Acme United Annual Report 2023

Plain-text annual report

annual report Annual Financial Statements 30 June 2023 Acumentis Group Limited (ASX: ACU) ABN 50 102 320 329 TABLE OF CONTENTS 1. Introduction 4. Risk Chairman’s Report ..................................... 08 Signiﬁcant Estimates & Judgements ........ 67 CEO’s Report.............................................. 10 Financial Risk Management ...................... 67 Capital Management ................................. 72 2. Financial statements Directors’ Report ....................................... 16 5. Group structure Auditor’s Independence Declaration ....... 33 Business Combinations ............................. 77 Statement of Proﬁt or Loss and Other Comprehensive Income ............................ 34 Statement of Financial Position ................ 35 Statement of Changes in Equity ................ 36 Statement of Cash Flows .......................... 37 3. Notes to consolidated ﬁnancial statements How the Numbers are Calculated ............. 40 Revenue ..................................................... 40 Material Proﬁt or Loss Items ..................... 41 Other Income and Expense Items ............ 41 Income Tax Expense ................................. 42 Financial Assets and Liabilities ................. 43 Non Financial Assets and Liabilities ......... 50 Equity ......................................................... 62 Other Reserves .......................................... 64 Cash Flow Information .............................. 65 Interests of Other Entities ........................ 80 6. Unrecognised items Contingent Liabilities ................................ 83 Commitments ............................................ 83 Events occurring after the reporting period......................................... 84 7. Other information Related Party Transactions ....................... 87 Share-based Payments ............................. 88 Remuneration of Auditors ......................... 90 Earning Per Share ...................................... 90 Parent Entity Financial Information .......... 92 Going concern ........................................... 92 Summary of Signiﬁcant Accounting Policies ................................... 93 7. Directors’ declaration Directors’ Declaration ..............................107 Independent Auditor’s Report .................108 ASX Additional Information .....................112 Introduction ASX:ACU FY22-23 ACUMENTIS 2023 ANNUAL REVIEW Acumentis continues its unwavering commitment to delivering service excellence and ensuring decision certainty for our valued clients nationwide. Homeowners, lenders, and corporations consistently rely on Acumentis for trusted property valuations and expert guidance. The past year has been marked by a rapidly changing property market, post pandemic recovery, and the influence of signiﬁcant cash rate increases. In response, the Acumentis team has shown remarkable agility while maintaining a steadfast focus on our strategic objective: diversiﬁcation. Our primary focus throughout FY23 has centred on diversifying our services and strengthening our team’s capabilities to align with this continuing transformation. Acumentis has been delivering property valuation expertise since 1905 to ﬁnancial institutions, governments, companies, and individuals across Australia. Acumentis provides this expertise nationwide from 45 metropolitan, regional and rural locations, with a team of over 330 property professionals. Acumentis Annual Report 2023 Pg 5 OUR SERVICES At Acumentis, we remain resolute in our commitment to diversify our service offerings. This commitment has not only shaped our marketing and business development strategies but has also driven our recruitment efforts. Recognising the evolving needs of our clients and the dynamic market conditions, and we have responded accordingly. Our dedication to understanding the unique challenges faced by our professional services and government clients has fostered deeper engagement and collaboration. This has enabled us to modify and customise our services to meet their speciﬁc requirements, resulting in the creation of effective and efﬁcient solutions and streamlined internal processes. Throughout the ﬁnancial year, we have consistently invested in reﬁning our services, bolstering internal training and processes, nurturing meaningful relationships, and increasing awareness across various segments, including family law, tax depreciation, strata, self-managed super funds, asset advisory, and insurance valuations. These efforts have been rewarded by increased fees from private and corporate clients, as well as a broader recognition of the Acumentis brand within these diverse audiences. OUR PEOPLE Externally, FY23 has seen an unwavering focus on client relationships and the client experience. We have embraced technological enhancements, including IT&T infrastructure, to drive operational efﬁciencies and we are striving to deliver service excellence at every interaction. Internally, our commitment extends to the growth and reward of our dedicated team members. We have reﬁned structures, enhanced training programs, and provided robust professional development support. This dedicated focus on upskilling aims to foster national consistency in our operational approach, ensuring that our clients receive the same high level of service, regardless of location. Our commitment to working as ONE TEAM and upholding our Guiding Principles remains at the core of the Acumentis culture and is celebrated through our internal awards and promotions programs. This company culture continues to attract and retain talented team members in a restricted labour market. AT ACUMENTIS OUR PURPOSE IS TO PROVIDE: • Decision certainty for our clients • Career certainty for our people • Investment certainty for our shareholders Pg 6 Acumentis Annual Report 2023 OUR GUIDING PRINCIPLES Our values system acts like our compass, guiding us in the right direction and navigating us in times of uncertainty. Our team use our Guiding Principles in their daily interactions and decision making. Never Quit: As individuals and a team, we continue to grow, improve and innovate. We consider all available options before committing to a decision, then go the extra mile to ensure we have decision certainty. We are resilient, and dependable, no matter how tough the problem. Embrace Equality: We strive to make available opportunities accessible equally by all. Support our People: Our decisions are always made with our people and clients at front-of-mind, to create a positive and lasting impact. We all beneﬁt and succeed. Walk the Talk: We do what we say we are going to do. We act with integrity and are accountable for our actions and decisions. We behave professionally whenever and wherever we conduct business. As we move forward into FY24, we do so with a sense of purpose, an unwavering commitment to our clients, and an agile mindset that empowers us to navigate the evolving landscape of the property market. Acumentis remains dedicated to delivering the highest standards of service excellence and decision certainty, and we are excited to share our continued progress and achievements. Acumentis Annual Report 2023 Pg 7 CHAIRMAN’S REPORT Pg 8 “ My fellow Board members continue to work tirelessly setting and reﬁning the strategic direction of the company, maintaining strong governance and enabling the business to achieve its goals.” Dear Shareholders, It is with pleasure I present my Chairman’s report for the FY23. Several years ago, Acumentis embarked on an ambitious strategy to reimagine the then loosely structured, predominantly mortgage valuation business into a national business, under single ownership, with less reliance on mortgage valuations and diversiﬁed both geographically and by the professional services we offer. The business invested heavily in its new branding and marketing strategies, acquisitions to complete the geographical footprint and consolidate ownership, its people and its IT&T systems. At the same time, executive management has worked to restructure the business to deliver an agile, efﬁcient and purposeful business that delivers exceptional service and value to its growing list of clients. The business has faced many challenges over this period and has weathered these due to the resilience and clear focus of its management and employees. FY23 can be seen as turning point in the delivery of this strategy with the business delivering an improved second half result despite a challenging economic environment including a steep tightening of interest rates and high inflation. Despite the strong second half result, there is still more to do. The business must continue to further diversify its services and focus on revenue growth, thereby enabling Acumentis to deliver appropriate levels of return to our shareholders now and well into the future. The Board, senior executives and staff are driven by clear strategies and goals for the business and expect to deliver on these through FY24 and beyond to cement Acumentis as the premier, Australian owned, property advisory business. The achievements over the last few years, and FY23 in particular, would not have been possible without the incredible hard work, focus and professionalism of our staff across the country and the senior leadership group headed by our CEO Tim Rabbit and CFO John Wise. My fellow Board members continue to work tirelessly setting and reﬁning the strategic direction of the company, maintaining strong governance and enabling the business to achieve its goals. I would like to personally thank our many stakeholders that have supported Acumentis over many years including our clients, ongoing and new, and of course our loyal shareholders. Keith Perrett Acumentis Chairman Acumentis Annual Report 2023 Pg 9 CEO’S REPORT Dear Shareholders I am pleased to present my 2023 CEO’s Report to shareholders following a year in which Acumentis has delivered a much improved ﬁnancial performance built on the strategies implemented over the last several years. DIVERSIFICATION OF SERVICES Throughout FY2023, we continued to diversify our services away from a reliance on mortgage valuation work, and this strategy supported us well as mortgage valuations fell throughout the year as interest rates rose. Our fees from corporate and private clients increased signiﬁcantly and our revenues from ﬁnancial institutions have stabilised. CORPORATE & PRIVATE Jul 2 0 2 1 A u g 2 0 2 1 S e p 2 0 2 1 O ct 2 0 2 1 N ov 2 0 2 1 D ec 2 0 2 1 Ja n 2 0 2 2 Fe b 2 0 2 2 M ar 2 0 2 2 A pr 2 0 2 2 M ay 2 0 2 2 Ju n 2 0 2 2 Jul 2 0 2 2 A u g 2 0 2 2 S e p 2 0 2 2 O ct 2 0 2 2 N ov 2 0 2 2 D ec 2 0 2 2 Ja n 2 0 2 3 Fe b 2 0 2 3 M ar 2 0 2 3 A pr 2 0 2 3 M ay 2 0 2 3 Ju n 2 0 2 3 GOVERNMENT Jul 2 0 2 1 A u g 2 0 2 1 S e p 2 0 2 1 O ct 2 0 2 1 N ov 2 0 2 1 D ec 2 0 2 1 Ja n 2 0 2 2 Fe b 2 0 2 2 M ar 2 0 2 2 A pr 2 0 2 2 M ay 2 0 2 2 Ju n 2 0 2 2 Jul 2 0 2 2 A u g 2 0 2 2 S e p 2 0 2 2 O ct 2 0 2 2 N ov 2 0 2 2 D ec 2 0 2 2 Ja n 2 0 2 3 Fe b 2 0 2 3 M ar 2 0 2 3 A pr 2 0 2 3 M ay 2 0 2 3 Ju n 2 0 2 3 FINANCIAL INSTITUTIONS Jul 2 0 2 1 A u g 2 0 2 1 S e p 2 0 2 1 O ct 2 0 2 1 N ov 2 0 2 1 D ec 2 0 2 1 Ja n 2 0 2 2 Fe b 2 0 2 2 M ar 2 0 2 2 A pr 2 0 2 2 M ay 2 0 2 2 Ju n 2 0 2 2 Jul 2 0 2 2 A u g 2 0 2 2 S e p 2 0 2 2 O ct 2 0 2 2 N ov 2 0 2 2 D ec 2 0 2 2 Ja n 2 0 2 3 Fe b 2 0 2 3 M ar 2 0 2 3 A pr 2 0 2 3 M ay 2 0 2 3 Ju n 2 0 2 3 Pg 10 Acumentis Annual Report 2023 Mortgage related work has fallen from 72% of fees in FY22 to 61% of fees in FY23 and we expect this trend to continue as we successfully build our non-mortgage advisory services. NON-MORTGAGE FEE GROWTH M ar 2 0 2 3 A pr 2 0 2 3 M ay 2 0 2 3 Ju n 2 0 2 3 Jul 2 0 2 1 A u g 2 0 2 1 S e p 2 0 2 1 O ct 2 0 2 1 N ov 2 0 2 1 D ec 2 0 2 1 Ja n 2 0 2 2 Fe b 2 0 2 2 M ar 2 0 2 2 A pr 2 0 2 2 M ay 2 0 2 2 Ju n 2 0 2 2 Jul 2 0 2 2 A u g 2 0 2 2 S e p 2 0 2 2 O ct 2 0 2 2 N ov 2 0 2 2 D ec 2 0 2 2 Ja n 2 0 2 3 Fe b 2 0 2 3 Mortgage Related Other % Other “ Throughout FY2023, we continued to diversify our services away from a reliance on mortgage valuation work, and this strategy supported us well as mortgage valuation volumes fell throughout the year as interest rates rose” Timothy Rabbitt - Managing Director & CEO 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Pg 11 COST OPTIMISATION Through FY23, as well as driving revenue growth and diversiﬁcation, we have focussed on delivering a more streamlined, agile business with a focus on achieving efﬁciencies across service delivery and support functions. This has seen over $2M reduction in employee expenses and almost $1M reduction in overhead expenses compared to FY22. FY23 PERFORMANCE Despite a $1.7M reduction in fees, we have seen our EBITDA improve 70% from $2.0M in FY22 to $3.4M in FY23. FY22 V FY23 EBITDA 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 - FY22 EBITD A Reduction in e m ploy m ent expense Reductoin in revenue Reduction in insurance expense Reduction in IT&T expenses Increase in other expenses FY23 EBITD A The success of our strategies is further demonstrated by the strong second half results where EBITDA reached 11% and PBT 6% of revenues. Pg 12 Acumentis Annual Report 2023 Revenue 27,426 27,943 55,369 26,767 26,933 53,700 1st Half $’000 2nd Half $’000 FY2022 $’000 1st Half $’000 2nd Half $’000 FY2023 $’000 Gain on de-recognition of investment in associated entity EBITDA Operating proﬁt / (loss) Gain on de-recognition of investment in associated entity Acquisition costs expensed Proﬁt / (loss) before tax 1,539 - 1,539 - - - 28,965 27,943 934 (214) 56,908 2,035 38 26,767 26,933 53,700 580 (771) 2,835 1,498 3,415 727 - 1,539 (18) (232) (156) 1,421 - - - - - - (771) 1,498 727 1,101 252 1,539 (138) 1,653 MARKET OUTLOOK While the tightening interest rates and high inflation pressures have dampened the mortgage valuation market, population growth, lack of supply and the need to reﬁnance a large number of ﬁxed rate loans established 2-3 years ago are expected to provide support through FY24. With all levels of Government continuing to invest in infrastructure and a renewed focus on delivering the required increase in dwellings over the medium term, the opportunities for Acumentis to successfully deliver on its strategies are expected to remain. EXPECTATIONS FOR FY24 The company anticipates continued growth in revenues and tight cost control leading to improved returns to shareholders through FY2024 and beyond. As we wrap up our reporting for FY2023, I would like to personally thank our Board of Directors, senior executives and all our exceptional staff for their hard work over many years during which the business weathered many challenges and is now emerging as a stronger business, with a renewed focus on delivering value to our clients and stakeholders. I would also like to thank our many loyal, long term, clients as well as the growing number of new clients that have demonstrated via engaging with Acumentis, the value and decision certainty that our services provide. Finally, I would like to express my continued appreciation to our shareholders who have supported the business through the challenges of the last few years and assisted the business rebuild and expand. Timothy Rabbitt Managing Director & CEO Acumentis Annual Report 2023 Pg 13 Pg 13 Financial statements ASX:ACU FY22-23 Pg 14 Acumentis Annual Report 2023 TABLE OF CONTENTS Directors’ report ....................................................................................................................................16 Remuneration report – audited .............................................................................................................22 Auditor’s independence declaration .....................................................................................................33 Consolidated statement of proﬁt or loss and other comprehensive income .......................................34 Consolidated statement of ﬁnancial position .......................................................................................35 Consolidated statement of changes in equity ......................................................................................36 Consolidated statement of cash flows ..................................................................................................37 Notes to the consolidated ﬁnancial statements ...................................................................................38 How numbers are calculated ................................................................................................................40 Risk.........................................................................................................................................................66 Group structure .....................................................................................................................................76 Unrecognised items ...............................................................................................................................82 Other information ..................................................................................................................................86 Directors’ declaration ..........................................................................................................................106 Independent auditor’s report to the members ..................................................................................108 ASX additional information .................................................................................................................112 Acumentis Annual Report 2023 Pg 15 DIRECTORS’ REPORT The Directors present their report together with the ﬁnancial report of the Consolidated Entity, being Acumentis Group Limited (“the Company”) and its controlled entities, for the year ended 30 June 2023 and the auditor’s report thereon. Directors & Company Secretary The Directors & Company Secretary of the Company in ofﬁce at any time during or since the end of the ﬁnancial year are: Keith Perrett Independent Director Chair of the Board 25/05/18 – current Non-Executive director 01/02/18 - current Audit & Risk Committee 22/02/18 – 21/11/19 21/02/21 – 22/04/21 Chair of Audit & Risk Committee 08/11/22 – current Nominations & Remuneration Committee 22/02/18 – 21/11/19 21/02/21 – 22/04/21 08/11/22 - current Chair of Nominations & Remuneration Committee 25/05/18 – 21/11/19 Les Wozniczka Non-Executive Director 13/04/21 – current Nominations & Remuneration Committee 22/04/21 – current Audit & Risk Committee 22/04/21 – 07/11/22 Keith Perrett brings to the board strong experience in strategy development, government relations, stakeholder engagement and business development. He also has a strong business and government network, particularly within New South Wales & Queensland. He is currently Non-Executive Chairman of Silver Mines Ltd (ASX:SVL) and has previously held positions as the Chairman of the Grains Research and Development Corporation (GRDC), the National Rural Advisory Council (NRAC), the Wheat Research Foundation (WRF), and President of the Grains Council of Australia. Directorships of Other Listed Entities in Last 3 Years Silver Mines Ltd, 21/06/16 - current Les Wozniczka has been an active private investor since retiring as Chief Executive of Futuris Corporation in 2008 and currently holds a 11.9% stake in Acumentis Group Limited. He has been a director of public companies and is experienced in the management of regulated entities. Prior to Futuris Corporation, Les was a founding shareholder in Corporate Governance International, a partner in The Partners Group offering corporate advice, a Potter Partners partner and investment banker and international currency and bond manager. Les has an MBA and BSc (Psych) from UNSW and DipEd from the University of Adelaide. Pg 16 Acumentis Annual Report 2023 Andrea Staines OAM Independent Director Non-Executive director 26/09/19 - current Chair of Nominations & Remuneration Committee 21/11/19 – current Audit & Risk Committee 21/11/19 – current Timothy Rabbitt Managing Director Executive director 10/12/20 – current Andrea Staines OAM has been a professional Non-Executive Director in excess of