Ashland Global
Annual Report 2022

Plain-text annual report

Appendix 4E Year Ended 3 July 2022 Lodged with the ASX under Listing Rule 4.3A 31 August 2022 The following information should be read in conjunction with the attached Annual Report. 1. DETAILS OF REPORTING PERIODS: The current reporting period is the 52 weeks to 3 July 2022. The previous corresponding reporting period was the 52 weeks from 5 July 2020 to 4 July 2021. The group works on a 4-4-5 week based calendar in line with the group’s weekly reporting calendar. The consolidated statement of profit or loss and other comprehensive income and consolidated statement of financial position relates to Ashley Services Group Limited (“ASH” and its controlled entities). 2. RESULTS FOR ANNOUNCEMENT TO THE MARKET: Results: Revenue from ordinary activities Profit after tax for the year Profit after tax for the year attributable to shareholders Change % Change Up Up Up 17.2% 21.8% 26.8% To To To Amount $’000 449,776 11,356 11,315 Refer to Chairman and Managing Director’s review in the Annual Report and separate results presentation for commentary on the results. Control gained over entities: During the financial year ended 3 July 2022, the Group did not gain control over any new entities (2021: The Instruction Company Pty Ltd was acquired on 15 September 2020, with a financial effective date of 6 July 2020). Loss of control over entities: Not applicable. Details of interests in significant joint ventures and associates: On 22 June 2022, the Group acquired a 49% interest in Dardi Munwurro Labour and Traffic Management Pty Limited, a company providing Indigenous labour hire in Victoria. Dividend re-investment plans: Not applicable. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 1 Dividends: Record Date Payment Date Interim Dividend - 2022 3 March 2022 17 March 2022 Final Dividend - 2022 1 September 2022 16 September 2022 Additional Information: Cents per Share 3.0 3.0 Franked Amount per Share (Cents) 3.0 3.0 2022 Restated 2021 Net tangible assets ($000) Shares on Issue Net tangible assets per share ($) Note: 1. Right-of-use assets are excluded assets for the purposes of the Net Tangible Assets calculation. 17,2021 143,975,904 0.119 15,0671 143,975,904 0.105 Audit qualification or review: The audited financial statements are attached. Ross Shrimpton Managing Director Sydney, 31 August 2022 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 Ashley Services Group Limited Annual Report 2022 CHAIRMAN AND MANAGING DIRECTOR’S REVIEW ------------------------------------------------------------------ 5 DIRECTORS’ REPORT --------------------------------------------------------------------------------------------------------- 8 AUDITOR’S INDEPENDENCE DECLARATION -------------------------------------------------------------------------- 20 CORPORATE GOVERNANCE STATEMENT ----------------------------------------------------------------------------- 21 DIRECTORS’ DECLARATION----------------------------------------------------------------------------------------------- 22 INDEPENDENT AUDITOR’S REPORT ------------------------------------------------------------------------------------ 23 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ------------- 28 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ----------------------------------------------------------- 29 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ------------------------------------------------------------ 30 CONSOLIDATED STATEMENT OF CASH FLOWS --------------------------------------------------------------------- 31 NOTES TO THE FINANCIAL STATEMENTS ----------------------------------------------------------------------------- 32 ASX ADDITIONAL INFORMATION --------------------------------------------------------------------------------------- 72 CORPORATE DIRECTORY -------------------------------------------------------------------------------------------------- 74 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 4 Chairman and Managing Director’s Review MR IAN PRATT AND MR ROSS SHRIMPTON The financial year has proven to be a strong success, particularly considering the challenges associated with the pandemic, rising labour costs and overall shortages of skilled labour and staff. We continue to be well positioned to meet these challenges with strengthened management and systems allowing the Group to be highly competitive across all our market segments. The year also saw us acquire a minority interest of 49% in Dardi Munwurro Labour and Traffic Management Pty Limited, a company providing Indigenous labour hire in Victoria. Subsequent to year end, the Group similarly acquired a non-controlling interest of 49% in Yalagan Infrastructure Pty Limited, a company supporting Indigenous labour hire in New South Wales. These new entities broaden Ashley Services labour hire offerings for Indigenous labour. Additionally, on 5 July 2022, the Group acquired a 75% interest in Linc Personnel Pty Limited, a company currently providing labour to the oil and gas sector in Western Australia and the Northern Territory. We continue to review potential acquisitions in line with our strategy to broaden our geographical and industry footprints in growing profitable sectors. On 28 July 2022, the Group announced a fully franked final dividend of 3.0 cents per share (Ex-div: 31 August 2022; Payment: 16 September 2022). Together with the previously paid 3.0 cents per share interim dividend, this delivers a fully franked full year dividend of 6.0 cents per share for 2022, a 43% increase on the 2021 dividend. We remain focused on continuing improvement in our core areas of strength; namely safety, customer satisfaction, systems and internal staff development as well as enhancing our marketing capability and improving labour retention. We are also committed to additional growth and value creation through the acquisition and successful integration of new businesses. This years’ achievement is again a testament to our 300 internal staff who are the backbone of our organisation’s continuing success. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 5 Chairman and Managing Director’s Review DISCUSSION ON RESULTS Earnings Net profit after tax (“NPAT”) for the financial year ended 3 July 2022 was $11.4 million (restated FY21: profit $9.3 million). Key elements within the result include: Revenues Group Revenue at $449.8 million increased by $66.1 million (17%) from the comparative period. Labour Hire revenues at $438.2 million were up $64.3 million (17%), with growth in all business lines except Concept Engineering. Growth was particularly strong in Action Workforce, predominantly in Victoria where hours worked with existing customers grew significantly. Training revenues at $11.5 million were up by $1.8 million (19%) with growth achieved across both the Ashley and The Instruction Company (“TIC”) training businesses. Earnings before interest taxes depreciation and amortisation (“EBITDA”) Group EBITDA for the financial year was $18.7 million, up by $3.45 million (23%) on the prior corresponding period (restated FY21: EBITDA of $15.25 million). EBITDA for the 2nd half (“H2”) was $9.4 million versus $9.3 million for the first half (“H1”) and $8.65 million in the second half of FY21 (restated). Labour Hire division EBITDA of $21.7 million, was up $4.2 million (24%) on the prior corresponding period (restated FY21: $17.56 million), improving in line with the revenue increases. EBITDA margin increased slightly to 4.95% (restated FY21: 4.7%). Training division EBITDA of $1.5 million was down $0.5 million or 25% on the prior corresponding period (FY21: $2.0 million), with compliance costs increasing and classroom-based training continuing to be impacted by COVID-19. Corporate overheads (excluding interest, depreciation and amortisation), at $4.5 million were up $0.2 million on prior corresponding period (FY21: $4.3 million), primarily due to increases in the cost of insurance and salary inflation. Statement of financial position Net assets at $31.5 million were up by $3.5 million on the prior year (restated 2021: $28.0 million) mainly reflecting the impact of our dividend policy which pays out approximately 75% of attributable profit to shareholders. The payout ratio for the current financial year was 76%. Noteworthy balance sheet movements include:  Trade Receivables up $5.3 million to $42.9 million. Debtors have increased in line with the revenue increases - revenue for May and June 22 was $12 million (or 14%) above the prior period. Trade and other payables were up $3.4 million to $30.8 million reflecting the increased activity. Net working capital increased $1.9 million, representing our expected increase in underlying working capital at a rate of 3%-4% of revenues.  Other receivables increased $5.7 million to $12.7 million, mainly due to the increase in receivables due under the Boosting Apprenticeship Commencements Scheme (“BAC”). The collection of these receivables will benefit operating cash flows in the financial year ended 30 June 23.  Property, plant and equipment increased $0.8 million, with capital additions of $1.4m above depreciation of $0.5m and minimal disposals in the year.  Borrowings increased $4.2 million and cash decreased $1.2 million, with total net debt increasing $5.4 million during the year to fund the net working capital and other receivable increases, as well as the $8.2 million of dividend payments and $1.2 million in remaining CCL and TIC acquisition payments. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 6 Chairman and Managing Director’s Review Cash Flow Operating cash flow was stronger in H2, with an inflow of $6.2 million ($0.5 million H1), bringing the full year operating cash flow to $6.7 million. Operating cash flow before income taxes and interest was $11.65 million, $7 million below EBITDA, due primarily to increased working capital requirements linked to revenue growth and the increase in other receivables. The overall outflow from investing activities of $2.8 million included the final earn out payments relating to the CCL and TIC acquisitions ($0.825 million and $0.375 million respectively) as well as normal stay in business capital requirements and course material development costs. The overall outflow from financing activities of $5.1 million was primarily due to the combined $8.2 million dividend payments covering the 2021 final dividend ($3.5 million), the 2022 interim dividend ($4.3 million) and the 2021 final CCL final dividend to minority shareholders ($0.46 million). Lease payments of $1.1 million were in line with the prior period and borrowings increased $4.2 million. Overall, this delivered a net cash decrease in cash and cash equivalents for FY22 of $1.2 million (2021: $5.1 million outflow). DIVIDEND On 28 July 2022 the Group declared a fully franked final dividend of 3.0 cents in relation to the financial year ended 3 July 2021. With a fully franked interim dividend of 3.0 cents previously declared on 2 February 2022, this brings the full year dividend for the financial year ended 3 July 2021 to a total of 6.0 cents, a 43% increase on the dividend for the prior financial year (FY21: 4.2 cents). EVENTS SUBSEQUENT TO BALANCE DATE In addition to the dividend announcement outlined above, subsequent to year end the Group acquired: 1. a 75% interest in Linc Personnel Pty Limited for $3.615 million. This company currently provides labour to the oil and gas sector in Western Australia and the Northern Territory; and 2. a non-controlling interest of 49% in Yalagan Infrastructure Pty Limited, a company supporting Indigenous labour hire in New South Wales. Other than these items, 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 2022 7 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 3 July 2022. 