Alamos Gold
Annual Report 2022

Plain-text annual report

AINSWORTH GAME TECHNOLOGY A I N S W O R T H G A M E T E C H N O L O G Y A N N U A L R E P O R T 2 0 2 2 2022 ANNUAL REPORT Contents Performance Overview New Products Sustainability Statement Board of Directors Chairperson’s Report Chief Executive Officer’s Report Shareholder Information Directors’ Report 2 4 6 7 8 10 12 14 Financial Statements Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Lead Auditor’s Independent Declaration Corporate Directory 47 51 98 99 107 108 AINSWORTH GAME TECHNOLOGY Notice of Annual General MeetingAinsworth Game Technology Limited ABN 37 068 516 665Notice is hereby given that the 2022 Annual General Meeting of the members of Ainsworth Game Technology Limited will be held at:Bankstown Sports Club “Birdwood Room” L1, 8 Greenfield Parade (Cnr Greenfield Parade and Mona Street) Bankstown NSW 2200 On Tuesday 29th November 2022 at 10:00am AEDT RESULTS ANNOUNCEMENT FOR SIX MONTHS ENDING 31ST DECEMBER 2022:Wednesday 22nd February 2023Dates may be subject to changeIn accordance with ASX Listing Rule 4.10.3, Ainsworth Game Technology’s Corporate Governance Statement can be found on its website at: https://www.agtslots.com/investor/corporate-governance 1 ANNUAL REPORT 2022North America • Strong revenue contribution of $115.1 million representing 52% of the Group’s total revenue. • Segment profit increased by 32% to $51.5 million compared to FY21, driven by higher outright unit sales which included the 400 HHR units sales to Kentucky Downs. • High performing HHR products continue to contribute to the revenue growth in this segment. • MTD continues to positively contribute with the most recent released game sets leading in South Dakota.. Latin America • Significant uplift in segment revenue and profit driven by market re-opening within Q2FY22. • Revenue increased by 185% compared to FY21. • Segment profit was $20.8 million compared to ($8.6) million loss in FY21. • Improved performance in FY22 compared to FY21. • Positive adjusted EBITDA of A$48.6 million (excludes currency and one-off items), improvement on the A$15.5 million reported in FY21. • Increase in revenue by 38% due to strong product performance in North America and re-opening of the LATAM market. • Strong balance sheet to enable further investment in product development. • Net cash of $50.3m compared to net cash of $5.1m at pcp, and net cash of $32.2m at the prior half. • Profit before tax (excluding currency impact) is $7.6m, compared to ($47.7m) loss in pcp. • Underlying EBITDA for the period improved by 214%. • Progressive increase in number of machines operating under participation and lease allowed an increase of revenue by 147%. • An impairment review of this Cash Generating Unit (CGU) has resulted in a one-off (non-cash) impairment charge of A$4.7 million which was brought upon by global inflationary cost pressures. Australia • Revenue in NSW was affected by lockdowns and offset by improvements in QLD and VIC allowing consistent revenue with FY21. • An improvement in segment profit by 158% was achieved due to reduced depreciation expenses as a result of assets that were fully written down at 30 June 2021. • Gross profit margin of 36% also contributed to an improved segment result. 2 Rest of the World • The slight revenue increase from this segment is predominantly from the online division, contributing 69% of total revenue (PCP: 43%), and assisting to offset the underperformance from other regions within Rest of the World, encompassing New Zealand, Europe and Asia. • EBITDA and segment profit improved due to higher online revenue with high margin contribution. • The increase in online revenue compared to PCP is due to the execution of GAN agreement with Ainsworth on 1 July 2021 which is expected to generate at least US$30.0 million over a 5-year period and will further strengthen Ainsworth’s brand presence in USA through GAN’s distribution network. Online Gaming • Ainsworth Interactive has now established itself as a leading Real Money Gaming (online content supplier throughout the licensed and regulated markets in the USA, Latin America and Europe). • Ainsworth is working closely in the USA with our exclusive online partner Game Account Network (GAN) as they continue to expand our content distribution with casino operators throughout New Jersey, Michigan and Pennsylvania. • The online division continues to partner with Zynga in providing Ainsworth’s established and high performing game titles in the social online gaming market. Performance OverviewFinancial HighlightsAINSWORTH GAME TECHNOLOGYHistorical Performance - AUD (M) (by Half and Full Fiscal Year) Domestic Revenue International Revenue Adjusted Profit /(Loss) After Tax 72.1 52.9 19.2 (-16.8) 87.4 67.6 19.8 (0.8) 100.7 84.0 16.7 (6.1) 119.5 97.3 22.2 (16.9) H1FY21 H2FY21 H1FY22 H2FY22 FY21 220.2 181.3 159.5 120.5 39.0 38.9 (-17.6) (23.0) FY22 *Adjusted Profit/(Loss) After Tax excludes currency impacts and other one-off non-recurring items Revenues - AUD (M) (by Half and Full Fiscal Year) 220.2 159.5 119.5 87.4 100.7 72.1 H1FY21 H2FY21 H1FY22 H2FY22 FY21 FY22 *Note 1: Significant decline in revenue impacted by the onset of COVID-19 at beginning of Calender Year 2020 Reported and Adjusted EBITDA - AUD (M) (by Half and Full Fiscal Year) 48.6 37.1 24.6 20.7 27.9 12.5 15.5 14.4 10.2 1.1 H1FY21 H2FY21 H1FY22 H2FY22 FY21 FY22 (-36.8) (-26.6) Reported Adjusted * Adjusted EBITDA excludes currency impacts and other one-off non-recurring items 3 ANNUAL REPORT 2022CABINETS PRODUCT A-STAR™ Curve XL The new size of Ainsworth arrived last year when the Company launched its new A-STAR™ Curve XL video slot cabinet. This premium cabinet takes Ainsworth’s gameplay to the next level with a 4K 55-inch floating infinity monitor, dynamic LED lighting and state-of-the- art LCD button deck. This gorgeous game package can be utilized in most major North American casino markets with an expanding suite of exciting gameplay experiences aimed at attracting the biggest players. Grand / Royal Legacy Ainsworth’s High Denomination games continue to excel in the North American market with titles like Thunder Cash™, Eagle Bucks™ and Mustang Money 2™ regularly industry wide performance rankings. appearing Grand Legacy™ and Royal Legacy™ aim to expand on Ainsworth’s High Denom legacy with a pair of three-reel, nine-line games. These companion titles offer up to 125x multipliers, five levels of jackpots, and the chance to win more than one Progressive Jackpot on a single spin. in A-STAR™ Slant Top The sleek A-STAR™ Slant Top offers a 27-inch game screen with an optional 27-inch topper allowing increased visibility across any gaming floor. The newest addition to the A-STAR™ cabinet series provides a premium sound system, dynamic touchscreen button deck and a built-in pedestal base. All of Ainsworth’s latest games in addition to a selection of existing player favourites are available on the A-STAR™ Slant Top making this versatile, comfortable and classy design a stand out selection on any gaming floor. 4 AINSWORTH GAME TECHNOLOGY New Low Denomination Content The recent G2E 2022 showcased Ainsworth’s renewed focus on improving the performance of low denom content on the A-STAR™ Curve cabinet. Key titles drawing interest from casino operators include a trio of gameplay experiences which were first introduced in Australia and performing well above average in the region: Treasure Spirits™, Cash Stacks Gold™ and Ultra Shot™. Treasure Spirits™ and Cash Stacks Gold™ offer exciting 5th reel instant win prizes, unique Free Games and the innovative Hold ‘n Stack bonus. Ultra Shot™ offers players the new Level Up bonus. All new game series offer player selectable denominations starting at 1c. Multi Games Ainsworth demonstrates its leadership in the multi- game segment by expanding the Multi Win™ brand across LATAM. Multi Win™ takes the multi-game market segment to a higher level, with flexible operator and player-selectable options such as multi-lines, multi- denomination, and multi-language. Coupled with standalone progressive configurations, the new line of Multi Games, including MW 20™ & MW 21™, offers an indispensable package for all casinos. Xtension Link™ This a unique take on a progressive link product in the LATAM market offering a mix of ways games and line games. Options of expanding reels with up to 32,768 routes or 100 lines. A Hold & Respin feature with expanding reels and prize modifiers. Jackpot options of 4-level SAP or Link. Ainsworth Historical Horse Racing Ainsworth’s Historical Horse Racing (HHR) System continues to flourish. The System is now active in six U.S. markets: Kentucky, New Hampshire, Wyoming, Louisiana, Virginia, and Alabama. More than 2,500 Ainsworth terminals have been placed with more than 100 unique titles available. Just as importantly, four major manufacturers – Aristocrat, IGT, Konami and Light & Wonder – have products connected to the Ainsworth System. New ProductsONLINE B2B Real Money Gaming (RMG) Ainsworth Interactive is a leading developer and publisher of digital games in the real money gaming (RMG) market for mobile and web platforms. Our Digital business segment provides software design, development, maintenance, and support services for our remote gaming servers (RGS). The RGS is our core distribution platform which provides Ainsworth content to casino operators in the US, Latin America, and European markets. With our exclusive US partnership with GAN, Ainsworth has 130 online games available globally, including our latest land-based titles in New Jersey, Michigan, and Pennsylvania. In Latin America, Ainsworth supports its casino partners and customers with one of the most comprehensive gaming libraries on the market, both online and in physical casino markets. We are currently live in the top online operations in the region, such as Caliente and Strendus in Mexican online, Solbet and Apuesta Total in Peru, Rushbet and BetPlay in Colombia, and recently entered the Argentinian market with Betwarrior. B2B Social Casino Business The partnership between Ainsworth Interactive and Zynga continues to thrive and is growing from strength to strength. Ainsworth’s latest slot games are available exclusively on Zynga’s Hit it Rich App, one of the most popular social casinos in the world. Hit It Rich attracts a different demographic of players and exposes the Ainsworth brand and content to a new global audience. All of our games are offered and played across multiple platforms, including Apple, Google, Facebook, Amazon, and Microsoft. 5 ANNUAL REPORT 2022Despite the impacts of the pandemic on global operations over the FY22 period, the Company remains focused and committed to implementing a range of initiatives directed towards ensuring its business and operations make a positive contribution towards sustainable development. ENVIRONMENT & ENERGY OUR PEOPLE Mission: Build an engaged, skilled, and responsible workforce guided by values that support our strategy. Example of initiatives: • Provide a safe and enjoyable work environment, with programs that support and incentivise employees; • The conduct of employee training in support of the Company’s global compliance efforts, including training for employees on what constitutes bribery, unlawful/corrupt conduct and money laundering and the penalties associated with such conduct; • An ongoing assessment of the workplace health and safety risks of all Ainsworth employees, including the proactive encouragement of COVID-19 vaccine take up by all employees worldwide; • Allowing all employees to utilise flexible work conditions where practicable. ETHICAL SOURCING Mission: Ensuring that those involved in our supply chain are treated fairly and operate in a safe environment and conforming to local requirements. Example of initiatives: • The ongoing efforts of the Company to minimise the risk of modern slavery within the Company’s domestic and global supply chain as detailed in the Company’s Modern Slavery Statement and published on the Company’s website. Mission: Minimise the impact of the Company’s business activities on the environment. Example of initiatives: • Implementation of solar energy technologies and industrial standard energy saving high lumen LED lighting throughout its Newington premises and factory; • Recycling of paper and cardboard waste, used metal (such as that found in end-of-life/used gaming machines) and water; • Ongoing minimisation of use of hazardous substances in the design and manufacture of the Company’s products; • Continuous initiatives to reduce paper usage by incorporating paperless transactions and record keeping where possible. LICENSING & COMPLIANCE Mission: Ensuring that we operate in accordance with global compliance best practice across global markets. Example of initiatives: • Proactive approach to compliance and probity by having vigorous policies and procedures ensuring that we maintain our licences around the world; • The regular vetting and review of all new and existing significant customers and suppliers of the Company by a dedicated and professionally trained regulatory compliance function overseen by the Company’s Regulatory and Compliance Committee, to ensure all persons that do business with the Company are aligned with Ainsworth’s ethical and compliance values and requirements. For more details concerning these values and requirements please see the Ainsworth Regulatory and Compliance Committee Charter, published on the Company’s website. 6 Sustainability StatementAINSWORTH GAME TECHNOLOGYRESPONSIBLE GAMBLING Mission: While we strive to deliver excellence in gaming global solutions, supporting and promoting responsible gambling is one of our core values. Example of initiatives: • Ensuring the Company’s gaming products are regularly tested and approved in accordance with relevant local laws and technical standards to ensure they operate with fairness and integrity and that they facilitate responsible gaming machine play; • Through the Company’s full membership and support of the Gaming Technologies Association of Australia (‘GTA’), assisting in the provision of responsible gaming resources to the general public that allow players to make informed decisions about their participation in gaming machine play. More information on these initiatives is available from the GTA website: www.gamingta.com. Danny Gladstone Chairperson and Independent Non-Executive Director Member of the Audit and Risk Committee Appointed Non-Executive Director 1 July 2019 Chairperson since 26 November 2019 Graeme Campbell OAM Independent Non-Executive Director Chairperson of the Audit and Risk Committee Member of the Remuneration and Nomination Committee Appointed 18 September 2007 Colin Henson Dip-Law BAB, FCPA, FCG (CS, CGP) FAICD Independent Non-Executive Director Chairperson of the Remuneration and Nomination Committee Chairperson of the Regulatory and Compliance Committee Member of the Audit and Risk Committee Appointed 3 April 2013 Heather Scheibenstock GAICD, FGIA Independent Non-Executive Director Appointed 11 July 2022 7 Board of DirectorsANNUAL REPORT 2022Dear fellow shareholders, I am pleased to present Ainsworth’s 2022 Financial Year Annual Report. Your Company has delivered a much-improved performance with good momentum evidenced in the second half of the year. Trading conditions improved across most of our international markets as customers progressively reopened venues and activity levels began to progressively recover. For FY22, AGT delivered a Profit After Tax of $11.8 million for the year. This compares to a Loss After Tax of $53.4 million in FY21. Profit before Tax for FY22, excluding currency impacts and one-off items, was $27.3 million and was a more reflective representation of trading performance. The second half contributed $17.3 million towards the normalised net profit, an increase of 73% compared to the $10 million in the first half of FY22. This is a positive swing of over $44 million compared to the loss of $17.1 million we reported in FY21. In the second half of the year, we benefited from improved product performance in North America and some recovery in market conditions in Latin America as previous pandemic restrictions were eased. Reflecting the improvement in trading conditions offshore, international revenues increased by 50% versus the Prior Corresponding Period (PCP), and now account for 82% of the Group’s total revenue. Recurring revenues, another strong feature of AGT’s business model, increased by 29%. Units under gaming operation at FY22 were 6,389, generating annuity style recurring revenues. North America delivered good results primarily driven by strong product performance. AGT’s leading Historical Horse Racing (HHR) products and system once again made a material contribution with the sale of 400 machines previously placed under participation at Kentucky Downs. Latin America was our fastest growing region in these results. Revenues increased by 185%. The recovery was driven by venue re-openings, and a significant increase in unit sales of over 200%. AGT’s domestic performance improved as the year progressed although the results do not reflect our potential. I am encouraged with the changes we have initiated and the investments we have made to fundamentally upgrade and further improve game performance. We made further progress in The Rest of the World segment, primarily through our Online operations, which represented 69% of total revenue in this segment in the year, compared to 43% in the PCP. This increase was attributable to the increased contribution of the previously established GAN agreement following the addition of the jurisdictions in Michigan and Pennsylvania during the year. The Board determined to record a provision of $17.4 million on AGT’s balance sheet at June 30th to reflect the ongoing position with the Mexican Tax Administration Service as we have disclosed. The final resolution remains uncertain, and the Company will 8 Chairperson’s ReportAINSWORTH GAME TECHNOLOGYensure that the market is kept updated for all future material developments. long-term sustained success, and I look forward to updating you as we make continued progress. The Board looks forward to recommencing the declaration of dividends under its dividend policy when circumstances permit. I would like to acknowledge and thank Mr Harald Neumann, our CEO, for his leadership and my fellow Board members for their contributions through the year. I would like to close by thanking the rest of the highly capable executive team in Australia and the Americas, as well as our dedicated and loyal employees, my fellow shareholders and as always, our customers. Danny Gladstone Chairperson Ainsworth’s cash flow and balance sheet are positive features of the Company’s performance. We closed the year with a net cash position of $50.3 million which was a $45.2 million rise on the PCP. Cash flow from operations was $51.3 million, an increase of $29.1 million. We repaid $39.1 million of borrowings during the year, which was well timed given the interest rate rises. Our priority remains to maintain a strong balance sheet and liquidity to support required levels of working capital to satisfy customer demand and support the necessary R&D investments to strengthen AGT for sustained success. We are fundamentally improving the outputs of our R&D investments and lifting competitiveness of our products. We are offering more value and entertainment to our customers and have established an organisational structure and balance sheet to support these strategies. The global organisational structure has strong product leadership and clear lines of accountability. Management has also implemented a range of focusing on technology, development, measures and culture to improve product performance, lift staff retention rates and enhance AGT’s ability to attract world class development talent. This is key to our 9 ANNUAL REPORT 2022Dear Shareholders, I am proud to report Ainsworth is recovering well from the effects of the pandemic with renewed profitability, a strong balance sheet and a clear strategy to upgrade game performance to sustain ongoing success. I started in the role as your new CEO last October. Fortunately, since then we have seen venues reopen across our major international markets, some improvements in customers’ capital expenditure programs and increased interest in AGT’s top performing game products. It is the potential to leverage these growth drivers into sustained growth and improved returns for shareholders that drew me to your Company when I joined and continues to excite me about Ainsworth today. Along with the Board and my management team, we are committed to deliver on our potential to be a larger and more profitable company in our major markets. Our results benefitted from growth in the second half of the year as trading conditions recover across the Americas. We delivered a recovery in Profit Before Tax, excluding currency impacts and one-off items, of $27.3 million in the year, with H2 contributing almost two thirds of the total profit. Group Revenue increased to over $220 million, up 38% on the $159.5 million in the Prior Corresponding Period (PCP). The gross margin in the period was 63% which partly reflects supply chain and sourcing issues earlier in the year. We built up our inventory at the year end to $68 million. This is higher than the recent average of around $56 million, so that we could mitigate supply chain risks. Group operating costs in constant currency terms were $190.5 million, 13% higher than in the PCP. The increase in operating costs was mainly attributable to the increase in salaries and wages to normal levels following wage subsidies in prior periods. AGT is actively working on measures to mitigate inflationary cost pressures across its regions. Total headcount numbers were consistent to those twelve months earlier with reductions in resources in Australia reflecting the reduced revenue environment Underlying EBITDA was $48.6 million with momentum in the second half of the year. Underlying EBITDA in Half 2 was $27.9 million, representing growth of 35% compared to the first half of the year, and almost double the result of $15.5 million reported for the full year FY21. Strong product performance in North America supported our improved performance. High denomination games continue to be strengths of AGT in the United States. The Company has regularly delivered 5 of the top 25 performing games in this segment. 10 The sale of 400 HHR machines to Kentucky Downs was one of the highlights of the year. New HHR installations in Kentucky, Wyoming, Louisiana and most recently New Hampshire also made initial contributions in the period. Newly approved HHR legislation in Kansas along with continued expansion in New Hampshire and Louisiana is expected to provide additional placement opportunities in this high-quality market. Pleasingly, the recent Supreme Court Opinion in Texas will give us the long-term stability with one of our highest performing installations and provides a new opportunity at another Class II tribal location. MTD is also performing better. Our latest game set combines the best-in-class games from both Ainsworth and MTD. It has been released in South Dakota and is leading the market. Machines placed under participation and lease (including connection fees), which generate recurring revenue, contributed 31% of the revenues from this segment. With higher average selling prices, increase in recurring revenue and disciplined cost controls, segment profit rose to $51.5 million versus $39.1 million in the PCP, up 32%. Latin America enjoyed a sharp recovery in performance. The recovery was driven by increased customer activity and growing demand for the A-STAR™ range of cabinets and top performing game themes such as Pan Chang, Rio Grande Los Toritos, and Multi-Win Games. Improved Average Selling Price drove improved gross margin to 66% in FY22, compared to 61% in the PCP. This improvement in revenue and margin drove the segment profit increase to $20.8 million compared to a heavily pandemic impacted loss of $8.6 million in the year before. At 30 June 2022, a total of 3,818 units were under operation, generating $16.8 million in recurring revenue, an increase of 147% on the PCP. Further revenue opportunities can be expected as markets continue to recover and purchasing decisions return to pre COVID-19 levels across the region. The Board determined to record a provision of $17.4 million in AGT’s balance sheet at 30th June to reflect the current and ongoing position with the Mexican Tax Administration Service (SAT) as we disclosed to ASX on 12 July 2022. The Company maintains and will strongly defend its position that both software (including game) and hardware should be considered as a whole for the calculation of regional value content and USA origin under the North American Free Trade Agreement (NAFTA). This issue is ongoing, and we will update the market as we go. A further non-cash impairment charge of $5.2 million was recorded, primarily from the LATAM region. The impairment charge to the carrying value reflects inflationary cost increases and uncertainties within this region. It is also due CEO’s ReportAINSWORTH GAME TECHNOLOGYto the timing nature of the current business model within LATAM where gaming machines are initially placed under operation, which results in assets requiring assessment for impairment purposes despite the generation of increased participation revenue prior to the potential conversion to sale. AGT’s domestic performance improved following the lockdowns in NSW and Victoria early in the period. Annual revenues were consistent at $39 million. Half 2 revenue at $22.2 million were 33% higher than in Half 1 and segment profit increased by 158% compared to the PCP, driven by market recovery and better margin achieved through improved production recoveries. Encouragingly, in Queensland, revenues in Half 2 of FY22 increased by 26% compared to Half 1 of FY22 and 36% for the full year compared to the PCP. An increase in unit sales drove the growth, which assisted to offset reductions resulting from regulatory changes introduced in Victoria and South Australia which generated additional revenue in the PCP. Overall, game performance improved across all domestic markets, a key priority at AGT, with both Cash Stacks and Treasure Spirits series showing sustained performance. Segment profit improved to $6.2 million compared to $2.4 million in the PCP. The Rest of the World segment reported a slight improvement in revenue to $14.0 million with online revenues contributing 69% of the segment total, compared to 43% in the PCP. This increase in online revenue assisted to offset reduction in land-based sales in New Zealand where pandemic related lockdowns impacted activity levels. Higher margin online revenues enabled segment profit to increase 38% to $9.1 million compared to $6.6 million in the PCP. recommencing payments in Latin America as the market recovers. We also enjoyed a strong recovery in cash flows in FY22. Operating cash flow increased to $51.3 million from $22.2 million in the PCP. Capex is low at $1.7 million. There was a reduction in depreciation costs on assets that were previously impaired for the Latin America and Australia and Rest of the World Cash Generating Unit’s (CGU’s) offset a portion of the increase in operating costs. We spent $3.8 million on development expenditure and repaid over $39 million of debt. From the 1st January 2023, the Company’s financial year end will change from 30 June to 31 December, a calendar year basis. The Company will have a six-month transitional financial year beginning on 1 July 2022 and ending on 31 December 2022. We enter the second half of calendar year 2022 with good momentum. We expect to have continued growth in North America, further improvements in the Latin America markets and steady performance from Australia. AGT’s North American business continues to make progress in both Class II and Class III markets. Opportunities are continually being pursued in existing and new HHR markets, in particular New Hampshire, Louisiana and Wyoming. We will continue to leverage our key strengths of AGT’s trusted brand, our highly capable staff, the company’s enduring commitment to developing superior game technologies and our customer relationships across our major markets. In closing I would like to finish by thanking the Board, all my colleagues at Ainsworth for their contributions to these results and our customers for their trust and support. AGT’s priority is to maintain a balance sheet to support product and increase competitiveness and be able to fund working capital to support revenue growth. investments technology to We closed the year with a net cash position of $50.3 million. This is a significant improvement on the PCP, but also the balance sheet at the end of the first half of the year. We had a net cash balance of $32.2 million at the end of December. Of the $17.3 million of PBT, excluding currency and one-off items that we recorded in Half 2, we converted net cash of $18 million in the second half at over 100% cash conversion. Ainsworth is in the strongest financial position it has been in for some time. The company has over $311 million of net assets and effectively no debt. The receivables closing balance of $112.7 million was a decrease of $3.7m due to good cash collections. Encouragingly, customers are Harald Neumann Chief Executive Officer 11 ANNUAL REPORT 2022Distribution of shareholders Category 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total NUMBER OF EQUITY SHAREHOLDERS Performance Rights Ordinary Shares Options 944 1,354 421 519 51 3,289 – – – – 20 20 1 21 23 248 4 297 The number of shareholders holding less than a marketable parcel of ordinary shares is 618 (128,976 ordinary shares). On market buy-back There is no current on market buy-back of ordinary shares. Unquoted equity securities At 20 September 2022, 8,900,000 performance rights and 7,392,442 options have been issued to 20 and 297 employees, respectively. Both of these performance rights and options are unlisted, non-transferable and remain unexercised. Regulatory considerations affecting shareholders The Company is subject to a strict regulatory regime in regard to the gaming licences and operations within the gaming industry. It is necessary for the Company to regulate the holding of shares to protect the businesses of the Company in respect of which a gaming licence is held. By accepting shares, each potential investor acknowledges that having regard to the gaming laws, in order for the Company to maintain a gaming licence, the Company must ensure that certain persons do not become or remain a member of the Company. The Constitution of the Company contains provisions that may require shareholders to provide certain information to the Company and the Company has powers to require divesture of shares, suspend voting rights and suspend payments of certain amounts to shareholders. Shareholder Information INFORMATION ABOUT SHAREHOLDERS Shareholder the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report is set out below: required by information SHARE HOLDINGS (AS AT 20 SEPTEMBER 2022) Number of shareholders and shares on issue The issued shares in the Company were 336,793,929 ordinary shares held by 3,289 shareholders. Substantial shareholders The number of shares held by substantial shareholders and their associates are set out below: Shareholder Novomatic AG Spheria Asset Management Allan Gray Investment Management Number of Ordinary Shares 178,150,817 24,170,878 23,462,481 Voting rights Ordinary shares The voting rights attaching to ordinary shares are that on a show of hands every member present in person or by proxy has one vote and upon a poll, each share shall have one vote. Options and Performance Rights Option and performance right holders have no voting rights. 12 AINSWORTH GAME TECHNOLOGY Shareholder Information (continued) Twenty largest shareholders Name NOVOMATIC AG CITICORP NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED VOTRAINT NO 1019 PTY LIMITED (MCA PRIVATE INVESTMENT A/C) HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ASSOCIATED WORLD INVESTMENTS PTY LTD J P MORGAN NOMINEES AUSTRALIA PTY LIMITED BNP PARIBAS NOMS PTY LTD (DRP) MR KJERULF DAVID HASTINGS AINSWORTH CJHA PTY LIMITED (THE CJHA INVESTMENT A/C) MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED THE PAVILION MOTOR INN OF WAGGA WAGGA PTY LTD BNP PARIBAS NOMS (NZ) LTD (DRP) CASOLA HOLDINGS PTY LTD (NORDIV HOLDINGS S/FUND A/C) MR CHRISTIAN JOHN HASTINGS AINSWORTH MR SASHA ALEXANDER CAJKOVAC MISS PATTARAWADEE SMARNKEO MR RICHARD JAMES GOLDSACK + MS AMANDA JANE HAY (GOLDSACK & HAY FAMILY A/C) GLOBAL MARKET TRADING PTY LTD Total Number of ordinary shares held 178,150,817 32,810,082 15,208,011 15,066,904 11,012,815 10,616,580 7,710,822 7,557,529 7,533,450 7,533,450 5,509,105 2,808,748 1,500,000 1,255,690 1,070,000 770,650 692,819 684,999 546,273 435,453 Percentage of total 52.90 9.74 4.52 4.47 3.27 3.15 2.29 2.24 2.24 2.24 1.64 0.83 0.45 0.37 0.32 0.23 0.21 0.20 0.16 0.13 308,474,197 91.60 ANNUAL REPORT 2022 13 The directors present their report together with the consolidated financial statements of the Group comprising of Ainsworth Game Technology Limited (the Company) and its subsidiaries for the financial year ended 30 June 2022 and the auditor’s report thereon. 