilities ........................................................................................... 77 31. Notes to the consolidated statement of cash flows ................................................................... 79 32. Financial instruments and financial risk management ............................................................... 81 33. Operating segment ........................................................................................................................... 85 34. Share-based payment – Long term incentive ............................................................................. 88 35. Subsequent events ............................................................................................................................ 89 Directors’ Declaration............................................................................................................................... 90 Independent Auditor’s Report….…………………………………………………………………………………..91 39 39 Consolidated statement of comprehensive income For the year ended 30 June 2023 Revenue Other income Direct mobility and payment related expenses Employee benefits expenses Advertising and marketing expenses Technology and communications expenses Depreciation and amortisation expenses Impairment charges Other expenses Results from operating activities Finance income Finance costs Net finance costs Profit/(Loss) before income tax Income tax (expense) / benefit Profit/(Loss) for the period Notes 3 3 5 10, 12, 13 4 6 2023 $'000 147,251 23,194 170,445 2022* $'000 126,138 2,637 128,775 (31,742) (36,020) (66,729) (61,128) (11,221) (2,746) (11,288) (12,235) (10,999) (16,177) - (10,249) (19,869) (15,555) (38,500) 31,762 4 34 (1,222) (3,538) (1,218) (3,504) (39,718) 28,258 11,900 (1,195) (27,818) 27,063 Other comprehensive income Items that may be reclassified subsequently to profit or loss: Foreign exchange translation differences, net of tax Other comprehensive income/(loss) for the period, net of income tax Total comprehensive income/(loss) for the period Attributable to: Owners of the Company Non-controlling interest Total profit/(loss) for the period Owners of the Company Non-controlling interest Total comprehensive income/(loss) for the period Earnings per share Total attributable to owners of the Company: Basic earnings per share Diluted earnings per share 88 88 27,151 (76) (76) (27,894) 26,792 271 27,063 (28,118) 300 (27,818) 26,880 271 27,151 (28,194) 300 (27,894) 21 21 22.1 cents 21.4 cents (23.3 cents) (23.3 cents) * The comparative information has been re-stated and certain operating expenses have been reclassified to better reflect the nature of the expenses. Refer to Note 2. The consolidated statement of comprehensive income is to be read in conjunction with the notes to the consolidated financial statements. 40 A2B Annual Report 2023 40 Consolidated statement of financial position As at 30 June 2023 Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Assets held for sale Total current assets Non-current assets Trade and other receivables Property, plant and equipment Taxi plate licences Goodwill Intellectual property Right-of-use assets Net deferred tax assets Financial assets Total non-current assets Total assets Current liabilities Trade and other payables Loans and borrowings Lease liabilities Current tax liabilities Deferred income Provisions Total current liabilities Non-current liabilities Loans and borrowings Lease liabilities Deferred income Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Profits reserve Retained losses Total equity attributable to equity holders of the Company Non-controlling interest Total equity Notes 2023 $'000 2022 $'000 31 7 8 9 7 10 11 12 13 30 14 15 16 17 30 18 17 30 18 19 19 19 29,541 45,762 3,157 3,490 10,438 92,388 12,295 60,254 3,667 3,322 - 79,538 5,598 16,730 1,341 27,487 13,468 4,123 22,740 963 92,450 184,838 5,303 23,673 1,349 27,487 12,722 6,517 20,507 977 98,535 178,073 38,193 602 1,195 3,096 118 7,580 50,784 55,880 1,649 1,556 310 118 8,112 67,625 15,000 3,453 118 1,257 19,828 70,612 114,226 17,274 5,530 236 1,268 24,308 91,933 86,140 138,325 3,230 45,615 (74,428) 112,742 1,484 114,226 138,325 2,016 18,823 (74,428) 84,736 1,404 86,140 The consolidated statement of financial position is to be read in conjunction with the notes to the consolidated financial statements. 41 41 Consolidated statement of cash flows For the year ended 30 June 2023 Cash flows from operating activities Receipts from customers and others Payments to suppliers, licensees and employees Dividends received Interest received Finance costs paid Income tax (paid) / received Net cash provided by / (used in) operating activities Cash flows from investing activities Purchase of property, plant and equipment Payments for development of intellectual property Proceeds from sale of property Proceeds from sale of plant and equipment Government compensation for cancelling tradeable value of Taxi licences Net cash provided by / (used in) investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Payment of lease liabilities Dividends paid to non-controlling interest in subsidiaries Net cash (used in) / provided by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Effect of movements in exchange rate on cash held Cash and cash equivalents at 30 June Notes 2023 $'000 2022 $'000 1,023,208 (1,010,961) - 32 (1,728) (178) 10,373 733,673 (744,600) 167 1 (1,014) 5,529 (6,244) (5,606) (4,540) 19,000 1,322 (4,044) (4,731) - 449 1,630 11,806 - (8,326) 5,000 (8,321) (1,489) (191) (5,001) 17,178 12,295 68 29,541 17,347 (288) (2,021) (83) 14,955 385 11,874 36 12,295 31 31 The consolidated statement of cash flows is to be read in conjunction with the notes to the consolidated financial statements. 42 A2B Annual Report 2023 42 Consolidated statement of changes in equity For the year ended 30 June 2023 Balance at 1 July 2022 Total comprehensive income/(loss) for the period: Profit for the period Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners: Transfer to profits reserve Share-based payments Dividends to non-controlling interest in subsidiaries 34 Balance at 1 July 2021 Total comprehensive income/(loss) for the period: (Loss)/profit for the period Other comprehensive (loss) Total comprehensive (loss)/income for the period Transactions with owners in their capacity as owners: Share-based payments Dividends to non-controlling interest in subsidiaries 34 - - - - - - - - - - - - - Notes Share capital $'000 138,325 Other reserves $'000 Profit reserves $'000 Retained losses $'000 Non- controlling interest $'000 2,016 18,823 (74,428) 1,404 Total equity $'000 86,140 27,063 88 27,151 - 1,126 (191) 935 114,226 - 88 88 26,792 - 26,792 - - - 26,792 (26,792) 1,126 - - 1,126 3,230 26,792 (26,792) 45,615 (74,428) 271 - 271 - - (191) (191) 1,484 - (76) (76) 1,133 - 1,133 2,016 - - - - - - (28,118) 300 (27,818) - - (76) (28,118) 300 (27,894) - - - - 1,133 (83) (83) (83) 1,050 18,823 (74,428) 1,404 86,140 Balance at 30 June 2023 138,325 138,325 959 18,823 (46,310) 1,187 112,984 Balance at 30 June 2022 138,325 The consolidated statement of changes in equity is to be read in conjunction with the notes to the consolidated financial statements. 43 43 Notes to the consolidated financial statements For the year ended 30 June 2023 1. Reporting entity A2B Australia Limited (the Company) is a company domiciled in Australia. The address of the Company's registered office is 9-13 O’Riordan Street, Alexandria. The Consolidated Financial Statements as at and for the year ended 30 June 2023 comprise the Company and its subsidiaries (together referred to as the Group). The Group is a for-profit entity and during the year ended 30 June 2023 was involved in providing technology, booking, dispatch, payment and Taxi related services. 2. Basis of preparation Statement of compliance The Consolidated Financial Statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The Consolidated Financial statements comply with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB). The Consolidated Financial Statements were authorised for issue by the Board of Directors on 22 August 2023. Going concern The financial report has been prepared on a going concern basis. During FY23, the Company returned to profitability, delivered on its ‘Better Before Bigger” turnaround strategy and returned to a net cash position at 30 June 2023. The momentum gained in FY23 continued in the early months of FY24 and management is confident that budget targets for FY24 showing revenue and earnings growth are achievable with the Company experiencing continued profitable growth. As of 30 June 2023, the Group had access to $29.5 million in liquidity and reported a net cash position of $13.9 million. This is an improvement of $20.5 million compared with last year. At 30 June 2023, the Group had access to a working capital facility of $15 million expiring in September 2024. This facility has been renegotiated in August 2023 and extended to September 2026. Management has prepared cash flow forecast scenarios based on A2B’s new strategic plan. The business is expected to continue improving its cash flow position through sustainable growth, supported by its recently implemented strategy and cost control initiatives. These cash flow forecasts demonstrate that the Group has sufficient cash and credit facilities to enable the Group to meet its obligations as they fall due. Therefore, the directors believe that it remains appropriate to prepare the financial statements on a going concern basis and have a reasonable expectation that the Group will comply with the requirements of its debt facilities during the next 12 months from the date of which the financial report is authorised for issue. Interests in land and buildings A2B’s interests in land and buildings, excluding the properties held for sale, are accounted for under Property, Plant and Equipment and are measured at cost less accumulated depreciation and impairment losses. The book value of A2B’s interest in land and buildings, relating to one property located in Melbourne, was $2.2 million as at 30 June 2023. Please refer to Note 10 for further information. 44 A2B Annual Report 2023 44 During FY23 the Company entered into contracts to sell both of its properties located in Alexandria, Sydney. The property at 9-13 Bourke Road settled on 29 May 2023 and the property located at 9-13 O’Riordan Street is expected to settle in December 2023. Refer to Note 9 for further information concerning assets held for sale. Basis of measurement The Consolidated Financial Statements have been prepared on the historical cost basis except for financial assets (unlisted investments), which are measured at fair value through other comprehensive income. Functional and presentation currency These Consolidated Financial Statements are presented in Australian dollars, which is the Company's functional currency and the functional currency for the majority of the Group entities. The Company is of a kind referred to in ASIC Corporation Instrument 2016/191 (Rounding in Financial/Directors’ Reports) and in accordance with that Instrument, amounts in the Consolidated Financial Statements and the Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Use of estimates and judgements The preparation of Consolidated Financial Statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the Consolidated Financial Statements are described in the following notes: Note 7 Trade and other receivables Note 10 Property, plant and equipment Note 11 Taxi plate licences Note 12 Goodwill Note 13 Intellectual property Transactions eliminated on consolidation Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the Consolidated Financial Statements. 