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 Mr Ron Hollands Director Appointed / Resigned Appointed 1 October 2015 Appointed 12 Oct 2000; Managing Director (“MD”) to 15 Feb 2016, Non- Executive Director 15 Feb 2016 to 23 Jan 2017 and Managing Director from 23 Jan 2017 Appointed 22 June 2022, resigned 25 July 2022 Mr Paul Brittain Mr Chris McFadden Executive Director Appointed 25 July 2022 Executive Director Appointed 6 April 2017; resigned 22 June 2022 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 Pratt Partners and was previously a Director of Charter Hall 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 | MD (since 23 January 2017) (previously Non-Executive Director from 15 February 2016 to 23 Jan 2017 and MD 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. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 8 Directors’ Report • • • Mr Ron Hollands | Executive Director (from 22 June 22 to 25 July 2022) & Company Secretary (for the entire financial year) Qualifications | Bbus (UTS), ICAA, MBA (MGSM) Experience | 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 30 years’ experience in a range of industries. Mr Paul Brittain | Executive Director (from 25 July 2022) Qualifications | BSc (Exeter, UK), CA, AMP (Wharton) Experience | Paul was appointed Chief Financial Officer and Executive Director of Ashley Services Group on 25 July 2022. Paul, a chartered accountant, worked with Touche Ross in the UK and Deloitte in Sydney, before spending nearly 30 years in large divisional CFO and M&A roles in the Construction Materials Industry (Rinker and Boral) and the Engineering and Industrial Sectors (UGL and Coates Hire), working throughout both Australia and the USA. Most recently Paul was the EGM Finance for Boral Australia. Paul was also previously CFO of Ashley Services Group from December 2014 to February 2017. Paul is a Member of Chartered Accountants Australia and New Zealand. Paul 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); resigned 22 June 2022 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, CFO of Staples Australia, Senior Commercial Manager at Woolworths and Asia-Pac CFO of The Nuance Group. Chris is a Fellow of CPA Australia and a Graduate of the Australian Institute of Company Directors. Chris was a member of the Nominations, Audit & Risk Management and Remuneration Committees, up until his date of resignation. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 9 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 Ron Hollands Mr Paul Brittain Mr Chris McFadden • Number of Shares Held 15,060 Shareholding • % 0.01 80,279,030 55.76 434,497 0.31 - 0.00 - 0.00 Directorships of other listed companies 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 Ron Hollands Mr Paul Brittain Mr Chris McFadden a. Principal activities Company Date from Date to Nil Nil Nil Nil Nil - - - - - - - - - - The principal activities of the Group during the financial year were the provision of labour hire (including recruitment) and training services. 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 7 7 7 7 7 7 2 2 2 2 2 2 - - - - - - - - - ASHLEY SERVICES GROUP ANNUAL REPORT 2022 - - - 10 Directors’ Report 1. BUSINESS REVIEW a. Operating results The consolidated profit of the Group attributable to equity holders after providing for income tax amounted to $11,356,000 (restated 2021: profit $9,326,000). b. Review of operations financial Information on the operations and position of the Group and its business strategies and prospects is set out in the Chairman and Managing Director’s Review. c. Future developments Likely developments in the operations of the consolidated entity in future years and the expected results of those operations are referred to generally in the Chairman and Managing Director’s Review. d. 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 2022 except as follows: On 28 July 2022 the Group declared a fully franked final dividend of 3.0 cents in relation to the financial year ended 3 July 2022, with a payment date of 16 September 2022. On 5 July 2022, the Group acquired a 75% interest in Linc Personnel Pty Limited, a company currently providing labour to the oil and gas sector in Western Australia and the Northern Territory. On 25 July 2022, the Group acquired a minority interest of 49% in Yalagan Infrastructure Pty Limited, a company supporting Indigenous labour hire in New South Wales. e. Ongoing Litigation Ashley Services Group Limited (ASH) has no current ongoing litigation. 2. OTHER INFORMATION a. 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 3 July 2022. Details of the amounts paid to HLB Mann Judd Assurance (NSW) Pty Ltd 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 20 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 Financial Instrument / Directors’ Reports) 2016/191, amounts in the financial report are rounded off to the nearest thousand dollars unless otherwise indicated. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 11 Directors’ Report 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. 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 executive 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 (resigned 22 June 2022). • • Non-Executive Directors: • • Ian Pratt Ron Hollands (appointed 22 June 2022, resigned 25 July 2022). Other key management personnel: • • Paul Rixon (General Manager, Labour Hire, resigned 1 April 2022) Glen Everett (Chief Operating Officer, commenced 7 March 2022). include both the Key management personnel Directors and other key management personnel named above. b. Principles used to determine the nature and amount of remuneration is 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 reward that objectives and shareholders. the creation of value for 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; short-term performance incentives, provided in cash; and incentives, to be Long-term performance provided in either cash or shares (at the Long-Term company’s sole discretion). • • ASHLEY SERVICES GROUP ANNUAL REPORT 2022 12 Directors’ Report performance plans have been suspended since 30 June 2017, but a new plan is expected to be put in place for certain key management personnel from the financial year ended 30 June 2023 onwards, to be presented for review and approval by shareholders at the November 2022 annual general meeting. The combination of these comprises the executive’s total remuneration. Table 5: Key components of senior executive remuneration framework in place during the year ended 3 July 2022. 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 FY22 Overview of the senior executive STI plan Who participates in the Senior Executive STI plan? Senior executives, other than the MD, 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. are What 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. 100% of any STI award is paid in cash within 30 days of finalisation of the audited Annual Report. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 13 Directors’ Report STI plan for the financial year ended 30 June 2023 The remuneration committee has approved a similar Short Term Incentive (STI) plan for the year ended 30 June 2023, 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 executive remuneration Details of remuneration of the Directors and other key management personnel of Ashley Services Group are set out in the tables on pages 14 to 18. 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 7: Executive and Key Management Personnel Service Agreements Name Ross Shrimpton Chris McFadden, resigned 22 June 2022 Paul Brittain, appointed 25 July 2022 Paul Rixon, resigned 1 April 2022 Glen Everett, appointed 7 March 2022 Base Salary $1 450,000 450,000 475,000 299,849 450,000 Target STI %2 Target LTI %2, 3, 4 - 50 30 50 30 - 50 To be determined 50 To be determined Term of agreement Ongoing n/a Notice Period 6 months 6 months Ongoing 6 months n/a 6 months Ongoing 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. 4. This plan applicable for Chris McFadden and Paul Rixon has been suspended since the financial year ended 30 June 2017. A new plan is expected to be put in place for Paul Brittain and Glen Everett for the financial year ended 30 June 2023 onwards, to be presented for review and approval by shareholders at the November 2022 annual general meeting. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 14 Directors’ Report Table 8: Statutory key performance indicators of the group over the last five years 2022 2021 2020 2019 2018 Profit / (Loss) for the year attributable to shareholders ($000) Basic earnings per share (cents) Dividend payments ($000)1 11,315 7.86 8,639 8,923 6.20 6,047 4,667 3.24 3,887 5,424 3.77 3,887 Dividend payout ratio (%) Increase / (decrease) in share price (%)2 Total KMP incentives as percentage of profit/(loss) for the year (%) Note: 1. 2022 Final Dividend declared 28 July 2022 in relation to the 2022 financial year, with payment date of 16 September 2022. 83.3 (0.1) 67.8 92.3 43.4 76.3 4.1 0.0 3.9 71.7 33.3 6.1 4,789 3.33 3,600 75.1 204.7 3.1 2022 Interim Dividend declared 2 February 2022 in relation to the 2022 financial year, with payment date of 17 March 2022. 2021 Final Dividend declared 27 July 2021 in relation to the 2021 financial year, with payment date of 17 September 2021. 2021 Interim dividend declared 28 January 2021 in relation to the 2021 financial year, with payment date of 18 March 2021. 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. 2. Table 9: 2022 – Remuneration of Key Management Personnel calculated in line with Australian Accounting Standards 2022 Name Non-executive Directors Ian Pratt Ron Hollands Executive Director Ross Shrimpton Chris McFadden5 ST1 employee benefits Cash salary & fees $ Termination payments5 $ ST1 employee bonus S 205,479 - - 10,000 - - 426,432 426,432 - - 38,665 (5,461) PE2 benefits Super- annuation $ 20,548 1,025 23,568 23,568 LT3 employee benefits Performance based Remuneration Total4 $ - - $ 226,027 11,025 10,624 460,624 % - - - - 483,204 (1.12) Other key management personnel Paul Rixon6 Glen Everett7 210,256 - (1,459) 130,846 - - 18,121 7,856 4,452 231,370 - 138,702 (0.63) - Total Note: 1. ST – Short-term. The amount shown for bonus expense represents the under or over-accrual for bonus payments in relation to 15,076 1,550,952 10(0.45)1(((0.45) 1,409,445 (6,920) 94,686 38,665 the year ending 4 July 2021. 2. PE – Post-employment. 3. LT – Long-term. All previous LTI performance hurdles were not met and LTI plans have been suspended since 2017. No expense has been recognised in the profit or loss account for the year ended 3 July 2022. LT expense also includes accruals for Long Service Leave. 4. Amounts included in the above table include amounts expensed within the Profit or Loss account for the year. 5. Resigned, effective 22 June 2022, with a mutually agreed termination payment of $38,665. 6. Resigned, effective 1 April 2022. 7. Commenced 7 March 2022. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 15 Directors’ Report Table 10: 2022 – Remuneration payments for Key Management Personnel 2022 Name Non-executive Directors Ian Pratt Ron Hollands5 Executive Director Ross Shrimpton6 Chris McFadden7 ST1 employee benefits Cash salary & fees $ Termination payments7 $ ST1 employee bonus S 205,479 - - 10,000 - - 426,432 426,432 - - 38,665 214,616 PE2 benefits Super- annuation $ 20,548 1,025 23,568 23,568 LT3 employee benefits Performance based Remuneration Total4 $ - - - - $ 226,027 11,025 450,000 703,281 % - - - 30.5 31.9 - Other key management personnel Paul Rixon8 Glen Everett9 230,580 - 144,415 130,846 - - 18,121 7,856 59,160 452,276 - 138,702 Total Note: 1. ST – Short-term. 2. PE – Post-employment. 3. LT – Long-term. All previous LTI performance hurdles were not met and LTI plans have been suspended since 2017. No LTIs have 59,160 1,981,311 1,429,769 359,031 38,665 94,686 10118.1 been paid. Payments do include Long Service Leave payments. 