1. DIRECTORS The directors of the Company at any time during or since the end of the financial year are: Name, Qualifications & Independence Status CURRENT Age Experience, Special Responsibilities & Other Directorships Mr Daniel Eric Gladstone Chairperson and Non-Executive Director (Classified as Independent effective 11 July 2022) 67 yrs – Danny has held senior positions within the gaming industry over a successful career spanning 40 years. – Former Chairperson of Gaming Technologies Association. – Inducted into the Club Managers Association Australia Hall of Fame in 2000. – Member of Regulatory and Compliance Committee since 2010 until 30 June 2019. – Chief Executive Officer since 2007 (Executive Director since 2010) until 30 June 2019. – Non-Executive Director since 2019, appointed Chairperson of the Board on 26 November 2019. – Member of Audit & Risk Committee from 24 June 2021. – Graeme has specialised in the area of liquor and hospitality for over 30 years in corporate consultancy services with particular emphasis on hotels and registered clubs. – Independent Chairperson of Harness Racing Australia. – Chairperson of Nominations Committee of Parramatta Rugby League Football Club (Eels). – Former Chairperson of Harness Racing NSW, Former Director of Central Coast Stadium, Blue Pyrenees Wines and NSW Harness Racing Club. – Former Director and Chairperson of Lantern Hotels Group. – Recipient of J.P. Stratton award and Ern Manea Gold Medal. Inducted into the Inter Dominion Hall of Fame in February 2014. Awarded Order of Australia medal in January 2018 for services to harness racing. – Director of Liquor Marketing Group Limited (Bottle Mart) since 2013. – Chairperson of Audit & Risk Committee of Illawarra Catholic Club Group. – Director of TerraCom Limited effective 28 January 2022 (appointed Chairperson on 8 July 2022). – Member of Audit & Risk Committee since 2017 until 26 November 2019 - appointed Chairperson from 26 November 2019, member of Regulatory and Compliance Committee until 1 July 2017, member of Remuneration and Nomination Committee since 2015. – Lead Independent Non-Executive Director since 2013 until appointed Chairperson in 2016 until 26 November 2019. Lead independent Non- Executive Director since 26 November 2019 until 11 July 2022. Mr Graeme John Campbell OAM Independent Non-Executive Director 65 yrs 14 AINSWORTH GAME TECHNOLOGY Directors’ Reportfor the year ended 30 June 2022Name, Qualifications & Independence Status CURRENT Age Experience, Special Responsibilities & Other Directorships Mr Colin John Henson Dip-Law BAB; FCPA; FCG (CS, CGP) FAICD Independent Non-Executive Director 74 yrs – Colin has had a lengthy career in senior corporate positions and as a director and Chairperson of private companies and publicly listed companies across a broad range of industries. – Fellow of the Australian Institute of Company Directors, Fellow of CPA (Certified Practising Accountants) Australia and Fellow of the Governance Institute of Australia. Colin is also a non-practising member of the Law Society of NSW. – Director since 2013. – Member of Audit & Risk Committee since 2017 and Chairperson from 1  April 2017 until 26 November 2019. Member of Audit & Risk Committee from 26 November 2019. – Chairperson of Remuneration and Nomination Committee since 2015. – Member of Regulatory and Compliance Committee since 2019 and Chairperson from 1 April 2021. Ms Heather Alice Scheibenstock GAICD, FGIA Independent Non-Executive Director 54 yrs – Heather has extensive leadership experience within the gaming and hospitality industries specialising in strategic planning and offshore growth spanning over 30 years. – Currently is Executive Director at SenSen Networks (ASX: SNS) – She has previously held senior executive roles at Echo Entertainment and Solaire Group. – Deputy Chair and Chair of the Quality and Outcomes Committee of Ability Options since 2017 and Director SenSen Networks Ltd from 2018. – Chair of Audit and Risk Committee at SenSen Networks Ltd. – Former Non-Executive Director of Ainsworth from 2016 until November 2019. – Graduate of Australian Institute of Company Directors and Women on Boards. – Fellow of Governance Institute of Australia. – Appointed Director on 11 July 2022. FORMER Harald Michael Karl Neumann Non-Executive Director 60 yrs – Harald has extensive leadership experience in senior executive positions in a career spanning over 20 years mainly within technology companies. – Former Regional Chief Executive Officer (CEO) at Alcatel AG (now Alcatel–Lucent) a global tele-communications equipment Company. – Former Managing Director at Bundesrechenzentrum GmbH, the Austrian government’s information technology service provider, until 2006. – Former CEO of G4S Security Services Austria AG, the Austrian subsidiary of one of the world’s leading integrated security companies before joining Novomatic in 2011. – Former CEO and Chairperson of the Executive Board of Novomatic from 2014 until 2020. – Former Board Member of the American Chamber of Commerce and Vice Chairperson of the Board of Österreichische Lotterien GmbH. – Graduate of the Vienna University of Economics and Business and Member of the Rotary Club Klosterneuburg. – Non-Executive Director since 2017 until 1 October 2021. – Appointed as CEO and Executive Director effective 1 October 2021. Resigned as Executive Director on 21 December 2021. ANNUAL REPORT 2022 15 Directors’ Report (continued)for the year ended 30 June 20222. COMPANY SECRETARY Mr Mark L Ludski has held the position of Company Secretary since 2000. Mr ML Ludski previously held the role of Finance Manager with another listed public company for ten years and prior to that held successive positions in two leading accounting firms where he had experience in providing audit, taxation and business advisory services. Mr ML Ludski is a member of Australian Institute of Company Directors and a Chartered Accountant holding a Bachelor of Business degree, majoring in accounting and sub-majoring in economics. Mr ML Ludski was appointed a member of the Remuneration and Nomination Committee of the Company effective 24 June 2021 and a member of the Regulatory and Compliance Committee effective 22 September 2021. 3. DIRECTORS MEETINGS The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are: Directors DE Gladstone GJ Campbell CJ Henson HK Neumann(1) Board Meetings B A 11 11 11 7 11 11 11 7 Audit and Risk Committee Meetings Remuneration & Nomination Committee Meetings Regulatory & Compliance Committee Meetings A 3 3 3 – B 3 3 3 – A – 5 5 – B – 5 5 – A – – 4 – B – – 4 – A - Number of meetings attended B - Number of meetings held during the year (excluding approved leave of absence and meetings held whilst not a director/member) (1) Mr HK Neumann resigned as Director effective 21 December 2021. 4. PRINCIPAL ACTIVITIES The principal activities of the Group during the course of the financial year were design, development, manufacturing, sales and distribution of gaming content and platforms including electronic gaming machines, other related equipment and services and online social and real money games. The Group continues to execute strategies to expand and diversify its product offerings within both land-based and online gaming markets, including social gaming and licensed “Real Money” gambling markets. There were no significant changes in the nature of the activities of the Group during the year. 4.1 Objectives Ainsworth is a well-established and recognised gaming machine developer, designer and manufacturer operating in local and global markets. Our strategy is to profitably and sustainably expand this footprint by leveraging off our deep expertise and substantial experiences for the benefit of all shareholders. The Group’s objectives are to: – produce games that are appealing to players utilising our broad range of talented skilled game designers along with collaborations with third party game developers; – focus on regaining market share decline in domestic market and growing international revenue; – improve profitability within geographical markets that are expected to achieve the greatest contributions to the Group’s financial results, and creation of growth; – diversify and expand on contributions from recurring revenue through additional units under gaming operation; – prudently invest in product research and development in order to provide quality market leading products that are innovative and entertaining, and result in increased player satisfaction and therefore greater venue profitability; – further expand presence within online gaming markets, including social gaming and licensed “Real Money” gambling markets through collaborations with other major online platform providers; – prudently manage levels of investment in working capital and further improve cash flow from operations to facilitate investment in growth opportunities; – provide an improved return on shareholder equity through profitability, payment of dividends and share price growth; and – prudent management of operating expenditure and liquidity whilst the economic effects of post COVID-19 pandemic continue to still being experienced. 16 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 2022In order to meet these objectives, the following priority actions will continue to apply in future financial years: – grow the Group’s footprint and operating activities in domestic and international markets; – continual investment in research and development to produce innovative products with leading edge technology; – implement and actively monitor risk management strategies to minimise risks and challenges brought upon from post pandemic; – manage product and overhead costs through improved efficiencies in supply chain and inventory management; – actively pursue initiatives to improve and reduce investment in working capital; – maintain best practice compliance policies and procedures and increase stakeholder awareness of the Group’s regulatory environment; and – ensure retention and development of the Group’s talent base. 4.2 Environmental Regulation The Group is committed to ensuring it complies with all environmental laws and regulations through conducting its operations as a responsible business that does not cause harm to people and the environment. The Group’s operations have been assessed as having a minimal impact on the environment. The Company assembles gaming machines and systems in Australia, North America and Latin America. The Company uses limited amounts of harmful chemicals in its assembly process. Ainsworth is committed to regularly review and assess any potential exposures to environmental regulations and ensure meaningful contributions towards sustainable developments are being maximised and addressed accordingly. The Directors are not aware of any breaches of any environmental legislation or of any significant environmental incidents during the financial year. 5. OPERATING & FINANCIAL REVIEW 5.1 Business Strategy and Investments for Future Performance Business Strategy Ainsworth’s strategy has always been built around our mission which is to provide high quality innovative gaming solutions globally and to secure sustainable profitability and growth for all stakeholders. As Ainsworth continues to navigate through the volatility in the global operating environment brought upon by COVID-19 and other factors, the Group continues to focus on executing its key priority actions as outlined below: – employ the best talent available to drive effective and efficient product development; – grow the Group’s footprint and operating activities in domestic and international markets, particularly North America; – target investment in research and development to produce innovative products with leading edge technology; – manage product and overhead costs through improved efficiencies in supply chain and inventory management; and – pursue initiatives to continually improve and reduce investment in working capital. The Group entered the second half of FY22 with a redefined group of executive leadership led by Mr Harald Neumann, the Group’s CEO (appointed in Oct 2021). Mr Neumann’s top priority is to ensure that Ainsworth’s global team is aligned with the same growth vision which will allow the Group to maintain the momentum during the recovery phase and growth in future period. During the year, under Mr Neumann’s leadership, he has established a new global organisational structure with new product leadership and clear lines of accountability. He has also initiated implementation of a range of measures focusing on technology, development, and culture to improve product performance, lift staff retention rates and enhance AGT’s ability to attract world class development talent. The Group has shown resilience with a strong balance sheet that will allow the Group to continually invest in talent to develop innovative products and technological capabilities to accelerate growth objectives in future periods. Investments for Future Performance The Group continues to evaluate opportunities within domestic and international gaming markets during the period. Since the initial release of the A-Star™ 27-inch dual screen cabinet in February 2020, the A-Star™ cabinet range has expanded with the release of the 55” inch and Slant Top versions being released in the market. Further investments in research and development have been pursued to ensure game developments continue to complement the A-Star™ hardware range. This investment is expected to assist the ongoing expansion and breadth of innovative, technically advanced and consistently high performing products. ANNUAL REPORT 2022 17 Directors’ Report (continued)for the year ended 30 June 20225. OPERATING & FINANCIAL REVIEW (continued) During the year, the Group continued to execute previously identified strategies and plans across its global product development operations, which most notably includes game development, software and hardware activities. The Group has significantly bolstered its ability to develop highly competitive game content as a result of expanding its internal studios through the appointment of additional experienced game developers in Australia and Las Vegas. Furthermore, the Group has in place agreements with third-party game development studios located in various parts of the world to further diversify the Group’s game content and complement the innovation capabilities of the Group’s internal studios. The Group has now started to secure key regulatory approvals for a new EGM software platform that will power the Group’s future range of games. This software platform provides a more “off-the-shelf” development environment that allows the Group to deliver a broader and more complex range of gaming content that benefit from the efficiencies provided by modern software development methodologies and tools. This has also enabled the Group to attract new software development talent from a larger pool of highly skilled software developers. Ainsworth Interactive is now a self-contained division that is engaged in the design, development and distribution of digital gaming solutions for regulated online real money gaming (“RMG”), social casino and mobile gaming worldwide. This strategy is to focus on expanding our game content distribution network throughout the online markets of Europe, Latin America (“LATAM”) and the USA (through our partnership with GAN Limited (“GAN”)), continuing to invest in interactive product innovation. We have extended our game content development and licensing agreement with the NASDAQ listed Zynga Inc. that will expand and deepen the existing strategic relationship through the addition of new Ainsworth Interactive content to Zynga’s “Hit It Rich” social casino app. Following from the successful entry into New Jersey’s RMG in FY21, the Group secured a 5-year partnership with GAN to provide GAN with the exclusive use of current and future Ainsworth RMG game assets within the USA. Under this exclusive agreement, GAN will incorporate Ainsworth’s existing online operations in New Jersey as well as the planned expansions in Michigan and Pennsylvania. Ainsworth’s acquisition of MTD Gaming Inc. in 2020, a Montana-based game development company that specializes in video poker and keno products, is focused on expanding delivery of these products into additional markets, such as Nevada, California, New Mexico, Oklahoma, Arizona and Florida. This will further increase Ainsworth’s footprint in these important markets. The Group’s Class II Historical Horse Racing (“HHR”) products are experiencing more placements into existing and new markets, with Ainsworth continuing to integrate products from other manufacturers such as IGT, Light n Wonder and Konami. This niche product has been a top performer in its class since its initial launch and continues to outperform its competitors. Additional opportunities are being pursued for the Group’s leading HHR products in new jurisdictions following the passing of new legislation in Kansas and Texas. The synergies and benefits with the Group’s majority shareholder, Novomatic AG (NAG), are continuing to be explored. Ainsworth has been appointed as the non-exclusive distributor for NAG’s Electronic Table Gaming products across Asia Pacific. Improved cooperation for technical, commercial, and content sharing are expected to benefit both companies moving forward. Three initial game mixes developed by NAG’s game studio, Octavian, are expected to be launched as exclusive products into North America on Ainsworth’s hardware. 5.2 Risk management and material risks The Group encounters a range of risks that may threaten its ability to meet its objectives. To address these risks the Group has in place a detailed risk management procedure that details the objectives and actions required to deliver a best practice approach to integrating risk management into the Group’s leadership, business planning, staff culture and day-to-day operations. Key responsibility for ensuring the Group adheres to its risk management procedure rests with the Board and the Group’s audit and risk committee. The audit and risk committee reviews the risks identified and assessed by management. The key risks identified during this process of review are provided to the board of directors. Below is a table that summarises the key risks that have been identified by the Group, along a summary of the required action to reduce the likelihood or the consequences for the business should any of these risks eventuate. 18 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 2022Risk Description Mitigation Measures Breach of laws, regulations, and license conditions Any material breach or failure to meet gaming compliance requirements and the requirements of any other applicable laws may have an adverse impact on the financial performance and operating position of the Group. The introduction of new laws, regulations or requirements that result in adverse outcomes Changing community attitudes towards gaming risk, the occurrence of adverse government or regulatory action against the Group or the gaming industry. Attraction and retention of talented employees The Group has experienced heightened competition for talent in all areas of operation. This has been exacerbated by inflationary impacts and evolving employee requirements, placing the Group at risk of losing employees in particular those employees that hold strategically important functions that are difficult to replace. Global supply chain disruption Global supply chain challenges have impacted the Group’s operations in all major markets resulting in customer order fulfillment delays. The Group maintains robust regulatory compliance oversight across all business functions to ensure the Group’s dealings with government, regulatory bodies, customers and suppliers are conducted lawfully and with integrity and respect for all stakeholders. Internal auditor periodically reviews and provides independent assurance regarding the adequacy of controls and processes for managing risk and compliance obligations. Employees and managers are provided with training and support to enable them to effectively manage their risk and compliance obligations. The Group regularly reviews its policies and procedures to ensure they support the objective of ongoing compliance with all applicable laws. A recent review of these policies and procedures identified a requirement for greater oversight of the Group’s activities in higher risk jurisdictions. The outcome of this review is on-going to ensure actions to mitigate identifiable risks have been addressed. Proactive support by the Group for measures supported by evidence as to their effectiveness that promote responsible game play. Engagement through the manufacturer peak body, the Gaming Technologies Association Limited, with governments, regulators and academics/ researchers in the development of evidence-based policy outcomes. Greater investment in the Group’s global human resource management capabilities. Conducting employee salary and incentive benchmarking across all core functions. Adoption of flexible work policies. Adopting a mix of employee rewards and incentives that are directed towards long-term employee retention. Increased investment in employee training, employee diversity and leadership development. The Group’s global supply chain team is authorised to rapidly respond to market conditions as they evolve. The Group is continually identifying and where feasible using domestically based suppliers, or identifying alternate suppliers based in regions that carry less sovereign or geopolitical risk. Ongoing engagement with key suppliers to strengthen relationships and ensure delivery commitments are met. Enhancement of business resilience measures. ANNUAL REPORT 2022 19 Directors’ Report (continued)for the year ended 30 June 20225. OPERATING & FINANCIAL REVIEW (continued) Risk Description Mitigation Measures Cyber security breach resulting in business disruption and financial loss The Group’s businesses rely on the successful operation of its technology infrastructure. This infrastructure may be adversely affected by various factors including malicious attacks on technology systems or a significant hardware, software, or digital failure. In addition, the global requirement to work from home and or rely on digital solutions to maintain operations during the pandemic has caused a rapid rise in the frequency and sophistication of cyber-attacks. The Group has policies, procedures, practices, frameworks, and resources in place to manage data security risks. The Group has disaster recovery plans and business continuity plans in place to manage major technology failures. The Group has implemented a global cyber security protection roadmap. It continues to rollout best practice global cybersecurity tools and data breach identification and protection measures. All employees are required to undertake an ongoing global information security training program to minimise the risk of human error (the main cause of cyber security attacks). Loss of IP rights Inability to protect the Group’s intellectual property rights (IPR) may prevent the Group from effectively differentiating its product lines from those of its competitors, resulting in a loss of competitive advantage. Proactive monitoring of competitor activities via product monitoring and the “watching” of competitor IP registrations in core markets. Targeted enforcement of IPR breaches where identified. Ongoing investment in the skills and capabilities of the Group’s IPR specialist employees. Litigation risks From time to time the Group become involved or may become involved in litigation and disputes with third parties. The Group maintains on staff specialist legal compliance and regulatory personnel and implements robust risk, compliance and contract management processes. Financial and balance sheet risk Market disruption and competition The Group is exposed to risks relating to the cost and availability of funds to support its operations, including changes in interest rates, foreign currency exchange rates, counterparty credit and liquidity risks, each of which could impact its financing activities. The Company’s US subsidiary is subject to a number of conditions and financial covenants under its bank facility. A failure to comply with these conditions and covenants may require the Company or its subsidiaries to repay borrowings earlier than anticipated or result in increased financing costs for the Group, which could in turn adversely affect its financial performance. A failure to adequately respond to market disruption and rising competition in any or all core markets will impact the Group’s market share and revenues. 20 AINSWORTH GAME TECHNOLOGY The Group’s finance facilities and interest rate, credit, liquidity, and currency risks are managed by the Group’s finance department in line with policies approved by the Board. The Group has recruited leading industry talent as part of its increased investment in its global design and development function. The Group undertakes regular and ongoing reviews of customer requirements, technology changes and competitor activities. The Group has established management KPIs and incentives that support the development of innovative and differentiated product lines in all global markets. Directors’ Report (continued)for the year ended 30 June 20225.3 Review of Financial Condition Capital structure and treasury policy The Company currently has on issue 336,793,929 ordinary shares. The Board continues to ensure a strong capital base is maintained to enable investment in the development of the business. The Group’s performance is monitored to oversee an acceptable return on capital is achieved and dividends are able to be provided to ordinary shareholders in future periods. There were no changes in the Group’s approach to capital management. The Group is exposed to translational foreign currency risks that are denominated in currencies other than AUD. The Group continually monitors and reviews the financial impact of currency variations to minimise the volatility of changes and adverse financial effects in foreign currency exchange rates. Cash flows The movement in cash is set out as below: In millions of AUD EBITDA Change in working capital Subtotal Interest and tax Significant items (non-cash) Other cash and non-cash movements Operating cash flow In millions of AUD Operating cash flow Capex Development expenditure Proceeds from sale of PPE Investing cash flow Proceeds from borrowings Repayment of borrowings Proceeds from finance lease liabilities Repayment from finance lease liabilities Borrowing costs paid Financing cash flow Net incease in cash 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 24.6 9.1 33.7 (0.1) 2.0 (4.6) 31.0 12.5 (1.5) 11.0 1.4 10.0 (2.1) 20.3 37.1 7.6 44.7 1.3 12.0 (6.7) 51.3 (26.6) (16.5) (43.1) 2.4 66.3 (3.4) 22.2 63.7 24.1 87.8 (1.1) (54.3) (3.3) 29.1 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 31.0 (0.8) (2.4) – (3.2) 0.3 (24.5) 0.4 (0.6) (1.0) (25.4) 2.4 20.3 (0.9) (1.4) 0.1 (2.2) 0.2 (14.6) 0.1 (1.0) (0.8) (16.1) 2.0 51.3 (1.7) (3.8) 0.1 (5.4) 0.5 (39.1) 0.5 (1.6) (1.8) (41.5) 4.4 22.2 (2.2) (2.3) 5.5 1.0 36.6 (39.2) 1.1 (1.8) (2.2) (5.5) 17.7 29.1 0.5 (1.5) (5.4) (6.4) (36.1) 0.1 (0.6) 0.2 0.4 (36.0) (13.3) The net increase in cash predominantly resulted in net cash from operating activities, mainly attributable to higher sales during this period and recommencement of payments from Latin America customers. The improvement in operating cash flow has allowed the Group to repay all of its secured bank loan during the year amounting to $38.6 million (US$28.0 million). This strong cash flow will allow the Group to further invest in product development and assist in minimising risks associated with the volatility of the current economic conditions. ANNUAL REPORT 2022 21 Directors’ Report (continued)for the year ended 30 June 20225. OPERATING & FINANCIAL REVIEW (continued) Liquidity and funding At 30 June 2022, the Group held a cash of $50.3 million, up from the $42.4 million reported at 30 June 2021. The Group maintained strong overall liquidity and balance sheet over the reporting period. The Company through its US-based operating subsidiary, Ainsworth Game Technology Inc, has a secured bank facility with Western Alliance Bancorporation (WAB). Ainsworth Game Technology Inc. is the borrower. At inception of the facility on 18 February 2021, the facility limit was at US$35 million. As part of the terms and conditions of the facility, the available limit is to reduce by US$0.5 million at each quarter end. As at 30 June 2022, the facility limit was at US$32.5 million and the facility is currently undrawn. 5.4 Earnings and Performance Summary During the reporting period, the Group continued to navigate through the volatility in the global operating environment as a result of the COVID-19 pandemic. In the six months ended 31 December 2021 (“H1FY22”), lockdowns and restrictions were still in place for two of the Group’s major markets, Australia and Latin America regions, which impacted the Group’s customer’s operations. As vaccination rates increased, lockdowns and restrictions were progressively lifted or relaxed in the six months ended 30 June 2022 (“H2FY22”), however, further challenges brought about from the pandemic became more prevalent during the reporting period, such as supply chain disruptions, talent recruitment and increasing inflationary cost pressures. Notwithstanding the continuing operational challenges, the Group delivered an improved result and recorded a statutory net profit after tax of $11.8 million in the twelve months ended 30 June 2022 (“FY22”), compared to the ($53.4) million loss recorded in the twelve months ended 30 June 2021 (“FY21”). The profit after tax, excluding the effect of net foreign currency movement was $5.3 million, an improvement on the ($44.1) million loss in FY21. The current year profit before tax, excluding the effect of net foreign currency gains was $7.6 million. The following table summarises the results for the year: In millions of AUD Reported Results Total Revenue Profit / (loss) before tax Profit / (loss) after tax EBITDA EBIT 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 100.7 119.5 220.2 159.5 13.9 9.1 24.6 13.8 1.9 2.7 12.5 1.1 15.8 11.8 37.1 14.9 (59.2) (53.4) (26.6) (57.9) 60.7 75.0 65.2 63.7 72.8 Earnings per share (fully diluted) 2.7 cents 0.7 cents 3.4 cents (15.9 cents) 19.3 cents Underlying Results(1) Profit / (loss) before tax Profit / (loss) after tax EBITDA Balance sheet and cash flow Total assets Net assets Operating cashflow Closing net cash 10.0 6.1 20.7 381.4 301.7 31.0 32.2 17.3 16.9 27.9 406.5 311.3 20.3 50.3 27.3 23.0 48.6 406.5 311.3 51.3 50.3 (17.1) (17.6) 15.5 393.1 287.9 22.2 5.1 44.4 40.6 33.1 13.4 23.4 29.1 45.2 (1) Underlying results excludes foreign currency impacts and one-off items. These items are outlined in the following page - ‘A reconciliation of the reported EBITDA to the underlying EBITDA’. 22 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 2022A reconciliation of the reported EBITDA to the underlying EBITDA is shown in the following table: In millions of AUD Reconciliation: Profit / (loss) before tax Net interest (income) / expense Depreciation and amortisation Reported EBITDA Foreign currency (gains) / losses (Writeback) / Impairment on trade receivables Rent concessions Provision for Mexican duties and other charges Impairment losses - LATAM and Australia and Other CGU COVID-19 related government subsidies Gain on LV parcel of land sale Underlying EBITDA 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 13.9 (0.1) 10.8 24.6 (3.5) – (0.4) – – – – 20.7 1.9 (0.8) 11.4 12.5 (4.7) (1.5) (0.1) 16.5 5.2 – – 27.9 15.8 (0.9) 22.2 37.1 (8.2) (1.5) (0.5) 16.5 5.2 – – 48.6 (59.2) 1.3 31.3 (26.6) 11.5 9.0 (0.5) – 32.7 (7.3) (3.3) 15.5 75.0 (2.2) (9.1) 63.7 (19.7) (10.5) – 16.5 (27.5) 7.3 3.3 33.1 The information presented in this review of operations has not been audited in accordance with the Australian Auditing Standards. Key earnings and performance highlights are outlined below: – Reported revenue improvement in FY22 compared to FY21, predominantly attributable to the North America and Latin Americas; – Participation and lease revenue contributed to 24% of the Group’s total revenue; – Ainsworth’s leading Historical Horse Racing (“HHR”) products and system continues to incrementally contribute to the Group’s results with recurring connection fee of $15.2 million reported in this period; – Sale of 400 HHR units to Kentucky Downs in July 2021; – Outright sales momentum continued across all major markets; – Net cash position of $50.3 million at 30 June 2022 compared to $5.1 million at 30 June 2021. Strong cash flows allowed bank facility loan repayment of $38.6 million (US$28.0 million) in FY22; – Lower trade receivables balances over total revenue as customers recommence payments as their operations reopen and resume to more normalised levels, contributing to improvement in working capital; – Foreign exchange positively contributed to the results by $19.7 million as a result of strengthening of the US Dollar against the Australian Dollar at reporting date; and – Underlying EBITDA for the period improved by 214%. ANNUAL REPORT 2022 23 Directors’ Report (continued)for the year ended 30 June 20225. OPERATING & FINANCIAL REVIEW (continued) Net Profit After Tax movement FY21 to FY22 (A$ million) 25 15 5 -5 -15 -25 -35 -45 -55 7.3 7.6 21.5 (9.8) 11.8 5.3 6.5 19.7 2.2 (9.3) 45.8 (12.3) (3.1) 9.1 (22.8) (44.1) (53.4) NPAT FY21 (exc currency loss) NPAT FY21 Product Sales Gaming Operations Service Revenue COGS Other income Overheads D&A Other expenses Forex Net Interest Tax NPAT FY22 NPAT FY22 (exc currency gains) The Group achieved a profit after tax of $11.8 million compared to ($53.4) million loss after tax, reflecting strong recovery post pandemic. Notable movements from NPAT in this period when compared to FY21 are set below: – Increase in Class III product sales in North America and Latin America; – Increase in Class II product sales in North America; – Increase in gaming operations revenue contribution from Latin America as customers are resuming their operations to more normalised levels; – Increase in overheads resulting from no COVID-19 government assistance recognised in this period as well as increased selling expenses in relation to higher sales recognised during FY22; – Decrease in depreciation and amortisation (D&A) resulting from no D&A expenses recognised for assets that were fully impaired in ‘Australia and other’ and ‘Latin America’ CGU’s in prior periods; – Other expenses reduction resulting from reduced impairment recognised for Australia and other and Latin America CGU’s, partially offset by the recognition of a provision for the Mexican duties and other charges; – Tax expense of $4.0 million recognised for the period, compared to $5.8 million tax benefit recognised in FY21; and – Favourable foreign exchange rate predominately relating to balance sheet translation originated from investment in the Americas. $’000 2022 2021 2020 2019 2018 Profit / (loss) attributable to owners of the Company $11,753 ($53,409) ($43,433) $10,895 $31,936 Dividends paid – – – Change in share price ($A) ($0.28) $0.83 ($0.26) $8,313 ($0.37) $4,966 ($1.12) Net profit/(loss) amounts for 2018 to 2022 have been calculated in accordance with Australian Accounting Standards Board (AASB). 