Aurora Spine
Annual Report 2023

Plain-text annual report

ANNUAL REPORT 2023 Drive Endless Possibilities table of contents 02 Highlights: FY23 03 Highlights: Financial 04 Chairman’s Letter 06 CEO’s Letter 09 Our Purpose & Values 10 Group Portfolio and Dealerships 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 ANNUAL REPORT 2023 1 A YEAR OF HiGHLiGHTS August 2022 October 2022 February 2023 March 2023 June 2023 Entered New Zealand market with Auckland City BMW Limited acquisition. Launched Australia’s first Retail Next showroom at Melbourne BMW & MINI. BMW & MINI are now represented in VIC, NSW, NZ and QLD with Motorline & Gold Coast BMW/ MINI acquisition. Settled strategic acquisition of property underlying the Group’s Audi Centre Brisbane and other dealerships in Fortitude Valley. Ringwood BMW greenfield opens. Audi Sutherland 2022 Metropolitan Dealer of the Year. Mercedes- Benz Toowong & Macgregor awarded as 2022 Transformational Champions. Auckland City BMW awarded 2022 BMW Dealer of the Year. 2 AUTOSPORTS GROUP Revenue $2,371 million Normalised1 NPBT1 $115.7 million Statutory NPAT $66.6 million Gross Profit $475.6 million EBITDA $198.0 million 26% up on PCP 33% up on PCP 22% up on PCP 27% up on PCP 30.7% up on PCP FY dividend 19 cents (fully franked) (10 cents H2 2022FY fully franked) 19% up on PCP 1. Normalised NPBT excludes property impairment, acquisition and restructure costs and acquisition amortisation. ANNUAL REPORT 2023 3 CHAIRMAN’S LETTER Dear Shareholders, I am pleased to present my letter as Chairman for the 2023 financial year. In last year’s letter, I commented on the way in which our business handled change diligently within a complex external environment and remained disciplined in executing its growth strategy. This year was no different. I am pleased to report that Autosports Group delivered an excellent financial result in FY2023 including a 26.4% increase in revenue whilst accomplishing several strategic acquisitions. Change is constant, and our ability to stay ahead of the curve and adapt to the evolving economic, social, technological and regulatory landscape is vital. Ongoing geopolitical tensions impacted global economies with inflationary pressures and rising interest rates. We saw this in Australia as the Reserve Bank implemented interest rate rises in an effort to curb inflation. Nevertheless, for Autosports Group, consumer demand remained stable despite these economic headwinds as customer orders for new vehicles increased against the previous year. The automotive industry in general experienced supply chain challenges last year, however, we are pleased to report that these challenges have started to ease. As a result, many customer orders for new vehicles were delivered contributing to this year’s 33.4% growth in underlying normalised1 Net Profit Before Tax. The parts and services divisions of our business have also fully recovered from the impact of the pandemic-related lockdowns. In recent years, the automotive retailing landscape has continued to evolve with a marked shift towards the availability of, and demand for, electric vehicles and digital platforms. Social change and the trend towards consumers opting for electric vehicles have become part of the automotive industry’s transformation. This social change is supported by more brands offering a wider range of electric vehicles and has contributed to a notable increase in EV sales compared to prior years. Our longstanding relationships with leading luxury and prestige brands allow us to support the delivery of an expanding range of high-end hybrid and electric vehicles to market. Digital transformation has emerged as a driver of growth and innovation for many businesses. This is not merely about adopting new technologies but also about reimagining customer experiences. Our customer-centric approach to digital transformation centres around creating seamless and personalised experiences for our customers. We have invested in digital platforms and user-friendly interfaces to deliver a smooth and engaging customer experience whilst improving operational efficiency. The regulatory environment in FY2023 has undergone considerable changes, particularly in the domains of privacy, consumer protection and ESG. This changing landscape highlights the need for a sound corporate governance framework that is both adaptable and scalable. We acknowledge that there is always more work to be done and, by embracing a culture of continuous improvement, we can progressively mature our existing processes and procedures to respond to changing regulatory requirements. Our directors’ report includes more detail on the progress we have made in the area of ESG. Corporate Governance The Board of Directors, supported by our committees and management team, played an important role in enhancing our governance practices during the reporting period as we reviewed existing programs, updated our policies and continued with our internal audit program which is aligned with our risk management framework. We commissioned an independent review of our executive remuneration structure as part of our approach to continuous improvement and to compare with industry benchmarks. Our 2023 Corporate Governance Statement sets out our approach to corporate governance by reference to the ASX Corporate Governance Council’s recommendations in more detail. 1. Normalised NPBT excludes property impairment, acquisition and restructure costs and acquisition amortisation 4 AUTOSPORTS GROUP “ Our consistent approach to growing the business through a combination of acquisitive and organic growth has contributed to this year’s financial results.” Our executive director and co-founder of Autosports Group, Mr Ian Pagent retired from his executive position. Ian continues his important role with the company as a non-executive director and remains our major shareholder. We continue to benefit from Ian’s unparalleled industry knowledge and entrepreneurial spirit along with his continued active involvement with the business. We also welcome Brent Polites in his new role of Head of Franchised Automotive overseeing the retail operations across the group. Brent joined Autosports Group in 2014. During his tenure, Brent gained valuable experience as a Dealer Principal in various dealerships and brands within our group including Audi and BMW, which will undoubtedly be an asset in his new position. Growth Acquisitions have been a key component of our growth, allowing us to broaden our portfolio and expand our geographic presence. Our long-standing relationships with our Original Equipment Manufacturers (OEMs) have also supported our growth. This year we rapidly grew our representation of BMW Group brands including BMW, MINI and Rolls- Royce. A particular highlight during the year was our expansion into the New Zealand market when we acquired Auckland City BMW Limited comprising five dealerships covering two BMW, two MINI and a Rolls-Royce dealership. This acquisition delivers both scale and geographical diversity. In February 2023, the Group acquired the Motorline and Gold Cost BMW and MINI businesses extending the Group’s BMW and MINI offering to Queensland for the first time. Our