45 45 Change in classification During the year ended 30 June 2023, the Group updated the classification of certain operating expenses to better reflect the nature of these expenses. Comparative amounts in the consolidated statement of comprehensive income were re-stated as follows: Restated financial statement disclosure Direct mobility and payment related expenses Payment processing costs School taxi and bus route services cost Other Taxi related costs June 2022 $'000 (1,407) (7,729) (1,446) (10,582) Previous financial statement disclosure Other expenses June 2022 $'000 Other expenses (10,582) (10,582) Refer to Note 5 for further details of direct mobility and payment related expenses. New accounting standards (a) New and amended accounting standards adopted by the Group During the year, the Group has applied a number of new and revised accounting standards issued by the Australian Accounting Standards Board (AASB) that are mandatorily effective for an accounting period that begins on or after 1 July 2022, as follows: AASB 2020-3 Amendments to Australian Accounting Standards – Annual Improvements 2018-2020 and Other Amendments, including: ▪ Amendments to AASB 137 – Onerous Contracts – Cost of Fulfilling a Contract. ▪ Amendments to AASB 116 – Property, Plant and Equipment: Proceeds before Intended Use. ▪ Reference to the Conceptual Framework (Amendments to AASB 3). Based on AASB 137 Provisions, Contingent Liabilities and Contingent Assets, the full cost approach was utilised and hence there was no impact on measurement of onerous contracts. None of the above new and amended accounting standards have had a significant impact on the Group’s consolidated financial statements. (b) New accounting standards and interpretations not yet adopted The following standards, amendments to standards and interpretations are relevant to current operations. They are available for early adoption but have not been applied by the Group in this Financial Report. ▪ AASB 2020-1 and 2020-6 Classification of liabilities as current or non-current. ▪ AASB 2021-2 Amendments to Australian Accounting Standards – Disclosure of Accounting Policies and Definition of Accounting Estimates. ▪ AASB 2021-5 Amendments to Australian Accounting Standards – Deferred Tax related to Assets and Liabilities arising from a Single Transaction. ▪ AASB 17 Insurance Contracts. ▪ AASB 2020-5 Amendments to Australian Accounting Standards – Insurance Contracts. ▪ AASB 2022-1 Amendments to Australian Accounting Standards – Initial Application of AASB 17 and AASB 9 Comparative Information. ▪ AASB 2022-5 Amendments to AASB 16 Leases – Lease Liability in a Sale and Leaseback. 46 46 A2B Annual Report 2023 ▪ AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture. ▪ AASB 2022-7 Editorial Corrections to Australian Accounting Standards and Repeal of Superseded and Redundant Standards. ▪ AASB 2022-6 Amendments to Australian Accounting Standards – Non-current Liabilities with Covenants. ▪ AASB 2023-1 Amendments to Australian Accounting Standards – Supplier Finance Arrangements. ▪ AASB 2023-2 Amendments to Australian Accounting Standards – International Tax Reform – Pillar Two Model Rules. AASB 17 Insurance Contracts (AASB 17) will be first applicable to the Group for the financial year commencing 1 July 2023 and must be applied retrospectively. Insurance contracts are defined as contracts ‘under which one party (the issuer) accepts significant insurance risk from another party (the policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder’. AASB 17 establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts. Management is in the process of determining the impact and no material items have been identified to date. 3. Revenue and other income Revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control over a product or service to a customer. The following is a description of the Group’s principal activities from which the Group generates its revenue: Payment processing revenue Payment processing revenue is derived from payments processed through the A2B Payment System and is disclosed net of Goods and Services Tax (GST) and third party credit card fees. Payments processed through the A2B taxi payment system relate to the total transaction value processed. As the Group acts in the capacity of an agent, the revenue represents only the fee received on the transaction, although the Group is exposed to credit risk on the full amount of the payments processed. Payment processing revenue is recognised at the point in time when the payment is processed. Network subscription and Taxi plate licence income Network subscription fee and Taxi plate licence incomes are billed every month in advance. Revenue is recognised over the period when the services are provided. Other Taxi related services income Other Taxi related services income is generated from the fit-out of vehicles as Taxis, and repair and replacement of in-vehicle Taxi equipment. Revenue is recognised over the period when the services are provided, or a point in time when the Group has transferred the control to the buyer through ownership, generally when the customer has taken delivery of the goods. Taxi operating income Taxi operating income is derived from the rental of vehicles to Independent Drivers. This revenue is recognised on a straight-line basis over the time when services are rendered, whichever is applicable. 47 47 Courier service income Courier service income was generated from providing courier dispatch services to Customers, of which revenue is recognised at the point in time when services are rendered. Revenue was also generated from subscriptions by courier agents, which was recognised over the period when the services are rendered. This business was sold in August 2022. Insurance commission revenue Insurance commission revenue comprised of brokerage fees received from referrals to insurance products. Revenue is recognised at the point in time when the referral has been fully rendered. Hardware sales income Sales of hardware are recognised at the point in time when the Group has transferred the control to the buyer through ownership, generally when the customer has taken delivery of the goods. Hardware sales primarily relate to the sale of Taxi equipment. Car sales income Car sales income is generated through the sale of cars to Taxi Operators. This revenue is recognised at a point in time when the ownership of the car is transferred to Customers. School taxi and bus route services revenue School taxi and bus route services revenue is based on contracts for these services with Government departments. It is billed in arrears and recognised over the period when services are rendered. Taxi Subsidy Scheme revenue The Taxi Subsidy Scheme (TSS) revenue is derived from providing services to issue TSS cards and process Taxi travel transactions of TSS participants in some states and territories. It is billed monthly in arrears and is recognised over the period when services are rendered. Software consulting and licence income Software consulting and licence income is derived through the provision of a software license to a licensee for the return of a fixed fee. Software consulting income is derived in relation to consulting and software development. It is recognised over time when services are rendered. Other revenue Other revenue is generated from ancillary Taxi operations. It is recognised at a point in time or over time, whichever is applicable, when services are rendered. Interest on finance lease receivables Interest earned on vehicle and insurance loans is recognised on a basis reflecting a constant periodic return based on the lessor’s net investment outstanding in respect of the loan. 48 A2B Annual Report 2023 48 Taxi equipment and terminal rental income Taxi equipment and terminal rental income is derived from the rental of Taxi equipment and payment terminals. This revenue is recognised at a point in time or over time when services are rendered, whichever is applicable. Revenues Revenue from contracts with customers Payment processing revenue Network subscription income Brokered Taxi plate licence income Owned Taxi plate licence income Other Taxi related services income Taxi operating income Courier service revenue Insurance commission revenue Car and hardware sales income School taxi and bus route services revenue Taxi Subsidy Scheme revenue Software consulting and licence income Other Total revenue from contracts with customers Other revenue Interest on finance lease receivables and others Taxi equipment and terminal rental income Total other revenue Total revenue 2023 $'000 2022 $'000 35,350 54,234 4,608 461 1,895 6,718 315 1,094 8,626 11,052 3,620 5,442 4,684 138,099 25,707 42,408 2,487 125 1,747 9,483 3,149 917 5,711 6,382 3,986 5,291 11,849 119,242 1,210 7,942 9,152 147,251 1610 5,286 6,896 126,138 For more information about receivables and contract liabilities from contracts with customers, refer to Notes 7 and 16, respectively. No information is provided about remaining performance obligations at 30 June 2023 or at 30 June 2022 that have an original expected duration of one year or less, as allowed by AASB 15. Other income Non-operating activities Government grants Gain on disposal of property, plant and equipment Net gain on property transactions NSW taxi plate licence compensation - impairment reversal Total other income 2023 $'000 2022 $'000 215 83 21,274 1,622 23,194 2,496 141 - - 2,637 49 49 Government grants In FY23 the Group recognised $215,000 (FY22 $2,378,000) income from Government grants. There were no new Government grants available to the Group in FY23. Net gain on property transactions Included in the gain on disposal of property, plant and equipment is the net gain from the sale of the Bourke Road, Alexandria property in May 2023 and the net gain from a land swap. NSW taxi plate licence compensation – impairment reversal The Company has recognised as other income the reversal of the impairment resulting from compensation received from the NSW Government to compensate owners of NSW taxi plate licences following legislative changes in FY23. Total turnover Total turnover in FY23 was $1,002 million (FY22 $733 million) and does not represent revenue in accordance with Australian Accounting Standards. Total turnover represents the value of Taxi hire charges (fares) paid through the Cabcharge Payment System plus Cabcharge's Taxi service fee plus the Group’s revenue from other sources. A2B's credit risk is based on turnover rather than revenue. The receipts from customers and others as disclosed in the consolidated statement of cash flows includes the total turnover. 4. Finance income Finance income comprises interest income on funds invested and foreign currency gains. Interest income is recognised as it accrues using the effective interest method. Finance income Interest income Total finance income 2023 $'000 2022 $'000 34 34 4 4 50 A2B Annual Report 2023 50 5. Direct mobility and payment related expenses Direct mobility and payment related expenses Payment processing costs Brokered Taxi plate licence costs Taxi operating expenses School taxi and bus route services cost Courier service expenses Cost of cars and hardware sold Other Taxi related costs 2023 $'000 2022 $'000 (6,982) (4,198) (2,769) (9,028) (191) (7,756) (5,096) (36,020) (5,098) (2,059) (5,333) (5,090) (1,979) (5,507) (6,676) (31,742) Payment processing costs Payment processing costs are fees paid to Taxi Networks and Drivers relating to payments processed through the A2B Payment System. Brokered taxi license plate costs Brokered taxi license plate costs consist of taxi licence plate fees paid to Taxi licence owners and Government. Taxi operating expenses Taxi operating expenses are all running expenses related to operating A2B’s owned fleet of taxis. This fleet makes up a small proportion (<5%) of all vehicles affiliated with A2B’s network. School taxi and bus route services cost School taxi and bus route services costs are those expenses incurred in providing transport services contracted with Government departments. Courier service expenses Courier service expenses are all expenses incurred by the Group related to the provision of courier dispatch services. This business was sold in August 2022. Cost of cars and hardware sold The cost of cars and hardware sold represents the cost of goods sold, the cost of acquiring cars and hardware that the Group sells. Other Taxi related costs Other Taxi related costs include all costs related to fitting out of vehicles as Taxis. 