24 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 20225.5 Review of Principal Businesses Results in the current period and prior corresponding period are summarised as follows: In millions of AUD Segment revenue Australia and Rest of the World Australia Rest of the World Total Australia and Rest of the World Americas North America Latin America Total Americas Total segment revenue Segment result Australia and Rest of the World Australia Rest of the World Total Australia and Rest of the World Americas North America Latin America Total Americas Total segment result Unallocated expenses Net foreign currency gains / (losses) R&D expenses Corporate expenses Other expenses Total unallocated expenses Less : interest included in segment result EBIT Net interest income / (expense) Profit / (loss) before income tax Income tax (expense) / benefit Profit / (loss) after income tax 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 16.7 7.2 23.9 54.6 22.2 76.8 100.7 3.3 4.0 7.3 23.1 10.0 33.1 40.4 3.5 (18.0) (10.9) – (25.4) (1.2) 13.8 0.1 13.9 (4.8) 9.1 22.2 6.8 29.0 60.5 30.0 90.5 119.5 2.9 5.1 8.0 28.4 10.8 39.2 47.2 4.7 (17.3) (10.1) (21.7) (44.4) (1.7) 1.1 0.8 1.9 0.8 2.7 38.9 14.0 52.9 115.1 52.2 167.3 220.2 6.2 9.1 15.3 51.5 20.8 72.3 87.6 8.2 (35.3) (21.0) (21.7) (69.8) (2.9) 14.9 0.9 15.8 (4.0) 11.8 39.0 13.7 52.7 88.5 18.3 106.8 159.5 2.4 6.6 9.0 39.1 (8.6) 30.5 39.5 (11.5) (33.4) (18.8) (32.7) (96.4) (1.0) (57.9) (1.3) (59.2) 5.8 (53.4) (0.1) 0.3 0.2 26.6 33.9 60.5 60.7 3.8 2.5 6.3 12.4 29.4 41.8 48.1 19.7 (1.9) (2.2) 11.0 26.6 (1.9) 72.8 2.2 75.0 (9.8) 65.2 ANNUAL REPORT 2022 25 Directors’ Report (continued)for the year ended 30 June 20225. OPERATING & FINANCIAL REVIEW (continued) SEGMENT RESULT AS A % OF REVENUE 12 months to 30 Jun 2021 12 months to 30 Jun 2022 % 2 4 4 . % 7 4 4 . % 8 9 3 . % 9 5 1 . % 2 6 . % 0 5 6 . % 2 8 4 . % 8 9 3 . % 8 4 2 . N O R T H A M E R I CA L A T I N A M E R I C A A U S T R A L IA R E S T O F T H E W O R L D A G T G R O U P C O N S O L I D A T ED . % 0 7 4 - Segment result as a percentage of revenue has improved for all regions, reflecting recoveries from the pandemic in FY22. The earnings performance in the Americas now represents 83% ($72.3 million) of the total segment result compared to 77% ($30.5 million) in FY21. The significant uplift in the Americas contribution to the total segment result was a result of the improvement in the Latin America market as this region progressively reopened in the last quarter of calendar year 2021 after pro-longed customer venue closures and restrictions in place driven by COVID-19. The majority of the Group’s customers within this region have now resumed their operations and are returning to more normalised levels. Latin America contributed $20.8 million segment profit in FY22, compared to ($8.6) million segment loss in FY21. North America’s sale of the 400 HHR machines to Kentucky Downs as well as continued strong performance in game operations and recurring revenue from HHR units connecting to Ainsworth’s HHR system during the year also contributed to the improved segment results in Americas. Financial performance in the current period and prior corresponding period is summarised as follows: In millions of AUD Domestic revenue International revenue Total revenue Cost of sales Gross profit Gross profit margin % Other income Sales, service & marketing expenses Research and development expenses Administrative expenses Writeback / (impairment) of trade receivables Other expenses Net finance income / (costs) Profit / (Loss) Before Tax Income tax (expense) / benefit Profit / (Loss) After Tax 26 AINSWORTH GAME TECHNOLOGY 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 16.7 84.0 100.7 (37.7) 63.0 63% 1.2 (25.0) (18.0) (10.9) – – 3.6 13.9 (4.8) 9.1 22.2 97.3 119.5 (44.5) 75.0 63% (0.2) (30.8) (17.3) (10.1) 1.5 (21.7) 5.5 1.9 0.8 2.7 38.9 181.3 220.2 (82.2) 138.0 63% 1.0 (55.8) (35.3) (21.0) 1.5 (21.7) 9.1 15.8 (4.0) 11.8 39.0 120.5 159.5 (69.9) 89.6 56% 4.1 (46.2) (33.4) (18.8) (9.0) (32.7) (12.8) (59.2) 5.8 (53.4) (0.1) 60.8 60.7 (12.3) 48.4 7% (3.1) (9.6) (1.9) (2.2) 10.5 11.0 21.9 75.0 (9.8) 65.2 Directors’ Report (continued)for the year ended 30 June 2022Revenue D U A f o s n o i l l i M REVENUE BY FINANCIAL PERIOD 250 200 150 100 50 0 H1 FY21 H2 FY21 H1 FY22 H2 FY22 FY21 FY22 Financial Period North America Latin America Australia Rest of the World As outlined in the graph above, improvements in revenue since the pandemic have been achieved across all financial periods as the market continues to recover with improved product performance and increased customer confidence to invest in capital expenditure in their venues. Ainsworth’s key market, North America, continues to show strong revenue contributing $115.1 million in revenue representing 52% of the Group’s total revenue. HHR high performing products continue to positively contribute to revenues within this segment. In H1 FY22 400 HHR units which were previously operating on a participation basis in Kentucky Downs were converted to sale. As at 30 June 2022, 4,245 HHR units were connected to Ainsworth’s HHR system generating recurring revenue. MTD has continued to positively contribute to the North America segment profit and provides future growth in premium performing Poker, Keno and Video Reel content. MTD’s latest game set combines the best-in-class games from both Ainsworth and MTD and this game set has been a leading product within South Dakota in the current period. The Latin America segment in FY21 was adversely impacted by the COVID-19 pandemic where there were restrictions placed on our customers operations. However, as the Latin America market reopens and progressively recovers from the effects of COVID-19, this segment has shown positive signs with revenue increasing in FY22 compared to FY21. This segment generated $52.2 million of revenue, an increase of 185% on the $18.3 million in FY21. It is expected that as the regions within this segment continue to recover and the group releases new game themes which are under development, revenue and segment profit will increase in future periods. Australia achieved similar revenue in FY22 compared to FY21 due to the spread of Delta strain of COVID-19 that prompted lockdowns and restrictions during the first half of FY22. The government impacted restrictions affected customer operations and capital spent predominately in NSW, however, revenue improved in H2 once restrictions were lifted. Rest of the World revenue remained fairly consistent compared to FY21. All the land-based markets within the Rest of the World segment, i.e. New Zealand, Asia and Europe have reductions in revenue compared to FY21 due to the pandemic as lockdowns and travel restrictions were still in place for some of the regions within these markets during the year. Included in the Rest of the World revenue is online revenue of $9.6 million compared to the $5.9 million in FY21, which assisted in offsetting the reduction in the land-based markets within this segment. The increase in online revenue is attributable to the execution of a 5-year integration and distribution agreement with GAN Limited (“GAN”) on 1 July 2021. This contractual agreement is expected to generate at least US$30.0 million over a 5-year period and will further strengthen Ainsworth’s brand presence in USA through GAN’s distribution network. The online division continues to partner with Zynga in providing Ainsworth’s established and high performing game titles in the social online gaming market. ANNUAL REPORT 2022 27 Directors’ Report (continued)for the year ended 30 June 2022 5. OPERATING & FINANCIAL REVIEW (continued) Cost of sales and operating costs Gross margin of 63% was achieved in this period compared to 56% in FY21, an increase of 7%. The improvement in margin is mainly from the improvement in fixed production overhead recovery as more units were produced and sold during this period and an increase in recurring revenue with high margin contribution. Operating costs, excluding cost of sales, other expenses, (writeback) / impairment of trade receivables, and financing costs for FY22 were $112.1 million compared to $98.4 million in FY21, an increase of 14%. These operating costs over total revenue reported 51% compared to 62% in FY21. The revenue recovery and implementation of cost minimisation measures initiated from prior periods have been maintained to ensure profitability is sustainable. Sales, service and marketing (SSM) expenses in FY22 were $55.8 million compared to $46.2 million in FY21. The increase in SSM expenses is directly attributable to increased variable selling costs, increase in personnel costs, no government subsidies recognised in this period and recommencement of trade shows. As the Group’s major markets, North America, Latin America and Australia, reopened and continued to recover from COVID-19, better leverage of fixed costs within SSM has been achieved, contributing to an overall improvement in segment profit. Research and development (R&D) expenses in FY22 were $35.3 million compared to $33.4 million in FY21, an increase of 6%. Increase in R&D expenses were mainly attributable to an increase in personnel costs as no government assistance such as JobKeeper subsidies in Australia were received. The Group’s strategic investment in R&D talent remains to be the Group’s top priority to ensure Ainsworth remains competitive in the industry, delivering high quality products. Administration costs were $21.0 million in FY22, an increase of 12% compared to the $18.8 million in FY21. This increase was mainly because no COVID-19 related government subsidies were received during this period. Cost control initiatives are continually being implemented to ensure that administration costs remain relevant to the Group’s overall profitability. Financing income and loss Net financing income was $9.1 million in FY22, compared to a net financing loss of ($12.8) million FY21. This favourable movement of $21.9 million was a result of net foreign exchange gain of $8.2 million recognised in FY22 (FY21: net foreign exchange loss of ($11.5) million), a favourable change of $19.7 million. The favourable change in the foreign currency movement is due to the strengthening of the US dollar against AU dollar resulting in favourable valuation on US dollar denominated balance sheet items. Interest income on trade receivables, predominantly from Latin America, was $2.8 million in FY22 compared to $1.1 million in FY21, a favourable change of $1.7 million. Interest expenses were $1.9 million in FY22 compared to $2.4 million in FY21, a favourable change of $0.5 million predominately arising from reduced interest on secured bank loan as repayments were made progressively throughout the period. Segment review North America In millions of AUD Revenue Gross Profit Segment EBITDA Segment Profit Segment Profit (%) 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 54.6 36.8 28.4 23.1 42% 60.5 42.1 33.8 28.4 47% 115.1 78.9 62.2 51.5 45% 88.5 60.1 50.8 39.1 44% 26.6 18.8 11.4 12.4 1% The North America segment profit increased by 32% to $51.5 million compared to FY21, driven by higher outright unit sales (2,297 units compared to 1,703 units) achieved during this period which included the 400 HHR units sales to Kentucky Downs. The segment profit in FY21 also included a one-off gain on sale of land of $3.3 million. Excluding this gain, the segment profit in FY22 improved by 44% compared to FY21. Participation and lease revenue was $36.2 million, a decrease of 6% compared to FY21. The decrease was driven by the drop in the total gaming operation units for Class II machines during the period, predominantly resulting from the 400 HHR unit sales to Kentucky Downs that was converted to sales from a participation arrangement in July 2021. As the year progressed, this segment was able to replace the 400 units that came off participation arrangement with 1,679 units of Class II units placed at 30 June 2022 compared to 1,731 units at 30 June 2021. Key game titles from the high denomination game suites, particularly the Super Charged 7’s classic and Thunder Cash, continue to drive sales momentum. 28 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 2022High performing HHR products continue to contribute to the revenue growth in this segment. At 30 June 2022, a total of 4,245  units were installed in various markets on the Group’s HHR system, generating recurring connection fees. Newly approved HHR legislation in New Hampshire, Kansas, and Louisiana will provide additional placement opportunities in this high-quality market segment. The average fee per day comprising of participation and fixed lease of Class II, III and HHR machines was US$33, a reduction from the US$37 in the year ended 30 June 2021. This resulted from the reduction in the number of Class II machines in the installed base which contribute a higher average fee per day compared to Class III machines. MTD continues to positively contribute within this particular market segment. The most recent new game set released in South Dakota and Louisiana has been the leading performing product in this market and contributed to the majority of the revenue achieved in the current period for MTD products. Ainsworth successfully secured approval to sell MTD products in Nevada and is investing in improving game functionality for this market which is currently in progress. It is expected that this investment should increase Ainsworth’s footprint in this new jurisdiction. Latin America In millions of AUD Revenue Gross Profit Segment EBITDA Segment Profit / (Loss) Segment Profit / (Loss) (%) 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 22.2 15.0 9.3 10.0 45% 30.0 19.4 10.0 10.8 36% 52.2 34.4 19.3 20.8 40% 18.3 11.1 (4.3) (8.6) (47%) 33.9 23.3 23.6 29.4 87% The significant uplift in the Latin America segment revenue and profit is driven by the market re-opening within the last quarter of calendar year 2021. During FY22, a total of 1,880 units were sold compared to 625 units in FY21. Revenue increased by 185% compared to FY21 and delivered an improved segment profit of $20.8 million compared to the ($8.6) million loss in FY21. At 30 June 2022, 3,554 of the 3,818 game operations installed based were operating compared to 2,713 units at 30 June 2021 and 3,241 units at 31 December 2021. As the markets continue to recover, additional units are expected to return to operation further increasing revenue under participation and lease. The progressive increase in number of machines operating reflects the incremental contribution of participation and lease revenue reported compared to preceding periods. Machines under gaming operation contributed revenue of $16.8 million in FY22 compared to $6.8 million in FY21. Demand continues to grow for the A-STARTM range of cabinets, coupled with improvement in performing game titles such as Pan Chang, Fiesta Grande, Rio Grande Los Toritos, and Multi Win Games. Australia In millions of AUD Revenue Gross Profit Segment EBITDA Segment Profit Segment Profit (%) 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 16.7 6.6 3.8 3.3 20% 22.2 7.4 3.6 2.9 13% 38.9 14.0 7.4 6.2 16% 39.0 10.6 5.4 2.4 6% (0.1) 3.4 2.0 3.8 10% Operational challenges and extended lock downs in New South Wales impacted Australia’s revenue in H1FY22 offset by improved revenue contribution in Queensland and Victoria, resulting in revenue consistent with FY21. Servicing revenues, which are primarily derived from maintenance contracts in NSW were also impacted by government restrictions and venue closures during the first quarter of FY22. Queensland’s revenue contribution increased by 36% following the success of the Cash Stacks Link in this state. Increase in corporate sales within Victoria in FY22 resulted in an increase of revenue by 38% compared to FY21. An improvement in segment profit was achieved due to reduced depreciation expenses as a result of assets that were fully written down at 30 June 2021. Gross profit margin of 36% also contributed to an improved segment result. ANNUAL REPORT 2022 29 Directors’ Report (continued)for the year ended 30 June 20225. OPERATING & FINANCIAL REVIEW (continued) Rest of the World (“ROW”) In millions of AUD Revenue Gross Profit Segment EBITDA Segment Profit Segment Profit (%) 6 months to 31 Dec 2021 6 months to 30 Jun 2022 12 months to 30 Jun 2022 12 months to 30 Jun 2021 Variance 7.2 4.7 4.1 4.0 56% 6.8 6.0 5.2 5.1 75% 14.0 10.7 9.3 9.1 65% 13.7 7.8 7.1 6.6 48% 0.3 2.9 2.2 2.5 17% The slight revenue increase from this segment is predominantly from the online division, contributing 69% of total revenue, and assisting to offset the underperformance from other regions within Rest of the World, encompassing New Zealand, Europe and Asia. The Asia market remains challenging as this region was impacted by border closures and travel restrictions throughout most the year. New Zealand was in lockdown between August to December 2021 which further impacted this region’s revenue contribution for this period. Similar to the Australian segment, the improved segment profit of 65% compared to FY21 resulted from no significant write-down of inventories carrying value recognised in this period. The online revenue of $9.6 million (FY21: $5.9 million), an increase of $3.7 million from FY21 reflects revenue contribution from GAN following the execution of GAN agreement with Ainsworth on 1 July 2021. The GAN agreement is expected to contribute at least US$30 million over a 5-year period which commenced on 1 July 2021. 5.6 Significant Changes in the State of Affairs As advised and communicated to the Australian Stock Exchange (“ASX”) on 2 June 2022, the Board has determined to amend the Company’s financial year end from 30 June to 31 December, a calendar year basis. This change will align with the financial reporting schedule of overseas operations and industry business cycles. The Company’s majority shareholder, Novomatic AG, reports on a calendar basis and the alignment of reporting periods will also reduce duplication of financial reporting processes and increase efficiencies for the Group. The Company will have a six-month transitional financial year beginning on 1 July 2022 and ending on 31 December 2022. Thereafter, from 1 January 2023, the Company will be on a twelve-month financial year, commencing on 1 January and ending on 31 December. Other than the matter noted above and those arising from the ongoing impacts post COVID-19 pandemic, specifically the inflationary effects currently being experienced across global economies, as discussed in the operating and financial review in the Directors’ report and elsewhere in this financial report, there were no significant changes in the state of affairs of the Group during the financial year. Impact of Legislation and other external requirements 5.7 The Group continues to work with regulatory authorities to ensure that the necessary product approvals to support its operations within global markets are granted on a timely and cost-effective basis. The granting of such licenses will allow the Group to expand its operations. The Group aims to conduct its business worldwide in jurisdictions where gaming is legal and commercially viable. Accordingly, the Group is subject to licensing and other regulatory requirements of those jurisdictions. The Group’s ability to operate in existing and new jurisdictions could be adversely impacted by new or changing laws or regulations and delays or difficulties in obtaining or maintaining approvals and licenses. 6. DIVIDENDS No dividends were declared and paid by the Company for the year ended 30 June 2022 (30 June 2021: nil) EVENTS SUBSEQUENT TO REPORTING DATE 7. There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction, or event of a material and unusual nature likely, in the opinion of the directors of the Company, to significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. 30 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 20228. LIKELY DEVELOPMENTS The Group continues to navigate through the volatile global operating environments including challenging economic conditions brought upon by the pandemic. Development initiatives previously implemented have been progressed to ensure the necessary product approvals, helping to achieve improved product performance and financial improvement in future periods as markets recover. Further execution of strategies in online gaming markets with extensions of partnerships with top performing social game providers and the launch of our US based remote gaming server in North America are expected to provide complementary revenue gains within online social and “Real Money” gaming segments in future periods. This strategy is aimed at achieving increased market share in selected geographical business sectors to positively contribute to Group results in future financial years. Further information about likely developments in the operations of the Group and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Group. 9. DIRECTORS’ INTERESTS The relevant interest of each director in the shares and rights over such instruments issued by the companies within the Group and other related bodies corporate, as notified by the directors to the Australian Stock Exchange (“ASX”) in accordance with S205G (1) of the Corporations Act 2001, at the date of this report is as follows: Current Mr DE Gladstone Mr GJ Campbell Mr CJ Henson Ainsworth Game Technology Limited Share Options/ Performance Rights over Ordinary Shares Ordinary Shares 174,765 389,241 135,189 – – – 10. SHARE OPTIONS/PERFORMANCE RIGHTS 10.1 Unissued Shares under Share Options/Performance Rights At the date of this report unissued ordinary shares of the Group under share options/performance right are: Expiry Date 30 August 2024 24 June 2027 Total Instrument Exercise Price Number of Shares Share Options $0.73 7,567,321 Performance Rights $nil 8,900,000 16,467,321 There are no other shares of the Group under share options/performance rights and holders of these instruments are not entitled to participate in the same rights as ordinary shareholders unless the instruments vest and are exercised. Further details about share-based payments to directors and Key Management Personnels (“KMPs”) are included in the Remuneration Report in Section 15. 10.2 Shares issued on Exercise of Options/Performance Rights During or since the end of the financial year, no ordinary shares of the Company as a result of the exercise of options or performance rights. ANNUAL REPORT 2022 31 Directors’ Report (continued)for the year ended 30 June 2022INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS Indemnification 11. 11.1 The Group has agreed to indemnify current and former directors of the Group against all liabilities to another person (other than the Company or a related body corporate) that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Neither the Group nor Company have indemnified the auditor in relation to the conduct of the audit. 11.2 Insurance Premiums Since the end of the previous financial year, the Company has paid insurance premiums in respect of directors’ and officers’ liability and legal expenses’ insurance contracts, for current and former directors and officers, including senior executive officers of the Company and directors, senior executive and secretaries of its controlled entities. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors’ and officers’ liability and legal expenses contracts, as such disclosure is prohibited under the terms of the contract. 12. NON-AUDIT SERVICES During the year KPMG, the Group’s auditor, has performed certain other services in addition to the audit and review of the financial statements. 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 and risk committee, is satisfied that the provision of those non-audit services during the year by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act 2001 for the following reasons: – all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed by the audit and risk committee to ensure they do not impact the integrity and objectivity of the audit; and – the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards. Details of the amounts paid to the auditor of the Group, KPMG, and its network firms for audit and non-audit services provided during the year are set out below: Services Other than Audit and Review of Financial Statements: Other Regulatory Audit Services Controlled entity audit Other Services In relation to taxation and other services Audit and Review of Financial Statements Total paid/payable to KPMG 2022 $ 27,500 91,750 119,250 328,000 447,250 LEAD AUDITOR’S INDEPENDENCE DECLARATION 13. The Lead auditor’s independence declaration is set out on page 107 and forms part of the directors’ report for the financial year ended 30 June 2022. 14. ROUNDING OFF The Group is of a kind referred to in ASIC Corporations (Rounding in financial/directors’ report) Instrument 2016/191 and in accordance with that Instrument, amounts in the consolidated financial statements and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. 32 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 202215. REMUNERATION REPORT Message from the Chairperson of the Remuneration and Nomination Committee On behalf of the Remuneration and Nomination Committee (RNC) and with the authority of the Board of Directors I  provide the FY22 Remuneration Report. During FY22 significant challenges continued for the Company following the effects of the COVID-19 pandemic in early 2020. Government-imposed requirements including the limited travel through restrictions throughout the year affected the operations of our customers and other operators across certain markets. The global gaming industry was significantly impacted, and the Ainsworth Group acted to address the extreme negative effects which threatened the Company’s business. Many measures previously established during the last quarter of FY21 were continued into FY22 to mitigate the initial effects on the Group. The 2021 Annual General Meeting (AGM) approved the 2021 Remuneration Report with 0.21% of shareholders voting against the resolution. The Company encourages engagement with major shareholders and investors to discuss any concerns, ensuring feedback to maintain robust remuneration strategies to recruit new employees and motivate, retain, and reward personnel. The appointment of an independent remuneration consultant (Remuneration Strategies Pty Ltd (RS)) during 2022 ensured current remuneration practices and proxy service reports on remuneration structures were aligned to shareholder interests. The objective of this engagement with RS assisted the RNC to ensure remuneration structures including Fixed Remuneration (FR), Short-Term Incentives (STI) and Long- Term Incentives (LTI) were aligned to appropriate financial objectives and increasing shareholder wealth. The Committee’s approach to remuneration structures focuses on and includes the following: – to align executive remuneration with the Group’s business strategy; – to support, retain and motivate our people by providing competitive rewards; and – to retain and recruit new employees and promote the appropriate environment to increase the technical and innovative capabilities across the Group. The remuneration of key executives is fully aligned to our key business objectives listed in section 15.2 which underpin future remuneration structures, including STI and LTI compensation programs. The measures undertaken by the RNC (as approved by the Board) included: – Voluntary reductions to base salaries/fees for directors and senior executives, as previously outlined, within FY20 and FY21 were re-instated to previous levels on 1 January 2021; and – A review of Key Management Personnel (KMP) remuneration considered that no increases had been awarded since 1 July 2016. Increases ranging from 3% - 10% were recommended effective 1 July 2021 to employees across the Group, including KMP’s, other than the Board of Directors, to ensure retention and reflect inflationary effects in cost of living. The RNC confirmed that for FY23 there would be no change in fixed annual remuneration for all current KMP’s. – Short-Term Incentives (STI’s) for FY22 were established under a mix of both financial and non-financial criteria as outlined in section 15.1(c). The criteria relating to financial targets were not awarded for global and regional financial targets. STI amounts were awarded based on individual achievement of non-financial targets following recommendations by the Chief Executive Officer (CEO) which were reviewed by the RNC and confirmed by the Board. The Board and the RNC have agreed with all KMP’s that no STI plan for the six (6) month period ending 31 December 2022 will be established and a new revised plan will be re-evaluated for the 2023 calendar year; – The RNC commissioned a review of KMP’s compensation arrangements by RS, including the structure and terms of the grant of performance rights under the Rights Share Trust (RST) in June 2022. RS confirmed that current remuneration levels compared to comparable companies was reasonable and reflective of current industry and market conditions; and – The LTI grants undertaken or in place during the year are summarised below: – In FY20 share options were granted subject to vesting, performance and service conditions. These share options have an exercise price of $0.73 based on the share price at the grant date and vest progressively over a four-year period, providing share price hurdles and service conditions are met. The share price hurdles are increased at each relevant vesting date and the share options are cumulative on the basis that the higher share price is achieved when measured; and ANNUAL REPORT 2022 33 Directors’ Report (continued)for the year ended 30 June 202215. REMUNERATION REPORT (continued) – The RNC reviewed the establishment of a new LTI grant during the current period which occurred on 24 June 2022 whereby performance rights were granted under the Rights Share Trust (RST) to eligible KMP’s and senior executives. These performance rights were granted with a nil exercise price however are dependent on service conditions, vesting conditions and share price hurdles at each vesting date. These rights vest progressively over a three-year period, provided share price hurdles and service conditions are met. The share price hurdles are increased at each relevant vesting date and are cumulative on the basis that the higher share price is achieved when measured. RS confirmed that based on their assessment undertaken that the structure and terms of this grant of performance rights was designed to provide incentives and retention of key management and align shareholder interests through share price gains with Board objectives of improving financial results. The vesting and share price hurdles on the above two LTI grants are detailed in Section 15.1 (e). Remuneration strategies will be continually reviewed to ensure they align with Board objectives over the coming year. C.J Henson Chairperson, Remuneration and Nomination Committee 34 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 2022Contents 15.1 Remuneration Framework-Audited (a) Fixed Compensation (b) Performance Linked Compensation (c) Short-term Incentive Bonus (d) Non-Financial KPI’s (e) Long-term Incentive (f) Short-term and Long-term Incentive Structure (g) Other Benefits 15.2 Linking the Remuneration Framework to Business Outcomes – Audited (a) Consequences of Performance on Shareholder Wealth 15.3 Service Contracts – Audited 15.4 Non-Executive Directors – Audited 15.5 Services from Remuneration Consultants – Audited 15.6 Directors’ and Executive Officers’ Remuneration – Audited 15.7 Analysis of Bonuses included in Remuneration – Audited 15.8 Equity Instruments – Audited (a) Rights and options over equity instruments granted as compensation (b) Modification of terms of equity-settled share-based payment transactions (c) Exercise of options granted as compensation (d) Details of equity incentives affecting current and future remuneration (e) Analysis of movements in equity instruments (f) Rights and options over equity instruments (g) Movements in shares 36 36 36 36 37 37 38 38 38 39 39 40 40 41 43 44 44 44 44 44 45 45 46 ANNUAL REPORT 2022 35 Directors’ Report (continued)for the year ended 30 June 2022levels 15. REMUNERATION REPORT (continued) 15.1 Remuneration Framework-Audited Remuneration is referred to as compensation throughout this report. Key management personnel have authority and responsibility for planning, strategic directing and controlling the activities of the Group, directly or indirectly, including directors of the Company and other executives. Key management personnel comprise of the directors of the Company and senior executives for the Group that are named in this report. Compensation for key management personnel of the Group are competitively set to attract and retain appropriately qualified and experienced directors and executives. The RNC regularly reviews market conditions and surveys on the appropriateness of compensation packages of the Group given trends in comparative companies both locally and internationally, and the objectives of the Group’s compensation strategy. In addition, independent remuneration consultants are used when considered appropriate to assist the RNC to determine and advise on compensation levels given changes in market conditions. The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account: – the capability and experience of the key management personnel; – the key management personnel’s performance against individual Indicators Key Performance (KPIs) and contributions to the Group’s performance; and – the Group’s performance including: – revenue and earnings; – growth in share price and delivering returns on shareholder wealth; and – the amount of incentives within each key management person’s compensation. Compensation packages include a mix of fixed and variable compensation and short-term and long-term performance- based incentives. In addition to their salaries, the Group also provides non-cash