latest greenfield site, Ringwood BMW in Victoria also opened in early 2023. Securing tenure over strategically important retail sites where our dealerships operate is a key tenet of our property strategy. In June 2023, the business finalised the purchase of a key retail site in Fortitude Valley where the Group’s Audi Centre Brisbane dealership is located. Our consistent approach to growing the business through a combination of acquisitive and organic growth has contributed to this year’s financial results. Financial Result Statutory net profit after tax grew 22.1% to $66.6 million (2022: $54.6 million). The Board declared a final dividend of 10 cents per share which brings the total dividend for FY2023 to 19 cents per share, up 18.8% compared to FY2022. Our company’s solid financial performance and prudent management have enabled us to share these rewards and deliver value to our shareholders. Our CEO, Nick Pagent, will discuss the financial result for FY2023 in more detail in his CEO Letter. The future We can be proud of what Autosports Group has accomplished in the last financial year. The collective effort of our Board, management and people supported the execution of the Group’s growth strategy and delivered a solid financial result for FY2023. A special thanks to our CEO, Nick Pagent, and his management team for their determination and effort in delivering this year’s achievements. In the year ahead we aim to build upon these achievements and position the business for continued growth. I would like to thank our employees for their dedication and invaluable contributions during the year. Finally, I would like to extend my appreciation to our management team, my fellow board members, valued shareholders and business partners for your continued support. Yours faithfully James Evans Chairman ANNUAL REPORT 2023 5 CEO’S LETTER Dear Shareholders, I am pleased to share with you an outstanding result for the year. I am pleased to share with you another outstanding result for the year; a record profit, continued progress on the execution of our strategic plan and strengthening of our relationships with key OEM partners. Our corporate strategy can be simply expressed as excelling in representing the world’s great automotive luxury and prestige brands, from prime locations across Australia and now New Zealand. We see this as the most resilient consumer segment in retail automotive which offers the best margin potential. It has allowed us to build a corporate skill set and market position that gives us a competitive advantage in Australia and New Zealand. It also means we have declined acquisition opportunities for brands that do not align with our luxury-based strategy and skill set. As the future for the industry and economy looks more challenging in the year ahead, I am confident our decision to concentrate on the luxury end of the market will be rewarded. The new vehicle market remained strong, with registrations up 8.2% in the six months to June 2023 per Vfacts however the luxury and prestige markets were stronger outperforming the broader market with 27.3% growth in the same period. Throughout this period, we saw normalising of supply and demand in global supply chains which allowed us to grow our new vehicle revenue by 25.9% in FY2023. Pleasingly, we were able to achieve this growth whilst increasing our forward customer orderbank volumes, revenue and gross profits compared to last year. Furthermore, luxury demand remained resilient with like-for-like growth in new customer orders in FY2023. Electric vehicles gathered momentum in the market. In the month of June 2023, we saw a new high with alternate powertrains (Plug-in Hybrid, Hybrid and full Electric) representing 23.2% of the passenger and SUV market. Luxury manufacturers remain positioned to thrive in this environment with an array of new models due to launch in this and coming years. While the EV space has been the most dynamic part of the industry including several new players, barriers to entry to the luxury space remain high. This is further evidence that our luxury- focused corporate strategy is right for Autosports Group. The used vehicle market continued to be a dynamic arena with prices more reflective of their pre-Covid valuations; as a result, margins stabilised and our strategy of focusing on the lowest cost of acquisition and most efficient sales channel improved used car revenue by 22.4%. Our strong back-end (service and parts) growth was driven by two key factors. Firstly, the increased volume of new cars delivered in the post- Covid era support trailing income streams in service, parts and panel. Secondly, the growing penetration of service plan contracts support customer retention rates and provide more predictable revenue streams from our aftersales division. These factors allow for growth opportunities in the highest margin elements of our business and provide a foundation to weather turbulence caused by macroeconomic factors that affect front-end sales. Of course, this opportunity needs capacity. In FY2023 we were pleased to open the greenfield site at Ringwood BMW and launch our state-of-the-art facility at Melbourne BMW with increased service capacity. We also invested at Brighton Jaguar Land Rover, Ducati Sydney, our Bespoke by Autosports business and Volvo sites in Sydney to help meet the growing needs of our existing customer base. Delivering this growth from our existing aftersales resources will be one of the key priorities for the coming year. This growth in aftersales, our new business acquisitions and the thawing of the global supply constraints have contributed to record turnover of $2.371m and an overall improvement in gross margin to 20.1%; while improvements in efficiency through scale and diligent cost control afforded a reduction in operational expenditure to 11.7% resulting in a record EBITDA margin of 8.4% and a NPBT ratio of 4.9%, up 0.3% on last year. Given the broad- based inflation and rising interest 6 AUTOSPORTS GROUP “ Our corporate strategy remains luxury-focused.” rate conditions we have faced this year, the result is testament to our experienced team and strength of our core business. We leave the year with a 30 June 2023 cash balance of $42m and net debt of $181m, backed by property assets with a carrying value of $194m. Strategic Focus Our corporate strategy remains luxury-focused. Acquisitive growth supports this strategy through the addition of sensibly priced assets with brands and locations where we can unlock margin improvements through our scale and experience. The robust cashflows of the business allowed us to expand into the New Zealand market this year by acquiring two BMW and two MINI dealerships in Auckland, and the only Rolls-Royce dealership in New Zealand. These businesses gave us immediate scale in the marketplace and are operating in line with our expectations. We were also pleased to add the Motorline and Gold Coast BMW and MINI dealerships to our portfolio in February, deepening our relationship with BMW Group and increasing our scale and geographic coverage through aligned strategic growth. As this acquisition settled mid-year in FY2023, we will see a full year of turnover