51 51 6. Income tax expense Income tax expense comprises current and deferred tax. Income tax expense is recognised except to the extent that it relates to a business combination or items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. A2B Australia Limited and its wholly owned Australian resident subsidiaries form a tax consolidated group. The current tax rate applicable to the group is 30%. Amounts recognised in profit and loss Current income tax expense (benefit) Current year Capital losses utilised Adjustment for prior years Deferred tax expense Origination and reversal of temporary differences Utilisation of previously unbooked tax losses Origination and reversal of temporary differences Total income tax expense (benefit) Numeric reconciliation between tax expense and pre-tax profit Profit / (loss) before tax from continuing operations Prima-facie income tax using the corporate tax rate of 30% Effect of tax rates in foreign jurisdiction Add tax effect of: Non-deductible depreciation Other non-deductible items Less tax effect of: Rebatable fully franked dividends Capital losses utilised Origination and reversal of temporary differences Recognition of previously unbooked tax losses Adjustment for prior years - tax payable Income tax expense / (benefit) Effective tax rate on pre-tax profit 2023 $'000 2022 $'000 7,592 (6,597) (13,002) - - 34 (12,968) 995 976 1,296 - (228) (776) 1,195 - (11,900) 2023 $'000 2022 $'000 28,258 8,477 (186) (39,718) (11,915) (117) 281 102 305 60 (39) - - (106) (6,597) (776) - (228) - 34 (11,900) 1,195 30.0% 4.2% 52 A2B Annual Report 2023 52 Amounts recognised in other comprehensive income 2023 Tax (expense) Benefit $'000 Before tax $'000 2022 Tax (expense) Net of tax $'000 Before tax $'000 Benefit Net of tax $'000 $'000 Items which may be reclassified subsequently to profit or loss: Foreign exchange translation differences (88) - (88) 76 - 76 (88) - (88) 76 - 76 7. Trade and other receivables Trade receivables are recognised initially at the value of the invoice sent to the Customer and subsequently at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses are recognised in profit or loss. Any gains or losses on derecognition is recognised in profit or loss. The Group derecognises a financial asset when contractual rights to the cash flows from the financial assets expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial assets are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. Finance lease receivables When the Group is the lessor in a lease agreement that transfers substantially all of the risks and rewards incidental to ownership of an asset to the lessee, the arrangement is classified as a finance lease and a receivable equal to the net investment in the lease is recognised and presented within trade and other receivables. Impairment The Group has specifically assessed the circumstances of individual customers in the current environment. A specific doubtful debt provision accounts for most of the Group's allowance for impairment as at 30 June 2023. In addition, the Group recognises an allowance for expected credit losses using the simplified approach allowed under AASB 9. Expected credit losses are based on the difference between the contractual cash flows due and all the cash flows that the Group expects to receive. The collective loss allowance is determined based on the historical default rate. Write-off The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. The Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group's procedures for recovery of amounts due. 53 53 Current Trade receivables Accumulated impairment losses Finance lease receivables Other receivables Non-current Finance lease receivables Movement in allowance for impairment Opening balance Net remeasurement in allowance for impairment Amount written off as uncollectable Closing balance Ageing of trade receivables 2023 $'000 2022 $'000 37,184 (3,551) 3,907 8,222 45,762 55,216 (6,937) 3,356 8,619 60,254 5,598 5,598 5,303 5,303 (6,937) (235) 3,621 (3,551) (7,366) (1,973) 2,402 (6,937) Not past due Past due 1 - 30 days Past due 31 - 60 days Past due 61 - 90 days Past due over 90 days Gross $'000 30,446 1,359 251 304 4,824 37,184 2023 Impairment $'000 (187) (42) (84) (73) (3,165) (3,551) Net $'000 30,259 1,317 167 231 1,659 33,633 Gross $'000 44,056 3,162 739 354 6,905 55,216 2022 Impairment $'000 (411) (352) (489) (293) (5,392) (6,937) Net $'000 43,645 2,810 250 61 1,513 48,279 The Group’s credit risk management policies are outlined in Note 32. There have been no changes to the credit risk management policies during the year. Finance lease receivables 2023 2022 Future minimum lease payments $'000 4,713 6,326 11,039 Interest $'000 806 728 1,534 Present value of minimum lease payments $'000 3,907 5,598 9,505 Future minimum lease payments $'000 4,080 5,849 9,929 Present value of minimum lease payments $'000 3,356 5,303 8,659 Interest $'000 724 546 1,270 Less than one year Between one and five years There have been no unguaranteed residual values. No lease payments are considered uncollectable at the reporting date. Collateral is held in the case of finance lease receivables, where the Group holds a lien over the leased asset. The market value of such collateral is not expected to vary materially from the net investment value of the finance lease receivables. There has been no change in credit risk policies during the financial year. 54 A2B Annual Report 2023 54 8. Inventories Inventories are measured at the lower of cost and net realisable value. Costs are assigned on a first- in, first-out basis and include direct materials and the cost of purchase. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Motor vehicles in transit Parts, safety cameras and sundries - at cost 2023 $'000 709 2,448 3,157 2022 $'000 769 2,898 3,667 In 2023, inventories of $9,708,000 (2022: $7,826,000) were recognised as an expense during the year and included in “cost of cars and hardware sold” and “other taxi related costs”. 9. Assets held for sale Non-current assets are classified as held for sale if it is highly probable that they will be recovered primarily through sale rather than through continuing use. Such assets are generally measured at the lower of their carrying amount and fair value less costs to sell. Once classified as held for sale, property, plant and equipment is no longer depreciated. On 29 May 2023, settlement took place on the sale of the Company’s property at 9-13 Bourke Road, Alexandria for $19.0 million. The net gain from the sale of this property is reflected in ‘Other Income’ in the Consolidated Statement of Comprehensive Income, refer to Note 3. On 30 March 2023. the Group exchanged contracts for the sale of its property at 9-13 O’Riordan Street, Alexandria for $78 million. Settlement is expected in December 2023. Accordingly, the Group’s interest in the O’Riordan Street property has been classified as an asset held for sale. The sale prices for both Alexandria properties are in line with the independent valuation for the property undertaken by a registered qualified valuer in May 2022. Property, plant and equipment at cost Accumulated depreciation 2023 $'000 2022 $'000 14,945 (4,507) 10,438 - - - 10. Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the item. Depreciation Items of property (excluding freehold land), plant and equipment are depreciated at rates based upon their expected useful lives using the straight-line method. Leased assets are depreciated over the shorter of the lease term and their useful lives. 55 55 The estimated useful lives of each major class of asset for the current and comparative periods are: ▪ Buildings ▪ ▪ ▪ EFTPOS Equipment Leasehold improvements Furniture, fittings, plant and equipment 40 to 50 years 10 years 3 to 8 years 4 to 8 years Depreciation methods, useful lives and residual values are reassessed at each reporting date. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within other income/other expense in profit or loss. Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the profit or loss during the financial period in which they are incurred. Impairment testing The property, plant and equipment is allocated to the two groups of Cash Generating Units (CGU) according to business operation and assessed for impairment based on the methodology described in Note 12. If the recoverable amount of specific property, plant and equipment is identified to be less than its carrying value, an impairment charge is recognised in the profit or loss and the carrying value of the asset is written-down to its recoverable amount. Should the recoverable amount increase in future periods the carrying value may be adjusted to the lower of the recoverable value or the amortised cost of the asset had it not been impaired. Independent valuations of interests in land and buildings In monitoring market values for the Group's interest in land and buildings the directors have relied upon independent valuations from registered qualified valuers. Amounts disclosed below represent the fair value of the Group's interest in land and buildings that were not held for sale at 30 June 2023, as determined at the time of the most recent independent valuation report. Independent registered qualified valuers are engaged to perform the valuations. The values are determined based on the highest and best use of the property. The fair value disclosure has been categorised as a Level 3 fair value based on certain unobservable inputs to the valuation techniques used. The valuers have used either a capitalisation of net income approach or a direct comparison approach to determine the fair value. The significant inputs to the capitalisation of net income approach included the forecast net income, adopted capitalisation rate and the discount rate. The significant inputs to the direct comparison approach included the land value range per square metre and the estimated demolition costs. The fair values determined by the independent registered qualified valuers are sensitive to changes in these significant inputs, amongst others. However, overall the fair value of the Group's interest in land and buildings is significantly higher than the book value of these interests. The above market valuations do not consider the potential impact of capital gains tax. Following the completion of A2B’s property portfolio review, the Board decided in July 2023 to also market its remaining Melbourne property. Further detail can be found in Note 35, Subsequent Events. 56 A2B Annual Report 2023 56 Furniture, fittings, plant & equipment $'000 Land & buildings $'000 Eftpos equipment $'000 Total $'000 15,976 5,247 (1,641) (13,584) 5,998 78,925 4,622 (3,184) (1,361) 79,002 135,898 40,997 10,876 1,007 - (4,825) - (14,945) 127,004 42,004 (5,976) (580) 751 4,254 (1,551) (67,111) (4,169) 2,444 253 (68,583) (112,225) (39,138) (1,002) (5,751) - 3,195 - 4,507 (110,274) (40,140) 10,000 4,447 11,814 10,419 1,859 1,864 23,673 16,730 16,292 262 (578) 78,045 3,640 (2,265) - (495) 78,925 15,976 138,905 44,568 4,044 142 (3,713) (6,556) - (495) 135,898 40,997 (62,379) (5,636) (6,359) (610) 270 1,483 - 144 (67,111) (5,976) (105,916) (37,901) (8,779) (1,810) 573 2,326 - 144 (112,225) (39,138) 10,656 10,000 15,666 11,814 6,667 1,859 32,989 23,673 2023 year: Cost Opening balance Additions Disposals Assets held for sale Closing balance Accumulated depreciation Opening balance Depreciation expense Disposals Assets held for sale Closing balance Net book value Opening balance Closing balance 2022 year: Cost Opening balance Additions Impairment Disposals Closing balance Accumulated depreciation Opening balance Depreciation expense Impairment Disposals Closing balance Net book value Opening balance Closing balance 11. Taxi plate licences Taxi and other licences acquired separately are reported at cost less accumulated amortisation and impairment losses. These assets are tested for impairment in accordance with the accounting policy. Taxi plate licences which have indefinite useful lives are tested for impairment in accordance with the policy below. Taxi plate licences with 10 or 50 year lives are amortised over their respective useful life. These taxi plate licences with a finite life are tested for impairment wherever there is any indication that the asset may be impaired. 57 57 Impairment testing Taxi plate licences with indefinite useful lives are tested for impairment annually, and whenever there is any indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. During FY23, the NSW Government announced a compensation scheme for owners of NSW taxi plate licences. The Company has previously impaired the value of NSW taxi licences. Following the compensation announcement, a reversal of prior year impairment losses totalling $1,630,000 has been recognised for those licences that the Company has received compensation for as at 30 June 2023. A corresponding disposal of the NSW taxi plate licences has also been recognised in FY23 to reflect the compensation received. Total compensation received by the Group was $1,630,000 with a net gain of $1,622,000 recognised in FY23. The net gain is reported in Other Income, refer to Note 3. 58 A2B Annual Report 2023 58 Composition and movement 2023 year: Cost Opening balance Additions Impairment reversal Disposals Closing balance Accumulated amortisation Opening balance Amortisation expense Disposals Closing balance Net book value Opening balance Closing balance 2022 year: Cost Opening balance Additions Disposals Closing balance Accumulated amortisation Opening balance Amortisation expense Disposals Closing balance Net book value Opening balance Closing balance Indefinite life Finite life 50 year renewable $'000 $'000 10 year $'000 Total $'000 1,311 - 1,630 (1,637) 1,304 2,195 - - (1) 2,194 3,356 - - 6,862 1,630 - (1,638) 6,854 3,356 - (2,194) - - - (2,194) - - (5,513) (3,319) - - - - (3,319) (5,513) 1,311 1,304 1 37 - 37 1,349 1,341 1,311 - - 1,311 2,195 - - 2,195 - (2,194) - - - (2,194) - - 6,862 3,356 - - - - 3,356 6,862 (5,513) (3,319) - - - - (3,319) (5,513) 1,311 1,311 1 1 37 37 1,349 1,349 59 59 Impairment considerations After assessing the recoverable amount of Taxi plate licences based on value-in-use, using a discounted projected cash flow model, the Group determined that no impairment charge was required (FY22 $Nil). To determine value-in-use, 5 scenarios of free cash flows have been prepared based on estimated Taxi plate licence income for the forthcoming year plus annual growth of between -20% to 5% for years 2 to 5 based on expected market conditions with weights of between 10% to 30% (FY22 between -20% to 5% for years 2 to 5 with weights of between 10% to 30%) and a long term growth rate of between -20% to 0% after 5 years (FY22 -20% to 0%). A post-tax discount rate of 12.5% (FY22 12.4%) was applied in determining the recoverable amount. This long term growth rate reflects an estimation of the long term rental income growth for taxi plates and the discount rate is based on comparable industry market assumptions for the risk free rate, the market risk premium, the cost of debt, the beta and an additional risk weighting for these assets. An increase of 497 basis points in the post-tax discount rate would be required before an impairment of more than $10,000 is incurred. 