benefits to its key management personnel and contributes to post-employment defined contribution superannuation plans on their behalf. Fixed Compensation (a) Fixed compensation consists of base compensation (which is calculated on a total cost basis and includes any Fringe Benefits Tax (FBT) charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds. Compensation levels are reviewed annually by the RNC through a process that considers individual, segment and overall performance of the Group. In addition, market surveys are obtained to provide further analysis so as to ensure the 36 AINSWORTH GAME TECHNOLOGY directors’ and senior executives’ compensation is competitive in the marketplace. A senior executive’s compensation is also reviewed on promotion and performance under the overall financial performance of the Group. This review determined that given the fact of no increases had been awarded to key management personnel for periods ranging from 3 – 5 years across the Group and the inflationary effects resulting from the COVID-19 pandemic, increases between 3% – 10% were awarded at 1 July 2021 to certain key management personnel. All directors and senior executives voluntarily had previously agreed to reductions in fixed compensation during prior periods. The RNC undertook a review of fixed compensation levels in FY22 to assist with determining an appropriate mix between fixed and performance for senior executives of the Group during the year. It was determined and confirmed that no increases, apart from significant changes to roles and responsibilities, would be provided to either KMP’s or senior executives who were recipients under the grant of performance rights on 24 June 2022 under the LTI Plan. The appropriate mix between fixed and performance linked compensation determined by the RNC and the Board as an objective, which is taken into consideration in establishing incentive plans (STI and LTI), is to achieve 60% fixed and 40% performance linked. The current year given the organisational and KMP’s changes and the LTI Plan granted on 24 June 2022 are not considered to be reflective of the compensation mix levels. linked compensation Performance Linked Compensation (b) Performance linked compensation includes both short- term and long-term incentives and is designed to reward key management personnel for meeting or exceeding their financial and personal objectives. The STI is an ‘at risk’ bonus provided in the form of cash, while the LTI is provided as performance rights or share options over ordinary shares of the Company under the rules of the Employee Share Plans. In addition to their salaries, selected key sales management personnel receive commission on sales within their specific business segments as part of their service contracts at each vesting date. A review was undertaken by the RNC to determine and assess current performance linked compensation arrangements - STI and LTI plans. This review was evaluated by the Board to determine appropriate remuneration levels taking into consideration the Group’s growth objectives, industry specific and market considerations and related retention of key employees. Short-term Incentive Bonus (c) Each year the RNC determines the objectives and KPIs of the key management personnel. The KPIs generally include measures relating to the Group, the relevant segment, and the individual, and include financial, people, customer, compliance, strategy and risk measures. The measures are chosen as they directly align the individual’s reward to the KPIs of the Group and to its strategy and performance. Directors’ Report (continued)for the year ended 30 June 2022The financial performance objectives for FY22 were significantly affected by a one-off provision during the period for the Mexican audit relating to prior years. This was re-assessed by the RNC on 4 August 2022 where previously approved STI amounts were reduced to reflect this circumstance. The specific STI was put in place for FY22 and primarily comprised of non- financial targets and financial targets, i.e. Group and regional profit before tax and EBITDA targets, excluding foreign currency gains / (losses). These financial performance targets were assessed by the RNC for all key management personnel (excluding non-executive directors and the CEO for FY22), and it was determined that the Group would not award the STI amounts for the current period based on the non-achievement of financial targets. Non-Financial KPI’s (d) The non-financial objectives vary with position and responsibility and include measures such as achieving strategic outcomes, safety measures, and compliance with established regulatory processes, customer satisfaction and staff development. The non-financial objectives for key management personnel (excluding non-executive directors and the CEO for FY22) confirmed on 4 August 2022 where it was determined STI’s under these non-financial criteria would be awarded in the current period. Currently, the performance linked component of compensation comprises approximately 9% (2021: 1%) of total payments to key management personnel. Long-term Incentive (e) The plans currently in place are identified below: Performance Rights On 24 June 2022, the Group granted to eligible employees and executives the opportunity to participate in the grant of performance rights over ordinary shares in Ainsworth Game Technology Limited, under the Ainsworth Game Technology Limited Rights Share Trust (RST). The performance rights were granted at nil consideration or exercise price however are dependent on service conditions, vesting conditions and share price performance hurdles. The performance rights convert to ordinary shares of the Company on a one-for-one basis with no voting or dividend rights until this conversion. The performance hurdles and vesting conditions for this plan are as follows: Tranche 1 Tranche 2 Tranche 3 Performance Hurdles Vesting Conditions The VWAP for 20 consecutive trading days preceding to 30 June 2024 is equal or greater than A$2.00. The VWAP for 20 consecutive trading days preceding to 31 December 2024 is equal or greater than A$2.40. The VWAP for 20 consecutive trading days preceding to 30 June 2025 is equal or greater than A$2.76. 25% will vest if performance hurdle is met on 30 June 2024. 25% will vest if performance hurdle is met on 31 December 2024. 50% will vest if performance hurdle is met on 30 June 2025. The performance rights granted are cumulative whereby should the performance hurdles not be met at the respective vesting dates, the grant relating to these tranches will be re-tested at the next applicable performance vesting date, subject to higher performance conditions. If the performance conditions at the end of the next applicable performance period are satisfied, then the performance rights for the current performance period and any non-vested share options from prior periods will vest. Performance rights that do not vest at the end of the final vesting period (30 June 2025) will lapse. Upon cessation of employment prior to the vesting date, these rights will be forfeited and lapse. These performance rights do not entitle the holder to dividends that are declared during the vesting period. Share Options On 30 August 2019, the Group offered to eligible employees the opportunity to participate in share options over ordinary shares in Ainsworth Game Technology Limited, under the Ainsworth Game Technology Limited Option Share Trust (OST). To be eligible to participate in the OST, the employees were selected by the directors and reviewed by the RNC. The OST provides employees an option to purchase allocated shares at the valuation price at grant date. Each option is convertible to one ordinary share. Option holders have no voting or dividend rights. On conversion from option to ordinary shares, the issued shares will have full voting and dividend rights. The ability to exercise the right is conditional on the continuing employment of the participating employee and achievement of performance hurdles. ANNUAL REPORT 2022 37 Directors’ Report (continued)for the year ended 30 June 202215. REMUNERATION REPORT (continued) 15.1 Remuneration Framework Audited (continued) The performance hurdles and vesting conditions for this plan are as follows: Tranche 1 Tranche 2 Tranche 3 Performance Hurdles Vesting Conditions On 30 August 2021 (“first vesting date”), the share price shall be 50% greater than exercise price of $0.73. 25% will vest if the VWAP for 20 days preceding the first vesting date is equal or greater than $1.10. On 30 August 2022 (“second vesting date”), the share price shall be 20% greater than the hurdle price established at the first vesting date. On 30 August 2023 (“third vesting date”), the share price shall be 20% greater than the hurdle price established at the second vesting date. 25% will vest if the VWAP for 20 days preceding the second vesting date is equal or greater than $1.32. 50% will vest if the VWAP for 20 days preceding the third vesting date is equal or greater than $1.58. The share options granted are cumulative whereby should the performance hurdles not be met at the respective vesting dates, the grant relating to these tranches will be re-tested at the next applicable performance vesting date, subject to higher performance conditions. If the performance conditions at the end of the next applicable performance period are satisfied, then the share options for the current performance period and any non-vested share options from prior periods will vest. Options that do not vest at the end of the final vesting period (30 August 2023) will lapse. Upon cessation of employment prior to the vesting date, these options will be forfeited and lapse. These share options do not entitle the holder to dividends that are declared during the vesting period. The hurdles set for the above plans were determined as appropriate due to the following consideration: – share price growth is considered more reflective of the Group’s underlying performance and is aligned to shareholder wealth as there are limited numbers of gaming industry companies within the ASX; – to ensure relevance of the LTI for international employees; – international expansion reflects ASX share price and is a more meaningful performance measure; and – inherent volatility of the gaming industry makes total shareholder return and earning per share less relevant. Short-term and Long-term Incentive Structure (f) Given the highly competitive nature of the gaming industry and to ensure retention of key employees, the RNC has and continues to consider performance linked remuneration is appropriate. The current review of both short-term and long-term incentive plans is ongoing to ensure these are aligned to Board and shareholder interests. (g) Other Benefits Key management personnel receive additional benefits such as non-monetary benefits, as part of the terms and conditions of their appointment. Non-cash benefits typically include payment of allowances and provision of motor vehicle benefits, including the applicable fringe benefits tax on these benefits. 15.2 Linking the Remuneration Framework to Business Outcomes – Audited In the RNC Chairperson’s introduction to the Remuneration Report, we indicated that the key business objectives will underpin future remuneration structures. The objectives are: – invest in product development to create a diverse and creative product offering to increase market share in global markets; – improve the Group’s performance through revenue and earnings growth in domestic and international markets; – improve cash flows through reduction in working capital investment and maintain a strong balance sheet to support growth and deliver value; and – maintain a strong focus on best practice compliance throughout the Group in adherence to gaming laws and regulations. 38 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 2022The following remuneration structures are considered by the RNC to achieve these business objectives: – short-term incentives that measure and reward increased market share in selected global markets, adherent to the Good Governance and Compliance with Gaming Laws and Regulations; – long-term incentives that measure and reward revenue and earnings growth in domestic and international markets, as well as the strengthening of the Balance Sheet and using Capital Investment Targets; and – the objective of these incentive programs is to increase shareholder value for investors and key management stakeholders. Consequences of Performance on Shareholder Wealth (a) In considering the Group’s performance and benefits for shareholder wealth, the RNC have regard to the following indices in respect of the current financial year and the previous four financial years. Profit Before tax (PBT) and Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) on a global and regional basis are considered as financial performance targets in setting the short-term incentive bonus. Profit / (loss) amounts for 2018 to 2022 have been calculated in accordance with Australian Accounting Standards. $’000 2022 2021 2020 2019 2018 Profit / (loss) attributable to owners of the Company $11,753 ($53,409) ($43,433) $10,895 $31,936 Dividends paid – – – Change in share price ($A) ($0.28) $0.83 ($0.26) $8,313 ($0.37) $4,966 ($1.12) 15.3 Service Contracts – Audited It is the Group’s policy that service contracts for KMP’s and key employees be unlimited in term but capable of termination by either party on periods 3 to 12 months’ notice and that the Group retains the right to terminate the contracts immediately, by making payment equal to the notice period. However, in the event of removal for misconduct as specified in his service contract, KMP’s have no entitlement to a termination payment. The Group has entered into service contracts with each key management personnel that provide for the payment of benefits where the contract is terminated by the Group. The key management personnel are also entitled to receive on termination of employment their statutory entitlements, if applicable, of accrued annual and long service leave, together with any accrued superannuation. The service contracts outline the components of remuneration paid to the key management personnel but does not prescribe how remuneration levels are modified year to year. Remuneration levels are reviewed each year to take into account market conditions, cost-of-living changes, any change in the scope of the role performed by the senior executive, retention of key personnel and any changes required to meet the principles of the remuneration policy. Mr Harald Neumann was appointed as Chief Executive Officer (CEO) effective 1 October 2021 as per his contract with the Company. The contract specifies the duties and obligations to be fulfilled by the CEO and provides that the Board and CEO will agree on Group’s objectives for achievement for each relevant period. Other key provisions of the service agreements relating to KMP’s are outlined as below: Executives Mr H Neumann 6 Months 6 Months Notice to be given by Executive Notice to be given by the Group Termination Payment Post-employment restraint Mr ML Ludski 12 Months 12 Months Mr D Bollesen 3 Months 3 Months Mr R Comstock 6 Months 6 Months 6 Months (fixed remuneration) 12 Months (fixed remuneration) 3 Months (fixed remuneration) 6 Months (fixed remuneration) 6 Months 12 Months 12 Months 6 Months ANNUAL REPORT 2022 39 Directors’ Report (continued)for the year ended 30 June 202215. REMUNERATION REPORT (continued) 15.4 Non-Executive Directors – Audited Total compensation for all non-executive directors, last voted upon by shareholders at the 2012 Annual General Meeting, is not to exceed $850,000 per annum, with effect from 1 July 2012. Directors’ base fees are presently $120,000 per annum (excluding superannuation) and was set based on a review of fees paid to other non-executive directors of comparable companies. The fees paid to non-executive directors reflect the demands and responsibilities associated with their roles and the global nature of the operations within the highly regulated environment within which the Group operates. Fees incorporate an allowance for the onerous probity requirements placed on non-executive directors by regulators of the jurisdictions in which the Group operates or proposes to operate in. In addition to these fees the cost of reasonable expenses is reimbursed as incurred. There was no increase in non-executive compensation including Board and Committee fees during the period. The remuneration included in Section 15.6 reflects voluntary reductions by non-executive directors in the prior year. The remuneration levels returned to normal levels effective 1 January 2021. Non-executive directors do not participate in performance related compensation and are not provided with retirement benefits apart from statutory superannuation. The CEO and Company Secretary do not receive any additional fees for undertaking Board or Committee responsibilities. Following a review undertaken by an independent remuneration consultant, non-executive director’s fees were originally assessed based on current market levels for comparable companies, demands and responsibilities associated with their roles and the global nature of the Group’s operations within a highly regulated environment to ensure the Board is appropriately compensated. Other independent non-executive directors who also chair or are a member of a committee receive a supplementary fee in addition to their annual remuneration. No changes to directors or committee fees were made in the current year. At the onset of the pandemic non-executive directors reduced all fees for specific periods in 2021 and 2020. These fees returned to pre-COVID-19 levels as at 1 January 2021. Current fees for directors, excluding superannuation are set out below. POSITION Chair of Board Lead Independent Director (in addition to directorship fees where applicable) Australian Resident Non-executive Director Chair of Audit and Risk Committee Chair of Regulatory and Compliance Committee Chair of Remuneration and Nomination Committee Member of Audit and Risk Committee Member of Regulatory and Compliance Committee Member of Remuneration and Nomination Committee $ (per annum) 250,000 10,000 120,000 20,000 24,000 12,000 12,000 15,000 8,000 15.5 Services from Remuneration Consultants – Audited The RNC, comprising a majority of independent non-executive directors, utilises as necessary the services of Remuneration Strategies Pty Ltd (RS), an independent remuneration consultant, to assist the RNC review and evaluate remuneration practices of the Group. The engagement with RS was established under strict protocols to ensure an independent view which was free from any undue influence on their assignment on the proposed remuneration arrangements, including the LTI grant’s vesting and performance hurdles. The RNC (independent non-executive directors only) received a report from RS in June 2022 to assist in reviewing current compensation levels for all KMP’s and the establishment of a new LTI grant to ensure alignment to Board objectives and shareholder interests. The grant of performance rights on 24 June 2022 was in line with recommendations provided by RS who confirmed that the LTI and total employment costs for KMP’s who were granted performance rights were reasonable as compared to benchmarking against comparative companies. RS were paid $10,000 (excluding $7,500 for documentation and their services relating to the LTI grant) in the current year. No amounts were paid to RS in the prior year. 40 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 2022% – – – – – – – – – – – – f o n o i t r o p o r P n o i t a r e n u m e r e c n a m r o f r e p - d e t a e r l s t n e m y a p d e s a b e r a h s f o n o i t r o p o r P n o i t a r e n u m e r e c n a m r o f r e p I % T S - d e t a e r l l $ a t o T ) $ B ( / s t h g R i s n o i t p O d e s a b - e r a h S s t n e m y a p r e h t O m r e t - g n o L - t s o P s t i f e n e B t n e m y o p m E l m r e t - t r o h S s $ t i f e n e b n o i t a n m r e T i ) $ C ( s $ t i f e n e b - r e p u S n o i t a u n n a l $ a t o T s $ t i f e n e b ) $ A ( s $ e e f - n o N h s a c I T S y r a t e n o m s u n o b & y r a a S l : e r a y t i t n e d e t a d i l o s n o c e h t f o l e n n o s r e p t n e m e g a n a m y e k r e h t o d n a , y n a p m o C e h t f o r o t c e r i d h c a e f o n o i t a r e n u m e r f o l t n e m e e r o a m h c a e j – – – – – – – – – – – – 0 0 8 3 7 1 , 2 4 5 9 5 1 , 0 0 8 4 8 1 , 3 4 4 2 6 1 , 0 0 2 8 8 2 , 5 7 3 6 4 2 , – – – , 2 1 0 0 2 1 0 0 8 6 4 6 , , 2 7 3 8 8 6 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 0 0 8 5 1 , 0 0 0 8 5 1 , 2 4 8 3 1 , 0 0 8 6 1 , 3 9 0 4 1 , 0 0 2 6 2 , 0 0 7 5 4 1 , 0 0 0 8 6 1 , 0 5 3 8 4 1 , 0 0 0 2 6 2 , 5 7 3 1 2 , 0 0 0 5 2 2 , – – – – – – 2 1 4 0 1 , 0 0 6 9 0 1 , 0 0 8 8 5 , 2 2 7 9 5 , 0 0 0 8 8 5 , 0 5 6 8 2 6 , – – – – – – – – – – – – – – – – – – – – – – – – 0 0 0 8 5 1 , 2 2 0 2 0 0 7 5 4 1 , 0 0 0 8 6 1 , 0 5 3 8 4 1 , 0 0 0 2 6 2 , 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 0 0 0 5 2 2 , 1 2 0 2 – – – 0 0 6 9 0 1 , 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 f o t n u o m a d n a e r u t a n e h t f o s l i a t e D s r o t c e r i D e v i t u c e x e - n o N D U A n I l l e b p m a C J G r M t n e r r u C s r o t c e r i D e v i t u c e x e - n o N s e t a Y B M r M r e m r o F e n o l t s d a G E D r M n o s n e H J C r M ) 1 2 0 2 h c r a M 1 3 d e n g s e R i ( ) r o t c e r i D e v i t u c e x E - n o N ( ) ( 1 n n a m u e N K H r M t o n d d e h i , r o t c e r i d e v i t u c e x e - n o n a s a t n e m t n o p p a i ’ s n n a m u e N r M g n i r u D . 1 2 0 2 r e b o t c O 1 n o ) O E C ( r e c ffi O e v i t u c e x E f i e h C s a i t n e m t n o p p a o t p u d o i r e p e h t r o f r o t c e r i d e v i t u c e x e - n o n a s a w n n a m u e N r M ) 1 ( . 0 2 0 2 l i t n u 4 1 0 2 m o r f y t i t n e t n e r a p e t a m i t l u e h t f o d r a o B e v i t u c e x E e h t f o n o s r e p r i a h C d n a O E C e h t s a w n n a m u e N r M . s e e f ’ s r o t c e r i d y n a e v e c e r i 0 0 0 8 8 5 , 2 2 0 2 ’ s r o t c e r i D e v i t u c e x e - n o N l a t o t - b u S 0 5 6 8 2 6 , 1 2 0 2 n o i t a r e n u m e R ANNUAL REPORT 2022 41 ) d e u n i t n o c ( t r o p e R ’ s r o t c e r i D 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f d e t i d u A – n o i t a r e n u m e R ’ s r e c ffi O e v i t u c e x E d n a ’ s r o t c e r i D . 6 5 1 % f o n o i t r o p o r P n o i t a r e n u m e r e c n a m r o f r e p - d e t a e r l s t n e m y a p d e s a b e r a h s f o n o i t r o p o r P n o i t a r e n u m e r e c n a m r o f r e p I % T S - d e t a e r l l $ a t o T ) $ B ( / s t h g R i s n o i t p O d e s a b - e r a h S s t n e m y a p r e h t O m r e t - g n o L - t s o P s t i f e n e B t n e m y o p m E l m r e t - t r o h S s $ t i f e n e b n o i t a n m r e T i ) $ C ( s $ t i f e n e b - r e p u S n o i t a u n n a l $ a t o T s $ t i f e n e b ) $ A ( s $ e e f - n o N h s a c I T S y r a t e n o m s u n o b & y r a a S l s e v i t u c e x E t n e r r u C D U A n I ) d e u n i t n o c ( d e t i d u A – n o i t a r e n u m e R ’ s r e c ffi O e v i t u c e x E d n a ’ s r o t c e r i D . 6 5 1 ) d e u n i t n o c ( I T R O P E R N O T A R E N U M E R . 5 1 ) d e u n i t n o c ( t r o p e R ’ s r o t c e r i D 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f 42 AINSWORTH GAME TECHNOLOGY – % 1 % 1 % 3 – – – % 1 – % 4 % 1 % 3 – % 3 – % 2 – – – % 1 2 % 3 2 – – % 6 1 % 6 1 – % 9 % 4 % 1 % 4 1 % 2 1 % 1 . O E C s a t n e m t n o p p a s h m o r f i i – – , 1 2 2 3 8 6 , 4 1 7 3 9 7 , 6 3 4 8 3 5 8 6 5 5 3 4 , – , 9 4 7 2 0 3 3 8 0 2 5 7 , , 2 9 1 8 5 8 9 3 8 9 0 2 , , 7 3 4 4 6 3 4 7 1 7, 7 1 3 , , 5 6 0 1 6 7 1 , , 4 7 9 3 2 8 3 , , 7 3 4 9 4 4 2 , d o i r e p e h t o t s e – 4 9 0 6 , 6 8 9 8 , 2 8 8 7, 1 6 0 3 1 , – – 7 2 1 3 , – – – – – – – – – – 1 8 0 8 4 , 7 7 2 7, 3 8 8 8 3 3 , 0 0 2 9 1 , – – – 1 4 2 7, 5 2 1 9 1 3 , 0 6 4 5 3 , – – 6 4 0 9 2 6 , 9 8 9 3 , – – – , 7 5 0 5 2 6 , 0 1 2 0 9 6 4 0 8 2 2 1 , , 3 0 1 9 6 1 , 3 0 3 8 9 3 , 4 5 7 4 5 4 2 4 8 8 1 1 , – , 2 1 9 5 3 3 – 2 0 6 9 7 3 , – – – – 0 0 0 0 0 1 , 2 0 6 9 7 2 , – – – – – – 0 0 2 5 1 , 6 5 8 1 1 , 6 6 5 2 7 2 , 3 6 5 5 2 , 0 0 4 9 4 , 3 0 6 7, 9 1 3 4 2 2 , 8 0 3 1 3 , 0 6 4 0 1 , ) 3 5 3 7, 1 ( 0 5 6 9 5 , ) 3 5 3 7, 1 ( 0 5 6 9 5 , – – – ) 9 0 1 9 3 , ( 0 0 5 0 6 3 , 0 0 5 0 6 3 , , 0 2 6 0 0 2 5 4 3 6 7 1 , 2 6 0 7, 5 4 2 , 7 5 8 6 7 1 , , 7 1 4 3 5 4 , 8 8 7 6 2 8 1 , – 9 2 9 5 2 1 , 6 5 9 9 1 1 , 0 0 5 0 6 3 , , 0 2 6 0 0 2 , 5 4 1 5 3 2 – 9 2 9 5 2 1 , 8 7 6 9 7 1 , , 0 3 5 5 5 4 1 , , 2 6 0 5 4 0 3 , , 0 8 1 4 8 0 2 , 2 4 8 2 9 1 , 2 7 1 4 1 , 7 5 8 6 7 1 , , 7 1 4 3 5 4 , 6 1 5 8 4 2 1 , , 8 8 7 4 1 4 2 , 2 4 8 2 9 1 , 2 7 1 4 1 , 6 6 1 7, 7 8 1 , 0 0 2 7, 6 3 1 5 5 6 , 2 6 6 3 1 , 8 2 5 6 2 , 5 7 0 4 5 , 7 1 7 1 6 , 3 1 7 7, 1 7 2 3 6 2 , , 7 1 4 9 0 3 1 0 5 2 1 , 7 6 6 6 1 1 , 9 4 2 0 8 1 , 4 5 6 9 9 6 , 0 0 0 0 5 , – 1 2 2 6 7 1 , , 2 2 1 1 0 3 0 0 0 2 1 , 0 0 0 4 2 , 7 4 2 8 1 , 2 7 1 4 1 , 4 5 6 9 4 6 , , 4 7 9 5 4 1 0 5 9 2 6 2 , 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 i s e c v r e S l i a c n h c e T r e g a n a M l a r e n e G n o i t a r e n u m e R s ’ e v i t u c e x E l a t o T s r e c i f f O e v i t u c e x E & s ’ r o t c e r i D l a t o T n o i t a r e n u m e R r e c i f f O g n i t a r e p O f i e h C ) ( 2 k c o t s m o C R r M r e c i f f O e v i t u c e x E f i e h C ) ( 2 e s e z z u r B V r M s e v i t u c e x E r e m r o F ) ( 3 y v e L L S r M l i a c n a n F i f i e h C - i k s d u L L M r M t y r a e r c e S y n a p m o C / r e c i f f O r e c i f f l O y g o o n h c e T f i e h C n e s e l l o B D r M r e c i f f O e v i t u c e x E f i e h C ) ( 1 n n a m u e N K H r M ) 1 2 0 2 r e b o t c O 7 d e t n o p p A i ( k c o t s m o C r M r o f l d e s o c s d n o i i t a r e n u m e r e h T . 2 2 0 2 y r a u n a J 1 t a s a P M K a d e fi i l s s a c e b o t d e s a e c e s e z z u r B V r M d n a 2 2 0 2 y r a u n a J 1 e v i t c e ff e ) P M K ( n o s r e P t n e m e g a n a M y e K s a d e fi i l s s a c s a w k c o t s m o C R r M . P M K a s a d e fi i l s s a c e b o t d e s a e c d n a 1 2 0 2 r e b m e t p e S 0 1 n o e v i t c e ff e O E C a s a d e n g s e r i y v e L r M . ’ s P M K s a d e fi i l s s a c e r e w s a u d v d n l i i i e s e h t e r e h w d o i r e p e h t o t s e l t a e r e s e z z u r B r M d n a l t a e r d e s o c s d n o l i i t a r e n u m e r e h T . 1 2 0 2 r e b m e c e D 1 2 n o r o t c e r i d a s a d e n g s e r e h i l i t n u 1 2 0 2 r e b o t c O 1 n o r e c ffi O e v i t u c e x E f i e h C d e i t n o p p a s a w n n a m u e N r M ) 1 ( ) 2 ( ) 3 (   Notes in Relation to the Table of Directors and Executive Officers Remuneration - Audited A. The STI’s identified reflect performance during the 30 June 2022 financial year, unless otherwise identified (refer 15.7 below) and uses the criteria set out in section 15.1(c). These STI amounts were initially considered and approved by the RNC on 20 June 2022 however given the change in financial results affected by the provision established for the potential Mexican import duties (refer to details included in the Financial Report), the RNC undertook a re-evaluation on 4 August 2022. It was determined that the Group would not meet the financial targets. STI amounts originally determined were therefore eliminated under these financial criteria however the previously approved non-financial criteria were reassessed and awarded for all eligible participants. B. The fair value of performance rights and options is calculated at the date of grant using both the Black-Scholes-Merton simulation models after taking into account the impact of share price growth conditions during the vesting period. The value disclosed is the portion of the fair value of the rights or options recognised as an expense in each reporting period. C. In accordance with AASB 119 Employee Benefits, annual leave is classified as other long-term employee benefit. Details of Performance Related Remuneration - Audited Details of the Group’s policy in relation to the proportion of remuneration that is performance related is discussed in section 15.1 of this Remuneration Report. STI bonuses have been provided to the extent that these are payable as at 30 June 2022. 15.7 Analysis of Bonuses included in Remuneration – Audited Details of the vesting profile of the STI cash bonuses included as remuneration to each director of the Company, and other key management personnel for FY22 are detailed below: Executives Current Mr ML Ludski(1) Mr D Bollesen Mr R Comstock Former Mr V Bruzzese Mr SL Levy(2) STI cash bonus STI Entitlement $ (A) Included in Remuneration $ (A) % Vested in Year (B) % Forfeited in Year (C) 199,152 170,000 97,930 36,493 175,000 169,103 100,000 49,400 18,247 116,667 50% 59% 50% 50% 67% 50% 41% 50% 50% 33% (1) The STI amount of $169,103 includes $69,103 relating to FY21 performance following approval by the RNC and Board which was paid in September 2021. The FY22 STI amount awarded is $100,000 resulting in 50% forfeiture during FY22. (2) The STI paid to Mr Levy related to FY21 performance. A. STI bonuses included in remuneration for the 2022 financial year relate to specific deliverables and individual performance. These were initially evaluated by the RNC on 20 June 2022 however given the change in the financial results were re-assessed on 4 August 2022 where it was confirmed that where financial targets were not achieved, the relevant STI amounts were eliminated accordingly. B. The amount vested in the 2022 year represented all current and previous STI amounts awarded in the current period. There is no further STI amounts outstanding at 30 June 2022. C. The amounts forfeited are due to the performance criteria not being met in relation to the current financial year. ANNUAL REPORT 2022 43 Directors’ Report (continued)for the year ended 30 June 202215. REMUNERATION REPORT (continued) 15.8 Equity Instruments – Audited All rights and options refer to rights and options over ordinary shares of Ainsworth Game Technology Limited, unless otherwise stated, which are exercisable on a one-for-one basis under the RST plans. (a) Rights and options over equity instruments granted as compensation Performance rights were issued to KMP’s on 24 June 2022. (b) Modification of terms of equity-settled share-based payment transactions No terms of equity-settled share-based payment transactions (including performance rights and options granted as compensation to a key management person) have been altered or modified by the issuing entity during the reporting period or the prior period. Exercise of options granted as compensation (c) During the reporting period no shares (2021: nil shares) were issued on the exercise of rights or options previously granted as compensation. (d) Details of equity incentives affecting current and future remuneration Details of vesting profiles of rights and options held by each key management person of the Group are detailed below: Executives Instrument Number Current Maximum value in future years $ (A) Grant Date % vested in year % forfeited in a year (B) Financial years in which grant vests (C) Mr H Neumann Rights 2,800,000 Mr ML Ludski Rights 1,000,000 936,456 334,449 24 June 2022 24 June 2022 Options 237,056 4,667 30 August 2019 Mr D Bollesen Mr R Comstock Rights Rights 600,000 700,000 200,669 24 June 2022 234,114 24 June 2022 Options 125,000 2,461 30 August 2019 Former Mr V Bruzzese Rights 200,000 Options 141,723 Mr SL Levy Options 500,000 – – – 24 June 2022 30 August 2019 30 August 2019 –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% –% 2024–2025 2024–2025 2022–2024 2024–2025 2024–2025 2022–2024 2024–2025 2022–2024 100% – A. Maximum value for Mr V Bruzzese is nil as he ceased to be classified a KMP as at 1 January 2022. B. The % forfeited in the year represents the reduction from the maximum number of rights and options available to vest at the beginning of the year. C. Financial years refer to 30 June reporting periods until a 31 December balance date is formally effected. 