ﬁfteen years on a range of Australian and New Zealand entities and is currently on the board of social enterprise UnitingCare Queensland. Andrea has experience in the property sector through her time on the board of QIC. She has extensive experience from being on the boards of entities with operations distributed nationwide including social enterprise Goodstart Early Learning, ASX-listed Aurizon & Kelsian Group, Australia Post and Australian Rail Track Corporation. Andrea is a former CEO of Australian Airlines (mark II), a Qantas subsidiary flying between Asia and Australia, which she co-launched. During this time, she was also a member of the Qantas Executive Leadership Team. Prior to this, Andrea led Qantas Revenue Management - a team that optimized Qantas passenger revenue using mathematical techniques. Before joining Qantas, Andrea worked in various ﬁnancial and strategy roles with American Airlines at their Dallas headquarters. Andrea has an MBA from the University of Michigan and a Bachelor of Economics from the University of Queensland. She is a Fellow of the Australian Institute of Company Directors (AICD) and a Member of Chief Executive Women (CEW). Directorships of Other Listed Entities in Last 3 Years Kelsian Group Limited (previously SeaLink Travel Group Limited) 15/02/16 – 25/10/22 Tim has worked with Acumentis since 1992 (then Taylor Byrne) and been in the CEO role since September 2019 and was appointed Managing Director in December 2020. Tim led Taylor Byrne from 2013 until the merger with LMW in 2019 and was instrumental in the transition of the company from a partnership into a corporate structure. As CEO of Acumentis Tim holds overall responsibility for the management of the business, including risk management, governance, strategic planning and ﬁnancial management. He has worked across the commercial, industrial and specialised rural property sectors throughout Queensland, the Northern Territory, New South Wales and Western Australia. A Certiﬁed Practicing Valuer, Tim specialises in litigation and acquisition matters and has been involved in numerous gas, mining and powerline easement acquisition projects throughout Queensland and New South Wales. He has regularly acted as an Expert Witness in various courts, and been involved in negotiations for the acquisition of properties for roads, rails, dams, mines, powerline and gas and water pipeline easements, and gas infrastructure. Tim has served as the Queensland President of the Australian Property Institute, is a member of the Valuation Board of Review for the Northern Territory, the Royal Institute of Chartered Surveyors, the International Right of Way Association, and the Australian Institute of Company Directors. Acumentis Annual Report 2023 Pg 17 Patrice Sherrie Independent Director Non-Executive director 01/11/20 – 08/11/22 Audit & Risk Committee 01/11/20 – 08/11/22 Chair of Audit & Risk Committee 01/11/20 – 08/11/22 Nominations & Remuneration Committee 01/11/20 – 08/11/22 John Wise Company Secretary 27/09/16 – current Patrice is an experienced executive and director with over 35 years’ experience in chartered accounting and commerce. She has diverse industry experience including property, infrastructure, ﬁnance, childcare, retail and the arts. Patrice sits on several different Boards including City of Brisbane Investment Corporation Pty Ltd, Brisbane Sustainability Agency, Andersen’s Floor Coverings, Millovate and The Lord Mayors Charitable Trust (Brisbane). Patrice provides considered input around the board table and offers reﬁned governance skills; ﬁnance and accounting skills and the ability to elevate the proﬁle of the organisation via her well-developed networks across property, ﬁnance and government. Patrice brings energy, commitment and a strong work ethic to companies she is involved with. She has held senior executive roles in growing businesses so understands the challenges and how to develop strategies to grow businesses. Patrice brings years of experience as a director to any appointment and has been the Chair or member of a number of sub committees. John joined Acumentis in September 2016 as Chief Financial Ofﬁcer and Company Secretary. John has had extensive experience in the property services sector having previously held the position of CFO & Company Secretary at Savills from 1999 until 2016. John trained with Price Waterhouse in the UK and also worked in Hungary before emigrating to Australia in 1990. John has a Bachelor of Science, Honours Degree in Mathematics and is a fellow of the Institute of Chartered Accountants in England and Wales (ICAEW). Pg 18 Acumentis Annual Report 2023 Directors’ Meetings The number of directors’ meetings held, and the number of meetings attended by each of the directors (when a director) of the Company during the ﬁnancial year were as follows: Director Keith Perrett Andrea Staines Patrice Sherrie Timothy Rabbitt Les Wozniczka Board Audit & Risk Committee Nominations & Remuneration Committee Held Attended Held Attended Held Attended 11 11 4 11 11 11 9 4 10 10 3 6 3 - 6 3 6 3 - 6 3 4 1 - 4 3 4 1 - 4 Company particulars Acumentis Group Limited is incorporated in Australia. The address of the registered ofﬁce is Level 7, 283 Clarence Street, Sydney, NSW 2000. Corporate Governance Statement Acumentis Group Limited and the board are committed to achieving and demonstrating the highest standards of corporate governance. Acumentis Group Limited has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (4th edition) published by the ASX Corporate Governance Council. The 2023 Corporate Governance Statement is dated as at 30 June 2023 and reflects the corporate governance practices in place at the end of the 2023 ﬁnancial year. The 2023 Corporate Governance Statement was approved by the board on 14th August 2023 and can be viewed at: https://www.acumentis.com.au/investor-center/corporate-governance/ https://www.acumentis.com.au/investor-center/corporate-governance/ Principal activities The principal activity of the Consolidated Entity during the course of the ﬁnancial year was property valuation. There were no signiﬁcant changes in the nature of the activities of the Consolidated Entity during the year. Acumentis Annual Report 2023 Pg 19 Review of operations Revenue Continuing operations Gain on de-recognition of investment in associated entity Proﬁt before tax Operating proﬁt from continuing operations Gain on de-recognition of investment in associated entity Acquisition costs expensed Income tax (expense) / beneﬁt Net proﬁt after tax from continuing operations Year ended 30 June 2023 $000s Year ended 30 June 2022 $000s Increase / (Decrease) $’000 % Change 53,700 - 53,700 727 - - 727 (298) 429 55,369 1,539 56,908 38 1,539 (156) 1,421 24 1,445 (1,669) (1,539) (3,208) 689 (1,539) 156 (694) (322) (1,016) (3%) (100%) (6%) 1,813% (100%) (100%) (49%) (1,342%) (70%) The results for the year ended 30 June 2023 reflect the success of the strategies to diversify revenues geographically, focussing on development of government, corporate and private clients as well as non- ﬁnance related valuation and advisory services. With the increase in interest rates throughout the year, fees earned from ﬁnancial institutions related to lending decreased by 19% year on year but Acumentis was successful in offsetting this fall with a 78% year on year increase in fees from government clients and a 14% year on year increase in fees from corporate and private clients. Whilst overall revenues fell 3%, operating proﬁts from continuing operations increased signiﬁcantly as a result of restructuring undertaken in 2022 improving gross margins and lowering overhead costs. The company delivered an operating proﬁt of $727K (FY22 $38K) and a proﬁt before tax of $727K (FY22 $1,421K). The result for the year ended 30 June 2023 includes the following signiﬁcant items: Expenses Redundancy and termination costs Business Overview 225,000 The business continues to diversify its revenues streams geographically with growth in revenues in WA and SA in particular following the acquisition of these businesses during the previous ﬁnancial year. Whilst the current ﬁnancial year saw a reduction in fees from ﬁnancial institutions, this was offset by strong growth in fees derived from government, corporate and private clients. The business now has a more diversiﬁed fee base with non-ﬁnance related fees making up circa 40% of total fees. Pg 20 Acumentis Annual Report 2023 Outlook The Board expects economic conditions in FY24 to remain challenging with high interest rates and inflation as well as the risk of recession adversely impacting business and consumer conﬁdence. Despite the challenges, the business is in a position to grow and deliver improved proﬁtability. Dividends The Board has not declared any dividends with respect to FY23 (FY22: none). No dividends were paid by the Company since the end of the previous ﬁnancial year. Events subsequent to the end of the reporting period There were no signiﬁcant events subsequent to the end of the reporting period. State of affairs There have been no signiﬁcant changes in the state of affairs of the Consolidated Entity that occurred during the year under review. Likely Developments Refer to the Outlook included in this Directors’ Report above. Environmental regulation The operations of the Consolidated Entity are not subject to any signiﬁcant environmental regulation under a law of the Commonwealth or of a State or Territory. Acumentis Annual Report 2023 Pg 21 REMUNERATION REPORT – AUDITED Nominations & Remuneration Committee A major role of the Nominations & Remuneration Committee is to ensure that the remuneration policies and outcomes achieve an appropriate balance between the interests of Acumentis Group shareholders and rewarding and motivating executives and employees in order to achieve their long-term commitment to the Consolidated Entity. The committee meets as required but generally at least twice per year. The members of the Nominations & Remuneration Committee during the year were: Name Current members Andrea Staines (Member & Chair from 21 November 2019) Leslie Wozniczka (Member from 22 April 2021) Keith Perrett (Member from 8 November 2022) Independent Non-executive Y N Y Y Y Y Remuneration strategy Remuneration levels are competitively set to attract and retain appropriately qualiﬁed and experienced directors and senior executives. The remuneration of the Consolidated Entity’s senior executives includes a mix of ﬁxed components and performance-based incentives comprising short term incentives (“STI’s”) and long term incentives (“LTI’s”). Component Fixed STI LTI Settled Cash Cash Share Based How Measured Market rates, reviewed annually. The performance of the Consolidated Entity and the individual performance of the executives based on achievement of speciﬁc key performance indicators (KPI’s) which include ﬁnancial and non- ﬁnancial targets. STI’s and the associated KPI’s are reviewed and set annually with STI payments, if any, being made post ﬁnalisation of the annual external audit. The performance of the Consolidated Entity and the individual performance of the executives. The performance of the Consolidated Entity is based on total shareholder return and earnings per share. LTI’s have a minimum period of 3 years and are forfeited if the executive ceases to be employed by the Consolidated Entity. The board considers that the performance-based incentive is appropriate as it directly aligns the individuals reward with the Consolidated Entity’s performance. Pg 22 Acumentis Annual Report 2023 In considering the Consolidated Entity’s performance, the board has regard to the following indices in respect of the current ﬁnancial year and previous years. Revenue from rendering services EBITDA1 Net proﬁt / (loss) to equity holders of the Company Earnings / (loss) per share (cents) 2023 $000 53,519 3,420 429 0.23 2022 $000 55,163 2,035 2021 $000 44,043 4,902 2020 $000 36,666 (38) 2019 $000 41,493 (1,612) 1,445 (9,688) (2,555) (15,148) 0.83 (6.19) (1.76) (18.36) 1. EBITDA excludes gain on de-recognition of investment in associated company (note 13 (a)) and gain on disposal of non-current assets. The factors that are considered to affect total shareholders return are summarised below. Dividends declared (per share) 2023 $000 - 2022 $000 - 2021 $000 - 2020 $000 - 2019 $000 - Share price at the end of the period $0.061 $0.095 $0.115 $0.080 $0.180 Non-executive directors are paid an annual fee for their service on the board and committees which is determined by the Nominations & Remuneration Committee. Aggregate remuneration for all non-executive directors is not to exceed $400,000 per annum as approved by the shareholders. Non-executive directors’ aggregate salary & fees for the year were $273,000. These fees include statutory superannuation. Non-executive directors do not receive bonuses nor are they entitled to be issued with options or performance rights on securities in the Consolidated Entity. Non-executive directors do not receive any retirement beneﬁts other than statutory superannuation payments. Non-executive directors do not receive separate fees for committee memberships. The Consolidated Entity has a policy that prohibits those that are granted share-based payments as part of their remuneration from being compensated for changes in value of the underlying securities. Acumentis Annual Report 2023 Pg 23 Directors’ and senior executive ofﬁcers’ remuneration Details of the nature and amount of each major element of the remuneration of each member of key management personnel are: Short term Post-employment Long term Total $ Performance Related % Share Based % Name Year Salary & Fees $ Super- annuation beneﬁts $ STI (b) $ Termination beneﬁts $ Movement in long term beneﬁts $ Share based payments $ Non-executive directors K Perrett 2023 120,000 2022 120,000 A Staines 2023 58,823 2022 59,546 P Sherrie1 2023 20,814 2022 59,546 L Wozniczka 2023 65,000 2022 65,500 - - - - - - - - Executive directors T Rabbitt 2023 378,361 34,792 2022 387,559 80,500 Other key management personnel J Wise 2023 252,904 22,986 2022 256,559 35,455 - - 6,177 5,954 2,186 5,954 - - 25,292 23,568 25,711 25,269 - - - - - - - - - - - - - - - - - - - - - - - - - - - - 120,000 120,000 65,000 65,500 23,000 65,500 65,000 65,500 - - - - - - - - - - - - - - - - (8,793) (13,659)3 415,993 6,409 52,140 550,176 8% 15% -3% 9% 3,410 3,675 15,716 320,727 8,455 329,413 7% 11% 5% 3% 1. 2. 3. Appointed 1 November 2020 and resigned 8 November 2022 Other directors and senior executive ofﬁcers were employed throughout both ﬁnancial years Includes the effect of lapse of FY21 tranche of rights due to the performance condition not being met Notes in relation to the table of directors’ and executive ofﬁcers’ remuneration (a) Analysis of options & performance rights included in remuneration Option & Performance Rights – Share Based Payments The directors at their discretion allocate share options or performance rights that entitle key management personnel and senior employees to be issued shares in the Company. The terms of the options including vesting conditions and performance criteria vary depending upon the incentive arrangements appropriate for key management personnel and senior employees and are a part of an approved Employee Share Acquisition Scheme, which was initially approved by shareholders at the 2018 Annual General Meeting and renewed for a further 3 years at the 2021 Annual General Meeting. Pg 24 Acumentis Annual Report 2023 Options There were no options held by key management personnel outstanding at the date of this report (2022: nil). Performance Rights Performance rights may be granted under the Acumentis Group Performance Rights and Option Plan which was ﬁrst approved by shareholders at the 2018 Annual General Meetings and the approval was renewed for a further 3 years at the 2021 Annual General Meeting. The Plan allows the Company to grant options or rights to selected senior executives to acquire ordinary shares in the Company. Participants are required to satisfy performance and service conditions at the time of the offer. The exercise price for performance rights is nil. Rights cannot be transferred and are not quoted on the ASX. Performance rights on issue are as follows: Tranche Date Transaction FY21 15 Oct 20 Grant Chief Executive Ofﬁcer 1,000,000 30 Jun 23 Lapse (market & performance conditions not met) (1,000,000) FY22 20 Sep 21 Grant 28 Oct 21 Grant 8 Apr 22 Forfeit (service condition not met) 10 Jun 22 Forfeit (service condition not met) 19 May 23 Forfeit (service condition not met) FY23 25 Oct 22 Grant Chief Financial Ofﬁcer Other employees - - - - - - Total 1,000,000 (1,000,000) - 240,000 1,200,000 1,440,000 - - - - - 240,000 (144,000) (144,000) (120,000) (120,000) (240,000) (240,000) - - 240,000 - - - 240,000 240,000 696,000 1,176,000 405,000 300,000 435,000 1,140,000 405,000 300,000 435,000 1,140,000 Total 645,000 540,000 1,131,000 2,316,000 1. Further information on performance rights can be found at note 19(a) to the ﬁnancial statements. Acumentis Annual Report 2023 Pg 25 Vesting conditions are as follows: Number of rights on issue Service Condition Market Condition The executive must remain employed for 3 years to the ﬁnalisation of the statutory audit for the ﬁnancial year ended. If the service condition is not met none of the performance rights will vest. 50% of the performance rights will vest if the total shareholder return (“TSR”) for Acumentis is at least equal to the TSR for the ASX300 for the period FY21 FY22 FY23 - 1,176,000 1,140,000 30 Jun 23 30 Jun 24 30 Jun 25 1 Jul 20 – 30 Jun 23 1 Jul 21 – 30 Jun 24 1 Jul 22 – 30 Jun 25 Performance Condition 50% of the performance rights will vest pro-rata based on the earnings per share of Acumentis Group Limited being between 2.4 cents & 3.2 cents for FY23 2.5 cents & 3.4 cents for FY24 2.6 cents & 3.5 cents for FY25 The Board has the discretion to adjust the number of rights that ultimately vest and/or the service condition period if it forms the view that the unadjusted outcome is not appropriate to the circumstances that prevailed over the measurement period. The Board has discretion to determine that some or all unvested rights held lapse on a speciﬁed date if allowing the rights to vest would, in the opinion of the Board, result in an inappropriate beneﬁt to the rights holder. Such circumstances would include joining a competitor or actions that harm the Consolidated Entities’ stakeholders. In the case of fraud or misconduct, all unvested rights will be forfeited. Vesting and exercise of performance rights issued during prior years No performance rights vested during the year ended 30 June 2023 (2022: none). (b) Analysis of short term incentives included in remuneration Short-term incentive cash payments were awarded to the CEO Timothy Rabbitt and CFO John Wise. The performance-based component for the CEO is a cash payment based on both ﬁnancial and non- ﬁnancial KPI’s and qualitative assessment of performance. The performance-based component for the CFO is a cash payment based on non-ﬁnancial KPI’s and qualitative assessment of performance. Director / Key Management Personnel Vesting date Cash STI Paid / Payable Cash STI Forfeited Financial Year the cash STI was paid / is payable Timothy Rabbitt 30 June 2023 15% John Wise 30 June 2023 50% 85% 50% 2024 2024 Pg 26 Acumentis Annual Report 2023 Contracted Commitment Timothy Rabbitt (CEO) and John Wise (CFO) are employed by the Company under ongoing employment contracts. The notice periods and termination payments provided for under these contracts are as follows: Director / Key Management Personnel Notice Period Months Termination Payment $ Timothy Rabbitt John Wise 6 3 212,500 75,000 The termination payments are not provided for in the ﬁnancial statements. Acumentis Annual Report 2023 Pg 27 BENEFICIAL INTEREST OF DIRECTORS AND KEY MANAGEMENT PERSONNEL IN SHARES & OPTIONS Movement in shareholdings The movement during the reporting period in the number of ordinary shares in the Company held directly, indirectly, or beneﬁcially by each director or key management person including their personally related entities is as follows: Held at 1 July 2022 Purchases Sales Appointment / (Retirement) from Board Held at 30 June 2023 John