Aurora Spine
Annual Report 2022

Plain-text annual report

A N N U A L R E P O RT _2022 Drive Endless Possibilities 02 Highlights: FY22 03 Highlights: Financial 04 Chairman’s Letter 06 CEO’s Letter 08 Group Portfolio and Dearlership 10 Our Purpose and Values 12 Directors’ Report 36 Auditor ’s independence declaration 37 Financial statements 41 Notes to the consolidated financial statements 76 Directors’ declaration 77 Independent auditor ’s report 81 Shareholder information 83 Corporate directory ii AUTOSPORTS GROUP _AN NUAL RE P O RT 2 0 22 T A B L E O F _ C O N T E N T S AUTOS PORT S GROU P_A NNUAL R EPORT 2022 1 H I G H L I G H T S _ F Y 2 2 Jul 2021 Nov 2021 Dec 2021 Jan 2022 Jun 2022 Jun 2022 Jul 2022 Purchased Alexandria Mazda business (formerly John Newell Mazda) Purchased Bundoora BMW property at 62 Enterprise Drive, Bundoora Victoria Appointed James Evans as Chairman Purchased 98 O’Riordan Street, Alexandria property Purchased Suttons Subaru and Kia (Rosebery) Opened Ducati Sydney greenfield Entered into agreement to purchase Auckland City BMW Limited 2 AUTOSPORTS GROUP _AN NUAL RE P O RT 2 0 22 H I G H L I G H T S _ FiN A N CiA L * *compared to FY21 unless specified Statutory NPAT $54.6 million Normalised1 NPBT $92.8 million Gross Margin 19.9% up 29% up 23% up 16% Revenue $1,876m down 5.2% Customer new vehicle orders exceed deliveries in 2022FY FY dividend 16 cents (fully franked) (9 cents H2 2022FY) by 25% up 78% 1. Normalised NPBT excludes AASB16 adjustments, acquisition and restructure costs and acquisition amortisation. AUTOS PORT S GROU P_A NNUAL R EPORT 2022 3 C H A I R M A N ’ S _ L E T T E R Dear Shareholders, I am pleased to present my first As supply chain pressures ease, the seamlessly. Our inaugural Chairman, letter as Chairman of Autosports Group. It is a privilege to serve as Chairman of your Company and deliver a pleasing financial result for FY2022. Reflecting on the events that have transpired in the past year, Autosports Group showed resilience and remained disciplined in the execution of its strategy. customer new vehicle orders built over Tom Pockett, retired at our 2021 Annual the course of FY2022 will produce profit General Meeting to concentrate on his other in subsequent periods. leadership roles. I am honoured to have Domestically, our State Governments responded differently to new waves of the pandemic as lockdown restrictions varied from state to state. Having learned from the earlier lockdowns, our been elected as Chairman of your Company. In doing so, I would like to acknowledge the significant contribution Tom Pockett made during Autosports Group’s formative years as a listed company. business was well equipped to handle Tom’s leadership and guidance helped the challenges the lockdowns presented. Autosports Group deliver on its growth The geographic diversification of our strategy by acquiring several businesses dealerships helped offset the impacts and has contributed to building and The COVID-19 pandemic persisted with being experienced. Autosports Group enhancing a foundation of good corporate workforces and supply chains affected supported the vaccination roll-out and we governance and a company we can trust. on a global scale. Meanwhile, many were grateful our workforce could return I am confident that our Board, together pharmaceutical companies delivered to business as usual in the second half. with our management team will lead the several vaccines to market in record time. Fortunately, in Australia there was a positive uptake of vaccinations that facilitated the reopening of our State and international borders. The ripple effect of the war in Ukraine has permeated global supply chains increasing the cost of necessities and causing food shortages. This year was not immune to severe weather events. Queensland and New company to continue to deliver on its strategic objectives. South Wales experienced flood events In achieving our objectives, we are and excessive rain that persisted through committed to ensuring we operate the second half. Within this external environment Autosports Group handled the matters within its control diligently and persevered with the execution of its within a framework of sound corporate governance. This is achieved through our commitment to continually review and improve our governance frameworks which are supported by the valuable contribution of our People & Remuneration Committee and Audit & Risk Committee. These macroeconomic events have strategy. Opportunities that presented impacted the automotive industry. There themselves were seized and internal is a shortage of components in vehicle discipline was constant. As a result, We continue to invest in our most production including semi-conductor chips and wiring harnesses which has Autosports Group grew underlying normalised1 Net Profit Before Tax by important asset – our people. We are developing leadership skills in our talent led to an undersupply of new vehicles. 23.4% on pcp to $92.8 million. pool of high potential people to build a These supply constraints were tempered by an increase in new vehicle orders and improved gross margins which has supported profitability in the period. Corporate Governance Alongside managing the change presented by our external environment we have also handled internal changes within the business pathway for our future leaders. We are doing this through our Emerging Leader Development Programs and state and national talent reviews. 1. Normalised NPBT excludes AASB16 adjustments, acquisition and restructure costs and acquisition amortisation. 4 4 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 “ REFLECTING ON THE EVENTS THAT HAVE TRANSPIRED IN THE PAST YEAR, AUTOSPORTS GROUP SHOWED RESILIENCE AND REMAINED DISCIPLINED IN THE EXECUTION OF ITS STRATEGY.” Strategy These two properties bring Autosports The future Through its history the Company has demonstrated success in acquiring Group’s property portfolio to $98.8 million. The diversity of our business model through new and used car sales and businesses and integrating them into the After the year end, we achieved an service and parts provides resilience wider group. This year was no different important milestone in our growth in a market which continues to be as we furthered our growth trajectory strategy with our entry into the New impacted by a number of external events. through inorganic and organic growth. Zealand market and expansion of our We will keep progressing our growth At the start of the year on 1 July 2021, we acquired an 80% interest in John Newell Mazda (now Alexandria Mazda). We broadened our brand representation with the addition of the Subaru and Kia brands to our portfolio. We purchased the Kia and Subaru businesses from Suttons Motor Group in June 2022 and relocated them to our recently purchased property of these are conveniently located in our growing automotive hub in Alexandria, in the southern fringe of Sydney’s CBD. relationship with BMW Group. We strategy as we partner with new brands announced the acquisition of 100% of and enter new markets to build scale the shares in Auckland City BMW Limited and diversification to our portfolio of which operates two BMW, two MINI and businesses. a Rolls-Royce dealership in Auckland, New Zealand. The transaction settled on 1 August 2022 enhancing our geographic diversity and providing an immediate scale entry into the New Zealand market. I would like to thank our management team, employees and customers for their support and contribution to our financial results in FY22. I also want to acknowledge and thank my fellow directors for their leadership Statutory net profit after tax grew 29% and guidance throughout the year. To to $54.6 million (2021: $42.4 million). our shareholders, we look forward to Accordingly, the Board has declared a continuing to deliver on our strategy and at 98 O’Riordan Street Alexandria. All Financial Results Our property strategy is premised fully franked final dividend of 9 cents position the business for future growth. on acquiring properties where our per ordinary share, bringing the full year dealerships are located to expand our dividend to 16 cents per share fully tangible asset base, reduce occupancy franked, up from 9 cents for FY21. This costs and, in time, benefit from capital continued growth in the payout ratio accretion. Property ownership also reflects the Company’s resilience despite delivers security and tenure over the a challenging external environment Yours faithfully site. In addition to our purchase of 98 and commitment to adding value for James Evans O’Riordan Street Alexandria mentioned shareholders. Chairman earlier, during the year we purchased 62 Enterprise Drive Bundoora where our Bundoora BMW dealership is located. Further information about the Group’s financial results is also contained within the CEO’s Letter. AUTOS PORT S GROU P_A NNUAL R EPORT 2022 5 C E O ’ S _ L E T T E R Dear Shareholders, I am pleased to report that Autosports Group has delivered Strong cashflows allowed the business to continue to expand by acquisition. In FY22 we added John Newell Mazda a strong performance in FY2022. (now Alexandria Mazda) and Suttons Financially the business delivered a normalised1 NPBT of $92.8m (up 23.4% on FY21). This profit drove strong operating cashflows of $135m and enabled the business to continue to invest in acquisitive growth and provide a dividend to shareholders of 16c per share (final dividend 9c per share). Within this framework the core business was able to grow profits despite a worldwide structural undersupply of new vehicles. This undersupply was driven by shortages in the supply of semi conductors and wiring looms and exacerbated by ongoing logistics delays relating primarily to Subaru Rosebery and Suttons City Kia to our portfolio. These businesses have been integrated into our automotive hub in Alexandria and are trading well. More recently, we announced our acquisition of New Zealand’s prominent BMW, MINI and Rolls-Royce business, Auckland City BMW Group. This acquisition was settled post FY22 on 1 August 2022. The Group’s balance sheet continued to strengthen with the addition of two key property acquisitions underlying our Bundoora BMW and Subaru/Kia Alexandria businesses. This brought the Group’s underlying property portfolio to $98.8m. COVID-19 across the world. As we enter FY23 Autosports Group New vehicle demand exceeded supply, remains well positioned for future growth. especially in luxury and super-luxury Organically, demand is strong and brands. This demand saw Autosports customer new vehicle orders are high. Group grow its customer new vehicle Service and parts have further demand orders another 66% in the period January and capacity growth. Underlying 2022 to July 2022 . These customer vehicle supply whilst still structurally new vehicle orders combined with undersupplied will improve gradually strong underlying demand will support through the period. FY22 Results Revenue declined by 5.2% on the prior year to $1,876m, reflecting the supply constraints experienced across the automotive industry globally. New vehicle sales revenue decreased by 10.5%, used vehicles increased by 2.6% while revenue in service and parts was up 8.9% to $247 million. Despite the decline in revenue, we reported a strong increase in gross profit (up 10.5%) to $373.8m with an uplift in gross margin to 19.9%. We experienced gross margin increase as customer new vehicle orders continue to grow and higher margin back-end revenue recovered during the course of the year. The Company remains disciplined on operational expenditure and continues to leverage the scale of its operations to deliver further efficiencies. Normalised EBITDA was $112.4 million, representing an increase of 20.7% on the new vehicle revenue growth as supply normalises. The business is also positioned well for further growth by acquisition. Strong prior year. FY22 demonstrated the resilience of cashflows, a broader acquisition runway, our business model underscored by supportive financiers and OEMs, as the rebound in our backend service and well as a fragmented market all provide parts business. While service and parts Autosports Group opportunity for well- revenue was impacted by COVID-19 priced acquisition led growth. lockdowns in FY21 and in Q1 FY22, post lockdown customers have returned to the roads, and backend service and parts revenue has similarly recovered. Autosports Group delivered a record normalised1 Net Profit Before Tax of $92.8 million for FY22 which was an increase of 23.4% on FY21. Statutory Net Profit After Tax was $54.6m compared to $42.4m for the prior year. 1. Normalised NPBT excludes AASB16 adjustments, acquisition and restructure costs and acquisition amortisation. 6 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 “AS W E E NT E R F Y 2 3 AU TO S P O RT S   G R O U P R E M A I N S   W E L L P O S I T I O N E D F O R   F U T U R E G R OW T H ” Financial Position We acquired the Subaru and Kia Outlook Autosports Group remains in a strong financial position. Cash at hand as at 30 June was $90.8m with corporate debt of $112m including property debt of $80.4m which is backed by our property portfolio of $98.8m. Strategic focus Autosports Group continues to leverage its organic and acquisition growth strategy. We continue to target organic growth through improving the revenue mix of our business towards higher margin products and expanding our net margins through enhanced operating leverage. We opened a new Ducati dealership in Sydney, and have commenced greenfield developments for BMW in Ringwood Victoria, which includes a new BMW and Motorrad Showrooms and a state-of-the-art service workshop. We also remain on track to open our new showroom development for BMW in Kings Way Melbourne. These sites will deliver further scale and synergies to our business. Our acquisition strategy remains focused on acquiring strategically aligned brands in geographic locations where Autosports Group can unlock margin improvements. We made significant progress in this area during the year. businesses from Suttons Motor Group which are strongly complementary to our Group. For FY23 Autosports Group’s front end margins will be supported by the continued structural undersupply and These businesses were subsequently increased customer new vehicle orders, relocated to our newly acquired property while back end margins are expected to at 98 O’Riordan Street, Alexandria, NSW, increase as we hopefully return to a year which is adjacent to our Mazda Alexandria without lockdowns. business and opposite our super-luxury and Jaguar Land Rover dealerships. While OEM partners are working hard to increase vehicle supply to the Australian/ In July we announced an agreement NZ market and unwind the international to acquire Auckland City BMW Limited impact of semi-conductor supply in New Zealand. This transaction constraints, new vehicle underlying provides immediate scale as we enter demand is expected to continue to the NZ luxury auto brands market and exceed supply in FY23. enhances the geographic diversity and reach of our business beyond Australia. With its market leading share in luxury brands, Auckland City BMW will be a strong complement to our existing We expect demand for used vehicles to remain high and we remain well placed to service this demand. Service and parts revenues should business whilst continuing our growth continue to grow which supports further strategy in the luxury market. Our property strategy is focused on improvements in Autosports Group’s revenue mix and gross profit margin. controlling strategically important retail In closing I would like to thank the Board, sites and improving our capacity to actively manage our retail locations. This management and all the team across Autosports Group for their collective also further strengthens the Company’s efforts in delivering another strong balance sheet. financial result in FY22. During the year we acquired the Bundoora We have much to look forward to in FY23 BMW site in Victoria and also 98 and we are very well placed to continue O’Riordan Street, Alexandria in Sydney. our growth trajectory. These acquisitions were funded through Thank you to our shareholders for your the Company’s debt and existing cash reserves and are highly complementary to our existing operations. continued support of the Company. Nick Pagent Chief Executive Officer AUTOS PORT S GROU P_A NNUAL R EPORT 2022 7 G R O U P _ P O R T F O LiO 8 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 8AUTOSPORTS GROUP | ANNUAL REPORT 2021THE GROUP’S PORTFOLIO OF DEALERSHIPS INCLUDE:G R O U P _ D E A L E R S HiP S AU D I 6 VO LVO 3 B M W 6 VO L K S WAG E N 4 B M W M OTO R R A D 2 L A M B O R G H I N I 2 M AS E R AT I 2 B E NT L EY 3 D U C AT I 1 P R E ST I G E AU TO T R A D E R S 3 M I N I 5 M E R C E D E S - B E N Z 3 ASTO N M A RT I N 1 L A N D R OV E R 2 JAG U A R 2 A L P I N A 1 S U B A R U 1 K I A 1 M A Z DA 2 M C L A R E N 1 R O L L S - R OYC E 2 This reflects our dealerships as at the date of this report and includes dealerships acquired after 30 June 2022. AUTOS PORT S GROU P_A NNUAL R EPORT 2022 9 8AUTOSPORTS GROUP | ANNUAL REPORT 2021THE GROUP’S PORTFOLIO OF DEALERSHIPS INCLUDE:O U R _ P U R P O S E Drive Endless Possibilities 10 AUTOSPORTS GROUP _AN NUAL RE P O RT 2 0 22 O U R _ VA L U E S 1 2 3 4 Strive for excellence We set goals with clear Village Care Leading change We are united in purpose We demonstrate care We leverage our scale and through people towards our customers and collective intelligence to drive direction and defined – their experience We coach and mentor our – change – We hold ourselves to account – training and development required for growth people to be their best We invest in our people for We deliver the changes We are visible, – – approachable and connected We recognise the role you We embrace the use of across the Group play – everyone is important technology to deliver the outcomes – – We are proactive in our approach – – We exceed expectations in everything we do We embrace diversity and inclusion – – We make decisions with consideration of our key stakeholders – employees, customers, shareholders, community & manufacturers We are part of a large Group retaining a family feel to our success – optimum experience for our customers and stakeholders We do what is right by our – people, customers and We move with the times – communities taking into account tomorrow, – We are eager to help each today – other and create a safe We are resilient and environment for our people embrace change AUTOS PORT S GROU P_A NNUAL R EPORT 2022 11 Autosports Group Limited Directors' report 30 June 2022 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as 'Autosports Group', 'ASG' or the 'Group') consisting of Autosports Group Limited (referred to hereafter as the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the year ended 30 June 2022. Directors The following persons were directors of Autosports Group Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: James Evans Nicholas Pagent Ian Pagent Robert Quant Marina Go Thomas Pockett Chairman (from 1 December 2021) and Independent Director (appointed on 5 August 2021) Executive Director and Chief Executive Officer Executive Director Independent Director Independent Director Chairman and Independent Director (retired on 30 November 2021) Principal activities During the financial year, our principal activities included the sale of new and used motor vehicles, distribution of finance and insurance products on behalf of retail financiers and automotive insurers, sale of aftermarket products and spare parts, motor vehicle servicing and collision repair services. There have been no significant changes in the nature of principal activities. Our operations comprise of: ● ● ● ● 47 franchised dealerships selling new and used prestige and luxury motor vehicles (as at 1 August 2022); 3 used motor vehicle outlets, focused primarily on the sale of used prestige and luxury motor vehicles; 3 franchised motorcycle dealerships selling new and used motorcycles; and 7 specialist prestige motor vehicle collision repair facilities. Dividends Dividends paid during the financial year were as follows: Consolidated 30 June 2022 30 June 2021 $'000 $'000 Final dividend for the year ended 30 June 2021 of 7.0 cents (2020: Nil cents) per ordinary share 14,070 - Interim dividend for the year ended 30 June 2022 of 7.0 cents (2021: 2.0 cents) per ordinary share 14,070 4,020 28,140 4,020 On 24 August 2022, the directors declared a fully franked final dividend for the year ended 30 June 2022 of 9.0 cents per ordinary share, to be paid on 15 November 2022 to eligible shareholders on the register as at 1 November 2022. This equates to a total estimated distribution of $18,090,000, based on the number of ordinary shares on issue as at 30 June 2022. The financial effect of the dividends declared after the reporting date are not reflected in the 30 June 2022 financial statements and will be recognised in the subsequent financial period. Operating and financial review Autosports Group generates income from: ● ● ● ● ● the sale of new and used motor vehicles; the sale or distribution of ancillary products and services, such as finance, insurance and aftermarket products; the sale of motor vehicle spare parts; the provision of motor vehicle servicing; and the provision of collision repair services. 