44 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 2022(e) Analysis of movements in equity instruments The movement during the reporting period, by value, of rights and options over ordinary shares in the Company held by each key management person of the Group is detailed below: Instrument Total value $ Granted in year $ Amount paid on exercise $ Value of rights exercised in year $(A) Forfeited in year $ Current Mr H Neumann Mr ML Ludski Mr D Bollesen Mr R Comstock Former Mr V Bruzzese Mr S Levy Rights Rights Options Rights Rights Options Options Options 942,550 336,625 30,029 201,975 235,638 15,834 17,953 63,337 6,094 2,176 6,809 1,306 1,524 1,603 2,243 – – – – – – – – – – – – – – – – – – (63,337) A. No rights or options were exercised during the year. Rights and options over equity instruments (f) The movement during the reporting period, by number of rights and options over ordinary shares in Ainsworth Game Technology Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows: Held at 30 June 2021 Granted as compensation Exercised Other Changes* Held at 30 Jun 2022 Vested during the year Vested & exercisable at 30 June 2022 Rights/Share Options Current Mr H Neumann Mr ML Ludski Mr D Bollesen – 2,800,000 237,056 1,000,000 – 600,000 Mr R Comstock 125,000 700,000 Former Mr V Bruzzese 141,723 200,000 Mr SL Levy 500,000 – – – – – – – – – – – – (500,000) 2,800,000 1,237,056 600,000 825,000 341,723 – – – – – – – – – – – – – * Other changes represent options that were forfeited during the year. Rights and options held by key management personnel that are vested and exercisable at 30 June 2022 were nil (2021: nil). No rights or options were held by related parties of key management personnel. ANNUAL REPORT 2022 45 Directors’ Report (continued)for the year ended 30 June 202215. REMUNERATION REPORT (continued) 15.8 Equity Instruments – Audited (continued) (g) Movements in shares The movement during the reporting period in the number of ordinary shares in Ainsworth Game Technology Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows: Current Mr GJ Campbell Mr CJ Henson Mr DE Gladstone Mr M Ludski Former Mr V Bruzzese Mr SL Levy Mr MB Yates Held at 30 June 2021 Purchases Sales Dividend Re-Investment Plan (DRP) allotment Held at 30 June 2022 389,241 135,189 177,146 10,000 3,283 62,500 43,600 – – – – 500 – – – – – – – – (43,600) – – – – – – – 389,241 135,189 177,146 10,000 3,783 62,500 – No shares were granted to key management personnel during the reporting period as compensation in 2021 or 2022. There were no other changes in key management personnel in the period after the reporting date and prior to the date when the Financial Report was authorised for issue. This directors’ report is made out in accordance with a resolution of the directors. D.E Gladstone Chairperson Dated at Sydney this 23rd day of September 2022 46 AINSWORTH GAME TECHNOLOGY Directors’ Report (continued)for the year ended 30 June 2022 In thousands of AUD Assets Cash and cash equivalents Receivables and other assets Current tax assets Inventories Prepayments Total current assets Receivables and other assets Deferred tax assets Property, plant and equipment Right-of-use assets Intangible assets Total non-current assets Total assets Liabilites Trade and other payables Loans and borrowings Lease liabilities Employee benefits Deferred income Current tax liability Provisions Total current liabilities Trade and other payables Loans and borrowings Lease liabilities Employee benefits Deferred income Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Accumulated losses Total equity The notes on pages 51 to 97 are an integral part of these consolidated financial statements. Note 30-Jun-22 30-Jun-21 18 17 16 17 15 12 27 13 24 21 27 22 14 25 24 21 27 22 14 15 50,318 83,871 3,210 68,301 6,159 42,393 82,501 1,874 56,116 8,873 211,859 191,757 28,873 11,868 67,132 8,250 78,553 33,944 12,246 66,735 9,475 78,989 194,676 201,389 406,535 393,146 36,253 34,757 52 2,035 9,338 9,446 2,995 18,352 78,471 3,702 – 11,905 464 665 – 52 1,824 8,406 844 – 833 46,716 6,472 37,240 13,532 493 – 760 16,736 95,207 311,328 58,497 105,213 287,933 207,709 131,575 207,709 119,933 (27,956) (39,709) 311,328 287,933 ANNUAL REPORT 2022 47 Consolidated Statement of Financial Positionas at 30 June 2022In thousands of AUD Revenue Cost of sales Gross profit Other income Sales, service and marketing expenses Research and development expenses Administrative expenses Writeback / (impairment) of trade receivables Other expenses Results from operating activities Finance income Finance costs Net finance income / (costs) Profit / (loss) before tax Income tax (expense) / benefit Profit / (loss) for the year Other comprehensive income / (loss) Items that may be reclassified to profit and loss: Foreign operations - foreign currency translation differences Total other comprehensive income / (loss) Total comprehensive income / (loss) for the year Profit / (loss) attributable to owners of the Company Total comprehensive profit / (loss) attributable to the owners of the Company Note 30-Jun-22 30-Jun-21 7 8 11 11 15 220,157 159,520 (82,139) 138,018 1,004 (55,818) (35,286) (20,952) 1,541 (69,957) 89,563 4,154 (46,244) (33,358) (18,771) (8,993) (21,781) (32,720) 6,726 11,044 (1,965) 9,079 15,805 (4,052) (46,369) 1,056 (13,857) (12,801) (59,170) 5,761 11,753 (53,409) 11,515 11,515 23,268 11,753 23,268 (13,638) (13,638) (67,047) (53,409) (67,047) Earnings per share: Basic earnings per share (AUD) Diluted earnings per share (AUD) 20 20 $0.03 $0.03 $(0.16) $(0.16) The notes on pages 51 to 97 are an integral part of these consolidated financial statements. 48 AINSWORTH GAME TECHNOLOGY Consolidated Statement of Profit or Loss and Other Comprehensive Income or Lossfor the year ended 30 June 2022In thousands of AUD Balance at 1 July 2020 Total comprehensive loss for the period Loss Transfer between reserves Other comprehensive loss Foreign currency translation reserve Total other comprehensive loss Total comprehensive loss for the period Transactions with owners, recorded directly in equity Share-based payment amortisation Total transactions with owners Attributable to owners of the Company Issued Capital Equity compensation reserve Fair value reserve Translation reserve Profit reserve Retained Earnings / (Accumulated losses) Total Equity 207,709 4,879 9,684 23,145 122,760 (13,622) 354,555 – – – – – – – – – – – – 425 425 – – – – – – – – – – (53,409) (53,409) (27,322) 27,322 – (13,638) (13,638) – – – – (13,638) (13,638) (13,638) (27,322) (26,087) (67,047) – – – – – – 425 425 Balance at 30 June 2021 207,709 5,304 9,684 9,507 95,438 (39,709) 287,933 Balance at 1 July 2021 207,709 5,304 9,684 9,507 95,438 (39,709) 287,933 Total comprehensive income for the period Profit Transfer between reserves Other comprehensive income Foreign currency translation reserve Total other comprehensive income Total comprehensive income for the period Transactions with owners, recorded directly in equity Share-based payment amortisation Total transactions with owners – – – – – – – – – – – – 127 127 – – – – – – – – – 11,515 11,515 11,515 – – – – – – – – – 11,753 11,753 – – – – 11,515 11,515 11,753 23,268 – – 127 127 Balance at 30 June 2022 207,709 5,431 9,684 21,022 95,438 (27,956) 311,328 The notes on pages 51 to 97 are an integral part of these consolidated financial statements. ANNUAL REPORT 2022 49 Consolidated Statement of Changes in Equityfor the year ended 30 June 2022In thousands of AUD Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations Interest received Income taxes (paid) / received Net cash from operating activities Cash flows (used in) / from investing activities Proceeds from sale of property, plant and equipment Interest received Acquisitions of property, plant and equipment Development expenditure Net cash (used in) / from investing activities Cash flows used in financing activities Borrowing costs paid Proceeds from borrowings Repayment of borrowings Proceeds from finance lease Payment of lease liabilities Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Effect of exchange rate fluctuations on cash held Cash and cash equivalents at 30 June Note 30-Jun-22 30-Jun-21 231,855 142,838 (181,780) (123,010) 50,075 19,828 2,809 (1,548) 1,052 1,367 18a 51,336 22,247 12 13 77 10 (1,703) (3,836) (5,452) 5,474 4 (2,220) (2,328) 930 (1,808) 498 (2,205) 36,618 (39,068) (39,237) 513 (1,643) (41,508) 4,376 42,393 3,549 1,103 (1,798) (5,519) 17,658 26,543 (1,808) 50,318 42,393 The notes on pages 51 to 97 are an integral part of these consolidated financial statements. 50 AINSWORTH GAME TECHNOLOGY Consolidated Statement of Cash Flowsfor the year ended 30 June 202221. Loans & borrowings 22. Employee benefits 23. Share-based payments 24. Trade and other payables 25. Provisions 26. Financial instruments 27. Leases 28. Capital and other commitments 29. Related parties 30. Group entities 31. Subsequent events 32. Auditor’s remuneration 33. Parent entity disclosures 82 83 83 86 86 87 91 94 94 96 96 96 97 1. 2. 3. 4. 5. 6. 7. 8. 9. Reporting entity Basis of preparation Significant accounting policies Determination of fair values Financial risk management Operating segments Revenue Other income Expenses by nature 10. Employee benefit expenses 11. Finance income and finance costs 12. Property, plant and equipment 13. Intangible assets 14. Deferred income 15. Taxes 16. Inventories 17. Receivables and other assets 18. Cash and cash equivalents 18A. Reconciliation of cash flows from operating activities 19. Capital & reserves 20. Earnings per share 52 52 53 62 62 64 67 69 69 70 70 71 72 75 76 77 77 78 79 80 81 ANNUAL REPORT 2022 51 Index to Notes to the Financial Statements and Significant Accounting Policiesfor the year ended 30 June 2022 The Group continues to navigate through the volatility in the global environment as a result of the COVID-19 pandemic, in particular, changes in macroeconomic conditions related to inflationary cost pressures and supply chain disruptions which have led to additional estimates and judgements which involves assumptions when preparing these financial statements. Key judgements which include incorporating best available information and past performance, have been exercised in considering the impacts of these conditions which may impact the future performance of the Group. These estimates and judgements require ongoing assessment, which have inherent uncertainty at the time of preparation of these financial statements. The following were the key areas, but not limited to, that required additional judgements as a result of the pandemic: – the recoverability of receivables; – the appropriateness of stock obsolescence provisions; – impairment testing on non-financial assets; and – the recoverability of deferred tax assets. Should actual performance differ significantly from the assumptions used for the estimates and judgements mentioned above, it is likely that there may be material changes to the carrying value of the assets and liabilities listed above in future reporting periods. Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial year are included in the following notes: – Note 13 - Intangible Assets: impairment test of intangible assets and goodwill which the key assumptions underlying recoverable amounts, including the recoverability of Development CGU; incorporates – Note 25 - Provisions: provision on the Mexican Tax Administration Service (“SAT”) audit and review which incorporates judgement related to the probability of the outcome making a reliable estimate of the potential obligation and the timing of the outflow that may arise; and – Note 26 - Financial instruments: measurement of ECL allowance from trade receivables which incorporates key assumptions in determining the historical loss rate. (the 1. REPORTING ENTITY Ainsworth Game Technology Limited ‘Company’) is a company domiciled in Australia. The address of the Company’s registered office is 10 Holker Street, Newington, NSW, 2127. The consolidated financial statements of the Company as at and for the year ended 30 June 2022 comprised of the Company and its subsidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’). The Group is a for-profit entity and primarily is involved in the design, development, manufacturing, sales and distribution of gaming content and platforms including electronic gaming machines, other related equipment and services and online social and real money games. 2. BASIS OF PREPARATION (a) Statement of compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The preparation of the consolidated financial statements is in conformity with the International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board. The consolidated financial statements were authorised for issue by the Board of Directors on 23 September 2022. (b) Basis of measurement The consolidated financial statements have been prepared on the historical cost basis except where stated in ‘Note 3 – Significant accounting policies’. (c) Functional and presentation currency The financial information of each of the Group’s entities and foreign branches is measured using the currency of the primary economic environment in which it operates (the functional currency). These consolidated financial statements are presented in Australian dollars, which is the Company’s primary functional currency. The Company is of a kind referred to in ASIC Corporations (Rounding Instrument in Financial/Directors Reports) 2016/191 and in accordance with that Instrument, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated. (d) Use of estimates and judgements In preparing these consolidated financial statements, judgements, estimates and management has made assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income, and expenses. Actual results may differ to these estimates. 52 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 20223. SIGNIFICANT ACCOUNTING POLICIES The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements and have been applied consistently by Group entities. Business combination (a) Basis of consolidation (i) The Group accounts for business combinations using the acquisition method when control is transferred to the Group (see (a)(ii)). The consideration transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment refer (Note 3(g)). Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt of equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. (ii) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Interest in equity-accounted investee (iii) A joint venture is an arrangement in which the Group has joint control, and whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities. Interest in a joint venture is accounted for using the equity method. It is recognised initially at cost, which includes transactions costs. Subsequently to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and Other Comprehensive Income (“OCI”) of the equity-accounted investee, until the date on which significant influence of joint control ceases. (iv) Transactions eliminated on consolidation Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements in accordance with Australian Accounting Standards. (v) Acquisitions on or after 1 July 2004 For acquisitions on or after 1 July 2004, goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognised immediately in profit or loss. Foreign currency transactions (b) Foreign currency (i) Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance date are retranslated to the functional currency at the foreign exchange rate at that date. Non-monetary assets & liabilities that are measured at fair value in a foreign currency are translated into the functional currency at exchange rate when the fair value was determined. Foreign currency differences are generally recognised in profit or loss and presented within finance cost. Foreign operations (ii) The assets and liabilities of foreign operations are translated to Australian dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to Australian dollars at the average exchange rates for the period. Foreign currency differences are recognised in other comprehensive income and presented in the translation reserve in equity. When a foreign operation is disposed of such that control is lost, the cumulative amount in the translation reserve related to that foreign operation is transferred to the profit or loss, as part of gain or loss on disposal. When the Group disposes of only a part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant portion of cumulative amounts is re-attributed to non-controlling interest. When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation, are recognised in other comprehensive income and are presented in the translation reserve in equity. (c) Financial instruments (i) Non-derivative financial assets Non-derivative financial assets comprise trade and other receivables and cash and cash equivalents. Recognition and initial measurement Trade and other receivables are financial assets with a contractual right to receive cash from another entities. Trade and other receivables are recognised initially at fair value on the date that they are originated adjusted for directly attributable transaction costs. Subsequent to initial recognition, trade and other receivables are measured at amortised cost using the effective interest method, less any impairment losses. ANNUAL REPORT 2022 53 Notes to the Financial Statements (continued)for the year ended 30 June 20223. SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value and are used by the Group in the management of its short-term commitments. Classification and subsequent measurement On initial recognition, a financial asset is classified as measured at amortised cost. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. The assessment amount of current and non-current receivable involves reviewing the contractual term and how it compares to the current payment trend. When the current payment trend is less favourable from the contractual term, the Group will base the current and non-current assessment on payment trend. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at Fair Value Through Profit or Loss (“FVTPL”): – it is held within a business model whose objective is to hold assets to collect contractual cash flows; and – its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Financial assets - Business model assessment The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes: – the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management’s strategy focuses on earning contractual interest income, maintaining an interest rate profile, matching the duration of the financial assets to the duration of any related liabilities or expected cash outflows or realising cash flows through the sale of the assets; – how the performance of the portfolio is evaluated and reported to the Group’s management; – the risks that affect the performance of the business model (and the financial assets held within that business model) and how those risks are managed; – how managers of the business are compensated - e.g. whether compensation is based on the fair value of the assets managed or the contractual cash flows collected; and 54 AINSWORTH GAME TECHNOLOGY – the frequency, volume and timing of sale of financial assets in prior periods, the reasons for such sales and expectations about future sales activity. Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets. Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL. Financial assets - Assessment whether contractual cash flows are solely payments of principal and interest For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin. In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this condition. In making this assessment, the Group considers: – contingent events that would change the amount or timing of cash flows; – terms that may adjust the contractual coupon rate, including variable-rate features; – prepayment and extension features; and – terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features). Financial assets – Subsequent measurement and gains and losses Financial assets at amortised cost are subsequently measured at amortised cost using the effective interest method. The gross carrying amount is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. Notes to the Financial Statements (continued)for the year ended 30 June 2022The Group enters into transactions whereby it transfers assets recognised in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised. (ii) Non-derivative financial liabilities Non-derivative financial borrowings and trade and other payables. liabilities comprise loans and Recognition and initial measurement Financial liabilities are initially recognised on the date that they are originated. All other financial liabilities are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. Loans and borrowings and trade and other payables are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost with any difference between cost and redemption value being recognised in the income statement over the period of the borrowings on an effective interest basis. Classification and subsequent measurement Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. Derecognition The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expired. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss. the carrying amount extinguished and (iii) Offsetting Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group currently has a legally enforceable right to set off the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. (iv) Share capital Ordinary shares Ordinary shares are classified as equity incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Recognition and measurement (d) Property, Plant and Equipment (i) Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses. Cost includes expenditures that are directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Machines previously held as inventory are transferred to property, plant and equipment when a rental or participation agreement is entered into. When the rental or participation agreements cease and the machines become held for sale, they are transferred to inventory at their carrying amount. Proceeds are reflected in revenue while value disposed are recognised as cost of sale. These are treated as an operating cash flow. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment and are recognised net within “other income” or “other expenses” in profit and loss. (ii) Subsequent costs The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of an item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. (iii) Depreciation Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately. ANNUAL REPORT 2022 55 Notes to the Financial Statements (continued)for the year ended 30 June 20223. SIGNIFICANT ACCOUNTING POLICIES (continued) Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the assets. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated. Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. The estimated useful lives for the current and comparative periods are as follows: – buildings – leasehold improvements – plant and equipment 39 - 40 years 10 years 2.5 - 20 years The useful lives of capitalised machines leased under rental or participation agreements are included in the plant and equipment useful lives. Depreciation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate. Intangible assets (e) (i) Goodwill Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see Note 3(a)(v). Goodwill is subsequently carried at cost less accumulated impairment losses (refer Note 3(h)). (ii) Research and development research activities, undertaken with Expenditure on the prospect of gaining new technical knowledge and understanding, is recognised in profit or loss when incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct that are directly attributable to preparing the asset for its intended use. Other development expenditure and discontinued projects that are expected to have no further economic benefit are recognised in profit or loss when incurred. labour and overhead costs 56 AINSWORTH GAME TECHNOLOGY Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses. (iii) Other intangible assets Other intangible assets, which include intellectual property, technology and software assets, customer relationships, tradenames and trademarks, and service contracts, that are acquired by the Group through business combinations, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses. Refer Note 3(a)(i) for details on the determination of cost of these acquired assets. (iv) Subsequent expenditure it Subsequent expenditure increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss when incurred. is capitalised only when (v) Amortisation Amortisation is based on the cost of an asset less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefit embodied in the asset. The estimated useful lives for the current and comparative periods are as follows: – capitalised development costs – intellectual property – technology and software – customer relationships and contracts 4 - 5 years 3 - 10 years 5 - 10 years 3 - 10 years acquired – tradenames and trademarks – service contracts 3 years 3 years Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Inventories (f) Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in first-out principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. in progress, cost Notes to the Financial Statements (continued)for the year ended 30 June 2022losses Impairment loss allowances recognises general (g) (i) Non-derivative financial assets for The Group expected credit (“ECLs”) on financial assets measured at amortised cost. The Group measures general loss allowances for trade receivables at an amount equal to the lifetime ECLs. The provision matrix contains the Group’s receivables grouped by geographical region as customers in the same locations have similar credit characteristics. Historical default rates (or loss rates) for each geographical region are based on aging profile, past due analysis and historical write off data. The loss rates are adjusted for forward looking assumptions and then applied to receivables to compute the general lifetime ECL for these different geographical region customers. At every reporting date, the Group assesses the credit risk when estimating the ECL and in making the assessment considers reasonable and supportable information that is relevant and available. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience, credit assessment based on external economic conditions and any available forward-looking information such as inflation and GDP. In addition, the Group also performs regular reviews of past due receivables at an individual customer level and recognises additional specific loss allowances for individual customers where credit risk is deemed significant. Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit impaired. A  financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: – significant financial difficulty of the borrower or issuer; – the restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise; – a breach of contract such as a default or shortfall of agreed payment plans; or – it is probable that the borrower will enter bankruptcy or other financial reorganisation. Presentation of allowance for ECL in the statement of financial position Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. Write-off The gross carrying amount of a financial asset is written off when the Group has no reasonable expectations of recovering a financial asset in its entirety or a portion thereof. For individual and corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. Indicators include amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments. The Group expects no significant recovery from amounts written off. However, financial assets that are written off could still be subject to enforcement activities in accordance with the Group’s procedures for recovery of amounts due. (ii) Non-financial assets The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date. An impairment loss is recognised if the carrying amount of an asset or its related cash generating unit (CGU) exceeds its estimated recoverable amount. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets (the “CGU”). The goodwill acquired in a business combination for the purpose of impairment testing, is allocated to CGU that is expected to benefit from the synergies of the combination. The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated. An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGUs and then to reduce the carrying amount of the other assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the the asset’s carrying amount does not exceed carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. ANNUAL REPORT 2022 57 Notes to the Financial Statements (continued)for the year ended 30 June 2022(v) Equity-settled share-based payment transactions The grant date fair value of options granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period in which the employees become unconditionally entitled to the options. The amount recognised as an expense is adjusted to reflect the actual number of share options for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. Where such adjustments result in a reversal of previous expenses these are recognised as a credit to profit or loss in the period that it is assessed that certain vesting conditions will not be met. (i) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as a finance cost. (j) Warranties A provision for warranties is recognised when the underlying products are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities. 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (h) Employee benefits (i) Defined contribution superannuation funds A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. to defined contribution Obligations superannuation funds are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. for contributions (ii) Other long-term employee benefits The Group’s net obligation in respect of long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on-costs; that benefit is discounted to determine its present value, and the fair value of any related assets is deducted. The discount rate is the yield rate at the reporting date on corporate bonds that have maturity dates approximating the terms of the Group’s obligations. (iii) Termination benefits Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably. (iv) Short-term benefits Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting from employees’ services provided to reporting date and are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at reporting date including related on-costs, such as workers remuneration insurance and payroll tax. Non-accumulating non-monetary benefits, such as cars and free or subsidised goods and services, are expensed based on the net marginal cost to the Group as the benefits are taken by the employees. A liability is recognised for the amount expected to be paid under short-term cash bonus plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. 58 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 2022(k) Revenue Type of product/ service Revenue recognition methods and timing of payments Description of revenue recognition i. Machine and part sales Point in time recognition. Timing of payments vary and are dependent on negotiations with customers. When customers obtain control of machines. This is typically when the goods are physically delivered, and the customer has accepted the goods. At this point the customer has the significant risks and rewards of ownership and the Group has an entitlement to payment of the goods. ii. Multi element arrangements iii. Rendering of services Point in time and over time recognition, depending on the various performance obligations. Payments are received monthly. Point in time and over time recognition. Payments are received monthly. iv. License income Point in time and over time recognition. Payments are received either upfront or on a periodical basis. For machine sales in which the Group is also responsible for fulfilling performance obligations related to installation of the machines sold, under AASB 15 the installation is considered as a separate performance obligation. This is because the promise to install is implicit in the contract based on established business practices and creates a valid expectation that the Group will provide the service to the customer. Revenue is only recognised when this performance obligation is met. The arrangements are like machine and part sales however payment terms on multi-elements are on a monthly basis over the term of the contract. If the arrangement contains a significant financing component, the interest income is recognised over the term of the contract. Revenue from services rendered include provision of servicing and preventative maintenance which are recognised over the period of the service agreement. Revenue is recognised based on a fixed daily fee per machine serviced. One-off services are performed and are recognised at a point in time when the service is carried out. The timing of the recognition of license income is dependent on the type of performance obligations to be delivered to the customers. For license income that is recognised at a point in time, the performance obligations relate to the provision of games to customers. For license income that is recognised over time, the performance obligations relate to provision of hosting services of remote gaming servers. For license income that are recognised over time, any contract liabilities relating to advance consideration received from customers are recognised and assessed at every reporting date. The contract liability is recognised as revenue as and when the performance obligations are carried out. ANNUAL REPORT 2022 59 Notes to the Financial Statements (continued)for the year ended 30 June 20223. SIGNIFICANT ACCOUNTING POLICIES (continued) Type of product/ service Revenue recognition methods and timing of payments Description of revenue recognition v. Rental and Participation Payments are received monthly for both products. Operating lease rental revenue is recognised on a straight-line basis over the term of the lease contract. Rental revenue is calculated by multiplying the daily fee by the total number of days the machine has been operating on the venue floor. Participation revenue represents variable lease payments based on a share of turnover of net win of the participation machine. The variable lease payments are recognised in the profit & loss as participation revenue. Participation revenue amounted to $49,036 thousand for the year (2021: 41,877 thousand) Refer to Note 3(l) (ii) vi. Sale type leases Timing of payments vary and are dependent on negotiations with customers. At commencement date, revenue is recognised at an amount being the lower of the fair value of the machines or the present value of lease payments discounted using a market interest rate. Finance income is recognised over the lease term based on a pattern reflecting a constant periodic rate. Refer to Note 3(l) (ii) Leases (l) At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. As a lessee (i) At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease component. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased. Lease payments included in the measurement of the lease liability comprise the following: – fixed payments, including in-substance fixed payments; – variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; – amounts expected to be payable under a residual value guarantee; and – the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. 60 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 2022The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension, or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. The Group presents right-of-use assets that do not meet the definition of investment property in ‘right-of-use assets’ and lease liabilities in ‘lease liabilities’ in the statement of financial position. Short-term leases and leases of low-value assets The Group has elected not to recognise right-of-use assets and lease liabilities for leases of low-value assets and short- term leases, including IT equipment. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. (ii) As a lessor At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices. When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for a major part of the economic life of the asset. If an arrangement contains lease and non-lease components, then the Group applies AASB 15 to allocate the consideration in the contract. (m) Finance income and finance costs Finance income comprises interest income and foreign currency gains. Interest income is recognised in profit or loss as it accrues using the effective interest method. Finance costs comprise interest expense on borrowings and foreign currency losses. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position. Income tax is recognised (n) Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for temporary differences arising from the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Deferred tax is not recognised for taxable temporary differences arising from the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised, see Note 15. ANNUAL REPORT 2022 61 Notes to the Financial Statements (continued)for the year ended 30 June 2022(b) Trade and other receivables/payables For receivables/payables with a remaining life of less than one year, the notional amount is deemed to reflect the fair value. The fair value of all other receivables/payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. (c) Non-derivative financial instruments Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases the market rate of interest is determined by reference to similar lease agreements. For loans and borrowings, fair value is calculated based on discounted expected future principal and interest cash flows. (d) Lease liabilities The fair value is estimated as the present value of future for cash flows, discounted at market homogeneous lease agreements. The estimated fair values reflect changes in interest rates. interest rates (e) Equity-settled share-based payment transactions The fair value as defined under AASB 2 of employee share options is measured using the Black-Scholes-Merton model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value. 5. FINANCIAL RISK MANAGEMENT (a) Overview The Group has exposure to the following risks from their use of financial instruments: – Credit risk; – Liquidity risk; and – Market risk. This note presents information about the Group’s exposure to each of the above risks, its objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report and the Group’s exposure to these risks are further elaborated in Note 26. 3. SIGNIFICANT ACCOUNTING POLICIES (continued) (o) Earnings per share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is calculated by dividing the adjusted profit or loss attributable to ordinary shareholders of the Company, and the weighted average number of ordinary shares outstanding, both for the effects of all dilutive potential ordinary shares, which comprise of convertible notes, performance rights and share options granted to employees. (p) Segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are regularly reviewed by the Group’s CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. (q) Changes in new standards and interpretations not yet adopted A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2022 and earlier application is permitted. However, there are currently no new standards, amendments to standards or accounting interpretations that are expected to materially affect the Group’s consolidated financial statements in future periods. 4. DETERMINATION OF FAIR VALUES A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in measuring fair values is included in the following notes: – Note 23: share-based payments; and – Note 26: financial instruments. Intangible assets (a) The fair value of intangibles acquired in a business combination is based on the discounted cash flows expected to be derived from the use or eventual sale of these contracts. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets. 62 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 2022(b) Risk management framework The Board of Directors have an overall responsibility for the establishment and oversight of the risk management framework. The Board has established processes through the Group’s Audit and Risk Committee (“ARC”), which is responsible for developing and monitoring risk management policies. The ARC reports regularly to the Board of Directors on its activities. Risk management policies are established to identify and analyse the risks faced by the Group, 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 Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Group’s ARC oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The ARC is assisted in its oversight role by Internal Audit. Internal Audit undertakes reviews of risk management controls and procedures, the results of which are reported to the ARC. (c) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers. Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer, including the default risk of the industry and country in which customers operate. The Group’s concentration of credit risk is disclosed in Note 26. is assessed by the compliance Each new customer division as to suitability and analysed for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes investigations, external ratings when available and in some cases bank references. Purchase limits are established for each customer, which represents the maximum open amount without the Board. requiring approval Customers that fail to meet the Group’s creditworthiness criteria may only transact with the Group within established limits unless Board approval is received or otherwise only on a prepayment basis. In monitoring the customer credit risk, customers are reviewed by grouped geographic region and also at an individual level in computing general lifetime ECL allowances and specific loss allowances respectively. Further information is detailed in 3(g) above. Customers in certain region are considered to have ‘high-risk’ profiles due to historical dealings, political instability in the region of from operation and challenging economic conditions. For such customers, the company requires future sales to be made on a prepayment basis within sales limits approved by the Chief Executive Officer and Chief Financial Officer, and thereafter only with Board approval. Goods are sold subject to retention of title clauses, so that in the event of non-payment, the Group may have a secured claim. The Group does not require collateral in respect of trade and other receivables. The Group has established an allowance for impairment that represents its estimate of incurred and expected credit losses in respect of trade and other receivables. The main component of this allowance is a general loss component that relates to overall gross receivable exposure. (d) Guarantees The Group’s policy is to provide financial guarantees only for wholly owned subsidiaries. At 30 June 2022, no guarantees were outstanding (2021: none). that cannot (e) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. Typically, the Group ensures that it has access to sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances reasonably be predicted, such as natural disasters and pandemics. The Group has completed a cashflow projection which supports this 60-day assumption. The Company through its US-based operating subsidiary, Ainsworth Game Technology Inc, has a secured bank facility with Western Alliance Bancorporation (WAB). Ainsworth Game Technology Inc. acts as the borrower and party to the relevant credit agreements while its parent entities within the AGT Group of companies, AGT Pty Ltd and Ainsworth Game Technology Limited, serve as guarantors. This facility imposes certain customary financial covenants which includes total leverage and fixed charge coverage ratios measured on a quarterly and annual basis. During the year, all imposed financial convents were met. At inception of the facility on 18th February 2021, the facility limit was at US$35 million. As part of the terms and conditions of the facility, the available limit is to reduce by US$0.5 million at each quarter end. As at 30 June 2022, the facility limit was at US$32.5 million with no drawdowns utilised. ANNUAL REPORT 2022 63 Notes to the Financial Statements (continued)for the year ended 30 June 20226. OPERATING SEGMENTS The activities of the Group are the entities within predominantly within a single business which is the design, development, manufacture, sale and service of gaming machines and other related equipment and services. Information reported the Group’s Chief Executive Officer (CEO) as the chief operating decision maker for the purposes of resource allocation and assessment of performance is focused on the geographical location of customers of gaming machines. As such, the Group’s reportable segments are as follows: – Australia and other (‘other’ consists of Asia, New Zealand, to South Africa, Europe and Online); – North America; and – Latin America. Performance of each reportable segment is based on segment revenue and segment result as included in internal management reports that are reviewed by the Group’s CEO. Segment results includes segment revenues and expenses that are directly attributable to the segment, which management believes is the most relevant approach in evaluating segment performance. The revenue from external parties reported to the CEO is measured in a manner consistent within the statement of profit or loss and other comprehensive income. The Group has a large and dispersed customer base. The Group’s largest customer accounts for only 6% of the total reportable revenue. 5. FINANCIAL RISK MANAGEMENT (continued) (f) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. in which Currency risk (i) The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of the Group entities. The functional currencies of Group entities are primarily the Australian dollar (AUD) and the US dollar (USD). The currencies transactions are primarily denominated are AUD, USD, Euro, and New Zealand Dollar. The Group continually monitors and reviews the financial impact of currency variations to determine strategies to minimise the volatility of changes and adverse financial effects in foreign currency exchange rates. The Group measures its currency risk exposure using sensitivity analysis and cash flow forecast. No hedging arrangements were utilised during the reporting period. these Interest rate risk (ii) The Group’s main interest rate risk arises from floating rate borrowings drawn under bank debt facilities. (g) Capital management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board continues to monitor group performance so as to ensure sufficient flexibility to fund operation demands of the business, to support any strategic opportunities and that dividends are able to be provided to ordinary shareholders. The Board continues to review alternatives to ensure present employees will hold equity in the Company’s ordinary shares. This is expected to be an ongoing process establishing long-term incentive plans to further align shareholders and employees’ interests. The Group has managed its capital through debt ratio and debt to equity ratio and applies judgements by benchmarking these ratios against other industry players: Debt Ratios 2022 2021 Debt Ratio (Total Liabilities/ Total Assets) Debt to Equity Ratio (Total Liabilities/Total Equity) 23.4% 26.8% 30.6% 36.5% 64 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 2022i g n m a g f o n o i t u b i r t s d i d n a i e c v r e s , s e a s l o t s e l t a e r d n a s r e m o t s u c f o n o i t a c o l l i a c h p a r g o e g e h t n o d e s a b s i e u n e v e r t n e m g e s , s t n e m g e s l e b a t r o p e r f o s i s a b e h t n o n o i t a m r o n f i g n i t n e s e r p n I : s w o l l o f s a d e d u c n l i s i x a t r e t f a t fi o r p t e n o t t l u s e r t n e m g e s f o n o i t a i l i c n o c e r A s t n e m g e s e b a t r o p e r l t u o b a n o i t a m r o f n I 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f ) d e u n i t n o c ( s t n e m e t a t S l i i a c n a n F e h t o t s e t o N . s m r o l f t a p d n a t n e t n o c l a t o T n i t a L a c i r e m A h t r o N a c i r e m A l a t o T a i l a r t s u A r e h t O d n a r e h t O / e p o r u E r e h t o d n a a i l a r t s u A w e N h t u o S l d n a a e Z i a s A a i l a r t s u A S A T / C V I / T N D L Q W S N 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F D U A f o s d n a s u o h t n I , 7 5 1 0 2 2 5 9 1 2 5 , , 1 0 1 5 1 1 1 6 8 2 5 , 3 0 3 1 1 , 0 1 0 2 , 4 7 6 0 4 1 3 , 2 6 2 6 , 7 6 1 2 1 , 5 0 3 7, 1 e u n e v e r t n e m g e s e b a t r o p e R l ) 5 6 9 1 , ( 5 2 2 8 , ) 6 8 2 5 3 , ( 0 1 % 0 4 % 0 4 % 5 4 % 9 2 3 5 1 8 9 , 1 0 3 9 1 , 0 8 1 2 6 , 2 7 6 6 1 , 4 5 5 7, 8 5 5 7 0 2 , 4 6 4 1 5 , 5 3 3 5 1 , 5 0 7 8 , 9 4 4 ) 4 4 ( 4 0 9 1 5 4 1 , 6 3 3 2 , 4 3 5 1 , s t n e m g e s o t d e t a c o l l a t o n e u n e v e r t s e r e t n I e s n e p x e t s e r e t n I ) % ( t l u s e r t n e m g e S A D T B E I t n e m g e S t l u s e r t n e m g e S t l u s e R i n a g y c n e r r u c n g e r o F i s e s n e p x e D & R ) 2 5 9 0 2 , ( s e s n e p x e e v i i i t a r t s n m d a d n a e t a r o p r o C ) 1 8 7 1 2 , ( 5 0 8 5 1 , ) 2 5 0 4 , ( 3 5 7 1 1 , . ) d n a s u o h t 7 2 4 2 3 $ , : 1 2 0 2 ( d n a s u o h t , 5 3 5 8 2 $ e r a 2 2 0 2 e n u J 0 3 t a s a ) a i l a r t s u A ( e l i i c m o d f ’ o y t n u o c s y t i t n e e h t n i d e t a c o l , s t e s s a x a t f d e r r e e d d n a s t n e m u r t s n i l i a c n a n fi n a h t r e h t o , s t e s s a t n e r r u c - n o N s t n e m g e s o t d e t a c o l l a t o n s e s n e p x e r e h t O e s n e p x e x a t e m o c n I x a t r e t f a t i f o r p t e N x a t e r o e b f t i f o r P i h c h w f o , ) d n a s u o h t , 2 7 7 2 2 1 $ : 1 2 0 2 ( d n a s u o h t , 0 0 4 5 2 1 $ l a t o t 2 2 0 2 e n u J 0 3 t a s a s e i r t n u o c i n g e r o f n i d e t a c o l , s t e s s a x a t d e r r e e d f d n a s t n e m u r t s n i l i a c n a n fi n a h t r e h t o , s t e s s a t n e r r u c - n o N . a c i r e m A h t r o N n i e r a , ) d n a s u o h t , 2 7 7 2 2 1 $ : 1 2 0 2 ( d n a s u o h t , 0 0 4 5 2 1 $ s e s n e p x e r e h t o ‘ n i d e d r o c e r s i d n a s u o h t 8 5 4 $ f o s t e s s a U G C r e h t O d n a a i l a r t s u A f o n w o d e t i r w d n a d n a s u o h t 2 9 7 4 $ , f o s t e s s a U G C a c i r e m A n i t a L f o n w o d e t i r w o t l g n i t a e r s e s n e p x e t n e m r i a p m I . s e g r a h c r e h t o d n a s e i t u d n a c x e M i r o f n o s i i v o r p f o d n a s u o h t , 1 3 5 6 1 $ s i ’ s t n e m g e s o t d e t a c o l l a t o n s e s n e p x e r e h t o ‘ n i d e d u c n l i o s A l . ’ s t n e m g e s o t d e t a c o l l a t o n ANNUAL REPORT 2022 65     i g n m a g f o n o i t u b i r t s d i d n a i e c v r e s , s e a s l o t s e l t a e r d n a s r e m o t s u c f o n o i t a c o l l i a c h p a r g o e g e h t n o d e s a b s i e u n e v e r t n e m g e s , s t n e m g e s l e b a t r o p e r f o s i s a b e h t n o n o i t a m r o n f i g n i t n e s e r p n I ) d e u n i t n o c ( S T N E M G E S G N T A R E P O I . 6 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f ) d e u n i t n o c ( s t n e m e t a t S l i i a c n a n F e h t o t s e t o N . s m r o l f t a p d n a t n e t n o c l a t o T n i t a L a c i r e m A h t r o N a c i r e m A l a t o T a i l a r t s u A r e h t O d n a r e h t O / e p o r u E w e N h t u o S r e h t o d n a a i l a r t s u A 1 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F l d n a a e Z i a s A a i l a r t s u A S A T / C V I / T N D L Q W S N D U A f o s d n a s u o h t n I 0 2 5 9 5 1 , 5 8 2 8 1 , 0 9 4 8 8 , 5 4 7 2 5 , 5 7 4 8 , 2 7 4 4 , 7 7 7 8 0 5 4 , 3 8 1 5 , 8 9 8 8 , 2 3 4 0 2 , e u n e v e r t n e m g e s e b a t r o p e R l ) 1 0 4 2 , ( ) 6 5 4 1 1 , ( ) 8 5 3 3 3 , ( 4 9 4 0 9 5 , ) 8 9 2 4 , ( 2 9 7 0 5 , 5 5 5 2 1 , % 5 2 ) % 7 4 ( % 4 4 % 7 1 2 3 5 9 3 , ) 4 8 5 8 , ( 6 7 0 9 3 , 0 4 0 9 , 1 3 7 5 , 8 1 8 0 7 9 0 2 1 , 3 7 3 1 , 3 2 1 ) 4 8 2 ( s t n e m g e s o t d e t a c o l l a t o n e u n e v e r t s e r e t n I s s o l y c n e r r u c n g e r o F i e s n e p x e t s e r e t n I s e s n e p x e D & R ) % ( t l u s e r t n e m g e S A D T B E I t n e m g e S t l u s e r t n e m g e S t l u s e R 66 AINSWORTH GAME TECHNOLOGY ) 1 7 7 8 1 , ( ) 0 2 7 2 3 , ( ) 0 7 1 9 5 , ( 1 6 7 5 , ) 9 0 4 3 5 , ( . ) d n a s u o h t 3 9 6 0 5 $ , : 0 2 0 2 ( , d n a s u o h t 7 2 4 2 3 $ e r a 1 2 0 2 e n u J 0 3 t a s a ) a i l a r t s u A ( e l i i c m o d f ’ o y t n u o c s y t i t n e e h t n i d e t a c o l , s t e s s a x a t f d e r r e e d d n a s t n e m u r t s n i l i a c n a n fi n a h t r e h t o , s t e s s a t n e r r u c - n o N t i f e n e b x a t e m o c n I x a t f e r o e b s s o L x a t r e t f a s s o l t e N s t n e m g e s o t d e t a c o l l a t o n s e s n e p x e r e h t O s e s n e p x e e v i i i t a r t s n m d a d n a e t a r o p r o C i h c h w f o , ) d n a s u o h t , 9 2 2 5 6 1 $ : 0 2 0 2 ( d n a s u o h t , 2 7 7 2 2 1 $ l a t o t 1 2 0 2 e n u J 0 3 t a s a s e i r t n u o c i n g e r o f n i d e t a c o l , s t e s s a x a t d e r r e e d f d n a s t n e m u r t s n i l i a c n a n fi n a h t r e h t o , s t e s s a t n e r r u c - n o N . a c i r e m A h t r o N n i e r a , ) d n a s u o h t , 9 4 6 3 4 1 $ : 0 2 0 2 ( d n a s u o h t , 2 7 7 2 2 1 $ r e h t o ‘ n i d e d r o c e r s i d n a s u o h t 5 9 9 7 $ , f o s t e s s a U G C r e h t O d n a a i l a r t s u A f o n w o d e t i r w d n a d n a s u o h t , 5 2 7 4 2 $ f o s t e s s a U G C a c i r e m A n i t a L f o n w o d e t i r w o t g n i t a e r l s e s n e p x e t n e m r i a p m I . ’ s t n e m g e s o t d e t a c o l l a t o n s e s n e p x e     . s r e m o t s u c h t i w s t c a r t n o c m o r f d e v i r e d s i e u n e v e r ’ s p u o r G e h T . s t n e m e t a t s l i a c n a n fi l a u n n a t s a l e h t n i d e b i r c s e d e s o h t e r a s m a e r t s e u n e v e r n a m d n a s n o i ’ i t a r e p o s p u o r G e h T 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f E U N E V E R . 7 ) d e u n i t n o c ( s t n e m e t a t S l i i a c n a n F e h t o t s e t o N . n o i t i n g o c e r e u n e v e r f o g n m i i t d n a s e n i l i e c v r e s d n a s t c u d o r p r o a m j , t e k r a m l i a c h p a r g o e g y r a m i r p y b d e t a g e r g g a s d s i i e u n e v e r , l e b a t i g n w o l l o f e h t n I e u n e v e r f o n o i t a g e r g g a s i D l a t o T n i t a L a c i r e m A h t r o N a c i r e m A l a t o T a i l a r t s u A r e h t O d n a r e h t O / e p o r u E w e N h t u o S r e h t o d n a a i l a r t s u A l d n a a e Z i a s A a i l a r t s u A S A T / C V I / T N D L Q W S N 8 3 1 6 , 2 9 1 5 1 , 3 5 6 1 2 , 6 9 8 4 1 , 3 2 0 3 5 , 4 1 8 6 6 – 3 9 3 4 1 , – 9 9 7 6 0 7 7, 1 9 5 6 4 , – 8 3 1 6 , 3 3 9 3 , 9 6 5 9 , 4 9 7 6 1 , 9 2 2 6 3 , – – – 3 – 9 6 5 9 , – – – – – – – – – – 5 5 2 9 0 1 , 6 2 3 0 2 , 8 0 7 5 5 , 1 2 2 3 3 , 1 3 7 1 , 0 1 0 2 , 4 7 6 – – – – – – – – – – – – 3 1 9 7 2 2 2 , 0 4 0 5 , 2 2 2 1 , 4 2 7 9 , 3 4 4 2 , – – 5 1 8 1 1 , 0 6 5 1 , – 0 3 9 3 , , 7 5 1 0 2 2 5 9 1 2 5 , , 1 0 1 5 1 1 1 6 8 2 5 , 3 0 3 1 1 , 0 1 0 2 , 4 7 6 0 4 1 3 , 2 6 2 6 , 7 6 1 2 1 , 5 0 3 7, 1 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F s e n i l e c i v r e s / s t c u d o r p r o a M j s t n e m e g n a r r a t n e m e e l i t l u M s e a s l t r a p d n a e n h c a M i D U A f o s d n a s u o h t n I i s e c v r e s f o g n i r e d n e R s e s a e l e p y t l e a S e m o c n i e s n e c L i n o i i t a p c i t r a p d n a l a t n e R n o i t i n g o c e r e u n e v e r f o g n m T i i 0 8 2 3 3 1 , 2 7 6 4 3 , 7 7 8 6 8 , , 7 5 1 0 2 2 3 2 5 7, 1 5 9 1 2 5 , 6 0 3 9 5 , 5 9 7 5 5 , , 1 0 1 5 1 1 2 0 3 9 3 , 9 5 5 3 1 , 1 6 8 2 5 , 1 3 7 1 , 2 7 5 9 , – 0 1 0 2 , 3 0 3 1 1 , 0 1 0 2 , – 4 7 6 4 7 6 – 7 2 2 1 0 4 1 3 , 5 3 2 6 , 5 5 1 2 1 , 0 4 1 3 , 2 6 2 6 , 7 6 1 2 1 , 7 5 3 3 1 , 8 4 9 3 , 5 0 3 7, 1 e m i t n i i t n o p a t a d e r r e f s n a r t i s e c v r e s d n a s t c u d o r P e m i t r e v o d e r r e f s n a r t i s e c v r e s d n a s t c u d o r P ANNUAL REPORT 2022 67 4 6 7 6 , 5 1 0 2 , 8 0 4 4 1 , 0 8 3 3 1 , 9 4 4 5 4 , – – 2 0 2 6 1 , 4 1 8 6 , 0 2 5 9 5 1 , 5 8 2 8 1 , 8 0 6 0 9 , 2 1 9 8 6 , 2 1 8 9 , 3 7 4 8 , 0 2 5 9 5 1 , 5 8 2 8 1 , – 5 1 0 2 , 5 3 5 9 , 9 9 8 5 , 5 3 6 8 3 , 0 9 4 8 8 , 9 1 9 8 3 , 1 7 5 9 4 , 0 9 4 8 8 , l a t o T n i t a L a c i r e m A h t r o N a c i r e m A l a t o T a i l a r t s u A r e h t O d n a r e h t O / e p o r u E w e N h t u o S r e h t o d n a a i l a r t s u A l d n a a e Z i a s A a i l a r t s u A S A T / C V I / T N D L Q W S N ) d e u n i t n o c ( s t n e m e t a t S 4 0 5 7, 7 9 4 8 9 , 6 0 4 2 3 , 9 4 2 5 3 , 4 1 6 2 , 2 7 4 4 , 7 7 7 4 6 7 6 , – – 1 7 8 4 , 1 6 8 5 , – – – – 1 6 8 5 , – – – – – – – – – – – – – – – – – – – – – – 9 4 3 3 , 9 5 1 1 , 8 5 1 4 , 5 2 0 1 , 0 8 5 6 , 8 1 3 2 , – – 2 6 2 2 , 9 9 2 3 1 , – 1 7 8 4 , l i i a c n a n F e h t o t s e t o N 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f 1 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F ) d e u n i t n o c ( E U N E V E R . 7 s e n i l e c i v r e s / s t c u d o r p r o a M j s t n e m e g n a r r a t n e m e e l i t l u M s e a s l t r a p d n a e n h c a M i D U A f o s d n a s u o h t n I i s e c v r e s f o g n i r e d n e R s e s a e l e p y t l e a S e m o c n i e s n e c L i n o i i t a p c i t r a p d n a l a t n e R 68 AINSWORTH GAME TECHNOLOGY 5 4 7 2 5 , 5 7 4 8 , 2 7 4 4 , 7 7 7 8 0 5 4 , 3 8 1 5 , 8 9 8 8 , 2 3 4 0 2 , 7 7 8 1 4 , 8 6 8 0 1 , 5 4 7 2 5 , 4 1 6 2 , 1 6 8 5 , 5 7 4 8 , – 2 7 4 4 , 2 7 4 4 , – 7 7 7 7 7 7 1 7 0 5 4 , 8 0 5 4 , 8 0 1 5 , 5 7 3 8 1 5 , 0 2 8 7 8 8 , 8 9 8 8 , 1 1 9 4 , 1 2 5 5 1 , 2 3 4 0 2 , e m i t n i i t n o p a t a d e r r e f s n a r t i s e c v r e s d n a s t c u d o r P e m i t r e v o d e r r e f s n a r t i s e c v r e s d n a s t c u d o r P n o i t i n g o c e r e u n e v e r f o g n m T i i 8. OTHER INCOME In thousands of AUD Royalties income Bad debts recovered Rent concessions Other income Gain on sale of property, plant and equipment 9. EXPENSES BY NATURE In thousands of AUD Employee benefits expense Sales commission expense Depreciation and amortisation expense Impairment of property, plant and equipment Cost of goods sold Legal expenses Evaluation and testing expenses Marketing expenses Provision for Mexican duties and other charges (Writeback) / impairment of trade receivables Impairment of right-of-use assets Computer and communications expenses Warranty expenses Duty charges License fees Property related expenses Travel and entertainment expenses Other expenses Note 2022 2021 26 27 Note 10 12,13,27 12 25 26 27 161 28 521 42 252 1,004 82 151 519 36 3,366 4,154 2022 2021 57,802 6,384 22,158 4,938 68,430 1,331 5,645 3,615 16,531 (1,541) 312 2,855 2,105 2,316 4,614 4,280 2,888 9,772 45,067 5,063 31,284 28,564 56,694 632 5,387 2,264 – 8,993 4,156 3,293 1,653 280 4,003 2,901 1,318 8,491 214,435 210,043 ANNUAL REPORT 2022 69 Notes to the Financial Statements (continued)for the year ended 30 June 202210. EMPLOYEE BENEFIT EXPENSES In thousands of AUD Wages and salaries Short-term incentives Contributions to defined contribution superannuation funds Decrease in liability for annual leave Increase / (decrease) in liability for long service leave Termination benefits Equity settled share-based payment transactions Note 2022 2021 52,779 41,293 22 22 1,128 3,146 (116) 280 458 127 354 3,015 (93) (170) 243 425 57,802 45,067 In FY22 there were $nil JobKeeper subsidies received by the Australian companies within the group (2021: $4,164 thousand) and $nil employment retention tax credits received by the US companies within the group (2021: $3,137 thousand). Government grants are recognised when there is reasonable assurance that they will be received, and the Group will comply with the conditions associated with the grant. Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic basis in the periods in which the expenses are recognised, as a reduction in the related expense. 11. FINANCE INCOME AND FINANCE COSTS In thousands of AUD Interest income Net foreign exchange gain Finance income Interest expense on financial liabilities Net foreign exchange loss Finance costs Net finance income / (costs) recognised in profit or loss Note 2022 2,819 8,225 11,044 (1,965) – (1,965) 9,079 2021 1,056 – 1,056 (2,401) (11,456) (13,857) (12,801) 70 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 202212. PROPERTY, PLANT AND EQUIPMENT In thousands of AUD Cost Balance at 1 July 2020 Re-classification of inventory to plant and equipment Re-classification of PPE Category Additions Disposals Effect of movements in foreign exchange Balance at 30 June 2021 Balance at 1 July 2021 Re-classification of inventory to plant and equipment Additions Disposals Effect of movements in foreign exchange Balance at 30 June 2022 Depreciation and Impairment Losses Balance at 1 July 2020 Depreciation charge for the year Impairment Loss Re-classification of PPE Category Disposals Effect of movements in foreign exchange Balance at 30 June 2021 Balance at 1 July 2021 Depreciation charge for the year Impairment Loss Disposals Effect of movements in foreign exchange Balance at 30 June 2022 Carrying Amounts At 1 July 2020 At 30 June 2021 At 30 June 2022 Note Land & buildings Plant & equipment Leasehold improvements Total 63,958 – – 5 (2,362) (5,572) 136,148 17,209 (45) 2,215 (9,314) (9,658) 4,244 – 45 – – (33) 204,350 17,209 – 2,220 (11,676) (15,263) 56,029 136,555 4,256 196,840 56,029 136,555 4,256 196,840 – 79 – 5,116 61,224 8,951 1,794 4,565 – – (824) 15,330 1,555 (18,860) 10,040 144,620 85,825 16,522 23,448 (42) (6,857) (6,360) – 69 – 36 15,330 1,703 (18,860) 15,192 4,361 210,205 2,140 373 551 42 – (23) 96,916 18,689 28,564 – (6,857) (7,207) 14,486 112,536 3,083 130,105 14,486 1,583 – – 1,410 17,479 55,007 41,543 43,745 112,536 9,700 4,920 (13,787) 8,830 122,199 50,323 24,019 22,421 3,083 259 18 – 35 3,395 2,104 1,173 966 130,105 11,542 4,938 (13,787) 10,275 143,073 107,434 66,735 67,132 9 13 9 13 Disposals in the table above includes sale of gaming machines previously under participation or rental agreements of $4,980 thousand (2021: $2,309 thousand) at net book value. The carrying amount of plant and equipment on participation and fixed rental leases is $17,788 thousand (2021: $18,047 thousand). Impairment loss of ($4,938) thousand (2021: ($28,564) thousand) recognised during the year relates to the recoverability of the carrying value of assets within the ‘Latin America’ and ‘Australia and Other’ cash generating units. See ‘Note 13 – Intangible assets’ for further details. ANNUAL REPORT 2022 71 Notes to the Financial Statements (continued)for the year ended 30 June 20228 2 3 2 , 3 6 9 0 3 1 , ) 3 6 5 4 1 , ( ) 9 3 1 6 , ( 9 8 5 2 1 1 , 6 3 8 3 , 9 8 5 2 1 1 , ) 6 3 9 4 , ( 4 7 8 5 , 3 6 3 7, 1 1 5 2 2 8 3 , 4 2 5 0 1 , ) 3 6 5 4 1 , ( ) 6 8 5 ( 0 0 6 3 3 , 1 1 2 9 , 0 0 6 3 3 , ) 6 3 9 4 , ( 5 3 9 0 1 8 8 3 , 8 3 7 2 9 , 9 8 9 8 7 , 3 5 5 8 7 , 6 3 1 1 , 2 1 9 6 1 , 2 8 3 0 2 , 3 8 5 1 , – – ) 8 9 ( 8 3 0 1 , 8 3 0 1 , – – 5 9 3 3 1 1 , – ) 7 ( 0 7 1 1 2 4 7 2 4 7 2 5 1 2 – 6 3 5 2 5 – – ) 3 7 4 1 , ( 9 3 4 5 1 , – – ) 0 4 9 ( 2 4 4 9 1 , 9 3 4 5 1 , 2 4 4 9 1 , – – 9 0 4 1 , 8 4 8 6 1 , – 4 3 1 6 , 9 6 4 1 , ) 4 4 5 ( 9 5 0 7, 9 5 0 7, 6 0 5 1 , – 5 2 7 0 9 2 9 , – – 9 9 8 1 4 3 0 2 , – ) 5 3 ( 5 2 9 5 , 4 8 9 1 , 4 7 8 7, 4 7 8 7, 5 8 6 1 , – 4 7 1 3 3 7 9 , – – – 3 8 5 1 , 3 8 5 1 , – – – 3 8 5 1 , – – – – – – – – – – 8 2 3 2 , 5 7 8 6 4 , ) 3 6 5 4 1 , ( – 0 4 6 4 3 , 6 3 8 3 , 0 4 6 4 3 , ) ) 6 3 9 4 , ( – 0 4 5 3 3 , 0 6 8 6 , 0 6 6 3 2 , 3 6 5 4 1 , ( – 7 5 9 5 1 , 5 0 8 5 , 7 5 9 5 1 , ) 6 3 9 4 , ( – – – 5 7 0 4 4 , ) 8 2 6 3 , ( 7 4 4 0 4 , 7 4 4 0 4 , – – 1 7 4 3 , 8 1 9 3 4 , – – – 6 3 4 2 , 6 3 4 2 , 6 3 4 2 , – – – 9 9 6 2 8 6 1 , 6 3 4 2 , 4 6 7 8 0 6 6 6 0 1 , 0 8 3 8 , 8 5 5 7, 8 7 7 0 1 , 7 5 4 4 1 , 8 6 5 1 1 , 8 0 6 0 1 , 3 8 5 1 , 3 8 5 1 , 3 8 5 1 , 5 1 2 3 2 , 3 8 6 8 1 , 4 1 7 6 1 , 9 3 6 1 4 , 1 1 0 8 3 , 2 8 4 1 4 , l a t o T s k r a m e d a r t & e c r o f k r o w & e r a w t f o s s t s o c e c n e c i l s t s o c l l i w d o o G e t o N s e m a n e d a r T i s p h s n o i t a e r l r e m o t s u C l & y g o o n h c e T a d a v e N t n e m p o e v e D l ) d e u n i t n o c ( s t n e m e t a t S l i i a c n a n F e h t o t s e t o N 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o f S T E S S A E L B G N A T N I I . 3 1 0 2 0 2 y u J 1 l t a e c n a a B l s n o i t i d d A t s o C D U A f o s d n a s u o h t n I 72 AINSWORTH GAME TECHNOLOGY f f o n e t t i r w d n a d e s i t r o m a y l l u f s t l e s s a e b g n a t n i I y c n e r r u c n g e r o i f n i s t n e m e v o m f o s t c e f f E 1 2 0 2 e n u J 0 3 t a e c n a a B l 1 2 0 2 y u J 1 l t a e c n a a B l s n o i t i d d A f f o n e t t i r w d n a d e s i t r o m a y l l u f s t e s s a e b g n a t n i l I y c n e r r u c n g e r o i f n i s t n e m e v o m f o s t c e f f E s e s s o l t n e m r i a p m i d n a n o i t a s i t r o m A 0 2 0 2 y u J 1 l t a e c n a a B l r a e y e h t r o f n o i t a s i t r o m A 2 2 0 2 e n u J 0 3 t a e c n a a B l f f o n e t t i r w d n a d e s i t r o m a y l l u f s t e s s a e b g n a t n l i I y c n e r r u c n g e r o i f n i s t n e m e v o m f o s t c e f f E 1 2 0 2 e n u J 0 3 t a e c n a a B l 1 2 0 2 y u J 1 l t a e c n a a B l r a e y e h t r o f n o i t a s i t r o m A f f o n e t t i r w d n a d e s i t r o m a y l l u f s t e s s a e b g n a t n i l I y c n e r r u c n g e r o i f n i s t n e m e v o m f o s t c e f f E 2 2 0 2 e n u J 0 3 t a e c n a a B l s t n u o m a g n y r r a C i 1 2 0 2 e n u J 0 3 t A 2 2 0 2 e n u J 0 3 t A 0 2 0 2 y u J 1 l t A Impairment testing for development costs In accordance with the Group’s accounting policies, the Group has evaluated whether the carrying amount of a CGU or group of CGUs exceeds the recoverable amount as at 30 June 2022 due to the presence of impairment indicators at reporting date. The four main CGUs or group of CGUs are: Development, Australia and other (comprised of Asia, New Zealand, South Africa, Europe and Online), North America and Latin America. The determination of CGUs for the purposes of testing development costs for impairment is consistent with last financial year. The Group has maintained that the most reasonable and consistent basis upon which to allocate development costs is to have the Group’s research and development function (‘Development CGU’) recharge product development costs to the Group’s other CGUs, which are in line with the Group’s geographic operating segments. The carrying amount of the Group’s development costs amounts to $16,714 thousand (2021: $18,683 thousand), comprising of $14,293 thousand (2021: $16,022 thousand) in development costs relating to product development and $2,421 thousand (2021: $2,661 thousand) in development costs relating to online development activities. Development costs include costs relating to products and online gaming that are not yet available for sale and as such their recoverable amount is assessed at the end of each reporting period. Product development costs are recharged from the Development CGU to individual CGUs, based on the forecasted sales revenue of each individual CGU. Other assets, consisting of intangible assets and property, plant and equipment, are allocated to the individual CGUs to which they relate. The Group has allocated goodwill and intangible assets on a consistent basis with last financial year. This includes allocation of goodwill arising from the acquisition of Nova Technologies in 2016 and MTD Gaming Inc. in 2020 which have been allocated to the North America CGU. There has been no movement in the carrying value of goodwill compared to 30 June 2020 other than foreign currency translation differences at reporting date. The Group’s corporate assets largely comprises of building facilities, IT infrastructure and manufacturing equipment. The allocation of the corporate assets was based on the usage pattern by each CGU. The allocation of goodwill, indefinite useful life intangible assets and other assets to the Group’s identified CGUs are as follows: CGUs Development North America CGUs Development North America 30 June 2022 Indefinite life intangible assets ‘$000 Capitalised development costs ‘$000 Other assets ‘$000 Recoverable amount ‘$000 – 1,583 16,714 – 37,459 56,704 66,752 256,156 30 June 2021 Indefinite life intangible assets ‘$000 Capitalised development costs ‘$000 Other assets ‘$000 Recoverable amount ‘$000 – 1,583 18,683 – 38,039 58,883 64,717 201,732 Goodwill ‘$000 – 41,482 Goodwill ‘$000 – 38,011 Headroom ‘$000 12,579 156,387 Headroom ‘$000 7,995 103,255 As at 30 June 2022, all assets within the Latin America CGU and Australia and other CGU have been fully impaired as a result of recoverable amount being lower than the carrying value. Details are outlined on the following page. Key assumptions used in determining the recoverable amount The recoverable amount of each CGU was estimated based on its value in use (“VIU”). VIU for each individual CGU was determined by discounting the future cash flows generated from continuing operations of that CGU over a five-year period. The key assumptions used when assessing the recoverable amount of each CGU are outlined as follows: Cost base: The cost base of FY23 and FY24 was most significantly impacted from FY22 due to existing inflationary pressures and business resuming operations to pre-COVID-19 pandemic level. This resulted in the 2-year average cost increases in Australia and other of 15.7%, North America of 28.1%, Latin America of 12.4% and Development of 21.2%. The key costs component consists of direct and indirect costs such as freight costs and wages and salaries. ANNUAL REPORT 2022 73 Notes to the Financial Statements (continued)for the year ended 30 June 2022INTANGIBLE ASSETS (continued) 13. Other key assumptions: CGUs Development Australia and other North America Latin America 30 June 2022 Average annual revenue growth rate(1) Pre-tax Discount rate Terminal growth rate Pre-tax Discount rate 30 June 2021 Average annual revenue growth rate 14.9% 13.4% 14.2% 20.4% 9.2%(2) 13.3% 10.6% 10.2%(3) 2.0% 2.0% 1.8% 4.0% 14.7% 14.3% 13.7% 20.4% 16.9% 13.5% 12.1% 31.9% Terminal growth rate 2.0% 2.0% 1.8% 4.0% (1) The 5-year forecast average annual revenue growth rates (FY23 to FY27) have been calculated based on FY22 revenue as the base year. When estimating the revenue growth rates, management has considered and incorporated the effects of the pandemic and the market conditions for each CGU. The change in macroeconomic conditions such as inflationary costs and supply chain disruptions brought upon by the pandemic have been incorporated when determining the recoverable amount for each of the CGUs. The revenue growth for each of the CGUs was determined based on the local market landscape and the expected recovery from the pandemic. (2) The notable change in average annual revenue growth rate by 770 basis points for the Development CGU compared to 30 June 2021 is based on a higher base year (FY22 revenue) used in determining the average annual revenue growth rate following from the first period recognition of the US exclusivity agreement with GAN Limited. It is expected that this agreement will generate a minimum guarantee of US$30.0 million over a five-year period which commenced in FY22. (3) The notable change in average annual revenue growth rate by 2,170 basis points for the Latin America CGU compared to 30 June 2021 is a result of higher FY22 revenue of $52,195 thousand compared to FY21 revenue of $18,285 thousand used as the base year when determining the average annual revenue growth rate. The improvement in the revenue in FY22 compared to FY21 is showing signs of recovery in this CGU from the adverse impact of the second wave of COVID-19 that occurred during FY21. Impairment charges recognised during the year Latin America CGU Since the onset of the pandemic in 2020, the Latin America CGU has been severely impacted as a large proportion of customers operating within Latin America, primarily Mexico, Argentina and Peru, were either closed or imposed with new restrictions for a prolonged period. Capital expenditure commitments in these Latin American jurisdictions were deferred in terms of both hardware and technology purchasing decisions due to the prolonged closure. In addition, the inflationary costs pressures resulting from global resources and supply chain shortages have also affected this CGU’s recoverable amount. Although the Group has seen significant recoveries in FY22 in the Latin America CGU with an improvement on revenue to $52,195 thousand in the current period compared to $18,285 thousand in FY21, the Group has considered the current inflationary challenges on the business and the ability to recover these from customers taking a longer term to value. The longer-term effects of COVID-19 on the Latin America economic conditions will impact on the timing of when cost inflation can be passed onto our customers, we have taken this into account in our assessment of the recoverability of this CGU. Incorporating the most recent available information and increasing costs pressures, the group recorded an impairment charge of $4,792 thousand (2021: $24,725 thousand) against the Latin America CGU leased assets, property, plant and equipment and right-of-use assets. This impairment charge has been recognised in the income statement under ‘Other expenses’. It is the Group’s view that this CGU will continue to recover post pandemic and the Group will continue to re-assess the recoverable value of this CGU in particular the terminal year cashflow (which contributes significantly to the recoverable amount calculation) and if and when the recoverable value exceeds the carrying value, the Group will reverse any previous impairment recorded. Australia and other CGU The emergence and subsequent rapid spread of the Delta strain of COVID-19 in June 2021 in Australia triggered various lockdowns across all states and territories, in particular Victoria and New South Wales which endured the longest and harshest restrictions. Targets for vaccination rates set across states and territories with the incentive of easing restrictions and ending lockdowns were met at the end of December 2021, resulting in re-opening of state borders and easing of trading restrictions, despite a new variant, Omicron, was confirmed in Australia in November 2021. This relaxation in restrictions contributed to an improved revenue for the Australian market in H2FY22 compared to H1FY22. However inflationary cost pressures resulting from COVID-19, geopolitical instability and global supply chain challenges have affected this CGU’s recoverable amount. 