Wise 265,884 200,856 2023 Non-Executive Directors Keith Perrett Andrea Staines Patrice Sherrie Les Wozniczka Executive Directors Timothy Rabbitt Key Management Personnel 2022 Non-Executive Directors Keith Perrett Andrea Staines Patrice Sherrie Les Wozniczka Executive Directors Timothy Rabbitt Key Management Personnel 418,577 822,857 - - - - 19,810,755 6,142,858 1,477,479 394,612 Held at 1 July 2021 418,577 - - 19,810,755 - - - - 1,463,479 14,000 John Wise 222,515 43,369 Purchases Sales Appointment / (Retirement) from Board Held at 30 June 2022 - - - - - - - - - - - - 1,241,434 - - 25,953,613 1,872,091 466,740 - - - - - - - - - - - - 418,577 - - 19,810,755 1,477,479 265,884 The executive ofﬁcers named are those who are directly accountable and responsible for the strategic direction and operational management of the Consolidated Entity. The directors are of the opinion that only the executive ofﬁcers detailed above meet the deﬁnition of key management personnel as set out in AASB 124 Related Party Disclosures. Pg 28 Acumentis Annual Report 2023 Transactions with Director-Related Entities The Consolidated Entity did not enter into any transactions with any director-related entities, except for payment of non-executive directors’ fees to some directors, in either of the years ended 30 June 2022 or 30 June 2023. END OF REMUNERATION REPORT Acumentis Annual Report 2023 Pg 29 PROCEEDINGS ON BEHALF OF THE CONSOLIDATED ENTITY During the ﬁnancial year and in the interval between the end of the ﬁnancial year and the date of this report the Consolidated Entity has made no application for leave under Section 237 of the Corporations Act 2001. No person has applied for leave of court to bring proceedings on behalf of the Consolidated Entity or intervene in any proceeding to which the Consolidated Entity is a party for the purpose of taking responsibility on behalf of the Consolidated Entity for all or any part of these proceedings. The Consolidated Entity was not a party to any such proceedings during the year. Directors’ Interests The relevant interest of each director in the shares issued by the Company as notiﬁed by the Directors to the Australian Securities Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows: Keith Perrett Andrea Staines Timothy Rabbitt Les Wozniczka Share Options Shares under option Ordinary Shares 1,241,434 - 1,872,091 25,953,613 There were 2,500,000 unissued ordinary shares of Acumentis Group Limited under option at the date of the report (2022: 2,500,000). Refer to note 7 for further details. Shares issued on exercise of options There were no options exercised during the year (2022: Nil). Indemniﬁcation and Insurance of Ofﬁcers and Auditors Ofﬁcers The Company has agreed to indemnify all current Directors of Acumentis Group Limited to the maximum extent permitted by law against any liability incurred by them by virtue of their holding ofﬁce as an ofﬁcer of the Consolidated Entity other than: • • • a liability owed to the Consolidated Entity or a related body corporate of the Company; a liability for a pecuniary penalty order under section 1317G of the Law or a compensation order under section 1317H of the Law; or a liability owed to a person other than the Consolidated Entity that did not arise out of conduct in good faith. Pg 30 Acumentis Annual Report 2023 Since the end of the previous ﬁnancial year, the Consolidated Entity has paid premiums in respect of Directors and Ofﬁcers liability insurance, for all past, present, or future directors, secretaries, ofﬁcers or employees of the Consolidated Entity. Conditions of the Insurance policy restrict disclosure of the premium amount. The insurance premiums relate to: • • costs and expenses incurred by the relevant ofﬁcers in defending proceedings, whether civil or criminal and whatever their outcome other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage. Further details of insurance policies have not been disclosed as the policies prohibit such disclosure. Auditors The Company has not, during or since the end of the ﬁnancial year, indemniﬁed or agreed to indemnify the auditor of the Company or any related entity against a third-party liability incurred by the auditor. During the year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Rounding of Amounts The Consolidated Entity has applied the relief available under ASIC Instrument 2016/191 and accordingly, amounts in the ﬁnancial statements and directors’ report have been rounded to the nearest thousand dollars, or in certain cases, to the nearest dollar. Auditors Independence Declaration under Section 307C of the Corporations Act 2001 The auditor’s independence declaration is set out on page 33 and forms part of the Directors’ Report for the ﬁnancial year ended 30 June 2023. Non-audit Services During the year, William Buck, the Company’s auditor, has performed certain other services in addition to their statutory duties. The board has considered the non-audit services provided during the year by the auditor and in accordance with written advice provided by resolution of the Audit & 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 2001 for the following reasons: • • all non-audit services were subject to the corporate governance procedures adopted by the Consolidated Entity and have been reviewed by the Audit & Risk Committee to ensure that they do not impact the integrity and objectivity of the auditors; 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 (including Independence Standards), as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Consolidated Entity, acting as an advocate for the Consolidated Entity or jointly sharing risks and rewards. Acumentis Annual Report 2023 Pg 31 Details of the amounts paid to the auditors of the Consolidated Entity, William Buck, and its related practices for audit and non-audit services provided during the year are set out below: Statutory and other audit services Full year audit Half year review Service other than statutory audit Preparation & lodgement of taxation returns Tax advice: • Acquisition due diligence 2023 2022 174,000 60,000 234,000 9,790 - 9,790 160,000 60,000 220,000 13,740 13,500 27,240 This report is made in accordance with a resolution of the directors. Keith Perrett Director Dated at Sydney this 14th day of August 2023 Pg 32 Acumentis Annual Report 2023 AUDITOR’S INDEPENDENCE DECLARATION AUDITOR’S INDEPENDENCE DECLARATION UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF ACUMENTIS GROUP LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2023 there have been: — 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. Yours faithfully William Buck Accountants & Advisors ABN: 16 021 300 521 Domenic Molluso Partner Sydney, 14 August 2023 Level 29, 66 Goulburn Street, Sydney NSW 2000 Level 7, 3 Horwood Place, Parramatta NSW 2150 +61 2 8263 4000 nsw.info@williambuck.com williambuck.com.au William Buck is an association of firms, each trading under the name of William Buck across Australia and New Zealand with affiliated offices worldwide. Liability limited by a scheme approved under Professional Standards Legislation. 16 Acumentis Annual Report 2023 Pg 33 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Revenue from rendering of services Gain on de-recognition of investment in associated company Other income Expenses from operating activities: Employee expenses Software, printing & stationary expenses Marketing expenses Communications expenses Insurance expenses Administration expenses Occupancy expenses Depreciation and amortisation expenses Other expenses from operating activities Results from operating activities Finance income Finance expense Proﬁt before tax Income tax (expense) / beneﬁt Proﬁt for the year attributable to owners of the parent Notes 1 13(b) 3(a) 2023 $000 2022 $000 53,519 55,163 - 181 1,539 206 53,700 56,908 39,022 2,657 824 311 2,490 1,021 699 2,287 3,309 41,336 2,805 765 555 2,897 1,234 648 1,935 3,030 52,620 55,205 1,080 1,703 35 (388) (353) 36 (318) (282) 727 1,421 (298) 429 24 1,445 3(b) 3(b) 4 Total comprehensive proﬁt for the year attributable to owners of the parent 429 1,445 Basic earnings per share Diluted earnings per share 21(a) 21(b) 0.23 cents 0.83 cents 0.22 cents 0.81 cents The above statement of proﬁt or loss and other comprehensive income should be read in conjunction with the accompanying notes. Pg 34 Acumentis Annual Report 2023 CONSOLIDATED STATEMENT OF FINANCIAL POSITION Assets Cash and cash equivalents Term deposits Trade and other receivables Other ﬁnancial assets Other current assets Total current assets Other ﬁnancial assets Term deposits Deferred tax assets Plant and equipment Right of use assets Intangible assets Total non-current assets Total assets Liabilities Trade and other payables Borrowings Lease liabilities Current tax liabilities Deferred consideration Employee beneﬁts Total current liabilities Borrowings Lease liabilities Deferred consideration Employee beneﬁts Provisions Total non-current liabilities Total liabilities Net assets Equity Issued capital Retained earnings Other reserves Total equity Notes 5(a) 5(b) 5(c) 5(d) 6(f) 5(d) 5(b) 6(e) 6(a) 6(b) 6(c) 5(e) 5(f) 5(g) 6(d) 5(h) 6(g) 5(f) 5(g) 5(h) 6(g) 6(h) 7 8 2023 $000 1,697 1 5,916 371 1,064 9,049 284 913 2,545 737 2,505 22,140 29,124 38,173 3,834 8 1,765 - 143 4,897 10,647 39 1,566 1,263 446 142 3,456 14,103 24,070 2022 $000 856 42 6,287 349 1,361 8,895 653 887 2,835 934 2,489 22,245 30,043 38,938 4,162 908 1,561 28 406 5,229 12,294 1,448 2,271 1,406 509 182 5,816 18,110 20,828 22,208 19,433 1,697 165 1,268 127 24,070 20,828 The above consolidated statement of ﬁnancial position should be read in conjunction with the accompanying notes. Acumentis Annual Report 2023 Pg 35 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Retained Earnings / (Accumulat- ed Deﬁcit) $000 Other Reserves $000 Notes Share Capital $000 Balance at 1 July 2021 Shares issued Share based payments expense 7(a) 8 Total comprehensive proﬁt attributable to members of the parent entity Corporations Act 2001 s258F reduction in capital 7(b) Balance at 30 June 2022 Balance at 1 July 2022 Shares issued Share based payments expense 7(a) 8 Total comprehensive proﬁt attributable to members of the parent entity 44,887 (27,600) 1,969 - - (27,423) 19,433 19,433 2,775 - - - - 1,445 27,423 1,268 1,268 - - 429 Total Equity $000 17,318 1,969 96 1,445 - 31 - 96 - - 127 20,828 127 - 38 - 20,828 2,775 38 429 Balance at 30 June 2023 22,208 1,697 165 24,070 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Pg 36 Acumentis Annual Report 2023 CONSOLIDATED STATEMENT OF CASH FLOWS Cash flows from operating activities Cash receipts in the course of operations Lease receipts Cash payments in the course of operations Interest received Interest paid Income tax paid Notes 3(b) 3(b) 2023 $000 2022 $000 59,591 59,867 350 241 (56,228) (58,109) 32 (388) (36) 36 (318) (170) Net cash provided by operating activities 9(a) 3,321 1,547 Cash flows from investing activities Payments for plant and equipment Payments for intangible assets Purchase of investments - Acquisition of incorporated entities - Deferred consideration paid - Refund of previously paid consideration Decrease / (increase) in security deposits invested Loans advanced Loans repaid 6(a) 6(c) 13(a), (b) 5(h), 13(a), (b) (331) (450) - (406) - 15 - - (447) (617) (805) (61) 27 (87) (189) 20 Net cash used in investing activities (1,172) (2,159) Cash flows from ﬁnancing activities Shares issued (net of costs) Repayment of borrowings Repayment of lease liabilities Dividends paid Net cash provided from ﬁnancing activities Net increase / (decrease) in cash and cash equivalents held Cash and cash equivalents at beginning of the year 7(a) 5(f) 2,775 (2,309) (1,774) - - (440) (1,668) (110) (1,308) (2,218) 841 856 (2,830) 3,686 Cash and cash equivalents at the end of the year 5(a) 1,697 856 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Acumentis Annual Report 2023 Pg 37 Notes to the consolidated ﬁnancial statements ASX:ACU FY22-23 Pg 38 Acumentis Annual Report 2023 TABLE OF CONTENTS How numbers are calculate .................................................................................................. 40 1 2 3 4 5 6 7 8 9 Revenue ............................................................................................................................40 Material proﬁt or loss items..............................................................................................41 Other income and expense items ....................................................................................41 Income tax expense .........................................................................................................42 Financial assets and ﬁnancial liabilities ...........................................................................43 Non-ﬁnancial assets and liabilities ..................................................................................50 Equity ................................................................................................................................62 Other reserves ..................................................................................................................64 Cash flow information .......................................................................................................65 Risk ............. ....................................................................................................................... 66 10 11 12 Signiﬁcant estimates and judgements .............................................................................67 Financial risk management ..............................................................................................67 Capital management ........................................................................................................72 Group structure ................................................................................................................... 76 13 14 Business combinations - acquisitions..............................................................................77 Interests in other entities .................................................................................................80 Unrecognised items .............................................................................................................. 82 15 16 17 Contingent liabilities .........................................................................................................83 Commitments ...................................................................................................................83 Events occurring after the reporting period .....................................................................84 Other information ................................................................................................................ 86 18 19 20 21 22 23 24 Related party transactions ...............................................................................................87 Share-based payments ....................................................................................................88 Remuneration of auditors .................................................................................................90 Earnings per share ............................................................................................................90 Parent entity ﬁnancial information ...................................................................................92 Going concern ...................................................................................................................92 Summary of signiﬁcant accounting policies ....................................................................93 Acumentis Annual Report 2023 Pg 39 HOW NUMBERS ARE CALCULATED This section provides additional information about those individual line items in the ﬁnancial statements that the directors consider most relevant in the context of the operations of the entity, including: a) Accounting policies that are relevant for an understanding of the items recognised in the ﬁnancial statements. These cover situations where the accounting standards either allow a choice or do not deal with a particular type of transaction; b) Analysis and sub-totals, including segment information; and c) Information about estimates and judgements made in relation to particular items. 1 Revenue Revenue from rendering of services Recovery of disbursements Recharge of shared services to licensees 2023 $000 53,423 75 21 53,519 2022 $000 55,114 20 29 55,163 (a) Revenue from rendering of services Revenue from the rendering of services to clients is recognised when the individual performance obligation under the applicable contract is satisﬁed and at the price agreed in the contract. For the large majority of contracts, there is a single performance obligation at the completion of the service and revenue is recognised at this point. (b) Recovery of disbursements Where the contract with the client allows the recovery of disbursements incurred in delivering the services, these are billed to the client at the time the performance obligation in the contract is satisﬁed or in accordance with an agreed billing schedule as appropriate. (c) Recharge of shared services to licensees Revenue relating to the provision of shared services to licensees is billed and recognised on a monthly basis over the term of the agreement relating to the provision of such services. Further information on the measurement and timing of recognition of revenues may be found in note 24(e). Pg 40 Acumentis Annual Report 2023 2 Material proﬁt or loss items The Consolidated Entity has identiﬁed a number of items which are material due to the signiﬁcance of their nature and/or amount. These are listed separately here to provide a better understanding of the ﬁnancial performance of the Consolidated Entity. Income Gain on de-recognition of investment in associated company Notes 13(a) Expenses Redundancy and termination costs Acquisition costs expensed IT&T MSP migration non-recurring costs 2023 $000 - 225 - - 2022 $000 1,539 248 156 395 3 Other income and expense items This note provides a breakdown of the items included in ‘other income’ and ‘ﬁnance income and expenses’. Information about speciﬁc proﬁt and loss items (such as gains and losses in relation to the sale of plant & equipment) is disclosed in the related statement of ﬁnancial position notes. (a) Other income Licence fee income Sundry income 2023 $000 159 22 181 2022 $000 181 25 206 Licence fee income represented fees charged to non-controlled entities which had been licenced to use the Acumentis brand and systems. Licence fees were charged as a percentage of revenue earned by the licensee. Acumentis Annual Report 2023 Pg 41 (b) Finance income and expense Finance income - Employee loans - $3K capitalised (2022 $Nil) - Lease income from sublease - Term deposits Finance expenses - Borrowings - Leases - Overdrafts - Insurance premium ﬁnance 2023 $000 11 22 2 35 (100) (177) (49) (62) (388) 2022 $000 4 27 5 36 (79) (186) (26) (27) (318) Finance income comprises interest income on funds invested. Interest income is recognised using the effective interest rate method, which, for floating rate ﬁnancial assets, is the rate inherent in the instrument. Interest income is recognised as it accrues in the Statement of Proﬁt & Loss and Other Comprehensive Income, using the effective interest method. Finance expenses comprise interest expense on borrowings, leases and unwinding of the discount on ﬁnancial assets. All borrowing costs are recognised in the Statement of Proﬁt & Loss and Other Comprehensive Income using the effective interest method. 