and profit in this next period. We have also strengthened the balance sheet by purchasing our existing retail location in Fortitude Valley. This brings the carrying value of our real estate portfolio to beyond $194m and we remain on track with our strategy of making sensible investments in strategically important retail locations. Importantly our strong cashflows, balance sheet strength and supportive OEM finance partners leave the business well-placed to continue our growth strategy. Outlook We expect FY2024 will present more challenges than the past year, however, the structural undersupply in new vehicles we have endured over the past two years has left us well-positioned to leverage our order banks which are at near record levels. The luxury consumer remains resilient with enquiry and order rates remaining stable even as the broader economy slows. Combined with a full-year cycling of acquisitions made in the prior year, Autosports is positioned to deliver continued revenue growth through FY2024. Our mature back-end operations, untapped capacity and high service plan contract penetrations mean that we are poised for continued aftersales growth in FY2024. Demand for used cars remains strong and our streamlined strategy built around our existing Prestige Auto Traders infrastructure will allow us to service this demand in a cost- efficient manner. The prevailing macroeconomic environment creates opportunity for on-strategy, accretive, acquisition-led growth. The outlook for acquisition- led growth is positive. Autosports Group’s scale, operating cash flows and luxury acquisition runway leave us well-positioned to progress our growth strategy in FY24. In closing, I would like to thank the Board, management and the entire team across Autosports Group for their collective efforts in delivering a record result in FY2023. Finally, a special thank you to our shareholders; there is so much to look forward to in this next year as we deliver on our strategy and continue our purpose to Drive Endless Possibilities. Nick Pagent Chief Executive Officer ANNUAL REPORT 2023 7 8 AUTOSPORTS GROUP OUR PURPOSE & VALUES Drive Endless Possibilities Strive for excellence Village Care Leading change We set goals with clear direction and defined outcomes – We hold ourselves to account – We are proactive in our approach – We exceed expectations in everything we do – We make decisions with consideration of our key stakeholders – employees, customers, shareholders, community and manufacturers We are united in purpose through people – We coach and mentor our people to be their best – We are visible, approachable and connected across the Group – We embrace diversity and inclusion – We are part of a large Group retaining a family feel We demonstrate care towards our customers and their experience We leverage our scale and collective intelligence to drive change – – We invest in our people for training and development – We recognise the role you play – everyone is important to our success – We do what is right by our people, customers and communities – We are eager to help each other and create a safe environment for our people We deliver the changes required for growth – We embrace the use of technology to deliver the optimum experience for our customers and stakeholders – We move with the times – taking into account tomorrow, today – We are resilient and embrace change ANNUAL REPORT 2023 9 GROUP PORTFOLiO 10 AUTOSPORTS GROUP 8AUTOSPORTS GROUP | ANNUAL REPORT 2021THE GROUP’S PORTFOLIO OF DEALERSHIPS INCLUDE:GROUP DEALERSHiPS A L P I N A3 ASTO N M A RT I N1 AU D I6 B E NT L EY3 B M W9 3 B M W M OTO R R A D D U C AT I1 JAG U A R2 K I A1 L A N D R OV E R2 2 L A M B O R G H I N I M AS E R AT I2 M A Z DA2 M C L A R E N1 3 M E R C E D E S - B E N Z M I N I7 R O L L S - R OYC E2 S U B A R U1 VO LVO3 VO L K S WAG E N4 This reflects our dealerships as at the date of this report and includes dealerships acquired after 30 June 2022. ANNUAL REPORT 2023 11 Autosports Group Limited Directors' report 30 June 2023 The directors present their report, together with the financial statements, on the consolidated entity ('Autosports Group' or 'Group') consisting of Autosports Group Limited ('Company') and the entities it controlled at the end of, or during, the year ended 30 June 2023. 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 Marina Go Ian Pagent Robert Quant Chairman Executive Director and Chief Executive Officer Independent Director Non-Executive Director (effective 1 February 2023); Executive Director (until 31 January 2023) Independent Director 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: ● ● ● ● 54 dealerships selling new and used prestige and luxury motor vehicles; 3 used motor vehicle outlets, primarily on the sale of used prestige and luxury motor vehicles; 4 motorcycle dealerships selling new and used motorcycles; and 8 specialist prestige motor vehicle collision repair facilities. Dividends Dividends paid during the financial year were as follows: Consolidated 30 June 2023 30 June 2022 $'000 $'000 Final dividend for the year ended 30 June 2022 of 9.0 cents (2021: 7.0 cents) per ordinary share 18,090 14,070 Interim dividend for the year ended 30 June 2023 of 9.0 cents (2022: 7.0 cents) per ordinary share 18,090 14,070 36,180 28,140 On 23 August 2023, the directors declared a fully franked final dividend for the year ended 30 June 2023 of 10.0 cents per ordinary share, to be paid on 15 November 2023 to eligible shareholders on the register as at 1 November 2023. This equates to a total estimated distribution of $20,100,000, based on the number of ordinary shares on issue as at 30 June 2023. The financial effect of the dividends declared after the reporting date are not reflected in the 30 June 2023 financial statements and will be recognised in the subsequent financial period. Operating and financial review The 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 2 DIRECTORS’ REPORT30 June 2023 Autosports Group Limited Directors' report 30 June 2023 The profit for the Group after providing for income tax and non-controlling interest amounted to $65,426,000 (2022: $53,376,000). The following tables demonstrate the Group’s financial performance normalised to exclude the impact of acquisition, impairment and restructure expenses ('other items'). The profit for the financial year was impacted by other items as follows: 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 expenses³ Add: Restructure and relocation expenses⁴ Add: Property impairment ⁵ Profit before tax excluding other items Consolidated 30 June 2023 30 June 2022 $'000 $'000 65,426 1,223 33,652 100,301 3,367 4,871 1,156 6,004 53,376 1,204 25,780 80,360 3,968 463 1,954 - 115,699 86,745 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. Relates to non-cash amortisation of customer contracts arising on acquisitions made by the Group. Relates to expenses and purchase taxes incurred on the acquisition of Auckland City BMW Ltd and Motorline BMW, Motorline MINI, Motorline Bodyshop, Gold Coast BMW and Gold Coast MINI. Restructure and relocation expenses relate to costs associated with relocation to the new Kings Way BMW dealership. Previous year expenses relate to the relocation of Lamborghini Brisbane and Audi Indooroopilly dealerships along with redundancies and other non-trading expenses. Property impairment arose as a result of the acquisition of 586 Wickham Street, Fortitude Valley on 15 June 2023. Due to the proximity of the acquisition to year end there has been no opportunity for appreciation in value of the property and as such capitalised acquisition costs including stamp duty resulted in the carrying value of the property exceeding its valuation. 