Ashland Global
Annual Report 2020

Plain-text annual report

Annual Report 2020 LABOUR HIRE | RECRUITMENT TRAINING Ashley Services Group Limited Annual Report 2020 CHAIRMAN AND MANAGING DIRECTOR’S REVIEW ------------------------------------------------------------------ 5 DIRECTORS’ REPORT ------------------------------------------------------------------------------------------------------- 10 AUDITOR’S INDEPENDENCE DECLARATION -------------------------------------------------------------------------- 19 CORPORATE GOVERNANCE STATEMENT ----------------------------------------------------------------------------- 20 DIRECTORS’ DECLARATION----------------------------------------------------------------------------------------------- 21 INDEPENDENT AUDITOR’S REPORT ------------------------------------------------------------------------------------ 22 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ------------- 27 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ----------------------------------------------------------- 28 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ------------------------------------------------------------ 29 CONSOLIDATED STATEMENT OF CASH FLOWS --------------------------------------------------------------------- 30 NOTES TO THE FINANCIAL STATEMENTS ----------------------------------------------------------------------------- 31 ASX ADDITIONAL INFORMATION --------------------------------------------------------------------------------------- 73 CORPORATE DIRECTORY -------------------------------------------------------------------------------------------------- 75 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 4 Chairman and Managing Director’s Review MR IAN PRATT AND MR ROSS SHRIMPTON 2020 has been a challenging year as we have all faced the difficulties presented by living and working in a COVID impacted environment. Our staff throughout the entire company adapted and adjusted systems and operations, with this hard work having a major effect in limiting the COVID impact on our business. This has enabled us to achieve a profit after tax, normalised for the adoption of the new accounting standard (AASB 16 – Leases), which was up 1.6% on the previous year. Our business has shown an impressive resilience to provide a hard-earned continuation of our quality results along with strong cash generation. To a large extent our organisation has been shielded from the worst impacts of COVID due to the major drivers underlying our business. Action Workforce has benefited from a high exposure to the supermarket and related supply chain sector. Both the CCL Group and Concept Engineering were supported by their presence in major Victorian government infrastructure projects that have continued throughout the COVID period. The impressive safety performance of our company continues to represent world’s best practice which is something we are extremely proud of. Our cash flow performance, reflected in a $14.1 million operating cash inflow for the year, was an outstanding result. This has allowed us to again close the year with zero borrowings in a year where we made both our initial acquisition payment and a special dividend for the CCL Group, as well as the payment of our 2019 dividend. This cash position together with the resilience exhibited in our results places us as one of a select few companies maintaining a dividend at last year’s level (2.7 cents per share). As a result of our cash generation and our stable operating results, the Board is pleased to announce the move to twice yearly dividend payments. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 5 Chairman and Managing Director’s Review LABOUR HIRE DIVISION (including the CCL Group) Our Labour Hire division delivered an impressive revenue growth of $50 million or 17.9%. EBITDA at $12.5m represented a $1 million or 9.1% lift on prior year. Year one of our ownership of the CCL Group, with the acquisition completed on 20 December 2019 and having financial effective date of 1 July 2019, delivered on our expectations which underlined the business case at the time of the acquisition. The CCL Group was able to deliver revenue growth of 23% on the pre-acquisition year, driven predominantly by growth in the Victorian government infrastructure sector. Action Workforce delivered revenue growth of 3.0% on the prior year. Concept Engineering, which is strongly Victorian centric, experienced a revenue reduction of 8.7% on the previous year. Concept Recruitment Specialists, which has now absorbed the former Blackadder operations, experienced a revenue reduction of 13.9% on the previous year, largely the result of the COVID effect on the permanent white- collar recruitment sector. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 6 Chairman and Managing Director’s Review TRAINING DIVISION Our Training division experienced restrictions on face to face training and a relaxing of the need to attend training classes to qualify for unemployment benefits, both of which impacted class numbers and completions. The first half of the financial year had Training at an EBITDA of $0.8 million, well up on prior year and well poised for a similar second half. It was pleasing to breakeven across the second half and hold onto a full year EBITDA for the Training division of $0.8 million. Results so far in the 2021 financial year are encouraging with Queensland and Western Australia returning to pre-COVID student activity and Victoria is holding the line with a move to a greater mix of distance learning. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 7 Chairman and Managing Director’s Review DISCUSSION ON RESULTS Earnings and result Earnings Net profit after tax (“NPAT”) for the financial year ended 5 July 2020, including the full year contribution from the recently acquired CCL Group, was a total group profit of $5.1 million (FY19: profit $5.4 million) Key elements within the result include: Revenues Group Revenue at $336.8 million increased by $49.3 million (17.1%) from the comparative period. Labour Hire revenues were up $50 million (17.9%), largely due to the first year of CCL Group revenues. Training revenues were down by $0.7 million (-8.6%). Earnings before interest taxes depreciation and amortisation (“EBITDA”) Group EBITDA for the financial year was a profit of $9.7 million, up by $0.6 million (6.6%) on the prior corresponding period (FY19: EBITDA of $9.1 million).  Labour Hire division EBITDA of $12.5 million, was up $1.0 million (9.1%) on the prior corresponding period (FY19: $11.5 million), largely due to the CCL contribution, with Action Workforce also showing a modest lift. These were somewhat reduced by declines in Concept Engineering and declines and start-up costs for our Concept Recruitment Specialists division which absorbed the Blackadder brand in FY20.  Training division EBITDA of $0.8 million was down $0.2 million or -21% on the prior corresponding period (FY19: $1.0 million) after a breakeven second half, which was pleasing for a severely COVID impacted sector.  Corporate overheads, at $3.6 million were up $0.2 million on prior corresponding period (FY19: $3.4 million), primarily due to additional costs incurred in relation to the acquisition of the CCL Group. Statement of financial position The acquisition of the CCL group has seen a significant change to our statement of financial position. Net assets at $25.8 million were down by $0.8 million on the prior year (2019: $26.6 million), partly due to the creation of a non-current redemption liability ($2.0 million) for the 20% Put option for the CCL Group acquisition. Noteworthy balance sheet movements include:  Trade and Other Receivables up $0.9m - CCL $6.8m, so reflects significant reduction in traditional business  Right-of-use Asset $2.3m - AASB16 adoption  Intangible Assets up $6.1m - CCL Goodwill  Trade and Other Payables up $4.6m - CCL $3.6m  Dividends Payable up $0.4m - CCL minorities FY20 dividend payable in Jul-20  Borrowings remain at ZERO – CCL acquisition initial payment $5.7m debt drawing in H1 repaid in H2  Lease Liabilities (Current) up $0.7m - AASB16 adoption  Other Liabilities (Current) up $1.4m - CCL Contingent Consideration $1.4m  Lease Liabilities (Non-current) up $1.7m - AASB16 adoption  Other Liabilities (Non-current) up $2.8m - CCL Contingent Consideration $0.8m, CCL Redemption Liability $2.0m  Common Control Reserve up $1.6m – CCL Redemption Liability less Non-controlling interests. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 8 Chairman and Managing Director’s Review Cash Flow Operating cash flow was strong in the second half, building on an inflow of $2.2 million at the half, to end at our best ever level of $14.1 million inflow for the year (FY19: $4.8 million) allowing us to again close the year with zero borrowings. The overall outflow from investing activities of $5.4 million was primarily due to the initial payment of $4.8 million for the CCL acquisition (less cash acquired) and also capital expenditure of $0.5 million which was in line with the prior year. The overall outflow from financing activities of $7.5 million was primarily due to the $3.9 million dividend payment of 2.7 cent per share made during the year as well as a $2.6m special dividend paid to the former CCL Group shareholders. Overall this delivered a net cash inflow for FY20 of $1.3 million. DIVIDEND On 27 July 2020 the Group declared a fully franked final dividend of 2.7 cents in relation to the financial year ended 5 July 2020, in line with the rate of the prior financial year (FY19: 2.7 cents). EVENTS SUBSEQUENT TO BALANCE DATE Other than the dividend announcement outlined above, no matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Ian Pratt Chairman Ross Shrimpton Managing Director ASHLEY SERVICES GROUP ANNUAL REPORT 2020 9 Directors’ Report The Directors present their annual financial report on the consolidated entity, being Ashley Services Group Limited and its controlled entities (“Group”) for the financial year ended 5 July 2020. 1. GENERAL INFORMATION a. Directors The names of the Directors in office at any time during, or since the end of the year are: Table 1: Director Details Names Mr Ian Pratt Chairman Mr Ross Shrimpton Managing Director Executive Director Appointed 6 April 2017 and Company Secretary from 26 August 2020 Appointed / Resigned Appointed 1 October 2015 Appointed 12 Oct 2000; Managing Director to 15 Feb 2016, Non-Executive Director 15 Feb 2016 to 23 Jan 2017 and Managing Director from 23 Jan 2017 Mr Chris McFadden Directors’ Information • • • Mr Ian Pratt | Non-Executive Chairman (since 1 October 2015) Qualifications | CA Experience | Ian has over 40 years’ experience in the accounting profession and is a Director of a number of Public and Private companies. During this time, he has been involved in the recruitment, finance and property industries, and advises on income tax and related matters. Currently Ian is a Partner at Trood Pratt & Co Chartered Accountants and was previously a Director of Charter Hall Direct Property Management Limited (formerly Macquarie Direct Property Management Limited). Mr Pratt is a Member of Chartered Accountants Australia and New Zealand. Ian is Chairman of the Nominations, Audit & Risk Management and Remuneration Committees. Mr Ross Shrimpton | Managing Director (since 23 January 2017) (previously Non-Executive Director from 15 February 2016 and Managing Director to 15 February 2016) Qualifications | BComm (UNSW), CA, MAICD Experience | Ross is the founder and Managing Director of Ashley Services Group and has been instrumental in the overall growth and strategic direction of Ashley Services. Ross has over 40 years’ experience in finance and management across a number of large international organisations such as CSR/Humes and David Brown, originally commencing his professional career with Deloitte Touche Tohmatsu. Overall, Ross has over 20 years of relevant experience in the labour hire and training industries. Ross is a Member of Chartered Accountants Australia and New Zealand and a member of the Australian Institute of Company Directors. Ross is a member of the Nominations, Audit & Risk Management and Remuneration Committees. Mr Chris McFadden | Executive Director (from 6 April 2017) & Company Secretary (from 26 August 2020) Qualifications | BBus (UTS), FCPA, GAICD Experience | Chris was appointed Chief Financial Officer of Ashley Services Group in January 2017 and was appointed Executive Director in April 2017. Chris was formerly CFO at Ross Human Directions Limited (ASX: RHD), a company principally involved in the provision of temporary labour and recruitment services. Chris’s previous roles include: CFO of sass & bide, a division of Myer, CFO of Staples Australia, Senior Commercial Manager at Woolworths Limited and Asia Pacific CFO of The Nuance Group. Chris is a Fellow of CPA Australia and a Graduate of the Australian Institute of Company Directors. Chris is a member of the Nominations, Audit & Risk Management and Remuneration Committees. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 10 Directors’ Report Interests in shares and options As at the date of this report, the interests of the directors in the shares of Ashley Services Group Limited were: Table 2: Shares Held by Directors Names Mr Ian Pratt Mr Ross Shrimpton Mr Chris McFadden1 Directorships of other listed companies • Number of Shares Held Shareholding % • 15,060 80,279,030 630,630 0.01 55.76 0.44 Directorships held in other listed companies by the Directors in the three years immediately before the end of the financial year are as follows: Table 3: Other Directorships of listed entities Name Mr Ian Pratt Mr Ross Shrimpton Mr Chris McFadden Principal activities Company Date from Date to Nil Nil Nil - - - - - - The principal activities of the Group during the financial year were the provision of labour hire (including recruitment) and training services. Company secretary Mr Ron Hollands held the position of Company Secretary for the entire financial year. Ron is a Chartered Accountant and holds a Bachelor of Business from University of Technology, Sydney, an MBA from MGSM and a Graduate Diploma of Applied Corporate Governance from the Governance Institute of Australia. Ron has over 25 years’ experience in a range of industries including professional practice, financial services and real estate. Mr Chris McFadden, Executive Director and Chief Financial Officer of the Ashley Services Group Limited was appointed as joint Company Secretary on 26 August 2020. Directors’ meetings Details of meetings of directors (including committees of directors) held in the financial year and attendances by each director are shown in the following table: Table 4: Meeting Attendance Board Meetings Audit & Risk Management Committee Meetings Remuneration Committee Meetings Nomination Committee Meetings Held Attended Held Attended Held Attended Held Attended Mr Ian Pratt Mr Ross Shrimpton Mr Chris McFadden 10 10 10 10 10 10 2 2 2 2 2 2 1 1 1 1 1 1 0 0 0 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 0 0 0 11 Directors’ Report 1. BUSINESS REVIEW Operating results The consolidated profit of the Group attributable to equity holders after providing for income tax amounted to $4,667,000 (2019: profit $5,424,000). Review of operations Information on the operations and financial position of the Group and its business strategies and prospects is set out in the Chairman and Managing Director’s Review. Future developments in the operations of the Likely developments consolidated entity in future years and the expected results of those operations are referred to generally in the Chairman and Managing Director’s Review. Events subsequent to reporting date There have been no matters or circumstances that have arisen since the end of the year that would have significantly affected the group’s operations in financial year 2020 except as follows: On 27 July 2020 the Group declared a fully franked final dividend of 2.7 cents in relation to the financial year ended 5 July 2020, with a payment date of 11 September 2020. Ongoing Litigation Ashley Services Group Limited (ASH) has no current ongoing litigation. 