4 Income tax expense This note provides an analysis of the Consolidated Entity’s income tax expense, shows what amounts are recognised directly in equity and how the tax expense is affected by non-assessable and non-deductible items. It also explains signiﬁcant estimates made in relation to the Consolidated Entity’s tax position. Pg 42 Acumentis Annual Report 2023 (a) Income tax expense / (beneﬁt) Current tax Current year tax payable Utilisation of brought forward tax losses Adjustments for prior years Total current tax expense Deferred income tax Decrease / (increase) in deferred taxes (note 6(e)) Total deferred tax expense / (beneﬁt) Income tax expense / (beneﬁt) 2023 $000 105 (105) 8 8 290 290 298 2022 $000 98 (98) 19 19 (43) (43) (24) (b) Reconciliation of income tax beneﬁt to prima facie tax payable Proﬁt from continuing operations before tax 2023 $000 727 2022 $000 1,421 Prima facie income tax beneﬁt calculated at 30% on proﬁt (2021: 30%) 218 426 Increase / (decrease) in income tax expense due to: Non-deductible expenses - Entertainment - Other expenses Effect of non-assessable gain on de-recognition of investment in associated company Adjustments for prior years Restatement of future tax beneﬁt from 26% to 30%1 (note 6(e)) Income tax expense / (beneﬁt) 1. to reflect expected revenues exceeding $50M and the entity no longer qualifying for lower tax rate 21 - - 239 59 - 298 17 - (462) (19) 14 (19) (24) 5 Financial assets and ﬁnancial liabilities This note provides information about the Consolidated Entity’s ﬁnancial instruments, including: • An overview of all ﬁnancial instruments held by the Consolidated Entity; • Speciﬁc information about each type of ﬁnancial instrument; • Accounting policies; and • Information about determining the fair value of the instruments, including judgements and estimation uncertainty involved. Acumentis Annual Report 2023 Pg 43 The Consolidated Entity holds the following ﬁnancial instruments: Financial assets at amortised cost Cash and cash equivalents Term deposits Trade and other receivables Other ﬁnancial assets Financial liabilities at amortised cost Trade and other payables Borrowings Lease liabilities Deferred ﬁxed consideration Financial liabilities at fair value Deferred contingent consideration (a) Cash and cash equivalents Note 5(a) 5(b) 5(c) 5(d) 5(e) 5(f) 5(g) 5(h) 2023 $000 1,697 914 5,916 655 9,182 3,834 47 3,331 143 7,355 2022 $000 856 929 6,287 1,002 9,074 4,162 2,356 3,832 549 10,899 5(h) 1,263 1,263 Cash at bank and on hand Receivables ﬁnance facility Cash and cash equivalents in the Statement of Cash Flows 2023 $000 1,275 422 1,697 2022 $000 856 - 856 The receivables ﬁnance facility is able to be drawn drown without notice and funds are immediately available. Receipts from trade receivables are banked into a speciﬁc bank account which is swept each day to credit the receivables ﬁnance account. As a result, the receivables ﬁnance account balance often fluctuates between being positive to being negative. The receivables ﬁnance account forms an integral part of the Consolidated Entity’s cash management and is operated as though it was a bank account with an overdraft facility. The receivables ﬁnance facility account is therefore included in cash and cash equivalents in accordance with the requirements and deﬁnitions in Australian Accounting Standard AASB107 Cash Flow Statements. Pg 44 Acumentis Annual Report 2023 Access was available at the reporting date to the following lines of credit: Available Receivables ﬁnance facility Bank bill & loan facility Bank overdraft Unused at reporting date Receivables ﬁnance facility Bank bill & loan facility Bank overdraft 2023 $000 3,000 - - 3,000 3,000 - - 3,000 2022 $000 - 2,300 1,700 4,000 - - 1,700 1,700 During the year, the Consolidated Entity’s approach to capital management changed. Following the capital raise in February/March 2023, the Consolidated Entity repaid outstanding bank bills and replaced its $1.7M overdraft facility with a $3M receivables facility which carries a lower interest rate. The receivables ﬁnance facility may be drawn at any time, may be terminated by the bank without notice and is secured via floating charges over the trade receivables of the Consolidated Entity together with ﬁxed and floating charges of the other assets and business of the Consolidated Entity. The facility carries interest at the 30 day bank bill rate plus a margin of 2.1%. The current rate is 7.47%. A line fee of 1% is also charged. The facility is subject to annual review with the next review in October 2023. (b) Term deposits Current Term Deposits Non-current Term Deposits 2023 $000 1 913 2022 $000 42 887 Term deposits are held to provide security for bank guarantees, which are required for property leases and a customer contract. Property leases are typically for ﬁxed periods of up to 7 years but may include extension options. Term deposits have maturities ranging from 1 to 12 months, however will be rolled over for as long as bank guarantees are required to be kept. Acumentis Annual Report 2023 Pg 45 (c) Trade and other receivables Current Trade receivables Less: provision for expected credit losses Other receivables 2023 $000 5,931 (152) 137 5,916 2022 $000 6,522 (299) 64 6,287 (i) Classiﬁcation as trade and other receivables Trade receivables are amounts due from customers for services performed in the ordinary course of business. Other receivables are non-derivative ﬁnancial assets with ﬁxed or determinable payments that are not quoted in an active market. If collection of the amounts is expected in one year or less they are classiﬁed as current assets. If not, they are presented as non-current assets. Trade receivables are generally due for settlement within 30 days and therefore are all classiﬁed as current. The Consolidated Entity’s impairment and other accounting policies for trade and other receivables are outlined in notes 11(a) and 24(k) respectively. (ii) Fair values of trade and other receivables Due to the short-term nature of the current receivables, their carrying amount is considered to be the same as their fair value. (iii) Impairment and risk exposure Information about the impairment of trade and other receivables, their credit quality and the Consolidated Entity’s exposure to credit risk, foreign currency risk and interest rate risk can be found in note 11(a). (d) Other ﬁnancial assets Current Lease receivable - right of use assets Non-Current Lease receivable – right of use assets Employee loans (note 18(d)) 2023 $000 371 95 189 284 2022 $000 349 467 186 653 Pg 46 Acumentis Annual Report 2023 (e) Trade and other payables Current Trade payables Other payables and accrued expenses 2023 $000 705 3,129 3,834 2022 $000 1,262 2,900 4,162 Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature. (f) Borrowings Current Commercial bank loans Motor vehicle loan Non-Current Commercial bank loans Motor vehicle loan 2023 $000 - 8 8 - 39 39 2022 $000 900 8 908 1,400 48 1,448 During the year, the Consolidated Entity’s approach to capital management changed. Following the capital raise in February/March 2023, the Consolidated Entity repaid the outstanding bank bills totalling $2,300,000. Movement in bank loans and bills Balance as at 1 July 2021 Acquisition of controlled entity Repayments Balance as at 30 June 2022 Balance as at 1 July 2022 Advances Repayments Balance as at 30 June 2023 Short-term loan $’000 Motor vehicle loan $’000 Bank bills and loans $’000 - 137 (137) - - - - - - 59 (3) 56 56 - (9) 47 2,600 - (300) 2,300 2,300 - (2,300) - Total $’000 2,600 196 (440) 2,356 2,356 - (2,309) 47 Acumentis Annual Report 2023 Pg 47 Secured liabilities The motor vehicle loan carries ﬁxed interest at 3.49% and has total repayments of $836 per month. The motor vehicle loan is secured by ﬁxed charge over the related motor vehicle. The loan is not subject to review. The bank loan carried a floating interest rate of BBSY + 2.6% plus a 1% facility fee and had capital repayments of $75,000 per month. The bank loan was secured by ﬁxed and floating charges over the assets and business of the Consolidated Entity. The loan was repaid in March 2023 and replaced with a receivables ﬁnance facility (note 5(a)). (g) Lease liabilities Current Lease liabilities – right of use assets Non-Current Lease liabilities – right of use assets Total Payable as follows Within one year One year or later and no later than ﬁve years Later than ﬁve years Future ﬁnance charges Recognised as a liability Secured liabilities 2023 $000 1,765 1,566 3,331 1,878 1,636 - 3,514 (183) 3,331 2022 $000 1,561 2,271 3,832 1,691 2,353 - 4,044 (212) 3,832 Lease liabilities are effectively secured as the interests in the right of use assets recognised in the ﬁnancial statements revert to the lessor in the event of default. Pg 48 Acumentis Annual Report 2023 (h) Deferred consideration Deferred consideration relates to the acquisition of Acumentis (WA) Holdings Pty Ltd (“ACU WA”) on 1 July 2021 and the acquisition Acumentis (SA) Pty Ltd (“ACU SA”) on 1 February 2022. Current Fixed consideration ACU SA paid in two equal instalments on 10 Aug 2022 & 10 Feb 2023 ACU WA paid in two equal instalments on 23 Jul 2022 & 23 Jan 2023 ACU SA payable 10 Aug 2023 Non-Current Fixed consideration ACU SA paid 10 Aug 2023 Contingent consideration Total 2023 $000 - - 143 143 - 1,263 1,263 1,406 2022 $000 286 120 - 406 143 1,263 1,406 1,812 (i) Contingent consideration Contingent consideration of $797,000 was recognised for the acquisition of ACU WA (note 13(a)) and $466,000 for the acquisition of ACU SA (note 13(b)). The fair value of the contingent consideration is based upon estimates of average proﬁts before tax of the entities to June 2025. These estimates are based on parent proﬁt levels, revenue growth of between 3% and 5%, overheads maintained at current levels with 3% annual increases from FY2024 and increase in employment expenses calculated as 55% of the increase in revenue in the years after. Contingent consideration has not been discounted to its present value as the effect is not material. Balance at 1 July Arising on acquisitions: • Acumentis (WA) Pty Ltd (note 13(a)) • Acumentis (SA) Pty Ltd (note 13(b)) (Gain) / loss recognised in other comprehensive income • Acumentis (WA) Pty Ltd • Acumentis (SA) Pty Ltd Balance at 30 June 2023 $000 1,263 - - - - 1,263 2022 $000 - 797 466 - - 1,263 Acumentis Annual Report 2023 Pg 49 The deferred contingent consideration liability represents the fair value of amounts which may become payable in August 2025 in connection with the acquisition of subsidiaries. The amount payable is dependent on the acquired businesses performance for the three years ending 30 June 2025. The deferred consideration was measured as at 30 June 2023 and no adjustment was required to be recorded in other comprehensive income for the year ended 30 June 2023. 6 Non-ﬁnancial assets and liabilities This note provides information about the Consolidated Entity’s non-ﬁnancial assets and liabilities, including: • Speciﬁc information about each type of non-ﬁnancial asset and non-ﬁnancial liabilit: - Plant and equipment (note 6(a)) - Right of use assets (note 6(b)) - Intangible assets (note 6(c)) - Current tax liabilities (note 6(d)) - Deferred tax balances (note 6(e)) - Other current assets (note 6(f)) - Employee beneﬁt obligations (note 6(g)) - Provisions (note 6(h)) • Accounting policies; and • Information about determining the fair value of the assets and liabilities, including judgements and estimation uncertainty involved. (a) Plant & equipment Cost Balance at 1 July 2021 Additions – cash Acquisition of controlled entities Disposals Balance at 30 June 2022 Balance at 1 July 2022 Additions – cash Disposals Balance at 30 June 2023 Accumulated Depreciation Balance at 1 July 2021 Acquisition of controlled entities Depreciation charge for the year Disposals Balance at 30 June 2022 Balance at 1 July 2022 Depreciation charge for the year Disposals Balance at 30 June 2023 Ofﬁce Equipment $000 Furniture and Fittings $000 Leasehold Improvements $000 Motor Vehicles $000 1,393 400 375 (163) 2,005 2,005 246 (53) 2,198 1,005 303 254 (163) 1,399 1,399 345 (53) 1,691 574 46 57 (16) 661 661 67 (155) 573 475 49 57 (16) 565 565 48 (147) 466 446 1 164 - 611 611 18 (208) 421 221 120 90 - 431 431 69 (163) 337 - - 68 - 68 68 - - 68 - 10 6 - 16 16 13 - 29 Total $000 2,413 447 664 (179) 3,345 3,345 331 (416) 3,260 1,701 482 407 (179) 2,411 2,411 475 (363) 2,523 Pg 50 Acumentis Annual Report 2023 Carrying Amounts 1 July 2021 30 June 2022 1 July 2022 30 June 2023 388 606 606 507 99 96 96 107 225 180 180 84 - 52 52 39 712 934 934 737 (i) Recognition and measurement Items of plant and equipment are stated at cost less accumulated depreciation (see below) and impairment losses (see accounting policy note 24(m)). When parts of an item of plant and equipment have different useful lives, they are accounted for as separate items (major components) of plant and equipment. Gains and losses on disposal of an item of plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of plant and equipment and are recognised net within “other income” in the Statement of Proﬁt & Loss and Other Comprehensive Income. (ii) Depreciation Depreciation is charged to the Statement of Proﬁt & Loss and Other Comprehensive Income on a straight-line basis over the estimated useful lives of each part of an item of plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives, unless it is reasonably certain that the Consolidated Entity will obtain ownership by the end of the lease term. The estimated useful lives in the current and comparative periods are as follows: • • • • • Ofﬁce equipment Furniture and ﬁttings 2-5 years 4-5 years Leasehold improvements lesser of life of the lease or 10 years Right of use assets life of the underling lease Motor vehicles 5 years The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually. Acumentis Annual Report 2023 Pg 51 (b) Right of use assets (i) Amounts recognised in the balance sheet. Cost Balance at 1 July 2021 Additions Acquisition of controlled entities Disposals Balance at 30 June 2022 Balance at 1 July 2022 Additions Disposals Balance at 30 June 2023 Accumulated Depreciation Balance at 1 July 2021 Acquisition of controlled entities Depreciation charge for the year Disposals Balance at 30 June 2022 Balance at 1 July 2022 Depreciation charge for the year Disposals Balance at 30 June 2023 Carrying Amounts 1 July 2021 30 June 2022 1 July 2022 30 June 2023 Lease liabilities Current Non-current Buildings $000 Ofﬁce Equipment $000 7,273 1,724 171 (4,252) 4,916 - 208 - - 208 Total $000 7,273 1,932 171 (4,252) 5,124 - - - 4,916 1,273 (1,924) 4,265 4,701 62 1,054 (3,251) 2,566 2,566 1,188 (1,924) 1,830 2,572 2,350 2,350 2,435 208 - - 208 - - 69 - 69 69 69 - 138 - 139 139 70 2023 $000 1,765 1,566 3,331 5,124 1,273 (1,924) 4,473 4,701 62 1,123 (3,251) 2,635 2,635 1,257 (1,924) 1,968 2,572 2,489 2,489 2,505 2022 $000 1,561 2,271 3,832 Pg 52 Acumentis Annual Report 2023 (ii) Amounts recognised in the statement of proﬁt or loss The statement of proﬁt or loss shows the following amounts relating to leases: Depreciation and impairment charge of right of use assets Buildings Ofﬁce equipment Interest expenses (included in ﬁnance cost) Expenses relating to short term leases (included in occupancy expenses) The total cash outflow for leases in 2023 was $1,774,000 (2022: $1,668,000). 2023 $000 1,188 69 1,257 177 210 2022 $000 1,054 69 1,123 186 369 (iii) The Consolidated Entities leasing activities and how these are accounted for The Consolidated Entity leases ofﬁces, equipment and software. Contracts are typically for ﬁxed periods of up to 7 years but may include extension options. Contracts may contain both lease and non-lease components. The Consolidated Entity allocates the consideration in the contract to the lease and non-lease components based on their relative stand alone prices, however for leases of real estate for which the Consolidated Entity is the lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. These agreements do not impose covenants other than the security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. Leases are recognised as a right of use asset and a corresponding liability at the date at which the leased asset is available for use by the Consolidated Entity. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • ﬁxed payments, less incentives receivable; • variable payments that are based on an index or rate, initially measured using the index or rate as at the commencement date; and • amounts expected to be payable under residual value guarantees. Lease payments to be made under reasonably certain extension options are also included in the measurement of liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used. Lease payments are allocated between principal and ﬁnance cost with the ﬁnance cost charged to the proﬁt and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Acumentis Annual Report 2023 Pg 53 Right of use assets are measured at cost comprising the following: • • • • the amount of the initial measurement of the lease liability; any lease payments made at or before the commencement date less any lease incentives received; any initial direct costs; and restoration costs. Right of use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight line basis. Payments associated with short term leases (with a term of 12 months or less) or low value assets are recognised on a straight line basis as an expense in the proﬁt or loss. (c) Intangible assets Goodwill Computer software Trademarks Notes (i) – (iv) (v) (vi) 2023 $000 20,324 1,575 241 22,140 2022 $000 20,324 1,680 241 22,245 (i) Goodwill The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Consolidated Entity. Where the acquired subsidiary has signiﬁcant long-term contracts or other customer relationships the future value of these relationships is assessed and is included as an asset in the fair value, above, of assets transferred. Goodwill on the acquisition of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash generating units or groups of cash generating units that are expected to beneﬁt from the business combination in which the goodwill arose. (ii) Subsequent expenditure Subsequent expenditure on capitalised intangible assets excluding goodwill is capitalised only when it increases the future economic beneﬁts embodied in the speciﬁc asset to which it relates. All other expenditure is expensed as incurred. Pg 54 Acumentis Annual Report 2023 (iii) Impairment tests for goodwill Goodwill has an indeﬁnite useful live and is not amortised. The goodwill amounts are tested for impairment annually by estimating the recoverable amount of the cash generating units based on value in use. The following cash generating units have signiﬁcant carrying amounts for goodwill: Goodwill Residential valuations Regional valuations WA Business SA Business Movement in Goodwill Balance at 1 July Acquisition of incorporated businesses (note 13(a) and 13(b)) Impairment charge Reduction of previously recognised goodwill Balance at 30 June 2023 $000 3,016 9,486 6,393 1,429 2022 $000 3,016 9,486 6,393 1,429 20,324 20,324 20,324 - - 20,324 12,529 7,822 - (27) 20,324 (iv) Impairment review and charge The Company tests whether goodwill has suffered any impairment on a six monthly basis. The recoverable amount of cash generating units is determined based on value in use calculations which require the use of assumptions. The calculations use cash flow projections based on ﬁnancial forecasts approved by management covering the 12 months post reporting date. Cash flows beyond the 12 month period are extrapolated using the estimated growth rates stated below. 