74 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 2022Although the Group has seen improvement in the industry activity levels, the cost and supply shortage pressures have prompted revision to the assumptions on costs within this CGU in future forecasted cashflows which has resulted in an impairment charge of $458 thousand (2021: $7,995 thousand) against property, plant and equipment and right-of-use assets. This impairment charge has been recognised in the income statement under ‘Other expenses’. Impairment testing on other CGU’s North America CGU As the forecasted recoverable amount exceeds carrying amount (“headroom”) of this CGU by $156,387 thousand, Management does not believe that there is a reasonable possible change in key assumptions which will result in a material impairment charge. Development CGU The recoverable amount of the Development CGU is significantly driven by the performance of the other CGUs’ and a change in key assumptions will impact both the geographical and the Development CGUs’. As the revenue projections of the Australia and other, North America and Latin America CGUs are also dependent on the success of products supplied by the Development CGU, impairment could also potentially arise at the Development CGU level if the other CGUs have deficiencies in their recoverable amounts compared to their carrying amounts. As at 30 June 2022, the Development CGU has a headroom of $12,579 thousand, compared to $7,995 thousand at 30 June 2021. The recoverable amount of this CGU has been affected by the increase in development costs recharged to other CGUs as a result of the higher development costs being incurred in the Development CGU. Given that this CGU’s recoverable amount is highly dependent on the performance of other CGUs, here are sensitivities performed on key assumptions that have been incorporated when forecasting the recoverable amount for the Development CGU: Assumptions Change in average annual revenue growth rate in North America CGU(1) Discount Rate Model Assumption Sensitivity Development CGU Headroom Impact ‘$000 Triggers Impairment for Development CGU 10.6% + 200 basis points - 200 basis points 14.9% + 100 basis points - 100 basis points + $1,378 - $1,455 - $7,332 + $9,000 No No No No (1) As the North America CGU is the largest contributor to the cash inflows for the Development CGU, a change in the average annual revenue growth rate in North America CGU is determined to be more sensitive to the Development CGU’s recoverable amount compared to a change in the average annual revenue growth rate assumptions in Australian and Other and Latin America CGU’s. This sensitivity assumes the specific assumption moves in isolation, whilst all other assumptions are held constant. In reality, a change in this assumption may accompany a change in another assumption. In addition, for all CGUs, whilst the achievement of forecast revenue growth rates is dependent on the success of current strategic initiatives, market conditions, improved product performance, a change in implemented product development and new hardware configurations release, Management, based on historical experience and industry specific factors, has reviewed and assessed that forecast revenue growth rates are expected to be achieved. 14. DEFERRED INCOME The carrying value of deferred income in the consolidated statement of financial position as at 30 June 2022 predominantly relates to the execution of a 5-year integration and distribution agreement with GAN Limited (“GAN”) on 1 July 2021 whereby the Group provides GAN with the exclusive use of current and future Ainsworth real money online game assets within the U.S. for a minimum guaranteed consideration of US$30 million. It is expected that as payments are received, these payments are recognised as deferred income and will be amortised over the life of the contract, subject to meeting the Group’s performance obligations and revenue recognition policies. As at 30 June 2022, of the $10,111 thousand (Current: $9,446 thousand / Non-current: $665 thousand) carrying value recognised in deferred income, $9,166 thousand (30 June 2021: $nil) relates to this GAN agreement. ANNUAL REPORT 2022 75 Notes to the Financial Statements (continued)for the year ended 30 June 202215. TAXES Current tax expense In thousands of AUD Tax recognised in profit or loss Current tax expense Current year Prior year adjustments Recognition of R&D tax credits Deferred tax benefit Origination and movement of timing differences Total income tax (expense) / benefit Reconciliation of effective tax rate In thousands of AUD Profit / (loss) before income tax Income tax expense using the Company’s domestic tax rate Effective tax rates in foreign jurisdictions Non-deductible expenses Non-assessable income and concessions Prior year adjustments 2022 2021 (5,380) 409 537 (4,434) 382 (4,052) 2022 2021 (30.00%) 4.89% (34.59%) 31.47% 2.59% (25.64%) 15,805 (4,741) (30.00%) 773 (5,467) 4,974 409 (4,052) (0.57%) 23.68% (3.00%) 0.16% (9.73%) (720) (87) 402 (405) 6,166 5,761 (59,170) 17,751 337 (14,013) 1,778 (92) 5,761 In thousands of AUD Gross deferred tax assets Employee benefits Provisions Property, plant and equipment Unrealised foreign exchange gains Tax loss carry carry-forwards Other Gross deferred tax assets Gross deferred tax liabilities Property, plant and equipment Unrealised foreign exchange losses Other Net deferred tax assets Movements Balance at the start of the year Credited to profit or loss Balance at the end of the year 76 AINSWORTH GAME TECHNOLOGY 2022 2021 3,025 5,337 285 – 1,923 9,439 2,748 4,056 324 2,191 1,876 8,158 20,009 19,353 (3,286) (2,317) (2,538) 11,868 11,486 382 11,868 (6,141) – (1,726) 11,486 4,917 6,569 11,486 Notes to the Financial Statements (continued)for the year ended 30 June 2022The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Judgement is required in determining the Group’s provision for income taxes and carrying value of deferred tax assets. There are certain transactions and calculations undertaken during the ordinary course of business for which the ultimate determination is uncertain. The Group estimates its tax liabilities based on the Group’s understanding of relevant tax laws. The deductible temporary differences and tax losses do not expire under current tax legislation. R&D non-refundable tax offset credits are available to be applied against income tax payable in future years and do not expire under current tax legislation. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis, or their tax assets and liabilities will be realised simultaneously. A reassessment of the carrying amount of all deferred tax assets is performed at each reporting period. Management has assessed that the carrying amount of the deferred tax assets of $11,868 thousand should be recognised as management considers that it is probable that future taxable profits would be available against which they can be utilised based on current estimates on the Group’s future trading performance, incorporating the impacts of post COVID-19 pandemic and the change in global macroeconomic conditions such as rising inflation rates and interest rates on future near-term profitability. Where the final outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. 16. INVENTORIES In thousands of AUD Raw materials and consumables Finished goods Stock in transit Inventories stated at the lower of cost and net realisable value 2022 2021 37,623 25,673 5,005 68,301 29,820 25,049 1,247 56,116 During the year ended 30 June 2022 raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales amounted to $65,165 thousand (2021: $45,095 thousand). A re-classification from inventory to property, plant and equipment of $15,330 thousand (2021: $17,209 thousand) was recorded to reflect gaming products for which rental and participation agreements were entered into during the year. During the year ended 30 June 2022, the write down of inventories to net realisable value amounted to $5,210 thousand (2021: $6,517 thousand). The write down is included in cost of sales. 17. RECEIVABLES AND OTHER ASSETS In thousands of AUD Current Trade receivables Less impairment losses Other assets Amount receivable from shareholder-controlled entities Non-current Trade receivables Note 2022 2021 26 29 90,465 (11,051) 79,414 3,675 782 83,871 91,538 (11,719) 79,819 122 2,560 82,501 28,873 28,873 33,944 33,944 The Group’s provision for doubtful debts was $11,051 thousand as at 30 June 2022 which is materially consistent with the prior corresponding period (30 June 2021: $11,719 thousand). ANNUAL REPORT 2022 77 Notes to the Financial Statements (continued)for the year ended 30 June 202217. RECEIVABLES AND OTHER ASSETS (continued) Information about the Group’s exposure to credit and market risks and impairment losses for trade and other receivables is included in Note 26. Leasing arrangements Included in trade receivables are receivables from gaming machines that have been sold under finance lease arrangement. The lease payments receivable under these contracts is as follows: In thousands of AUD 2022 2021 Minimum lease payments under finance leases are receivable as follows: Less than one year One to two years Two to three years Unearned finance income as follows: Less than one year One to two years Two to three years The present value of minimum lease payments and lease receivables classification is as follows: Less than one year One to two years Two to three years 18. CASH AND CASH EQUIVALENTS In thousands of AUD Bank balances Cash deposits Cash and cash equivalents in the statement of cash flows 8,162 5,958 1,360 15,480 101 14 – 115 8,061 5,944 1,360 15,365 3,608 1,168 – 4,776 179 46 – 225 3,429 1,122 – 4,551 2022 2021 42,787 7,531 50,318 40,610 1,783 42,393 The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 26. 78 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 202218A. RECONCILIATION OF CASH FLOWS FROM OPERATING ACTIVITIES In thousands of AUD Cash flows from operating activities Profit / (Loss) for the period Adjustments for: Rent concessions Equity-settled share-based payment transactions Net finance (income) / costs Depreciation Impairment losses on trade receivables and provision for obsolescence Amortisation of intangible assets Impairment on LATAM and Australia CGU Provision for Mexican duty and other charges Gain on sale of property, plant and equipment Unrealised currency translation movements Income tax expense / (benefit) Operating profit before changes in working capital & provisions Change in trade and other receivables Change in inventories Net transfers between inventory and leased assets Change in other assets Change in trade and other payables Change in provisions and employee benefits Cash generated from operations Interest received Income taxes (paid) / refunded Net cash from operating activities Note 2022 2021 11,753 (53,409) 8 10 11 12,27 13 13 15 (521) 127 (9,079) 12,947 3,669 9,211 5,250 16,531 (252) (11,214) 4,052 42,474 4,307 (11,893) (7,724) 1,876 3,428 17,607 50,075 2,809 (1,548) (519) 425 12,801 20,760 15,510 10,524 32,720 – (3,366) 6,658 (5,761) 36,343 (18,863) 22,181 (14,884) (7,769) 4,132 (1,312) 19,828 1,052 1,367 51,336 22,247 ANNUAL REPORT 2022 79 Notes to the Financial Statements (continued)for the year ended 30 June 202219. CAPITAL & RESERVES (a) Share capital In thousands of shares In issue at 1 July Shares issued during the year In issue at 30 June – fully paid Ordinary shares 2022 2021 336,794 336,794 – – 336,794 336,794 (i) Ordinary Shares The Company does not have authorised capital or par value in respect of its issued shares. All issued shares are fully paid. All shares rank equally with regard to the Company’s residual assets. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. Issue of ordinary shares During the year, no ordinary shares were issued. (b) Nature and purpose of reserve (i) Equity compensation reserve The equity compensation reserve represents the expensed cost of share options issued to employees. Fair value reserve (ii) The fair value reserve comprises the cumulative net change in fair value of related party loans and borrowings where interest is charged at below market rates. (iii) Translation reserve The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign operations where their functional currency is different to the presentation currency of the reporting entity. (iv) Profits reserve This reserve is comprised wholly of the profits generated by the Australian entity which would be eligible for distribution as a frankable dividend. (c) Dividends No dividends were paid by the Company during the year. During the year and subsequent to the reporting date, no dividend was proposed by the board of directors (2021: nil). The amount of to shareholders (2021: $28,017 thousand). The ability to utilise the franking credits is dependent upon the ability to declare dividends. for subsequent financial years franking credits available is $28,017 thousand 80 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 202220. EARNINGS PER SHARE Basic earnings per share The calculation of basic earnings per share at 30 June 2022 was based on the profit attributable to ordinary shareholders of $11,753 thousand (2021: ($53,409) thousand loss) and a weighted average number of ordinary shares outstanding as at 30 June 2022 of 336,794 thousand (2021: 336,794 thousand) calculated as follows: Profit / (loss) attributable to ordinary shareholders In thousands of AUD Profit / (loss) for the period Profit / (loss) attributable to ordinary shareholders Weighted average number of ordinary shares In thousands of shares Issued ordinary shares at 1 July Effect of shares issued Weighted average number of ordinary shares at 30 June Total basic earnings per share attributable to the ordinary equity holders of the Company Note Note 19 2022 11,753 11,753 2021 (53,409) (53,409) 2022 2021 336,794 336,794 – – 336,794 336,794 $0.03 ($0.16) Diluted earnings per share The calculation of diluted earnings per share at 30 June 2022 was based on the profit attributable to ordinary shareholders of $11,880 thousand (2021: ($52,984) thousand loss) and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of 344,532 thousand (2021: 336,794 thousand), calculated as follows: Profit / (loss) attributable to ordinary shareholders (diluted) In thousands of AUD Note 2022 2021 Profit / (loss) attributable to ordinary shareholders Amortisation of share-based payment arrangement Profit / (loss) attributable to ordinary shareholders (diluted) Weighted average number of ordinary shares (diluted) In thousands of shares Weighted average number of ordinary shares at 30 June Effect of rights and options on issue Weighted average number of ordinary shares (diluted) at 30 June Total diluted earnings per share attributable to the ordinary equity holders of the Company 11,753 (53,409) 127 425 11,880 (52,984) Note 19 2022 2021 336,794 336,794 7,738 – 344,532 336,794 $0.03 ($0.16) As at 30 June 2022, nil rights and options (2021: 9,004 thousand options) were excluded from the diluted weighted average number of ordinary shares calculation because their effect would have been anti-dilutive. ANNUAL REPORT 2022 81 Notes to the Financial Statements (continued)for the year ended 30 June 202221. LOANS & BORROWINGS This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group’s exposure to interest rate, foreign currency and liquidity risk, see Note 26. In thousands of AUD Current Insurance premium funding Non-Current Secured bank loan 2022 2021 52 52 – – 52 52 37,240 37,240 Terms and debt repayment schedule Terms and conditions of outstanding loans were as follows: In thousands of AUD Nominal interest rate Year of maturity Face value Carrying amount Face value Carrying amount 2022 2021 Insurance premium funding 3.38% Secured bank loan LIBOR + 3.00% 2022 2026 Total interest-bearing liabilities 53 – 53 52 – 52 53 37,240 37,293 52 37,240 37,292 The Group’s secured bank loan relates to a US$32.5 million facility with the Western Alliance Bancorporation (WAB) through the Company’s US-based operating subsidiary, Ainsworth Game Technology Inc. During the year, the Group repaid $38.6 million of the loan. All financial covenants were met throughout the year. Insurance premium funding Finance lease liabilities of the Group are payable as follows: In thousands of AUD Less than one year Future minimum lease payments 53 53 2022 Interest 1 1 Present value of minimum lease payments Future minimum lease payments 52 52 53 53 2021 Interest 1 1 Present value of minimum lease payments 52 52 82 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 202222. EMPLOYEE BENEFITS In thousands of AUD Current Accrual for salaries and wages Accrual for short-term incentive plan Liability for annual leave Liability for long service leave Non-Current Liability for long service leave 2022 2021 786 890 4,174 3,488 9,338 464 464 590 347 4,290 3,179 8,406 493 493 23. SHARE-BASED PAYMENTS At 30 June 2022, the Group had the following share-based payment arrangements: (a) 24 June 2022 Performance Rights (i) Description of programme On 24 June 2022, the Group granted to eligible employees and executives the opportunity to participate in the grant of performance rights over ordinary shares in Ainsworth Game Technology Limited, under the Ainsworth Game Technology Limited Rights Share Trust (RST). To be eligible to participate in the RST, the employees were selected by the directors and reviewed by the Remuneration and Nomination Committee. The performance rights were granted at $nil consideration or exercise price however are dependent on service conditions, vesting conditions and share price performance hurdles. The performance rights convert to ordinary shares of the Company on a one-for-one basis with no voting or dividend rights until this conversion. The total issued performance rights under this programme were 8,900,000 units. As at 30 June 2022, all of the total issued performance rights were outstanding. The key terms and conditions related to the grants under the programme are as follows, with all rights to be settled by the physical delivery of shares. Employee entitled Rights granted to key management personnel Number of instruments issued at grant date 5,100,000 Rights granted to senior and other employees 3,800,000 Total performance rights granted 8,900,000 Vesting conditions Contractual life of rights Service conditions and performance hurdles from grant date as per RST below Service conditions and performance hurdles from grant date as per RST below 5 years 5 years Performance hurdles – Tranche 1 - 25% will vest if the VWAP for 20 consecutive trading days preceding to 30 June 2024 is equal or greater than A$2.00. – Tranche 2 - 25% will vest if the VWAP for 20 consecutive trading days preceding to 31 December 2024 is equal or greater than A$2.40. – Tranche 3 - 50% will vest if the VWAP for 20 consecutive trading days preceding to 30 June 2025 is equal or greater than A$2.76. ANNUAL REPORT 2022 83 Notes to the Financial Statements (continued)for the year ended 30 June 202223. SHARE-BASED PAYMENTS (continued) The Rights granted are cumulative whereby should the performance hurdles not be met at the respective vesting dates, the grant relating to these tranches will be re-tested at the next applicable performance vesting date subject to higher performance conditions. If the performance conditions at the end of the next applicable performance period are satisfied, then the Rights for the current performance period and any non-vested Rights from prior performance periods will vest. The last date whereby all tranches can be re-tested is on the final vesting date, being 30 June 2025, at which time any unvested Rights will lapse. (ii) Measurement of fair value The fair value of the Rights granted on 24 June 2022 under the RST are as follows: Fair value determined at grant date Tranche 1 - Vesting date 30 June 2024 Tranche 2 - Vesting date 31 December 2024 Tranche 3 - Vesting date 30 June 2025 Fair value per right $0.3717 $0.3476 $0.3136 The fair value of the Rights has been measured using the Monte Carlo expected valuation method. The inputs used in the measure of the fair value at grant date of the equity settlement shared based payment plan under the RST were as follows: Share price at grant date Exercise price Expected volatility Expected life Expected dividend yield Risk-free interest rate (based on Treasury Bonds) RST plan $0.995 Nil 62.4% 5 years Nil 2.92% The volatility rate has been determined using historical data from the three years immediately prior to the grant date. This has been based on an evaluation of the historical volatility of the Company’s compounded share price returns. (b) 30 August 2019 Share options (i) Description of programme On 30 August 2019, the Group offered to eligible employees the opportunity to participate in a share option over ordinary shares in Ainsworth Game Technology Limited, under the Ainsworth Game Technology Limited Option Share Trust (OST). To  be eligible to participate in the OST, the employees were selected by the directors and reviewed by the Remuneration and Nomination Committee. The OST provides for employees an option to purchase allocated shares at the valuation price at grant date. Each option is convertible to one ordinary share. Option holders have no voting or dividend rights. On conversion from option to ordinary shares, the issued shares will have full voting and dividend rights. The ability to exercise the right is conditional on the continuing employment of the participating employee. The total issued share options under this programme were 11,062,029 units. As at 30 June 2021, 9,004,414 share options were outstanding (30 June 2020: 9,898,621). During the year, 1,437,093 options were cancelled due to termination of employees with 7,567,321 share options outstanding as at 30 June 2022. 84 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 2022The key terms and conditions related to the grants under the programme are as follows, with all options to be settled by the physical delivery of shares. Employee entitled Options granted to key management personnel Number of instruments issued at grant date 878,779 Options granted to senior and other employees 10,183,250 Total share options OST 11,062,029 Vesting conditions Contractual life of options Four years’ service and performance hurdles from grant date as per OST below Four years’ service and performance hurdles from grant date as per OST below 5 years 5 years Performance hurdles – Tranche 1 - 25% will vest if the VWAP for 20 days preceding to 30/08/2021 is equal to or greater than $1.10. – Tranche 2 - 25% will vest if the VWAP for 20 days preceding to 30/08/2022 is equal to or greater than $1.32. – Tranche 3 - 50% will vest if the VWAP for 20 days preceding to 30/08/2023 is equal to or greater than $1.58. The share options granted are cumulative whereby should the performance hurdles not be met at the respective vesting dates, the grant relating to these tranches will be re-tested at the next applicable performance vesting date subject to higher performance conditions. If the performance conditions at the end of the next applicable performance period are satisfied, then the share options for the current performance period and any non-vested share options from prior performance periods will vest. The last date whereby all tranches can be re-tested is on the final vesting date, being 30 August 2023, at which time any unvested share options will lapse. No share options were vested at the first vesting date of 30 August 2021. (ii) Measurement of fair value The fair value of the share options granted on 30 August 2019 under the OST are as follows: Fair value determined at grant date Tranche 1 - Vesting date 30 August 2021 Tranche 2 - Vesting date 30 August 2022 Tranche 3 - Vesting date 30 August 2023 Fair value per option $0.1327 $0.1282 $0.1229 The fair value of the share option has been measured using the Black-Scholes-Merton formula. The inputs used in the measure of the fair value at grant date of the equity settlement shared based payment plan under the OST were as follows: Share price at grant date Exercise price Expected volatility Expected life Expected dividends Risk-free interest rate (based on Treasury Bonds) OST plan $0.737 $0.73 27.1006% 5 years 3.38% 0.6940% The expected volatility has been based on an evaluation of the historical volatility of the Company’s share price, particularly over the historical period commensurate with the expected term. The volatility rate under this option has been determined based on the daily share price returns over the 5-year period leading up to the date of valuation. ANNUAL REPORT 2022 85 Notes to the Financial Statements (continued)for the year ended 30 June 202224. TRADE AND OTHER PAYABLES In thousands of AUD Current Trade payables Other payables and accrued expenses Deferred consideration on MTD Gaming Inc acquisition Amount payable to shareholder-controlled entities 29 Non-Current Deferred consideration on MTD Gaming Inc acquisition Note 2022 2021 15,867 16,435 3,829 122 15,932 14,430 3,547 848 36,253 34,757 3,702 3,702 6,472 6,472 The deferred consideration on MTD Gaming Inc. acquisition as outlined above relates to an asset acquisition made on 9 March 2020 and is subject to meeting gross profit targets in relevant markets determined at the time of acquisition and this consideration is payable at any time before 30 June 2024. Based on the current projections, it is expected that the deferred consideration will be payable in the relevant periods where those set targets are achieved. 25. PROVISIONS In thousands of AUD Balance at 1 July 2021 Provisions made during the year Provisions used during the year Balance at 30 June 2022 Service/ warranties 802 2,105 (1,988) 919 Mexican Tax Administration Service (“SAT”) – 17,419 – Legal 31 1,597 (1,614) Total 833 21,121 (3,602) 14 17,419 18,352 A provision has been established in relation to probable outcomes arising from the current audit and review by the Mexican Tax Administration Service (“SAT”) on import duties of Ainsworth Gaming Machines for calendar years 2015 to 2017. The outcome of the Company’s submission to prove interdependency of software with its hardware is in progress. Accordingly, the Company has recorded a provision of $17,419 thousand which includes estimated unpaid duty and other associated charges. When determining the provision, the Group applied the ‘expected value approach’ as per AASB 137 which incorporates the best estimates of the probable outcomes and the associated exposure for these outcomes. Judgement was required to determine the probability of the outcome and to make a reliable estimate of the potential obligation and the timing of the outflow that may arise. The Group has recognised a provision using the Group’s best estimate of the outcome and estimated expenditure required to settle the obligation. The corresponding expense recorded for this provision has been recognised in the Statement of Profit or Loss and Other Comprehensive Income under ‘Other expenses’. 86 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 202226. FINANCIAL INSTRUMENTS (a) Credit risk (i) Exposure to credit risk Trade and other receivables The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was: In thousands of AUD Receivables Note 17 Carrying amount 2022 2021 109,069 109,069 116,323 116,323 The Group’s gross maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: In thousands of AUD Australia North America Latin America Europe New Zealand Asia 2022 15,447 33,804 66,791 1,924 289 1,865 2021 13,041 40,419 68,080 2,683 2,209 1,610 120,120 128,042 The Group’s concentration of credit risk arises from its two most significant receivable amounts represented by customers in Latin America. They account for $5,722 thousand (2021: $1,189 thousand) and $5,042 thousand (2021: $4,941 thousand) of the trade receivables carrying amount at 30 June 2022 respectively. Cash and cash equivalents The Group held cash of $42,787 thousand at 30 June 2022 (2021: $40,610 thousand) and $7,531 thousand of cash deposits at 30 June 2022 (2021: $1,783 thousand), which represents its maximum credit exposure on these assets. The cash and cash deposits are held with bank and financial institution counterparts, which are rated AA- to A-, based on rating agency Standard & Poor ratings. Impairment losses on trade receivables Latin American region customers remain to have the highest concentrated risk by geographic region for the Group as at 30 June 2022 due to the nature of credit term offerings which typically entails extended payment terms and economic conditions coupled with pro-longed COVID-19 lockdowns and restrictions. However, as Latin America market reopens and most customers have been able to resume operations to more normalised levels and recommencing payments to the Group; Management reassessed its expected credit loss matrix provision to incorporate the improvements experienced in this region. North America which is deemed to have a medium risk experienced similar recoveries and as such were also subject to the same reassessment in the provision matrix. The reassessment resulted in improved loss rates and a material derecognition of net impairment losses of $1,541 thousand for trade receivables predominately relating to the two geographical regions mentioned above. The Australia & Other risk remained low and consistent with prior year. ANNUAL REPORT 2022 87 Notes to the Financial Statements (continued)for the year ended 30 June 202226. FINANCIAL INSTRUMENTS (continued) In thousands of AUD Geographical region Australia & Other North America Latin America In thousands of AUD Geographical region Australia & Other North America Latin America 2022 Debtor Balance 19,525 33,804 66,791 120,120 2021 Debtor Balance 19,543 40,419 68,080 128,042 Loss rate 8.0% 3.6% 12.4% Loss rate 7.7% 4.2% 12.5% The movement in the allowance for impairment in respect of trade receivables during the year was as follows: In thousands of AUD Balance at 1 July Impairment loss written off Provision during the year Reversal of provision Bad debts recovered Effect of exchange rate fluctuations Balance at 30 June Impairment loss allowance under AASB 9 1,567 1,212 8,272 11,051 Impairment loss allowance under AASB 9 1,507 1,710 8,502 11,719 2021 6,249 (2,796) 8,993 – (151) (576) 2022 11,719 (79) – (1,541) (28) 980 11,051 11,719 Based on historic default rates and current repayment plans in place, the Group believes that apart from the above, no further impairment is necessary in respect of trade receivables not past due or on amounts past due as these relate to known circumstances that are not considered to impact collectability. The allowance for impairment losses in respect of receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible; at that point the amounts are considered irrecoverable and are written off against the financial asset directly. 