2. OTHER INFORMATION Options There are no unissued ordinary shares that are either under option at the date of this report or have been exercised during the year. b. Non-audit services The Group may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Group are important. The current auditor, HLB Mann Judd Assurance (NSW) Pty Ltd, did not provide any non-audit services during the year ended 5 July 2020. Details of the amounts paid to HLB Mann Judd for audit services provided during the year are outlined in Note 4 to the financial statements. c. Auditor’s independence declaration A copy of the auditor’s independence declaration as required under section 307c of the Corporations Act 2001 is set out on page 19 and forms part of this report. d. Environmental issues The Group’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory. e. Indemnifying officers or auditors Insurance of officers During the financial year, Ashley Services Group Limited paid a premium to insure the directors, secretaries and officers of the Group and its Australian entities. The insurance policies prohibit disclosure of the premiums payable under the policies and details of the insured liabilities. f. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Group, or to intervene in any proceedings to which the Group is a party, for the purpose of taking responsibility on behalf of the Group for all or part of those proceedings. g. Rounding off of amounts In accordance with ASIC Corporations (Rounding in Instrument / Directors’ Reports) Financial 2016/191, amounts in the financial report are rounded off to the nearest thousand dollars unless otherwise indicated. 3. REMUNERATION REPORT – AUDITED The directors of Ashley Services Group Limited present the remuneration report for Non-Executive Directors, Executive Directors and other key management personnel, prepared in accordance with the the Corporations Act 2001 and Corporations Regulations 2001. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 12 Directors’ Report The remuneration report is set out in the following main headings: • • • • • • • key management personnel; principles used to determine the nature and amount of remuneration; Non-Executive Director remuneration; details of remuneration; executive service agreements; share-based compensation; and additional information. Key management personnel a. The following persons acted as Directors of the Group or as key management personnel during the financial year: Executive Directors: • Ross Shrimpton • Chris McFadden Non-Executive Directors: • Ian Pratt Other key management personnel: • Paul Rixon (General Manager, Labour Hire) Key management personnel include both the Directors and other key management personnel named above. b. Principles used to determine the nature and amount of remuneration is that to ensure The objective of the Group’s executive reward framework for performance is competitive and appropriate for the results delivered. The framework seeks to align executive reward with achievement of strategic objectives and for shareholders. the creation of value reward The Board seeks to ensure that executive reward satisfies the following key criteria for good reward governance practices: • • • • • competitiveness and reasonableness; acceptability to shareholders; performance linkage / alignment of executive compensation; transparency; and capital management. Alignment of shareholders’ interest • • focuses on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering a return on assets as well as focusing the executive on key non- financial drivers of value; and attracts and retains high-calibre executives. Alignment to program participants’ interests • • • rewards capability and experience; provides a clear structure for earning rewards; and provides recognition for contribution to the business. The framework provides a mix of fixed and variable pay, including short term incentives. The Board has established a Remuneration Committee which provides advice on remuneration and incentive policies and practices and specific recommendations on remuneration packages and other terms of employment for executives and Directors. The Corporate Governance Statement provides further information on the role of this committee. Executive pay The executive pay and reward framework has three components: • base pay and benefits, including superannuation; and short-term performance incentives, provided in cash. • The combination of these comprises the executive’s total remuneration. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 13 Directors’ Report Table 5: Key components of senior executive remuneration framework in place during the year ended 5 July 2020. Fixed Remuneration/Base Pay Short Term Incentive (STI) • Base pay is determined by reference to appropriate benchmark information, taking into account an individual’s responsibilities, performance, qualifications and experience, the broad objective being to pitch fixed remuneration at median market levels. • ‘At risk’ award opportunity for the achievement of annual performance objectives linked to annual financial targets and non-financial goals set by individual. • Base pay is structured as a package, which may be delivered as a mix of cash and other benefits, such as the provision of a motor vehicle, at the executive’s discretion. • Financial targets in line with budgets set for the individual’s area of influence for the financial year, coupled with non-financial key performance measures. • There are no guaranteed base pay increases in any executives’ • Paid in cash within 30 days of finalisation of employment contracts. Audited Annual Report. Table 6: Key features of the senior executive STI plan for FY20 Overview of the senior executive STI plan Who participates in the Senior Executive STI plan? Senior executives participate in the senior executive STI plan. How much can executives earn? STI opportunity for senior executives ranges from zero to 100% of target STI for significant out- performance. Thresholds and performance conditions Is there a threshold level of performance required? Yes. There are threshold levels for EBITDA that must be met to receive an STI payment. Achievement of the thresholds does not automatically entitle executives to an STI award. Financial performance measures must also be met to earn an STI payment. What are performance conditions? the Measures Senior Executives Financial measures (80% of STI opportunity) Assessed against: • Budget EBITDA for the individual’s area of influence for the financial year. • 20% payable for achievement of 80% of budget. Remaining 80% payable on a straight-line pro rata basis for performance from 80% to 130% of budget. Non-Financial measures (20% of STI opportunity) • Individually set Key Performance Indicators. Setting and assessing performance Who sets and assesses performance? How is the STI delivered? The MD sets and assesses performance and short term incentive outcomes for senior executives with guidance from the Remuneration Committee. The Remuneration Committee sets the targets for MD and assesses performance against those targets. 100% of any STI award is paid in cash within 30 days of finalisation of the audited Annual Report. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 14 Directors’ Report STI plan for the financial year ended 5 July 2020 The remuneration committee has approved a similar Short Term Incentive (STI) plan for the year ended 5 July 2020, based upon budget targets for that annual period. c. Non-executive Director remuneration and Board performance review Non-executive Directors’ remuneration are reviewed annually and are determined by the Board based on recommendations from the Remuneration Committee. In making its recommendations, the Remuneration Committee takes into account remuneration paid to other non-executive Directors of comparable companies and where necessary will seek external advice. No remuneration consultants were used during the financial year. In accordance with the Company’s Constitution, the Directors are entitled to receive an annual fee and for participation in Board sub-committees. For non-executive Directors, fees are not linked to performance. The Company does not operate equity plans for non-executive Directors. Non-executive Directors are entitled to statutory superannuation included as part of their Directors’ fees. There are no other schemes for retirement benefits for non-executive Directors. d. Details of remuneration Details of remuneration of the Directors and other key management personnel of Ashley Services Group are set out in the tables on pages 15 to 17. The key management personnel of Ashley Services Group are listed in the table below. The key management personnel have authority and responsibility for planning, directing and controlling activities of the Group. Remuneration and other terms of employment for the Executive Directors and other Key Management Personnel are formalised in a service agreement. The major provisions of the agreements relating to remuneration are set out below: Table 8: Executive and Key Management Personnel Service Agreements Name Ross Shrimpton Chris McFadden Paul Rixon Base Salary $1 Target STI %2 Target LTI %2, 3 450,000 450,000 291,748 - 50 50 - 50 50 Term of agreement Ongoing Ongoing Ongoing Notice Period 6 months 6 months 6 months Base salary is on an annual basis and includes superannuation contributions. Note: 1. 2. Maximum annual award as a percentage of annual salary. 3. This plan has been suspended since the financial year ended 30 June 2017. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 15 Directors’ Report Table 9: Statutory key performance indicators of the group over the last five years 2020 2019 2018 2017 2016 Profit / (Loss) for the year attributable to members ($000) Basic earnings per share (cents) Dividend payments ($000)1 4,667 3.24 3,887 5,424 3.77 3,887 4,789 3.33 3,600 Dividend payout ratio (%) Increase / (decrease) in share price (%)2 Total KMP incentives as percentage of profit/(loss) for the year (%) Note: 1. 2020 Dividend declared 27 July 2020 in relation to the 2020 financial year, with payment date of 11 September 2020. 2019 Dividend declared 9 August 2019 in relation to the 2019 financial year, with payment date of 6 September 2019. 2018 Dividend declared 26 July 2018 in relation to the 2018 financial year, with payment date of 17 August 2018. Increase/(decrease) in share price (%) is year-end share price relative to prior year-end. 204.7 75.1 83.3 71.7 33.3 3.1 0.0 4.1 6.1 2. (70.9) (5,969) (69,626) (4.08) (46.42) - - - - - (63.0) - Table 10: 2020 – Remuneration of Key Management Personnel 2020 Name Non-executive Directors Ian Pratt5 Executive Director Ross Shrimpton Chris McFadden Other key management personnel Paul Rixon6 ST1 employee benefits Cash salary & fees $ Salary non- cash $ ST1 employee bonus S - - 118,293 205,480 428,997 428,997 273,336 - - - - PE2 benefits Super- annuation $ 19,520 21,003 21,003 LT3 employee benefit Performance based Remuneration Total4 $ - - - $ 225,000 450,000 568,293 % - - 20.8 71,760 21,003 - 366,099 19.6 Total Note: 1. ST – Short-term. 2. PE – Post-employment. 3. LT – Long-term. As all previous LTI performance hurdles have now lapsed no expense has been recognised in the profit and loss - 1,609,392 1,336,810 190,053 82,529 - 11.8 account for the year ended 5 July 2020. 4. Amounts included in the above table include amounts paid to key management from all entities. 5. During the year tax advisory fees have also been paid to Trood Pratt & Co (Company in which Ian Pratt is a Partner). 6. Novated car lease refund of $4,715 included in these figures. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 16 Directors’ Report Table 11: 2019 – Remuneration of Key Management Personnel 2019 Name Non-executive Directors Ian Pratt5 Executive Director Ross Shrimpton Chris McFadden Other key management personnel Paul Rixon ST1 employee benefits Cash salary & fees $ Salary non- cash $ ST1 employee bonus S - - 191,975 206,347 404,469 429,469 262,719 - - - - PE2 benefits Super- annuation $ 19,603 20,531 20,531 LT3 employee benefit Performance based Remuneration Total4 $ - - - $ 225,950 425,000 641,975 % - - 29.9 136,400 20,531 419,650 32.5 Total Note: 1. ST – Short-term. 2. PE – Post-employment. 3. LT – Long-term. As none of the performance hurdles for any of the relevant years has been met no expense has been recognised in 1,712,575 1,303,004 328,375 81,196 - 19.2 the profit and loss account for the year ended 30 June 2019. 4. Amounts included in the above table include amounts paid to key management from all entities. 5. During the year tax advisory fees have also been paid to Trood Pratt & Co (Company in which Ian Pratt is a Partner). Other transactions with key management personnel Information on share-based payments and other transactions with key management personnel is set out on the previous pages. e. Shares held by key management personnel The number of ordinary shares in the Company during the 2020 reporting period held by each of the Group’s key management personnel, including their related parties are set out below: Table 12: Shares held by Key Management Personnel Name Ian Pratt Ross Shrimpton Chris McFadden Paul Rixon Total Balance at start of the year 15,060 80,279,030 630,630 41,416 80,966,136 Shares Disposed - Change from KMP - Balance at end of the year 15,060 - - - - - - - - 80,279,030 630,630 41,416 80,966,136 f. Executive service agreements On appointment to the Board, all non-executive Directors sign a letter of appointment with the Company. The letter summarises the terms including compensation, relevant to the office of Director. All contracts with executives may be terminated by either party with a notice period as outlined in Table 8. Executives are typically restricted for twelve months after termination from conducting or engaging in competing businesses and from solicitation of customers and employees of the Company. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 17 Directors’ Report End of audited Remuneration Report. Signed in accordance with a resolution of the Board of Directors made pursuant to section 298(2) of the Corporations Act 2001. Ian Pratt Chairman Sydney, 28 August 2020 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 18 Auditor’s Independence Declaration As lead auditor for the audit of the consolidated financial report of Ashley Services Group Limited for the year ended 5 July 2020, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (a) the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and (b) any applicable code of professional conduct in relation to the audit. This declaration is in relation to Ashley Services Group Limited and the entities it controlled during the period. Sydney, NSW 28 August 2020 S P James Director ASHLEY SERVICES GROUP ANNUAL REPORT 2020 19 Corporate Governance Statement A Corporate Governance Statement has been adopted by the Board on 30 August 2016 and can be found at http://www.ashleyservicesgroup.com.au/investor- centre/corporate-governance/ The Board has adopted a suite of governance materials which are available in the Corporate Governance section of the Company’s website (www.ashleyservicesgroup.com.au), under “Investor Centre”. The governance materials have been prepared and adopted on the basis that corporate governance procedures can add to the performance of the Company and the creation of shareholder value, and help to engender the confidence of the investment market. Diversity To date, the board or a committee have not set measurable objectives for achieving gender diversity and to assess annually both the objectives and the company’s progress in achieving them. The Company provides the following information on the proportion of women employees in the whole organisation, women in Senior Executive positions and women on the Board of the Company. Directors & Senior Management Corporate & Administration Labour Hire Recruitment Training Total Female Male 25% 86% 62% 86% 58% 66% 75% 14% 38% 14% 42% 34% During the financial year ending 5 July 2020 the its annual report to the Company submitted Workplace Gender Equality Agency and is again compliant with the Workplace Gender Equality Act 2012 (Act). The performance of the Board and Senior Executives in the 2020 financial year has been reviewed against both quantitative and qualitative measures and Directors and Senior Executives provided feedback on the discharge of their responsibilities. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 20 Directors’ Declaration 1. In the opinion of the Directors of Ashley Services Group Limited: a. The consolidated financial statements and notes of Ashley Services Group Limited are in accordance with the Corporations Act 2001, including: i. Giving a true and fair view of its financial position as at 5 July 2020 and of its performance for the financial year ended on that date; and ii. Complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; b. There are reasonable grounds to believe that Ashley Services Group Limited will be able to pay its debts as and when they become due and payable; and c. At the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 28 to the financial statements. 2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and Chief Financial Officer for the financial year ended 5 July 2020. 3. Note 1 confirms that the consolidated financial statements also comply with International Financial Reporting Standards. Signed in accordance with a resolution of the Directors. Ian Pratt Chairman Sydney, 28 August 2020 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 21 Independent Auditor’s Report to the Members of Ashley Services Group Limited REPORT ON THE AUDIT OF THE FINANCIAL REPORT Opinion We have audited the financial report of Ashley Services Group Limited (“the Company”) and its controlled entities (“the Group”), which comprises the consolidated statement of financial position as at 5 July 2020, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration for the Group. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group’s financial position as at 5 July 2020 and of their financial performance for the year then ended; and (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (“the Code”) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 22 Key Audit Matter How our audit addressed the key audit matter Revenue Recognition Refer to Note 1 (Summary of significant accounting policies) and Note 2 (Revenue and other income) Labour hire revenue is the most significant account balance in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Total revenue and other income of $338.9 million comprises a number of streams including: • • • labour hire revenue ($329.5 million); training revenue ($7.3 million); and other income ($2.1 million). We focussed on this matter due to the size and magnitude of labour hire revenue, as well as the higher level of inherent risk due to the manual processes for inputting, calculating, reviewing, and recording of the labour hire revenue. Employment Costs Refer to Note 1 (Accounting policies) Employment costs, both internal and allocated externally, is one of the most significant account balances in the Consolidated Statement of Profit or Loss and Other Comprehensive Income. Total employment costs amount to $321.7 million. We focussed on this matter due to the size and magnitude of employment costs, as well as the higher level of inherent risk due to the manual processes for the volume of inputting, calculating, reviewing, and recording of the employment costs. We assessed whether the Group’s accounting policies were in compliance with Australian Accounting Standards and specifcally whether revenue had been recognised in accordance with accounting standard AASB 15 Revenue from Contracts with Customers. We tested the Group’s process for recognising labour hire revenue. We tested labour hire revenue recognised in the period by agreeing to timesheets, payroll reports, amounts billed and subsequently received. We tested the process for raising and authorising credit notes throughout the financial year and immediately subsequent to year end. We compared the accuracy of hours on-billed as labour hire revenue to amounts paid to employees, refer to employment costs below. We tested the correct cut-off and accrual of labour hire revenue at year end. We tested the Group’s process for recognising employment costs. We tested the controls surrounding the authorisation of changes in employee details, such as pay rates. We tested employment costs recognised in the period by agreeing to timesheets, payroll reports, and amounts subsequently paid. We analytically reviewed the labour hire margins from the current and prior year. We tested the cut-off and accrual of employment costs at year end. We tested whether PAYG amounts were deducted and subsequently paid to the Australian Taxation Office. We tested superannuation amounts paid by recalculation and comparison to gross wages. We tested the subsequent payment to the superannuation clearing house. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 23 Key Audit Matter How our audit addressed the key audit matter Accounting for Asset Acquisition Refer to Note 24 (Business combination) As disclosed in Note 24 to the financial statements, during the year the Group completed the acquisition of 80% of the issued capital of CCL Group. The accounting for this business combination resulted in the recognition of goodwill of $6.3m. The estimated acquisition price for the 80% purchase of the CCL Group was $7.89 million but will be adjusted for subsequent earn-outs for FY20 and FY21 (currently estimated at FY20 EBITDA levels). The acquisition of the remaining 20% shareholding is subject to both Call and Put Options. Accounting for this acquisition is a complex and judgemental exercise, requiring management to determine the existence and fair value of acquired assets and liabilities, in particular determining the allocation of purchase consideration. We focussed on this area as a key audit matter given the size of the acquisition and its impact on the financial statements of the Group. We examined the asset sale and purchase agreements to understand key terms and conditions. We reviewed the accounting treatment, and considered whether it complied with the requirements of Australian Accounting Standards. We reviewed management’s assessment of the identified assets and liabilities acquired including the fair value attributable to these assets and liabilities. We reviewed the calculation of goodwill on acquisition. We reviewed the calculations and underlying assumptions used to determine the contingent liabilities for retention and earnouts. We reviewed the calculations and underlying assumptions used to determine the redemption liability for the Put Option. We considered the adequacy of the financial report discslosures in Note 24. Carrying Value of Goodwill Refer to Note 12 (Intangible assets) and Note 13 (Impairment) The Group recognised Goodwill of $9.1m as at 5 July 2020 in relation to the Labour Hire division. This Goodwill arose on acquisition of subsidary companies during the current year (Note 24) and prior years. As required by Australian Accounting Standards the Group tested this Goodwill for impairment, at 5 July 2020. The Group determined the recoverable amount using value in use calculations for the relevant cash generating units (“CGU”), which involved a significant level of judgement in respect of factors such as: • • • Estimated future revenues and costs; Discount rates; and Terminal values. We considered this to be a key audit matter due to the significant judgement involved in estimating the recoverable amount of the Goodwill and the potentially material impact on the financial report. We evaluated the Group’s goodwill impairment assessment process; We obtained the Group’s value in use models and considered the assumptions applied by management; We assessed the accuracy of previous Group forecasting to inform our evaluation of forecasts included in the value in use model. We applied increased scepticism to current period forecasts in areas where previous forecasts were not achieved and /or where future uncertainty is greater or volatility is expected; We challenged discount and terminal value multiples by comparing these with rates used by comparable companies. We compared forecast revenues and costs to historical results; We tested the mathematical accuracy of the impairment models used by management; We performed sensitivity analysis on the Labour Hire CGU in relation to the discount rate and terminal value multiple assumptions, and profit forecasts; ASHLEY SERVICES GROUP ANNUAL REPORT 2020 24 Key Audit Matter How our audit addressed the key audit matter We assessed the Group’s disclosures of the quantitative and qualitative considerations in relation to the valuation of goodwill, by comparing these disclosures to our understanding of the assets. Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Group’s Annual Report for the year ended 5 July 2020, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • • • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 25 • • • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards. From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. REPORT ON THE REMUNERATION REPORT Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 12 to 18 of the directors’ report for the year ended 5 July 2020. In our opinion, the Remuneration Report of Ashley Services Group Limited for the year ended 5 July 2020 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. HLB Mann Judd Assurance (NSW) Pty Ltd Chartered Accountants S P James Director Sydney, NSW 28 August 2020 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 26 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the financial year ended 5 July 2020 Note 2 2 3 3 5 Revenue Other income Employment costs Depreciation and amortisation expense Finance costs Other expenses Profit before income tax from continuing operations Income tax expense Profit for the year from continuing operations Profit / (Loss) for the year from discontinued operations Profit for the year Other comprehensive income Total comprehensive income for the year Total comprehensive income for the year is attributable to: Owners of Ashley Services Group Limited Non-controlling interests Basic earnings per share (cents) from continuing operations Diluted earnings per share (cents) from continuing operations Basic earnings per share (cents) from discontinued operations Diluted earnings per share (cents) from discontinued operations Basic earnings per share (cents) Total Diluted earnings per share (cents) Total 21 21 21 21 21 21 The accompanying notes form part of these financial statements. 5 Jul 2020 $000 336,841 2,040 (321,668) (2,068) (713) (7,387) 30 Jun 2019 $000 287,570 1,184 (273,995) (1,007) (647) (5,570) 7,045 1,976 5,069 - 5,069 - 5,069 4,667 402 5,069 3.24 3.24 0.00 0.00 3.24 3.24 7,535 2,111 5,424 - 5,424 - 5,424 5,424 - 5,424 3.77 3.77 0.00 0.00 3.77 3.77 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 27 Consolidated Statement of Financial Position As at 5 July 2020 Assets Current assets Cash and cash equivalents Trade and other receivables Contract assets Other assets Total current assets Non-current assets Property, plant and equipment Right-of-use assets Deferred tax assets Intangible assets Other assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Current tax payable Dividends payable Lease liabilities Other liabilities Provisions Total current liabilities Non-current liabilities Deferred tax liabilities Lease liabilities Other liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Common control reserve Accumulated losses Total equity Note 7 8 9 10 11 1(e) 14 12, 13 15 14 1(e) 16 18 14 1(e) 16 18 19 20 The accompanying notes form part of these financial statements. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 5 Jul 2020 $000 30 Jun 2019 $000 8,063 29,418 154 1,745 39,380 1,060 2,345 4,694 9,322 92 17,513 56,893 18,517 1,634 400 723 1,412 2,453 25,139 764 1,716 2,762 682 5,924 31,063 25,830 148,815 (59,261) (63,724) 25,830 6,784 28,524 571 1,444 37,323 1,140 - 3,602 3,200 - 7,942 45,265 13,900 307 - - - 2,295 16,502 964 - - 1,175 2,139 18,641 26,624 148,815 (57,687) (64,504) 26,624 28 Consolidated Statement of Changes in Equity For the financial year ended 5 July 2020 For the year ended 5 July 2020 Balance at 1 July 2019 Profit for the period Other comprehensive income for the year Total comprehensive income for the year Recognition of non-controlling interest of CCL Group Derecognition of non-controlling interest of CCL Group Other equity Dividends paid Balance at 5 Jul 2020 For the year ended 30 June 2019 Balance at 2 July 2018 Profit for the period Other comprehensive income for the year Total comprehensive income for the year Dividends paid Balance at 30 June 2019 Share Capital $000 Common Control Reserve $000 Retained Earnings $000 Non- controlling Interest $000 148,815 (57,687) (64,504) - - - - - - - - - - - 399 (1,973) 4,667 - 4,667 - - - - (3,887) 148,815 (59,261) (63,724) 148,815 (57,687) (66,329) - - - - - - - - 5,424 - 5,424 (3,599) 148,815 (57,687) (64,504) - 402 - 402 397 (399) - (400) - - - - - - - Total $000 26,624 5,069 - 5,069 397 - (1,973) (4,287) 25,830 24,799 5,424 - 5,424 (3,599) 26,624 The accompanying notes form part of these financial statements. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 29 Consolidated Statement of Cash Flows For the financial year ended 5 July 2020 Operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Income taxes paid Net cash from continuing operations Net cash used in discontinued operations Net cash from operating activities Investing activities Note 5 Jul 2020 $000 30 Jun 2019 $000 371,567 318,707 (354,693) (312,564) 22 (620) (2,151) 14,125 - 66 (632) (825) 4,752 - 23 14,125 4,752 Payments for property, plant and equipment in continuing operations Payments for intangibles Proceeds from sale of property, plant and equipment Payments for businesses, net of cash acquired 24 Net cash used in investing activities Financing activities Net proceed/(repayment) from/(of) external borrowings in continuing operations Repayment of leasing liabilities Dividends paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of the financial year Cash and cash equivalents at end of the financial year 7 The accompanying notes form part of these financial statements. (502) (198) 139 (4,812) (5,373) - (966) (6,507) (7,473) 1,279 6,784 8,063 (899) - 166 - (733) - - (3,599) (3,599) 420 6,364 6,784 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 30 Notes to the Financial Statements Table of Contents ACCOUNTING POLICIES ----------------------------------------------------------------------------------------- 33 REVENUE AND OTHER INCOME ------------------------------------------------------------------------------- 43 EXPENSES ----------------------------------------------------------------------------------------------------------- 44 AUDITOR’S REMUNERATION ---------------------------------------------------------------------------------- 44 INCOME TAX EXPENSE ------------------------------------------------------------------------------------------ 45 KEY MANAGEMENT PERSONNEL DISCLOSURES ---------------------------------------------------------- 45 CASH AND CASH EQUIVALENTS ------------------------------------------------------------------------------- 45 TRADE AND OTHER RECEIVABLES ---------------------------------------------------------------------------- 46 CONTRACT ASSETS ----------------------------------------------------------------------------------------------- 46 OTHER ASSETS ---------------------------------------------------------------------------------------------------- 46 PROPERTY, PLANT AND EQUIPMENT ------------------------------------------------------------------------ 47 INTANGIBLE ASSETS --------------------------------------------------------------------------------------------- 48 IMPAIRMENT ------------------------------------------------------------------------------------------------------ 49 TAX BALANCES ---------------------------------------------------------------------------------------------------- 50 TRADE AND OTHER PAYABLES -------------------------------------------------------------------------------- 52 OTHER LIABILITIES------------------------------------------------------------------------------------------------ 52 BORROWINGS ----------------------------------------------------------------------------------------------------- 53 PROVISIONS ------------------------------------------------------------------------------------------------------- 54 SHARE CAPITAL --------------------------------------------------------------------------------------------------- 54 COMMON CONTROL RESERVE -------------------------------------------------------------------------------- 55 EARNINGS PER SHARE ------------------------------------------------------------------------------------------- 55 SEGMENT INFORMATION -------------------------------------------------------------------------------------- 56 CASH FLOW INFORMATION ----------------------------------------------------------------------------------- 57 BUSINESS COMBINATION -------------------------------------------------------------------------------------- 58 FAIR VALUE MEASUREMENT ---------------------------------------------------------------------------------- 60 CONTROLLED ENTITIES ------------------------------------------------------------------------------------------ 63 PARENT ENTITY DISCLOSURES -------------------------------------------------------------------------------- 65 DEED OF CROSS GUARANTEE --------------------------------------------------------------------------------- 66 RELATED PARTY TRANSACTIONS ----------------------------------------------------------------------------- 69 SECURED AND CONTINGENT LIABILITIES ------------------------------------------------------------------- 69 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 31 Notes to the Financial Statements 31. 32. 33. 34. FINANCIAL INSTRUMENTS ------------------------------------------------------------------------------------- 69 OPERATING LEASE COMMITMENTS ------------------------------------------------------------------------- 72 EVENTS AFTER THE REPORTING DATE ---------------------------------------------------------------------- 72 DIVIDENDS --------------------------------------------------------------------------------------------------------- 72 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 32 Notes to the Financial Statements 1. ACCOUNTING POLICIES a. General information The financial statements for the financial year ended 5 July 2020 cover Ashley Services Group Limited and its controlled entities (“Ashley Services” or the “Group”). Ashley Services Group is a public Company listed on the Australian Securities Exchange (trading under the symbol “ASH”), incorporated and domiciled in Australia. The following is a summary of the material accounting policies adopted by the Group in the preparation of the consolidated financial statements. The accounting policies have been consistently applied unless otherwise stated. Statement of compliance b. The consolidated financial statements are general purpose financial statements which have been prepared in accordance with the and Australian Corporations Act 2001 Accounting Standards (including Australian Accounting Interpretations) adopted by the Australian Accounting Standards Board. The consolidated financial statements of the Group also comply with International Financial Reporting Standards (‘IFRS’) adopted by the International Accounting Standards Board. The Group is a for-profit entity for the purposes of preparing the financial statements. The consolidated financial statements were authorised for issue by the Board of Directors on 28 August 2020. c. Basis of preparation The consolidated financial statements have been prepared on an accruals basis and are based on historical costs, except for the measurement at fair value of selected non- current assets, financial assets and financial liabilities as disclosed in this note. Cost is based on the fair values of the consideration given in exchange for assets. All amounts are presented in Australian dollars, unless otherwise noted. accordance with ASIC Corporations In (Rounding in Financial / Directors’ Reports) Instrument 2016/191, amounts in the financial report are rounded off to the nearest thousand dollars unless otherwise indicated. d. Going concern The consolidated financial statements have been prepared on a going concern basis. e. Adoption of new and revised Accounting Standards and Interpretations Accounting The Group adopted all of the new, revised or amended and Interpretations the Australian issued by Accounting Standards Board (“AASB”) that are mandatory for the current reporting period. Standards As stated below, the nature and effects of changes arising from adoption of new, revised or amending Accounting Standards and Interpretations did not have a significant impact on the Group. The main new Accounting Standard that became effective during the current reporting period is as follows: AASB 16: Leases The Group has adopted AASB 16: Leases from 1 July 2019 but has not restated comparatives for the 2019 reporting period, as permitted under the the specific standard. The the adjustments arising from the new leasing rules are therefore recognised in the opening statement of financial position on 1 July 2019. in reclassifications and transition provisions The Group’s leasing activities and how these are accounted for The Group leases various offices and equipment. Rental contracts are typically made for fixed periods of 2 to 5 years, both with and without extension options. Contracts may contain both lease and non- lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants other than the ASHLEY SERVICES GROUP ANNUAL REPORT 2020 33 Notes to the Financial Statements security interests in the leased assets that are held by the lessor. Leased assets may not be used as security for borrowing purposes. Until the 2019 financial year, leases of property, plant and equipment were classified as either finance leases or operating leases. From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: - fixed payments in-substance fixed payments), less any lease incentives receivable (including - variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date - amounts expected to be payable by the Group under residual value guarantees the exercise price of a purchase option if the Group is reasonably certain to exercise that option, and - - payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option. Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of- use asset in a similar economic environment with similar terms, security and conditions. To determine the incremental borrowing rate, the Group uses recent third-party financing received as a starting point, adjusted to reflect changes in financing conditions since third party financing was received. Lease payments are allocated between principal and finance cost. The finance cost is charged to statement of financial performance over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following: - the amount of the initial measurement of lease liability - any lease payments made at or before the lease less any commencement date incentives received restoration costs. - any initial direct costs, and - Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. Payments associated with short-term leases of office are recognised on a straight-line basis as an expense financial performance. Short-term leases are leases with a lease term of 12 months or less. statement of in Impact of adoption On adoption of AASB 16, the Group recognised lease liabilities and associated right-of-use assets in relation to leases which had previously been classified as ‘operating leases’ under the principles of AASB 117 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 July 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 July 2019 was 3%. Practical expedients applied In applying AASB 16 for the first time, the Group has used the following practical expedients permitted by the standard: - applying a single discount rate to a portfolio similar of characteristics. relying on previous assessments on whether leases are onerous as an alternative to performing an impairment leases with reasonably - ASHLEY SERVICES GROUP ANNUAL REPORT 2020 34 Notes to the Financial Statements review. There were no onerous contracts as at 1 July 2019. Amounts recognised in the consolidated statement of financial position - accounting for operating leases with a remaining lease term of less than 12 months as at 1 July 2019 as short-term leases. for the initial direct costs measurement of the right-of-use asset at the date of initial application, and - excluding - using hindsight in determining the lease term where the contract contains options to extend or terminate the lease. Measurement of lease liabilities Below is a reconciliation between the operating lease commitments reported as at 30 June 2019 and lease liabilities recognised under AASB16 Leases on 1 July 2019. • Operating disclosed as at 30 June 2019 lease commitments Less: Discount based on the weighted average incremental borrowing rate of 3% Less: Low value and short-term lease commitments Lease liability recognised as at 1 July 2019 Of which are: Current lease liabilities Non-current lease liabilities 2019 $000 3,140 (233) (96) 2,811 871 1,940 2,811 Adjustments recognised in the consolidated statement of financial position on 1 July 2019 The change in accounting policy affected the following items in the consolidated statement of financial position on 1 July 2019: - right-of-use assets – increase by $2,810,721 lease liabilities – increase by $2,810,721 - There was no impact on accumulated losses on 1 July 2019 as the Group has used the practical expedients permitted by the standard. Refer to above. • Right-of-use assets Property Lease liabilities Current Non-current 2020 $000 2,345 2,345 723 1,716 2,439 2019 $000 2,811 2,811 871 1,940 2,811 Additions to the right-of-use assets during the financial year ended 5 July 2020 were $520,000 and the total cash outflow for leases was $966,000. Amounts recognised in the consolidated statement of financial performance • Depreciation charge of right-of-use assets Property Interest expense (incl in finance costs) relating Expense to short-term leases (incl in other expenses) Lessor accounting 2020 $000 2019 $000 986 986 75 454 - - - - The Group did not need to make any adjustments to the accounting for assets held as lessor under operating leases as a result of the adoption of AASB 16. Other amending Accounting Standards and Interpretations Several other amending Accounting Standards and Interpretations apply for the first time for the current reporting period commencing 1 July 2019. These other amending Accounting Standards and Interpretations did not result in ASHLEY SERVICES GROUP ANNUAL REPORT 2020 35 Notes to the Financial Statements any adjustments to the amounts recognised or disclosures in the financial report. f. New Accounting and Interpretations not yet adopted and interpretations Standard Certain new accounting standards and interpretations have been published that are not mandatory for 5 July 2020 reporting periods and have not been early adopted by the Group. The Group’s assessment is that there would be no material impact from these new standards and interpretations on the Group’s results. g. Business combinations Business combinations occur where an acquirer obtains control over one or more businesses and result in the consolidation of its assets and liabilities. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities liabilities) assumed are recognised (subject to certain limited exceptions). contingent (including a from resulting When measuring the consideration transferred in the business combination, any asset or liability contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is Contingent accounted for within equity. consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to the business combination are recognised as expenses in the statement of profit or loss and other comprehensive income when incurred. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. h. Basis of consolidation The Group financial statements consolidate those of Ashley Services Group Limited and all of its subsidiaries as of 5 July 2020. Ashley Services Group Limited controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 5 July 2020. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains or losses on companies. transactions between Group Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non- controlling interests based on their respective ownership interests. i. Revenue and other income Revenue for both labour hire and training services is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring services to a customer. For each contract with a the Group undertakes the following: customer, ASHLEY SERVICES GROUP ANNUAL REPORT 2020 36 Notes to the Financial Statements i. ii. Identifies the contract with a customer Identifies the performance obligations in the contract of iii. Determines the transaction price which considers variable estimates consideration and time value of money iv. Allocates the transaction price to the separate performance obligations based on the relative stand-alone selling price of each distinct service to be delivered Recognises revenue when, or as, each performance obligation is satisfied in a manner that depicts the transfer to the customer of the services promised. v. All revenue is stated net of the amount of GST. Labour hire is recognised upon Labour hire revenue delivery of the service to the customers or in the instance of placement fees at the time the employee has been placed. Revenue from a contract to provide labour hire services is recognised over time as services are rendered based predominantly on an hourly rate. Training revenue Revenue from a contract to provide training services is recognised over time as the services are the percentage of completion method that depicts the transfer to the customer of the services rendered. rendered using Interest revenue Interest revenue is recognised using the effective interest method, which for floating rate financial assets is the rate inherent in the instrument. Dividend revenue Dividend revenue is recognised when the right to receive a dividend has been established, usually on declaration of the dividend / distribution. Other income Other income primarily includes State funding employer rebates earned in relation to specified categories of individuals. Intangible assets j. Goodwill Goodwill is initially recognised as the difference between the fair value of consideration, and the fair value of net assets acquired less any accumulated impairment losses. The value of goodwill acquisition of the business. is recognised on The Group adopts the full goodwill method. The fair value of the interests in the business is determined using valuation techniques which make the maximum use of market information where available. Under this method, goodwill attributable to the interests of the business is recognised in the financial statements. Goodwill