30 June 2023 Annual increase in revenues Increase in employee expenses as a % of increased revenues Annual increase in overheads Terminal growth rate Discount rate 30 June 2022 Annual increase in revenues Increase in employee expenses as a % of increased revenues Annual increase in overheads Terminal growth rate Discount rate Residential Business Regional Business WA Business SA Business 3.0% 55.0% 3.0% 2.0% 14.6% 2.0% 55.0% 3.0% 2.0% 13.7% 3.0% 55.0% 3.0% 2.0% 14.6% 2.0% 55.0% 3.0% 2.0% 13.7% 3.0% 55.0% 3.0% 2.0% 14.6% 3.0% 55.0% 3.0% 2.0% 13.7% 5.0% 55.0% 3.0% 2.0% 14.6% 5.0% 55.0% 3.0% 2.0% 13.7% Acumentis Annual Report 2023 Pg 55 Management has determined the values assigned to each of the key assumptions as follows Assumption Approach used to determine values Revenues Annual growth rate based on past performance, current and expected market conditions and management’s expectations of business development opportunities and likelihood of success. Employee expenses Overheads Based on past performance and management’s expectations for the future. Fixed and semi-variable costs of the cash generating units, which do not vary signiﬁcantly with revenue. Management forecasts these costs based on the current structure of the business, adjusting for anticipated inflationary increases and known restructuring and cost-saving measures. Terminal growth rate This is conservatively set at a level below the long term inflation rate in Australia. The Company operates in a mature market sector and accordingly long term growth will be achieved via diversiﬁcation in services, client base and geographies rather than long term growth of existing business lines. Discount rate The pre-tax rate discount rate adopted is based on the risk-free interest rate and business speciﬁc risk factors, market borrowing rates and investor expected returns. Impact of reasonably possible changes in key assumptions The recoverable amount of the Regional business cash generating unit is estimated to exceed the carrying amount of the cash generating unit at 30 June 2023 by $5,380,000 (30 June 22: $4,980,000). The recoverable amount at 30 June 2023 would equal its carrying amount if the key assumptions were to changes as follows: Annual increase in revenues Annual increase in overheads Discount rate From 3.0% 3.0% 14.6% To 0.8% 6.2% 20.0% Reasonably possible changes in key assumptions for other cash generating units would not result in the recoverable amounts equalling their carrying values. Pg 56 Acumentis Annual Report 2023 (v) Computer software Movement in computer software Balance at 1 July Acquisition of controlled entities Additions Amortisation Disposals Balance at 30 June 2023 $000 1,680 - 450 (555) - 1,575 2022 $000 1,467 1 617 (405) - 1,680 Costs incurred in developing products or systems and costs incurred in acquiring software and licences that will contribute to future period ﬁnancial beneﬁts through revenue generation and/ or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service and direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 5 years. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Consolidated Entity has an intention and ability to use the asset. (vi) Trademarks Movement in trademarks Balance at 1 July Disposals Balance at 30 June 2023 $000 241 - 241 2022 $000 241 - 241 Trademarks have indeﬁnite useful lives and are not amortised. Trademarks are tested for impairment annually by estimating the recoverable amount of the cash generating units based on value in use. Acumentis Annual Report 2023 Pg 57 (d) Current tax liabilities Current Tax liability 2023 $000 - 2022 $000 28 The current tax liability for the Consolidated Entity of $Nil (2022: $28,000) represents the amount of income taxes payable in respect of current and prior ﬁnancial periods. The 2022 liability relates to pre- acquisition proﬁts of Acumentis (SA) Pty Ltd (note 13(b)), which following the acquisition has been added to the tax consolidation group. In accordance with the tax consoled ation legislation, Acumentis Group Limited as the head entity of the Australian tax-consolidated group has assumed responsibility for the current tax asset/liability initially recognised by the members in the tax-consolidated group. Income tax on the Statement of Proﬁt & Loss and Other Comprehensive Income for the year comprises current and deferred tax. Income tax is recognised in the Statement of Proﬁt & Loss and Other Comprehensive Income except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the end of the reporting period, and any adjustment to tax payable in respect of previous years. The Company and its wholly owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2003 and are therefore taxed as a single entity from that date. Newly acquired wholly owned entities are immediately added to the tax-consolidation group. The head entity within the tax-consolidated group is Acumentis Group Limited. (i) Tax consolidation Current tax expense/income, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated group are recognised in the separate ﬁnancial statements of the members of the tax-consolidated group using the group allocation approach by reference to the carrying amounts of assets and liabilities in the separate ﬁnancial statements of each entity and the tax values applying under tax consolidation. Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries are assumed by the head entity in the tax-consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution or distribution. The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable proﬁts of the tax-consolidated group will be available against which the tax losses can be utilised. Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability are recognised by the head entity only. Pg 58 Acumentis Annual Report 2023 (ii) Nature of tax funding arrangements and tax sharing arrangements The head entity, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax- consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the head entity recognising an inter-entity receivable (payable) equal in amount to the tax liability (asset) assumed. Any such inter-entity receivables (payables) are at call. Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities. The head entity in conjunction with other members of the tax-consolidated group has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the ﬁnancial statements in respect of this agreement as payment of any such amounts under the tax sharing agreement is considered remote. (e) Deferred tax balances Deferred tax assets and liabilities are attributable to the following: Recognised deferred tax assets Right of use assets Employee provisions Provision for expected credit losses Accruals Make good provisions s40-880 ITAA 1936 “black hole” expenditure Income tax losses carried forward Finance lease assets Plant and equipment Other 2023 $000 248 1,309 45 151 42 95 757 (140) (12) 50 2,545 2022 $000 403 1,354 90 152 54 143 862 (245) (16) 38 2,835 Acumentis Annual Report 2023 Pg 59 Movement in temporary differences during the year Deferred tax assets Right of use assets Employee provisions Doubtful debts Accruals Make good provisions S40-880 “black hole” expenditure Income tax losses carried forward Finance lease assets Plant and equipment Other Deferred tax assets Right of use assets Employee provisions Doubtful debts Accruals Make good provisions S40-880 “black hole” expenditure Income tax losses carried forward Finance lease assets Plant and equipment Other (f) Other current assets Prepaid expenses Balance 1 July 22 $000 403 1,354 90 152 54 143 862 (245) (16) 38 2,835 Balance 1 July 21 $000 266 1,114 46 112 54 119 955 - - 9 2,675 Aquisition of Businesses $000 Recognised in Proﬁt & Loss $000 Change in Tax Rate $000 Balance 30 June 23 $000 - - - - - - - - - - - (155) (45) (45) (1) (12) (48) (105) 105 4 12 (290) - - - - - - - - - - - 248 1,309 45 151 42 95 757 (140) (12) 50 2,545 Acquisition of Businesses $000 Recognised in Proﬁt & Loss $000 Change in Tax Rate $000 Balance 30 June 22 $000 - 147 2 - - - - - (16) (16) 117 - 23 - - - - - - (2) (2) 19 137 70 42 40 - 24 (93) (245) 2 47 24 2023 $000 1,064 403 1,354 90 152 54 143 862 (245) (16) 38 2,835 2022 $000 1,361 Pg 60 Acumentis Annual Report 2023 (g) Employee beneﬁt obligations Current Annual leave Long service leave Performance pay Non-Current Long service leave 2023 $000 2,062 1,856 979 4,897 446 2022 $000 2,223 1,781 1,225 5,229 509 The current portion of this liability includes all of the accrued annual leave, the unconditional entitlements to long service leave where employees have completed the required period of service and also for those employees who are entitled to pro-rata payments in certain circumstances. The entire amount of the annual leave provision is presented as current, since the group does not have an unconditional right to defer settlement for any of these obligations. The non-current portion of the long service leave liability is measured based on the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. Consideration is given to expected future wage and salary increases and past experience of employee retention. Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Remeasurements as a result of experience adjustments and changes in actuarial assumptions are recognised in proﬁt or loss. Based on past experience, the group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months. Current obligations expected to be settled after 12 months 2023 $000 1,621 2022 $000 1,649 Acumentis Annual Report 2023 Pg 61 (h) Provisions Non-Current Make Good Movement in provisions Balance at 1 July Utilised during year Decrease during year Balance at 30 June 2023 $000 142 182 (27) (13) 142 2022 $000 182 Make Good $000 182 - - 182 The provision has not been discounted to its present value as the effect is not material. It is expected that the expense will be incurred within a 5-year period. 7 (a) Equity Ordinary shares The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share on a poll at meetings of the Company. On a show of hands, every shareholder present at a meeting or by proxy is entitled to one vote. There are currently 218,174,605 ordinary fully paid shares on issue (2022: 175,317,445). Shares have no par value, and the Company does not have a limited amount of capital. Share capital Balance at 30 June 2022 Issue of shares as part consideration for the acquisition of: Acumentis (WA) Holdings Pty Ltd Acumentis (SA) Pty Ltd Shares issued to settle corporate advisory fees in relation to the acquisition of: Acumentis (WA) Holdings Pty Ltd Acumentis (SA) Pty Ltd Corporations Act 2001 – s258F Capital Reduction Balance at 30 June 2022 Capital raise Placement of shares Placement of shares to directors Share Placement Plan (SPP) Placement of SPP Shortfall shares Costs of capital raise Balance at 30 June 2023 Note Number 13(a) 13(b) 13(a) 13(b) 7(b) 159,005,153 13,820,096 1,463,339 967,243 61,614 - 175,317,445 21,928,571 6,642,857 3,685,732 10,600,000 - 218,174,605 $000 44,887 1,609 237 113 10 (27,423) 19,443 1,535 465 258 742 (225) 22,208 Pg 62 Acumentis Annual Report 2023 On 23 July 2021, the Company issued 13,820,096 ordinary shares at 11.64 cents per share as partial consideration for the acquisition of the remaining 57.2% of the issued share capital of Acumentis (WA) Holdings Pty Ltd. An additional 967,243 ordinary shares were issued at 11.64 cents per share to settle corporate advisory fees in relations to the acquisition. On 10 February 2022, the Company issued 1,463,339 ordinary shares at 16.23 cents per share as partial consideration for the acquisition of 100% of the share capital of Acumentis (SA) Pty Ltd. An additional 61,614 ordinary shares were issued at 16.23 cents per share to settle corporate advisory fees in relations to the acquisition. On 9 February 2023, the Company issued 21,928,571 ordinary shares at 7 cents per share under a placement to institutional, professional and sophisticated investors under ASX Listing Rule 7.1. On 17 March 2023, the Company issued 6,642,857 ordinary shares at 7 cents per share to directors of the Company, under a placement with the issue to directors approved at an Extraordinary General Meeting held on 10 March 2023. On 17 March 2023, the Company issued 3,685,732 ordinary shares at 7 cents per share to existing shareholders under a Share Purchase Plan (SPP). On 24 March 2024, the Company issued 10,600,000 ordinary shares at 7 cents per share to institutional, professional and sophisticated investors under a placement of the SPP Shortfall with the placement of the shortfall approved by shareholders at an Extraordinary General Meeting held on 10 March 2023. (b) Capital Reduction On 30 June 2022, Acumentis Group Limited reduced its share capital by $27,423,000 in accordance with section 258F of the Corporations Act 2001, reducing accumulated losses deemed to be of a permanent nature by the same amount. There is no impact on shareholders from the capital reduction as no shares have been cancelled or rights varied, and there is no change in the net asset position of the Company. There is also no impact on the availability of the Company’s tax losses from this capital reduction. The losses deemed to be of a permanent nature were as follows: Year ended 30 June Impairment of goodwill Impairment of customer relationships Impairment of leased assets Consultants’ costs re cyber-attacks Acquisition costs expensed 2009 $’000 2017 $’000 195 - 220 - - 415 - - - - 262 262 2019 $’000 12,284 - - 407 528 2020 $’000 - - 497 791 - 2021 $’000 1,904 10,000 131 204 - Total $’000 14,383 10,000 848 1,402 790 13,219 1,288 12,239 27,423 Acumentis Annual Report 2023 Pg 63 (c) Options to acquire ordinary shares The holders of options are not entitled to receive dividends nor are they entitled to vote at meetings of the Company. Options Balance at 1 July Balance at 30 June 2023 Number 2,500,000 2,500,000 2022 Number 2,500,000 2,500,000 On 23 August 2019, 2,500,000 options were issued to the underwriter and lead manager of the share offer in part consideration of the services provided. These options have an exercise price of $0.12 and an expiry date of 23 August 2023. 8 Other Reserves Share-based payments Balance at 1 July Performance rights expense Balance at 30 June 2023 $000 127 38 165 2022 $000 31 96 127 Pg 64 Acumentis Annual Report 2023 9 (a) Cash flow information Reconciliation of proﬁt after income tax to net cash inflow from operating activities Notes 2023 $000 2022 $000 429 1,445 Proﬁt for the period after tax Adjustments for the period Depreciation & amortisation Loss on disposal of ﬁxed assets Gain on de-recognition of investment in associated company 13(a) Gain on disposal of right of use asset Expenses settled via issue of shares Performance rights expense Changes in assets & liabilities during the period net of amounts relating to acquisition of controlled entities (Increase)/decrease in trade and other receivables (Increase)/decrease in other ﬁnancial assets (Increase)/decrease in deferred tax assets (Increase)/decrease in other assets Increase/(decrease) in trade and other payables Increase/(decrease) in provision for income tax Increase/(decrease) in employee beneﬁt obligations Increase/(decrease) in provisions Net cash from operating activities 7(a) 5(c) 5(d) 6(e) 6(f) 5(e) 6(d) 6(g) 6(h) 2,287 53 - - - 38 2,807 371 347 290 297 (328) (28) (395) (40) 3,321 1,935 - (1,539) (56) 123 96 2,004 (861) 321 (43) (343) 326 (151) 294 - 1,547 Acumentis Annual Report 2023 Pg 65 Risk ASX:ACU FY22-23 Pg 66 Pg 66 Acumentis Annual Report 2023 Acumentis Annual Report 2023 RISK This section of the notes discusses the Consolidated Entity’s exposure to various risks and shows how these could affect the Consolidated Entity’s ﬁnancial position and performance. 10 Signiﬁcant estimates & judgements The preparation of ﬁnancial statements requires the use of accounting estimates which, by deﬁnition, will seldom equal the actual results. Management also needs to exercise judgement in applying the Consolidated Entity’s accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity, and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong. Detailed information about each of these estimates and judgements is included in notes 1 to 7 together with information about the basis of calculation for each affected line item in the ﬁnancial statements. The areas involving signiﬁcant estimates or judgements and which have the potential for material impact to the ﬁnancials are: • Deferred contingent consideration (note 5(h)) • • Intangible assets (note 6(c)) Employee beneﬁts (note 6(g)) 11 Financial risk management This note explains the Consolidated Entity’s exposure to ﬁnancial risks and how these risks could affect the Consolidated Entity’s future ﬁnancial performance. Current year proﬁt and loss information has been included where relevant to add further context. Risk Exposure arising from Measurement Management Credit risk Cash and cash equivalents, trade receivables and debt investments and contract assets Ageing analysis Credit ratings Diversiﬁcation of bank deposits Credit limits Liquidity risk Borrowings and other liabilities Rolling cash flow forecasts Availability of borrowing facilities Interest rate risk Long-term borrowings at variable rates Sensitivity analysis Accept risk given low levels of debt The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Chief Executive Ofﬁcer and Chief Financial Ofﬁcer are responsible for developing and monitoring risk management policies. Risk management policies are established to identify and analyse the risks faced by the Consolidated Entity, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Consolidated Entity’s activities. The Consolidated Entity, through their training and management Acumentis Annual Report 2023 Pg 67 standards and procedures, aim to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Consolidated Entity’s Audit Committee oversees how management monitors compliance with the Consolidated Entity’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Consolidated Entity. (a) Credit Risk Credit risk is the risk of ﬁnancial loss to the Consolidated Entity if a customer or counterparty to a ﬁnancial instrument fails to meet its contractual obligations and arises principally from the Consolidated Entity’s receivables from wholesale and retail clients. Trade and other receivables The Consolidated Entity’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Consolidated Entity’s customer base, including the default risk of the industry and country, in which clients operate, has less of an influence on credit risk. The Consolidated Entity has established a credit policy under which each new customer is analysed individually for creditworthiness before the Consolidated Entity’s standard payment and delivery terms and conditions are offered. Credit limits are established for each customer, these limits are reviewed regularly. Clients which fail to meet the Consolidated Entity’s benchmark creditworthiness are placed on a restricted customer list and may transact with the Consolidated Entity only on a prepayment basis. In monitoring customer credit risk, clients are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer, geographic location, industry, ageing proﬁle, maturity and existence of previous ﬁnancial difﬁculties. The Consolidated Entity’s trade and other receivables relate mainly to the Consolidated Entity’s retail clients. The Consolidated Entity does not require collateral in respect of trade and other receivables. The Consolidated Entity has established an allowance for credit losses that represents their estimate of expected credit losses in respect of trade and other receivables. Exposure to credit risk The carrying amount of the Consolidated Entity’s ﬁnancial assets represents the maximum credit risk exposure. The Consolidated Entity’s maximum exposure to credit risk at the end of the reporting period was: Trade and other receivables Other ﬁnancial assets Cash and cash equivalents Term deposits & other Note 5(c) 5(d) 5(a) 5(b) 2023 $000 5,916 655 1,697 914 9,182 2022 $000 6,287 1,002 856 929 9,074 Pg 68 Acumentis Annual Report 2023 The Consolidated Entity’s maximum exposure to credit risk for trade and other receivables before impairment losses at the end of the reporting period by type of customer was: Financial clients Non-ﬁnancial clients Government non-ﬁnancial clients The Consolidated Entity’s most signiﬁcant clients included the following amounts within trade and other receivables carrying amounts: An Australian ﬁnancial client An Australian non-ﬁnancial client An Australian Government non-ﬁnancial client 2023 $000 3,657 1,710 701 6,068 928 146 239 2022 $000 4,259 1,878 449 6,586 1,002 286 94 Impairment Losses The aging of the Consolidated Entity’s trade and other receivables at the end of the reporting period was: Not past due Past due 0-30 days Past due 31-120 days Past due 121 days or more Gross 2023 $000 5,019 663 108 278 6,068 Impairment 2023 $000 7 2 2 141 152 Gross 2022 $000 5,176 696 420 294 6,586 Impairment 2022 $000 6 5 20 268 299 The movement in the allowance for impairment in respect of trade receivables during the year was as follows: Balance at 1 July (Decrease) / Increase during year Balance at 30 June 2023 $000 299 (147) 152 2022 $000 153 146 299 The Consolidated entity applies the AASB 9 simpliﬁed approach to measuring expected credit losses which uses a lifetime expected loss allowances for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. Acumentis Annual Report 2023 Pg 69 The expected loss rates are based on payment proﬁles of sales over a 5 year period ended 30 June 2022 and the corresponding historical credit losses experienced over this period and to 30 June 2023 (for invoices raised prior to 30 June 2022). The historical loss rates are adjusted to reflect current and forward- looking macro-economic factors that might impact the ability of customers to settle the receivables. Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of the debtors to engage in a repayment plan and the failure to make contractual payments for a period of greater than 120 days past due. Impairment losses on trade receivables are presented as net impairment losses within operating proﬁt. Subsequent recoveries of amounts written off are credited against the same line item. (b) Liquidity risk Liquidity risk is the risk that the Consolidated Entity will not be able to meet its ﬁnancial obligations as they fall due. The Consolidated Entity’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 Consolidated Entity’s reputation. Typically, the Consolidated Entity ensures that it has sufﬁcient cash on demand to meet expected operational expenses for a period of 45 to 60 days, including the servicing of ﬁnancial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The following are the contractual maturities of ﬁnancial liabilities, including estimated interest payments and excluding the impact of netting arrangements: Non-derivative ﬁnancial liabilities Note Carrying Amount $000 Contractual cash flows $000 Payable 6 months or less $000 Payable between 6 and 12 months $000 Payable after 12 months $000 30 June 2023 Trade and other payables Short and long term loans Lease liabilities Deferred consideration 30 June 2022 Trade and other payables Short and long term loans Lease liabilities Deferred consideration 5(e) 5(f) 5(g) 5(h) 5(e) 5(f) 5(g) 5(h) 3,834 47 3,331 1,406 8,618 4,162 2,356 3,832 1,812 3,834 47 3,331 1,406 8,618 4,162 2,356 3,832 1,812 3,834 4 865 143 4,846 4,162 454 878 203 - 4 900 - 904 - 454 683 203 12,162 12,162 5,697 1,340 - 39 1,566 1,263 2,868 - 1,448 2,271 1,406 5,125 Pg 70 Acumentis Annual Report 2023 (c) Interest risk Interest rate risk is the risk that changes in interest rates will affect the Consolidated Entity’s income and expenses or the value of its holdings of ﬁnancial instruments and ﬁnancial liabilities. The objective of interest rate risk management is to manage and control interest rate risk exposures within acceptable parameters, while optimising the return. Interest rate risk is managed by seeking to maximise the yield achieved on cash held at bank and minimise the interest rates incurred on borrowings. At the end of the reporting period the interest rate proﬁle of the Consolidated Entity’s interest-bearing ﬁnancial instruments and borrowings was: Variable rate instruments Assets - Cash and cash equivalents - Non-current ﬁnancial assets Liabilities - Current borrowings - Non-current borrowings Fixed rate instruments Assets - Term deposits - Current ﬁnancial assets - Non-current ﬁnancial assets Liabilities - Current lease liabilities - Non-current lease liabilities Note 5(a) 5(d) 5(f) 5(f) 5(b) 5(d) 5(d) 5(g) 5(g) 2023 $000 1,697 189 8 39 914 371 95 1,765 1,566 2022 $000 856 186 908 1,448 929 349 467 1,561 2,271 (d) Cash flow sensitivity analysis for rate instruments The impact of interest rate changes on the proﬁtability of the Consolidated Entity is likely to be immaterial. (e) Fair values The Directors consider that the fair value of ﬁnancial assets and ﬁnancial liabilities of the Consolidated Entity approximate their carrying amount. (f) Financial instruments at fair value The Consolidated Entity has adopted the following fair value hierarchy in relation to its ﬁnancial instruments that are carried in the balance sheet at fair value: Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 Level 3 Inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices). Inputs for the asset or liability that are not based on observable market data (unobservable inputs). Acumentis Annual Report 2023 Pg 71 The following table sets out the fair value of liabilities that are measured at fair value: 30 June 2023 Deferred contingent consideration (note 5(h)) - - 1,263 1,263 Level 1 $000 Level 2 $000 Level 3 $000 Total $000 30 June 2022 Deferred contingent consideration (note 5(h)) Level 1 $000 - Level 2 $000 - Level 3 $000 1,263 Total $000 1,263 The fair value of the deferred contingent consideration is determined based on the expected payment which is dependent upon the average proﬁt before tax for the acquired businesses for the three years ended 30 June 2025. This unobservable input is estimated by applying various growth factors to current and forecast revenues and costs (consistent with those utilised for testing impairment of the goodwill related to these acquisition – refer note 6(c)(iv)) which results in a weighted average annual growth in proﬁt of 44% over the remaining two years of the three year measurement period. If the weighted average growth in proﬁt changed then the deferred consideration would change as follows: • Growth in proﬁt increased by 10%, deferred consideration would increase by $89,000 • Growth in proﬁt decreased by 10%, deferred consideration would decrease by $92,000 The amount is not discounted due to the immaterial impact that discounting would have. 12 (a) Capital management Risk management The Company’s objectives when managing capital are to: • • Safeguard their ability to continue as a going concern, so they can continue to provide returns to shareholders and beneﬁts to other stakeholders; To maintain a capital structure that is appropriate for a professional services ﬁrm with limited tangible assets; and • To reduce the overall cost of capital. In order to maintain or adjust capital structure, the Company may adjust the level of dividends to shareholders, return capital to shareholders, issue new shares, source new debt ﬁnance or repay debt ﬁnance. Pg 72 Acumentis Annual Report 2023 The Company monitors capital on the basis of the following gearing ratio: Net debt (borrowings minus cash or cash equivalents) / total equity Borrowings Cash or cash equivalents (Net cash) / net debt Total Equity Net debt to equity ratio Note 5(f) 5(a) 2023 $000 47 (1,697) (1,650) 24,070 (7%) 2022 $000 2,356 (856) 1,500 20,828 7% The Company also monitors net working capital calculated as follows: Cash or cash equivalents Trade and other receivables Trade and other payables Current borrowings Current tax liabilities Current deferred consideration Current employee beneﬁt obligations - Total - Expected to be settled after 12 months Note 5(a) 5(c) 5(e) 5(f) 6(d) 5(h) 6(g) 6(g) 2023 $000 1,697 5,916 2022 $000 856 6,287 (3,834) (4,162) (8) - (143) (4,897) 1,621 352 (908) (28) (406) (5,229) 1,649 (1,941) The net working capital increased during the year as a result of the capital raise and resultant retirement of debt and the beneﬁts of the restructuring undertaken in calendar 2022 resulting in a lower employee cost base. During the year, the Consolidated Entity’s approach to capital management changed. Following the capital raise in February/March 2023, the Consolidated Entity repaid outstanding bank bills and replaced its $1.7M overdraft facility with a $3M receivables facility which carries a lower interest rate. As a result of the restructure of the borrowing facilities, the Consolidated Entity is no longer required to comply with any ﬁnancial covenants or capital restrictions. Acumentis Annual Report 2023 Pg 73 (b) Dividends (i) Ordinary shares Dividends recognised in the current and prior years by the Company are: 2023 No dividends declared 2022 No dividends declared Cents per share Total amount $000 Franked/ unfranked Date of Payment - - - - - - - - (ii) Franked dividends After the end of the reporting period, the directors have not declared a ﬁnal dividend. Dividend franking account 30% franking credits available to shareholders of Acumentis Group Limited for subsequent ﬁnancial years Company 2023 $000 Company 2022 $000 2,079 2,079 The above available amounts are based on the balance of the dividend franking account at the end of the reporting period adjusted for: a) b) c) Franking credits that will arise from the payment of the current tax liabilities; Franking debits that will arise from the payment of dividends recognised as a liability at the year-end; and Franking credits that will arise from the receipt of dividends recognised as receivables by the tax consolidated group at the year-end. The ability to utilise the franking credits is dependent upon there being sufﬁcient available proﬁts to declare dividends. As there is no dividend declared for 2023, there is no impact on the dividend franking account for dividends proposed after the end of the reporting period but not recognised as a liability (2022: nil). Pg 74 Acumentis Annual Report 2023 THIS PAGE IS AN INTENTIONALLY BLANK PAGE Acumentis Annual Report 2023 Pg 75 Group structure ASX:ACU FY22-23 Pg 76 Pg 76 Acumentis Annual Report 2023 Acumentis Annual Report 2023 GROUP STRUCTURE This section provides information which will help users understand how the group structure affects the ﬁnancial position and performance of the Consolidated Entity as a whole. In particular, there is information about:: • • • Changes to the structure that occurred during the year as a result of business combinations and the disposal of a discontinued operation; Transactions with non-controlling interests; and Interests in joint operations. A list of signiﬁcant subsidiaries is provided in note 14(a). This note also discloses details about the Consolidated Entity’s equity accounted investments. 13 (a) Business combinations - Acquisitions Acumentis (WA) Holdings Pty Ltd and its controlled entities (“ACU WA”) Summary of acquisition Effective 1 July 2021, the Company acquired the remaining 57.8% of issued shares in ACU WA thereby taking its holding to 100%. Up to 30 June 2021, the Company’s existing 42.2% investment had been accounted for using the equity method. The associated asset was de-recognised and a gain representing the difference between fair value and the carrying value of the investment at 30 June 2021 was recorded as follows: Fair value of net assets of Acumentis (WA) Holdings Pty Ltd Acumentis’ 42.2% share Dividend paid prior to completion of acquisition Carrying value of associate Gain on de-recognition of asset ACU WA $000 6,281 2,653 80 (1,194) 1,539 Acumentis Annual Report 2023 Pg 77 Details of the purchase consideration, the net assets acquired, and goodwill were as follows: Details of the consideration transferred Cash paid ($1,834,000 to vendors and $2,000 to vendors’ advisors) Cash payable within 12 months (in 2 equal installments on 23 Jan 2022 and 23 Jul 2022) Cash payable greater than 12 months (payable on 23 Jan 2023) Contingent consideration1 Shares issued (13,820,096 ordinary shares at $0.1164 per share) (note 7(a)) Fair value of existing shareholding Fair value of assets and liabilities acquired Cash and cash equivalents Term deposits Trade and other receivables Other current assets Deferred tax assets Property, plant & equipment Right of use assets Intangible assets Trade and other payables Dividend payable2 Tax payable Borrowings Lease liabilities Employee beneﬁts Goodwill3 Net cashflows from acquisition Cash paid Cash and cash equivalents acquired $000 1,836 122 61 797 1,609 4,425 2,653 7,078 1,263 34 727 110 111 121 109 1 (729) (190) (151) (137) (111) (473) 685 6,393 7,078 (1,836) 1,263 (573) 1. The contingent consideration is calculated as 4.5X the average proﬁt before tax for the three years ended 30 June 2025 minus the initial and ﬁxed deferred considerations already paid. Any contingent consideration payable will be satisﬁed 55% in cash and 45% via the issue of Acumentis Group Limited ordinary shares. Contingent consideration will be settled following ﬁnalisation of the FY2025 audit (expected in August 2025). 2. The dividend relates to pre-acquisition proﬁts and was paid in July 2021 with $110,000 paid to previous shareholders and paid $80,000 to Acumentis Group Limited. 3. The goodwill is attributable to the workforce and the proﬁtability of the acquired business. It will not be deductible for tax purposes. The fair value of the ordinary shares issued as part consideration was based on the volume weighted average published share price for the 15 trading days prior to 18 May 2021 when the acquisition was agreed and announced to the Australian Stock Exchange. Pg 78 Acumentis Annual Report 2023 Acquisition costs Acquisition costs of $23,000 are included in other expenses in the statement of proﬁt or loss and in operating cash flows in the statement of cashflows. Fees paid to the Company’s corporate advisor of $113,000 are included in other expenses in the statement of proﬁt or loss and were settled via the issue of ordinary shares (see note 7(a)) and so does not appear in the statement of cashflows. (b) Acumentis (SA) Pty Ltd (“ACU SA”) Summary of acquisition Effective 1 February 2022, the Company acquired 100% of the issued share capital of ACU SA which had previously operated as a franchisee of the wholly owned Western Australian Acumentis business. Details of the purchase consideration, the net assets acquired, and goodwill were as follows: Details of the consideration transferred Cash paid – consideration - Paid on settlement - Payable in 3 equal instalments 6, 12 & 18 months after settlement Contingent consideration1 Shares issued (1,463,339 ordinary shares at $0.1623 per share) (note 7(a)) Provisional fair value of assets and liabilities acquired Cash and cash equivalents Trade and other receivables Deferred tax assets Property, plant & equipment Trade and other payables Tax payable Lease liabilities Employee beneﬁts Goodwill2 Net cashflows from acquisition Cash paid Cash and cash equivalents acquired 2022 $000 419 428 466 237 1,550 187 129 6 61 (84) (28) (59) (91) 121 1,429 1,550 (419) 187 (232) 1. The contingent consideration is calculated as 3X the average proﬁt before tax for the three years ended 30 June 2025 minus the initial and ﬁxed deferred considerations already paid. Any contingent consideration payable will be satisﬁed 75% in cash and 25% via the issue of Acumentis Group Limited ordinary shares. Contingent consideration will be settled following ﬁnalisation of the FY2025 audit (expected in August 2025). 2. The goodwill is attributable to the workforce and the proﬁtability of the acquired business. It will not be deductible for tax purposes. Acumentis Annual Report 2023 Pg 79 The fair value of the ordinary shares issued as part consideration was based on the volume weighted average published share price for the 15 trading days prior to 31 January 2022 when the acquisition was agreed and announced to the Australian Stock Exchange. Acquisition costs Acquisition costs of $11,000 are included in other expenses in the statement of proﬁt or loss and in operating cash flows in the statement of cashflows. Fees paid to the Company’s corporate advisor of $10,000 are included in other expenses in the statement of proﬁt or loss and were settled via the issue of ordinary shares (see note 7(a)) and so does not appear in the statement of cashflows. (c) Revenue & Proﬁt Contribution The acquired entities / business contributed the following revenues and proﬁts between the effective date of acquisition and the end of the ﬁnancial year: Acquisition date Revenue Net proﬁt before tax 2022 ACU WA $000 2022 ACU SA $000 1 Jul 2021 1 Feb 2022 7,583 857 780 57 2022 Total $000 8,363 914 If the acquisitions had occurred on 1 July 2021, consolidated revenue and loss before tax would have been: Revenue Net proﬁt / (loss) before tax 14 (a) Interests in other entities Subsidiaries 2022 $000 57,885 1,581 The Consolidated Entity’s subsidiaries at 30 June 2023 are set out below. Unless otherwise stated, they have share capital consisting solely of ordinary shares that are held directly by the Consolidated Entity, and the proportion of ownership interests held equals the voting rights held by the Consolidated Entity. All entities are incorporated and operate in Australia only. Pg 80 Acumentis Annual Report 2023 Ownership interest held by the Consolidated Entity Ownership interest held by non- controlling interests Name of entity 2023 % 2022 % 2023 % 2022 % Principal activities Acumentis Pty Ltd Acumentis Brisbane Pty Ltd Acumentis Gold Coast Pty Ltd Acumentis Melbourne Pty Ltd Acumentis Statutory Services Pty Ltd Taylor Byrne Holdings Pty Ltd Acumentis Regional Pty Ltd Lane Infrastructure Pty Ltd Acumentis Australia Pty Ltd LMW Group Pty Ltd 1 Acumentis Joint Venture Pty Ltd 1 Acumentis Management Pty Ltd Acumentis Advisory Pty Ltd MVS National Pty Ltd 1 Cosgrave & Eastoe Pty Ltd 1 Hoolihan Valuations Pty Ltd Acumentis (WA) Holdings Pty Ltd Acumentis (WA) Pty Ltd Acumentis (WA) Advisory Pty Ltd HPG Nominees Pty Ltd WA Property Valuers Pty Ltd Acumentis (SA) Pty Ltd 100 100 100 100 100 100 100 100 100 - - 100 100 - - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Valuations Commercial valuations Commercial valuations Commercial valuations Government valuations Non-trading Regional valuations Property advisory services - National valuation contracting entity - - - - - - - - - - - - - Non-trading Non-trading Group employer Non-trading Non-trading Non-trading Non-trading Non-trading Valuations Property advisory services Franchisor Non-trading Valuations 1. These entities were de-registered on 26 October 2022 Acumentis Annual Report 2023 Pg 81 Unrecognised items ASX:ACU FY22-23 Pg 82 Pg 82 Acumentis Annual Report 2023 Acumentis Annual Report 2023 UNRECOGNISED ITEMS This section of the notes provides information about items that are not recognised in the ﬁnancial statements as they do not (yet) satisfy the recognition criteria. 15 Contingent liabilities In 2019, the Company was the victim of two cyber-attacks which resulted in signiﬁcant losses. The Company’s cyber insurance policy responded and paid $1.1M to external consultants and $2.0M to the Company. On 17 December 2021, the Company’s cyber insurers notiﬁed the Company that they now consider that the two cyber-attacks should be aggregated as a single claim and accordingly have requested repayment of $1.1M. Based on insurance specialist legal advice the Directors have rejected the repayment request. The Directors believe that the Company will be successful in rebutting the insurers proposition and accordingly do not expect to repay any portion of the insurance beneﬁts received and therefore no amounts have been provided for in the accounts as at 30 June 2023. The Directors do not believe that legal costs that may be incurred in relation to this matter will have a material impact on the ﬁnancial result for the FY23. The Consolidated Entity, from time to time, is involved in matters of litigation in the normal course of business in undertaking valuation services. At 30 June 2023 there are no open litigated claims that are expected to have a material impact on the results of the Consolidated Entity. The Consolidated Entity has professional indemnity insurance, and under the terms of the insurance policy, each claim has an excess which is required to be paid by the Consolidated Entity. It was not practical to estimate the maximum contingent liability arising from litigation; however, in a worst-case situation there could be a material adverse effect on the Consolidated Entity’s ﬁnancial position. In the directors’ opinion, disclosures of any further information in relation to litigation would be prejudicial to the interests of the Consolidated Entity. 16 Commitments Capital expenditure The Consolidated Entity does not have any capital expenditure commitments at the end of the reporting period. Operating lease commitments Within one year One year or later and no later than ﬁve years Later than ﬁve years 2023 $000 247 - - 247 2022 $000 259 - - 259 Under accounting standard AASB16 – Leases, except for leases with terms of 12 months or less or where the value of the leased asset does not exceed $5,000, commitments under leases are now recorded on the statement of ﬁnancial position. Where the Consolidated Entity leases property and equipment under non-cancellable operating leases with lease terms less than or equal to 12 months or with asset values less than or equal to $5,000 the leases continue to be accounted for off balance sheet with operating lease commitments disclosed in the above table. Acumentis Annual Report 2023 Pg 83 Guarantees Acumentis Group Limited has not entered into any guarantees, in the current or previous ﬁnancial year, in relation to the debts of its subsidiaries. 