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 items adjusted above) to reflect the core earnings of the Group. Operational overview Market conditions The Australian automotive retailing sector operated in a relatively stable economic environment during the 2023 financial year, closing the first six months of calendar year 2023 year with new vehicle registrations up 8.2% according to vFacts, as global supply chain pressures started to ease. The national economy experienced modest GDP growth and relatively low unemployment rates. Despite the Reserve Bank of Australia implementing a series of interest rate rises in response to inflationary pressures, business conditions remained positive for Autosports Group. Consumer confidence in the luxury segment remained high; reflected in increased volumes of new vehicle orders for the Group and the Prestige and Luxury segments of the market outperforming the mainstream volume segment. Coming out of a period where local travel was restricted due to Covid related restrictions, we have seen consumers revert to more normal vehicle usage patterns. As a result, our Service, Parts and Collision Repair operations have reverted to a more normal operating environment leading to growth in aftersales revenues. Strategic acquisitions In FY2023 the Group actively pursued its growth strategy expanding into new geographic markets, strengthening its representation of the BMW Group brands and adding a core retail property to its portfolio. Autosports Group entered the New Zealand market in August 2022 when it purchased 100% of the shares in Auckland City BMW Limited through its wholly-owned New Zealand subsidiary, Autosports NZ Limited. Auckland City BMW Limited operates two BMW dealerships and two MINI dealerships in Auckland, and the only Rolls-Royce dealership in New Zealand. The shares were purchased for $61,807,000 (NZ$ 68,873,000) of which $12,115,000 (NZ$13.5 million) was debt-funded and the balance with cash reserves. 3 ANNUAL REPORT 2023 13 Autosports Group Limited Directors' report 30 June 2023 In February 2023, Autosports Group expanded its BMW and MINI operations to Queensland for the first time after acquiring the business and assets of Motorline BMW, Motorline MINI, Motorline Bodyshop, Gold Coast BMW and Gold Coast MINI. The purchase consideration at settlement was approximately $66 million funded by cash reserves and a $30 million debt facility. Our acquisitive growth was also complemented by organic growth. In early 2023, the Group opened Ringwood BMW in the Eastern Suburbs of Melbourne. Victoria is where Autosports Group acquired its first BMW dealerships at Doncaster and Bundoora in 2017. This was followed by Melbourne BMW in November 2017 which was recently upgraded to a state-of-the-art facility, the first of its kind in Australia representing BMW’s latest Retail Next corporate identity. Now, approximately six years after acquiring its first BMW dealership, the Group has grown to represent 9 BMW dealerships and 7 MINI dealerships across Victoria, New South Wales, Queensland and Auckland, New Zealand. Another element of Autosports Group’s growth strategy is to control strategically important retail sites. Supported by OEM financiers, over time the business is expected to benefit from capital accretion and gradually reduce occupancy costs. During the year, the Group purchased the land and buildings at 586 Wickham Street and 10 Light Street, Fortitude Valley, Queensland where our Audi Centre Brisbane dealership is located. The purchase price for the property was $98 million, of which approximately 76% was funded through new debt facilities. The property is a purpose-built automotive dealership comprising showroom, service and parts facilities and provides operational synergies with several brands represented at this central Brisbane location. Environment, social and governance Environment This section of our report sets out our progress in the areas of environment, social responsibility and governance. Through our relationships with well-established vehicle manufacturers, Autosports Group has expanded the range of vehicles, catering to the growing demand for alternatives to traditional internal combustion engines. In 2023 calendar YTD, sales of electric and hybrid vehicles increased by 58% per Vfacts, representing 19.9% of the total passenger and SUV segment registrations. Beyond our vehicle offering, incorporating more environmentally conscious options in our retail facility developments is an area of opportunity. One example is the re-development of our Audi Indooroopilly retail site which incorporated several initiatives to help reduce environmental impact. These initiatives included low energy wattage LED lighting, dual flush, low water usage toilet cisterns, low water usage tapware, rainwater harvesting, solar energy harvesting through photovoltaic cell, energy efficient windows, low VOC paint finishes and insulated roofing. This year, we progressed the installation of solar panels on the roof of five dealerships. We are regularly reviewing our internal governance structures. This includes investing in an integrated management system to consolidate quality, environmental, health and safety management into a single cohesive framework. The aim of an integrated system is to engage our workforce through a simplified single framework to better manage safety and environmental risks. Social Health and well-being During FY2023, the safety focus continued by further developing a safety culture across the Group. Our safety program is supported by four state-based safety committees, regular reporting on safety hazards and communicating incidents and near misses across the Group as a means of shared learning. We conducted a safety internal audit during the year to independently measure the Group’s performance against safety benchmarks with demonstrated improvement in safety practices. We have continued to embed our Safe Work Procedures through training to demonstrate how work and hazardous tasks are to be carried out safely. Mental health and well-being remained a priority on the safety agenda during the year. We introduced a Wellbeing newsletter as an education piece with activities available for our employees to utilise. Our employees and immediate family members have access to our Employee Assistance Program (EAP) which is an independent, free, and confidential counselling and support program. This program offers support on a range of topics including counselling, mental health, relationships, exercise, and financial counselling. Through this platform, we have also offered health and well-being webinars and discounted health insurance. People and Diversity