12 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 1 DIRECTORS’_REPORT30 June 2022 Autosports Group Limited Directors' report 30 June 2022 The following tables demonstrate the Group’s statutory financial performance normalised to exclude the impact of acquisition, impairment and restructure expenses ('other items'). Profit after providing for income tax and non-controlling interest amounted to $53,376,000 (2021: $41,932,000). The profit for the financial year was impacted by other items as follows: Revenue Statutory profit after tax attributable to the owners of Autosports Group Limited Add: Non-controlling interest¹ Add: Income tax expense Profit before income tax expense Add: Intangible amortisation² Add: Acquisition expense³ Add: Restructure and relocation expenses⁴ Add: Closure of franchise⁵ Profit before tax excluding other items Consolidated 30 June 2022 30 June 2021 $'000 $'000 1,875,954 1,978,406 53,376 1,204 25,780 80,360 3,968 463 1,954 - 41,932 480 19,241 61,653 5,416 746 1,308 917 86,745 70,040 1 2 3 4 5 Represents the 20% non-controlling interest in New Centenary Mazda Pty Ltd held by the dealer principal and 20% non- controlling interest in John Newell Holdings Pty Ltd held by the dealer principal. Intangible amortisation relating to non-cash amortisation of customer contracts arising on acquisitions made by the Group. Relates to expenses incurred on the acquisition of John Newell Holdings Pty Ltd, Suttons Subaru Rosebery and Suttons City Kia businesses, along with property acquisition costs incurred during the financial year. Previous year relates to the Trivett Alexandria business and Brighton Jaguar Land Rover acquisitions. Restructure and relocation expenses relate to the relocation of Lamborghini Brisbane and Audi Indooroopilly dealerships during the year along with redundancies and other non-trading expenses. Reflects the closure of Volvo Cars Mt Gravatt and Volvo Cars Brighton both of which ceased trading in the previous financial year. Profit before tax excluding other items noted above is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the statutory result under AAS adjusted for certain items. The directors consider profit before tax excluding other items (being the impact of acquisition, impairment and restructure expenses) to reflect the core earnings of the Group. Operational overview Market conditions While consumer demand remained strong during the financial year, new vehicle supply remains constrained by a global undersupply of new vehicles impacted by shortages in the supply of semi-conductors and wiring looms and is exacerbated by ongoing logistics delays relating to COVID-19. This supply shortage has resulted in the Group’s order write exceeding deliveries by 25% throughout Financial Year 2022 ('FY22'). Supply of new vehicles is expected to improve throughout Financial Year 2023 ('FY23') which will allow us to deliver our customer new vehicle orders. Year on year the Vfacts data showed new car registrations decreased by 5.2% for the calendar year to June 2022. The overall new vehicle sales market was down 2.1% for FY22. The prestige segment was down 15.8% and similarly, the luxury segment was down 8.9% in the FY22. The prestige and luxury market performance against total market is a result of constrained supply of vehicles as opposed to declining demand with the Group’s customer new vehicle orders remaining at high levels as noted above. The total used car retail market in Australia remains approximately three times larger than the franchised new car market. Strategic acquisitions Acquisition-led growth continues to support our growth strategy with two new brands and three new businesses added to the portfolio. 2 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 13 Autosports Group Limited Directors' report 30 June 2022 In the past two years we established an automotive hub in Alexandria, NSW. Alexandria is an inner-city suburb approximately four kilometres south of Sydney’s CBD catering to customers in Sydney’s inner-city fringe and Eastern Suburbs. Starting with the Group acquiring six luxury and super-luxury brand dealerships in early 2020, including Rolls-Royce, Aston Martin, McLaren, Bentley, Jaguar and Land Rover, Autosports Group recently added Alexandria Mazda, Subaru, Kia and Ducati to this automotive precinct in Alexandria. The proximity between these dealerships allows synergies between the businesses from parts distribution, service and logistics to administration support. On 1 July 2021, we purchased 80% of the shares in John Newell Holdings Pty Ltd which operates the Group’s Mazda Alexandria dealership (formerly John Newell Mazda). Alexandria Mazda is our second Mazda dealership, along with Toowong Mazda in Queensland. On 1 June 2022, we purchased the Suttons Subaru Rosebery and Suttons City Kia retail dealerships from Suttons Motor Group welcoming the Subaru and Kia brands to the portfolio. As Suttons sold its site at Rosebery, we relocated the dealerships to 98 O’Riordan Street, Alexandria next to Mazda Alexandria. Executing on our property strategy to control strategically important sites and reduce occupancy costs, we purchased 98 O’Riordan Street on 7 April 2022 for $23,617,000 funding approximately 90% through existing financiers and the balance through cash reserves. The property is 1,729 sqm with a gross lettable area of 3,032 sqm. On 15 November 2021, we purchased the land and building at 62 Enterprise Drive, Bundoora in Victoria where our Bundoora BMW dealership operates. The acquisition saved approximately $1.6 million per annum in rent. The purchase price of $19,523,000 was 90% debt funded through existing financier and the balance through cash reserves. At the end of FY22, Autosports Group’s property portfolio had a carrying value of $98.8 million. Growth through carefully selected greenfield dealerships complements our acquisition-led growth. In June 2022, we officially opened our first Ducati dealership and service facility in Alexandria alongside our super-luxury brands. Our strong BMW presence in Victoria will be further expanded with the construction of a new BMW greenfield dealership in Ringwood, Victoria which is planned to open in 2023. Investing in new facilities is necessary for our businesses to provide a premium experience for our customers. Autosports Group is excited to reveal the new Melbourne BMW Kings Way facility in August 2022 which is the first BMW dealership in Australia with the latest BMW corporate identity. This exciting development will see the consolidation of the Melbourne BMW dealership from two sites (Kings Way and Southbank) into one state-of-the-art facility along the prominent Kings Way in Melbourne. Other facility upgrades include a new showroom at Audi Indooroopilly and the development of the Group’s property holding in Macgregor Queensland for an upgraded Mercedes-Benz Macgregor and Volkswagen dealerships. Environment, social and governance Environment As the global economy is shifting towards a more sustainable way of living and doing business, we recognise we have an important role to play both in working with vehicle manufacturers and in our own operations. The brands that Autosports Group represents are predominantly based in Europe where there is a strong impetus towards producing clean vehicles and lowering emissions. Autosports Group is proud to be delivering a range of new electric vehicles to market as consumer interest in these vehicles is rapidly increasing. The other part of our journey to a more sustainable future is a focus on developing a framework to incorporate a strategy around sustainability, measuring emissions, and implementing improved processes to minimise our impact on the environment. A key initiative of this includes several dealerships in the Group that have commenced MTA Green Stamp accreditation. As part of our journey toward sustainable energy, we have taken steps to reduce our reliance on non-renewable grid energy sources. Several dealerships have engaged with a renewable energy company to install a combined of 515 kW of solar photovoltaic panels in FY23. This should generate over 754 MW of clean renewable energy per year and offset approximately 618 tonnes of carbon annually. Our proactive approach to an environment-positive energy source will accelerate our transition to a more sustainable way of doing business and help reduce the cost of electricity across the dealerships whilst minimising our carbon footprint. Social Health and well-being Autosports Group prioritises the health and safety of its employees, customers and the community. During FY22, the safety agenda was led by leveraging the existing safety culture across the business and included conducting our own internal safety inspections of each site to ensure that we met and complied with our high safety standards. New Safe Work Procedures were implemented across the Group which show directions on how work and hazardous tasks are to be carried out safely. 14 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 3 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 There has been an increased effort on mental health and well-being with COVID-19 identifying some areas of interest that our people would benefit from. This has been led by introducing an Employee Assistance Program (EAP) offering Health and Well-being webinars to our people. Operationally, the business has continued to keep abreast of all State-based Government advice on COVID-19 directives and restrictions. The Group’s businesses remained adaptable despite the evolving restrictions and continued to maintain customer satisfaction and interaction during these challenging conditions. Each site has met the Government requirements with check-ins, vaccination requirements and maintaining site COVID-19 safe work plans. COVID-19 Safe Protocols were in place alongside the COVID Safety Plans which reinforced messages of risk assessment, enhanced cleaning methods, mental well-being, remote working, incident response and government travel restrictions, which have been a critical control through the period. We continue to support the Government roll-out of the vaccination program and mandated vaccinations as required by each state government. The Group introduced resources to help flexible working arrangements and continued to provide support for employees working from home who were able to do so and sent regular emails to all staff with government updates. People and Diversity This year we took time to review our purpose statement and values. We held several workshops with a cross-section of employees across all locations and thought carefully about who we are and what Autosports Group stands for. Our new purpose statement ‘Drive Endless Possibilities’ links to our growth path and is meaningful to our employees, customers, business partners and shareholders. We also refined Autosports Group's values which acknowledge our past but also represent our future aspirations. Our values include Care, Village, Leading Change and Strive for Excellence which will be embedded in all of our communications, performance discussions and the way we do business. Since June 2021, we have committed to offering up skilling of qualifications for both new and existing employees at no cost to staff members. These courses are delivered by registered training organisations and are predominantly delivered online. We received a positive uptake of this opportunity. We have continued to embed our communications platform ‘Workplace’ by Facebook. This has become the centralised communications platform for Group announcements. This also gives each site the ability to form site-based and department-based groups, to share site-specific details and information amongst team members. All new and existing employees have access to a comprehensive knowledge library, where our company policies, procedures and forms are stored for internal use. During the financial year, the senior leadership team invested time in reviewing our talent and succession plans. This process was extremely valuable to identify our top and emerging talent and a process we will continue with. We continue to recognise the importance of diversity and have implemented initiatives to help the business work towards set diversity targets. During the financial year, we initiated a Group Diversity and Inclusion Council which has a diverse mix of members from all areas. This group has set a targeted Diversity and Inclusion strategy to look at how we can create a more diverse and inclusive workforce. This has involved celebrating numerous days including International Women's Day, NAIDOC Week and International Day Against Homophobia, Biphobia and Transphobia (IDAHOBIT) and most recently introducing paid parental leave for both primary and secondary carers in our workforce. We completed our first Emerging Leaders Development Program which comprised of 23% female participants. Modern slavery On an annual basis Autosports Group adopts a modern slavery plan to investigate a supplier category according to risk and value. In FY22, the business conducted due diligence enquiries in relation to telecommunications and information technology suppliers. This area complemented the work being progressed in relation to cybersecurity maturity and resilience. Each year our Modern Slavery Plan is considered by the Audit and Risk Committee and adopted by the Board. A key part of Autosports Group’s modern slavery plan is supplier on-boarding which helps the Group assess new suppliers and asks new suppliers to adhere to our Supplier Code of Conduct. Our FY22 Modern Slavery Statement is published on our company website. Whistle-blower Our whistle-blower program supports employees, suppliers and their families to come forward with their concerns anonymously and confidentially. We utilise an external whistleblowing service to provide a safe platform for eligible whistle-blowers to raise concerns whilst maintaining a whistleblowing policy in accordance with statutory requirements. Governance Autosports Group sees its governance framework as a continually evolving one which is regularly reviewed and improved. At the core of our governance framework is our People & Remuneration Committee, Audit & Risk Committee and General Board which oversee our Compliance and Risk Management Framework, whistle-blower framework, modern slavery plan, privacy and cybersecurity framework. Our risk framework is also supported with an internal audit program designed to review and test the Group’s internal controls and compliance in key risk areas. 4 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 15 Autosports Group Limited Directors' report 30 June 2022 We take the privacy of our customers and the security of our systems very seriously. Accordingly, we have engaged a specialist security organisation to review and refine our Security Framework, Policies and Procedures. Key security infrastructure components have been reviewed and identified improvements and capabilities that are now in progress. We have invested in maturing our cybersecurity resilience and IT infrastructure to support a more efficient delivery of IT services across the Group. Operational excellence and community engagements Throughout the 2022 financial year, the Group celebrated both individual and team achievements across the business. Our dealerships were celebrated with Aston Martin and Rolls Royce winning APAC Dealer of the Year 2021; Audi Centre Mosman winning Metropolitan Audi Dealer of the Year, Finance Controller Award 2021, and Financial Services Award 2021; Audi Sutherland placed third in the Metropolitan Audi Dealer of the Year 2021 and was recognised with an Audi 15-year Partnership Award 2021; Audi Centre Brisbane was also recognised as Audi Foundation Dealer of the Year 2021; Audi Centre Parramatta won the Major Metropolitan Audi Financial Controller Award 2021 and Audi Five Dock was awarded the Major Metropolitan Audi Financial Services Award 2021. Our people were recognised in the 2021 BMW Dixi Club & MINI Academy awards; Jaguar Land Rover Business Manager of the Year 2021-2022; Maserati Middle Weight Sales Executive and Middle Weight Marketing Manager of the Year; Mercedes-Benz Retailer of the Year – Star Guild Winner in New Vehicle Sales, Shining Star - Joint Service Manager of the Year, and Part Manager Top Achiever; Mercedes-Benz Vans Master Technician and the 2021 Mazda Master Guild winners in Master Service Manager, Parts Manager, Sales, Sales Manager, Sales Consultants and Advisors. We also engaged in a variety of community engagement initiatives by sponsoring sporting clubs to support programs and the development of talent in the local communities; participated in school fundraising efforts to assist in securing new facilities and the development of children in our local areas; provided auction items for local charities and participated in fundraising efforts such as supporting the Audi Foundation, Movember, Berry Motorfair, The Smith Family Toy & Book Appeal, Ronald McDonald House Charity, Tour de Cure and CEO Dare to Cure; and provided a Volkswagen Passat to the Castle Hill Police, amongst many other initiatives across Queensland, New South Wales and Victoria. Marketing and technology The Group has continued to invest in the Salesforce Customer Relationship Management (CRM) platform to improve customer data management and has worked closely over the past 12 months with our OEMs to ensure that both entities have the right data at the right time to deliver outstanding outcomes for consumers. At the latter end of 2021, a team of key stakeholders across the Group designed the Autosports Group Digital Transformation Roadmap and implemented a Digital Transformation Steering Committee to ensure that projects are delivered according to key business priorities on time and on budget. One of the key projects progressed during the period is the Ducati online store. During FY22, the marketing team has continued to utilise the Salesforce Datorama platform to monitor marketing performance and optimise marketing spends realising significant cost efficiencies for the business and steady quality customer enquiry. Likely developments in operations in future years The Group’s diverse revenue model supports both resilience and growth through the Financial Year 2023 ('FY23') as: ● ● ● ● ● ● ● underlying vehicle supply, whilst structurally under supplied, should improve gradually during the period; service and parts revenue should maintain underlying growth rates between 6-9% in FY23; we intend to continue real estate acquisitions of key trading locations to maximise flexibility, security and balance sheet; we allocate capital to greenfield dealership opportunities and increase service and panel capacity; our strong balance sheet position supports further acquisition led growth in FY23; we intend to deliver shareholder returns with dividends in the range of 55-70% NPAT; and we continue to focus on the development and growth of our staff. Risk and governance The Group identified its key risk areas as: Supply chain COVID-19 Structural under supply exacerbated by the pandemic has caused shortage of supply of new vehicles across the automotive industry with demand continuing to exceed supply in FY22. This risk is mitigated through high consumer demand improving margins and careful inventory management. The pandemic continued in FY22 affecting the first half-year in particular. The Group is equipped to quickly adapt to changing public health regulations and has developed better ways to continue operating in a COVID-19 safe manner including sales through click and collect and contactless service operations. With appropriate cost reduction measures and support from other States that were not in lock-down, the Group managed the impact of the Victorian lock-downs efficiently. 