17 Events occurring after the reporting period There were no events occurring after the reporting period that have a material impact on the ﬁnancial statements or the operating activities of Acumentis Group Limited. Pg 84 Acumentis Annual Report 2023 THIS PAGE IS AN INTENTIONALLY BLANK PAGE Acumentis Annual Report 2023 Pg 85 Other information ASX:ACU FY22-23 Pg 86 Acumentis Annual Report 2023 OTHER INFORMATION This section of the notes includes other information that must be disclosed to comply with the accounting standards and other pronouncements, but that is not immediately related to individual line items in the ﬁnancial statements. 18 (a) Related party transactions Subsidiaries Interests in subsidiaries are set out in note 14(a). (b) Key management personnel compensation Executive directors and other key management personnel Short term employee beneﬁts Post-employment beneﬁts Long-term beneﬁts Share based payments 2023 $ 2022 $ 953,680 1,064,665 59,366 (5,383) 2,057 60,745 10,084 60,595 1,009,720 1,196,089 Detailed remuneration disclosures are provided in the remuneration report on pages 22 to 29. (c) Transactions with other related parties The following transactions occurred with related parties: Dividends received from associate Group management fee income from associates & franchisees 2023 $ - 21,450 2022 $ 80,248 29,150 Acumentis Annual Report 2023 Pg 87 (d) Loans to related parties Executive directors and other key management personnel Balance at 1 July Acquisition of controlled entities Loans advanced1 Interest charged Loan & interest repayments received Balance at 30 June 2022 $ 185,991 - - 10,487 (7,500) 188,978 2021 $ - 16,289 189,745 4,903 (24,946) 185,991 1. The employee loan was advanced to a vendor shareholder of Acumentis (WA) Holdings Pty Ltd to enable retirement of debt secured against that shareholder’s investment in Acumentis (WA) Holdings Pty Ltd. The loan carries interest at market rates, equal to the 6 monthly bank bill swap rate plus 2.6% and is repayable in full on the date of payment of any contingent consideration for the acquisition being August 2025. The loan is secured by the 2,606,565 ordinary shares in Acumentis Group Limited issued to the vendor as part consideration for the acquisition. 19 (a) Share-based payments Employee option & performance rights plans The directors at their discretion allocate share options or performance rights that entitle key management personnel and senior employees to purchase shares in the entity. The terms of the options including vesting conditions and performance criteria vary depending upon the incentive arrangements appropriate for key management personnel and senior employees and are a part of an approved Employee Share Acquisition Scheme, which was approved by shareholders at the 2018 Annual General Meeting and renewed at the 2021 Annual General Meeting. Movements in options during the period were as follows: As at 1 July Exercised during the year As at 30 June 2023 Average Exercise Price - - - 2023 Number of Options - - - 2022 Average Exercise Price - - - 2022 Number of Options - - - Performance rights were granted under the Acumentis Group Performance Rights and Option Plan which was approved by shareholders at the 2018 Annual General Meeting and renewed at the 2021 Annual General Meeting. The Plan allows the Company to grant options or rights to selected key employees to acquire ordinary shares in the Company. Participants are required to satisfy performance and service conditions at the time of the offer. The exercise price for performance rights is nil. Rights cannot be transferred and are not quoted on the ASX. Pg 88 Acumentis Annual Report 2023 Movements in performance rights during the period were as follows: As at 1 July Granted during the year Forfeited during year Failure to meet service condition Failure to meet performance and market conditions Vested and exercised during the year As at 30 June 2023 Number of Rights 2,416,000 1,140,000 2022 Number of Rights 1,000,000 1,680,000 (240,000) (264,000) (1,000,000) - - - 2,316,000 2,416,000 Tranche Grant date(s) Number of rights on issue FY21 FY22 FY23 15 Oct 20 20 Sep 21 & 28 Oct 21 25 Oct 22 - 1,176,000 1,140,000 Weighted average fair value at grant date1 11.83 cents 13.25 cents 6.92 cents Service Condition Market Condition The executive must remain employed for 3 years to the ﬁnalisation of the statutory audit for the ﬁnancial year ended. If the service condition is not met none of the performance rights will vest. 50% of the performance rights will vest of the total shareholder return (“TSR”) for Acumentis is at least equal to the TSR for the ASX300 for the period 30 Jun 23 30 Jun 24 30 Jun 25 1 Jul 20 –30 Jun 23 1 Jul 21 – 30 Jun 24 1 Jul 22 –30 Jun 25 Performance Condition 50% of the performance rights will vest pro-rata based on the earnings per share (“EPS”) of Acumentis Group Limited being between 2.4 cents & 3.2 cents for FY23 2.5 cents & 3.4 cents for FY24 2.6 cents & 3.5 cents for FY25 1. Rights granted subject to TSR condition are valued using Monte Carlo Simulation. Rights granted subject to EPS condition are valued using the Black-Scholes model. Expected dividends were not incorporated into these measurements. The Board has the discretion to adjust the number of rights that ultimately vest and/or the service condition period if it forms the view that the unadjusted outcome is not appropriate to the circumstances that prevailed over the measurement period. The Board has discretion to determine that some or all unvested rights held lapse on a speciﬁed date if allowing the rights to vest would, in the opinion of the Board, result in an inappropriate beneﬁt to the rights holder. Such circumstances would include joining a competitor or actions that harm the Company’s stakeholders. In the case of fraud or misconduct, all unvested rights will be forfeited. Acumentis Annual Report 2023 Pg 89 (b) Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period as part of employee beneﬁt expense were as follows: Options Performance rights 20 Remuneration of auditors Audit services Auditor of the Consolidated Entity – William Buck Audit and review of the ﬁnancial reports Other services Other William Buck related entities Acquisition due diligence Taxation and other services Total services 2023 $ - 38,000 38,000 2022 $ - 96,115 96,115 2023 $ 2022 $ 234,000 220,000 - 9,790 13,500 13,740 243,790 247,240 21 (a) Earnings per share Basic earnings per share The calculation of basic earnings per share was calculated as follows: Proﬁt / (loss) attributable to ordinary shareholders 2023 $000 429 2022 $000 1,445 Weighted average number of shares used as the denominator Number Number Issued Ordinary Shares at 1 July Shares issued during year Issued Ordinary Shares at 30 June 175,317,445 159,005,153 42,857,160 16,312,292 218,174,605 175,317,445 Weighted average number of ordinary shares at 30 June 189,605,747 173,444,588 Calculated basic earnings per share 0.23 cents 0.83 cents Pg 90 Acumentis Annual Report 2023 (b) Diluted earnings per share The calculation of diluted earnings per share was calculated as follows: Proﬁt / (loss) attributable to ordinary shareholders Weighted average number of ordinary shares and potential ordinary shares used as the denominator Issued Ordinary Shares at 1 July Shares issued during year Issued Ordinary Shares at 30 June Weighted average number of ordinary shares at 30 June Options on issue at 30 June (note 7(c)) Performance rights on issue at 30 June (note 19(a)) 2023 $000 429 2022 $000 1,445 Number Number 175,317,445 159,005,153 42,857,160 16,312,292 218,174,605 175,317,445 189,605,747 173,444,588 2,500,000 2,316,000 2,500,000 2,416,000 Weighted average number of ordinary shares and potential ordinary shares at 30 June 194,421,747 178,360,588 Calculated diluted earnings per share 0.22 cents 0.81 cents As at the date of this report there are 2,500,000 options over ordinary shares and 2,316,000 performance rights in the Company. Acumentis Annual Report 2023 Pg 91 22 Parent entity ﬁnancial information The following information has been extracted from the books and records of the parent and has been prepared in accordance with the accounting standards. (a) Statement of ﬁnancial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Retained earnings Other reserves Total equity (b) Statement of proﬁt & loss and other comprehensive income Total proﬁt / (loss) Total comprehensive income / (loss) 23 Going concern 2023 $000 2,532 57,019 59,551 26,957 1,382 28,339 2022 $000 31,136 57,950 89,086 55,738 2,999 58,737 31,212 30,349 22,208 8,839 165 31,212 19,433 10,789 127 30,349 2023 $ 1,950 1,950 2022 $ (13,528) (13,528) The directors are satisﬁed that the going concern basis of preparation is appropriate and therefore the ﬁnancial information does not include any adjustments relating to the recoverability or classiﬁcation of recorded asset amounts or to the amounts or classiﬁcation of liabilities that might be necessary should the company not be able to continue as a going concern. Pg 92 Acumentis Annual Report 2023 24 Summary of signiﬁcant accounting policies This note provides a list of the signiﬁcant accounting policies adopted in the preparation of these consolidated ﬁnancial statements to the extent they have not already been disclosed in the other notes above. These policies have been consistently applied to all the years presented, unless otherwise stated. The ﬁnancial statements are for the Consolidated Entity consisting of Acumentis Group Limited and its subsidiaries. (a) Basis of preparation These general purpose ﬁnancial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Acumentis Group Limited is a for-proﬁt entity for the purpose of preparing the ﬁnancial statements. (i) Compliance with IFRS The consolidated ﬁnancial statements also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (ii) Historical cost convention The ﬁnancial statements have been prepared on a historical cost basis. (iii) New and amended standards adopted by the Consolidated Entity No new or amended standards were applicable to the Consolidated for the current ﬁnancial year. (iv) New standards and interpretations not yet adopted The AASB has issued new and amended accounting standards and interpretations that have mandatory application dates for future reporting periods and which the Consolidated Entity has decided not to early adopt. These standards are not expected to have a material impact on the Consolidated Entity in the current or future reporting periods and on foreseeable future transactions. (b) Principles of consolidation and equity accounting (i) Subsidiaries Subsidiaries are all entities (including structured entities) over which the Consolidated Entity has control. The Consolidated Entity controls an entity when the Consolidated Entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for business combinations by the Consolidated Entity (refer to note 24(h)). Acumentis Annual Report 2023 Pg 93 Intercompany transactions, balances and unrealised gains on transactions between companies within the Consolidated Entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Consolidated Entity. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of proﬁt or loss, statement of comprehensive income, statement of changes in equity and balance sheet respectively. (ii) Associates Associates are all entities over which the Consolidated Entity has signiﬁcant influence but not control or joint control. This is generally the case where the Consolidated Entity holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting (see (iii) below), after initially being recognised at cost. (iii) Equity method Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Consolidated Entity’s share of the post-acquisition proﬁts or losses of the investee in proﬁt or loss, and the Consolidated Entity’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. When the Consolidated Entity’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Consolidated Entity does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Consolidated Entity and its associates and joint ventures are eliminated to the extent of the Consolidated Entity’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Consolidated Entity. The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 24(l). (iv) Changes in ownership interests The Consolidated Entity treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Consolidated Entity. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of Acumentis Group Limited. When the Consolidated Entity ceases to consolidate or equity account for an investment because of a loss of control, joint control or signiﬁcant influence, any retained interest in the entity is Pg 94 Acumentis Annual Report 2023 remeasured to its fair value with the change in carrying amount recognised in proﬁt or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or ﬁnancial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Consolidated Entity had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassiﬁed to proﬁt or loss. If the ownership interest in an associate is reduced but joint control or signiﬁcant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassiﬁed to proﬁt or loss where appropriate. (c) Functional and presentation currency These consolidated ﬁnancial statements are presented in Australian dollars which is the Company’s functional currency and the functional currency of all entities within the Consolidated Entity. (d) Segment reporting The Consolidated Entity’s operations and clients are located entirely in Australia. The Consolidated Entity’s operating segments have been identiﬁed based on the segments analysed within management reports. Based on these criteria, it has been determined that the Consolidated Entity only operates in the Valuation segment, which provides valuation, research and advice services in relation to property and businesses. Accordingly, no separate segment reporting is required. (e) Revenue recognition Revenue is recognised at an amount that reflects the consideration to which the Consolidated Entity is expected to be entitled to receive for the provision of services to clients. For each contract with a client, the Consolidated Entity identiﬁes the contract, the performance obligations in the contract and the total price for the services. The total price is then allocated to the separate performance obligations under the contract and each part of the total price is recognised as revenue when the associated performance obligation is satisﬁed. For the large majority of contracts with clients, the Consolidated Entity has a single performance obligation being the delivery of the service and so the revenue is recognised at this point in time. The speciﬁc accounting policies for the Consolidated Entity’s main types of revenue are explained in note 1. (f) Income tax The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Acumentis Annual Report 2023 Pg 95 Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated ﬁnancial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable proﬁt or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax is recognised in proﬁt or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. (g) Leases The Consolidated Entity accounts for leases in line with the requirements of AASB 16. AASB 16 introduced a single lessee accounting model that requires all leases to be accounted for on balance sheet. A lessee is required to recognise an asset representing the right to use the underlying asset during the lease term (i.e. right-of-use asset) and a liability to make lease payments (i.e. lease liability). Two exemptions are available for leases with a term less than 12 months or if the underlying asset is of low value. When a new lease is entered into, the net present value of the contracted rental payments is calculated using the interest rate implicit in the lease, or if this is not able to be reliably estimated, the Consolidated Entity’s incremental borrowing rate. This amount is capitalised as a right of use asset and depreciated on a straight line basis over the term of the lease. An offsetting lease liability is recorded. Over the term of the lease, interest costs are expensed and added to the lease liability and lease payments are deducted from the liability. (h) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the: • • • • • Fair values of the assets transferred; Liabilities incurred to the former owners of the acquired business; Equity interests issued by the Consolidated Entity; Fair value of any asset or liability resulting from a contingent consideration arrangement; and Fair value of any pre-existing equity interest in the subsidiary. Identiﬁable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Consolidated Entity recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis Pg 96 Acumentis Annual Report 2023 either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identiﬁable assets. Acquisition-related costs are expensed as incurred. The excess of the consideration transferred plus the amount of any non-controlling interest in the acquired entity and the acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identiﬁable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identiﬁable assets of the business acquired, the difference is recognised directly in proﬁt or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent ﬁnancier under comparable terms and conditions. Contingent consideration is classiﬁed either as equity or a ﬁnancial liability. Amounts classiﬁed as a ﬁnancial liability are subsequently remeasured to fair value with changes in fair value recognised in proﬁt or loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such re-measurement are recognised in proﬁt or loss. (i) Impairment of assets Goodwill and intangible assets that have an indeﬁnite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash- generating units). Non-ﬁnancial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. (j) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with ﬁnancial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insigniﬁcant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the balance sheet. (k) Trade receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for expected credit losses. See note 5(c) for further information about the Consolidated Entity’s accounting for trade receivables and note 11(a) for a description of the Consolidated Entity’s impairment policies. Acumentis Annual Report 2023 Pg 97 (l) Investments and other ﬁnancial assets (i) Classiﬁcation The Consolidated Entity classiﬁes its ﬁnancial assets in the following categories: • • Those to be measured subsequently at fair value; and Those to be measured at amortised cost. The classiﬁcation depends on the business model for managing the ﬁnancial assets and the contractual terms of the cash flows. See note 5 for details about each type of ﬁnancial asset. (ii) Recognition and derecognition Investments and other ﬁnancial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for ﬁnancial assets at fair value through proﬁt or loss. Such assets are subsequently measured at either amortised cost or fair value depending on their classiﬁcation. Classiﬁcation is determined based on both the business model within which such assets are held and the contractual cash flow characteristics of the ﬁnancial asset unless, an accounting mismatch is being avoided. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership. When there is no reasonable expectation of recovering part or all of a ﬁnancial asset, it’s carrying value is written off. (iii) Financial assets at fair value through proﬁt and loss Financial assets not measured at amortised cost or at fair value through other comprehensive income are classiﬁed as ﬁnancial assets at fair value through proﬁt or loss. Typically, such ﬁnancial assets will be either: (i) held for trading, where they are acquired for the purpose of selling in the short- term with an intention of making a proﬁt; or (ii) designated as such upon initial recognition where permitted. Fair value movements are recognised in proﬁt or loss. (iv) Financial assets at fair value through other comprehensive income Financial assets at fair value through other comprehensive income include equity investments which the consolidated entity intends to hold for the foreseeable future and has irrevocably elected to classify them as such upon initial recognition. Details on how the fair value of ﬁnancial instruments is determined are disclosed in note 5(c). (v) Impairment The Consolidated entity applies the AASB 9 simpliﬁed approach to measuring expected credit losses which uses a lifetime expected loss allowances for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on payment proﬁles of sales over the previous 3 years. The Pg 98 Acumentis Annual Report 2023 historical loss rates are adjusted to reflect current and forward-looking macro-economic factors that might impact the ability of customers to settle the receivables. Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of the debtors to engage in a repayment plan and the failure to make contractual payments for a period of greater than 120 days past due. Impairment losses on trade receivables are presented as net impairment losses within operating proﬁt. Subsequent recoveries of amounts written off are credited against the same line item. (vi) Income recognition Interest income Interest income is recognised using the effective interest method. When a receivable is impaired, the Consolidated Entity reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. Dividends Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of pre-acquisition proﬁts. However, the investment may need to be tested for impairment as a consequence, refer note 24(l)(v). (m) Plant and equipment Plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains or losses on qualifying cash flow hedges of foreign currency purchases of plant and equipment. 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 Consolidated Entity and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to proﬁt or loss during the reporting period in which they are incurred. The depreciation methods and periods used by the Consolidated Entity are disclosed in note 6(a)(ii). The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in proﬁt or loss. When revalued assets are sold, it is Consolidated Entity policy to transfer any amounts included in other reserves in respect of those assets to retained earnings. Acumentis Annual Report 2023 Pg 99 (n) Intangible assets (i) Goodwill Goodwill is measured as described in note 6(c). Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to beneﬁt from the business combination in which the goodwill arose. The units or groups of units are identiﬁed at the lowest level at which goodwill is monitored for internal management purposes. (ii) Trademarks, licences and customer contracts Separately acquired trademarks and licences are shown at historical cost. Trademarks, licenses and customer contracts acquired in a business combination are recognised at fair value at the acquisition date. Where they are assessed as having a ﬁnite useful life they are subsequently carried at cost less accumulated amortisation and impairment losses. (iii) Software Costs associated with maintaining software programmes are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identiﬁable and unique software products controlled by the Consolidated Entity are recognised as intangible assets when the following criteria are met: • • • • • • It is technically feasible to complete the software so that it will be available for use; Management intends to complete the software and use or sell it; There is an ability to use or sell the software; It can be demonstrated how the software will generate probable future economic beneﬁts; Adequate technical, ﬁnancial and other resources to complete the development and to use or sell the software are available; and The expenditure attributable to the software during its development can be reliably measured. Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate portion of relevant overheads. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use. (iv) Amortisation methods and periods Refer to note 6(c) for details about amortisation methods and periods used by the Consolidated Entity for intangible assets. Pg 100 Acumentis Annual Report 2023 (o) Trade and other payables These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of ﬁnancial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. (p) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in proﬁt or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are removed from the balance sheet when the obligation speciﬁed in the contract is discharged, cancelled or expired. The difference between the carrying amount of a ﬁnancial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in proﬁt or loss as other income or ﬁnance costs. Borrowings are classiﬁed as current liabilities unless the Consolidated Entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. (q) Borrowing costs Borrowing costs are expensed in the period in which they are incurred. (r) Provisions Provisions for legal claims and make good obligations are recognised when the Consolidated Entity has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks speciﬁc to the liability. The increase in the provision due to the passage of time is recognised as interest expense. Acumentis Annual Report 2023 Pg 101 (s) Employee beneﬁts (i) Short-term obligations Liabilities for wages and salaries, including non-monetary beneﬁts, that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee beneﬁt obligations in the balance sheet. (ii) Other long-term employee beneﬁt obligations The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period of high-quality corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. Re-measurements as a result of experience adjustments and changes in actuarial assumptions are recognised in proﬁt or loss. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. (iii) Post-employment obligations The Consolidated Entity operates various deﬁned contribution pension plans. Pension obligations For deﬁned contribution plans, the Consolidated Entity pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Consolidated Entity has no further payment obligations once the contributions have been paid. The contributions are recognised as employee beneﬁt expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. (iv) Share-based payments Share-based compensation beneﬁts are provided to employees via the Acumentis Group Employee Option & Performance Rights Plan and an employee share scheme. Information relating to these schemes is set out in note 19. Employee options and performance rights The fair value of options and performance rights granted under the Acumentis Group Limited Employee Option and Performance Rights Plan is recognised as an employee beneﬁts expense with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the options and performance rights granted: • Including any market performance conditions (e.g. the entity’s share price); Pg 102 Acumentis Annual Report 2023 • • Excluding the impact of any service and non-market performance vesting conditions (e.g. proﬁtability, sales growth targets and remaining an employee of the entity over a speciﬁed time period); and Excluding the impact of any non-vesting conditions (e.g. the requirement for employees to save or holdings shares for a speciﬁc period of time). The total expense is recognised over the vesting period, which is the period over which all of the speciﬁed vesting conditions are to be satisﬁed. At the end of each period, the entity revises its estimates of the number of options and performance rights that are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision to original estimates, if any, in proﬁt or loss, with a corresponding adjustment to equity. The Employee Option and Performance Rights Plan is administered by the Acumentis Employee Share Trust, which is not consolidated. When the options or performance rights are exercised, the trust transfers the appropriate number of shares to the employee. The proceeds received net of any directly attributable transaction costs are credited directly to equity. (v) Proﬁt-sharing and bonus plans The Consolidated Entity recognises a liability and an expense for bonuses and proﬁt-sharing based on a formula that takes into consideration the proﬁt attributable to the company’s shareholders after certain adjustments. The Consolidated Entity recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. (vi) Termination beneﬁts Termination beneﬁts are payable when employment is terminated by the Consolidated Entity before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these beneﬁts. The Consolidated Entity recognises termination beneﬁts at the earlier of the following dates: (a) when the Consolidated Entity can no longer withdraw the offer of those beneﬁts; and (b) when the entity recognises costs for a restructuring that is within the scope of AASB 137 and involves the payment of terminations beneﬁts. In the case of an offer made to encourage voluntary redundancy, the termination beneﬁts are measured based on the number of employees expected to accept the offer. Beneﬁts falling due more than 12 months after the end of the reporting period are discounted to present value. (t) Contributed equity Ordinary shares are classiﬁed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (u) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. Acumentis Annual Report 2023 Pg 103 (v) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing: • • The proﬁt attributable to owners of the Company, excluding any costs of servicing equity other than ordinary shares; and By the weighted average number of ordinary shares outstanding during the ﬁnancial year, adjusted for bonus elements in ordinary shares issued during the year. (ii) Diluted earnings per share Diluted earnings per share adjusts the ﬁgures used in the determination of basic earnings per share to take into account: • • The after income tax effect of interest and other ﬁnancing costs associated with dilutive potential ordinary shares; and The weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (w) Rounding of amounts The company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the ﬁnancial statements. Amounts in the ﬁnancial statements have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. (x) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or ﬁnancing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. Pg 104 Acumentis Annual Report 2023 THIS PAGE IS AN INTENTIONALLY BLANK PAGE Acumentis Annual Report 2023 Pg 105 Directors’ declaration ASX:ACU FY22-23 Pg 106 Acumentis Annual Report 2023 DIRECTORS’ DECLARATION 1 In the opinion of the directors of Acumentis Group Limited (‘the Company’): (a) the ﬁnancial statements and notes set out on pages 34 to 105 and the remuneration disclosures of the Remuneration report in the Directors’ report, set out on pages 22 to 29, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the ﬁnancial position of the Company and the Consolidated Entity as at 30 June 2023 and of its performance, for the ﬁnancial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; (b) the ﬁnancial report also complies with International Financial Reporting Standards as discussed in note 24(a); (c) 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 The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Chief Executive Ofﬁcer and Chief Financial Ofﬁcer for the ﬁnancial year ended 30 June 2023. Dated at Sydney this 14th day of August 2023 Signed in accordance with a resolution of the directors: Keith Perrett Director Acumentis Annual Report 2023 Pg 107 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS Acumentis Group Limited Independent auditor’s report to members Report on the Audit of the Financial Report Opinion We have audited the financial report of Acumentis Group Limited (the Company and its subsidiaries (the Consolidated Entity)), which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies and other explanatory information, and the directors’ declaration. In our opinion, the accompanying financial report of the Consolidated Entity, is in accordance with the Corporations Act 2001, including: i. giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2023 and of its financial performance for the year ended on that date; and ii. complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Consolidated Entity in accordance with the auditor independence requirements of 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 (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Level 29, 66 Goulburn Street, Sydney NSW 2000 Level 7, 3 Horwood Place, Parramatta NSW 2150 +61 2 8263 4000 nsw.info@williambuck.com williambuck.com.au William Buck is an association of firms, each trading under the name of William Buck across Australia and New Zealand with affiliated offices worldwide. Liability limited by a scheme approved under Professional Standards Legislation. Pg 108 Acumentis Annual Report 2023 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were 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 these matters. Impairment assessments – Goodwill Area of focus Refer also to notes 6 (c) and 24 (i) & (n) The Consolidated Entity’s net assets include a significant amount of intangible assets, the majority of which have originated from acquisitions in the current and prior years. As at 30 June 2023 the Consolidated Entity’s net assets include Goodwill of $20.3 million (2022: $20.3 million). There is a risk that the Consolidated Entity may not trade in line with initial expectations and forecasts, resulting in the carrying amount of intangible assets exceeding the recoverable amount and therefore requiring impairment. In accordance with the requirements of AASB 136 Impairment of Assets, the Consolidated Entity is required to test goodwill for impairment annually and whenever there is an indicator of impairment. The recoverable amount for each Cash Generating Unit (CGU) to which goodwill has been allocated has been calculated based on value-in-use models, which use discounted cash flow forecasts. The Directors make judgements over certain key inputs including, but not limited to, revenue growth, gross margins, discount rates, long term growth rates and inflation rates. Due to the high degree of judgement and estimation involved in the determination of the recoverable amount of each CGU, and the significance of the carrying amounts involved, we have determined that this is an area of significance in our audit of the financial report. How our audit addressed it Our audit procedures included: — Giving consideration to and performing an assessment of management’s determination of CGUs; — A detailed evaluation of the Consolidated Entity’s budgeting procedures upon which the forecasts are based and testing the principles and integrity of the discounted future cash flow models; — Testing the accuracy of the calculation derived from each forecast model and assessing key inputs to the calculations such as revenue growth, gross margins, discount rates and working capital assumptions; — Engaging our own valuation specialists to critically evaluate the appropriateness of the discount rates and the long-term growth rates used in the discounted cash flow model; — Reviewing the historical accuracy of the forecasts by comparing actual results with the original forecasts from prior years — Performing sensitivity analysis of the calculations; and — Assessing whether disclosure in the financial report is appropriate. Acumentis Annual Report 2023 Pg 109 Other Information The directors are responsible for the other information. The other information comprises the information contained in the Directors’ Report but does not include the financial report and the auditor’s report thereon, which we obtained prior to the date of this auditor’s report, and the annual report, which is expected to be made available to us after this date. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Consolidated Entity to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Consolidated Entity or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of these financial statements 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 independent auditor’s report. Pg 110 Acumentis Annual Report 2023 Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 22 to 29 of the directors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of Acumentis Group Limited, for the year ended 30 June 2023, complies with section 300A of the Corporations Act 2001. Responsibilities 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 responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Yours faithfully William Buck Accountants & Advisors ABN: 16 021 300 521 Domenic Molluso Partner Sydney, 14 August 2023 Acumentis Annual Report 2023 Pg 111 ASX ADDITIONAL INFORMATION Additional information required by the Australian Stock Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below. The Company was admitted to the Australian Stock Exchange under rule 1.3.2(b). Shareholdings Shareholding details are as at 28 July 2023. Substantial shareholders The number of shares held by substantial shareholders and their associates are set out below: Shareholder Redbrook Nominees Pty Ltd Newport Shipping Company Pty Limited Citicorp Nominees Pty Ltd Voting rights Number of Ordinary Shares Percentage 31,108,042 25,953,613 25,884,062 14.3% 11.9% 11.9% Ordinary shares Holders of ordinary shares are entitled to one vote per share at shareholder meetings. Options There are no voting rights attached to options Distribution of equity security holders Category 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 50,000 50,001 – 100,000 100,001 and over Total Number of Shareholders Number of shares 55 205 166 253 75 162 916 16,608 731,546 1,350,484 6,439,645 5,519,725 204,116,597 218,174,605 As at 30 June 2023 there were 218,174,605 ordinary shares on issue (note 7(a)). On-market buy back There is no current on-market buy back. Unmarketable Parcels The number of shareholders holding less than a marketable parcel of 6,489 shares (based on closing price of $0.073 on 28 July 2023 is 292 and they hold 998,072 securities. Pg 112 Acumentis Annual Report 2023 Twenty largest shareholders Name CITICORP NOMINEES PTY LIMITED NEWPORT SHIPPING COMPANY PTY LTD REDBROOK NOMINEES PTY LTD ACRES HOLDINGS PTY LTD KIUT INVESTMENTS PTY LTD ENABLE INVESTMENT MANAGER PTY LTD MR LESLIE PETER WOZNICZKA STIBBCO INVESTMENTS PTY LTD CAROSSAH PTY LTD WHITE VALUATIONS PTY LTD MS LYNETTE JANE ELLIS & MR JEFFREY GEORGE KEANE GOGORM SUPER PTY LTD KEVIN KING PTY LTD CONTINUUM PROPERTY CONSULTANCY BLAKE FRANCIS DEAN LIESCHKE ARKMIST PTY LTD MR STEWART ANDREW SMITH VENTURA RESOURCES PTY LTD TONY MICHAEL GORMAN NATHAN ALEXANDER KING Number of Ordinary Shares Percentage 25,884,062 19,555,041 14,339,068 10,352,537 10,054,536 6,323,817 5,720,000 4,585,753 4,411,112 3,600,000 3,558,334 3,182,494 3,136,069 3,033,212 2,747,576 2,645,712 2,629,851 2,622,199 2,606,565 2,507,063 11.9% 9.0% 6.6% 4.7% 4.6% 2.9% 2.6% 2.1% 2.0% 1.7% 1.6% 1.5% 1.4% 1.4% 1.3% 1.2% 1.2% 1.2% 1.2% 1.1% 133,495,001 61.2% Company Secretary John Wise Principal registered ofﬁce Level 7, 283 Clarence Street Telephone Facsimile Website Sydney NSW 2000 02 8823 6300 02 8823 6399 www.acumentis.com.au Location of share registry Automic Registry Services Level 5, 126 Phillip Street Sydney NSW 2000 Telephone 1300 288 664 (toll free within Australia) +61 2 9698 5414 (outside Australia) Email hello@automic.com.au Stock exchange The company is listed on the Australian Stock Exchange (“ACU”) Other information Acumentis Group Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. Acumentis Annual Report 2023 Pg 113 team acumentis! Liability limited by a scheme approved under Professional Standards Legislation. www.acumentis.com.au

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