88 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 2022(b) Liquidity risk The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements: 30 June 2022 In thousands of AUD Carrying amount Contractual cash flows 6 mths or less 6-12 mths 1-5 years 5 years or above Non-derivative financial liabilities Insurance premium funding 52 (53) Lease liabilities Secured bank loan Trade and other payables 13,940 (16,810) – 39,955 53,947 – (39,955) (56,818) (53) (1,361) – (36,253) (37,667) – – – (1,325) (9,552) (4,572) – – – (3,702) – – (1,325) (13,254) (4,572) It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at significantly different amounts. 30 June 2021 In thousands of AUD Non-derivative financial liabilities Insurance premium funding Lease liabilities Secured bank loan Trade and other payables Carrying amount Contractual cash flows 6 mths or less 6-12 mths 1-5 years 5 years or above 52 15,356 37,240 42,073 94,721 (53) (15,356) (37,240) (42,073) (94,722) (53) (921) – (35,601) (36,575) – (903) – – – – (7,151) (6,381) (37,240) (6,472) – – (903) (50,863) (6,381) (c) Currency Risk The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the AUD. The Group monitors and assesses under its Treasury Risk policy and facilities available whether hedging of all trade receivables and trade payables denominated in a foreign currency from time to time is considered appropriate. Exposure to currency risk (i) The Group’s significant exposures to foreign currency risk at balance date were as follows, based on notional amounts: In thousands of AUD Trade and other receivables Secured bank loan Trade and other payables USD 94,382 – (24,064) 2022 Euro 432 – (1) 2021 NZD USD Euro NZD 282 100,124 1,619 1,070 – – (37,240) – (25,821) (329) – – Net exposure in statement of financial position 70,318 431 282 37,063 1,290 1,070 ANNUAL REPORT 2022 89 Notes to the Financial Statements (continued)for the year ended 30 June 202226. FINANCIAL INSTRUMENTS (continued) The following significant exchange rates applied during the year: USD Euro NZD Average rate Reporting date spot rate 2022 2021 2022 2021 0.7259 0.6450 1.0668 0.7467 0.6260 1.0742 0.6889 0.6589 1.1088 0.7518 0.6320 1.0745 (ii) Sensitivity analysis In managing currency risks the Group aims to reduce the impact of short-term fluctuations on the Group earnings. Over the longer-term, however, permanent changes in foreign exchange will have an impact on profit or (loss). A 10 percent strengthening of the Australian dollar against the following currencies at 30 June 2022 would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. Effect In thousands of AUD 30 June 2022 USD Euro NZD 30 June 2021 USD Euro NZD Equity Profit or (loss) (20,771) (10,423) (39) (26) (39) (26) (18,048) (9,100) (117) (97) (117) (97) A 10 percent weakening of the Australian dollar against the following currencies at 30 June 2022 would have increased / (decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables remain constant. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. Effect In thousands of AUD 30 June 2022 USD Euro NZD 30 June 2021 USD Euro NZD 90 AINSWORTH GAME TECHNOLOGY Equity Profit or (loss) 30,839 12,740 48 31 48 31 27,503 11,123 143 119 143 119 Notes to the Financial Statements (continued)for the year ended 30 June 2022(d) Fair Values The carrying amount of the financial instruments approximate to fair value. Estimates of fair values (i) The methods used in determining the fair values of financial instruments are discussed in Note 4. Interest rates used for determining fair value (ii) The interest rates used to discount estimated cash flows, where applicable, are based on the government yield curve as at 30 June 2022 plus an adequate constant credit spread and are as follows: Receivables Secured bank loan Insurance premium funding Leases 2022 2021 6.00% 3.30% - 6.00% LIBOR + 3.00% LIBOR + 3.50% 3.38% 5.19% 1.27% 5.19% Interest rate risk (e) The Group does not account for any fixed-rate financial assets or all financial liabilities, excluding secured bank loan, at fair value through profit and loss. Therefore, a change in the interest rate does not have an impact to the Group’s profit and loss. As there is no drawdown from the secured bank loan, a change in the interest rate will not have an impact to the Group’s profit and loss. 27. LEASES (a) Leases as lessee (AASB 16) The Group leases a number of warehouses and office facilities. The leases run for a period of 1-10 years, with an option to renew the lease after that date. Lease payments are increased every year either by annual increases of 2-4%, or by market rental reviews at stipulated dates. None of the leases include contingent rentals. The warehouse and office facilities were entered into many years ago as combined leases of land and buildings. The Group leases plant and equipment. The leases typically run for a period of 5 years. The Group leases other IT equipment with contract terms of one to three years. These leases are short-term and/or of low value items. The Group has elected not to recognise right-of-use assets and lease liabilities for these leases. Information about leases for which the Group is a lessee is presented as follows. (i) Right-of-use assets In thousands of AUD Written down value Balance at 1 July 2020 Additions to right-of-use assets Disposals to right-of-use assets Depreciation charge for the year Impairment loss for the year Effect of movements in foreign exchange Balance at 30 June 2021 Note Land & Buildings Plant and Equipment Total 9 15,454 296 15,750 329 (356) (1,976) (4,094) (20) 9,337 – – (95) (62) (1) 138 329 (356) (2,071) (4,156) (21) 9,475 ANNUAL REPORT 2022 91 Notes to the Financial Statements (continued)for the year ended 30 June 2022Note Land & Buildings Plant and Equipment 9 9,337 513 – (1,358) (312) (21) 8,159 138 – – (47) – – 91 Total 9,475 513 – (1,405) (312) (21) 8,250 Note Land & Buildings Plant and Equipment Total (16,117) (329) 369 1,903 (773) 476 25 (297) (773) (4) 139 (18) 43 – (16,414) (1,102) 365 2,042 (791) 519 25 8 (14,446) (910) (15,356) Note Land & Buildings Plant and Equipment Total (14,446) (910) (15,356) (513) 4 1,924 (737) 521 (21) – 5 253 (20) – – (513) 9 2,177 (757) 521 (21) (13,268) (672) (13,940) 8 27. LEASES (continued) In thousands of AUD Balance at 1 July 2021 Additions to right-of-use assets Disposals to right-of-use assets Depreciation charge for the year Impairment loss for the year Effect of movements in foreign exchange Balance at 30 June 2022 (ii) Lease Liabilities In thousands of AUD Outstanding Liabilities Balance at 1 July 2020 Additions of lease liabilities Disposals of lease liabilities Payments made Interest expense Rent concessions Effects of movements in foreign exchange Balance at 30 June 2021 In thousands of AUD Balance at 1 July 2021 Additions of lease liabilities Disposals of lease liabilities Payments made Interest expense Rent concessions Effects of movements in foreign exchange Balance at 30 June 2022 92 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 2022Maturity analysis – contractual undiscounted cash flows The table below presents the contractual undiscounted cash flows associated with the Group’s lease liabilities, representing principal and interest. The figures will not necessarily reconcile with the amount disclosed in the consolidated statement of financial position. In thousands of AUD Less than one year One to five years More than five years 2022 2,686 9,552 4,572 2021 2,538 9,181 6,775 Total undiscounted lease liabilities at 30 June 16,810 18,494 Current Non-current Lease liabilities included in the consolidated statement of financial position (iii) Amounts recognised in profit or loss In thousands of AUD Interest on lease liabilities Rent concessions recognised in profit and loss Depreciation charge for the year 2,035 11,905 13,940 2022 (757) 521 1,824 13,532 15,356 2021 (784) 519 (1,405) (2,071) Expenses relating to leases of low-value assets, excluding short-term leases of low value assets (63) (70) (iv) Amounts recognised in statement of cash flows In thousands of AUD Total cash outflow for leases 2022 2021 (2,177) (1,958) (v) Extension options Some property leases contain extension options exercisable by the Group up to one year before the end of the non-cancellable contract period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options. Management can only be reasonably certain on leases that will critically affect business operations and will require longer period of planning shall a change in lease location be considered. The most material lease for the Group relates to the Group’s facility in Sydney, Australia and it was determined that it is reasonably certain that the lease will be extended for a further five years upon expiry of its initial term on 30 June 2024. The Group also reassesses whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control. The Group has estimated that the potential future lease payments, should it exercise the extension options, would result in an increase in lease liability of $7,507 thousand (2021: $6,542 thousand). ANNUAL REPORT 2022 93 Notes to the Financial Statements (continued)for the year ended 30 June 202228. CAPITAL AND OTHER COMMITMENTS In thousands of AUD Plant and equipment Contracted but not yet provided for and payable: Within one year Employee compensation commitments Key management personnel 2022 2021 1,600 416 Commitments under non-cancellable employment contracts not provided for in the financial statements and payable: Within one year 1,275 1,060 29. RELATED PARTIES The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period: Non-executive Directors Current Mr DE Gladstone Mr GJ Campbell Mr CJ Henson Executives Current Mr HK Neumann (Chief Executive Officer, Ainsworth Game Technology Limited) – appointed in October 2021 Mr ML Ludski (Chief Financial Officer and Company Secretary, Ainsworth Game Technology Limited) Mr D Bollesen (Chief Technology Officer (CTO), Ainsworth Game Technology Limited) – commenced from October 2021 as Chief Product Officer, and appointed as CTO effective from 1 January 2022 Mr HK Neumann (Former – Non-executive Director from July 2021, till appointed as CEO in October 2021) – Resigned as director on 21 December 2021 Mr R Comstock (Chief Operating Officer, Ainsworth Game Technology Limited) – classified as KMP effective from 1 January 2022 (a) Key management personnel compensation The key management personnel compensation included in ‘employee benefit expenses’ (see Note 10) is as follows: Mr V Bruzzese (General Manager Technical Services, Ainsworth Game Technology Limited) – ceased as KMP effective from 1 January 2022 In AUD Short-term employee benefits Post-employment benefits Share based payments Other long-term benefits Termination benefit 94 AINSWORTH GAME TECHNOLOGY 2022 2021 3,045,062 2,084,180 235,145 179,678 (17,353) 59,650 200,620 125,929 360,500 – 3,823,974 2,449,437 Notes to the Financial Statements (continued)for the year ended 30 June 2022Individual Directors and Executives Compensation disclosures (b) Information regarding individual directors and executive’s compensation and some equity instruments disclosures as permitted by Corporations Regulations 2M.3.03 and 2M.6.04 is provided in the Remuneration Report section of the Directors’ Report. Apart from the details disclosed in this note, no director has entered into a material contract with the Group since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year-end. The aggregate value of transactions and outstanding balances relating to related parties were as follows: In AUD Transaction Transactions value year ended 30 June Balance receivable/ (payable) as at 30 June Note 2022 2021 2022 2021 Sales to Novomatic and its related entities Purchases from Novomatic and its related entities Other charges made on behalf of Novomatic Purchases and other charges made on behalf of the Group (i) (i) (i) (i) 194,867 2,367,592 674,377 2,316,375 309,920 216,234 (121,898) (648,633) 336,930 243,225 107,405 243,225 761,084 200,370 – (199,010) (i) Transactions with Novomatic AG and its related entities are considered related party transactions as Novomatic AG holds a controlling interest in the Group. Amounts receivable from and payable to related parties at reporting date arising from these transactions were as follows: In AUD 2022 2021 Assets and liabilities arising from the above transactions Current receivables and other assets Amount receivable from shareholder-controlled entities 781,782 2,559,600 Current trade and other payables Amount payable to shareholder-controlled entities 121,898 847,643 ANNUAL REPORT 2022 95 Notes to the Financial Statements (continued)for the year ended 30 June 2022 30. GROUP ENTITIES Parent entity Ainsworth Game Technology Limited Subsidiaries AGT Pty Ltd – AGT Pty Mexico S. de R.L. de C.V. – AGT Pty Peru S.R.L. – AGT Pty Argentina S.R.L. – AGT Pty Colombia SAS – AGT Alderney Limited – Ainsworth Game Technology Inc – Ainsworth Interactive Pty Ltd – AGT Gaming Services S. de R.L de C.V. – AGT Interactive S. de R.L de C.V. – Ainsworth Panama S.A. – AGT Brasil - Technologia LTDA. AGT Service Pty Ltd – AGT Service (NSW) Pty Ltd – J & A Machines Pty Ltd – Bull Club Services Pty Ltd Ownership Interest Country of incorporation 2022 2021 Australia Australia Mexico Peru Argentina Colombia Alderney USA Australia Mexico Mexico Panama Brasil Australia Australia Australia Australia 100% 100% 100% 100% 100% 100% 100% 100% N/A(1) 100% 100% 100% 100% 100% 100% N/A(1) 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% (1) During the year ended 30 June 2022, the Group merged AGT Gaming Services S. dr R.L de C.V. into AGT Pty Mexico S. de R.L. se. C.V and deregistered Bull Club Services Pty Ltd. 31. SUBSEQUENT EVENTS There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. 32. AUDITOR’S REMUNERATION In AUD Audit and review services Auditors of the Company - KPMG Audit and review of financial statements Other regulatory audit services Other services Auditors of the Company - KPMG 2022 2021 328,000 345,500 27,500 27,500 355,500 373,000 In relation to taxation and other services 91,750 131,250 96 AINSWORTH GAME TECHNOLOGY Notes to the Financial Statements (continued)for the year ended 30 June 2022 33. PARENT ENTITY DISCLOSURES As at and throughout the financial year ended 30 June 2022 the parent entity of the Group was Ainsworth Game Technology Limited. In thousands of AUD Result of parent entity Profit / (loss) for the year Total comprehensive income / (loss) for the year Financial position of parent entity at year end Current assets Total assets Current liabilities Total liabilities Total equity of parent entity comprising of: Share capital Equity compensation and translation reserve Fair value reserve Profit reserves Accumulated losses Total equity 33.1 Parent entity capital commitments for acquisitions of property, plant and equipment In thousands of AUD Plant and equipment Contracted but not yet provided for and payable: Within one year 2022 2021 10,090 13,171 (46,023) (46,023) 51,429 51,975 333,604 327,242 18,916 32,374 24,291 39,309 207,709 207,709 14,038 9,684 95,438 10,831 9,684 95,438 (25,639) (35,729) 301,230 287,933 2022 2021 696 191 ANNUAL REPORT 2022 97 Notes to the Financial Statements (continued)for the year ended 30 June 20221. In the opinion of the directors of Ainsworth Game Technology Limited (the ‘Company’): (a) the consolidated financial statements and notes that are set out on pages 47 to 97 and the Remuneration report in sections 15.1 to 15.8 in the Directors’ report, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date; (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. 3. 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 2022. The directors draw attention to Note 2(a) to the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards. Signed in accordance with a resolution of the directors. Danny Gladstone Chairperson Dated at Sydney this 23 day of September 2022 98 AINSWORTH GAME TECHNOLOGY Directors’ Declarationfor the year ended 30 June 2022 Independent Auditor’s Report To the shareholders of Ainsworth Game Technology Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Ainsworth Game Technology Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: • • giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the year ended on that date; and complying with Australian Accounting Standards and the Corporations Regulations 2001. The Financial Report comprises: • Consolidated statement of financial position as at 30 June 2022; • Consolidated statement of profit or loss and other comprehensive income, Consolidated statement of changes in equity, and Consolidated statement of cash flows for the year then ended; • Notes including a summary of significant accounting policies; and • Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. 113 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. ANNUAL REPORT 2022 99 Independent Auditor’s Reportfor the year ended 30 June 2022 Independent Auditor’s Report (continued) Key Audit Matters The Key Audit Matters we identified are: • Revenue recognition; • Recoverability of trade receivables; • Carrying value of goodwill and intangible assets; and • Provision for Mexican Tax Administration Service (”SAT”). Revenue recognition Refer to note 7 of the Financial Report 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. The key audit matter How the matter was addressed in our audit Revenue recognition was a key audit matter due to: Our procedures included: • • the importance of revenue as a key performance indicator to the Group and its shareholders given the Group’s performance; and the audit effort associated with multiple revenue streams with different recognition criteria across different geographic locations. • • Key revenue streams include: • outright machine and spare parts sales; • • revenue from fixed and participation rental; and revenue from multi-element arrangements which consist of several components within the revenue stream. • Due to varying revenue recognition and measurement principles of the revenues generated by the Group, it necessitated greater involvement by the audit team to evaluate timing and measurement of revenue recognised. • • 114 evaluating the Group’s revenue recognition policies against the requirements of AASB 15 Revenue from contracts with customers and/or AASB 16 Leases; testing key revenue recognition controls of the Group, across different geographic locations, such as the Group’s control of matching underlying documents to determine the timing of revenue recognition. In testing these controls we inspected underlying documents such as invoices, delivery notes, customer contracts, purchase orders and sales orders; testing statistical samples of transactions in key revenue streams, across different geographic locations, to underlying records. We inspected the terms and conditions of the revenue contracts for consistency to the Group’s policy for timing and measurement of revenue recognition; testing a sample of revenue transactions, across different geographic locations, from immediately before and immediately after year end. We compared the year in which the revenue was recognised by the Group to terms of the underlying contract and satisfaction of the performance obligation by the Group; testing samples of multi-element revenue transactions recorded by the Group against 100 AINSWORTH GAME TECHNOLOGY for the year ended 30 June 2022 Independent Auditor’s Report (continued) contract terms; and • assessing the disclosures in the Group’s financial report using our understanding obtained from our testing against the requirements of accounting standards. Recoverability of trade receivables Refer to note 17 of the Financial Report The key audit matter How the matter was addressed in our audit Recoverability of trade receivables was a key audit matter because payment terms, prevailing industry practices and adverse market conditions due to COVID-19 vary significantly across the different geographic locations in which the Group operates. These conditions give rise to heightened exposure to credit risk across the Group, thus requiring greater audit focus. The prevailing practice by the Group in certain locations in which the Group operates is to provide payment terms which are extended beyond traditional payment terms observed in Australia. This required a heightened element of judgement, and scrutiny to be applied by us when assessing the recoverability of trade receivables, such as: • assessment of amounts overdue compared to contractual payment terms; • evidence from internal diligence performed by the Group on the continued credit worthiness of customers; • settlement history of previous sales with the Group; and • evidence of ongoing dialogue and correspondence with the Group. Our procedures included: • • testing controls in relation to credit limit check and approvals by management and examining customers adherence to the payment plan; testing the recoverability of selected samples of trade receivable balances held by the Group across geographic locations through: - enquiries with the Group on the samples selected to understand the rationale behind the Group’s recoverability assessment; and - challenging the Group’s recoverability assessment utilising our understanding of:  market conditions and practice;    ongoing correspondence between the customer and the Group; the Group’s internal diligence check on the continued credit worthiness of the customer; customer contract and payment history including adherence to contractual payment terms throughout the financial year and subsequent to year end. evaluating the expected credit loss model for the geographical locations in which the Group operates in accordance with AASB 9 Financial Instruments; assessing the Group’s disclosures in relation to trade receivable credit risk, by comparing these disclosures to our understanding obtained from our ANNUAL REPORT 2022 101 • • 115 for the year ended 30 June 2022 Independent Auditor’s Report (continued) testing and the requirements of the accounting standards. Carrying value of goodwill and intangible assets Refer to note 13 of the Financial Report The key audit matter How the matter was addressed in our audit Annual testing of goodwill and intangible assets is a key audit matter, due to the disruptions to the Group caused by COVID-19, current economic conditions and the significant judgement applied by us when evaluating the forward-looking assumptions, including: • • forecast cash flows and the growth rates (including terminal growth rates) applied to those forecasts in light of current competitive market conditions as well as significant business disruption arising from the impacts of COVID-19. These factors increase the estimation uncertainty and provide a risk of inaccurate forecasts; value in use model prepared is sensitive to the assumptions adopted by the Group including forecast growth rates and the discount rates applied for different jurisdictions applicable to each identified Cash Generating Unit (CGU). These assumptions have a significant impact on the recoverable amount of the assets within the identified CGUs. This drives additional audit effort to assess the feasibility and consistency of assumptions adopted by the Group; and • discount rates are complex in nature and vary according to the conditions and environment in which the CGU operates. The Group operates in various jurisdictions and is therefore subject to different discount rates for each CGU. In addition, an assessment of the forecasting risk applied in the discount rate required significant judgement during these uncertain times. This drives additional audit effort in challenging the assumptions used by the Group in determining the discount rate for each CGU. The Group uses complex models to perform its annual impairment testing of goodwill and intangible assets. Complex models, particularly those containing highly judgemental allocations of corporate assets and costs to CGUs using forward looking assumptions tend to Working with our valuation specialists, our procedures included: • analysing key assumptions in the Group’s value in use model, we: • met with management to understand the impacts of COVID-19 and the current economic conditions to the Group; • we assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the model and applied increased scepticism to assumptions in areas where previous forecasts were not achieved; • • challenged the Group’s forecast cash flow and growth rates’ assumptions by applying our knowledge of the Group, its past performance, and our industry understanding; and compared forecast growth rates and the terminal growth rates to published studies of industry trends and expectations across different jurisdictions and geographic locations, and considered differences for the Group’s operations; • we considered the sensitivity of the models by varying key assumptions, such as forecast growth rates, terminal growth rates and discount rates within a reasonably possible range. We considered the interdependencies of key assumptions when performing the sensitivity analysis and what the Group consider to be reasonably possible. We did this to identify those assumptions at higher risk of bias which may give rise to impairment and to focus our further procedures; 116 102 AINSWORTH GAME TECHNOLOGY for the year ended 30 June 2022 Independent Auditor’s Report (continued) be prone to greater risk of potential bias, error and/or inconsistent application. Such conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used to derive assumptions, and their consistent application. • we independently developed a discount rate range, across different jurisdictions and geographic locations applicable to each identified CGU. We did this using publicly available market data for comparable entities, adjusted by risk factors specific to the Group and the industry it operates in; • evaluating the value in use model used for goodwill and intangibles impairment testing against the requirements of the accounting standards; • we assessed the integrity of the value in use models used, including the accuracy of the underlying formulas; • we assessed the Group’s allocation of corporate assets to CGUs based on the requirements of the accounting standards; and • we assessed the adequacy of the disclosures in the financial report using our understanding obtained from our testing against the requirements of the accounting standards. Provision for Mexican Tax Administration Service (”SAT”) Refer to note 25 to the financial report The key audit matter How the matter was addressed in our audit The Mexican Tax Administration Service (“SAT”) provision is a key audit matter due to the additional audit effort from the: • • inherent complexity in the Group’s estimation of the provision relating to import duties levied in Mexico on gaming machines; and significant judgement applied by the Group and audit effort for us, in analysing the probabilities of the expected scenarios and the associated exposure for these outcomes. The estimate of the SAT provision is influenced by: • • the complexity of the North American Free Trade Agreement (“NAFTA”) and it’s regulatory requirements concerning preferential tariff treatment; the expected legal strategy of the Group to address the claim by SAT regarding preferential Working with our legal and tax specialists, our procedures included: • • • • understanding the claims and inspecting underlying correspondence with the SAT; examining and understanding the advice provided by the Group’s third-party experts; assessing the competency, scope, and objectivity of the Group’s third-party experts used in the determination of the SAT provision estimate; comparing the basis for recognition and measurement of the SAT provision for consistency with NAFTA regulatory requirements regarding preferential tariff treatment and criteria in the accounting standards; and 117 ANNUAL REPORT 2022 103 for the year ended 30 June 2022 Independent Auditor’s Report (continued) tariff treatment; • assessing the Group’s SAT provision estimation by: • • the likelihood and timing of further reviews by SAT on those years under the statute of limitations; and the legislation and provisions of the Mexican Federal Tax Code surrounding penalties. The Group engages third-party experts when assessing the completeness of the exposure. - comparing the value of a sample of custom imports in the Group’s SAT provision estimation to the underlying import documentation; - - - independently calculating the expected scenarios by applying the Mexican Federal Tax Code to the unpaid charges and comparing this with the provision estimated by the Group; inquiring with the Group and understanding the legal strategy to challenge the SAT’s claims; and independently obtaining and evaluating the Group’s external lawyer's advice against knowledge obtained from our other procedures. • assessing the appropriateness of disclosures in the financial report using our understanding obtained from our testing against the requirements of the accounting standard. Other Information Other Information is financial and non-financial information in Ainsworth Game Technology Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Directors Report including the Remuneration Report. The Chairman’s Report, Performance Overview, New Products, Board of Directors, Chief Executive Officer’s Report, Sustainability Statement, Shareholder Information and Corporate Directory are expected to be made available to us after the date of the Auditor's Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. 118 104 AINSWORTH GAME TECHNOLOGY for the year ended 30 June 2022 Independent Auditor’s Report (continued) Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error • assessing the Group and Company’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: • • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. 119 ANNUAL REPORT 2022 105 for the year ended 30 June 2022 Independent Auditor’s Report (continued) Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of Ainsworth Game Technology Limited for the year ended 30 June 2022, complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included on pages 33 to 46 of the Directors’ report for the year ended 30 June 2022. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Julie Cleary Partner Sydney 23 September 2022 120 106 AINSWORTH GAME TECHNOLOGY for the year ended 30 June 2022Lead Auditor’s Independence Declaration Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Ainsworth Game Technology Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Ainsworth Game Technology Limited for the financial year ended 30 June 2022 there have been: i. ii. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit and no contraventions of any applicable code of professional conduct in relation to the audit. KPMG KPM_INI_01 Julie Cleary Partner Sydney 23 September 2022 PAR_SIG_01 PAR_NAM_01 PAR_POS_01 PAR_DAT_01 PAR_CIT_01 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 121 ANNUAL REPORT 2022 107 for the year ended 30 June 2022Securities Exchange Listing The Company is listed on the Australian Securities Exchange. The Home Exchange is Sydney. CODE: AGI Website www.agtslots.com Share Registry Computershare Investor Services Pty Ltd Level 3, 60 Carrington Street, Sydney NSW Australia 2000 Tel: 1300 850 505 (within Aust) +61 3 9415 4000 (outside Aust) Fax: +61 3 9473 2500 Auditor KPMG Level 38, Tower Three International Towers Sydney 300 Barangaroo Avenue Sydney NSW Australia 2000 Tel: +61 2 9335 7000 Fax: +61 2 9335 7001 Other Information Ainsworth Game Technology Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. ASIA PACIFIC/EUROPE Mr Robert Dijkstra VP Business Development and Sales Asia Pacific Tel: +61 2 9739 8119 Tel: +61 419 449 628 Email: rdijkstra@agtslots.com THE AMERICAS Nevada 5800 Rafael Rivera Way, Las Vegas, NV 89118 Tel: +1 (702) 954-3000 Fax: +1 (702) 954-3001 Email: enquiries@agtslots.com Florida 1011 SW 30th Avenue, Deerfield Beach, FL 33442 Tel: +1 (954) 944-3800 Fax: +1 (954) 317-5555 Email: enquiries@agtslots.com CORPORATE DIRECTORY Independent Non-Executive Directors Mr DE Gladstone - Chairperson Mr GJ Campbell Mr CJ Henson Ms HA Scheibenstock Chief Executive Officer Mr HK Neumann Company Secretary and Chief Financial Officer Mr ML Ludski OFFICES AUSTRALIA Corporate and Head Office 10 Holker Street, Newington NSW Australia 2127 Tel: +61 2 9739 8000 Fax: +61 2 9648 4327 Email: enquiries@agtslots.com Queensland Unit 5 / 3916 Pacific Highway, Loganholme QLD Australia 4129 Tel: +61 7 3209 6210 Fax: +61 7 3209 6510 Email: gcoleman@agtslots.com Victoria Mr Wayne Flood State Sales Manager Tel: +61 419 551 454 Email: wflood@agtslots.com South Australia Mrs Kelly Frackowski Snr Sales Executive Tel: +61 409 171 616 Email: kfrackowski@agtslots.com 108 AINSWORTH GAME TECHNOLOGY Corporate Directory Ainsworth Game Technology ABN: 37 068 516 665 10 Holker Street, Newington New South Wales, Australia 2127 T: +61 2 9739 8000 F: +61 2 9648 4327 www.agtslots.com A I N S W O R T H G A M E T E C H N O L O G Y A N N U A L R E P O R T 2 0 2 2 

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