16 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 5 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 Macroeconomic risks As the products sold by the Group are discretionary for many customers, the Group’s financial performance can be impacted by current and future economic conditions which it cannot control. Increasing interest rates and inflationary pressure can put pressure on consumer spending and reduce purchasing power. Privacy and Data Breach The Group handles personal and sensitive information. Our Data Breach Response Plan is designed so we are ready to take prompt action to contain and address data security incidents. Our privacy management framework is built around awareness, governance and continuous improvement whilst also being inherently connected with our cybersecurity framework. The Group is dedicated to keeping its workforce appropriately trained and updated with privacy and data breach training and initiatives. Autosports Group conducted an internal audit on Data Privacy during the year and is a supporter of the OAIC’s annual Privacy Awareness Week. Work, Health and Safety (‘WHS’) The Group has a zero-risk tolerance for serious safety incidents. During the financial year, the Group continued to improve its WHS practices by using the existing safety culture across the business to continue to develop and train its workforce on WHS matters. Reliance on key personnel The Group engaged in activities during the financial year to develop the skills and experience of potential successors as part of its succession planning initiatives. Original equipment manufacturer (‘OEM’) risk The automotive industry is also experiencing a change in OEM business models including some manufacturers adopting an agency model. The Group’s supportive and collaborative approach to its relationships with OEMs have cultivated the Group’s excellent reputation amongst OEMs and we will continue to work with our business partners in this way. Regulatory compliance The Group is subject to a number of Australian laws and regulations such as consumer protection laws, consumer finance laws, laws relating to the sale of insurance products, importation laws, privacy laws and those relating to workplace health and safety. The Group monitors the regulatory landscape for regulatory change. Changes to market trends As consumer preferences trend towards electric vehicles, Autosports Group is well positioned to take advantage of the trend as we partner with many OEMs that are delivering new ranges of electric vehicles. The Group regularly monitors market trends to prepare for changes to consumer preferences and new technologies. Cybersecurity and Information technology (‘IT’) infrastructure FY22 saw a continuation of the Group’s Cybersecurity Maturity Uplift Program as cybersecurity risks remain a key risk for businesses globally. During the year, cybersecurity training was issued and IT governance structures implemented. Environmental regulation The Group is committed to continually improving its operations to deliver better environmental outcomes. The Group is subject to environmental regulation and is required to maintain licences and applies minimum environmental standards at its dealerships and service and collision facilities. Significant changes in the state of affairs On 1 July 2021, the Group acquired 80% of the shares in John Newell Holdings Pty Ltd for $10,808,000 (net of cash). On 1 June 2022, the Group acquired certain assets and liabilities of Subaru Sydney City and Sydney City Kia from Suttons Motors Group for $9,403,000. On 16 November 2021, the Group acquired the land and building from which its Bundoora BMW dealership operates for $19,523,000. On 7 April 2022, the Group acquired the land and buildings at 98 O’Riordan Street, Alexandria, from which the Subaru Sydney City and Sydney City Kia dealerships operate for $23,617,000. Refer to note 11 and note 28 to the financial statements for further details relating to the acquisitions. There were no other significant changes in the state of affairs of the Group during the financial year. Matters subsequent to the end of the financial year On 1 August 2022, the Group completed the acquisition of a 100% interest in Auckland City BMW Limited through its wholly-owned New Zealand-based subsidiary. The acquisition is subject to final completion adjustments. The final consideration is estimated at $63.2 million (NZ$70 million), funded by existing cash reserves and $12.2 million (NZ$13.5 million) debt facility. 6 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 17 Autosports Group Limited Directors' report 30 June 2022 Auckland City BMW Limited is a well-established business that comprises three dealerships representing approximately 37% of BMW’s market share, 50% of MINI’s market share and 100% of Rolls-Royce’s market share in New Zealand. It operates with a net profit before tax and EBITDA margins in excess of the Group’s FY2021 margins. Management accounts of the Auckland City BMW business recorded revenue of approximately $141.7 million (NZ$157 million) for the year ended December 2021. Executing this international acquisition marks an important milestone in the Group’s growth strategy and reinforces the Group’s positive business relationship with BMW Group over the last five years. It aligns strongly with the Group’s strategy to enhance geographic diversity and business reach beyond Australia. Regulatory change The Treasury Laws Amendment (Design and Distribution Obligations and Product Intervention Powers) Act 2019 introduced new product design and distribution obligations to help consumers obtain the appropriate financial product. Since 5 October 2021, businesses were required to meet the new design of financial products to meet consumers’ needs and distribute their products in a more targeted manner. This includes an obligation on the issuer to notify ASIC or the distributor to inform the issuer of a significant dealing in a financial product if inconsistent with the product’s target market determination. ASIC’s Regulatory Guide 271 on Internal Dispute Resolution updates credit licensees’ reporting requirements for complaints received from 5 October 2021. It broadens the definition of ‘complaint’ to include an expression of dissatisfaction about an organisation and its staff. Complaints do not need to be made in writing or contain the words ‘complaint’ or ‘dispute’ to trigger an internal dispute resolution process application. There is also an obligation on credit licence holders to monitor their social media channels to manage complaints. Notably, the regulation reduced the time frame for responding to complaints from 30 calendar days to 21. Since 5 October 2021, financial firms have been required to record all complaints received and have an effective system in place for recording information about complaints. ASIC released the final mandatory requirements for the internal dispute resolution (IDR) data reporting framework on 30 March 2022 to require all financial firms to report the IDR data to ASIC by 31 August 2023. The Australian Government introduced new safety and information standards for button batteries and consumer goods that contain button batteries. Manufacturers and distributors of such products must ensure safety warning tags are attached to applicable products and conduct mandatory testing. Changes to the Autonomous Sanctions Amendment Regulations establish the thematic sanctions regime concerning serious violations or abuses of human rights, serious corruption and significant cyber incidents. It allows the Australian Government to impose sanctions on individuals rather than geographic locations and extend to persons of Australian Citizens or residents. Amendments under the Corporations Act 2001 allow temporary COVID-19 relief measures and now enable electronic execution of company documents, distribution of meeting-related materials and use of technology in meetings. The NSW Government agreed to extend the Motor Dealers and Repairers Amendment Bill to cover the entire online vehicle purchase process for both new and used cars. Changes to Victoria’s workplace safety legislation commenced on 1 July 2022. These changes aim to prevent and better respond to workplace safety incidents, improve outcomes for injured workers and increase Victoria’s workers’ compensation scheme operations. Victoria’s Occupational Health and Safety updates saw additional rights and protections for labour-hire workers, prohibitions on insurance schemes to pay monetary penalties for offences under WorkSafe laws and other authorities for WorkSafe inspectors. A WorkSafe inspector can now issue prohibition notices, give directions to prevent foreseeable serious health and safety risks and prohibit activities with inadequate risk management. 18 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 7 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 Current directors Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Interests in rights: James Evans Independent Director and Chairman Bachelor of Economics, a member of the Chartered Accountants Australia and New Zealand, a Fellow of the Financial Services Institute of Australasia and a Fellow of the Australian Institute of Company Directors James has over 40 years' executive experience in retailing, and banking and financial services. Recently, James served as the Chair of Global Fund Manager Pendal Group Limited and the Chair of ME Bank, until its sale to the Bank of Queensland and was a Non-Executive Director of Investa Group, including Investa Wholesale Funds Management Limited and ICPF Holdings Limited. He was also the former Chair of Suncorp Portfolio Services Limited and a Non-Executive Director of Australian Infrastructure Fund Limited and Hastings Funds Management Limited. None Independent Director of Pendal Group Limited (ASX: PDL) from 2010-2022. Chairman from 2013 - 2022 Member of Audit and Risk Committee and People and Remuneration Committee None None None 8 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 19 Autosports Group Limited Directors' report 30 June 2022 Name: Title: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Interests in rights: Name: Title: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Interests in rights: Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Interests in rights: Nicholas ('Nick') Pagent Managing Director and Chief Executive Officer Nick has over 26 years' experience in the motor vehicle industry across Australia and the United Kingdom. Prior to founding Autosports Group, Nick worked in the United Kingdom in senior roles including Director of Sales and Dealer Principal with Mercedes-Benz London and Executive Audi, St Albans. Together with Ian Pagent, he is a Co-Founder of Autosports Group. None None None 39,615,703 ordinary shares held indirectly None 887,351 LTI performance rights and 157,779 STI performance rights convertible into ordinary shares James (‘Ian’) Pagent Executive Director Ian has over 53 years' experience in the motor vehicle industry across Australia, Asia and the United States of America. Between 1988 and 2002, Ian was co-owner and Managing Director of Trivett Classic Group. During this period, he was the dealer principal for BMW, Audi, Volvo, Jaguar, Land Rover, Aston Martin, Porsche, Lamborghini, Lotus, Mazda, Honda, Peugeot, Toyota and MG Rover. Together with Nick Pagent, he is a Co-Founder of Autosports Group. Non-Executive Director – Friends of Mater Foundation and Audit Foundation None None 65,644,224 ordinary shares held indirectly None 516,307 LTI performance rights and 68,619 STI performance rights convertible into ordinary shares Robert Quant Independent Director Bachelor of Business from the University of Technology, Sydney Robert has over 39 years' experience in professional accounting in advisory and leadership roles having developed sector expertise in retail automotive and professional services. His most recent executive roles include Global Leader - Asia Pacific for Grant Thornton International Limited and Chief Executive Officer of Grant Thornton Australia Limited. As well as sitting on and chairing a number of private boards, he advises in the areas of strategy development and organisational change. None None Chair of Audit and Risk Committee and Member of People and Remuneration Committee 62,499 ordinary shares held indirectly None None 20 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 9 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 Name: Title: Qualifications: Experience and expertise: Other current directorships: Former directorships (last 3 years): Special responsibilities: Interests in shares: Interests in options: Interests in rights: Marina Go Independent Director Master of Business Administration from the Australian Graduate School of Management (‘AGSM’) and a Bachelor of Arts from Macquarie University Marina is Chair of Adore Beauty and Netball Australia and a Non-Executive Director of EnergyAustralia, 7-Eleven and Transurban Group. She is also a member of the UNSW Business Advisory Council, and author of the business book for women, 'Break Through: 20 Success Strategies for Female Leaders'. Marina has over 25 years of leadership experience in the media industry, having started her career as a journalist. She is the former Chair of Ovarian Cancer Australia and Super Netball Limited as well as the former Non-Executive Director of Booktopia Group and Pro-Pac Packaging. She is also a member of the Australian Institute of Company Directors. Chair of Adore Beauty Group Ltd (ASX: ABY) - since 2 November 2021 and Non-Executive Director - since 6 October 2020 and Non-Executive Director of Transurban Group (ASX: TCL) - since 1 December 2021. Non-Executive Director of Booktopia Group Limited (ASX: BKG) - resigned on 31 March 2022, Non-Executive Director of Pro-Pac Packaging (Aust) Pty Ltd (ASX: PPG) - resigned on 23 November 2021. Chair of People and Remuneration Committee and Member of Audit and Risk Committee 40,833 ordinary shares held directly None None 'Other current directorships' quoted above are current directorships for listed entities only. 'Former directorships (last 3 years)' quoted above are directorships held in the last three years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Other key management and company secretary Name: Title: Experience and expertise: Interests in shares: Interests in options: Interests in rights: Aaron Murray Chief Financial Officer Aaron has over 25 years' experience in accounting and the motor vehicle industry. He has held the role of Autosports Group Chief Financial Officer since 2009, after joining the business in 2007. Prior to joining Autosports Group, he held accounting and finance roles with Trivett Classic, McMillan Volkswagen and Audi Centre Parramatta. 1,747,095 ordinary shares held directly and indirectly None 330,262 LTI performance rights and 59,661 STI performance rights convertible into ordinary shares 10 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 21 Autosports Group Limited Directors' report 30 June 2022 Name: Title: Qualifications: Experience and expertise: Caroline Raw Company Secretary and General Counsel Fellow of the Governance Institute, Bachelor of Laws and Bachelor of Commerce, Graduate Diploma of Applied Corporate Governance from Governance Institute. Caroline has over 17 years' experience as a corporate lawyer advising listed companies and funds on initial public offerings, capital raising, funds management and mergers and acquisitions. Prior to joining Autosports Group, she held a senior role at a national law firm in the equity capital markets and merger and acquisitions practice group. Caroline sat on the Capital Markets Committee of the Property Council of Australia and has previously acted as group company secretary and legal counsel for an ASX-listed property funds management company and an Australian real estate investment trust. Meetings of directors The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the year ended 30 June 2022, and the number of meetings attended by each director were: James Evans Nick Pagent* Ian Pagent* Robert Quant Marina Go** Thomas Pockett Full Board People and Remuneration Committee Attended Held Attended Held Audit and Risk Committee Attended Held 10 11 11 11 10 5 10 11 11 11 11 5 7 7 7 7 7 4 7 7 7 7 7 4 10 10 10 10 10 5 10 10 10 10 10 5 Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. * ** Whilst Nick Pagent and Ian Pagent are not members of the People and Remuneration Committee or Audit and Risk Committee, they attended each meeting. This meeting was a non-scheduled meeting held on short notice and Marina’s comments were received in advance. Shares under option There were no unissued ordinary shares of Autosports Group Limited under option outstanding at the date of this report. Shares under performance rights There were 1,652,731 unissued ordinary shares of Autosports Group Limited under performance rights at the date of this report. Shares issued on the exercise of options There were no ordinary shares of Autosports Group Limited issued on the exercise of options during the year ended 30 June 2022 and up to the date of this report. Shares issued on the exercise of performance rights No shares were issued on the exercise of performance rights during or since the end of the financial year. Instead, the Company arranged to purchase shares on-market through a facility offered by its Share Registry, Link Market Services, which satisfied vested performance rights during the financial year. There were no other ordinary shares issued during or since the end of the financial year. Indemnity and insurance of officers The Company has entered into Deeds of Indemnity, Insurance and Access with each of the directors as well as the Company Secretary and Chief Financial Officer of the Company to indemnify them for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. 22 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 11 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. 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 Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 25 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 25 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: ● all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants (including Independence Standards) issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. ● Officers of the Company who are former partners of Deloitte Touche Tohmatsu There are no officers of the Company who are former partners of Deloitte Touche Tohmatsu. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. 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 immediately after this directors' report. Remuneration report (audited) Sections The remuneration report is set out under the following main headings: 1 2 3 4 5 Remuneration essentials Senior Executive remuneration in detail Independent Director remuneration Statutory remuneration disclosures Transactions with key management personnel (1) Remuneration essentials What does this report cover? The directors of Autosports Group Limited are pleased to introduce to shareholders the Company’s remuneration report for the performance period 1 July 2021 to 30 June 2022 (‘financial year’ or ‘FY22’). Who does this report cover? This report sets out the remuneration arrangements for the Company’s key management personnel (‘KMP’). The term KMP refers to those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, including any director (whether executive or otherwise). Throughout the remuneration report, KMP are referred to as either Senior Executives (who are members of KMP performing an executive role) or Independent Directors. 