4. Amounts included in the above table include amounts paid in the year to key management from all entities. 5. Appointed 22 June 2022, resigned 25 July 2022. During the year company secretarial fees of $20,000 have also been paid to the Ron Holland Family Trust (in which Ron Hollands is a Trustee). 6. During the year rent and outgoings for the office at Arndell Park of $141,286 have been paid to Shrimpton Holdings Pty Limited as trustee for the Shrimpton Family Trust (an entity controlled by Mr Ross Shrimpton). 7. Resigned, effective 22 June 2022, with a mutually agreed termination payment of $38,665. 8. Resigned, effective 1 April 2022. 9. Commenced 7 March 2022. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 16 Directors’ Report Table 11: 2021 – Remuneration of Key Management Personnel calculated in line with Australian Accounting Standards 2021 Name Non-executive Directors Ian Pratt 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 PE2 benefits Super- annuation $ - - 220,077 205,480 428,306 428,306 270,054 - - - - LT3 employee benefits Performance based Remuneration Total4 $ $ 19,520 - 225,000 21,694 21,694 9,197 459,197 - 670,077 32.8 % - - 145,874 21,694 4,497 442,119 33.0 1,332,146 Total Note: 1. ST – Short-term. 2. PE – Post-employment. 3. LT – Long-term. All previous LTI performance hurdles were not met and LTI plans have been suspended since 2017. No expense has been recognised in the profit or loss account for the year ended 4 July 2021. LT expense also includes accruals for Long Service Leave. 13,694 1,796,393 365,951 84,602 - 20.4 4. Amounts included in the above table include amounts expensed within the Profit or Loss account for the year. Table 12: 2021 – Remuneration payments for Key Management Personnel 2021 Name Non-executive Directors Ian Pratt5 Executive Director Ross Shrimpton6 Chris McFadden Other key management personnel Paul Rixon ST1 employee benefits Cash salary & fees $ Salary non- cash $ ST1 employee bonus S - - 81,096 205,480 428,306 428,306 270,054 - - - - PE2 benefits Super- annuation $ 19,520 21,694 21,694 LT3 employee benefits Performance based Remuneration Total4 $ - - - $ 225,000 450,000 531,096 % - - 15.3 54,049 21,694 - 345,797 15.6 Total Note: 1. ST – Short-term. 2. PE – Post-employment. 3. LT – Long-term. All previous LTI performance hurdles were not met and LTI plans have been suspended since 2017. No LTIs have - 1,551,893 1,332,146 135,145 84,602 - 8.7 been paid. 4. Amounts included in the above table include amounts paid in the year to key management from all entities. 5. During the year tax advisory fees of $41,904 have also been paid to Trood Pratt & Co (Company in which Ian Pratt was a Partner until 02 March 2021). 6. During the year rent and outgoings for the office at Arndell Park of $138,061 have been paid to Shrimpton Holdings Pty Limited as trustee for the Shrimpton Family Trust (an entity controlled by Mr Ross Shrimpton). ASHLEY SERVICES GROUP ANNUAL REPORT 2022 17 Directors’ Report 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. Related party transactions are disclosed in Note 33. e. Shares held by key management personnel The number of ordinary shares in the Company during the 2022 reporting period held by each of the Group’s key management personnel, including their related parties are set out below: Table 13: Shares held by Key Management Personnel Name Ian Pratt Ross Shrimpton Chris McFadden Mr Ron Hollands Paul Rixon Glen Everett Total Balance at start of the period 15,060 80,279,030 699,999 419,497 96,239 - Shares Disposed - Change from KMP Balance at end of the period 15,060 - - (37,463) - - - - - 20,000 - - 20,000 80,279,030 662,536 439,497 96,239 - 81,492,362 81,509,825 (37,463) 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 7. 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. End of audited Remuneration Report. FUTURE PROSPECTS AND MATERIAL BUSINESS RISKS The Group anticipates favourable conditions in the labour hire market in the financial year ended 30 June 2023, given the risk of COVID-19 related lockdowns has diminished, following the successful vaccination roll out programme across Australia. Government initiatives available during the pandemic have assisted the Group to service our clients and as these programme wind down, we will continue to leverage the credibility generated through our impressive ability to deliver to our customers during the pandemic and aim to increase share of wallet with existing customers as well as securing and integrating new clients. Additionally, our continued investment in our candidate- and client-facing technology, including a candidate app, screening and on-boarding tools and client reporting portals, continues to enhance our competitive advantage. This, along with an increased investment in our marketing capability and online (including social media) exposure, will strengthen the position of our labour hire division. Our construction-exposed labour hire brands should see improving market conditions as COVID-19 pressures lessen and we are well placed to increase our market position if this sector ramps up again to full capacity, particularly in the traditional construction sector. Additionally, our exposure to the infrastructure sector in Victoria should continue to provide us with a solid base of activity with possible upside from any increasing private construction project activity. Margins will remain under pressure due to the competitive nature of the labour hire markets and inflationary pressures. We continue to review potential higher margin acquisitions and industry/geographic revenue mix. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 18 Directors’ Report Training has been relatively stable in terms of revenue over recent years apart from the lift due to the acquisition of The Instruction Company, effective July 2020. As elements of the public health response to COVID-19 have been relaxed, face-to-face classroom training and site-specific placement activity have returned. This would, if sustained, provide favourable conditions for our training division. As with any organisation, our prospects may be impacted by risks. The impact may be positive or negative, depending on whether the risks materialise or recede. The following are thought to be the more relevant risks, although it is the view of the directors that none of these specific risks, nor any other potential risks, are of special significance at this point in time. Changes in the regulatory environment are always a possibility and have the potential to create challenges for our business. This includes federal and state legislation relating to employment and award conditions, and also that relating to employment and training initiatives. With most of this legislation being foreshadowed in advance of any implementation, we continue to closely monitor any such changes and their likely implications for our business. This gives us an opportunity to participate in consultation processes and to be well placed to adapt as and when such changes may arise. Employment market supply and demand tensions create both challenges and opportunities for our business model. Sourcing staff to supply the extra demands being created and the availability of candidates to fill this demand can create challenges in fulfilment, but the scarcity of suitable workers, in many ways, drives the demand from our customers. Our investment in our marketing capability and technology, both candidate- and client- facing, as outlined above, is being utilised to mitigate risk in this area. There also remains uncertainty regarding how the COVID-19 pandemic will evolve, including the duration of the pandemic, the severity of the downturn and the speed of economic recovery. It is also difficult to predict the emergence of new variants of concern and the possible public health responses to them. We continue to monitor these events closely. 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, 31 August 2022 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 19 Auditor’s Independence Declaration To the directors of Ashley Services Group Limited: As lead auditor for the audit of the consolidated financial report of Ashley Services Group Limited for the year ended 3 July 2022, 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 31 August 2022 K L Luong Director ASHLEY SERVICES GROUP ANNUAL REPORT 2022 20 Corporate Governance Statement A Corporate Governance Statement has been adopted by the Board on 27 August 2021 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 36% 83% 65% 92% 52% 61% Male 64% 17% 35% 8% 48% 39% During the financial year ended 3 July 2022 the Company submitted its annual report to the 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 2022 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 2022 21 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 3 July 2022 and of its performance for the financial year ended on that date; and ii. Complying with Australian Accounting Standards and the Corporations Regulations 2001; b. There are reasonable grounds to believe that 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 32 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 3 July 2022. 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, 31 August 2022 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 22 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 3 July 2022, 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. 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 3 July 2022 and of its 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 2022 23 Key Audit Matter How our audit addressed the key audit matter Revenue Recognition Refer to Note 1 (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 $449.8 million comprises a number of streams including: • labour hire revenue ($438.2 million); • training revenue ($11.5 million); and • other income ($2 thousand). 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 $421.7 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. Our audit procedures included the following: • Documenting the design of the key revenue systems and processes and testing of the key controls. • Assessing whether the Group’s accounting policies were in compliance with Australian Accounting Standards and specifically whether revenue had been recognised in accordance with accounting standard AASB 15 Revenue from Contracts with Customers. • Testing a sample of revenue transactions to assess appropriate revenue recognition under the Group’s accounting policy and Australian Accounting Standards. • Performing analytical review over recognised revenue and costs of sales. • Analysis of revenue transactions using data analysis techniques. • Comparing the accuracy of hours on- billed as labour hire revenue to amounts paid to employees. • Testing the correct cut-off and accrual of labour hire revenue at year end. Our audit procedures included the following: • Documenting the design of the key revenue systems and processes and testing of the key controls (for Labour Hire employees). • Testing a sample of employment costs recognised in the period by agreeing to timesheets, payroll reports, and amounts subsequently paid. • Performing analytical review over the labour hire margins. • Analysis of payroll transactions using data analysis techniques. • Testing the correct cut-off and accrual of employment costs at year end. • Testing superannuation amounts paid by assessing the validity of the data in the contribution reports. • Testing sample of registered apprentices’ eligibility for wages subsidies. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 24 Carrying Value of Goodwill Refer to Note 15 (Intangible assets) and Note 16 (Impairment) The Group has a Goodwill balance of $10.7m as at 3 July 2022 in relation to the Labour Hire and Training divisions. This Goodwill arose on acquisition of subsidiary companies in prior years. As required by Australian Accounting Standards the Group tested this Goodwill for impairment, at 3 July 2022. The Group determined the recoverable amount using value in use calculations for the relevant cash generating units (“CGU”) being that of Labour Hire and Training, 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. Our audit procedures included but were not limited to the following: • Assessed the identification and determination of the Group’s CGUs based on our understanding of the nature of the Group’s business. • Tested the integrity and mathematical accuracy of the discounted cash flow models used by management for value in use assessments. • Evaluated and assessed key assumptions and methodologies applied to the underlying cashflow forecasts with reference to representations from management, documented business plans and historical results of the business operations. • Assessed the Group’s assumptions in developing the discount and terminal growth rates with reference to external sources. • Performed sensitivity analysis and evaluated whether a reasonably possible change in assumptions could cause the carrying amount of a CGU to exceed its recoverable amount. • Assessed the adequacy of disclosures included in Notes 15 and 16 to the financial statements. 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 3 July 2022, 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. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 25 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. • 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. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 26 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 3 July 2022. In our opinion, the Remuneration Report of Ashley Services Group Limited for the year ended 3 July 2022 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 K L Luong Director Sydney, NSW 31 August 2022 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 27 Consolidated Statement of Profit or Loss and Other Comprehensive Income For the financial year ended 3 July 2022 Revenue Other income Employment costs Depreciation and amortisation expense Finance costs Other expenses Profit before income tax Income tax expense Profit for the year Other comprehensive income Total comprehensive income for the year Total comprehensive income for the year is attributable to: Shareholders of Ashley Services Group Limited Non-controlling interests Basic earnings per share (cents) Diluted earnings per share (cents) Note 2 2 3 3 6 25 25 The accompanying notes form part of these financial statements. 3 Jul 2022 $000 449,776 2 (421,683) (1,772) (831) (9,135) 16,357 5,001 11,356 - 11,356 11,315 41 11,356 7.86 7.86 Restated 4 Jul 2021 $000 383,672 334 (361,212) (1,785) (648) (7,298) 13,063 3,737 9,326 - 9,326 8,923 403 9,326 6.20 6.20 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 28 Consolidated Statement of Financial Position As at 3 July 2022 3 Jul 2022 $000 Note Restated 4 Jul 2021 $000 Assets Current assets Cash and cash equivalents Trade and other receivables Current tax receivable Contract assets Other assets Total current assets Non-current assets Property, plant and equipment Loans to associated entities Right-of-use assets Deferred tax assets Intangible assets Other assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings 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 Non-controlling interest Total equity 8 9 17 10 11 12 13 14 17 15, 16 18 21 17 19 20 22 17 19 20 22 23 24 The accompanying notes form part of these financial statements. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 1,739 54,968 1,627 777 2,255 61,366 2,050 157 3,361 3,887 10,976 81 20,512 81,878 30,843 5,305 - - 1,050 - 3,991 41,189 4,028 2,474 1,973 675 9,150 50,339 31,539 148,815 (59,261) (57,999) (16) 31,539 2,969 44,421 - 791 2,035 50,216 1,247 - 2,042 5,709 10,848 111 19,957 70,173 27,391 1,090 1,083 460 888 1,220 3,932 36,064 2,341 1,324 1,973 514 6,152 42,216 27,957 148,815 (59,261) (61,540) (57) 27,957 29 Consolidated Statement of Changes in Equity For the financial year ended 3 July 2022 Share Capital $000 Common Control Reserve $000 Accumulated losses $000 Non- controlling Interest $000 For the year ended 3 July 2022 Balance at 5 July 2021 (Restated) 148,815 (59,261) Profit for the year Other comprehensive income for the year Total comprehensive income for the year Dividends paid Balance at 3 July 2022 For the year ended 4 July 2021 (Restated) - - - - - - - - 148,815 (59,261) (61,540) 11,315 - 11,315 (7,774) (57,999) Balance at 6 July 2020 148,815 (59,261) (63,724) Prior Period Restatement (see Note 5) Restated balance at 6 July 2020 - 148,815 - (59,261) Profit for the year Prior Restatement of Profit for the Year (see Note 5) Other comprehensive income for the year Total comprehensive income for the year Dividends paid Balance at 4 July 2021 - - - - - - - - 148,815 (59,261) (261) (63,985) 9,150 (227) - 8,923 (6,478) (61,540) The accompanying notes form part of these financial statements. (57) 41 - 41 - (16) - - - 460 (57) - 403 (460) (57) Total $000 27,957 11,356 - 11,356 (7,774) 31,539 25,830 (261) 25,569 9,610 (284) - 9,326 (6,938) 27,957 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 30 Consolidated Statement of Cash Flows For the financial year ended 3 July 2022 Operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Income taxes paid Net cash from operating activities Investing activities Payments for property, plant and equipment Payments for intangibles Proceeds from sale of property, plant and equipment CCL Group earn-out payment CCL Group retention payment TIC earn-out payment Payments for businesses acquired net of cash acquired 28 Net cash used in investing activities Financing activities Net proceeds from external borrowings 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 8 The accompanying notes form part of these financial statements. Note 3 Jul 2022 $000 4 Jul 2021 $000 482,918 411,146 (471,272) (401,767) 27 2 (745) (4,201) 6,702 (1,375) (351) 131 (825) - (375) - (2,795) 4,215 (1,117) (8,235) (5,137) (1,230) 2,969 1,739 116 (448) (3,624) 5,423 (679) (114) 19 (798) (600) - (1,011) (3,183) 1,090 (1,081) (7,343) (7,334) (5,094) 8,063 2,969 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 31 Notes to the Financial Statements Table of Contents ACCOUNTING POLICIES ----------------------------------------------------------------------------------------- 34 REVENUE AND OTHER INCOME ------------------------------------------------------------------------------- 43 EXPENSES ----------------------------------------------------------------------------------------------------------- 44 AUDITOR’S REMUNERATION ---------------------------------------------------------------------------------- 44 PRIOR PERIOD ADJUSTMENT ---------------------------------------------------------------------------------- 44 INCOME TAX EXPENSE ------------------------------------------------------------------------------------------ 45 KEY MANAGEMENT PERSONNEL DISCLOSURES ---------------------------------------------------------- 45 CASH AND CASH EQUIVALENTS ------------------------------------------------------------------------------- 46 TRADE AND OTHER RECEIVABLES ---------------------------------------------------------------------------- 46 CONTRACT ASSETS ----------------------------------------------------------------------------------------------- 46 OTHER ASSETS ---------------------------------------------------------------------------------------------------- 47 PROPERTY, PLANT AND EQUIPMENT ------------------------------------------------------------------------ 47 LOANS TO ASSOCIATED ENTITIES ---------------------------------------------------------------------------- 48 RIGHT-OF-USE ASSETS ------------------------------------------------------------------------------------------ 48 INTANGIBLE ASSETS --------------------------------------------------------------------------------------------- 49 IMPAIRMENT ------------------------------------------------------------------------------------------------------ 50 TAX BALANCES ---------------------------------------------------------------------------------------------------- 52 TRADE AND OTHER PAYABLES -------------------------------------------------------------------------------- 53 LEASE LIABILITIES ------------------------------------------------------------------------------------------------- 53 OTHER LIABILITIES------------------------------------------------------------------------------------------------ 54 BORROWINGS ----------------------------------------------------------------------------------------------------- 54 PROVISIONS ------------------------------------------------------------------------------------------------------- 55 SHARE CAPITAL --------------------------------------------------------------------------------------------------- 55 COMMON CONTROL RESERVE -------------------------------------------------------------------------------- 56 EARNINGS PER SHARE ------------------------------------------------------------------------------------------- 56 SEGMENT INFORMATION -------------------------------------------------------------------------------------- 57 CASH FLOW INFORMATION ----------------------------------------------------------------------------------- 58 BUSINESS COMBINATION -------------------------------------------------------------------------------------- 59 FAIR VALUE MEASUREMENT ---------------------------------------------------------------------------------- 60 CONTROLLED ENTITIES AND ASSOCIATES ------------------------------------------------------------------ 62 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 2022 32 Notes to the Financial Statements 31. 32. 33. 34. 35. 36. 37. PARENT ENTITY DISCLOSURES -------------------------------------------------------------------------------- 64 DEED OF CROSS GUARANTEE --------------------------------------------------------------------------------- 65 RELATED PARTY TRANSACTIONS ----------------------------------------------------------------------------- 68 SECURED AND CONTINGENT LIABILITIES ------------------------------------------------------------------- 68 FINANCIAL INSTRUMENTS ------------------------------------------------------------------------------------- 68 EVENTS AFTER THE REPORTING DATE ---------------------------------------------------------------------- 71 DIVIDENDS --------------------------------------------------------------------------------------------------------- 71 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 33 Notes to the Financial Statements 1. ACCOUNTING POLICIES a. General information The financial statements for the financial year ended 3 July 2022 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. Standards 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 the Australian Accounting Standards Board. The consolidated financial statements of the Group International Financial also comply with 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. adopted by The consolidated financial statements were authorised for issue by the Board of Directors on 31 August 2022. c. Basis of preparation Historical cost 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. Coronavirus (COVID-19) pandemic The World Health Organisation declared a global pandemic in March 2020 as a result of the COVID-19. The impact of the crisis has had a significant economic impact. The critical accounting estimates and judgements of the Group have required additional consideration and analysis due to the impact of COVID-19. Given the uncertainty of the extent of the impact of the pandemic, changes to the estimates and outcomes that have been applied in the measurement of the Group’s assets and liabilities may arise in the future. Other than adjusting events that provide evidence of conditions that existed at the end of the financial year, the impacts of events that arise after the reporting period will be accounted for in future reporting periods. Rounding In accordance with ASIC Corporations (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, revised or amending Accounting Standards and Interpretations Accounting The Group adopted all of the new, revised or amended and the Australian issued by Interpretations Accounting Standards Board (“AASB”) that are mandatory for the current reporting period. Standards The new, revised or amending Accounting Standards and Interpretations adopted did not have a significant impact on the Group’s financial statements. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 34 Notes to the Financial Statements f. New, revised or amending Accounting Standards and Interpretations issued but not yet mandatory Any new, revised or amending Accounting Standards and Interpretations that have been published and are not mandatory for 3 July 2022 reporting periods and have not been early adopted by the Group. These new, revised or amending Accounting Standards and Interpretations are not expected to have any material impact on the Group’s financial report in future reporting periods based on the Group’s current activities. 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 3 July 2022. 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 3 July 2022. 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 2022 35 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 revenue The contractors. Labour hire revenue comprises the sourcing, engagement and placing of both temporary and permanent sourcing, identification, submission and acceptance of contractors for specified roles at the customer are not considered to be distinct performance obligations from the contractor being engaged by ASH for an agreed period of time and deployed at the customer sites and are single therefore, accounted performance obligation. in “Significant accounting policy Note Applying judgement management Accounting Policies”, management has made a significant judgement to determine that the Group acts as principal in providing labour hire services to customers over the duration of contracts. for as a As explained in x. Labour hire revenue is recognised upon 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. Government grants and subsidies j. Government grants and subsidies relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. and grants subsidies Government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions. The Group has adopted the net method of accounting for government subsidies. Therefore, the government subsidies are recognised against Employment costs. The most significant receipt during the period was for various Government Stimuli as a result of the Covid-19 pandemic, including Boosting Apprenticeship Commencements Program and Completing Apprenticeship Commencements Program. Cashflows are reflected in receipts from customers for the monies received from the various and payments to suppliers and employees for the payments to employees. departments government Income tax k. The income tax expense (income) for the year tax expense comprises (income) and deferred tax expense (income). income current ASHLEY SERVICES GROUP ANNUAL REPORT 2022 36 Notes to the Financial Statements 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 income tax initial 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 differences and unused losses are 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 in subsidiaries, branches, to 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 probable that the reversal will occur in the foreseeable future. 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 liability will occur. respective asset and 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 The CCL Group consolidation 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 in the unused tax 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 contribution by, or distribution, to the head entity. l. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other investments with liquid short term highly original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown ASHLEY SERVICES GROUP ANNUAL REPORT 2022 37 Notes to the Financial Statements 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. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, for expected credit losses. less any allowance 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 profit or loss in that period. Expected credit losses 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 establish to consideration. Contract assets are treated as financial assets for impairment purposes. unconditional right an Property, plant and equipment o. Each class of property, plant and equipment is carried at cost, less where applicable, any impairment accumulated depreciation and 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% improvements, leasehold In the case of expected useful lives are determined by 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. Gains or losses on disposals are determined by comparing proceeds with carrying amount. These gains or recognised immediately in profit or loss. losses are p. Intangible assets 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. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 38 Notes to the Financial Statements 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 less accumulated amortisation and cost 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 is recorded in the profit or loss in the period the impairment is identified. Impairment of assets q. At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. information The assessment will include considering 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. least Impairment testing annually for goodwill and intangible assets with indefinite lives. is performed at r. Trade and other payables 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. s. Employee benefits 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 the probability satisfy that the ASHLEY SERVICES GROUP ANNUAL REPORT 2022 39 Notes to the Financial Statements with terms to maturity that match the expected timing of cash flows. t. 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. u. Borrowings 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. v. Comparative figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. w. 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 payable to, the ATO is included with other receivables or payables in the statement of financial position. 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. x. Significant management applying accounting policies judgement in 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. Revenue recognition judgement The main area of in revenue recognition relates to the recognition of labour hire arrangements where the Group acts on a principal (gross) basis rather than an agent (net) basis. The factors considered by the Directors, on a contract-by-contract basis, when concluding that the Group is acting as principal rather than agent are as follows: • The customer has a direct relationship with the Group; • The Group has the primary responsibility for providing the services to the customer and engages and contracts directly with the contractor; and • The Group has latitude in establishing rates directly or indirectly with all parties. 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 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 40 Notes to the Financial Statements 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 16. 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 losses The allowance for expected credit 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 In doing this, management requirements. considers the likelihood of employees reaching a qualifying period of service and adjust the valuation for these estimated probabilities. Long term incentive plan In determining management’s the provision term for senior incentive plan, long 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. Workers Compensation Provisions In certain states premiums payable in relation to workers compensation insurance can vary and be retrospectively adjusted, up to a period of five years, by the insurer based on the annual wages, number of claims made and a range of In determining the worker other factors. compensation insurance provision (including in trade and other payables) at balance date consideration is given to the previous years’ premium rates, retrospective adjustments and the current year gross wages. Coronavirus (COVID-19) pandemic on known information. Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Group based This consideration extends to the nature of the Group operations. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the significant financial statements or any to events or uncertainties with respect conditions which may impact the Group unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. y. Dividends A liability is recognised for the amount of any appropriately dividend 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 z. Earnings per share Basic earnings per share Basic earnings per share is calculated by 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 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 41 Notes to the Financial Statements shares outstanding during ordinary the financial year, adjusted for bonus elements in ordinary shares issued during the year. 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 2022 42 Notes to the Financial Statements 2. REVENUE AND OTHER INCOME Operating activities: Labour hire revenue Training revenue Other income: Interest received Sundry income 2022 $000 438,246 11,530 449,776 2 - 2 2021 $000 373,963 9,709 383,672 117 217 334 a. Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: 2022 Revenue Labour Hire $000 Training $000 Total $000 From external customers 438,246 11,530 449,776 Timing of revenue recognition Services transferred over time Services transferred at a point in time 2021 Revenue 422,590 15,656 438,246 11,530 - 11,530 Labour Hire $000 Training $000 434,120 15,656 449,776 Total $000 From external customers 373,963 9,709 383,672 Timing of revenue recognition Services transferred over time Services transferred at a point in time 362,024 11,939 373,963 9,709 - 9,709 371,733 11,939 383,672 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 43 Notes to the Financial Statements 3. EXPENSES Profit before income tax from continuing operations includes the following specific expenses: Depreciation Motor vehicles Office equipment Leasehold improvements Land and buildings right-of-use assets Amortisation Customer contracts and relationships Course material Finance costs Interest and finance charges paid/payable on borrowings Interest and finance charges paid/payable on lease liabilities Bank fees 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 28 have also paid fees to the auditor(s) as follows: Audit of financial reports - HLB Mann Judd Assurance (NSW) Pty Ltd 5. PRIOR PERIOD ADJUSTMENT 2022 $000 133 314 52 1,068 1,567 - 205 205 505 67 259 831 2022 $ 189,500 189,500 2021 $000 86 347 42 1,067 1,542 108 135 243 453 67 128 648 2021 $ 186,250 186,250 53,000 53,000 55,250 55,250 During the year ended 3 July 2022 management identified an under provisioning of current employee entitlements for labour hire employees, which spanned several financial years dating back to 2019. The cumulative effect of the adjustment was a reduction in Net Assets and Total Equity equal to $545,000 over the effected period ending 4 July 2021. The financial impact of the error over the restated comparative periods is as follows:  For the year ended 4 July 2021 in the Consolidated Statement of Profit or Loss and Other Comprehensive Income, the employment costs increased by $283,914 and profit for the year decreased by $283,914.  