is tested for impairment annually and is allocated to the Group’s cash-generating units or group of cash-generating units, which represent the lowest level at which goodwill is monitored but where such level is not larger than an operating segment. Gains or losses on the disposal of equity include the carrying amount of goodwill related to the entity sold. in the ownership in a Changes subsidiary are accounted for as equity transactions and do not affect the carrying amounts of goodwill. interest Other intangibles Intangibles acquired by the group are stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the profit or loss on a straight line basis over the estimated useful life. Estimated useful life of intangibles is as follows: Customer relationships Licenses Intellectual property - Course material 7 years 5 years 5-7 years Intangible assets, such as Brands, which are deemed to have an indefinite useful life are not amortised, but are assessed for impairment annually, within the CGU to which they are attributed. Where impairment is recognised, it ASHLEY SERVICES GROUP ANNUAL REPORT 2020 37 Notes to the Financial Statements is recorded in the profit or loss in the period the impairment is identified. probable that the reversal will occur in the foreseeable future. k. Income tax The income tax expense (income) for the year tax expense comprises (income) and deferred tax expense (income). income current Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. income tax expense Deferred reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited directly to equity instead of profit or loss when the tax relates to items that are credited or charged directly to equity. is recognised from the Except for business combinations, no deferred initial income tax recognition of an asset or liability where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary losses are differences and unused recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. tax investments Where temporary differences exist in relation to in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary differences can be controlled and it is not Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future in which significant amounts of periods deferred tax assets or liabilities are expected to be recovered or settled. Tax consolidation legislation. Ashley Services Group Limited and its wholly owned Australian subsidiaries have formed an income tax consolidated group under tax consolidation The CCL Group companies being 80% owned are not part of this income tax consolidated group. Each entity in the group recognises its own current and deferred tax assets and liabilities. Such taxes are measured using the ‘standalone taxpayer’ approach to allocation. Current tax liabilities (assets) and deferred tax assets arising from unused tax in the subsidiaries are immediately transferred to head entity. The group notified the Australian Taxation Office that it has formed an income tax consolidation group to apply from 1 July 2003. The income tax consolidated group has entered a tax funding arrangement whereby each company in the Group contributes to the income tax payable by the Group in proportion to their contributions to the Group’s taxable income. losses and tax credits Differences between the amounts of net tax assets and liabilities derecognised and the net amounts recognised pursuant to the funding arrangement are recognised as either a ASHLEY SERVICES GROUP ANNUAL REPORT 2020 38 Notes to the Financial Statements contribution by, or distribution, to the head entity. consideration. Contract assets are treated as financial assets for impairment purposes. l. Cash and cash equivalents o. Property, plant and equipment Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly investments with liquid original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown with short term borrowings in current liabilities on the consolidated statement of financial position. m. Trade and other receivables Trade and other receivables include amounts due from customers for services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. initially Trade and other receivables are recognised at fair value and subsequently measured at amortised cost using the effective interest method, for impairment. less any provision The recoverability of trade receivables is reviewed on an ongoing basis. Amounts which are determined not to be recoverable are written off by reducing the carrying amount to its recoverable amount, the difference is charged to the statement of profit or loss and other comprehensive income in that period. Expected credit losses, described in previous years’ financial statements of the Group as an allowance for impairment, are measured by the Group by applying a simplified approach which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Contract assets n. Contract assets are recognised when the Group has transferred goods or services to the customer but where the Group is yet to to establish unconditional right an Each class of property, plant and equipment is carried at cost, less where applicable, any accumulated depreciation and impairment losses. Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. The depreciable amount of fixed assets is depreciated on a straight line basis, over the useful asset’s life to the Group commencing from the time the assets are held ready for use. The annual depreciation rates used for each class of depreciable assets are: Class of fixed assets • Computer equipment Office equipment Furniture and fittings Motor vehicles Training equipment Leasehold improvements Depreciation rate 20 - 33% 20 - 33% 10% 18.75 - 25% 33% 20 - 50% In the case of leasehold improvements, lives are determined by expected useful reference to comparable owned assets or over the term of the lease, if shorter. The carrying amount of property, plant and equipment is reviewed annually at the end of the reporting period by the Directors to ensure it is not in excess of the recoverable amount of these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 39 Notes to the Financial Statements Gains or losses on disposals are determined by comparing proceeds with carrying amount. These gains or recognised immediately in profit or loss. losses are Trade and other payables p. Trade and other payables represent the liabilities for goods and services received by the Group that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. Employee benefits q. Provision is made for the Group’s liability for the employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. liability, In determining is given to employee wage consideration the increases and employee may vesting not requirements. Those cash flows are discounted using market yields on HQ corporate bonds with terms to maturity that match the expected timing of cash flows. the probability satisfy that the r. Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured at the best estimate of the amounts required to settle the obligation at the end of the reporting period. Borrowings s. Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. Impairment of assets t. At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. information include considering The assessment will external sources of information and internal sources of including dividends received from subsidiaries, deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell, and its value in use, to the asset’s carrying amount. Any excess of the asset’s carrying value over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount. Any impairment loss of a revalued asset is treated as a revaluation decrease. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing least annually for goodwill and intangible assets with indefinite lives. is performed at u. Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. v. GST Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the ATO. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or ASHLEY SERVICES GROUP ANNUAL REPORT 2020 40 Notes to the Financial Statements payable to, the ATO is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers. w. Significant management judgement in applying accounting policies When preparing the financial statements, management undertakes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses. Significant management judgement The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect on the financial statements. Determination of Cash Generating Units for purpose of impairment reviews Determination of the Cash Generating Units (“CGUs”) for purpose of impairment reviews is judgement made by management. a key Management has undertaken a formal assessment of what constitutes the CGUs, by identifying the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets, being Training and Labour Hire. Recognition of deferred tax assets The extent to which deferred tax assets can be recognised is based on an assessment of the probability of the Group’s future taxable income against which the deferred tax assets can be utilised. Estimation uncertainty Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. Impairment assessing In impairment, management estimates the recoverable amount of each asset or cash-generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate. Both future operating results and discount rates are discussed in Note 13. In 2020, the Group recognised no impairment losses on goodwill and/or other intangible assets (see Note 13). Useful lives of depreciable assets Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utility of certain software and IT equipment. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience and historical collection rates. Long service leave provisions In determining the provision for employees’ long service leave, consideration is given to the probability an employee may not satisfy vesting requirements. In doing this, management considers the likelihood of employees reaching a qualifying period of service and adjust the valuation for these estimated probabilities. Long term incentive plan long the provision term for senior In determining incentive plan, management’s consideration is given to the probability the required “earnings per share” performance requirement being achieved to be remote, and therefore a provision has not been recognised in relation to this. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 41 Notes to the Financial Statements x. Dividends A liability is recognised for the amount of any dividend appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year but not distributed at balance date. declared, being y. Earnings per share Basic earnings per share is calculated by Basic earnings per share dividing the profit attributable to equity holders of the Company, after deducting any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary the financial year, adjusted for bonus elements in ordinary shares issued during the year. shares outstanding during Diluted earnings per share Diluted earnings per share adjusts the figures used in determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 42 Notes to the Financial Statements 2. REVENUE AND OTHER INCOME Operating activities: Labour hire revenue Training revenue Other income: Interest received Sundry income 2020 $000 329,517 7,324 336,841 22 2,018 2,040 2019 $000 279,556 8,014 287,570 66 1,118 1,184 a. Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: 2020 Revenue Labour Hire $000 Training $000 Total $000 From external customers 329,517 7,324 336,841 Timing of revenue recognition Services transferred over time Services transferred at a point in time 2019 Revenue 319,820 9,697 329,517 7,324 - 7,324 327,144 9,697 336,841 Labour Hire $000 Training $000 Total $000 From external customers 279,556 8,014 287,570 Timing of revenue recognition Services transferred over time Services transferred at a point in time 268,294 11,262 279,556 8,014 - 8,014 276,308 11,262 287,570 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 43 Notes to the Financial Statements 3. EXPENSES Profit before income tax from continuing operations includes the following specific expenses: Finance costs Interest and finance charges paid/payable on borrowings Interest and finance charges paid/payable on lease liabilities Bank fees Depreciation Motor vehicles Office equipment Leasehold improvements Property right-of-use assets Amortisation Customer contracts and relationships – amortisation Course material 4. AUDITOR’S REMUNERATION Auditor of the parent entity Audit and review of financial reports under the Corporations Act 2001 - HLB Mann Judd Assurance (NSW) Pty Ltd Total Remuneration Other entities In addition to the above, the related entities detailed in Note 26 have also paid fees to the auditor(s) as follows: Audit of financial reports - HLB Mann Judd Assurance (NSW) Pty Ltd 2020 $000 544 75 94 713 57 503 144 986 1,690 129 249 378 2019 $000 633 - 14 647 2 511 247 - 760 129 118 247 2020 $ 151,000 151,000 2019 $ 150,000 150,000 55,500 55,500 26,000 26,000 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 44 Notes to the Financial Statements INCOME TAX EXPENSE 5. a. Components of tax expense for continuing operations Current tax expense Deferred tax – origination and reversal of temporary differences Under / (over) provision of tax in prior year – Change in tax rate – CCL Group Income tax expense 2020 $000 3,221 (1,291) 84 (38) 1,976 b. Reconciliation of prima facie tax on profit from ordinary activities to income tax expense Net profit before tax from continuing operations Prima facie tax expense on net profit from ordinary activities before income tax at 30% (FY19: 30%) Add / (less) Tax effect of: – Entertainment – Other – Change in tax rate – CCL Group – Intangible assets – Under / (over) provision of tax in prior year Income tax expense 2020 $000 7,045 2,113 22 1 (38) (206) 84 1,976 2019 $000 1,295 978 (162) - 2,111 2019 $000 7,535 2,261 3 9 - - (162) 2,111 The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on taxable profits under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period. 6. KEY MANAGEMENT PERSONNEL DISCLOSURES a. Key management personnel compensation for the year was as follows Short-term employee benefits Post-employment benefits Total 2020 $ 1,526,863 82,529 1,609,392 2019 $ 1,631,379 81,196 1,712,575 Individual director and key management personnel disclosures b. Detailed remuneration disclosures are included in the Directors’ Report. The relevant information can be found in the Remuneration section of the Directors’ Report on page 15 to 17, Tables 8 to 11. 7. CASH AND CASH EQUIVALENTS Cash on hand Cash at bank ASHLEY SERVICES GROUP ANNUAL REPORT 2020 2020 $000 4 8,059 8,063 2019 $000 4 6,780 6,784 45 Notes to the Financial Statements 8. TRADE AND OTHER RECEIVABLES Current Trade receivables Allowance for expected credit losses Other receivables 2020 $000 27,742 (406) 2,082 29,418 2019 $000 26,086 (10) 2,448 28,524 a. Ageing of trade receivables (before allowing for impairment of receivables) at year end is detailed below Current Past due 0 – 30 days (not considered impaired) Past due 31 – 60 days (not considered impaired) Past due 60+ days (not considered impaired) Past due 60+ days (considered impaired (b)) 2020 $000 23,586 1,407 582 1,761 406 27,742 2019 $000 19,147 4,582 1,001 1,346 10 26,086 b. The movement in the allowance for expected credit losses in respect of trade receivables is detailed below Balance at beginning of year CCL Group Increase/(decrease) in allowance recognised in profit or loss Amounts written-off Balance at end of year 9. CONTRACT ASSETS Current Contract assets 10. OTHER ASSETS Current Prepayments Bank guarantee1 2020 $000 10 361 52 (17) 406 2020 $000 154 154 2020 $000 1,240 505 1,745 2019 $000 555 - (92) (453) 10 2019 $000 571 571 2019 $000 939 505 1,444 Note: 1. As at balance date the Group had bank guarantees of $315,610 relating to property leases. The $504,635 represents a restricted bank account to cover the Group’s total available guarantee facility of $504,635. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 46 Notes to the Financial Statements 11. PROPERTY, PLANT AND EQUIPMENT Motor vehicles Cost Accumulated depreciation Office equipment Cost Accumulated depreciation Leasehold improvements Cost Accumulated depreciation Capital works in progress Cost Total property, plant and equipment a. Movement in carrying amounts of property, plant and equipment 2020 $000 576 (387) 189 4,649 (4,006) 643 1,782 (1,712) 70 158 158 1,060 2020 Balance at 1 July 2019 CCL Group at 1 July 2019 Additions/(transfers) Disposals Depreciation expense – continuing operations Balance at 5 July 2020 2019 Balance at 2 July 2018 Additions/(transfers) Disposals Depreciation expense – continuing operations Balance at 30 June 2019 Motor vehicles $000 32 Office equipment $000 941 Leasehold improvements $000 150 Capital work in progress $000 17 228 85 (99) (57) 189 37 199 (31) (503) 643 5 60 (1) (144) 70 - 158 (17) - 158 Motor vehicles $000 - Office equipment $000 1,032 Leasehold improvements $000 240 Capital work in progress $000 75 34 - (2) 32 466 (46) (511) 941 157 - (247) 150 - (58) - 17 2019 $000 148 (116) 32 4,725 (3,784) 941 1,968 (1,818) 150 17 17 1,140 Total $000 1,140 270 502 (148) (704) 1,060 Total $000 1,347 657 (104) (760) 1,140 The Group’s property, plant and equipment are encumbered by a fixed and floating charge as security for the group’s working capital facility (Refer Note 17). ASHLEY SERVICES GROUP ANNUAL REPORT 2020 47 Notes to the Financial Statements 12. INTANGIBLE ASSETS Goodwill Cost Acquisition CCL Group Impairment (note 13) Net carrying value Customer relationships/Licences Cost Impairment (note 13) Accumulated amortisation Net carrying value Brand names Cost Impairment (note 13) Net carrying value Intellectual property Cost Impairment (note 13) Accumulated amortisation Net carrying value Total intangible assets 2020 $000 65,256 6,302 (62,474) 9,084 2,062 (918) (1,036) 108 4,640 (4,640) - 8,330 (3,896) (4,304) 130 9,322 a. Intangible assets – detailed reconciliation 2020 Balance at 1 July 2019 Acquisition CCL Group Additions Amortisation – continuing operations Balance at 5 July 2020 2019 Balance at 2 July 2018 Capitalised course materials Amortisation – continuing operations Balance at 30 June 2019 Customer Relationships and Licences $000 237 - - (129) 108 Customer Relationships and Licences $000 366 - (129) 237 Goodwill $000 2,782 6,302 - - 9,084 Goodwill $000 2,782 - - 2,782 Brand Names $000 - Intellectual Property $000 181 - - - - - 198 (249) 130 Brand Names $000 - Intellectual Property $000 - - - - 299 (118) 181 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 2019 $000 65,256 - (62,474) 2,782 2,062 (918) (907) 237 4,640 (4,640) - 8,132 (3,896) (4,055) 181 3,200 Total $000 3,200 6,302 198 (378) 9,322 Total $000 3,148 299 (247) 3,200 48 Notes to the Financial Statements 13. IMPAIRMENT a. Impairment The consolidated entity tests whether goodwill and other intangible assets have suffered any impairment on an annual basis, or more frequently, if required. All remaining goodwill and other intangibles are confined to the Labour Hire division, with all earlier amounts previously attributed to the Training division being fully impaired across both the FY16 and FY17 financial years. There were no indicators of impairment in relation to the Labour Hire division at 5 July 2020. Labour Hire division The recoverable amount of the Labour Hire division has been determined based on a value in use calculation. That calculation uses cash flow projections based on financial forecasts approved by management for FY21 and a pre-tax discount rate of 18.7 per cent. Cash flows beyond that period have been held constant, reflecting the competitive nature of the industry. Management’s key assumption is that revenues for the Labour Hire division will increase by 9% in FY21. EBITDA margin is forecast at 3.8% (before corporate overhead allocations). The recoverable amounts of the CGUs were determined based on value-in-use calculations, covering detailed forecasts for five years, followed by an extrapolation of expected cash flows for the units’ remaining useful lives using the growth rates determined by management. The present value of the expected cash flows of each segment is determined by applying a suitable discount rate. Long term growth rates after the forecast period and discount rates used were as follows: Labour Hire Terminal Growth rates 5 July 2020 0% 30 June 2019 0% Pre-tax discount rates 5 July 2020 18.7% 30 June 2019 18.7% The growth rate reflects management’s view of longer-term average growth rates for the respective sectors. The discount rate reflects appropriate adjustments relating to market risk and specific risk factors of each unit. b. Impairment charges As a result of the analysis, there is no need for any impairment charges in the FY20 results. The same analysis in the prior year resulted in no impairment charge being recorded in the FY19 results. Movements in the net carrying amount of goodwill and other intangibles are presented in note 12a. The amount of goodwill, brand names and other intangibles remaining by CGU and subject to future impairment testing is as follows: 2020 Training Labour Hire Total Goodwill $’000 - 9,084 9,084 Customer Relationships/ Licences $’000 - 108 108 Brand Names $’000 Intellectual Property $’000 - - - 130 - 130 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 Total $’000 130 9,192 9,322 49 Notes to the Financial Statements 2019 Training Labour Hire Total c. Sensitivity analysis Goodwill $’000 - 2,782 2,782 Customer Relationships/ Licences $’000 - 237 237 Brand Names $’000 Intellectual Property $’000 - - - 181 - 181 Total $’000 181 3,019 3,200 Management has also run various sensitivity scenarios, primarily reviewing sensitivity of outcomes to FY21 EBITDA forecasts, long term growth rates and discount rates. In respect of reasonably possible changes in the key assumptions, major sensitivities are summarised as follows: Change in VIU Sustainable EBITDA margin; +/- $0.5 million each CGU 1% increase or decrease in long term growth rate 1% increase or decrease in pre-tax discount rate Labour hire CGU $’M +/-3.0 +/-1.0 +/-2.0 14. TAX BALANCES Current assets Income tax receivable Non-current assets Deferred tax assets (a) Current tax liabilities Income tax payable Non-current liabilities Deferred tax liabilities (a) 2020 $000 - 2019 $000 - 4,694 3,602 1,634 764 307 964 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 50 Notes to the Financial Statements a. Deferred tax assets and liabilities Deferred taxes arising from temporary differences and unused tax losses can be summarised as follows: Balance at Beginning of the Year $000 Recognised in Other Comprehensive Income $000 Recognised in Business Combination $000 Recognised in Profit & Loss $000 Balance at End of the Year $000 (720) (171) (71) 319 - 2,037 1,244 - 2,638 - - - - - - - - - - - - - - - - - - 210 125 39 (23) 28 (510) (46) (32) 296 28 1,161 (301) 3,198 943 52 52 1,291 3,929 Balance at Beginning of the Year $000 Recognised in Other Comprehensive Income $000 Recognised in Business Combination $000 Recognised in Profit & Loss $000 Balance at End of the Year $000 2020 Current assets Trade, other receivables and other assets Contract assets Non-current assets Intangible assets Property, plant and equipment Right-of-use assets1 Current liabilities Trade and other payables Provisions 2019 Tax loss carried forward Deferred tax asset Total Note: 1. This amount is net of lease liabilities. 2019 Current assets Trade, other receivables and other assets (1,505) Contract assets Non-current assets Intangible assets Property, plant and equipment Current liabilities Trade and other payables Provisions 2018 Tax loss carried forward Deferred tax asset Total - 26 315 2,842 1,398 540 3,616 - - - - - - - - - - - - - - - - 785 (171) (97) 4 (805) (154) (540) (978) (720) (171) (71) 319 2,037 1,244 - 2,638 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 51 Notes to the Financial Statements 15. TRADE AND OTHER PAYABLES Current Trade payables Accrued expenses GST payable Sundry creditors 2020 $000 1,442 5,354 4,281 7,440 18,517 2019 $000 833 4,359 2,641 6,067 13,900 Average credit period on purchases of products and services is 30 days. No interest is charged on trade payables. The Group has financial risk management policies in place to ensure payables are paid within credit time frame. 16. OTHER LIABILITIES Current CCL Contingent Consideration - Retention CCL Contingent Consideration – Earn Out Year 1 Other Other liabilities (Current) Non-current CCL Contingent Consideration – Earn Out Year 2 Redemption Liability Other liabilities (Non-current) Redemption Liability 2020 $000 600 789 23 1,412 789 1,973 2,762 2019 $000 - - - - - - - The Put Option represents a contractual obligation to purchase a non-controlling interest, which gives rise to a financial liability. This liability referred to as ‘redemption liability’ has been measured at the present value of the redemption amount or the put option consideration amount in accordance with the underlying Share Sale and Purchase Agreement. The Put Option can be exercised by any of the Remaining Shareholders (acting independently of the others):  at any time upon the occurrence of a Control Event in respect of Ashley Services Group Limited;  if the Extended EBAs in respect of both CTS and CCL are entered into on or before 20 June 2022 – at any time after 20 December 2022; if either or both of the Extended EBAs in respect of CTS and CCL is entered into after 20 June 2022 – six months after they have both been entered into;   at any time after 20 December 2025, regardless of whether the Extended EBAs in respect of both CTS and CCL have been entered into. The Put Option expires 20 years after Completion but the Purchaser has the right to reduce this to 10 years. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 52 Notes to the Financial Statements 17. BORROWINGS 2020 Invoice Financing Bank Bill Business Loan Balance at 5 July 2020 2019 Shrimpton Holdings Facility Balance at 30 June 2019 Working capital facility Available facility $000 13,000 6,125 19,125 Available facility $000 5,000 5,000 Facility used $000 - Remaining facility $000 13,000 - - 6,125 19,125 Facility used $000 - Remaining facility $000 5,000 - 5,000 During the financial year ended 5 July 2020, Ashley Services Group Limited entered into a new banking partnership facility with the Westpac Banking Corporation which included all transactional banking requirements as well as a $20 million financing facility, comprised of a $13 million Invoice Financing facility and a $7 million Bank Bill Business Loan (Reduces progressively over a term of 3 years). The Westpac facility is subject to a Security which includes, but is not limited to the following:  1st ranking General Security Agreement over the assets and undertakings of the Borrower and its Guarantors;  Contractual Subordination of Shrimpton Holdings Pty Ltd facility of $5 million; and  Flawed Asset Arrangement – Deposit of Action Workforce Pty Ltd and Concept Engineering (AUST) Pty Ltd for Invoice Finance Facility collections. As at 5 July 2020, both the current $6.125 million Bank Bill Business Loan and the $13 million Invoice Financing facility and the $5 million Shrimpton Holdings Facility were undrawn (30 June 2019, nil). The $5 million working capital facility through Shrimpton Holdings Pty Limited, a company associated with Ross Shrimpton, Managing Director, major shareholder of the Group, was re-evaluated by the Board in line with its expiry date. The facility was determined to be in excess of the Group’s funding requirements following the establishment of the new Westpac facilities. Accordingly, this facility was not been renewed and expired on 31 January 2020. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 53 Notes to the Financial Statements 18. PROVISIONS Current Employee benefits (a) Provision for discontinued operation (b) Total Non-current Employee benefits (a) Provision for discontinued operation (b) Total a. Reconciliation of employee provisions Opening balance CCL Group at 1 July 2019 Less: leave taken during the year Add: leave provided for during the year Closing balance 2020 $000 2,404 49 2,453 365 317 682 2020 $000 2,484 245 (1,615) 1,655 2,769 2019 $000 1,993 302 2,295 491 684 1,175 2019 $000 2,891 - (1,657) 1,250 2,484 b. Provision for discontinued operation During the second half of financial year ended 30 June 2017, the Board approved an orderly exit from the international and domestic hospitality student business originally acquired through the SILK acquisition in April 2015. The Group has fulfilled its obligations for the remaining students and the Registered Training Organisation (“RTO”) has been deregistered through the Australian Skills Quality Authority (“ASQA”). The $0.37 million provision at 5 July 2020 (FY19: $0.99 million) represents the discounted cost of future surplus lease obligations. 19. SHARE CAPITAL The Company does not have any share options on issue as at the date of this report. Details of share capital of the group are as follows: 143,975,904 (FY19: 143,975,904) fully paid ordinary shares Share issue costs Share capital a. Ordinary shares 2020 $000 154,234 (5,419) 148,815 2019 $000 154,234 (5,419) 148,815 The reduction in Share Capital from 150,000,000 shares ($149.9m) at 30 Jun 16 to 143,975,904 shares ($148.8m) net of share issue costs at 5 July 2020 was the result of the cancellation of 6,024,096 shares issued by way of consideration to fund the purchase of Integracom as approved by shareholders at the AGM of 9 November 2016. Ordinary shares confer on their holders the right to participate in dividends declared by the Board. Ordinary shares confer on their holders an entitlement to vote at any general meeting of the Company. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 54 Notes to the Financial Statements 20. COMMON CONTROL RESERVE The common control reserve has arisen following the adoption of the pooling of interests method used to account for the acquisition of the following entities since 1 July 2014: • • • • • • ADV Services Pty Limited; Ashley Institute Holdings Pty Limited; TBRC Holdings Pty Limited; Tracmin Pty Limited; and Australian Institute of Vocational Development Pty Limited; and CCL Group (Construction Contract Labour (VIC) Pty Ltd, Complete Traffic Services (VIC) Pty Ltd and VIC Traffic and Labour Solutions Pty Ltd) 21. EARNINGS PER SHARE Net profit after tax Weighted number of ordinary shares outstanding during the year used in calculating basic earnings per share (EPS) Weighted number of ordinary shares outstanding during the year used in calculating diluted earnings per share (EPS) Basic earnings per share (cents) from continuing operations Diluted earnings per share (cents) from continuing operations Basic earnings per share (cents) from discontinued operations Diluted earnings per share (cents) from discontinued operations Basic earnings per share (cents) Total Diluted earnings per share (cents) Total 2020 $000 4,667 2019 $000 5,424 143,975,904 143,975,904 143,975,904 143,975,904 3.24 3.24 - - 3.24 3.24 3.77 3.77 - - 3.77 3.77 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 55 Notes to the Financial Statements 22. SEGMENT INFORMATION The Group’s management identifies two operating segments, Labour Hire and Training, representing the main products and services provided by the Group. During the financial year ended 5 July 2020, there have been no changes from prior periods in the measurement methods used to determine operating segments and reported segment profit or loss. The revenues and profit generated by each of the Group’s operating segments are summarised as follows: 2020 Revenue From external customers Segment revenue Other income Employment costs Depreciation and amortisation expense Finance costs Other expenses Segment Profit Unallocated items Profit before income tax Income tax expense Profit after income tax Other comprehensive income Total comprehensive income for the year from continuing operations 2019 Revenue From external customers Segment revenue Other income Employment costs Depreciation and amortisation expense Finance costs Other expenses Segment Profit Unallocated items Profit before income tax Income tax expense Profit after income tax Other comprehensive income Total comprehensive income for the year from continuing operations Labour Hire $000 Training $000 Total $000 329,517 329,517 1,510 (313,646) (803) (170) (4,851) 11,557 7,324 7,324 502 (5,933) (643) (9) (1,071) 170 336,841 336,841 2,012 (319,579) (1,446) (179) (5,922) 11,727 (4,682) 7,045 (1,976) 5,069 - 5,069 Labour Hire $000 Training $000 Total $000 279,556 279,556 995 (266,157) (460) (134) (2,926) 10,874 8,014 8,014 123 (5,778) (222) (3) (1,314) 820 287,570 287,570 1,118 (271,935) (682) (137) (4,240) 11,694 (4,159) 7,535 (2,111) 5,424 - 5,424 No segments assets or liabilities are disclosed because there is no measure of segments assets or liabilities regularly reported to Management and to the Board. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 56 Notes to the Financial Statements a. Information about major customers Included in revenues from external customers are revenues of $94.5 million (2019: $90.5 million) which arose from sales to 2 (2019: 2) of the Group’s customers whose individual revenue exceeds 10% of total revenue in the Labour Hire segment. Sales to these 2 customers were $60.2 million and $34.3 million respectively (2019: $59.7 million and $30.8 million respectively). There are no customers whose individual revenue exceeded 10% of total revenue in the Training segment in either financial year. 23. CASH FLOW INFORMATION Reconciliation of cash flow from operations to profit after income tax Profit for the year Cash flows excluded from profit attributable to operating activities Adjustments for non-cash items: - Depreciation and amortisation expense - Bad and doubtful debts - Profit on disposal of fixed assets - Lease liability non-cash expense - Changes in assets and liabilities - Decrease/(increase) in trade and other receivables - Decrease/(increase) in contract assets - Decrease/(increase) in other assets - Decrease/(increase) in deferred tax assets - (Decrease)/increase in trade and other payables - (Decrease)/increase in dividends payable - (Decrease)/increase in provisions - (Decrease)/increase in other liabilities - (Decrease)/increase in current tax liabilities - (Decrease)/increase in deferred tax liabilities Net cash from operating activities 2020 $000 5,069 2,068 52 11 75 (894) 417 (393) (1,092) 3,447 400 (335) 4,173 1,327 (200) 14,125 2019 $000 5,424 1,007 (92) 16 - 1,200 (571) (517) 1,796 (1,813) - (1,187) - 307 (818) 4,752 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 57 Notes to the Financial Statements 24. BUSINESS COMBINATION During the year ended 5 July 2020, Ashley Services Group Limited acquired a major shareholding in the CCL Group. The acquisition was completed on 20 December 2019 with an effective date for the transaction of 1 July 2019. The estimated acquisition price for the 80% purchase of the CCL Group was $7.89 million but will be adjusted for subsequent earn-outs for FY20 and FY21 (currently estimated at FY20 EBITDA levels). The initial payment comprises 80% of the total purchase price based on the audited FY19 results (being for 80% (of the 80%)), with subsequent earn-outs based on FY20 (10%) and FY21 (10%) audited results. The CCL Group is one of the primary suppliers of contract labour in Victoria with a focus on the infrastructure, building and civil construction sectors. The CCL Group is also a key supplier of traffic management services for a range of construction based organisations. The CCL Group is comprised of the following companies:  Construction Contract Labour (VIC) Pty Ltd  Complete Traffic Services (VIC) Pty Ltd  VIC Traffic and Labour Solutions Pty Ltd (formerly CCL Filcon Pty Ltd– change of name date 22 May 2020) In addition, the Share Sale and Purchase Agreement provides for both Call and Put Options relating to the remaining 20% shareholding which was retained by both the founder and key management. As at the effective date of the transaction Ashley Services Group Limited did not have a present ownership interest in the remaining 20% shareholding. The Call Option can be exercised by the Purchaser at any time within 20 years after 20 December 2019 but the Purchaser has the right to reduce this period to 10 years. The Put Option can be exercised by any of the Remaining Shareholders (acting independently of the others):  at any time upon the occurrence of a Control Event in respect of Ashley Services Group Limited;  if the Extended EBAs in respect of both CTS and CCL are entered into on or before 20 June 2022 – at any time after 20 December 2022; if either or both of the Extended EBAs in respect of CTS and CCL is entered into after 20 June 2022 – six months after they have both been entered into;   at any time after 20 December 2025, regardless of whether the Extended EBAs in respect of both CTS and CCL have been entered into. The Put Option expires 20 years after Completion but the Purchaser has the right to reduce this period to 10 years. The business combination has been accounted for on the basis that the underlying shares subject to the Put Option have not been acquired. The Put Option has been recognised as a financial liability per Note 16. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 58 Note 16 Notes to the Financial Statements Purchase consideration Cash consideration Contingent consideration Total consideration Assets and liabilities acquired: Cash and cash equivalents Trade and other receivables Property, plant and equipment Deferred tax assets Trade and other payables Dividends payable Current tax payable Non-current liabilities Fair value of assets acquired Less: Assets and liabilities attributable to non-controlling interest Non-controlling interest at 20% Fair value of assets acquired attributed to controlling interest of parent entity Goodwill on acquisition Cashflows on acquisition Cash consideration Cash acquired Total cashflow outflows on acquisition to 5 July 2020 Note: 1 July 20191 $000 5,712 2,178 7,890 900 9,081 270 405 (5,050) (2,620) (614) (387) 1,9852 (397)3 1,588 6,302 5,712 (900) 4,812 1. Effective date of CCL Group acquisition. 2. As at the date of this report the provisional accounting for the business combination had been completed. The fair value of assets acquired and goodwill on acquisition has not changed from what has been previously reported. As at balance date 5 July 2020 the non-controlling interest has been derecognised as if it was acquired at that date, allowing for recognition of the redemption liability as detailed in Note 16. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 59 Notes to the Financial Statements 25. FAIR VALUE MEASUREMENT Fair value hierarchy The following tables detail the Group’s assets and liabilities, measured or disclosed at fair value, using a three- level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Unobservable inputs for the asset or liability. Consolidated – 5 July 2020 Level 1 $000 Level 2 $000 Level 3 $000 Total $000 Assets Total assets Liabilities CCL Contingent Consideration – Retention CCL Contingent Consideration – Earn Out Year 1 CCL Contingent Consideration – Earn Out Year 2 Redemption liability Total liabilities Consolidated - 30 Jun 2019 Level 1 $000 Assets Total assets Liabilities Total liabilities - - - - - - - - - - - 600 - 600 - - - 789 789 789 789 1,973 1,973 600 3,551 4,151 Level 2 $000 Level 3 $000 Total $000 - - - - - - There were no transfers between levels during the year. The Fair values of the Group’s remaining assets and liabilities are approximately equal to their carrying values. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 60 Notes to the Financial Statements The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial liabilities. Valuation techniques for fair value measurements categorised within level 2 and level 3 The contingent consideration – retention has arisen as a result of the business combination detailed in Note 24. The liability is contingent on the CCL Group continuing to operate specific enterprise bargaining terms and conditions over a three-year period from completion date of the acquisition. In accordance with the CCL Group Share Sale and Purchase Agreement, the agreed retention amount is $600,000. The contingent consideration – earn out year 1 and year 2 have arisen as a result of the business combination detailed in Note 24. The liabilities will be adjusted for subsequent earn-outs for FY20 and FY21 and have currently been valued using estimated FY19 EBITDA levels. The redemption liability has arisen as a result of the business combination detailed in Note 24. The liability has been valued at the present value of the redemption amount or the put option consideration amount in accordance with the underlying CCL Group Share Sale and Purchase Agreement. Level 3 assets and liabilities Movements in level 3 assets and liabilities during the current year are set out below: CCL Contingent Consideration – Earn Out Year 1 CCL Contingent Consideration – Earn Out Year 2 Redemption Liability Consolidated $000 $000 $000 Balance at 1 July 2019 Gains / (losses) recognised in other comprehensive income Additions Settlements during the year Balance at 5 July 2020 - - 789 - 789 Total $000 - - - - - - 789 1,973 3,551 - - - 789 1,973 3,551 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 61 Notes to the Financial Statements The level 3 assets and liabilities unobservable inputs and sensitivity are as follows: Description Unobservable inputs Range (weighted average) Sensitivity CCL Contingent Consideration – Earn Out 1 CCL Contingent Consideration – Earn Out 2 Redemption liability EBITDA FY20 2,887,786 10% change would increase/decrease fair value by $88,914. EBITDA FY21 2,887,786 10% change would increase/decrease fair value by $88,914. 2,887,786 10% change would increase/decrease fair value by $175,030. EBITDA FY during which Put Option exercised & EBITDA FY immediately following FY during which Put Option exercised ASHLEY SERVICES GROUP ANNUAL REPORT 2020 62 Notes to the Financial Statements 26. CONTROLLED ENTITIES Set out below are the controlled entities of Ashley Services Group Limited: Action Arndell Park Pty Limited Action Botany Pty Limited Action James (Qld) Pty Limited Action James NSW Pty Limited Action James Parramatta Pty Limited Action James WA Pty Limited (formerly Action Workforce AC Pty Limited) Action James WCF Pty Limited Action James Western Suburbs Pty Limited Action Job Support Pty Limited Action Merchandising Pty Ltd Action MMX Pty Limited Action Workforce ACT Pty Limited Action Workforce CAT Pty Limited Action Workforce COL1 Pty Limited Action Workforce COS1 Pty Limited Action Workforce COT Pty Limited Action Workforce IMT Pty Limited Action Workforce NSW Pty Limited Action Workforce OS Pty Limited Action Workforce OST Pty Limited Action Workforce Pty Limited Action Workforce T1 Pty Limited Action Workforce T2 Pty Limited Action Workforce VER1 Pty Limited Action Workforce Victoria Pty Limited Action Workforce VM Pty Limited Action Workforce VPS Pty Limited ADV Services Pty Limited ADV1 Pty Limited ADV2 Pty Limited ADV3 Pty Limited ADV6 Pty Limited Advance Exchange Pty Limited Advance GW Pty Limited Advance MIX Pty Limited Advance Recruitments Pty Limited AIVD Holdings Pty Limited ASG Electrical Contracting Pty Ltd (formerly ADV7 Pty Limited) Ash Pty Limited ASHLEY SERVICES GROUP ANNUAL REPORT 2020 Country of incorporation Australia Australia 2020 percentage owned % 100 100 2019 percentage owned % 100 100 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 63 Notes to the Financial Statements Ashley Institute Holdings Pty Limited Australian Institute of Vocational Development Pty Limited AWF Training 3 Pty Limited AWF Training 4 Pty Limited Cantillon Holdings Pty Limited CCL Group Holdings Pty Ltd (formerly Advance GX Pty Ltd) College of Innovation and Industry Skills Pty Limited Complete Traffic Services (VIC) Pty Ltd Concept AWF Pty Limited Concept Electrical Resources Pty Ltd (formerly Action James Mascot Pty Limited) Concept Employment (Aust) Pty Limited Concept Engineering (Aust) Pty Limited Concept Engineering Contracting Holdings Pty Ltd (ASG Integracom (Aust) Holdings Pty Ltd Concept Engineering Contracting Pty Ltd (formerly ASG Integracom (Aust) Pty Ltd) Concept Project Resources Pty Limited Concept Recruitment Specialists Pty Ltd Construction Contract Labour (VIC) Pty Ltd CP Action Workforce Pty Limited Executive Careers Australia Pty Limited Global Education and Training Group Pty Limited Integracom Holdings Pty Limited Integracom Unit Trust1 James Personnel Pty Limited James Warehousing Pty Limited Logistics People Pty Limited Qualitas Education Pty Limited Silk Group Holdings Pty Limited TBRC Holdings Pty Limited The Blackadder Recruitment Company Pty Limited The Instruction Company Holdings Pty Ltd (formerly AWF Training 2 Pty Ltd) Track Safety Australia Pty Ltd (formerly AWF Training 1 Pty Ltd) Tracmin Holdings Pty Limited Tracmin Pty Limited VIC Traffic and Labour Solutions Pty Ltd Vocational Training Australia Pty Limited Country of incorporation Australia 2020 percentage owned % 100 2019 percentage owned % 100 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 100 100 100 100 100 100 80 100 100 100 100 100 100 100 100 80 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 - 100 During the financial year ended 5 July 2020 the Group undertook a Corporate structure simplification review and rationalised its structure by deregistering a number of companies which were considered additional to the Group’s requirements. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 64 Notes to the Financial Statements 27. PARENT ENTITY DISCLOSURES a. Financial position Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Share capital Common control reserve Accumulated losses Total equity Note: 1. Accumulated losses includes dividends paid of $3.9 million. b. Statement of profit or loss and other comprehensive income Profit/(Loss) for the year Other comprehensive income Total comprehensive income/(loss) 2020 $000 92 19,605 19,697 (1,389) (10,248) (11,637) 8,060 148,815 (59,261) (81,494) 8,060 2019 $000 92 17,028 17,120 - (3,599) (3,599) 13,521 148,815 (57,687) (77,607) 13,521 2020 $000 - - - 2019 $000 - - - c. Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The Parent entity and some of its subsidiaries are party to a deed of cross guarantee under which each company guarantees the debts of the others. No deficiencies of assets exist in any of these subsidiaries. d. Contingent liabilities of the Parent Entity The Parent entity had no other known material contingent liabilities as at 5 July 2020. Commitments for expenditure for the Parent entity e. The Parent entity had Nil committed expenditure as at 5 July 2020 (30 June 2019: Nil). ASHLEY SERVICES GROUP ANNUAL REPORT 2020 65 Notes to the Financial Statements 28. DEED OF CROSS GUARANTEE The following entities have entered into a deed of cross guarantee dated 22 February 2018 under which each company guarantees the debts of the others:  Ashley Services Group Limited  Action Workforce Pty Limited  ADV6 Pty Limited  Ashley Institute Holdings Pty Ltd  Concept Engineering (Aust) Pty Ltd By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements and directors' report under Corporations Instrument 2016/785 issued by the Australian Securities and Investments Commission. The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there are no other parties to the deed of cross guarantee that are controlled by Ashley Services Group Limited, they also represent the 'Extended Closed Group'. a. Statement of profit or loss and other comprehensive income Extended Closed Group Revenue Other Income Employment costs Depreciation and amortisation expense Finance costs Other expenses Profit before income tax Income tax expense Profit after income tax Other comprehensive Income Total comprehensive income for the year 2020 $000 261,371 913 (250,347) (509) (151) (2,903) 8,374 (2,512) 5,862 - 5,862 2019 $000 268,294 995 (255,750) (413) (134) (2,737) 10,255 (3,076) 7,179 - 7,179 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 66 Notes to the Financial Statements b. Statement of Financial position Extended Closed Group Assets Current assets Cash and cash equivalents Trade and other receivables Other assets Total current assets Non-current assets Trade and other receivables Property, plant and equipment Deferred tax assets Right-of-use assets Other Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Dividends payable Current tax payable Lease liabilities Other liabilities Provisions Total current liabilities Non-current liabilities Deferred tax liabilities Lease liabilities Other liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Common control reserve Retained earnings Total Equity 2020 $000 2019 $000 2,302 19,952 677 22,931 100,820 459 3,485 783 19,605 125,152 148,083 28,149 7,487 11,603 241 1,389 1,634 50,503 (114) 566 2,761 208 3,421 53,924 94,159 148,815 (59,261) 4,605 94,159 2,297 27,681 883 30,861 83,616 550 3,485 - 17,028 104,679 135,540 27,151 3,599 9,575 - - 1,480 41,805 (114) - - 372 258 42,063 93,477 148,815 (57,687) 2,349 93,477 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 67 Notes to the Financial Statements c. Equity – retained profits Extended Closed Group Retained profits at the beginning of the financial year Adjustment to opening retained profits Profit after income tax expense Dividends paid Retained profits at the end of the financial year 2020 $000 2,349 281 5,862 (3,887) 4,605 2019 $000 (1,038) (193) 7,179 (3,599) 2,349 d. Contingent liabilities of the Extended Closed Group The Extended Closed Group had no other known material contingent liabilities as at 5 July 2020. e. Commitments for expenditure for the Extended Closed Group The Extended Closed Group had Nil committed expenditure as at 5 July 2020 (30 June 2019: Nil). f. Going Concern and Financial Support The financial statements of the Extended Closed Group have been prepared on a going concern basis. The directors have provided a letter of financial support confirming that each of the below listed companies within the Ashley Services group Limited and controlled entities agrees to provide whatever financial support is necessary to ensure each entity will be able to continue as a going concern and pays its debts as and when they fall due and payable. The financial support covers the following entities: • Ashley Services Group Limited; • Action Workforce Pty Limited; • Concept Engineering (Aust.) Pty Ltd; • ASH Pty Ltd; • Vocational Training Australia Pty Ltd; • Australian Institute of Vocational Development Pty Ltd; and • Tracmin Pty Ltd. The financial support includes but is not limited to the actions as noted below: • not calling on related party loans; • • agreeing to any cost re-allocations or management fee re-charges; and agreeing to debt forgiveness with any related entity. The undertaking remains current until the date on which the directors approve the financial statements of the Group for the financial year ending 5 July 2020. The directors are satisfied that collectively the Group has the financial ability to provide this support. g. Security Offered The Westpac facility (see Note 17) is subject to a Security which includes, but is not limited to the following:  1st ranking General Security Agreement over the assets and undertakings of the Borrower and its Guarantors;  Contractual Subordination of Shrimpton Holdings Pty Ltd facility of $5 million; and  Flawed Asset Arrangement – Deposit of Action Workforce Pty Ltd and Concept Engineering (AUST) Pty Ltd for Invoice Finance Facility collections. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 68 Notes to the Financial Statements 29. RELATED PARTY TRANSACTIONS a. Parent company There is no ultimate parent company for Ashley Services Group Limited. Transactions with related entities b. Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. Transactions with related parties are as follows: 20201 $ 20191 $ 130,967 116,454 - - 46,267 46,176 175,169 37,484 Rent and outgoings paid or payable to Shrimpton Holdings Pty Limited as trustee for the Shrimpton Family Trust, an entity which is controlled by Mr Ross Shrimpton for the head office at Arndell Park, New South Wales1 Loan balances from entities associated with Mr Ross Shrimpton. Interest and line fee paid to Shrimpton Holdings Pty Limited, an entity which is controlled by Mr Ross Shrimpton Fees payable to Trood Pratt & Co (of which Ian Pratt is a Partner) for taxation services Note: 2. All amounts as shown are exclusive of GST. 30. SECURED AND CONTINGENT LIABILITIES For assets pledged as security for borrowing facilities see Note 17. The Group had no other known contingent liabilities at 5 July 2020. 31. FINANCIAL INSTRUMENTS a. Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in Note 1 to the financial statement. b. Financial risk management objectives The Board of Directors has overall responsibility for the establishment and oversight of the Group’s financial management framework. The Board has an established Audit and Risk Management Committee which is responsible for developing and monitoring the Group’s financial management policies. The Committee provides regular reports to the Board of Directors on its activities. The Audit and Risk Management Committee oversees how management monitors compliance with risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks. The main risks arising from the Group’s financial instruments are market risk (including fair value interest rate risk), credit risk and liquidity risk. The Board reviews and approves policies for managing each of these risks. The Audit and Risk Management Committee oversees how management monitors compliance with risk management policies and procedures and review the adequacy of the risk management framework in relation to the risks. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purpose. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 69 Notes to the Financial Statements c. Market risk Interest rate risk The Group is exposed to interest rate risk associated with borrowed funds at floating interest rates. During the financial year, risks associated with interest rate movements were monitored by the Board; however, no hedging instruments were considered necessary to manage the risk. The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note. Interest rate sensitivity The sensitivity analyses below have been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates. At the reporting date, if interest rates had been 100 basis points higher or lower and all other variables were held constant, the effect on the Group would be as follows: Change in profit Increase in interest rates of 1% Decrease in interest rates of 1% Change in equity Increase in interest rates of 1% Decrease in interest rates of 1% Credit risk 2020 $000 142 (142) 142 (142) 2019 $000 91 (91) 91 (91) Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of financial loss from defaults. Trade receivables consist of a large number of customers. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The carrying value of trade receivables recorded in the financial statements, net of any impairment allowances, represents the Group’s maximum exposure to credit risks. The Group does not have any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk on liquid funds is limited because the counter parties are a reputable bank with high quality external credit ratings. The maximum credit risk exposure of financial assets is their carrying amount in the financial statements. Liquidity risk management d. Ultimate responsibility for liquidity risk management rests with the Managing Director and Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously comparing actual cash flows with forecasts and matching the maturity profiles of ASHLEY SERVICES GROUP ANNUAL REPORT 2020 70 Notes to the Financial Statements financial assets and liabilities. Included in Note 17 is a listing of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk. Liquidity and interest risk tables The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities. The table has been presented based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group may be required to pay. The table includes both interest and principal cash flows. Financial assets 2020 Cash and cash equivalents Trade and other receivables Contract assets Total 2019 Cash and cash equivalents Trade and other receivables Contract assets Total Financial liabilities 2020 Trade and other payables Borrowings Lease liabilities Other liabilities Total 2019 Trade and other payables Borrowings Total Weighted average effective interest rate % n/a n/a n/a Weighted average effective interest rate % n/a Within 1 year $000 8,063 29,418 154 37,635 1 to 5 years $000 - - Over 5 years $000 - - - - - - Within 1 year $000 6,784 1 to 5 years $000 - Over 5 years $000 - n/a n/a 28,524 571 35,879 - - - - - - Total $000 8,063 29,418 154 37,635 Total $000 6,784 28,524 571 35,879 Weighted average effective interest rate % n/a 4.35% 3.00% n/a Weighted average effective interest rate % n/a 5.85% Within 1 year $000 18,517 - 723 1,389 20,629 Within 1 year $000 13,900 - 13,900 1 to 5 years $000 - - 1,716 789 2,505 Over 5 years $000 - - - 1,973 Total $000 18,517 - 2,439 4,151 1,973 25,107 1 to 5 years $000 - - Over 5 years $000 - - Total $000 13,900 - - - 13,900 Fair value of financial instruments Refer to Note 25 for details on the fair value of financial instruments. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 71 Notes to the Financial Statements 32. OPERATING LEASE COMMITMENTS Leases as lessee Non-cancellable operating lease rentals are payable as follows: Leases as lessee Less than one year Between one and five years Total Note: 1. All amounts as shown are exclusive of GST. 2020 $000 - - - 20191 $000 1,384 1,756 3,140 The Group has adopted AASB 16 Leases from 1 July 2019 but has not restated comparatives for the 2019 reporting period, as permitted under the specific transition provisions in the standard. Refer to note 1(e) for further details on the adoption of AASB 16. 33. EVENTS AFTER THE REPORTING DATE No matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years, except for the following: On 27 July 2020 the Group declared a fully franked final dividend of 2.7 cents in relation to the financial year ended 5 July 2020, with a payment date of 11 September 2020. 34. DIVIDENDS a. Ordinary shares On 9 August 2019 the Group declared a fully franked final dividend of 2.7 cents in relation to the financial year ended 30 June 2019, with a payment date of 6 September 2019 (FY19: 2.5 cents). b. Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% (2019: 30%) 2020 $000 1,670 2019 $000 332 The balance of the franking accounts includes: • • • • franking credits that arose from the payment of the amount of the provision for income tax; franking debits that arise from the refund of the amount of the provision for income tax; franking debits that arise from the payment of dividends recognised as a liability at the reporting date; and franking credits that arise from the receipt of dividends recognised as receivables at the reporting date. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 72 ASX Additional Information Set out below is additional information as required by the ASX Limited Listing Rules and not disclosed elsewhere in this report. This information is effective as at 17 August 2020. Number of security holders and securities on issue Quoted equity securities Ashley Services has on issue 143,975,904 fully paid ordinary shares which are held by 690 shareholders. Voting rights Quoted equity securities The voting rights attached to fully paid ordinary shares are that on a show of hands, every member present, in person or proxy, has one vote and upon a poll, each share shall have one vote. Distribution of security holders Quoted equity securities Ordinary fully paid ordinary shares Holding 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Unmarketable parcel of shares Number of shareholders Number of shares 166 179 71 212 62 690 120,800 421,139 578,859 7,646,981 135,208,125 143,975,904 % 0.09 0.29 0.40 5.31 93.91 100.00 The number of shareholders holding less than a marketable parcel of Fully Paid Ordinary shares is 224 with a total number of shares held is 186,685. Substantial Shareholders The number of securities held by substantial shareholders and their associates are set out below: Fully Paid Ordinary Shares Name Ross Shrimpton JP Morgan Nominees Australia Limited ATF Viburnum Funds Pty Ltd Number 80,279,030 13,928,460 % 55.76% 9.67% Unquoted equity securities There are no unquoted shares. On-market buy-back There is no current on-market buy-back. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 73 ASX Additional Information Twenty largest shareholders Fully paid ordinary shares Details of the 20 largest shareholders of quoted securities (grouped) by registered shareholding are: Name Mr Ross Shrimpton JP Morgan Nominees Australia Limited HSBC Custody Nominees (Australia) Limited Hishenk Pty Ltd BNP Paribas Nominees Pty Ltd Aust Executor Trustees Ltd Mr Marc Shrimpton Action James Holdings Pty Limited Moat Investments Pty Ltd Mr Andrew Douglas Shrimpton Super Wide Pty Ltd Gailforce Marketing & PR Pty Limited Shann Superannuation Nominees Pty Ltd Mrs Kerry Elizabeth Draffin Mr Dean Michael Shrimpton Mr Christopher John McFadden & Mrs Toula McFadden Velkov Funds Management Pty Ltd Mr Mark Christopher Garrick Aust Executor Trustees Ltd Mr Brenton Fletcher Total Annual General Meeting Number of shares 80,279,030 18,526,728 5,481,443 3,725,000 2,229,371 1,582,009 1,500,000 1,486,615 1,424,000 1,275,000 1,140,326 900,000 700,000 649,445 632,388 630,630 600,000 596,618 589,575 500,391 % 55.76% 12.87% 3.81% 2.59% 1.55% 1.10% 1.04% 1.03% 0.99% 0.89% 0.79% 0.63% 0.49% 0.45% 0.44% 0.44% 0.42% 0.41% 0.41% 0.35% 124,448,569 86.46% The annual general meeting of the Company will be held at the company’s offices at Level 10, 92 Pitt Street Sydney NSW 2000 at 10.00am on Thursday 22 October 2020. Shareholders who are unable to attend the meeting are encouraged to complete and return their proxy form that will accompany the notice of meeting. ASHLEY SERVICES GROUP ANNUAL REPORT 2020 74 Bankers Westpac Level 18 275 Kent Street Sydney NSW 2000 Telephone: + 61 2 9155 7700 Facsimile: + 61 2 8253 4128 Website: www.westpac.com.au Share Registry Link Market Services Limited Central Park, Level 4 152 St Georges Terrace Perth WA 6000 Telephone: +61 1300 554 474 Facsimile: +61 2 9287 0303 Website: www.linkmarketservices.com.au Website www.ashleyservicesgroup.com.au ASX Code ASH Corporate Directory Non-Executive Directors Mr Ian Pratt (Chairman) Executive Directors Mr Ross Shrimpton – Managing Director Mr Chris McFadden Company Secretary Mr Ron Hollands Registered Office Level 10 92 Pitt Street Sydney NSW 2000 Australian Company Number 094 747 510 Australian Business Number 92 094 747 510 Auditors HLB Mann Judd Level 19 207 Kent Street Sydney NSW 2000 Telephone: + 61 2 9020 4000 Facsimile: + 61 2 9020 4190 Legal Adviser Addisons Lawyers Level 12 60 Carrington Street Sydney NSW 2000 Telephone: + 61 2 8915 1000 Facsimile: + 61 2 8916 2000 ASHLEY SERVICES GROUP ANNUAL REPORT 2020 75 

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