12 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 23 Autosports Group Limited Directors' report 30 June 2022 The following table sets out the Company’s KMP for the financial year. All KMP held their positions for the whole of the financial year, unless otherwise indicated. Name Position Independent Directors James Evans Tom Pockett Marina Go Robert Quant Senior Executives Nick Pagent Ian Pagent Aaron Murray Chairman (from 1 December 2021) and Independent Director (from 5 August 2021) Chairman and Independent Director (until 30 November 2021) Independent Director Independent Director Managing Director and Chief Executive Officer (‘CEO’) Executive Director Chief Financial Officer (‘CFO’) Remuneration governance and framework Role of the Board and People and Remuneration Committee The Board of Directors (the ‘Board’) is responsible for establishing, and overseeing the implementation of, the Company’s remuneration policies and frameworks and ensuring that they are aligned with the long-term interests of the Company and its shareholders. The People and Remuneration Committee assists the Board with these responsibilities. The role of the People and Remuneration Committee is to review key aspects of the KMP remuneration structure and arrangements and make recommendations to the Board. In particular, the People and Remuneration Committee reviews and recommends to the Board: ● ● ● ● ● arrangements for the Senior Executives (including annual remuneration and participation in short-term and long-term incentive plans); key performance indicator (‘KPI’) targets for Senior Executives that align with short and long-term goals and cultural expectations; remuneration arrangements for Independent Directors; major changes and developments to the Company’s equity incentive plans; and whether offers are to be made under the Company’s employee equity incentive plans in respect of a financial year and the terms of any offers. Recommendations are made based on annual reviews of Senior Executives' performance against KPIs. Use of remuneration consultants and other advisors In FY22, no remuneration consultants were used. Voting and comments made at the Company's 2021 Annual General Meeting ('AGM') At the 2021 AGM, 99.14% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2021. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. Remuneration policy and guiding principles In accordance with best practice corporate governance, the structure of Senior Executive and Independent Director remuneration is separate. Senior Executive remuneration Our remuneration framework is designed to be competitive and encourage Senior Executives to execute the Group’s strategy and achieve business objectives to increase shareholder value. 24 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 13 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 The Board and the People and Remuneration Committee are guided by the following objectives when making decisions regarding Senior Executive remuneration: Independent Director remuneration In remunerating Independent Directors, we aim to ensure that we can attract and retain qualified and experienced directors having regard to: ● ● ● the specific responsibilities and requirements for the Board; fees paid to Independent Directors of other comparable Australian companies; and the size and complexity of the Group’s operations. Remuneration mix and components Our executive remuneration framework is summarised below and includes components of remuneration which are structured to motivate executives to deliver sustained returns through a mix of short-term and long-term incentives. Executive remuneration framework Fixed remuneration (‘Fixed REM’) – Cash Short-term incentive (‘STI’) (at risk) – Equity Long-term incentive (‘LTI’) (at risk) – Equity Base salary plus superannuation and other benefits STI is subject to financial and non-financial performance hurdles Granted in performance rights at the start of the performance period Influenced by individual skills, qualifications, experience and performance Subject to a culture and values gateway hurdle Vesting subject to an earnings per share ('EPS') performance condition Reviewed annually Performance measured over 12 months Performance measured over three years Granted in performance rights which will vest following a 12-month deferral period subject to the Senior Executive’s continuous service 14 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 25 Autosports Group Limited Directors' report 30 June 2022 Market competitive base reward encourages sustainable performance in the medium to longer term and provides a retention element The tables below illustrate the remuneration mix for the Senior Executives at target performance. The tables below illustrate the remuneration mix for Senior Executives at maximum award. Company performance In FY22, gross profit grew 10.5% to $373.8 million as under supply of new vehicles resulted in higher gross margins. Statutory net profit after tax was $54.6 million compared to $42.4 million for the prior year. While there was a 5.2% decline in revenue (2022: $1.88 billion, 2021: $1.98 billion) reflecting the global shortage of new vehicle supply, the cycling out of lock-downs in the second half of the financial year resulted in a recovery in service and parts revenue (2022: $247 million, 2021: $227 million). We acquired several businesses during the year including Alexandria Mazda, Sydney City Kia and Subaru Sydney City. Ducati Sydney, a new greenfield dealership and service facility at Alexandria, opened in June 2022. Our business acquisitions were complemented by an investment in the properties underlying our Bundoora BMW dealership at 82 Enterprise Drive Bundoora VIC and Kia and Subaru dealerships at 98 O’Riordan Street, Alexandria NSW. At year end our cash at bank was $90.8 million (2021: $96.8 million) and corporate debt was $112.5 million. Of the corporate debt, $80.4 million is property debt supported by a property portfolio with a carrying value of $98.8 million. 26 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 15 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 Our remuneration structure was established to reward both short-term and long-term growth with gateway hurdles of upholding cultural and value expectations for continual improvement in corporate governance, compliance, risk management and stakeholder relationships. It is also intended to retain skilled executives in the long-term interests of the business. The table below shows our financial performance for the last five years. Share performance Earnings performance Liquidity Financial year ended 30 June Closing share price ($) Dividend per share (cents)* Basis earnings per share ('EPS') (cents) Earnings Before Interest and tax ('EBIT') $M Net profit after tax ('NPAT') $M Return on Equity ('ROE') % Cash flow from operations $M Interest coverage (Earnings before interest and tax ('EBITDA')) 2022 2021 2020 2019 2018 1.52 2.55 1.17 1.26 1.70 16.0 9.0 - 3.0 9.0 26.56 20.86 (50.97) 5.57 12.99 96.8 79.8 (76.1) 41.5 50.7 54.6 42.4 (102.3) 11.4 26.4 10.8 10.2 (27.1) 2.3 5.3 135.0 125.8 83.8 45.3 46.1 9.10 7.13 3.54 3.29 4.51 * 100% franked at 30% corporate income tax. (2) Senior Executive remuneration in detail Fixed remuneration The remuneration of Senior Executives includes a fixed component comprised of base salary, employer superannuation contributions and other benefits associated with the provision and use of motor vehicles. Fixed remuneration is regularly reviewed by the People and Remuneration Committee with reference to each Senior Executive’s individual performance and, as appropriate, relevant comparative compensation in the market. Fixed remuneration for Senior Executives is market-aligned to similar roles in companies of a comparable size, complexity and scale to Autosports Group. Short-term incentive Set out below is an explanation of the terms and conditions applying to the STI awards for Senior Executives during the performance period. Overview of the STI plan The STI plan is an ‘at-risk’ component of executive remuneration whereby, if the applicable performance conditions are met, STI awards will be delivered in the form of performance rights which will vest after a further deferral of one year subject to the executive’s continued service. Participation Executive directors and other members of senior management are eligible to participate in the STI plan. Performance period 1 July 2021 to 30 June 2022 STI opportunity The STI opportunities of the Senior Executives are set out below: Name Nick Pagent Ian Pagent Aaron Murray Level of performance At target Level of performance At maximum 50% of base salary 20% of base salary 50% of base salary 75% of base salary 45% of base salary 75% of base salary 16 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 27 Autosports Group Limited Directors' report 30 June 2022 Each Senior Executive’s STI opportunity is assessed against individually weighted financial and non-financial performance hurdles. In relation each financial key performance indicator comprising revenue, liquidity, EBITDA and EPS, the STI opportunity is awarded as follows: (i) < 90% - no award (ii) > 90% and < 100% - 30% of ‘target’ amount awarded (iii) 100% (at target) - 100% of ‘target’ amount awarded (iv) > 100% and < 110% - straight line pro rata between ‘target’ and ‘maximum’ amount awarded (v) 110% or greater - ‘maximum’ amount awarded. Additionally, all performance matrices were assessed exclusive of new or unbudgeted acquisitions. Non-financial KPIs were assessed based on the achievement of individual strategic objectives and performance against set criteria. The Board retained its discretion to determine each Senior Executive’s award including having regard to performance. Performance conditions Performance conditions for the initial grant include: (i) a “gateway hurdle” of upholding our culture and values. If the gateway hurdle is not met, no STI is awarded; and (ii) in addition, each Senior Executive has a balanced scorecard that determines their STI awards. These scorecards incorporate individually weighted financial and non- financial performance hurdles determined by the Board annually. The financial hurdles relate to the financial objectives of the Group and include targets measured against Revenue, Liquidity, EBITDA and EPS. EPS is calculated having regard to underlying profit, which measures profit from the Group’s ongoing operations adjusted, where the Board considers it appropriate. The non-financial performance hurdles are aligned to each Senior Executive’s role and include items such as reporting, safety, business and property acquisitions, culture and employee engagement, diversity, cybersecurity and internal audit. The Board has determined that the combination of financial and non-financial conditions provides the appropriate balance between short-term financial measures and the more strategic non-financial measures which in the medium to long-term will ultimately drive further growth and returns for shareholders. Following the end of the financial year, the People and Remuneration Committee assesses the performance of Senior Executives against the performance conditions set by the Board and determines the actual level of award for the Senior Executives for the initial grant and, therefore, the number of performance rights to be granted. The Board believes this method is most efficient and results in the most accurate outcomes. Following measurement against performance conditions, STI awards are delivered in the form of performance rights which vest following a deferral period of 12 months subject to a continuous service condition. Upon vesting, each performance right entitles the Senior Executive to one ordinary share in the Company. The Board has the discretion to settle performance rights with a cash equivalent payment. Performance rights are granted for nil consideration and no amount is payable on vesting. Measurement of performance conditions Delivery of STI awards Performance rights Number of performance rights to be granted The number of performance rights to be granted to Senior Executives is determined by dividing any STI award that the executive becomes entitled to receive by the volume weighted average price (‘VWAP’) of shares traded on the ASX during the 10 trading days following the release of the Group’s FY22 audited results. Dividend and voting rights Performance rights do not carry dividend or voting rights prior to vesting. Shares allocated on vesting carry the same dividend and voting rights as other shares. 28 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 17 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 Treatment on cessation of employment If a Senior Executive ceases to be employed during the 12 month deferral period, the following treatment will apply, unless the Board determines otherwise: (i) if they resign or are summarily terminated, all of their rights will lapse; or (ii) if they cease employment in any other circumstance, a pro rata portion (for the portion of the performance period elapsed) of unvested rights will remain on foot and will vest in the ordinary course. Change of control The Board may determine that all or a specified number of a Senior Executive’s performance rights will vest or cease to be subject to restrictions where there is a change of control event. Clawback and preventing inappropriate benefits The Board has broad clawback powers if, for example, the Senior Executive has acted fraudulently or dishonestly or there is a material financial misstatement. Percentage of STI awarded and forfeited for Senior Executives during the financial year Details of the STI outcomes received by Senior Executives during the financial year are outlined in the table below. Senior Executives Year Nick Pagent Ian Pagent Aaron Murray 2022 2021 2022 2021 2022 2021 Maximum potential STI bonus ($)* Percentage of target STI award granted Percentage of maximum STI award granted Percentage of maximum STI award forfeited STI award ($) 525,000 450,000 180,000 180,000 318,750 168,750 408,800 356,400 141,000 155,000 255,000 134,766 88% 100% 91% 100% 91% 100% 78% 79% 78% 86% 80% 80% 22% 21% 22% 14% 20% 20% * The maximum potential bonus is determined by reference to the maximum STI opportunity available to each Senior Executive as a percentage of their base salary. Long-term incentive Set out below is an explanation of the terms and conditions applying to the LTI awards for Senior Executives during the performance period. Overview of the LTI plan The LTI plan is an ‘at-risk’ equity component of executive remuneration which is subject to the satisfaction of a long-term performance condition. Participation Executive directors and other members of senior management are eligible to participate in the LTI plan. LTI opportunity The LTI opportunity of the Senior Executives is set out below: Nick Pagent Ian Pagent Aaron Murray 75% of base salary 45% of base salary 45% of base salary Instrument Upon vesting, each performance right entitles the Senior Executive to one ordinary share in the Company. The Board has the discretion to settle performance rights with a cash equivalent payment. Performance rights are granted for nil consideration and no amount is payable on vesting. Number of performance rights to be granted The number of performance rights granted to each Senior Executive will be determined by dividing the LTI award opportunity (calculated as a percentage of the Senior Executive’s base salary) by the VWAP of shares traded on the ASX during the 10 trading days following the release of the Group’s full year results for that financial year. 18 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 29 Autosports Group Limited Directors' report 30 June 2022 Performance period LTI grants have a three-year performance period, which commences on 1 July of the year they are granted. Performance conditions Performance rights will be tested against the compound annual growth rate (‘CAGR’) of the Group’s underlying EPS. The percentage of performance rights that vest, if any, will be determined by reference to the following vesting schedule, subject to any adjustments for abnormal or unusual profit items that the Board, in its absolute discretion, considers appropriate: CAGR of the Company’s underlying EPS over the performance period Percentage of performance rights that vest Less than 7% 7% (threshold performance) Between 7% and 15% 15% or above (maximum performance) Nil 50% Straight-line pro rata vesting between 50% and 100% 100% The Board will arrange for the performance condition to be tested following the release of the Company’s full year results. Any rights that remain unvested at the end of the performance period will lapse immediately. A continuous service condition also applies to the performance rights, subject to the cessation of employment provisions described below. The EPS performance condition has been chosen as it provides evidence of the Company’s growth in earnings and is directly linked to shareholder returns. Measurement and testing of performance conditions To measure the EPS performance condition, financial results are extracted by reference to the Company’s audited financial statements. The use of financial statements ensures the integrity of the measure and alignment with the financial performance of the Company. EPS is calculated having regard to underlying profit, which measures profit from the Group’s ongoing operations adjusted, where the Board considers it appropriate. Dividend and voting rights The performance rights do not carry dividend or voting rights prior to vesting. Shares allocated on vesting carry the same dividend and voting rights as other shares. Treatment on cessation of employment If an executive ceases to be employed before the executive’s performance rights vest, the following treatment will apply, unless the Board determines otherwise: (i) if the executive resigns or is summarily terminated, all their performance rights will lapse; or (ii) if the executive ceases employment in any other circumstances including retirement, a pro rata portion (for the portion of the performance period elapsed) of their rights will remain on foot and will be tested after the end of the performance period against the performance condition. Change of control The Board may determine that all or a specified number of a Senior Executive’s performance rights will vest or cease to be subject to restrictions where there is a change of control event. Clawback and preventing inappropriate benefits The Board has broad clawback powers if, for example, the Senior Executive has acted fraudulently or dishonestly or there is a material financial misstatement. 30 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 19 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 Executive service agreements Each Senior Executive is party to a written executive service agreement with the Company. The key terms are set out below. Base salary Periods of notice required to terminate and termination payments Nick Pagent – $700,000 per annum base salary plus other benefits valued at $93,385. Ian Pagent – $400,000 per annum base salary plus other benefits valued at $85,285. Aaron Murray – $425,000 per annum base salary plus other benefits valued at $84,885. Nick Pagent – either party may terminate the contract by giving 12 months’ notice. Ian Pagent – either party may terminate the contract by giving 12 months’ notice. Aaron Murray – either party may terminate the contract by giving 3 months’ notice. The Company may terminate immediately in certain circumstances, including where the relevant senior executive engages in serious or wilful misconduct. FY23 Senior Executive remuneration There are no proposed changes to the remuneration structure of Senior Executives for FY23. (3) Independent Director remuneration Principles of Independent Director remuneration As outlined in section 2, in remunerating Independent Directors, we aim to attract and retain qualified and experienced directors having regard to: ● ● ● the specific responsibilities and requirements for the Board; fees paid to Independent Directors of other comparable Australian companies; and the size and complexity of the Group’s operations. Independent Director remuneration for the financial year Board fees The current Independent Director fee pool is set at $800,000 per annum. The Independent Directors’ fees are $200,000 for the Chairman and $100,000 for other Independent Directors (including superannuation) per annum. Directors may be remunerated for reasonable travel and other expenses incurred in attending to the Group’s affairs and any additional services outside the scope of Board and Committee duties they provide. In order to maintain their independence, Independent Directors do not have any ‘at risk’ remuneration component. We do not pay benefits (other than statutory entitlements) on retirement to Independent Directors. Committee fees Independent Directors are paid Committee fees of $20,000 (including superannuation) per annum for the Chair of each Board Committee. Directors do not receive additional fees for being a member of a Board Committee. 