12. Goodwill Goodwill arising on the acquisition of a subsidiary is included in intangible assets. Goodwill is subsequently measured at cost less accumulated impairment losses. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. The two groups of cash generating units are B2C and B2B. There have been no changes to the CGUs during the year. Impairment considerations For the purpose of impairment testing, goodwill is allocated to groups of Cash Generating Units (CGU), according to business operation and / or geography of operation, which represent the lowest level at which the goodwill is monitored for internal management purposes. Goodwill is allocated to the Group’s CGUs as set out below and assessment of the recoverable amount for each CGU has been performed on a value-in-use basis using discounted cash flow projections. The impairment tests of the goodwill allocated to each CGU as per 30 June 2023 was based on base case scenario for the period FY24-FY28. The base case scenario was prepared based on a forecast EBITDA for the forthcoming year. For the base scenario, the assumed annual growth from FY24 - FY28 is 14.5% for B2C CGU and 14.6% for B2B CGU. The long-term terminal growth rate is 2.1% for both CGU’s. A post-tax discount rate of 12.5% (FY22 12.4%) was applied in determining the recoverable amount. The long-term growth rate reflects the general estimated long term Australian economic growth and the discount rate is based on comparable industry market assumptions for the risk free rate, the market risk premium, the cost of debt and the beta. 60 A2B Annual Report 2023 60 The valuation of the B2C CGU assumes growth driven by an increased fleet and associated revenue. The recoverable amount of the B2C CGU currently exceeds its carrying value in the base case model by $94.8 million. This is based on a compound annual growth rate of 14.5% for EBITDA over the period from FY24 to FY28 terminal year. The valuation of the B2B CGU assumes growth driven by an increase in fares processed and associated revenue. The recoverable amount of the B2B CGU currently exceeds its carrying value in the base case model by $31.2 million. This is based on a compound annual growth rate of 14.6% for EBITDA over the period from FY24 to FY28 terminal year. Management has identified that a reasonably possible unfavourable change in the five-year compound annual EBITDA growth rate, long term growth rate and discount rate assumptions in isolation and in the absence of any mitigating factors would result in the carrying value of the B2C and B2B CGUs becoming equal to the recoverable amount. For B2C, individual changes in key assumptions used in the base case model that would result in nil headroom would be a decrease to -10.0% in FY24-FY28 compound annual EBITDA growth rate, and an increase to 31.9% in the post-tax discount rate. For B2B, individual changes in key assumptions used in the base case model that would result in nil headroom would be a decrease to -0.1% in FY24-FY28 compound annual EBITDA growth rate, and an increase to 23.5% in the post-tax discount rate. B2C B2B 2023 year: Cost Opening balance Additions through acquisition Impairment loss Closing balance 2022 year: Cost Opening balance Additions through acquisition Impairment loss Closing balance Goodwill allocated Impairment loss 2023 $'000 22,954 4,533 27,487 2022 $'000 22,954 4,533 27,487 2023 $'000 - - - B2C $'000 B2B $'000 2022 $'000 - - - Total $'000 22,954 4,533 - - - - - - 4,533 22,954 27,487 27,487 22,954 - - 22,954 4,533 4,533 27,487 - - 27,487 61 61 13. Intellectual property Intangible assets acquired in a business combination Intangible assets acquired in a business combination primarily relating to customer contracts, software, trademarks and brand names are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair values can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date. Trademarks are considered to have indefinite useful lives and such assets are tested for impairment in accordance with the policy below. Software-as-a-Service (SaaS) arrangements SaaS arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the contract period. As such the Group does not receive a software intangible asset at the contract commencement date. The following table outlines the accounting treatment of costs incurred in relation to SaaS arrangements: Recognise as an operating expense over the term of the service contract Recognise as an operating expense as the service is received • Fee for use of application software • Customisation costs • Configuration costs • Data conversion and migration costs • Testing costs • Training costs Costs incurred for the development of software code that enhances or modifies, or creates additional capability to, existing on-premise systems and meets the definition of and recognition criteria for an intangible asset are recognised as intangible software assets. Capitalised development costs Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour, borrowing and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss when incurred. Capitalised development expenditure is measured at cost less accumulated amortisation and impairment losses. Amortisation Items of intellectual property are amortised at rates based upon their estimated useful lives using the straight-line method, and this amortisation is recognised in profit or loss. The estimated useful lives for current and comparative periods are as follows: Customer contracts Software 5 to 8 years 5 years Capitalised development costs (Internally developed applications) 4 to 8 years 62 A2B Annual Report 2023 62 Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Impairment testing The intellectual property is allocated to the two groups of Cash Generating Units (CGU) according to business operation and assessed for impairment based on the methodology described in Note 12. Intangible assets with indefinite useful lives and capitalised development costs (under development) are tested for impairment annually, and whenever there is any indication that the asset may be impaired. Intangible assets with finite useful lives and capitalised development costs (internally developed) are tested for impairment whenever there is any indication that the asset may be impaired. Recoverable amount is the higher of fair value less costs to sell and the value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money. If the recoverable amount of an asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (CGU) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss. Where an impairment loss subsequently reverses, the carrying amount of the asset (CGU) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (CGU) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss. 63 63 Indefinite life Finite life Trademarks Brands $'000 $'000 Customer contracts $'000 Software $'000 Capitalised development costs Under development $'000 Internally developed $'000 Total $'000 2023 year: Cost Opening balance Additions - internally developed Disposals Transfer Closing balance Accumulated amortisation Opening balance Amortisation expense Disposals Closing balance Net book value Opening balance Closing balance 2022 year: Cost Opening balance Additions - internally developed Impairment Transfer Closing balance Accumulated depreciation Opening balance Amortisation expense Impairment Closing balance Net book value Opening balance Closing balance 944 759 5,684 2,700 40,425 1,426 51,938 - - - 944 - - - 759 - - - 5,684 - - - 2,700 - - - 40,425 4,564 - - 5,990 4,564 - - 56,502 - - - - (759) - - (759) (4,832) (398) - (5,230) (1,935) (540) - (2,475) (31,690) (2,880) - (34,570) - (39,216) (3,818) - - - - (43,034) 944 944 - - 852 454 765 225 8,735 5,855 1,426 5,990 12,722 13,468 944 759 5,684 2,700 44,503 2,551 57,141 - - - 944 - - - 759 - - - 5,684 - - - 2,700 - (7,727) 3,649 40,425 4,731 (2,207) (3,649) 1,426 4,731 (9,934) - 51,938 - - - - (759) - - (759) (4,334) (498) - (4,832) (1,415) (520) - (1,935) (31,219) (4,386) 3,915 (31,690) - (37,727) (5,404) - - 3,915 - (39,216) 944 944 - - 1,350 852 1,285 765 13,284 8,735 2,551 1,426 19,414 12,722 14. Net deferred tax assets Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: ▪ ▪ temporary differences in the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; temporary differences relating to investments in subsidiaries and associates to the extent that the Group is able to control the timing or reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future; and 64 64 A2B Annual Report 2023 ▪ taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Deferred tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences and tax losses can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the Group will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law. Unrecognised capital losses at 30 June 2023 are $Nil (FY22 $6,154,712 gross). Recognised deferred tax assets and liabilities and the movements in these balances are set out below: 2023 year: Accumulated impairment losses - receivables Financial assets (unlisted investment) Employee entitlements Accruals Tax losses Disposal of property Prepayments Intellectual property Other taxable temporary differences 2022 year: Accumulated impairment losses - receivables Financial assets (unlisted investment) Employee entitlements Accruals Tax losses Prepayments Intellectual property Other taxable temporary differences Opening balance $'000 Charged to income $'000 Closing balance $'000 (1,046) 2,057 (4) 286 548 2,926 81 519 17,121 (17,121) - 19,554 1,011 282 3,474 600 - 19,554 (524) (538) (273) 251 - (538) (1,340) 20,507 (30) 2,233 (1,370) 22,740 2,100 286 3,188 411 (43) 2,057 - 286 2,926 519 (262) 108 3,536 (369) (538) 13,585 (155) 17,121 (524) - (538) (396) 8,218 (944) 12,289 (1,340) 20,507 65 65 15. Financial assets Unlisted equity investments are recognised initially and subsequently at each reporting date at fair value. Unrealised gains and losses arising from changes in fair value are recognised in other comprehensive income and presented in the fair value reserve in equity. There is no subsequent reclassification of fair value gains and losses to profit or loss on derecognition of the investment. Dividends from these investments are recognised in profit or loss when the Group’s right to receive payments is established. These unlisted investments are primarily investments in unrelated Taxi Network operations where the shareholding held by the Group is not sufficient to demonstrate significant influence. The Group has no intention to dispose of these unlisted investments in the foreseeable future. Unlisted investments Shares in other corporations 2023 $'000 2022 $'000 963 963 977 977 16. Trade and other payables Trade and other payables are recognised at the fair value of the invoice received from the supplier. The carrying value of trade and other payables is considered to approximate fair value. Contract liabilities primarily relate to the revenue arising from network subscription fee income, brokered taxi plate licence income, owned taxi plate licence income, taxi Operating income, interest on vehicle and insurance loans and taxi equipment and terminal rental which have been billed in advance. This will be recognised as revenue when the services are provided to the customers in the following month. Trade payables Security deposits Other payables and accruals Contract liabilities 17. Loans and borrowings 2023 $'000 11,913 7,375 16,658 2,247 38,193 2022 $'000 10,222 7,092 31,573 6,993 55,880 Loans and borrowings are recognised at the consideration received, less directly attributable transaction costs, with subsequent measurement at amortised cost using the effective interest rate method. For more information about the Group’s exposure to interest rate and liquidity risk, refer to Note 32. 