Career Development, Talent and Training With a focus on developing our talent internally, as well as bringing in new talent to Drive Endless Possibilities for our employees we are committed to finding opportunities to develop our people. During the year, the senior leadership team invested time in reviewing our talent and succession plans. This process helped identify our emerging talent and, through a consultative process engaging different parts of the business, we were able to make better decisions in selecting participants for our development programs. We operate two programs for our emerging leaders and future managers, both of which have been a success. Our Emerging Leaders Development Program (ELDP) is in its second year of operation, and as a result, we have seen approximately 30% of participants progress into more senior roles. Our Performance Excellence Program was introduced this year and aims to develop our younger team members aspiring to grow their careers. Through this program, we have approximately 45 employees who are ready to progress to a leadership role upon successfully completing this program. 14 AUTOSPORTS GROUP 4 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 From June 2021, we have committed to offering up-skilling of selected 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 various apprenticeship and traineeship opportunities available in Automotive Trades and Services. We employ many apprentices across the Group and see this as an important part of our people strategy to develop new talent and increase diversity across our Technicians, Parts team, Spray Painters and Panel Beaters. Diversity and Inclusion We have prioritised Diversity and Inclusion (D&I) through our D&I Council which has developed a strategy with measurable outcomes. Our D&I Council is in its second year of operation and meets monthly to discuss, plan and execute grassroots activities to foster diversity and inclusion. The Council is accountable for delivering its strategy and the Council’s progress is reported through various channels including to the Board. Our Diversity and Inclusion Strategy has five key areas including: (1) senior leaders proactively foster D&I; (2) our people understand the importance of diversity and practise inclusive behaviour; (3) workforce diversity increases at all levels; (4) attract, develop and retain diverse individuals to maximise performance and adapt to market changes; and (5) educate our business with learning initiatives around D&I. Community and Values Our purpose statement of ‘Drive Endless Possibilities’ links to our growth path and was developed to provide meaning to our employees, customers, business partners and shareholders. Our purpose statement sits alongside our values of Village, Care, Leading Change and Strive for Excellence which are embedded in our communications, performance discussions and is model for the way we strive to operate our business, including within the community. Our values are embodied in the accomplishments we achieved during the year. Strive for Excellence The outstanding performance of our people was recognised through the many personal awards achieved during the year including MINI Marketing Manager Best Practice Winner, Maserati Sales Milestone Executive Member Club, Maserati Marketing Manager of the Year, Audi Metro Financial Controller of the Year, Audi Major Metro Sales Manager of the Year, Audi Finance Dealer of the year, BMW Recognition of Service for 20 and 30 years, Mercedes-Benz Sales Guild Award – New Vehicle Sales Consultant of the Year winner, Mazda Guild Awards for Master Sales, Sales Consultants, Service and Parts. Village Our village is our collective spirit. We celebrated various causes and events including International Women’s Day, Ramadan, NAIDOC Week, Harmony Week, Lunar New Year and LGBTIQ celebrations. We took a snapshot of cultural demographics and representation at Autosports Group through a survey to gain better insights and drive the diversity program. Our village also includes our community. This year we participated in community events such as Sutherland2Surf, Ferragosto, MINI World Pride Concord Carnival-EV Sustainability Sydney German AutoFest Mini-Mos Fun Run 2023 Rugby Long Lunch, 2022 & 2023 Mosman Youth Art Prize, Aqua Rugby Sponsor, Manningham EV Day, International Women’s Day breakfast, Sorrento Couta Boat Sailing Club partnership (2023), Maroubra Surf Club, St Joesph’s Gregory Terrace Tattersall’s Club Black Tie Boxing and the Tattersall’s Club Business Series Lunch. Leading Change We introduced 12 weeks paid parental leave for primary carers and one week for secondary carers. We surveyed our female employees to help understand what they enjoyed about working at Autosports Group and importantly, what they perceived to be the barriers to females progressing in the automotive industry and what we could do to break them down. Our Diversity and Inclusion Council led and implemented several projects during the year to challenge stereotypes and lead change through acceptance including support for International Women’s Day, International Day Against Homophobia, Biphobia and Transphobia, Pride Month and NAIDIOC week. Care Over 200 Autosports Group employees took part in STEPtember stepping their way to over $20,000 for the Cerebral Palsy Alliance. Our value of care extends to our community as we supported the following charities and events during the year - Audi Foundation, RU OK? Day, CEO Dare to Cure, Ronald McDonald House Charities, Mercy Hospice Auckland, Pink Ribbon Morning Tea Breast Cancer NZ, Lifetime Dream Days NZ, Dine for a Cure NZ (Breast Cancer Research), Cyclone Relief Fund – Hawke’s Bay Annual Gold Coast Charity Event Sydney Breast Cancer Foundation Tour De Cure. Modern slavery On an annual basis, Autosports Group adopts a modern slavery plan to investigate a supplier category according to risk and value. In FY2023, we conducted due diligence enquiries on our waste management suppliers. This area is prone to exploitation by organised crime groups seeking to profit from modern slavery and forced labour practices. 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 is embedded into our procurement process where new suppliers are vetted and asked to adhere to our Supplier Code of Conduct. During the year, Autosports Group entered into an exclusive engagement with a migration agent that prioritises ethical recruitment practices to minimise the risk of exploitative practices affecting foreign workers seeking employment in Australia. Our FY2023 Modern Slavery Statement is published on our company website. 