20 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 31 Autosports Group Limited Directors' report 30 June 2022 (4) Statutory remuneration disclosures KMP remuneration The following table sets out the statutory disclosures in accordance with the Accounting Standards for the financial year. Short-term employee benefits Cash paid salary/fees $ Non- monetary¹ $ Post- employment benefits Super- annuation $ Share-based payments Long service leave $ Rights² $ Total $ 132,855 - 90,000 190,411 109,091 106,639 109,091 106,639 594,231 538,154 300,000 300,000 395,192 362,135 - - - - - - - - 69,817 69,803 61,717 61,703 61,317 62,769 13,285 - - 4,204 10,909 10,131 10,909 10,131 23,568 21,694 23,568 21,694 23,568 21,694 - - - - - - - - - - - - - - - - 146,140 - 90,000 194,615 120,000 116,770 120,000 116,770 21,399 10,965 6,447 1,521 12,065 6,623 933,800 806,400 321,000 335,000 446,250 303,514 1,642,815 1,447,016 712,732 719,918 938,392 756,735 Independent Directors James Evans Tom Pockett Marina Go Robert Quant Senior Executives Nick Pagent Ian Pagent Aaron Murray 20223 2021 20224 2021 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 1 2 3 4 5 The amounts disclosed as non-monetary benefits includes things such as motor vehicle, motor vehicle insurance, fringe benefit tax on motor vehicle and fuel allowance. The value of rights granted to the Senior Executives is based on the fair value estimate on grant date. Represents remuneration from 5 August 2021. Represents remuneration until 30 November 2021. Senior Executives forfeited salary of $235,577 during the year (2021: $174,711). There were no termination benefits provided in the financial year. Movements in performance rights held by KMPs The following table shows the changes in performance rights granted to KMPs during the financial year including the performance rights on issue and subject to exercise at a later date. The Independent Directors do not hold performance rights. 32 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 21 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 Performance rights awarded, vested and lapsed/forfeited during the year and available for exercise in future years are detailed below. Grant date Performance period Rights held at the start of the financial year Fair value on grant date Rights granted Rights exercised Rights held at the end of the financial year Rights lapsed or forfeited Nick Pagent LTI - FY19 13 Dec 2018 LTI - FY20 11 Dec 2019 LTI - FY21 9 Dec 2020 LTI - FY22 15 Dec 2021 STI - FY21 17 Dec 2021 Ian Pagent LTI - FY19 13 Dec 2018 LTI - FY20 1 11 Dec2019 LTI - FY21 9 Dec 2020 LTI - FY22 15 Dec 2021 STI - FY21 17 Dec 2021 Aaron Murray LTI - FY19 13 Dec 2018 LTI - FY20 11 Dec 2019 LTI - FY21 9 Dec 2020 LTI - FY22 15 Dec 2021 STI - FY21 17 Dec 2021 1 July 2018 - 30 June 2021 1 July 2019 - 30 June 2022 1 July 2020 - 30 June 2023 1 July 2021 - 30 June 2024 1 July 2021 - 30 June 2022 1 July 2018 - 30 June 2021 1 July 2019 - 30 June 2022 1 July 2020 - 30 June 2023 1 July 2021 - 30 June 2024 1 July 2021 - 30 June 2022 1 July 2018 - 30 June 2021 1 July 2019 - 30 June 2022 1 July 2020 - 30 June 2023 1 July 2021 - 30 June 2024 1 July 2021 - 30 June 2022 $1.20 283,554 $1.44 304,465 $1.40 350,467 - - - - 232,419 (283,554) - - - - - - - - 304,465 350,467 232,419 - 938,486 157,779 390,198 - (283,554) - - 157,779 1,045,130 $2.18 $2.18 $2.18 $2.18 $2.18 $2.18 $1.20 113,421 $1.44 202,977 $1.40 233,644 - - - - 79,686 (113,421) - - - - 550,042 68,619 148,305 - (113,421) $1.20 106,332 $1.44 114,175 $1.40 131,425 - - - - 84,662 (106,332) - - - - 351,932 59,661 144,323 - (106,332) - - - - - - - - - - - - - 202,977 233,644 79,686 68,619 584,926 - 114,175 131,425 84,662 59,661 389,923 1 Number of performance rights overstated due to administrative error corrected post balance date to 121,788. 22 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 33 Autosports Group Limited Directors' report 30 June 2022 KMP shareholdings The following table outlines the movements in KMP ordinary shareholdings in the Company (including their related parties) for the financial year. Shares held at the start of the financial year Received as part of remuneration Additions¹ Disposals/ others Shares held at the end of financial year - 166,667 40,833 62,499 - - - - - - - - - - - - - 166,667 40,833 62,499 39,332,149 65,466,803 1,697,763 283,554 113,421 106,332 - 64,000 - - - (57,000) 39,615,703 65,644,224 1,747,095 106,766,714 503,307 64,000 (57,000) 107,277,021 Independent Directors James Evans Thomas Pockett Marina Go Robert Quant Senior Executives Nick Pagent Ian Pagent Aaron Murray 1 On market purchase of shares. (5) Transactions with KMP Management fees The Group received administration service fees in relation to shared administration staff managing properties outside of the Group that are owned by Ian and Nick Pagent. Related party management fee Fee type GFB Properties Pty Ltd Autohaus Prestige Five Dock Pty Ltd Audi Parramatta Property Holdings Pty Ltd Audi Parramatta Properties 2 Pty Ltd Autosports Properties Leichhardt Pty Ltd New Centenary Properties Pty Ltd NDI Properties Pty Ltd Property management service Property management service Property management service Property management service Property management service Property management service Property management service The Group received management fees $ 12,600 25,200 12,600 12,600 25,200 12,600 12,600 113,400 34 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 23 DIRECTORS’_REPORT continued30 June 2022 Autosports Group Limited Directors' report 30 June 2022 Related party leases During the financial year, the Group had operating lease agreements on normal commercial terms with various entities owned by Ian and Nick Pagent. Related party operating leases Property location The Group paid rental fees $ GFB Properties Pty Ltd Autohaus Prestige Five Dock Pty Ltd Audi Parramatta Property Holdings Pty Ltd Audi Parramatta Properties 2 Pty Ltd Autosports Properties Leichhardt Pty Ltd New Centenary Properties Pty Ltd 3-7 Parramatta Rd, Five Dock NSW 34-36 Spencer St, Five Dock NSW, Unit C 2 Packard Ave, Castle Hill NSW, and 26-28 Chard Road, Brookvale NSW 49-51 Church St, Parramatta NSW 13 Church St, Parramatta NSW 531-571 Parramatta Rd, Leichhardt NSW 135 Moggill Rd, Toowong QLD and 45 Dickson Street, Artarmon NSW 957,275 828,714 750,398 560,724 1,341,919 3,008,359 7,447,389 This concludes the remuneration report, which has been audited. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ James Evans Chairman 24 August 2022 Sydney ___________________________ Nicholas Pagent Chief Executive Officer 24 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 35 36 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 AUDITOR’S_INDEPENDENCE_ DECLARATIONLiability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney NSW 2000 Australia Phone +61 2 9322 7000 www.deloitte.com.au The Board of Directors Autosports Group Limited 565 Parramatta Road Leichhardt NSW 2040 Australia 24 August 2022 Dear Directors AAuuttoossppoorrttss GGrroouupp LLiimmiitteedd In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Autosports Group Limited. As lead audit partner for the audit of the financial report of Autosports Group Limited for the year ended 30 June 2022, I declare that to the best of my knowledge and belief, there have been no contraventions of: (i)the auditor independence requirements of the Corporations Act 2001 in relation to theaudit; and(ii)any applicable code of professional conduct in relation to the audit .Yours sincerely DELOITTE TOUCHE TOHMATSU DDaavviidd HHaayynneess Partner Chartered Accountants Autosports Group Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2022 Revenue Interest revenue Expenses Changes in inventories Raw materials and consumables purchased Employee benefits expense Depreciation and amortisation expense Occupancy costs Acquisition and restructure expenses Other expenses Finance costs Profit before income tax expense Income tax expense Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Profit for the year is attributable to: Non-controlling interest Owners of Autosports Group Limited Total comprehensive income for the year is attributable to: Non-controlling interest Owners of Autosports Group Limited Basic earnings per share Diluted earnings per share Consolidated Note 30 June 2022 30 June 2021 $'000 $'000 5 1,875,954 1,978,406 8 9 (42,143) (1,460,060) (146,721) (52,339) (6,334) (2,417) (69,157) (16,431) (92,907) (1,547,181) (129,008) (49,582) (5,624) (2,971) (71,340) (18,149) 80,360 61,653 (25,780) (19,241) 54,580 42,412 - - 54,580 42,412 1,204 53,376 480 41,932 54,580 42,412 1,204 53,376 480 41,932 54,580 42,412 Cents Cents 26.56 26.29 20.86 20.67 6 6 6 7 20 20 31 31 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 26 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 37 CONSOLIDATED_STATEMENT_OF_ PROFIT_OR LOSS_AND_OTHER_COMPREHENSIVE_INCOMEFOR THE YEAR ENDED 30 JUNE 2022 Autosports Group Limited Consolidated statement of financial position As at 30 June 2022 Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Total current assets Non-current assets Property, plant and equipment Intangibles Right-of-use assets Deferred tax Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Employee benefits Borrowings Lease liabilities Income tax payable Total current liabilities Non-current liabilities Employee benefits Borrowings Lease liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Share-based payments reserve Accumulated losses Equity attributable to the owners of Autosports Group Limited Non-controlling interest Total equity Consolidated Note 30 June 2022 30 June 2021 $'000 $'000 8 9 10 11 12 13 7 14 15 16 17 7 15 16 17 18 19 20 90,817 58,731 217,454 14,617 381,619 172,298 445,784 203,147 21,721 842,950 96,844 72,919 250,799 9,612 430,174 115,482 427,448 215,784 18,948 777,662 1,224,569 1,207,836 152,762 1,610 20,887 249,826 36,653 17,331 479,069 3,339 93,936 198,732 296,007 140,313 827 16,748 290,461 29,745 14,116 492,210 3,684 75,620 214,217 293,521 775,076 785,731 449,493 422,105 475,637 4,506 (35,978) 444,165 5,328 475,637 3,306 (61,214) 417,729 4,376 449,493 422,105 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 27 38 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 CONSOLIDATED_STATEMENT_OF_ FINANCIAL_POSITIONAS AT 30 JUNE 2022 Autosports Group Limited Consolidated statement of changes in equity For the year ended 30 June 2022 Consolidated Balance at 1 July 2020 Issued capital $'000 Share-based payments reserve $'000 Accumulated losses $'000 Non- controlling interest $'000 Total equity $'000 475,637 874 (99,126) 3,896 381,281 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Share-based payments (note 33) Dividends paid (note 21) - - - - - - - - 41,932 - 41,932 480 - 480 42,412 - 42,412 2,432 - - (4,020) - - 2,432 (4,020) Balance at 30 June 2021 475,637 3,306 (61,214) 4,376 422,105 Consolidated Balance at 1 July 2021 Issued capital $'000 Share-based payments reserve $'000 Accumulated losses $'000 Non- controlling interest $'000 Total equity $'000 475,637 3,306 (61,214) 4,376 422,105 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Share-based payments (note 33) Dividends paid (note 21) - - - - - - - - 53,376 - 1,204 - 54,580 - 53,376 1,204 54,580 1,200 - - (28,140) - (252) 1,200 (28,392) Balance at 30 June 2022 475,637 4,506 (35,978) 5,328 449,493 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 28 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 39 CONSOLIDATED_STATEMENT_OF_ CHANGES_IN_EQUITY FOR THE YEAR ENDED 30 JUNE 2022 Autosports Group Limited Consolidated statement of cash flows For the year ended 30 June 2022 Cash flows from operating activities Profit before income tax expense for the year Adjustments for: Depreciation and amortisation Net loss on disposal of property, plant and equipment Share-based payments Interest received Interest and other finance costs Change in operating assets and liabilities: Decrease in trade and other receivables Decrease in inventories Increase in other operating assets Increase in trade and other payables Increase/(decrease) in contract liabilities Increase in employee benefits Decrease in bailment finance Interest received Interest and other finance costs paid Income taxes paid Net cash from operating activities Cash flows from investing activities Payment for purchase of business, net of cash acquired Payments for property, plant and equipment Proceeds from disposal of property, plant and equipment Proceeds from release of security deposits Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Repayment of related party payables Dividends paid Dividends paid to non-controlling interest On market share purchase to settle share-based payments Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial year Consolidated Note 30 June 2022 30 June 2021 $'000 $'000 6 6 6 28 11 32 32 32 32 21 20 33 80,360 61,653 52,339 1,555 2,811 (8) 16,431 49,582 2,610 2,432 (9) 18,149 153,488 134,417 16,718 42,143 (4,782) 8,541 783 1,680 (41,897) 176,674 8 (16,431) (25,217) 19,834 92,907 (1,352) 15,508 (720) 3,092 (107,677) 156,009 9 (18,149) (12,035) 135,034 125,834 (20,211) (69,127) 1,165 - (3,162) (33,634) 485 162 (88,173) (36,149) 40,709 (29,174) (34,420) - (28,140) (252) (1,611) 29,368 (22,725) (31,851) (2,430) (4,020) - - (52,888) (31,658) (6,027) 96,844 58,027 38,817 90,817 96,844 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 29 40 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 CONSOLIDATED_STATEMENT_OF_ CASH_FLOWS FOR THE YEAR ENDED 30 JUNE 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 1. General information The financial statements cover Autosports Group Limited as a consolidated entity consisting of Autosports Group Limited (the 'Company' or 'parent entity') and the entities it controlled at the end of, or during, the financial year (collectively referred to as the 'Group'). The financial statements are presented in Australian dollars, which is Autosports Group Limited's functional and presentation currency. Autosports Group Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: 565 Parramatta Road Leichhardt NSW 2040 A description of the nature of the Group's operations and its principal activities are included in the directors' report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 24 August 2022. The directors have the power to amend and reissue the financial statements. Note 2. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. New or amended Accounting Standards and Interpretations adopted The Group has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the Group during the financial year ended 30 June 2022. Net current asset deficiency The directors have prepared the financial statements on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. The statement of financial position reflects an excess of current liabilities over current assets of $97,450,000 as at 30 June 2022 (2021: $62,036,000). During the financial year ended 30 June 2022, the Group made a profit of $54,580,000 (2021: profit of $42,412,000). The directors have reviewed the cash flow forecast for the Group at least through to 30 August 2023. The forecast indicates that the Group will generate net positive operating cash inflows and operate within its overall finance facilities and that the Group will, therefore, be able to pay its debts as and when they fall due after considering the following factors: ● ● ● ● ● ● during the financial year the Group generated $135,034,000 (2021: $125,834,000) of cash flow from operating activities; during the financial year the Group used $20,211,000 of available cash to fund business acquisitions and $69,127,000 to fund additions to property, plant and equipment; as at 30 June 2022, the Group has undrawn capital finance facilities of $15,199,000 (2021: $15,201,000) out of which $11,200,000 is earmarked for specific purposes and undrawn bailment finance facilities of $281,715,000 (2021: $300,553,000); as at 30 June 2022, the Group has cash and cash equivalents amounting to $90,817,000 (2021: $96,844,000); as at 30 June 2022, the Group has deferred statutory tax obligations of $14,558,000 (2021: $34,099,000) out of which $14,558,000 is repayable within 12 months; the Group has the continuing support of its financiers. The directors have concluded that it is appropriate to prepare the financial statements on the going concern basis, as they believe that the Group will comply with its future financial covenants and be able to pay its debts as and when they become due and payable from cash flows from operations and available finance facilities for at least 12 months from the date of approval of these financial statements. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for- profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). Historical cost convention The financial statements have been prepared under the historical cost convention. 30 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 41 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 2. Significant accounting policies (continued) Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 34. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Autosports Group Limited as at 30 June 2022 and the results of all subsidiaries for the year then ended. Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de- consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the Group. Losses incurred by the Group are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Revenue recognition The Group recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, and any other contingent events. Such estimates are determined using either the 'expected value' or 'most likely amount' method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are initially recognised as deferred revenue in the form of a separate refund liability. New, demonstrator and used vehicles Revenue from the sale of vehicles is recognised at the point in time when the buyer obtains control of the goods, which is generally at the time of delivery of the vehicle. 42 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 31 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 2. Significant accounting policies (continued) Parts and service Revenue from the sale of parts is recognised at the point in time when the buyer obtains control of the goods, which is generally at the time of delivery of the goods. Service work on customers' vehicles is carried out under instructions from the customer. Service revenue is recognised over time based on either a fixed price or an hourly rate. Revenue arising from the sale of parts fitted to customers’ vehicles during service is recognised at the point in time upon delivery of the fitted parts to the customer upon completion of the service. Other revenue i) Aftermarket accessories and other revenue Aftermarket accessories and other revenue are recognised at the point in time when they are delivered to the customer. Aftermarket accessories relate to items fitted at the dealership and include products such as window tinting, mud flaps and paint protection. ii) Finance and insurance revenue Finance and insurance commissions are recognised at the point in time, usually in the period in which the related sale or rendering of service is provided. Finance and insurance commissions are received from finance companies and insurance companies as commission payments on products sold to customers. iii) Agency commission Agency commission represents fees from third parties where the Group acts as an agent by arranging a third party to provide goods and services to a customer. In such cases, the Group is not primarily responsible for providing the underlying good or service to the customer. Agency commission is recognised on an accrual basis on completion of the referral or when the commission is received. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Commercial income and rebates Volume related and vehicle specific bonuses and rebates are credited to the carrying value of inventory to which they relate. Once the inventory is sold, the amount is then recognised in cost of goods sold in profit or loss. Bonuses and rebates are recognised when the right to receive payment is established. Government grants Grants from the government are recognised at their fair value when there is reasonable assurance that the grant will be received and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in profit or loss over the periods necessary to match them with the costs that they are intended to compensate. Income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ● when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. ● Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. 32 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 43 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 2. Significant accounting policies (continued) Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Trade and other receivables Trade receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Inventories New and demonstrator vehicles New and demonstrator vehicles are stated at the lower of cost and net realisable value. Costs are assigned on the basis of specific identification. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Used vehicles Used vehicles are stated at the lower of cost and net realisable value on a unit-by-unit basis. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. The age of the car is considered in determining the selling price of used cars. Spare parts and accessories Spare parts and accessories are stated at the lower of cost and net realisable value. Costs are assigned to individual items on the basis of weighted average cost. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Other inventory Other inventory includes work in progress held at the lower of cost and net realisable value. Costs are assigned to individual customers on the basis of specific identification. Cost includes labour incurred to date and consumables utilised during the service. 44 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 33 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 2. Significant accounting policies (continued) Property, plant and equipment Property, plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment (excluding land) over their expected useful lives as follows: Buildings Leasehold improvements Plant and equipment Furniture, fixtures and fittings Motor vehicles 40 years over the estimated useful life 3 - 10 years 2 - 10 years 4 - 8 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Customer relationships Customer relationships acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite useful life of five years. Customer assets are made up of complementary customer relationships and databases in the servicing and parts business. Impairment of non-financial assets Goodwill is not subject to amortisation and is tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. 34 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 45 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 2. Significant accounting policies (continued) Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and other payables Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Contract liabilities Contract liabilities represent the Group's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or services to the customer. 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. Loans and borrowings are derecognised from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount and any consideration paid is recognised in profit or loss. Vehicles secured under bailment plans are provided to the Group under bailment agreements with floor plan loan providers. The Group obtains title to the vehicles immediately prior to sale. Vehicles financed under bailment plans are recognised as inventory with the corresponding floor plan liability owing to the finance providers. Floor plan finance facilities are available for drawdown by specified dealerships on a vehicle by vehicle basis, with repayment as it relates to an individual vehicle required immediately after the vehicle is sold. Finance costs are expensed in the period in which they are incurred. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. 46 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 35 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 2. Significant accounting policies (continued) Long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Share-based payments Equity-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using the Black- Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the Company. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The acquisition method of accounting is used to account for business combinations when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. To determine whether a set of activities and assets constitutes a business, the Group has the choice to apply a `concentration test', which is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. Alternatively, to determine if a business has been acquired, the Group assesses whether (as a minimum) an input and substantive process has been acquired and whether there is an ability to produce outputs from these. 36 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 47 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 2. Significant accounting policies (continued) The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Autosports Group Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming conversion of all dilutive potential ordinary shares. Goods and Services Tax ('GST') and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other 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 tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 30 June 2022. The adoption of these Accounting Standards and Interpretations is not expected to have any significant impact on the Group’s financial statements. 48 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 37 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 3. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, on the Group based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Group operates. Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience, historical collection rates, the impact of the Coronavirus (COVID-19) pandemic and forward-looking information that is available. The allowance for expected credit losses, as disclosed in note 8, is calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower. Goodwill The Group tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Refer to note 12 for further information. Recovery of deferred tax assets Deferred tax assets are recognised for deductible temporary differences and losses only if the Group considers it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the Group's operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The Group reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is a significant event or significant change in circumstances. Note 4. Operating segments The Group's operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. The directors have determined that there is only one operating segment identified and located in Australia, being motor vehicle retailing. The information reported to the CODM is the consolidated results of the Group. The segment results are therefore shown throughout these financial statements and not duplicated here. Refer to note 5 for information on revenue from the Group's products and services. Major customers There are no major customers for the Group representing more than 10% of the Group’s revenue. 38 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 49 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 5. Revenue Revenue for contracts with customers New and demonstrator vehicles Used vehicles Parts Service Other revenue Revenue Consolidated 30 June 2022 30 June 2021 $'000 $'000 1,139,845 444,082 126,300 120,866 44,861 1,273,285 432,936 116,382 110,675 45,128 1,875,954 1,978,406 Disaggregation of revenue All revenue is generated in Australia and revenue is recognised at a point in time, except for service revenue which is recognised over time. 50 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 39 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 6. Expenses Profit before income tax includes the following specific expenses: Depreciation Buildings Leasehold improvements Plant and equipment Furniture, fixtures and fittings Motor vehicles Right-of-use assets Total depreciation Amortisation Customer relationships Total depreciation and amortisation Share-based payments expense Share-based payment expenses in relation to directors, executives and employees Finance costs Floor plan interest Interest charges on lease liabilities Corporate interest Total finance costs expensed Leases Variable lease payments/(credits) Short-term lease payments Rental outgoings Superannuation expense Defined contribution superannuation expense Other provisions Inventory provision expenses/(credits) Consolidated 30 June 2022 30 June 2021 $'000 $'000 1,020 3,796 3,181 1,033 1,191 38,150 401 3,926 2,031 1,320 799 35,689 48,371 44,166 3,968 5,416 52,339 49,582 2,811 2,432 4,990 7,101 4,340 5,429 8,796 3,924 16,431 18,149 401 589 5,344 6,334 (408) 798 5,234 5,624 12,277 11,186 708 (4,677) The Group was eligible for JobKeeper support from the government on the condition that employee benefits continue to be paid. During the financial year, the Group received JobKeeper support payments amounting to $Nil (2021: $10,660,000) from the Australian Government. These have been recognised as government grants in the financial statements and recorded as a deduction in the employee benefits expenses. Included in 'raw materials and consumables' in profit or loss is $20,864,000 (2021: $20,106,000) of salaries and wages relating to direct service labour costs. 40 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 51 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 7. Income tax Income tax expense Current tax Deferred tax - origination and reversal of temporary differences Aggregate income tax expense Deferred tax included in income tax expense comprises: Increase in deferred tax assets Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Permanent tax differences Share-based payments Current year tax losses not recognised Prior year temporary differences now recognised Income tax expense Deferred tax asset Deferred tax asset comprises temporary differences attributable to: Amounts recognised other than in equity: Right-of-use assets Employee benefits Tax losses Property, plant and equipment Contract liabilities Provision for warranties Allowance for expected credit losses Accrued expenses Provision for inventories Customer relationships Work in progress Other items Deferred tax asset Movements: Opening balance Credited to profit or loss Additions through business combinations (note 28) Closing balance 52 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 41 Consolidated 30 June 2022 30 June 2021 $'000 $'000 27,828 (2,048) 20,846 (1,605) 25,780 19,241 (2,048) (1,605) 80,360 61,653 24,108 18,496 119 843 25,070 - 710 93 765 19,354 17 (130) 25,780 19,241 Consolidated 30 June 2022 30 June 2021 $'000 $'000 9,599 8,270 995 1,907 630 1,023 437 236 743 (2,049) (149) 79 8,390 6,682 2,084 1,572 856 640 388 201 148 (1,957) (122) 66 21,721 18,948 18,948 2,048 725 17,544 1,605 (201) 21,721 18,948 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 7. Income tax (continued) Provision for income tax Provision for income tax Note 8. Trade and other receivables Current assets Trade receivables Other receivables Less: Allowance for expected credit losses Consolidated 30 June 2022 30 June 2021 $'000 $'000 17,331 14,116 Consolidated 30 June 2022 30 June 2021 $'000 $'000 54,653 5,185 (1,107) 65,761 8,101 (943) 58,731 72,919 Allowance for expected credit losses The Group has recognised a loss of $248,000 in profit or loss in respect of the expected credit losses for the year ended 30 June 2022 (2021: gain/credit of $505,000). The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Expected credit loss rate Carrying amount 30 June 2022 30 June 2021 30 June 2022 30 June 2021 30 June 2022 30 June 2021 Allowance for expected credit losses Consolidated % % $'000 $'000 $'000 $'000 Not overdue 0 to 2 months overdue 2 to 3 months overdue 3 to 4 months overdue Over 4 months overdue 0.09% 13.50% 1.80% 8.60% 65.50% 0.10% 4.80% 5.70% 10.50% 26.60% 48,110 2,491 544 2,777 731 57,451 4,306 161 2,190 1,653 43 336 10 239 479 54,653 65,761 1,107 57 207 9 230 440 943 Movements in the allowance for expected credit losses are as follows: Opening balance Provisions recognised Receivables written off during the year as uncollectable Unused amounts reversed Closing balance Consolidated 30 June 2022 30 June 2021 $'000 $'000 943 543 (84) (295) 1,107 1,588 259 (140) (764) 943 42 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 53 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 9. Inventories Current assets New and demonstrator vehicles - at cost Less: Write-down to net realisable value Used vehicles - at cost Less: Write-down to net realisable value Spare parts and accessories - at cost Less: Write-down to net realisable value Other inventory - at cost Note 10. Other assets Current assets Prepayments Other cash deposits Consolidated 30 June 2022 30 June 2021 $'000 $'000 136,999 (4,442) 132,557 64,274 (1,629) 62,645 21,233 (1,270) 19,963 188,575 (4,466) 184,109 48,940 (421) 48,519 17,702 (1,746) 15,956 2,289 2,215 217,454 250,799 Consolidated 30 June 2022 30 June 2021 $'000 $'000 5,134 9,483 14,617 4,256 5,356 9,612 54 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 43 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 11. Property, plant and equipment Non-current assets Land and buildings - at cost* Less: Accumulated depreciation Leasehold improvements Less: Accumulated depreciation Plant and equipment Less: Accumulated depreciation Furniture, fixtures and fittings Less: Accumulated depreciation Motor vehicles Less: Accumulated depreciation Capital work in progress - at cost Consolidated 30 June 2022 30 June 2021 $'000 $'000 100,183 (1,421) 98,762 48,592 (14,539) 34,053 28,504 (14,757) 13,747 8,992 (4,321) 4,671 8,344 (2,178) 6,166 56,901 (401) 56,500 43,195 (13,016) 30,179 21,477 (7,711) 13,766 10,697 (4,939) 5,758 4,626 (1,903) 2,723 14,899 6,556 172,298 115,482 * Land and buildings represents owner-occupied premises at: ● 601 Mains Road, Macgregor, Queensland and the adjoining land 581, Mains Road, Macgregor, Queensland, from which Macgregor Mercedes-Benz trades; 120 - 124 Pacific Highway, Waitara, NSW, from which Mercedes-Benz Hornsby trades; 363 Nepean Highway, Brighton, Victoria, from which Brighton Jaguar Land Rover trades; 62 Enterprise Drive, Bundoora, Victoria 3083 from which Bundoora BMW dealership operates; and 98 O'Riordan Street, Alexandria from which Alexandria Mazda operates. ● ● ● ● Property acquisition: On 16 November 2021, the Group acquired the land and buildings from which its Bundoora BMW dealership operates. The total consideration transferred amounted to $19,523,000. On 7 April 2022, the Group acquired the land and buildings at 98 O’Riordan Street, Alexandria, from which the Suttons Subaru Rosebery and Suttons City Kia dealerships now trade. The total consideration transferred amounted to $23,617,000. 44 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 55 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 11. Property, plant and equipment (continued) Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2020 Additions Additions through business combinations (note 28) Disposals Transfers in/(out) Depreciation expense Balance at 30 June 2021 Additions Additions through business combinations (note 28) Disposals Transfers in/(out) Depreciation expense Land and buildings $'000 Leasehold improve- ments $'000 Plant and equipment $'000 Furniture, fixtures and fittings $'000 Motor vehicles $'000 Capital work in progress $'000 Total $'000 32,006 24,895 - - - (401) 56,500 43,282 - - - (1,020) 32,767 1,196 61 (644) 725 (3,926) 30,179 955 219 (1,093) 7,589 (3,796) 12,655 1,549 250 (310) 1,653 (2,031) 13,766 2,407 410 (163) 508 (3,181) 6,596 800 279 (751) 154 (1,320) 5,758 965 1 (44) (976) (1,033) 3,090 1,173 - (741) - (799) 2,723 6,179 - (1,282) (263) (1,191) 5,705 4,021 11 (649) (2,532) - 92,819 33,634 601 (3,095) - (8,477) 6,556 15,339 115,482 69,127 - (138) (6,858) - 630 (2,720) - (10,221) Balance at 30 June 2022 98,762 34,053 13,747 4,671 6,166 14,899 172,298 56 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 45 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 12. Intangibles Non-current assets Goodwill - at cost Less: Impairment Customer relationships - at cost Less: Accumulated amortisation Consolidated 30 June 2022 30 June 2021 $'000 $'000 548,126 (109,174) 438,952 32,157 (25,325) 6,832 530,100 (109,174) 420,926 27,879 (21,357) 6,522 445,784 427,448 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2020 Additions through business combinations (note 28) Amortisation expense Balance at 30 June 2021 Additions through business combinations (note 28) Amortisation expense Balance at 30 June 2022 Goodwill $'000 Customer relationships $'000 Total $'000 418,563 2,363 - 420,926 18,026 - 10,677 1,261 (5,416) 6,522 4,278 (3,968) 429,240 3,624 (5,416) 427,448 22,304 (3,968) 438,952 6,832 445,784 Goodwill acquired through business combinations is allocated to one group of cash-generating unit ('CGU') according to the business segment, being motor vehicle retailing which is the lowest level at which management monitors goodwill. The recoverable amount of the Group’s goodwill has been determined by value-in-use calculations ('VIU'). The calculations use cash flow projections based on the business plan, prior to any future restructuring to which the Group is not yet committed, approved by management covering a five year period and a terminal growth rate. Key assumptions Key assumptions are those to which the recoverable amount of an asset or cash-generating unit is most sensitive. The following key assumptions were used in the VIU model: (a) Earnings before interest, depreciation and amortisation ('EBITDA'); (b) Terminal growth rate of 2.0% beyond four year period (2021: 2.0%); and (c) (d) New vehicle motor growth (including rebates, aftermarket and finance and insurance) of 18.8% in FY23 (2021: 6.8%) due to full-year cycling of FY22 acquisition and organic growth and an average of 1.0% in FY24 to FY27 (30 June 2021: 4.0% in FY23 to FY25). New vehicle revenue is a key driver to the growth of other revenue streams. Pre-tax discount rate 15.61% (2021: 13.7%); As a result of the impairment testing, management has concluded that the recoverable amount of the CGU is higher than the carrying value of the assets, and therefore goodwill is not considered to be impaired. Sensitivity analysis The Group has conducted an analysis of the sensitivity of the impairment test to changes in key assumptions used to determine the recoverable amount of goodwill. The recoverable amount exceeds the carrying amount by $87,229,000. The directors believe that any reasonably possible change in any of the key assumptions below on which the recoverable amount is based will cause the carrying amount to equal the recoverable amount of the CGU. 46 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 57 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 12. Intangibles (continued) Sensitivity VIU assumptions VIU model equals carrying amount EBITDA % Post tax discount rate Pre-tax discount rate Terminal growth rate New vehicle motor growth (including rebates, aftermarket and finance and insurance) between FY2023 to FY2027 4.9% - 5.3%% 11.10% 15.61% 2% (0.7%) - 18.8% 4.4.