66 A2B Annual Report 2023 66 Composition Unsecured loans Bank borrowings Disclosure in the Consolidated Statement of Financial Position Current liability Non-current liability Bank facilities Working capital facility Multi option facility Total facility Amount used at 30 June Amount unused at 30 June 2023 $'000 602 15,000 15,602 2022 $'000 1,649 17,274 18,923 2023 $'000 602 15,000 15,602 2022 $'000 1,649 17,274 18,923 2023 $'000 15,000 1,600 16,600 15,000 1,600 2022 $'000 25,000 4,500 29,500 17,274 12,226 The unsecured loans are at-call and bear variable interest rates at 1.5% per annum. At 30 June 2023, the bank working capital facility had a limit of $15,000,000 expiring in September 2024. Bank borrowings bear interest, the interest rates are calculated as BBSY plus margin on the drawn loan balance ranging between 2.95% and 5.19% in financial year 2023. Post balance date the term of the working capital facility was extended to September 2026. For more information about the Group’s exposure to interest rate and liquidity risk, refer to Note 32. 18. Provisions Employee benefits and make good provisions Wages, salaries and annual leave Liabilities for employee benefits for wages, salaries and annual leave represent the present obligations resulting from employees' services provided up to the reporting date. The provisions have been calculated at undiscounted amounts based on expected wage and salary rates that the Group expects to pay as at reporting date and include related on-costs, such as workers' compensation insurance and payroll tax. A liability is recognised in other payables for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. 67 67 Long service leave The provision for employee benefits for long service leave represents the present value of the estimated future cash outflows to be made by the Group resulting from employees' services provided up to the reporting date. The provision is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the rates attached to corporate bonds at reporting date which most closely match the terms of maturity of the related liabilities. Superannuation plans The Group contributes to defined contribution superannuation funds for the benefit of employees or their dependants on retirement, resignation, disablement or death. The Group contributes a income and employees may make additional percentage of contributions on a voluntary basis. Obligations to defined contribution superannuation funds are recognised as an employee benefits expense in profit or loss in the periods during which services are rendered by employees. individual employees' gross for contributions Make good provision The make good provision represents the present value of the estimated future cash outflows to be made where the obligation to restore the leased property to its original condition exists. Composition Employee benefit provisions Annual leave provision Long service leave provision Redundancy provision Make good provision Disclosure in the Consolidated Statement of Financial Position Current provision Employee benefit provisions Make good provision Total current provision Non-current provision Employee benefit provisions Make good provision Total non-current provision Total provisions 2023 $'000 2022 $'000 4,115 3,141 983 598 8,837 4,094 3,035 1,500 751 9,380 2023 $'000 2022 $'000 7,442 138 7,580 7,840 272 8,112 798 459 1,257 8,837 789 479 1,268 9,380 68 A2B Annual Report 2023 68 Provision movement Balance at 1 July Provisions made during the year Provisions used during the year Provisions reversed during the year Balance at 30 June Annual leave $'000 4,094 1,687 (1,666) - 4,115 Long service leave Redundancy $'000 $'000 1,500 3,035 1,401 983 (1,500) (1,295) - - 983 3,141 Make good $'000 751 129 (21) (261) 598 Total $'000 9,380 4,200 (4,482) (261) 8,837 Defined contribution superannuation funds Contributions to defined contribution superannuation funds 2023 $'000 5,060 2022 $'000 5,298 19. Share capital and Reserves Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Profits reserve The profits reserve represents the profits of entities within the Group transferred to a separate reserve to preserve their profit character. Such profits are available to enable payment of franked dividends in future years. Foreign currency translation reserve The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. Fair value reserve The fair value reserve comprises the cumulative net change in the fair value of unlisted equity investments. On derecognition, the Group transfers that part of the reserve related to the underlying investment that is derecognised directly to Retained earnings. Employee Compensation Reserve The fair value of Long Term Incentive (LTI) plans granted is recognised in the employee compensation reserve over the vesting period. Composition and movement in issued capital (number of shares) Composition of issued capital Fully paid ordinary shares 2023 number 2022 number 121,230,683 121,230,683 69 69 Composition and movement in share capital (dollars) Composition of issued capital Fully paid ordinary shares Options over unissued shares 2023 $'000 2022 $'000 138,325 138,325 No options were granted during the year and there were no options outstanding at the end of the financial year. Performance Rights were awarded during the year and they may be converted into ordinary shares, subject to the Board’s discretion. Terms and conditions applicable to ordinary shares Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholder meetings. In the event of a wind up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds of liquidation. The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. Composition and movement in other reserves Foreign currency translation reserve $'000 Fair value reserve $'000 Employee compensation reserve $'000 (83) 88 - 5 (7) (76) - (83) (667) - - (667) (667) - - (667) 2,766 - 1,126 3,892 1,633 - 1,133 2,766 Total $'000 2,016 88 1,126 3,230 959 (76) 1,133 2,016 2023 year: Opening balance Foreign exchange translation differences, net of tax Share-based payments Closing balance 2022 year: Opening balance Foreign exchange translation differences, net of tax Share-based payments Closing balance 20. Dividends Dividends are recognised as a liability in the period in which they are declared. Reflecting the strength of A2B’s operating performance and balance sheet, the Board has reinstated the Company’s dividends, declaring a final FY23 fully franked dividend of $0.05 per share, scheduled for payment on 26 October 2023. The record date for the FY23 final dividend is 29 September 2023. 70 A2B Annual Report 2023 70 21. Earnings per share Basic earnings per share (EPS) is calculated by dividing the profit attributable to equity holders for the reporting period by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is calculated by dividing the profit attributable to equity holders for the reporting period by the weighted average number of ordinary shares outstanding including dilutive potential ordinary shares. Consolidated profit / (loss) attributable to owners of the Company (in thousands of AUD) 26,792 (28,118) Weighted average number of fully paid ordinary shares outstanding during the year used in calculation of basic EPS (in thousands of shares) 121,231 120,556 Weighted average number of fully paid ordinary shares outstanding during the year used in calculation of diluted EPS (in thousands of shares) 125,242 120,556 2023 2022 Any potential dilution in A2B’s earnings per share which might arise following the exercise of the LTI awards is immaterial given the number of existing shares on issue. Basic EPS Diluted EPS 22. Dividend franking balance 2023 22.1 cents 21.4 cents 2022 (23.3 cents) (23.3 cents) 2023 $'000 2022 $'000 Balance at the end of the financial year including franking credits / (debits) arising from income tax payable / (receivable) in respect of the financial year 27,338 27,232 The above available amounts are based on the balance of the dividend franking account at year- end adjusted for: 1. 2. 3. franking credits / (debits) that will arise from the payment/receipt of the current tax liabilities/receivables; franking debits that will arise from the payment of dividends recognised as a liability at the year- end; franking credits that will arise from the receipt of dividends recognised as receivables by the tax consolidated group at the year-end; and 4. franking credits that the entity may be prevented from distributing in subsequent years. The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. The impact on the dividend franking account of dividends proposed after the balance sheet date but not recognised as a liability is to reduce it by $Nil (FY22 $Nil). In accordance with the tax consolidation legislation, the Company as the head entity in the tax consolidated group has also assumed the benefit of $27,338,000 (FY22 $27,232,000) franking credits. 71 71 23. Parent entity disclosures As at, and throughout, the financial year ended 30 June 2023 the parent entity of the Group was A2B Australia Limited. Results of the parent entity Loss for the year Total loss for the year Financial position of the parent entity at year end Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Total equity of the parent entity comprising: Share capital Reserves Profits reserve Retained losses Total equity 2023 $'000 2022 $'000 (18,898) (18,898) (19,523) (19,523) 32,460 226,890 259,350 30,107 132,625 162,732 51,516 250,795 302,311 34,202 153,722 187,924 138,325 3,385 18,823 (63,915) 96,618 138,325 2,256 18,823 (45,017) 114,387 Parent entity capital expenditure commitments and contingencies At 30 June 2023, the parent entity has not made any capital expenditure commitments (2022 $Nil). For contingent liabilities as at 30 June 2023, refer to Note 28. Parent entity guarantees in respect of the debts of its subsidiaries The parent entity has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of certain subsidiaries. Further details of the Deed of Cross Guarantee and the subsidiaries subject to the deed are disclosed in Note 24. 24. Deed of Cross Guarantee Pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785, the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and Directors’ reports. It is a condition of the Instrument that the Company and each of the subsidiaries seeking relief enter into a Deed of Cross Guarantee (Deed). The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporation Act. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up. 72 A2B Annual Report 2023 72 The subsidiaries subject to the Deed are: Taxis Combined Services Pty Ltd ▪ ▪ Black Cabs Combined Pty Ltd ▪ Yellow Cabs (South Australia) Pty Ltd ▪ Yellow Cabs Australia Pty Ltd ▪ Combined Communications Network Pty Ltd ▪ EFT Solutions Pty Ltd ▪ Maxi Taxi (Australia) Pty Ltd ▪ 135466 Pty Ltd ▪ Newcastle Taxis Pty Ltd ▪ Austaxi Group Pty Ltd ▪ Taxitech Pty Ltd ▪ Arrow Taxi Services Pty Ltd ▪ North Suburban Taxis (Vic) Pty Ltd ▪ ABC Radio Taxi Pty Ltd ▪ Cabcharge Payments Pty Ltd ▪ Mobile Technologies International Pty Ltd The Consolidated income statement and retained earnings for the Company and controlled entities who are a party to the Deed is as follows: Revenue and other income Expenses Results from operating activities Finance income Finance costs Profit / (loss) before income tax Income tax (expense) / benefit Profit / (loss) for the year Retained losses at beginning of year Profit / (loss) for the year Transferred to profit reserve Retained losses at end of year 2023 $'000 156,597 (126,681) 29,916 20 (3,433) 26,503 (609) 25,894 2022 $'000 110,874 (150,125) (39,251) 2 (1,131) (40,380) 11,996 (28,384) (69,638) 25,894 (25,894) (69,638) (41,254) (28,384) - (69,638) 73 73 The Consolidated financial position for the Company and controlled entities which are a party to the Deed is as follows: Current assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Assets held for sale Total current assets Non-current assets Trade and other receivables Property, plant and equipment Taxi plate licences Goodwill Intellectual property Right-of-use assets Net deferred tax assets Financial assets Total non-current assets Total assets Current liabilities Trade and other payables Loans and borrowings Lease liabilities Current tax liabilities Deferred income Provisions Total current liabilities Non-current liabilities Loans and borrowings Lease liabilities Deferred income Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Profits reserve Retained losses Total equity attributable to equity holders of the Company 2023 $'000 2022 $'000 26,006 41,109 2,763 3,153 10,438 83,469 8,695 65,734 3,342 2,927 - 80,698 5,598 25,053 1,303 26,838 13,069 3,711 22,452 2,596 100,620 184,089 5,303 21,035 1,311 26,838 12,312 5,921 20,217 2,596 95,533 176,231 37,081 602 1,102 2,648 118 6,970 48,521 53,270 1,649 1,446 152 118 6,714 63,349 15,000 3,089 118 1,209 19,416 67,937 116,152 17,274 5,014 236 1,226 23,750 87,099 89,132 138,325 2,748 44,717 (69,638) 116,152 138,325 1,622 18,823 (69,638) 89,132 74 A2B Annual Report 2023 74 25. Related Party and Key Management Personnel disclosures Apart from the details disclosed in this note, no key management personnel (KMP) have entered into a material contract with the Company or the Group since the end of the previous financial year and there are no material contracts involving key management personnel interests existing at year end. KMP compensation (including Non-executive Directors) Short-term employee benefits - salary, fees, non-cash benefits, cash bonus Post-employment benefits - superannuation Other long-term benefits Termination benefits Share-based payment expense Incentive shares Loans to Directors and other KMP No loans are made to Directors or other KMP. Transactions with Directors and other KMP The Group has no transactions with related parties in the reporting period. 