5 ANNUAL REPORT 2023 15 Autosports Group Limited Directors' report 30 June 2023 Whistle-blower program Our whistle-blower program supports employees, suppliers and their families to come forward with their concerns anonymously and confidentially. We utilise an external whistle-blowing service to provide a safe platform for eligible whistle-blowers to raise concerns whilst maintaining a whistle-blowing policy in accordance with statutory requirements. During the year we conducted a review of our whistle- blower program to benchmark it against the regulatory guidance released by ASIC to measure our performance against industry standards. Governance We believe in improving our governance framework, with regular reviews increasing the maturity of these programs over time. The foundation of our governance structure comprises the People & Remuneration Committee, the Audit & Risk Committee, and our Board. These committees play a crucial role in overseeing our Compliance and Risk Management Framework, whistle-blower framework, modern slavery plan, privacy, and cybersecurity framework. Each year, we review our Board and Committee Charters and report on our progress in addressing the matters allocated to the Board and delegated to the committees. We regularly review our governance policies and report regulatory changes through these channels. Our internal audit program is closely linked to our risk profile and designed to review and test the effectiveness of our Group's internal controls in identified risk areas. Like most businesses across the globe, we are alive to the increasing threat of privacy and cyber incidents. During the reporting period, we have made progress in developing our privacy governance framework and continued to invest in cyber security and infrastructure systems. Marketing and technology In the past 12 months we have reviewed and made improvements to our marketing technology stack and data processes within the context of ever-present cyber risks and a changing data landscape. Throughout the year we have invested in enhanced security products to support our Salesforce CRM and have partnered with digital marketing experts to ready ourselves for expected changes to third party data usage. These investments aim to deliver increased marketing performance and cost efficiencies. During the period the marketing team was restructured to ensure that it can support the changing needs of the business. Key to this restructure was the appointment of a Head of Transformation and a Head of Retail. One of the key projects delivered in the transformation space last year was a service kiosk pilot. This change to the service experience is delivering both customer and business benefits and is planned to be rolled out across the Group in FY2024. The retail team has continued to deliver steady quality customer enquiry at better than benchmark cost per lead and cost per sale. Likely developments in operations in future years The Group’s diverse revenue model supports both resilience and growth through the Financial Year 2024 ('FY24') as: ● ● ● ● ● Revenue growth will come from the full year cycling of FY2023 acquisitions in Auckland and South Queensland; Improved new vehicle supply combined with strong order banks support organic growth; Service and Parts should continue above-trend organic growth as customer retention improves; Margin profile expected to remain stable; and Autosports Group remains well-placed for further well-priced acquisition opportunities. 16 AUTOSPORTS GROUP 6 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 Risk The Group identified its key risk areas as: 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. The  Group  monitors the external environment and its impact on the business. 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. During the year, we supported the OAIC’s annual Privacy Awareness Week and released our Privacy Framework with updated privacy training to improve privacy practices across the Group. Cyber Security and Information technology (‘IT’) infrastructure FY2023 saw a continuation of the  Group’s Cyber Security Maturity Uplift Program as cyber security risks remain a risk for businesses globally. During the year, further cyber security training was issued and progress was made in vendor security assessments and IT infrastructure. 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 through regular safety committee meetings, training on safe work procedures, safety inspections, an internal audit and regular reporting to the Board. 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  Group relies on its relationships with OEMs to offer its range of luxury and prestige vehicles to consumers. 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 has 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 and New Zealand 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 upward towards electric and hybrid vehicles in FY2023, Autosports is well positioned to take advantage of the trend as we represent many OEMs that are delivering new ranges of electric and hybrid vehicles. The  Group regularly monitors market trends for changes to consumer preferences including investment in new technologies. Supply chain The shortage of supply of new vehicles experienced in FY2022 showed improvement in FY2023. Supply shortages can arise from various factors including macroeconomic events affecting global supply chains and delays due to quarantine restrictions at Australian ports. Some supply chain risk can be mitigated through inventory management whilst market factors can also play a role in mitigating this risk through increased demand and improved gross margins as experienced in recent years. Environmental regulation The Group is subject to environmental regulation and is required to maintain licences and comply with local planning, State-based and federal environmental laws to operate its dealerships, service and collision facilities. Significant changes in the state of affairs On 1 August 2022, the Group acquired 100% interest in Auckland City BMW Limited for $61,807,000 (NZ$ 68,873,000), funded by existing cash reserves and $12,115,000 (NZ$ 13,500,000) debt facility. On 1 February 2023, the Group acquired trading assets and liabilities of Motorline BMW, Motorline MINI, Motorline Bodyshop, Gold Coast BMW and Gold Coast MINI for a total consideration of $65,754,000, funded by existing cash reserves and $30.0 million debt facility. Refer to note 28 to the financial statements for further details relating to the acquisitions. 7 ANNUAL REPORT 2023 17 Autosports Group Limited Directors' report 30 June 2023 On 15 June 2023, the Group acquired the land and buildings at 586 Wickham Street and 10 Light Street, Fortitude Valley, Queensland from which its Audi Centre Brisbane, Bentley Brisbane, Maserati Brisbane and Lamborghini Brisbane dealerships operate. The total consideration transferred amounted to $103,877,000 including purchase taxes. 