% - 4.8% 12.45% 17.54% (0.15%) (4.8%) - 14.8% Change 0.50% 1.35% 1.93% 2.15% 4.00% Notwithstanding the above, should market conditions deteriorate further than forecast, it may cause the carrying amount of the CGU to be lower than recoverable amount at a future date, which may result in an impairment. Remaining amortisation period The remaining amortisation period for customer relationships is 1-4 years (2021: 1-5 years). Note 13. Right-of-use assets Non-current assets Right-of-use asset Less: Accumulated depreciation Consolidated 30 June 2022 30 June 2021 $'000 $'000 371,781 (168,634) 346,267 (130,483) 203,147 215,784 The Group leases dealership operating premises under agreements of between 1 to 15 years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Property lease $'000 165,731 85,742 (35,689) 215,784 14,060 11,453 (38,150) 203,147 Consolidated Balance at 1 July 2020 Additions Depreciation expense Balance at 30 June 2021 Additions* Additions through business combinations (note 28) Depreciation expense Balance at 30 June 2022 * Additions represents lease renewals, exercise of option and rent reviews. For other AASB 16 lease-related disclosures refer to the following: ● ● ● ● note 6 for details of interest on lease liabilities and other lease expenses; note 17 and note 32 for details of lease liabilities at the beginning and end of the reporting period; note 22 for the maturity analysis of lease liabilities; and consolidated statement of cash flows for repayment of lease liabilities. 58 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 47 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 14. Trade and other payables Current liabilities Trade and other payables GST payable Accrued expenses Refer to note 22 for further information on financial instruments. Note 15. Employee benefits Current liabilities Employee benefits Non-current liabilities Employee benefits Note 16. Borrowings Current liabilities Bailment finance Capital loans Non-current liabilities Capital loans Refer to note 22 for further information on financial instruments. Consolidated 30 June 2022 30 June 2021 $'000 $'000 92,304 29,108 31,350 68,301 42,308 29,704 152,762 140,313 Consolidated 30 June 2022 30 June 2021 $'000 $'000 20,887 16,748 3,339 3,684 24,226 20,432 Consolidated 30 June 2022 30 June 2021 $'000 $'000 231,460 18,366 271,247 19,214 249,826 290,461 93,936 75,620 343,762 366,081 48 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 59 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 16. Borrowings (continued) Total secured liabilities The total secured liabilities are as follows: Bailment finance Capital loans Consolidated 30 June 2022 30 June 2021 $'000 $'000 231,460 112,302 271,247 94,834 343,762 366,081 Bailment finance Bailment is provided largely by the Original Equipment Manufacturer finance companies on a vehicle by vehicle basis and secured over the underlying vehicle. The current weighted average interest rate is 3.07% (2021: 2.50%). Capital loans Capital loans are secured by a fixed and floating charge over the assets of the Group, except for certain entities within the Group whereby security interest is held by a charge over the inventory and the proceeds from the sale of that inventory. The current weighted average interest rate is 3.40% (2021: 2.90%). Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit: Total facilities Bailment finance Capital loans Used at the reporting date Bailment finance Capital loans Unused at the reporting date Bailment finance Capital loans Note 17. Lease liabilities Current liabilities Lease liability Non-current liabilities Lease liability Refer to note 22 for information on the maturity analysis of lease liabilities. 60 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 49 Consolidated 30 June 2022 30 June 2021 $'000 $'000 513,175 127,501 640,676 231,460 112,302 343,762 281,715 15,199 296,914 571,800 110,035 681,835 271,247 94,834 366,081 300,553 15,201 315,754 Consolidated 30 June 2022 30 June 2021 $'000 $'000 36,653 29,745 198,732 214,217 235,385 243,962 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 18. Issued capital Consolidated 30 June 2022 30 June 2021 30 June 2022 30 June 2021 Shares Shares $'000 $'000 Ordinary shares - fully paid 201,000,000 201,000,000 475,637 475,637 Ordinary shares Ordinary shares entitle the holder to participate in any dividends declared and any proceeds attributable to shareholders should the Company be wound up, in proportions that consider both the number of shares held and the extent to which those shares are paid up. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. Capital risk management The Group's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current Company's share price at the time of the investment. The Group is pursuing additional investments in the short term and continues to integrate and grow its existing businesses in order to maximise synergies. The Group is subject to certain covenants on its financing arrangements and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 30 June 2021 Annual Report. Note 19. Share-based payments reserve Share-based payments reserve Consolidated 30 June 2022 30 June 2021 $'000 $'000 4,506 3,306 Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services. 50 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 61 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 19. Share-based payments reserve (continued) Movements in reserves Movements in the reserve during the current and previous financial year are set out below: Consolidated Balance at 1 July 2020 Share-based payments Balance at 30 June 2021 Share-based payments On market purchase shares in the company to settle vested long term incentives Balance at 30 June 2022 Note 20. Non-controlling interest Share-based payments $'000 874 2,432 3,306 2,811 (1,611) 4,506 The non-controlling interest represents the 20% non-controlling interest in New Centenary Mazda Pty Ltd held by the dealer principal and 20% non-controlling interest in John Newell Holdings Pty Ltd held by the dealer principal. Movements in the non-controlling interest are as follows: Opening balance Profit after income tax expense for the year Dividend declared to non-controlling interest Closing balance Note 21. Dividends Dividends Consolidated 30 June 2022 30 June 2021 $'000 $'000 4,376 1,204 (252) 5,328 3,896 480 - 4,376 Consolidated 30 June 2022 30 June 2021 $'000 $'000 Final dividend for the year ended 30 June 2021 of 7.0 cents (2020: Nil cents) per ordinary share 14,070 - Interim dividend for the year ended 30 June 2022 of 7.0 cents (2021: 2.0 cents) per ordinary share 14,070 4,020 28,140 4,020 On 24 August 2022, the directors declared a fully franked final dividend for the year ended 30 June 2022 of 9.0 cents per ordinary share, to be paid on 15 November 2022 to eligible shareholders on the register as at 1 November 2022. This equates to a total estimated distribution of $18,090,000, based on the number of ordinary shares on issue as at 30 June 2022. The financial effect of the dividends declared after the reporting date are not reflected in the 30 June 2022 financial statements and will be recognised in the subsequent financial period. 62 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 51 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 21. Dividends (continued) Franking credits Consolidated 30 June 2022 30 June 2021 $'000 $'000 Franking credits available for subsequent financial years based on a tax rate of 30% 67,121 50,601 The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: ● ● ● franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date franking debits that will arise from the payment of dividends recognised as a liability at the reporting date franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date Note 22. Financial instruments Financial risk management objectives The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate risk and ageing analysis for credit risk. Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of Directors ('the Board'). These policies include identification and analysis of the risk exposure of the Group and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within the Group's operating units. Finance reports to the Board on a regular basis. Market risk Foreign currency risk The Group is not exposed to any significant foreign currency risk. Vehicles are purchased in Australian Dollars. Price risk The Group is not exposed to any significant price risk. Interest rate risk The Group's main interest rate risk arises from its borrowings and cash at bank. Borrowings obtained at variable rates expose the Group to interest rate risk. Borrowings obtained at fixed rates expose the Group to fair value risk. As at the reporting date, the Group had the following variable rate borrowings: Consolidated Bailment finance Capital loans Cash at bank Net exposure to cash flow interest rate risk 30 June 2022 30 June 2021 Balance $'000 Balance $'000 231,460 112,302 (90,817) 271,247 94,834 (96,844) 252,945 269,237 An official increase/decrease in interest rates of 50 (2021: 50) basis points per annum applied to borrowing at the reporting date would have an adverse/favourable effect on the profit before tax of $1,265,000 (2021: $1,346,000) and equity of $885,000 (2021: $942,000) (assuming 30% tax). The percentage change is based on the expected volatility of interest rates using market data and analyst's forecasts. 52 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 63 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 22. Financial instruments (continued) Credit risk 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 a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The Group obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The Group does not hold any collateral. The Group has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the Group based on recent sales experience, historical collection rates and forward-looking information that is available. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. Liquidity risk Vigilant liquidity risk management requires the Group to maintain sufficient liquid assets (mainly cash and cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and payable. The Group manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Financing arrangements Unused borrowing facilities at the reporting date: Bailment finance Capital loans Consolidated 30 June 2022 30 June 2021 $'000 $'000 281,715 15,199 296,914 300,553 15,201 315,754 Remaining contractual maturities The following tables detail the Group's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated - 30 June 2022 Non-derivatives Non-interest bearing Trade payables Interest-bearing - variable Bailment finance Capital loans Interest-bearing - fixed rate Lease liability Total non-derivatives 1 year or less $'000 Between 1 and 2 years $'000 Between 2 and 5 years $'000 Over 5 years $'000 Remaining contractual maturities $'000 92,304 - - - 92,304 231,460 22,141 - 51,653 - 28,772 - 20,372 231,460 122,938 42,878 388,783 40,240 91,893 98,630 127,402 82,610 102,982 264,358 711,060 64 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 53 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 22. Financial instruments (continued) Consolidated - 30 June 2021 Non-derivatives Non-interest bearing Trade payables Interest-bearing - variable Bailment finance Capital loans Interest-bearing - fixed rate Lease liability Total non-derivatives 1 year or less $'000 Between 1 and 2 years $'000 Between 2 and 5 years $'000 Over 5 years $'000 Remaining contractual maturities $'000 68,301 - - - 68,301 271,247 21,775 - 16,235 - 44,026 - 22,391 271,247 104,427 38,127 399,450 39,787 56,022 109,885 153,911 98,826 121,217 286,625 730,600 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Note 23. Fair value measurement The carrying amounts of trade and other receivables and trade and other payables approximate their fair values due to their short-term nature. 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. Note 24. Key management personnel disclosures Compensation The aggregate compensation made to directors and other members of key management personnel of the Group is set out below: Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments Consolidated 30 June 2022 30 June 2021 $ $ 1,923,311 105,807 39,911 1,701,050 1,798,253 89,548 19,109 1,444,914 3,770,079 3,351,824 54 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 65 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 25. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Deloitte Touche Tohmatsu, the auditor of the Company, and its network firms: Audit services - Deloitte Touche Tohmatsu Audit or review of the financial statements Other services - Deloitte Touche Tohmatsu Tax review and compliance Training - leadership development program Other services - network firms Deloitte New Zealand - due diligence Note 26. Contingent liabilities Consolidated 30 June 2022 30 June 2021 $ $ 546,500 472,000 254,908 120,000 99,462 - 374,908 99,462 921,408 571,462 110,000 - All bank guarantees are provided to cover landlord deposits on leased property. Liabilities relating to landlord deposits are included in the total lease liabilities as disclosed in note 17. 66 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 55 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 27. Related party transactions Parent entity Autosports Group Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 29. Key management personnel Disclosures relating to key management personnel are set out in note 24 and the remuneration report included in the directors' report. Transactions with related parties The following transactions occurred with related parties: Consolidated 30 June 2022 30 June 2021 $ $ Other income: Management fees received from entities owned by the directors Ian Pagent and Nicholas Pagent 113,400 113,400 Payment for other expenses: Lease payments on properties to entities owned by the directors Ian Pagent and Nicholas Pagent 7,447,389 7,184,323 Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Loans from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. 56 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 67 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 28. Business combinations 2022 acquisitions John Newell Holdings Pty Ltd ('John Newell') On 1 July 2021, the Group acquired 80% of the shares in John Newell Holdings Pty Ltd. The total consideration transferred amounted to $12,050,000. The goodwill of $8,763,000 represents the future potential profits of the acquired business and the synergistic opportunities it offers and cross-selling opportunities that will arise from the acquisition. From the date of acquisition, John Newell contributed revenues of $63,582,000 and profit after tax of $3,060,000. Suttons Subaru Rosebery and Suttons City Kia ('Suttons') On 1 June 2022, the Group acquired certain assets and liabilities of Subaru Sydney City and Sydney City Kia from Suttons Motors Group. The total consideration transferred amounted to $9,403,000. The goodwill of $9,263,000 represents the future potential profits of the acquired business and the synergistic opportunities it offers and cross-selling opportunities that will arise from the acquisition. Due to timing of the acquisition, the results of the business did not materially impact the Group's 30 June 2022 financial year results. Details of the acquisitions are as follows: Cash and cash equivalents Trade receivables Inventories Prepayments Property, plant and equipment Right-of-use assets Customer relationships Deferred tax asset Trade payables Provision for income tax Employee benefits Bailment finance Lease liability Net assets acquired Goodwill John Newell Fair value $'000 Suttons Fair value $'000 Total $'000 1,242 2,530 6,587 223 617 11,453 3,225 884 (3,482) (604) (1,590) (6,015) (11,783) 3,287 8,763 - - 2,211 - 13 - 1,053 (159) (426) - (524) (2,028) - 140 9,263 1,242 2,530 8,798 223 630 11,453 4,278 725 (3,908) (604) (2,114) (8,043) (11,783) 3,427 18,026 Acquisition-date fair value of the total consideration transferred 12,050 9,403 21,453 Representing: Cash paid or payable to vendor Less: cash and cash equivalents acquired Net cash used 12,050 (1,242) 9,403 - 21,453 (1,242) 10,808 9,403 20,211 Acquisition costs expensed to profit or loss 22 - 22 The purchase price allocation of the 2022 acquisitions are final as at 30 June 2022. 2021 acquisitions Brighton Jaguar Land Rover On 15 February 2021, the Group acquired certain assets and liabilities of Brighton Jaguar Land Rover from SMG Prestige Cars Pty Ltd. The total consideration transferred amounted to $3,162,000. The goodwill of $2,363,000 represents the future potential profits of the acquired business and the synergistic opportunities it offers and cross selling opportunities that will arise from the acquisition. 68 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 57 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 28. Business combinations (continued) From the date of acquisition, Brighton Jaguar Land Rover contributed revenues of $17,966,000 and profit after tax of $425,000. If the acquisition had occurred at the start of the reporting period, management estimates that consolidated revenue and consolidated earnings before interest and tax would not have been materially different to what has been reported. In addition to the business acquisition, the Group acquired the underlying property at 363 Nepean Highway, Brighton, Victoria for $24,727,000. Details of the acquisition are as follows: Inventories Prepayments Property, plant and equipment Customer relationships Trade payables Deferred tax liability Employee benefits Other provisions Bailment finance Net assets acquired Goodwill Acquisition-date fair value of the total consideration transferred Representing: Cash paid or payable to vendor The purchase price allocation of the 2021 acquisition is final as at 30 June 2021. Note 29. Interests in subsidiaries Fair value $'000 4,074 17 601 1,261 (964) (201) (448) (5) (3,536) 799 2,363 3,162 3,162 The consolidated financial statements incorporate the assets, liabilities and results of the following wholly-owned subsidiaries: Name Autosports Brisbane Pty Ltd Autosports Castle Hill Pty Ltd Autosports Five Dock Pty Ltd Autosports Leichhardt Pty Ltd Autosports Prestige Pty Ltd Autosports Sutherland Pty Ltd Betar Prestige Cars Pty Ltd Birchgrove Finance Pty Ltd Modena Trading Pty Ltd Mosman Prestige Cars Pty Ltd New Centenary Mercedes-Benz Pty Ltd Prestige Auto Traders Australia Pty Ltd Prestige Group Holdings Pty Ltd Prestige Repair Works Pty Ltd ASG Brisbane Pty Ltd ASG Melbourne Pty Ltd Principal place of business / Country of incorporation Ownership interest 30 June 2022 30 June 2021 % % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 58 100% 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% AUTOS PORT S GROU P_A NNUAL R EPORT 2022 69 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 29. Interests in subsidiaries (continued) The consolidated financial statements also incorporates the assets, liabilities and results of the following subsidiaries with non-controlling interests: Principal place of business / Country of incorporation Name Parent Non-controlling interest Ownership Ownership Ownership Ownership interest interest interest interest 30 June 2022 30 June 2021 30 June 2022 30 June 2021 Principal activities % % % % New Centenary Mazda Pty Ltd Australia Motor vehicle dealership 80% 80% 20% 20% A.C.N 633 925 050 Pty Ltd * Australia Finance broker 100% 76% - 24% John Newell Holdings Pty Ltd ** Australia Motor vehicle dealership 80% - 20% - * ** The Group acquired the remaining 24% interest in A.C.N 633 925 050 Pty Ltd during the current financial year. On 1 July 2021, the Group acquired 80% of the shares in John Newell Holdings Pty Ltd. Summarised financial information of the subsidiary with non-controlling interests has not been included as it is not material to the Group. Note 30. Deed of cross guarantee The following entities are party to a deed of cross guarantee under which each company guarantees the debts of the others: Autosports Group Limited Autosports Brisbane Pty Ltd Autosports Castle Hill Pty Ltd Autosports Five Dock Pty