26. Remuneration of auditors Audit and review of financial reports Other services Auditors of the Company - KPMG Australia Taxation services Other assurance services 2023 $ 2,622,083 108,622 20,457 143,750 394,548 607,377 3,896,837 2022 $ 2,656,584 180,013 40,693 1,277,768 708,277 424,623 5,287,958 2023 $ 491,815 2022 $ 453,000 273,868 25,157 790,840 255,521 - 708,521 The increase in non-audit services provided by KMPG primarily relates to tax advice that supported the property transactions that were entered into during FY23. 75 75 27. Particulars relating to controlled entities 13cabs Innovations Pty Ltd 135466 Pty Ltd A2B Corporate Services Pty Ltd (previously known as Voci Asia Pacific Pty Ltd) ABC Radio Taxi Pty Ltd Access Communications Net Pty Ltd Arrow Taxi Services Pty Ltd Austaxi Group Pty Ltd Black Cabs Combined Car Sales Pty Ltd Black Cabs Combined Pty Ltd Cab Access Pty Ltd Cabcharge (Investments) Pty Ltd Cabcharge Payments Pty Ltd Carbodies Australia Pty Ltd Champ Australia Pty Ltd Champ NSW Pty Ltd Champ NSW Pty Ltd Champ WA Pty Ltd Combined Communications Network Pty Ltd EFT Solutions Pty Ltd Enterprise Speech Recognition Pty Ltd Go Taxis Pty Ltd Helpline Australia Pty Ltd Kingscliff Tweed Coast Taxis Pty Ltd Mact Franchise Pty Ltd Mact Network Pty Ltd Mact Rental Pty Ltd Maxi Taxi (Australia) Pty Ltd Melbourne Taxi Cab Service Pty Ltd Mobile Technologies Developments Pty Ltd Mobile Technologies International Pty Ltd Newcastle Taxis Pty Ltd North Suburban Taxis (Vic) Pty Ltd Silver Service (Victoria) Pty Ltd Silver Service Taxis Pty Ltd South Western Cabs (Radio Room) Pty Ltd Taxi Data Australia Pty Ltd Taxi Industry (Australia) Insurance Brokers Pty Ltd Taxi Services Management (Newcastle) Pty Ltd TaxiProp Pty Ltd Taxis Australia Pty Ltd Taxis Combined Services (Victoria) Pty Ltd Taxis Combined Services Pty Ltd Taxitech Pty Ltd Thirteen Hundred Pty Ltd Tiger Taxis NSW Pty Ltd Tiger Taxis Operations Pty Ltd Tiger Taxis Pty Ltd Tiger Taxis Queensland Pty Ltd Tweed Heads Coolangatta Taxi Service Pty Ltd Yellow Cabs (Queensland) Holdings Pty Ltd Yellow Cabs Australia Pty Ltd 76 A2B Annual Report 2023 Group interest % 2023 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 56 100 100 100 100 100 100 100 100 100 100 100 100 68 62 100 100 68 100 100 100 100 100 100 100 100 56 100 100 Group interest % 2022 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 56 100 100 100 100 100 100 100 100 100 100 100 100 68 62 100 100 68 100 100 100 100 100 100 100 100 56 100 100 76 Yellow Cabs of Sydney Pty Ltd Yellow Cabs South Australia Pty Ltd Yellow Cabs Victoria Pty Ltd Cabcharge NZ Limited (incorporated in NZ)* Cabcharge North America Limited (incorporated in USA) Manchester Taxi Division Limited (incorporated in UK) Mobile Technologies International Limited (incorporated in UK) Mobile Technologies International LLC (incorporated in USA) Unless otherwise indicated, all Group companies are incorporated in Australia. 100 100 100 100 93 100 100 100 100 100 100 100 93 100 100 100 * Cabcharge NZ Limited was deregistered and removed from the NZ Companies Register on 3 August 2023. The Group has lodged Form 6010 with ASIC for the deregistration of an additional 14 Australian entities in FY23. Confirmatio n from ASIC of deregistration is outstanding at the date of this report. 28. Capital expenditure commitments The Group has not entered into any contracts to purchase plant and equipment for which amounts have not been provided as at 30 June 2023 (FY22 $Nil). 29. Contingencies The Group had no material contingent liabilities at 30 June 2023 (FY22 $Nil) 30. Right-of-use assets and Lease liabilities The Group leases various offices and Taxitech workshops. The leases run typically for a fixed period of 1 to 10 years, with an option to renew the lease after that date. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. Information about leases for which the Group is a lessee is presented below. Right-of-use assets The right-of-use assets are initially measured at cost, which comprises: - - - The amount of the initial measurement of the lease liability Any lease payments made at or before the commencement date, less any lease incentives and any initial direct costs incurred by the lessee An estimate of the costs to dismantle and remove the underlying asset or to restore the underlying asset. Subsequently, the right-of-use asset is measured at cost less any accumulated depreciation and impairment losses and adjusted for certain measurements of the lease liability. The right-of-use asset is depreciated over the shorter period of the lease term and the economic useful life of the underlying asset. If a lease transfers ownership of the underlying asset or the costs of the right-of-use asset reflects that the Group will exercise a purchase option, the asset will be depreciated from the commencement date to the end of the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. Where the initially anticipated lease term is subsequently reassessed, any changes are reflected in a remeasurement of the lease liability and a corresponding adjustment to the asset. If the recoverable amount of a right-of-use asset is less than its carrying value, an impairment charge is recognised in the profit or loss and the carrying value of the asset is written-down to its recoverable amount. Should the recoverable amount increase in future periods the carrying value may be adjusted to the lower of the recoverable value or the amortised cost of the asset had it not been impaired. 77 77 2023 year: Balance at 1 July Depreciation Additions Derecognition * Balance at 30 June 2022 year: Balance at 1 July Depreciation Additions Derecognition * Balance at 30 June Land and buildings $'000 Equipment $'000 Total $'000 6,517 (1,430) 351 (1,315) 4,123 - 6,517 - (1,430) - 351 - (1,315) - 4,123 12,716 (1,994) 459 (4,664) 6,517 - 12,716 - (1,994) - 459 - (4,664) - 6,517 * Derecognition of the right-of-use assets during 2022 and 2023 is a result of lease re-assessment Lease liabilities Contractual undiscounted cash flows One year or less From one to five years Over five years Total undiscounted lease liabilities Current Non-current Total lease liabilities 2023 $'000 1,478 3,766 97 5,341 2022 $'000 2,006 5,377 789 8,172 1,195 3,453 4,648 1,556 5,530 7,086 The lease liability is initially measured at the present value of future lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or if this rate cannot be readily determined the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. Lease payments included in the measurement of the lease liability comprise: - - - - - Fixed payments (including in-substance fixed payments), less any lease incentives receivables Variable lease payments that depend on an index or a rate The exercise price of a purchase option if the lessee is reasonably certain to exercise that option The amount expected to be payable under a residual value guarantee Payments of penalties for termination of the lease, if the lease term reflects the lessee exercising an option to terminate the lease. Variable lease payments not included in the initial measurement of the lease liability are recognised directly in profit or loss. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related right- of-use assets) whenever: 78 78 A2B Annual Report 2023 - - - The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of the exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate The lease payments change due to changes in an index or rate or a change in the amount expected to be payable under a residual value guarantee A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. Amounts recognised in the Consolidated Statement of Comprehensive Income Interest on lease liabilities Depreciation Expenses relating to variable lease payments not included in lease liabilities Amounts recognised in the Consolidated Statement of Cash Flows Total cash outflow for leases 2023 $'000 314 1,430 267 2022 $'000 359 1,993 410 2023 $'000 1,803 2022 $'000 2,380 31. Notes to the consolidated statement of cash flows Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. The carrying value of cash is considered to approximate fair value. 79 79 Reconciliation of net cash provided by operating activities with profit from ordinary activities after income tax Profit / (loss) for the year Adjustment for non-cash items: Depreciation and amortisation Property, plant and equipment impairment charges Capitalised development costs impairment charges Net gain on disposal of property, plant and equipment Share-based payments Impairment reversal Other non cash items Changes in assets and liabilities, net of the effects of purchase of subsidiaries: Change in trade and other debtors Change in inventories Change in creditors and accruals Change in provisions Change in income taxes payable Change in deferred tax balances Net cash from (used in) operating activities Reconciliation of liabilities arising from financing activities 2023 $'000 27,063 2022 $'000 (27,818) 10,999 - - (21,357) 1,126 (1,622) (595) 16,177 4,230 6,019 (97) 1,133 - (118) 14,119 510 (19,741) (682) 2,786 (2,233) 10,373 (14,789) (396) 16,226 (436) 5,914 (12,289) (6,244) 2023 year: Balance at 1 July Net cash flows Lease net additions, derecognition and remeasure Balance at 30 June 2022 year: Balance at 1 July Net cash flows Lease net additions, derecognition and remeasure Balance at 30 June Cash and cash equivalents Cash on hand and at bank Balance as per Consolidated Statement of Cash Flows Interest bearing loans $'000 Lease liabilities $'000 Total liabilities from financing activities $'000 18,923 (3,321) - 15,602 7,086 (1,489) (949) 4,648 26,009 (4,810) (949) 20,250 13,316 1,864 17,059 (2,021) - (4,209) 7,086 18,923 15,180 15,038 (4,209) 26,009 2023 $'000 29,541 29,541 2022 $'000 12,295 12,295 80 A2B Annual Report 2023 80 Restricted cash There was no restricted cash at 30 June 2023 (2022 $Nil) which relates to current bank facilities. At 30 June 2023, $9.4 million is being held in escrow being the deposit for the sale of the O’Riordan Steet property. 32. Financial instruments and financial risk management Overview The Board of Directors’ policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain the future development of the business. The Board monitors the return on equity, which the Group defines as profit after tax divided by total shareholders’ equity. The Board also determines the level of dividends to ordinary shareholders. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The Group’s target is to achieve a return exceeding its cost of equity over the medium term. There were no changes in the Group’s approach to medium term capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. The Group has exposure to the following risks from financial instruments: ▪ Credit risk ▪ Liquidity risk ▪ Market risk This note presents information about the Group’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these Consolidated Financial Statements. Financial risk management objectives The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board has established the Audit & Risk Committee, which is responsible for developing and monitoring risk management activities. The Committee reports regularly to the Board of Directors on risk management. Risk management practices are established to identify and analyse the risks faced by the Group, to set appropriate policies which include risk limits and controls, and to monitor risks and adherence to policies. Risk management practices are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through their training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit & Risk Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers, investments with financial institutions and securities. The carrying value of cash and cash 81 81 equivalents, trade and other receivables and deposits with financial institutions represents the maximum credit exposure of these assets. Impairment losses and changes in financial assets recognised in the consolidated statement of comprehensive income were as follows: Impairment loss on trade receivables arising from contracts with customers 2023 $'000 (235) (235) 2022 $'000 (1,973) (1,973) a) Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The Group minimises concentration of credit risk in relation to trade accounts receivable by undertaking transactions with a large number of customers. Credit risk in trade and other receivables is managed in the following ways: ▪ The Board has established delegated limits and authority for agreements, contracts and receivable write-off ▪ Each new customer is analysed individually for creditworthiness under a credit policy before the Group’s standard payment and delivery terms and conditions are offered ▪ Payment terms are 28 days ▪ A risk assessment process is used for customers over 90 days; and ▪ Cash or bank guarantee is obtained where appropriate. The Group assumes the credit risk for the full value of Taxi fares settled through the Cabcharge Payment System (refer to Note 3). The Group has established an allowance for impairment that represents its estimate of expected losses in respect of trade and other receivables and similar investments. The allowance for trade and other receivables is the estimated irrecoverable amounts from billings. The main component of this allowance is a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets b) Investments The Group limits its exposure to credit risk by placing deposits with major Australian banks. Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group undertakes the following activities to ensure that there will be sufficient funds available to meet obligations: ▪ Prepare budgeted annual and monthly cash flows; ▪ Monitor actual cash flows on a daily basis and compare it to liquidity requirements; ▪ Maintain standby money market and commercial overdraft facilities; and ▪ Maintain committed borrowing facility in excess of budgeted usage levels. 82 82 A2B Annual Report 2023 There has been no change in liquidity risk policies during the financial year. Maturity profile of financial liabilities by remaining contractual maturities 2023 year: Contract liabilities, trade and other payables Loans and borrowings 2022 year: Contract liabilities, trade and other payables Loans and borrowings Carrying amount $'000 Contractual cashflows $'000 6 months or less $'000 6 to 12 months $'000 1 to 2 years $'000 2 to 5 years $'000 38,193 15,602 53,795 55,880 18,923 74,803 38,193 17,159 55,352 38,193 991 39,184 - 389 389 - 15,779 15,779 55,880 20,056 75,936 55,880 1,932 57,812 - 283 283 - 17,841 17,841 - - - - - - Typically the Group ensures that it has sufficient cash on demand and available liquidity to meet expected current operational expenses, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition, the Group maintains lines of credit as detailed in Note 17. Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. a) Currency risk The Group has no significant exposure to foreign exchange risk in respect of the Company and the entities it controls. b) Interest rate risk The principal risk to which financial assets and financial liabilities are exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instruments because of a change in market interest rates. 83 83 At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was: Fixed rate instruments Financial assets - finance lease receivables Financial liabilities - lease liabilities Variable rate instruments Financial assets - cash and cash equivalents Financial liabilities - loans and borrowings 2023 $'000 2022 $'000 9,505 (4,648) 4,857 8,659 (7,086) 1,573 29,541 (15,602) 13,939 12,295 (18,923) (6,628) As at 30 June 2023, the carrying value of financial assets and liabilities in the above table are considered to approximate their fair value. c) Interest rates used for determining fair value The interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve at the reporting date plus an adequate credit spread and were as follows: Loans and borrowings Finance lease receivables d) Fair value hierarchy 2023 2.95% to 5.19% 8% to 12% 2022 1.5% to 3.28% 8% to 11% To determine fair value, the Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data is available, maximising the use of relevant observable inputs and minimising unobservable inputs. Fair value measurements that are recognised in the Consolidated Financial Statements are categorised as follows: • Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities • Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable • Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. The fair value hierarchy of the investments is provided below: 30 June 2023 Unlisted equity instruments 30 June 2022 Unlisted equity instruments Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 - - 963 963 - - 977 977 84 A2B Annual Report 2023 84 The valuation techniques and significant unobservable inputs used to determine the fair value of these unlisted equity investments at 30 June 2023 is as follows: Valuation techniques Significant unobservable inputs Future Maintainable Earnings (FME) methodology – the estimate of FME represents the fair value of the unlisted equity investments on a going concern and cash flow basis, determined by capitalising the maintainable earnings of the investee using an appropriate earnings multiple. Expected earnings at 30 June 2023, with an adjusted earnings multiple of 1x, derived from comparable companies to the investee. The estimate of the fair value will increase (decrease) if the earnings and earnings multiple increases (decreases). Net Tangible Assets approach – the estimate of fair value is determined by valuing the assets and liabilities of the investee at market value (excluding operating assets and liabilities). Minority discount of 20%. The estimate of the fair value will increase (decrease) if the discount rate decreases (increases). The carrying amount of the unlisted equity investments is sensitive to possible changes in the significant unobservable inputs. e) Sensitivity analysis i. Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change in interest rates at the reporting date would not affect profit or loss. ii. Sensitivity analysis for variable rate instruments A change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2022. 2023 2022 33. Operating segment Profit or loss 100 bp increase 100 bp decrease $'000 (156) (189) $'000 156 189 An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the Group’s Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete financial information is available. Identification of reportable segments The Group’s operating segments are organised and managed separately according to the nature of the products and services provided. 85 85 The Group previously operated under three operating segments comprising of Mobility Services, Mobility Platforms and Payments. In financial year 2023, the Group was simplified into two operating segments comprising B2C (Business to Consumer) and B2B (Business to Business). Each segment represents a strategic business unit that offers different products and operates in different markets. Comparative numbers have been restated to reflect this change. Underlying EBITDA is the primary reporting measure used by A2B’s CODM. The CODM monitors the operating results of the business units separately for the purpose of making decisions about resource allocation and performance assessment. Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue and expenses are eliminated on consolidation. Segment description Reportable segments under AASB 8 Operating Segments are as follows: Reportable segment Principal activities B2C B2B Provides taxi network services to taxi operators, drivers, taxi license owners and passengers nationally in Australia. These services include taxi booking services, vehicle financing and insurance, full taxi fit-outs and repairs, driver training and education as well as instant local deliveries. B2C operates through a variety of brands including 13cabs, Silver Service and Maxi Taxi. The majority of revenue comes from network subscriptions that are charged monthly while revenue from related and ancillary services are generated as and when the services are provided (e.g. car sales income, interest on finance lease receivables and others, insurance commission revenue or taxi equipment and terminal rental income not included in subscriptions). Provides services to taxi networks, independent operators, corporate clients and governments both nationally and internationally. These services include integrated booking, payment and dispatch technologies, corporate travel solutions, consulting, licensing and other services. B2B operates through a including Cabcharge, Spotto, Giraffe and Mobile variety of brands Technologies International (MTI). Cabcharge provides corporate clients with a range of payment solutions to charge trips on a designated account accompanied by detailed trip information to enable efficient management of travel expenditure. Cabcharge operates throughout Australia and receives service fee income on non-cash payments based on the value of the fare processed. Spotto and Giraffe represent our handheld offering for taxi and hire car drivers. The current pricing model attracts a service fee based on the value of transactions processed and/or a terminal rental fee. MTI provides a SaaS booking, dispatch, payment, contact centre and vehicle monitoring platform. MTI earns SaaS style subscription revenue from vehicles accessing its technologies, income from bespoke software development, and fees from project management, which are recorded under software consulting and licence income. MTI operates throughout Australia, New Zealand, North America, Europe and the United Kingdom. 86 A2B Annual Report 2023 86 Analysis by segment June 2023: External segment revenue and other income Intersegment revenue and other income Total segment revenue and other income Underlying EBITDA June 20222: External segment revenue and other income Intersegment revenue and other income Total segment revenue and other income Underlying EBITDA B2C $'000 B2B $'000 Unallocated/ Eliminations1 $'000 Consolidated $'000 88,024 2,552 90,576 10,989 59,306 1,756 61,062 9,094 86,487 69 86,556 (10,013) 40,711 3,251 43,962 (1,996) 23,115 (4,308) 18,807 - 1,577 (3,320) (1,743) 2,566 170,445 - 170,445 20,083 128,775 - 128,775 (9,443) 1. Unallocated/Eliminations represents unallocated corporate costs, Government subsidies (including JobKeeper), gain on property transactions and consolidation elimination entries. 2. June 2022 values have been adjusted to reflect the changes made to segments and in the calculation of underlying EBITDA in June 2023. Reconciliation of underlying EBITDA to statutory results from operating activities Underlying EBITDA Items not included in Underlying Profit Before Tax: Net gain on property transactions NSW taxi plate licence compensation, impairment reversal Impairments and asset write-offs Termination and restructuring AASB16 depreciation, other items Total items not included in underlying EBITDA Depreciation and amortisation expenses Results from operating activities 2023 $'000 20,083 20221 $'000 (9,443) - - 21,274 1,622 - (9,750) (5,580) (2,007) 2,450 1,789 (12,880) 22,678 (16,177) (10,999) (38,500) 31,762 1. 2022 values have been adjusted to reflect the changes made in the calculation of underlying EBITDA in 2023. Segment assets and liabilities have not been disclosed as these are not reported to the CODM and are not used by the CODM to assess performance and to make resource allocation decisions. Geographical information The Group operates predominantly in one geographic segment with >95% of revenue generated in Australia during the financial year. Through its MTI and ManTax subsidiaries. the Group operates in other geographic segments including North America, Europe and the United Kingdom. These foreign subsidiaries contributed $7.2 million in revenue (FY22 $5.9 million) and non-current assets of $0.6 million (FY22 $0.6 million) to the Group’s Consolidated Statements. 87 87 34. Share-based payment – Long term incentive The Group has provided Long Term Incentive (LTI) awards to the KMP and other executives and granted them annually in the form of Rights. The grant date fair value of equity-settled share-based payment awards granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. The total share-based payment expense for the year was $1,125,901 (FY22 $1,132,899). Fair value The fair value of the awards as at the valuation date is set out in the following table: Grant date/employees entitled 2023 year Performance Rights granted to Key Management Personnel and senior management on 1 September 2022 Total number of Rights 2022 year Incentive shares granted to Executive Chairman on 28 April 2022 Performance Rights granted to Executive Chairman on 28 April 2022 Total number of Rights and Incentive Shares 2021 year Rights granted to CEO and key management personnel on 19 November 2020 666,667 Total number of Rights 444,444 1,111,111 Number of Rights Vesting conditions Valuation methodology Fair Value Expected vesting date Performance Period Share price Share price Share price Trinomial Lattice methodology $0.76 $0.60 $0.46 200,000 200,000 200,000 600,000 30 June 2026 1 July 2022 to 30 June 2026 400,000 Service 200,000 200,000 500,000 500,000 500,000 2,300,000 Monte Carlo simulation $1.29 30 September 2022 31 March 2023 1 July 2023 N/A Monte Carlo simulation $1.02 $0.87 $0.74 30 June 2026 28 April 2022 to 30 June 2026 Monte Carlo simulation $0.68 15 September 2023 1 July 2020 to 30 June 2023 Monte Carlo simulation $0.69 Service Service Share price Share price Share price Absolute Total Shareholder Return (market condition)* Relative Total Shareholder Return (non- market condition)* * Details of the operation of LTI awards are outlined in the Remuneration Report from page 22 to 36. 