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 No matter or circumstance has arisen since 30 June 2023 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. Regulatory change The new Respect@Work regime requires employers to take preventive measures against sexual harassment, sex discrimination, and victimisation in the workplace. Businesses can be held vicariously liable for employee or agent-committed sexual harassment unless reasonable preventive steps are taken. New WHS regulations provide a framework (including a code of practice) for any person conducting a business or undertaking to manage psychosocial risks in the workplace. The code of practice includes control measures and risk identification strategies that can be used. The Secure Jobs Better Pay reforms introduced several regulatory changes including prohibiting pay secrecy and declaring breastfeeding, gender identity, and intersex status as protected attributes under anti-discrimination laws. Additional obligations were imposed on employers when responding to extended parental leave requests up to 24 months. Employees can now request flexible working arrangements during pregnancy or when caring for a family member impacted by family and domestic violence under Secure Jobs Better Pay. The 2023 Workplace Reform Consultations plan further amendments to Fair Work laws. Such reforms include criminalising wage theft, stronger protection against discrimination and harassment, and fairness for casual workers. Federal parliament passed a bill that requires the Workplace Gender Equality Agency to publish pay gap information for Australian companies with more than 100 employees. The Privacy Act Review Report recommended changes to capture a wider range of personal information that are subject to the Act’s provisions. It also proposes changes to cyber security measures, data retention, privacy consent requirements, and individual rights over personal information. Privacy legislation was amended significantly increasing the penalties for serious or repeated privacy breaches. Treasury released a second consultation paper in June 2023, seeking views on implementing standardised, internationally-aligned requirements for disclosing climate-related financial risks. Government bodies such as the ACCC are seeking to regulate greenwashing claims and have issued guidance for business clarifying obligations under the Australian Consumer Law. Similarly, there is a Senate inquiry into greenwashing, looking at the impact of misleading environmental sustainability claims on consumers, with a report expected at the end of the calendar year. Amendments to the Australian Consumer Law’s unfair contract terms regime will broaden the regime’s application to various contracts and increases the scope for small businesses, while significantly increasing the penalties for breaches. In a recent review of the Modern Slavery Act, the Government has made recommendations regarding penalties for non-compliance, changes to reporting, and improving overall effectiveness. The Government has also indicated its intentions to minimise worker exploitation by introducing future legislative changes. ASIC issued a report setting out the good practices of whistle-blower disclosure including the directors’ responsibilities surrounding the program, establishing a good whistle-blower culture, and providing adequate resources and training. In New Zealand changes to the Fair Trading Act 1986 (NZ) took effect in August 2022 which extended the unfair contract terms regime to business-to-business contracts that fall under a specified value threshold and introduced a new prohibition on unconscionable conduct in trade. The Fair Pay Agreements Act 2022 (NZ) commenced in December 2022. This provides a framework for unions and employer associations within a sector to bargain for fair pay agreements that specify minimum employment terms for an industry or occupation. The Land Transport (Clean Vehicles) Amendment Act (No 2) 2022 (NZ) took effect in November 2022 provide a phase-in of the clean vehicle standards which are intended to support reduction of emissions of imported vehicles during the first half of 2023. Changes to the Credit Contracts and Consumer Finance Regulations 2004 (NZ) took effect on 4 May 2023, providing lenders with greater discretion to exclude discretionary expenses when making affordability assessments of borrowers. 18 AUTOSPORTS GROUP 8 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 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 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 88,612 ordinary shares held indirectly None None 9 ANNUAL REPORT 2023 19 Autosports Group Limited Directors' report 30 June 2023 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: 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 27 years' experience in the motor vehicle industry across Australia and the United Kingdom. Prior to founding Autosports, 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. Nick is a Co-Founder of Autosports Group. None None None 40,177,947 ordinary shares held indirectly None 836,914 LTI performance rights and 197,803 STI performance rights convertible into ordinary shares 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 a Non-Executive Director of Energy Australia, 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 26 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 James (‘Ian’) Pagent Non-Executive Director (effective 1 February 2023); Executive Director (until 31 January 2023) Bachelor of Arts (Hons) in Politics from Melbourne University and LLB from Sydney University 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. Ian is a Co-Founder of Autosports Group. None None None 65,834,631 ordinary shares held indirectly None 180,236 LTI performance rights and 40,186 STI performance rights convertible into ordinary shares 20 AUTOSPORTS GROUP 10 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 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: Robert Quant Independent Director Bachelor of Business from the University of Technology, Sydney Robert has over 40 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 '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: Name: Title: Experience and expertise: Interests in shares: Interests in options: Interests in rights: Brent Polites Head of Franchised Automotive Brent has more than 20 years’ experience in automotive including more than 12 years leading some of Australia’s largest dealerships. Brent has won multiple Dealer of the Year awards across different brands and States. He has a broad automotive experience that spans retail, importation and OEM wholesale. 156,752 ordinary shares held indirectly None None 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 Chief Financial Officer since 2009, after joining the business in 2007. Prior to joining Autosports, he held accounting and finance roles with Trivett Classic, McMillan Volkswagen and Audi Centre Parramatta. 1,890,931 ordinary shares held directly and indirectly None 308,625 LTI performance rights and 123,385 STI performance rights convertible into ordinary shares 11 ANNUAL REPORT 2023 21 Autosports Group Limited Directors' report 30 June 2023 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 18 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, 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') held during the year ended 30 June 2023, and the number of meetings attended by each director were: James Evans Nick Pagent* Marina Go Ian Pagent* Robert Quant Full Board People and Remuneration Committee Attended Held Attended Held Audit and Risk Committee Attended Held 10 10 10 10 10 10 10 10 10 10 7 7 7 7 7 7 7 7 7 7 6 6 6 6 6 6 6 6 6 6 Held: represents the number of meetings held during the time the director held office. * Whilst Nick Pagent and Ian Pagent are not members of the People and Remuneration Committee or Audit and Risk Committee, they attended each meeting. 