Ltd Autosports Leichhardt Pty Ltd Autosports Prestige Pty Ltd Autosports Sutherland Pty Ltd Betar Prestige Cars Pty Ltd Modena Trading Pty Ltd Mosman Prestige Cars Pty Ltd New Centenary Mercedes-Benz Pty Ltd Prestige Auto Traders Australia Pty Ltd Prestige Group Holdings Pty Ltd Prestige Repair Works Pty Ltd ASG Brisbane Pty Ltd ASG Melbourne Pty Ltd By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements and directors' report under Corporations Instrument 2016/785 issued by the Australian Securities and Investments Commission. The above companies represent a 'Closed Group' for the purposes of the Corporations Instrument, and as there are no other parties to the deed of cross guarantee that are controlled by Autosports Group Limited, they also represent the 'Extended Closed Group'. Entities controlled by the Group not party to the deed of cross guarantee are New Centenary Mazda Pty Ltd, Birchgrove Pty Ltd, A.C.N 633 925 050 Pty Ltd and John Newell Holdings Pty Ltd. 70 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 59 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 30. Deed of cross guarantee (continued) Set out below is a consolidated statement of profit or loss and other comprehensive income and statement of financial position of the 'Closed Group'. Statement of profit or loss and other comprehensive income Revenue Changes in inventories Raw materials and consumables purchased Employee benefits expense Depreciation and amortisation expense Occupancy costs Acquisition and restructure expenses Other expenses Finance costs Profit before income tax expense Income tax expense Profit after income tax expense Other comprehensive income for the year, net of tax Total comprehensive income for the year Equity - accumulated losses Accumulated losses at the beginning of the financial year Profit after income tax expense Dividends paid Accumulated losses at the end of the financial year 30 June 2022 30 June 2021 $'000 $'000 1,750,308 (36,180) (1,367,547) (135,741) (48,776) (5,920) (2,417) (64,283) (15,411) 1,910,331 (93,355) (1,490,878) (124,873) (48,345) (5,619) (2,971) (68,183) (17,632) 74,033 (22,937) 58,475 (18,285) 51,096 40,190 - - 51,096 40,190 30 June 2022 30 June 2021 $'000 $'000 (66,243) 51,096 (28,140) (102,413) 40,190 (4,020) (43,287) (66,243) 60 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 71 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 30. Deed of cross guarantee (continued) Statement of financial position Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Non-current assets Other financial assets Property, plant and equipment Intangibles Right-of-use assets Deferred tax Total assets Current liabilities Trade and other payables Contract liabilities Employee benefits Borrowings Lease liabilities Income tax payable Non-current liabilities Employee benefits Borrowings Lease liabilities Total liabilities Net assets Equity Issued capital Share-based payments reserve Accumulated losses Total equity 72 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 61 30 June 2022 30 June 2021 $'000 $'000 84,684 56,668 209,862 13,892 365,106 30,392 170,441 406,514 184,694 20,359 812,400 93,086 71,631 246,042 9,569 420,328 18,342 114,103 399,521 206,589 18,660 757,215 1,177,506 1,177,543 151,864 486 18,998 240,483 34,336 16,274 462,441 3,012 93,936 181,261 278,209 137,950 676 16,393 282,942 28,754 13,552 480,267 3,553 75,620 205,403 284,576 740,650 764,843 436,856 412,700 475,637 4,506 (43,287) 475,637 3,306 (66,243) 436,856 412,700 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 31. Earnings per share Profit after income tax Non-controlling interest Profit after income tax attributable to the owners of Autosports Group Limited Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Performance rights over ordinary shares Consolidated 30 June 2022 30 June 2021 $'000 $'000 54,580 (1,204) 42,412 (480) 53,376 41,932 Number Number 201,000,000 201,000,000 2,019,979 1,840,460 Weighted average number of ordinary shares used in calculating diluted earnings per share 203,019,979 202,840,460 Basic earnings per share Diluted earnings per share Note 32. Cash flow information Changes in liabilities arising from financing activities Consolidated Balance at 1 July 2020 Net cash from/(used in) financing activities Acquisition of leases Balance at 30 June 2021 Net cash from/(used in) financing activities Acquisition of leases Changes through business combinations (note 28) Cents Cents 26.56 26.29 20.86 20.67 Capital loans $'000 Lease liabilities $'000 Related party payables $'000 Total $'000 88,191 6,643 - 94,834 17,468 - - 190,071 (31,851) 85,742 243,962 (34,420) 14,060 11,783 2,430 (2,430) - - - - - - 280,692 (27,638) 85,742 338,796 (16,952) 14,060 11,783 347,687 Balance at 30 June 2022 112,302 235,385 Note 33. Share-based payments The Group has established an Equity Incentive Plan ('EIP') to assist in the motivation, reward and retention of senior management and other employees. The share-based payment expense for the year was $2,811,000 (2021: $2,432,000). The number of performance rights to be granted is determined by dividing any STI or LTI award that they become entitled to receive by the volume-weighted average price ('VWAP') of shares traded on the ASX during the 10 trading days following the release of the Group’s 30 June 2022 audited full-year results. EIP is delivered in the form of performance rights which will vest after a further deferral of one year subject to the executive’s continued service. The rights are measured over a 12 month period. 62 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 73 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 33. Share-based payments (continued) Performance conditions for the initial grant include: ● ● a 'gateway hurdle' of upholding the Group’s culture and values of individualised attention. Operating with honesty, integrity and accountability at all times and in accordance with the Group’s Code of Conduct. If the gateway hurdle is not met, no STI or LTI is awarded. in addition, each senior executive has an individualised balanced scorecard that determines their awards. These scorecards primarily focus on the financial objectives of the Group and include targets measured against total revenue, earnings before interest and taxation, EBITDA, net profit before taxation and net profit after taxation. The scorecards also include operational key performance indicators ('KPIs') such as sales and margin related matrices, as well as non-financial KPIs predominantly in the areas of risk and corporate governance to ensure the business continues to be well managed. The Board has determined that the combination of financial and non-financial conditions provides the appropriate balance between short-term financial measures and the more strategic non-financial measures which in the medium to long-term will ultimately drive further growth and returns for shareholders. LTI performance is measured against the compound annual growth rate ('CAGR') of the Group's underlying EPS. Upon vesting, each performance right entitles the senior executive to one ordinary share in the Company. The Board has the discretion to settle performance rights with a cash equivalent payment. Performance rights are granted for nil consideration and no amount is payable on vesting. If a senior executive ceases to be employed during the 12 month deferral period, the following treatment will apply, unless the Board determines otherwise: ● ● if they resign or are summarily terminated, all of their rights will lapse; or if they cease employment in any other circumstances, a pro rata portion (for the portion of the performance period elapsed) of unvested rights will remain on foot and will vest in the ordinary course. Movements in performance rights during the year Balance at the beginning of the year Granted during the year Exercised during the year Balance at the end of the year Performance rights vested and exercisable as at 30 June 2022 was nil (2021: nil). Note 34. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Profit after income tax Total comprehensive income 2022 Number 2021 Number 1,840,460 701,641 (522,122) 1,039,440 820,760 (19,740) 2,019,979 1,840,460 Parent 30 June 2022 30 June 2021 $'000 $'000 16,413 16,413 8,579 8,579 74 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 63 NOTES_TO_THE_CONSOLIDATED_ FINANCIAL_STATEMENTS continued30 June 2022 Autosports Group Limited Notes to the consolidated financial statements 30 June 2022 Note 34. Parent entity information (continued) Statement of financial position Total current assets Total assets Total current liabilities Total liabilities Equity Issued capital Share-based payments reserve Accumulated losses Total equity Parent 30 June 2022 30 June 2021 $'000 $'000 118,055 141,099 371,495 382,226 - - 204 204 477,495 4,506 (110,506) 477,495 3,306 (98,779) 371,495 382,022 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2022 and 30 June 2021. 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. Refer to note 30 for further details. Contingent liabilities The parent entity had no material contingent liabilities as at 30 June 2022 and 30 June 2021. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021. Significant accounting policies The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 2, except for the following: ● ● Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. Note 35. Events after the reporting period On 1 August 2022, the Group completed the acquisition of a 100% interest in Auckland City BMW Limited through its wholly-owned New Zealand-based subsidiary. The acquisition is subject to final completion adjustments. The final consideration is estimated at $63.2 million (NZ$70 million), funded by existing cash reserves and $12.2 million (NZ$13.5 million) debt facility. Apart from the dividend declared as disclosed in note 21 and the matters mentioned above, no other matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the Group's operations, the results of those operations, or the Group's state of affairs in future financial years. 64 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 75 Autosports Group Limited Directors' declaration 30 June 2022 In the directors' opinion: ● ● ● ● ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 2 to the financial statements; the attached financial statements and notes give a true and fair view of the Group's financial position as at 30 June 2022 and of its performance for the financial year ended on that date; there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and 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 30 to the financial statements. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ James Evans Chairman 24 August 2022 Sydney ___________________________ Nicholas Pagent Chief Executive Officer 76 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 65 DIRECTORS’_DECLARATION30 June 2022 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 77 INDEPENDENT_AUDITOR’S_REPORT_TO_THE MEMBERS_OF_AUTOSPORTS_GROUP_LIMITED Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Asia Pacific Limited and the Deloitte organisation. Deloitte Touche Tohmatsu ABN 74 490 121 060 Grosvenor Place 225 George Street Sydney, NSW, 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au Independent Auditor’s Report to the members of Autosports Group Limited RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee FFiinnaanncciiaall RReeppoorrtt Opinion We have audited the financial report of Autosports Group Limited (the “Company”) and its subsidiaries (the “Group”) which comprises the consolidated statement of financial position as at 30 June 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: • Giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its financial performance for the year then ended; and • 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 & Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. 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 for 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. KKeeyy AAuuddiitt MMaatttteerr RReeccoovveerraabbiilliittyy ooff GGooooddwwiillll As disclosed in Notes 2,3 and 12, the Group has recognised Goodwill with a carrying value of $439.0 million as at 30 June 2022. The assessment of the recoverable amount of goodwill and other intangible assets allocated to the group of CGUs requires management to exercise significant judgement, including: • • identification of and allocation of the goodwill to the group of CGUs; and the determination of the following key assumptions used in the calculation of the recoverable amount of the group of CGUs: the cash flow forecasts future growth rates terminal growth factors; and o o o o discount rates. HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt MMaatttteerr In conjunction with our valuation specialists, our procedures included, but were not limited to: • Obtained an understanding of management’s process of evaluating the recoverable amount of goodwill and other intangible assets and approval by the board of directors; • • • • • • Evaluated the Group’s identification of CGUs and the allocation of goodwill to the carrying value of the group of CGUs based on our understanding of the Group’s business and the requirements of the relevant accounting standard. This evaluation includes an analysis of the Group’s internal reporting process; approved Compared the Group’s forecast cash flows to the board the consideration of relevant factors such as the impact of supply chain constraints on current and future vehicle availability; including budget, Evaluated management’s historical forecasting accuracy by comparing actual results to budget; Compared growth rates with 3rd party independent data for the Australian motor industry; Challenged key inputs to the discount rate utilised by management to external data sources; Performed sensitivity analysis on the growth and discount rates; and • Assessed the appropriateness of the disclosures in Note 12 to the financial statements. Other Information The directors are responsible for the other information. The other information comprises the Directors’ Report , Corporate Directory and Shareholder Information, which we obtained prior to the date of this auditor’s report, and also includes the following information which will be included in the Group’s annual report (but does not include the financial report and our auditor’s report thereon): the FY22 Year in Review, Financial Highlights and the Letter from the Chairman and CEO, which is expected to be made available to us after that date. Our opinion on the financial report does not cover the other information and we do not and will 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 identified above 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 78 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 INDEPENDENT_AUDITOR’S_REPORT_TO_THE MEMBERS_OF_AUTOSPORTS_GROUP_LIMITED continued have performed on the other information that we obtained prior to the date of this auditor’s report, 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. When we read the FY22 Year in Review, Financial Highlights and the Letter from the Chairman and CEO ,if we conclude that there is a material misstatement therein, we are required to communicate the matter to the directors and use our professional judgement to determine the appropriate action. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. 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’s audit. We remain solely responsible for our audit opinion. AUTOS PORT S GROU P_A NNUAL R EPORT 2022 79 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, actions taken to eliminate threats or safeguards applied. 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. RReeppoorrtt oonn tthhee RReemmuunneerraattiioonn RReeppoorrtt Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 23 to 35 of the Directors’ Report for the year ended 30 June 2022.. In our opinion, the Remuneration Report of Autosports Group Limited, for the year ended 30 June 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. DELOITTE TOUCHE TOHMATSU David Haynes Partner Chartered Accountants Sydney, 24 August 2022 80 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 INDEPENDENT_AUDITOR’S_REPORT_TO_THE MEMBERS_OF_AUTOSPORTS_GROUP_LIMITED continuedAutosports Group Limited Shareholder information 30 June 2022 The shareholder information set out below was applicable as at 2 August 2022. Distribution of equity securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: JIP Parramatta Pty Ltd Sastempo Pty Ltd Livist Pty Ltd National Nominees Limited Citicorp Nominees Pty Limited Audi Parramatta Holdings Pty Ltd J P Morgan Nominees Australia Pty Limited NIP Parramatta Pty Ltd Lambhill Pty Ltd Pagent Family Investments Pty Ltd Five Dock DJC Pty Ltd HSBC Custody Nominees (Australia) Limited Ogle Investments Pty Ltd Aalhuizen Nominees Pty Ltd Ricgaz Pty Ltd Lambhill Pty Ltd Citicorp Nominees Pty Limited BNP Paribas Nominees Pty Ltd Liverpool Street Investments Daniaron Pty Ltd Ordinary shares % of total Number of holders shares issued 337 311 133 189 59 0.08 0.45 0.51 2.41 96.55 1,029 100.00 111 - Ordinary shares % of total Number held shares issued 23,657,626 21,994,131 15,455,897 15,449,484 15,351,085 15,310,969 11,525,924 10,401,678 7,548,311 7,193,635 6,436,189 6,076,278 5,147,053 4,722,374 2,866,808 2,792,647 2,446,766 2,124,304 2,078,757 1,674,863 180,254,779 11.77 10.94 7.69 7.69 7.64 7.62 5.73 5.17 3.76 3.58 3.20 3.02 2.56 2.35 1.43 1.39 1.22 1.06 1.03 0.83 89.68 70 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 81 SHAREHOLDER_INFORMATION30 June 2022 Autosports Group Limited Shareholder information 30 June 2022 Substantial holders Substantial holders in the Company are set out below: Ian and Nicholas Pagent - Ian Pagent - Nick Pagent Mr Gregory I Willims Celeste Funds Management Limited * OC Funds Mgt Ordinary shares % of total Number held shares issued 105,486,325 65,712,843 39,773,482 11,728,095 14,362,714 11,136,760 52.48 32.69 19.79 5.83 7.15 5.54 * Based on substantial holder notice lodged on 22 June 2022. Voting rights On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Performance rights The number of performance rights on issue as at the reporting date are: Name Nick Pagent Ian Pagent Aaron Murray There are no other unquoted equity securities on issue. Buy-back There is no current on-market buy-back. Number held 887,351 516,307 330,262 1,733,920 82 AUTOSPORTS GROUP_ AN NUAL RE P O RT 2 0 22 71 SHAREHOLDER_INFORMATION continued30 June 2022 Autosports Group Limited Corporate directory 30 June 2022 Directors James Evans Nicholas ('Nick') Pagent James ('Ian') Pagent Robert Quant Marina Go Company secretary Caroline Raw Registered office Share register Auditor 565 Parramatta Road Leichhardt NSW 2040 Tel: +61 2 8753 2873 Link Market Services Limited Level 12, 680 George Street Sydney NSW 2000 Tel: 1300 554 474 Deloitte Touche Tohmatsu Grosvenor Place, 225 George Street Sydney NSW 2000 Stock exchange listing Autosports Group Limited shares are listed on the Australian Securities Exchange (ASX code: ASG) Website http://autosportsgroup.com.au/ Corporate Governance Statement The directors and management are committed to conducting the business of Autosports Group Limited in an ethical manner and in accordance with the highest standards of corporate governance. Autosports Group Limited has adopted and has complied with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) ('Recommendations') to the extent appropriate to the size and nature of its operations. The Group’s Corporate Governance Statement, which sets out the corporate governance practices that were in operation during the financial year and ASX Appendix 4G are released to the ASX on the same day the Annual Report is released. The Corporate Governance Statement can be found on the company’s website at https://investors.autosportsgroup.com.au/investors/?page=corporate-governance. Annual General Meeting ('AGM') The Company’s 2022 AGM is scheduled for Friday, 25 November 2022. For the purposes of ASX Listing Rule 3.13.1 the Company gives notice that the last day to receive director nominations is 6 October 2022. ideate Co. 72 AUTOS PORT S GROU P_A NNUAL R EPORT 2022 83 CORPORATE_DIRECTORY 

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