88 A2B Annual Report 2023 88 Key assumptions The key assumptions adopted for the valuation of the awards are summarised in the following table: Share price at grant date Expected life Expected volatility Dividend yield Risk-free interest rate Reconciliation The reconciliation of outstanding rights is shown in the following table: Performance Rights reconciliation Rights outstanding as at 1 July Rights granted Rights forfeited Rights lapsed Rights exercised Rights outstanding as at 30 June Rights exercisable as at 30 June 35. Subsequent events Dividends 2023 2022 1 September 2022 28 April 2022 $1.17 3.8 years 45%-55% 0.00% 3.26% $1.29 3 years 37% 0.00% 2.68% Number of Rights 2023 2022 4,412,850 3,178,743 600,000 2,300,000 - - (2,542,479) (1,065,893) - - 2,470,371 4,412,850 - - In August 2023 the Board declared to pay a final fully franked dividend of $0.05 per share for FY23 with a record date of 29 September 2023 and a payment date of 26 October 2023. Property sale Following completion of the A2B property portfolio review, the Board resolved in July 2023 to sell its remaining property located in Melbourne at Downing Street, Oakleigh. Marketing activities commenced in July 2023. 89 89 Directors’ Declaration 1) In the opinion of the directors of A2B Australia Limited (the ‘Company’): a) the Consolidated Financial Statements and notes that are set out on pages 38 to 89 and the Remuneration Report in the Directors’ Report, set out on pages 22 to 36, are in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the consolidated entity's financial position at 30 June 2023 and of the performance for the financial year ended on that date; and ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2) There are reasonable grounds to believe that the Company and the controlled entities identified in Note 24 as parties to a Deed of Cross Guarantee will be able to meet any obligations or liabilities to which they are or may become subject to, by virtue of the Deed of Cross Guarantee between the Company and those entities pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785. 3) The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Executive Chairman and Chief Financial Officer for the financial year ended 30 June 2023. 4) The directors draw attention to Note 2 to the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards. Signed in accordance with a resolution of the Directors Mark Bayliss Executive Chairman 22 August 2023 Brent Cubis Director 22 August 2023 90 A2B Annual Report 2023 90 Independent Auditor’s Report To the shareholders of A2B Australia Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of A2B Australia Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • • giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2023 • Consolidated statement of comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended • Notes including a summary of significant accounting policies • Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. 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 fulfilled our other ethical responsibilities in accordance with the Code. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation 91 91 Key Audit Matters Key Audit Matters Key Audit Matters are those matters that, in our professional judgment, were of most significance in our audit of the Financial Report of the current period. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter Valuation of Goodwill at 30 June 2023 ($ 27.5 million) Refer to Note 12: Goodwill in the Financial Report The key audit matter How the matter was addressed in our audit The valuation of Goodwill is considered a key audit matter due to the size of the balance and the significant audit effort arising from: Our audit procedures included: • The industry in which the Group operates being impacted by disruptive technologies. Further, there are changes in government regulations impacting the taxi service fee which can be applied when processing payments; and • Estimation uncertainty on the ongoing recovery of the CGUs in the Group from changing customer behaviours following the COVID-19 global pandemic. We focussed on the significant forward looking assumptions the Group applied in their value in use models, including: • Discount rates are complicated in nature and vary according to the conditions and environment the specific cash generating unit (CGU) is subject to; • Forecast growth rates and terminal growth rates. In addition to the uncertainties described above, the Group’s models are highly sensitive to small changes in these assumptions, reducing available headroom. This drives additional audit effort specific to their feasibility and consistency of application to the Group’s strategy. • We considered the appropriateness of the value in use method applied by the Group to perform the annual test of goodwill for impairment against the requirements of the accounting standards. • We checked the forecast cash flows in the Group’s value in use model to the Board approved FY24 budget. • We assessed the accuracy of previous forecasting for the Group as an indicator to inform our evaluation of forecasts included in the value in use models. • We challenged the Group’s forecast cash flow and growth rate assumptions in light of the industry and regulatory changes on the Group. We compared forecast cash flow and growth rate assumptions for the taxi industry against available industry data. We considered the impact of the industry and regulatory changes on the Group’s key assumptions, for indicators of bias and inconsistent application using our knowledge of the Group, business and customers, and our industry experience. We checked the consistency of the growth rates to the Group’s revised plans and our experience regarding the feasibility of these in the industry economic environment in which they operate. • We performed sensitivity analysis on the models by varying key assumptions such as forecast cash flows and terminal growth rate, within a reasonably possible range. We did this to identify those assumptions which are at higher risk of bias or inconsistency in application. 92 A2B Annual Report 2023 92 These conditions increase the possibility of goodwill being impaired, which necessitates additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. • Working with our valuation specialists, we independently developed a discount rate range using publicly available data for comparable entities, adjusted by risk factors specific to the Group and the industry it operates in. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. • We analysed the Group’s internal reporting to assess the Group’s monitoring and management of activities, and the consistency of the allocation of goodwill to CGUs. • We assessed the Group’s allocation methodology of corporate costs and assets to CGUs to our understanding of the business and the criteria in the accounting standards. • We assessed the Group’s disclosures of the qualitative and quantitative considerations in relation to the valuation of goodwill, by comparing these disclosures to our understanding obtained from our testing and accounting standard requirements. Other Information Other Information is financial and non-financial information in A2B Australia Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we 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. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error • assessing the Group’s ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. 93 93 Auditor’s responsibilities for the audit of the Financial Report Our objective is: • • 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 Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They 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 the 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 at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our Auditor’s Report. 94 A2B Annual Report 2023 94 Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of A2B Australia Limited for the year ended 30 June 2023, complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 24 to 36 of the Directors’ report for the year ended 30 June 2023. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Cameron Slapp Partner Sydney 22 August 2023 95 95 Shareholder Information The information below was prepared as at 8 August 2023. 20 largest shareholders Holder 1 CITICORP NOMINEES PTY LIMITED 2 PALM BEACH NOMINEES PTY LIMITED 3 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 4 COMFORTDELGRO CORPORATION LIMITED 5 6 7 8 9 J P MORGAN NOMINEES AUSTRALIA PTY LIMITED PRUDENTIAL NOMINEES PTY LTD BNP PARIBAS NOMS PTY LTD BOND STREET CUSTODIANS LIMITED SWAN TAXIS PTY LTD 10 NATIONAL EXCHANGE PTY LTD 10 PORTMAN TRADING PTY LTD 11 UBS NOMINEES PTY LTD 12 J S R T PTY LTD 13 T MITCHELL PTY LTD 14 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSI EDA 15 MARK BAYLISS 16 AKAT INVESTMENTS PTY LIMITED 17 NEWECONOMY COM AU NOMINEES PTY LIMITED 18 MS FABY CHONG 19 MR RONALD ALFRED BRIERLEY 19 BARADNIL PTY LIMITED 20 BNP PARIBAS NOMINEES PTY LTD Total Substantial shareholders Holder Spheria Asset Management Sandon Capital Investors Mutual ComfortDelGro Corporation Limited Pinnacle Investments Management Group Limited Edgbaston Investment Partners Number of shares held % issued capital 29,548,443 13,189,434 10,716,677 8,980,676 6,605,830 3,900,000 3,648,451 2,669,112 2,631,004 2,000,000 2,000,000 1,364,203 1,188,000 1,160,818 1,136,376 800,000 650,000 528,307 525,487 500,000 500,000 476,447 24.37 10.88 8.84 7.41 5.45 3.22 3.01 2.20 2.17 1.65 1.65 1.13 0.98 0.96 0.94 0.66 0.54 0.44 0.43 0.41 0.41 0.39 94,719,265 78.13 Number of shares held % issued capital 20,800,367 13,189,424 13,082,423 11,611,680 7,607,688 6,347,465 17.16 10.87 10.79 9.58 6.28 5.24 Information included in the substantial shareholders table is sourced from substantial shareholder notices of the register that the Company’ maintains in accordance with section 672DA of the Corporations Act 2001, in each case as at 8 August 2023. 96 A2B Annual Report 2023 96 Spread of shareholders Size of holding 1 to 1000 1001 to 5000 5001 to 10000 10001 to 100000 100001 and Over Total Number of holders Number of shares held % of issued capital 1,396 1,299 380 458 60 3,135 731,459 3,421,884 2,676,902 12,678,984 101,721,454 121,230,683 0.60 2.82 2.21 10.46 83.91 100 The number of security investors holding less than a marketable parcel of securities is 540 and they hold 66,090 securities. Voting rights The voting rights of shareholders are set out in the Company’s Constitution. Each shareholder is entitled, either personally, or by proxy, attorney or representative, to be present at any general meeting of the Company and to vote on any resolution on a show of hands or on a poll. Every shareholder present in person, by proxy, or attorney or representative, has one vote for every share held. The Company has only one class of shares on issue (fully paid ordinary shares), each with the same voting rights. ASX listing The Company’s ordinary shares are quoted on the ASX under the trading code “A2B”, with Sydney being the Company’s home exchange. Details of trading activity are published in most daily newspapers and are also available on a 20 minute delayed basis, on the Company’s website at www.a2baustralia.com/investor-center/share- price/ . The Company is not currently conducting an on-market buy-back of its shares. Website An electronic version of the Annual Report www.a2baustralia.com/investor-center/reports/ . is available on the Company’s website at A printed copy of the Annual Report will only be sent to shareholders who have elected to receive one. 97 97 Annual General Meeting The 2023 Annual General Meeting of the shareholders of A2B Australia Limited will be held at 11am on Thursday, 16 November 2023 in The Gold Melting Room, The Mint, 10 Macquarie Street, Sydney. Full details provided in the Notice of Meeting. Registered Office A2B Australia Limited ABN 99 001 958 390 9-13 O’Riordan Street Alexandria NSW 2015 T: +61 2 9332 9222 www.a2baustralia.com Company Secretary Howard Edelman Auditor KPMG International Towers Sydney 3 300 Barangaroo Avenue Sydney NSW 2000 Share Registry Link Market Services Limited Locked Bag A14 Sydney South NSW 1235 T: 1300 724 911 www.linkmarketservices.com.au 98 A2B Annual Report 2023 98 99 A2B Australia Limited ABN 99 001 958 390 100 A2B Annual Report 2023
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