As at 4 July 2021 in the Consolidated Statement of Financial Position, Accumulated losses and current Provisions for employee entitlements increased by $544,840. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 44 Notes to the Financial Statements  For the year ended 5 July 2020 in the Consolidated Statement of Changes in Equity opening accumulated losses increased by $260,926.  There was no change to the Consolidated Statement of Cash Flows in any period. 6. INCOME TAX EXPENSE a. Components of tax expense Current tax expense Deferred tax – origination and reversal of temporary differences Under / (over) provision of tax in prior year – Change in tax rate – TIC Income tax expense 2022 $000 3,499 1,405 97 - 5,001 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% (FY21: 30%) Add / (less) Tax effect of: – Entertainment – Other – Change in tax rate – TIC – Intangible assets – Under / (over) provision of tax in prior year Income tax expense 2022 $000 16,357 4,907 14 1 - (18) 97 5,001 2021 $000 3,363 561 (184) (3) 3,737 2021 $000 13,347 4,004 10 3 (3) (93) (184) 3,737 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. 7. KEY MANAGEMENT PERSONNEL DISCLOSURES a. Key management personnel compensation for the year was as follows Short-term employee benefits Long-term employee benefits Post-employment benefits Total 2022 $ 1,441,190 15,076 94,686 1,550,952 2021 $ 1,698,097 13,694 84,602 1,796,393 b. Individual director and key management personnel disclosures Detailed remuneration disclosures are included in the Directors’ Report. The relevant information can be found in the Remuneration section of the Directors’ Report on pages 14 to 18, Tables 7 to 12. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 45 Notes to the Financial Statements 8. CASH AND CASH EQUIVALENTS Cash on hand Cash at bank 9. TRADE AND OTHER RECEIVABLES Current Trade receivables Allowance for expected credit losses Other receivables 2022 $000 2 1,737 1,739 2022 $000 42,907 (599) 12,660 54,968 2021 $000 2 2,967 2,969 2021 $000 37,611 (193) 7,003 44,421 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)) 2022 $000 33,411 7,044 1,042 811 599 2021 $000 34,514 1,451 469 984 193 42,907 37,611 b. The movement in the allowance for expected credit losses in respect of trade receivables is detailed below Balance at beginning of year Increase/(decrease) in allowance recognised in profit or loss Amounts written-off Balance at end of year 2022 $000 193 463 (57) 599 2021 $000 406 164 (377) 193 The directors of Ashley Services Group Limited are of the opinion that there has been no material impact on the basis of determining the recoverability of trade and other receivables due to COVID-19 beyond the allowance for expected credit losses already provided for. 10. CONTRACT ASSETS Current Contract assets ASHLEY SERVICES GROUP ANNUAL REPORT 2022 2022 $000 777 777 2021 $000 791 791 46 Notes to the Financial Statements a. Reconciliation of contract assets Opening balance Payments received Accruals Closing balance 11. OTHER ASSETS Current Prepayments1 Bank deposits Bank guarantee2 2022 $000 791 (8,285) 8,271 777 2022 $000 1,022 725 508 2,255 2021 $000 89 (6,200) 6,902 791 2021 $000 1,366 162 507 2,035 Note: 1. Prepayments include prepaid contract costs of $nil (2021: $543,003) 2. As at balance date the Group had bank guarantees of $79,969 (2021: $222,366) relating to property leases. The $508,067 (2021: $507,158) represents a restricted bank account to cover the Group’s total available guarantee facility with BankWest of $508,067. 12. 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 2022 $000 1,190 (504) 686 5,069 (4,051) 1,018 1,816 (1,509) 307 39 39 2,050 2021 $000 797 (438) 359 4,781 (4,212) 569 1,598 (1,512) 86 233 233 1,247 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 47 Notes to the Financial Statements a. Movement in carrying amounts of property, plant and equipment 2022 Balance at 4 July 2021 Additions/(transfers) Disposals Depreciation expense Balance at 3 July 2022 2021 Balance at 5 July 2020 Additions/(transfers) Disposals Depreciation expense Balance at 4 July 2021 Motor vehicles $000 359 Office equipment $000 569 Leasehold improvements $000 86 Capital work in progress $000 233 484 (24) (133) 686 812 (49) (314) 1,018 273 - (52) 307 (194) - - 39 Motor vehicles $000 189 Office equipment $000 643 Leasehold improvements $000 70 Capital work in progress $000 158 265 (9) (86) 359 281 (8) (347) 569 58 - (42) 86 75 - - 233 Total $000 1,247 1,375 (73) (499) 2,050 Total $000 1,060 679 (17) (475) 1,247 The Group’s property, plant and equipment are encumbered by a General Security Agreement as security for the group’s Invoice Financing capital facility (Refer Note 21). 13. LOANS TO ASSOCIATED ENTITIES Loan to Associated Entities 2022 $000 157 157 2021 $000 - - Note: 1. On 19 April 2022 the Group acquired a non-controlling interest of 49% in Dardi Munwurro Labour and Traffic Management Pty Limited, a company providing indigenous labour hire in Victoria, for $49. The loan represents the working capital requirements of the associated entity to 3 July 2022. 14. RIGHT-OF-USE ASSETS Land and buildings Accumulated depreciation 2022 $000 5,402 (2,041) 3,361 2021 $000 4,095 (2,053) 2,042 Note: 1. 2. Additions to the right-of-use assets during the year were $1,248,338. The Group leases land and buildings for its offices under agreements of between 1 to 5 years with, in some cases, options to extend. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 48 Notes to the Financial Statements 15. INTANGIBLE ASSETS Goodwill Cost Acquisition TIC Accumulated impairment (note 16) Net carrying value Customer relationships/Licences Cost Accumulated impairment (note 16) Accumulated amortisation Net carrying value Brand names Cost Accumulated impairment (note 16) Net carrying value Intellectual property – course materials Cost Accumulated impairment (note 16) Accumulated amortisation Net carrying value Total intangible assets a. Intangible assets – detailed reconciliation 2022 $000 71,558 1,654 (62,474) 10,738 2,062 (918) (1,144) - 4,640 (4,640) - 8,560 (3,896) (4,426) 238 10,976 2022 Balance at 4 July 2021 Additions Amortisation Balance at 3 July 2022 2021 Balance at 5 July 2020 Acquisition TIC Additions Amortisation Balance at 4 July 2021 Customer Relationships and Licences $000 - - - - Customer Relationships and Licences $000 108 - - (108) - Goodwill $000 10,738 - - 10,738 Goodwill $000 9,084 1,654 - - 10,738 Brand Names $000 - Intellectual Property $000 110 - - - 333 (205) 238 Brand Names $000 - Intellectual Property $000 130 - - - - - 115 (135) 110 2021 $000 71,558 1,654 (62,474) 10,738 2,062 (918) (1,144) - 4,640 (4,640) - 8,445 (3,896) (4,439) 110 10,848 Total $000 10,848 333 (205) 10,976 Total $000 9,322 1,654 115 (243) 10,848 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 49 Notes to the Financial Statements 16. a. IMPAIRMENT Impairment The consolidated entity tests whether goodwill and other intangible assets have suffered any impairment on an annual basis, or more frequently, if required. There were no indicators of impairment in relation to either the Labour Hire division or the Training division at 3 July 2022. 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 FY23 and covering detailed forecasts for a further four 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 after-tax cash flows has been determined by applying a suitable after-tax discount rate of 11.7 per cent. Cash flows after year 5 have been held constant, reflecting the competitive nature of the industry. Management’s key assumption is that revenue for the Labour Hire division (excluding any acquisitions post 3 July 2022) will increase by approximately 10% in FY23. EBITDA margin (before corporate overhead allocations) is forecast to decline by approximately 1 percentage point from 5% to 4% as government support programmes wind down and the Group works through contract renewals and business mix to sustain margin in the current competitive and inflationary environment. Training division The recoverable amount of the Training 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 FY23 and covering detailed forecasts for a further four 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 after-tax cash flows has been determined by applying a suitable after-tax discount rate of 11.7 per cent. Cash flows after year 5 have been held constant, reflecting the competitive nature of the industry. Management’s key assumption is that revenue for the Training division will increase by approximately 25% in FY23. EBITDA margin is forecast to return closer to historic levels of 18%-20% (before corporate overhead allocations), with FY22 impacted by COVID-19 inefficiencies and compliance costs. Long term growth rates after the forecast period and discount rates used were as follows: Labour Hire Training Terminal Growth rates 3 July 2022 0% 4 July 2021 0% Post-tax discount rates 3 July 2022 11.7% 4 July 2021 9.8% 0% 0% 11.7% 9.8% 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. Impairment charges b. As a result of the analysis, there is no need for any impairment charges in the FY22 results. The same analysis in the prior year resulted in no impairment charge being recorded in the FY21 results. Movements in the net carrying amount of goodwill and other intangibles are presented in note 15. The amount of goodwill, brand names and other intangibles remaining by CGU and subject to future impairment testing is as follows: ASHLEY SERVICES GROUP ANNUAL REPORT 2022 50 Notes to the Financial Statements 2022 Training Labour Hire Total 2021 Training Labour Hire Total Goodwill $’000 1,654 9,084 10,738 Goodwill $’000 1,654 9,084 10,738 Customer Relationships/ Licences $’000 - - - Customer Relationships/ Licences $’000 - - - Brand Names $’000 Intellectual Property $’000 - - - 238 - 238 Brand Names $’000 Intellectual Property $’000 - - - 110 - 110 Total $’000 1,892 9,084 10,976 Total $’000 1,764 9,084 10,848 c. Sensitivity analysis Management has also run various sensitivity scenarios, primarily reviewing sensitivity of outcomes to FY23 EBITDA forecasts, long term growth rates and discount rates. In respect of reasonably possible changes in the key assumptions, with all other assumptions remaining constant, major sensitivities are summarised as follows: Change in VIU Labour hire CGU $’M Sustainable EBITDA margin; +/- $0.5 million each CGU 1% increase or decrease in long term growth rate 1% increase or decrease in post-tax discount rate +/-3.3 +/-4.1 +/-6.9 Impairment $’000 - - - Training CGU $’M +/-3.3 +/-0.4 +/-0.5 Impairment $’000 - - - ASHLEY SERVICES GROUP ANNUAL REPORT 2022 51 Notes to the Financial Statements 17. 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) 2022 $000 1,627 2021 $000 - 3,887 5,709 - 1,083 4,028 2,341 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 (2,041) (237) - 238 51 3,212 2,145 - 3,368 - - - - - - - - - - - - - - - - - - (1,559) 4 - (380) (11) (828) (746) 11 (3,509) (3,600) (233) - (142) 40 2,384 1,399 11 (141) 2022 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 2021 Tax loss carried forward Deferred tax asset Total Note: 1. This amount is net of lease liabilities. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 52 Notes to the Financial Statements 2021 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 2020 Tax loss carried forward Deferred tax asset Total 18. TRADE AND OTHER PAYABLES Current Trade payables Accrued expenses GST payable Workers compensation Sundry creditors 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 (510) (46) (32) 296 28 3,198 943 52 3,929 - - - - - - - - - - - - - - - - - - (1,531) (2,041) (191) (237) 32 (58) 23 989 227 (52) (561) 2022 $000 8,314 6,534 4,044 2,042 9,909 30,843 - 238 51 4,187 1,170 - 3,368 2021 $000 5,205 6,197 4,321 581 11,087 27,391 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. 19. LEASE LIABILITIES Current Non-current 2022 $000 1,050 2,474 3,524 2021 $000 888 1,324 2,212 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 53 Notes to the Financial Statements 20. OTHER LIABILITIES Current CCL Contingent Consideration – Earn Out Year 2 The Instruction Company Deferred Consideration Other Other liabilities (Current) Non-current Redemption Liability Other liabilities (Non-current) Redemption Liability 2022 $000 - - - - 1,973 1,973 2021 $000 825 375 20 1,220 1,973 1,973 The redemption liability is a Put Option which represents a contractual obligation to purchase a non-controlling interest and originated from a previous business combination to acquire the CCL Group. The liability is a financial liability and has been measured 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. 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;  with the Extended EBAs in respect of both CTS and CCL having now been entered into (during January 2021) – at any time after 20 December 2022; The Put Option expires 20 years after Completion but the Purchaser has the right to reduce this to 10 years. 21. BORROWINGS 2022 Invoice Financing Bank Bill Business Loan Balance at 3 July 2022 2021 Invoice Financing Bank Bill Business Loan Balance at 4 July 2021 Facilities Available facility $000 25,000 10,000 35,000 Available facility $000 13,000 4,375 17,375 Facility used $000 5,305 Remaining facility $000 19,695 - 5,305 10,000 29,695 Facility used $000 679 Remaining facility $000 12,321 411 1,090 3,964 16,285 During the financial year ended 3 July 2022, Ashley Services Group Limited increased its borrowing capacity with the Westpac Banking Corporation. The facilities include all transactional banking requirements as well as a $35 million financing facility, comprised of a $25 million Invoice Financing facility and a $10 million Bank Bill Business Loan (Reduces quarterly by $500,000 per quarter, with a term of 3 years and any remaining outstanding balance payable at that term end). The Westpac facility is subject to a Security which includes:  1st ranking General Security Agreement over the assets and undertakings of the Borrower and its Guarantors (Ashley Services Group Limited and its trading controlled entities); and ASHLEY SERVICES GROUP ANNUAL REPORT 2022 54 Notes to the Financial Statements  Flawed Asset Arrangement – Deposit of Action Workforce Pty Ltd, Construction Contract Labour (VIC) Pty Ltd and Concept Engineering (AUST) Pty Ltd for Invoice Finance Facility collections. As at 3 July 2022, the combined Bank Bill Business Loan and the Invoice Financing facility were drawn to $5.305 million (4 July 2021; $1.09 million). 22. PROVISIONS Current Employee benefits (a) Make good provisions for leases Total Non-current Employee benefits (a) Make good provisions for leases Total b. Reconciliation of employee provisions Opening balance TIC at 6 July 2020 Less: leave taken during the year Add: leave provided for during the year Add: Prior Period Restatement (see note 5) Closing balance 23. SHARE CAPITAL 2022 $000 3,952 39 3,991 479 196 675 2022 $000 4,296 - (3,395) 3,530 - 4,431 Restated 2021 $000 3,882 50 3,932 414 100 514 2021 $000 3,030 137 (3,136) 3,981 284 4,296 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 (FY21: 143,975,904) fully paid ordinary shares Share issue costs Share capital a. Ordinary shares 2022 $000 154,234 (5,419) 148,815 2021 $000 154,234 (5,419) 148,815 Ordinary shares confer on their holders the right to participate in dividends declared by the Board. Ordinary shares confer on their holders an entitlement to vote at any general meeting of the Company. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 55 Notes to the Financial Statements 24. COMMON CONTROL RESERVE The common control reserve has arisen following the adoption of the pooling of interests method used to account for the acquisition of the following entities since 1 July 2014: • • • • • • ADV Services Pty Limited; Ashley Institute Holdings Pty Limited; TBRC Holdings Pty Limited; Tracmin Pty Limited; and Australian Institute of Vocational Development Pty Limited; and CCL Group (Construction Contract Labour (VIC) Pty Ltd, Complete Traffic Services (VIC) Pty Ltd and VIC Traffic and Labour Solutions Pty Ltd) 25. EARNINGS PER SHARE Profit after tax for the year attributable to shareholders ($’000) 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) Diluted earnings per share (cents) 2022 11,315 Restated 2021 8,923 143,975,904 143,975,904 143,975,904 7.86 143,975,904 6.20 7.86 6.20 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 56 Notes to the Financial Statements 26. 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 3 July 2022, 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: 2022 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 2021 Revenue From external customers Segment revenue Other income Employment costs Depreciation and amortisation expense Finance costs – interest and finance charges 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 Labour Hire $000 Training $000 Total $000 438,246 438,246 (5) (410,477) (744) (174) (5,979) 20,867 Restated Labour Hire $000 373,963 373,963 256 (351,799) (764) (191) (4,705) 16,760 11,530 11,530 7 (8,626) (913) (24) (1,385) 589 Training $000 9,709 9,709 76 (6,720) (756) (17) (1,055) 1,237 449,776 449,776 2 (419,103) (1,657) (198) (7,364) 21,456 (5,099) 16,357 (5,001) 11,356 - 11,356 Restated Total $000 383,672 383,672 332 (358,519) (1,520) (208) (5,760) 17,997 (4,934) 13,063 (3,737) 9,326 - 9,326 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 2022 57 Notes to the Financial Statements a. Information about major customers Included in revenues from external customers are revenues of $185.1 million (2021: $109.9 million) which arose from sales to three (2021: two) of the Group’s customers whose individual revenue exceeds 10% of total revenue in the Labour Hire segment. Sales to these three customers were $74.5 million, $56.5 million and $54.1 million respectively (2021: $54.0 million, $55.9 million and $29.3 million respectively). There are no customers whose individual revenue exceeded 10% of total revenue in the Training segment in either financial year. 27. 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)/loss on disposal of fixed assets - Lease liability non-cash expense - Loss on contingent consideration - Changes in assets and liabilities 2022 $000 11,356 1,772 463 (30) 67 - Restated 2021 $000 9,326 1,785 164 (36) 67 45 - Decrease/(increase) in trade and other receivables (10,547) (15,003) - 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 14 (190) 1,822 3,453 - 765 (1,220) (2,711) 1,688 6,702 (637) (309) (1,015) 9,881 60 1,050 (981) (551) 1,577 5,423 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 58 Notes to the Financial Statements 28. BUSINESS COMBINATION During the year ended 4 July 2021, 100% of the shares in The Instruction Company (TIC) were acquired. The acquisition was completed on 15 September 2020 with a financial effective date of 6 July 2020. The acquisition price for the purchase of TIC was $1.85 million. The initial payment of $1.1 million was made on completion with a further deferred consideration payment of $0.375 million made during June 2021. A further final deferred consideration payment was made during September 2021. The measurement period to account for the TIC acquisition is now complete and no changes were required to the original provisional accounting entries made for this acquisition. The Instruction Company is a Registered Training Organisation (RTO) servicing the Rail sector since 1996, creating and delivering rail training solutions to track owners, rail operators, contractors and service providers across Australia. There were no acquisitions during the year ended 3 July 2022. Note 20 Purchase consideration Cash consideration paid Sep-20 Deferred consideration paid Mar-21 Deferred consideration paid Sep-21 Total consideration Assets and liabilities acquired: Cash and cash equivalents Trade and other receivables Deferred tax assets Trade and other payables Dividends payable Current tax payable Non-current liabilities Fair value of assets acquired Goodwill on acquisition Cashflows on acquisition Cash consideration paid Sep-20 Deferred consideration paid Mar-21 Deferred consideration paid Sep-21 Cash acquired Total cashflow outflows on acquisition to 3 July 2022 Note: 1. Effective date of TIC acquisition. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 6 July 20201 $000 1,100 375 375 1,850 464 539 37 (327) (464) (34) (19) 196 1,654 1,100 375 375 (464) 1,386 59 Notes to the Financial Statements 29. 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 – 3 July 2022 Assets Total assets Liabilities Redemption liability Total liabilities Consolidated - 4 Jul 2021 Assets Total assets Liabilities TIC Deferred Consideration CCL Contingent Consideration – Earn Out Year 2 Redemption liability Total liabilities Level 1 $000 Level 2 $000 Level 3 $000 Total $000 - - - - - - Level 1 $000 Level 2 $000 - - - - - - 375 825 - 1,200 - - 1,973 1,973 Level 3 $000 - - - 1,973 1,973 1,973 1,973 Total $000 - 375 825 1,973 3,173 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. 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 Instruction Company deferred consideration arose as a result of the business combination detailed in Note 27. The liability represented a deferred payment of $0.375 million to be made on the twelve-month anniversary of the completion date of the acquisition as in accordance with The Instruction Company Share Sale and Purchase agreement. The CCL contingent consideration – Earn out year 1, which has been paid during the period, and Earn out year 2 arose in accordance with the CCL Group Share Sale and Purchase Agreement. The Earn out year 1 payment made was adjusted for the final FY20 EBITDA, whilst the Earn out year 2 liability was adjusted for the final FY21 EBITDA. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 60 Notes to the Financial Statements The redemption liability has arisen as a result of a previous business combination for the CCL Group. 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 Yr1 CCL Contingent Consideration Earn Out Yr2 $000 $000 - - - - Redemption Liability $000 1,973 Total $000 1,973 1,973 1,973 Consolidated Balance at 4 July 2021 Balance at 3 July 2022 CCL Contingent Consideration Earn Out Yr1 CCL Contingent Consideration Earn Out Yr2 Redemption Liability Consolidated $000 $000 $000 Balance at 5 July 2020 Gains/(losses) recognised in other comprehensive income Settlements during the year Transfer to Level 2 Balance at 4 July 2021 789 789 1,973 9 (798) - - 36 - (825) - - - - 1,973 Total $000 3,551 45 (798) (825) 1,973 The level 3 assets and liabilities unobservable inputs and sensitivity are as follows: Description Redemption liability Unobservable inputs EBITDA FY during which Put Option exercised & EBITDA FY immediately following FY during which Put Option exercised Range (weighted average) 2,887,786 Sensitivity 10% change would increase/decrease fair value by $175,030. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 61 Notes to the Financial Statements 30. CONTROLLED ENTITIES AND ASSOCIATES Set out below are the controlled entities and associates 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 Action James Western Suburbs Pty Limited Action Job Support Pty Limited Action MMX Pty Limited Action Workforce ACT 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 OGR Holdings Pty Limited (formerly 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 Ash Pty Limited Ashley Institute Holdings Pty Limited Australian Institute of Vocational Development Pty Limited AWF Training 3 Pty Limited BCC Labour Solutions Pty Ltd ASHLEY SERVICES GROUP ANNUAL REPORT 2022 Country of incorporation Australia Australia 2022 percentage owned % 100 100 2021 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 Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 62 Notes to the Financial Statements Cantillon Holdings Pty Limited CCL Group Holdings 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 Concept Engineering Contracting Pty Ltd Concept Power Pty Ltd Concept Project Resources Pty Limited Concept Rail Pty Ltd Concept Recruitment Specialists Pty Ltd Concept Retail Solutions Pty Ltd Construction Contract Labour (VIC) Pty Ltd CP Action Workforce Pty Limited Dardi Munwarro Labour and Traffic Management Pty Limited* Executive Careers Australia Pty Limited Global Education and Training Group Pty Limited Integracom Holdings Pty Limited Integracom Unit Trust 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 The Instruction Company Pty Ltd Track Safety Australia Pty Ltd Tracmin Holdings Pty Limited Tracmin Pty Limited VIC Traffic and Labour Solutions Pty Ltd Vocational Training Australia Pty Limited *Incorporated 19 April 2022. Country of incorporation Australia 2022 percentage owned % 100 2021 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 Australia 100 100 80 100 100 100 100 100 100 100 100 100 100 100 80 100 49 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 100 100 100 80 100 100 100 100 100 100 100 100 100 100 100 80 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 80 100 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 63 Notes to the Financial Statements 31. 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 2022 $000 92 16,808 16,900 - (23,092) (23,092) (6,192) 2021 $000 92 18,206 18,298 (825) (15,891) (16,716) 1,582 148,815 148,815 Common control reserve Accumulated losses Total equity Note: 1. The directors are in the process of reviewing dividend and loans with its subsidiaries and expect to rectify the above deficiency in net (59,277) (95,730) (6,192) (59,261) (87,972) 1,582 assets. b. Statement of profit or loss and other comprehensive income Profit/(Loss) for the year Other comprehensive income Total comprehensive income/(loss) 2022 $000 - - - 2021 $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 3 July 2022 (4 July 2021: Nil). e. Commitments for expenditure for the Parent entity The Parent entity had Nil committed expenditure as at 3 July 2022 (4 July 2021: Nil). ASHLEY SERVICES GROUP ANNUAL REPORT 2022 64 Notes to the Financial Statements 32. 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' reports 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 2022 $000 345,920 - (322,949) (514) (80) (3,058) 19,319 (5,795) 13,524 - 13,524 2021 $000 291,868 61 (275,129) (545) (141) (3,208) 12,906 (1,783) 11,123 - 11,123 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 65 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 assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Borrowings Dividends payable Current tax payable Lease liabilities Other liabilities Provisions Total current liabilities Non-current liabilities Lease liabilities Other liabilities Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Common control reserve Retained earnings Total Equity 2022 $000 439 31,122 9,286 40,847 2021 $000 52 27,917 5,263 33,232 132,600 113,269 459 3,599 465 16,811 153,934 194,781 41,933 3,198 21,123 19,181 185 - 2,044 87,664 322 1,973 270 2,565 90,229 104,552 148,815 (59,261) 14,998 104,552 393 3,599 683 18,208 136,152 169,384 36,799 679 13,921 13,386 221 825 2,047 67,878 509 1,973 222 2,704 70,582 98,802 148,815 (59,261) 9,248 98,802 ASHLEY SERVICES GROUP ANNUAL REPORT 2022 66 Notes to the Financial Statements c. Equity – retained profits Extended Closed Group Retained profits at the beginning of the financial year Profit after income tax expense Dividends paid Retained profits at the end of the financial year d. Contingent liabilities of the Extended Closed Group 2022 $000 9,248 13,524 (7,774) 14,998 2021 $000 4,604 11,123 (6,479) 9,248 The Extended Closed Group had no other known material contingent liabilities as at 3 July 2022 (4 July 2021: Nil). e. Commitments for expenditure for the Extended Closed Group The Extended Closed Group had Nil committed expenditure as at 3 July 2022 (4 July 2021: 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 2 July 2023. The directors are satisfied that collectively the Group has the financial ability to provide this support. g. Security Offered The Westpac facility (see Note 21) is subject to a Security which includes:  1st ranking General Security Agreement over the assets and undertakings of the Borrower and its Guarantors (Ashley Services Group Limited and its trading controlled entities); and  Flawed Asset Arrangement – Deposit of Action Workforce Pty Ltd, Construction Contract Labour (VIC) Pty Ltd and Concept Engineering (AUST) Pty Ltd for Invoice Finance Facility collections. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 67 Notes to the Financial Statements 33. 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: 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 an office at Arndell Park, New South Wales1 Fees payable to Trood Pratt & Co (of which Ian Pratt was a Partner until 02 March 2021) for taxation services Fees payable to Ron Holland Family Trust (of which Ron Hollands is Trustee) for Company Secretarial Services Note: 1. All amounts as shown are exclusive of GST. 34. SECURED AND CONTINGENT LIABILITIES For assets pledged as security for borrowing facilities see Note 21. The Group had no other known contingent liabilities at 3 July 2022 (4 July 2021: Nil). 35. FINANCIAL INSTRUMENTS 20221 $ 20211 $ 141,286 138,061 n/a 41,904 20,000 17,617 Significant accounting policies a. 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. Financial risk management objectives b. 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 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 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 2022 68 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 2022 $000 (531) 531 (531) 531 2021 $000 (129) 129 (129) 129 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 expected credit losses, 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 2022 69 Notes to the Financial Statements financial assets and liabilities. Included in Note 19 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 2022 Cash and cash equivalents Trade and other receivables Contract assets Total 2021 Cash and cash equivalents Trade and other receivables Contract assets Total Financial liabilities 2022 Trade and other payables Borrowings Lease liabilities Other liabilities Total 2021 Trade and other payables Borrowings Lease liabilities Other liabilities Total Weighted average effective interest rate % n/a n/a n/a Weighted average effective interest rate % n/a Within 1 year $000 1,739 54,968 777 57,484 1 to 5 years $000 - - Over 5 years $000 - - - - - - Within 1 year $000 2,969 1 to 5 years $000 - Over 5 years $000 - n/a n/a 44,421 791 48,181 - - - - - - Total $000 1,739 54,968 777 57,484 Total $000 2,969 44,421 791 48,181 Weighted average effective interest rate % n/a 4.01% 3.00% n/a Weighted average effective interest rate % n/a 4.35% 3.00% n/a Within 1 year $000 30,844 5,305 1,050 - 37,199 Within 1 year $000 27,392 1,090 888 1,220 30,590 1 to 5 years $000 - - 2,474 - 2,474 Over 5 years $000 - - - 1,973 Total $000 30,844 5,305 3,524 1,973 1,973 41,646 1 to 5 years $000 - - Over 5 years $000 - - 1,324 - 1,324 - 1,973 1,973 Total $000 27,392 1,090 2,212 3,193 33,887 Fair value of financial instruments Refer to Note 29 for details on the fair value of financial instruments. ASHLEY SERVICES GROUP ANNUAL REPORT 2022 70 Notes to the Financial Statements 36. 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 5 July 2022, the Group acquired a 75% interest in Linc Personnel Pty Limited for $3.615 million. This company currently provides labour to the oil and gas sector in Western Australia and the Northern Territory, with the acquisition expected to be earnings accretive in the financial year ended 30 June 2023. On 25 July 2022, the Group acquired a non-controlling interest of 49% in Yalagan Infrastructure Pty Limited, a company supporting Indigenous labour hire in New South Wales. On 28 July 2022 the Group declared a fully franked final dividend of 3.0 cents in relation to the financial year ended 3 July 2022. 37. DIVIDENDS a. Ordinary shares On 28 July 2022 the Group declared a fully franked final dividend of 3.0 cents in relation to the financial year ended 3 July 2022. With a fully franked interim dividend of 3.0 cents previously declared on 2 February 2022, this brings the full year dividend for the financial year ended 3 July 2022 to a total of 6.0 cents, a 43% increase on the dividend for the prior financial year (FY21: 4.2 cents). b. Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% (2021: 30%) 2022 $000 928 2021 $000 2,411 The balance of the franking accounts includes: • • • franking credits that will arise from the payment of the amount of the provision for income tax; franking debits that will arise from the refund of the amount of the provision for income tax; franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. • ASHLEY SERVICES GROUP ANNUAL REPORT 2022 71 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 26 August 2022. 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 1,156 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 227 364 163 333 69 1,156 161,235 954,408 1,316,710 10,750,419 130,793,132 143,975,904 % 0.12 0.66 0.91 7.47 90.84 100.00 The number of shareholders holding less than a marketable parcel of Fully Paid Ordinary shares is 63 with a total number of shares held is 6,971. 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 Richmond Hill Capital Pty Ltd Number 80,279,030 15,592,969 % 55.76% 10.83% 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 2022 72 ASX Additional Information 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 Citicorp Nominees Pty Ltd BNP Paribas Nominees Pty Ltd Mr Marc Shrimpton Moat Investments Pty Ltd Super Wide Pty Ltd Mr Andrew Douglas Shrimpton Action James Holdings Pty Limited Bond Street Custodians Pty Ltd Mast Financial Pty Ltd Stirling Superannuation Pty Ltd Mrs Kerry Elizabeth Draffin Velkov Funds Management Pty Ltd Garry Anthony John Butler WestFerry Operations Pty Ltd Mr Peter John Stirling and Mrs Rosalind Verena Sterling Mr Brenton Fletcher HBD Services Pty Ltd Shann Superannuation Nominees Pty Ltd Total Annual General Meeting Number of shares 80,279,030 21,102,626 3,359,222 2,123,102 1,500,000 1,424,000 1,140,326 1,115,000 777,888 750,000 696,000 650,000 637,416 628,000 604,243 602,559 530,000 513,023 500,000 500,000 % 55.76% 14.66% 2.33% 1.47% 1.04% 0.99% 0.79% 0.77% 0.54% 0.52% 0.48% 0.45% 0.44% 0.44% 0.42% 0.42% 0.37% 0.36% 0.35% 0.35% 119,432,435 82.95% 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 3 November 2022 OR electronically via a virtual AGM (details will be provided as required). 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 2022 73 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 Paul Brittain – Chief Financial Officer 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 Assurance (NSW) Pty Ltd 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 2022 74 

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