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 1,687,149 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 2023 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. 574,297 ordinary shares were provided from the shares purchased on-market during the 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. Chief Financial Officer and Head of Franchised Automotive 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 12 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 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 26 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 26 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. 13 ANNUAL REPORT 2023 23 Autosports Group Limited Directors' report 30 June 2023 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 Non-Executive 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 2022 to 30 June 2023 (‘financial year’ or ‘FY23’). 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 Non-Executive Directors. 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 Non-Executive Directors James Evans Marina Go Ian Pagent Robert Quant Senior Executives Nick Pagent Brent Polites Aaron Murray Chairman Independent Director Non-Executive Director (effective 1 February 2023); Executive Director (until 31 January 2023) Independent Director Managing Director and Chief Executive Officer (‘CEO’) Head of Franchised Automotive (from 1 January 2023) 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 Non-Executive 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 The Board recognises the need to motivate, attract and retain employees to deliver excellent business performance. In FY23, the People and Remuneration Committee commissioned a report from an independent remuneration consultant, Godfrey Remuneration Group Pty Limited, to provide guidance in relation to the Group’s remuneration policy and the rewards levels for the Senior Executives and Non- Executive Directors. The report considered remuneration structures in companies with comparable size and scale across relevant sectors. The People & Remuneration Committee and Board agreed to retain the current remuneration structure for Senior Executives and Non- Executive Directors in FY24. 24 AUTOSPORTS GROUP 14 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 An agreed set of protocols were put in place to ensure that the remuneration recommendations would be free from undue influence from KMP. These protocols include requiring that the consultant not communicate with affected KMP without a member of the People and Remuneration Committee being present, and that the consultant not provide any information relating to the outcome of the engagement with the affected KMP. The Board is also required to make inquiries of the consultant’s processes at the conclusion of the engagement to ensure that they are satisfied that any recommendations made have been free from undue influence. The Board is satisfied that these protocols were followed and as such there was no undue influence. Godfrey Remuneration Group Pty Limited was paid $69,300 inclusive of GST for its services. Voting and comments made at the Company's 2022 Annual General Meeting ('AGM') At the 2022 AGM, 99.74% of the votes received supported the adoption of the remuneration report for the year ended 30 June 2022. 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 Non-Executive 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. The Board and the People and Remuneration Committee are guided by the following objectives when making decisions regarding Senior Executive remuneration: Non-Executive Director remuneration In remunerating Non-Executive 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 Non-Executive 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. 15 ANNUAL REPORT 2023 25 Autosports Group Limited Directors' report 30 June 2023 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 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. 26 AUTOSPORTS GROUP 16 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 Company performance In FY23, profit before tax grew 25% to $100.3 million. Statutory net profit after tax grew 22.6% to $65.4 million compared to $53.4 million for the prior year. Revenue grew 26.4% (2023: $2.37 billion, 2022: $1.88 billion) and service and parts revenue grew 34.6% (2023: $333 million, 2022: $247 million). We acquired several businesses during the year including 100% of the shares in Auckland City BMW Limited and the business and assets of Motorline BMW, Motorline MINI, Motorline Bodyshop, Gold Coast BMW, Gold Coast MINI and Gold Coast Bodyshop. Ringwood BMW, a new greenfield dealership and service facility, opened in early 2023. During the year, we purchased the land and buildings at 586 Wickham Street and 10 Light Street, Fortitude Valley, Queensland where our Audi Centre Brisbane dealership is located. At year end our cash at bank was $41.99 million (2022: $90.8 million) and corporate debt was $223 million (2022: $112.5 million). Our remuneration structure was established to reward both short-term and long-term growth with gateway hurdles of upholding cultural and value expectations for continual improvement in corporate governance, compliance, risk management and stakeholder relationships. It is also intended to retain skilled executives in the long-term interests of the business. The table below shows our financial performance for the last five years. Share performance Earnings performance Liquidity Financial year ended 30 June Closing share price ($) Dividend per share (cents)* Basic 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')) 2023 2022 2021 2020 2019 2.03 1.52 2.55 1.17 1.26 19.0 16.0 9.0 - 3.0 32.55 26.56 20.86 (50.97) 5.57 133.9 96.8 79.8 (76.1) 41.5 66.6 54.6 42.4 (102.3) 11.4 13.8 10.8 10.2 (27.1) 2.3 166.0 135.0 125.8 83.8 45.3 5.53 9.10 7.13 3.54 3.29 * 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. 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 2022 to 30 June 2023 17 ANNUAL REPORT 2023 27 Autosports Group Limited Directors' report 30 June 2023 STI opportunity The STI opportunities of the Senior Executives are set out below: Name Nick Pagent Ian Pagent Brent Polites Aaron Murray Level of performance At target Level of performance At maximum 50% of base salary 20% of base salary 50% of base salary 50% of base salary 75% of base salary 45% of base salary 75% of base salary 75% of base salary 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, investor relations, cybersecurity, capital management, internal audit, operational management and contract management. 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. Measurement of performance conditions 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 award for the Senior Executives for the initial grant and, therefore, the number of performance rights to be granted. Delivery of STI awards Performance rights 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. 28 AUTOSPORTS GROUP 18 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 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 FY23 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. 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 Nick Pagent Ian Pagent Brent Polites Aaron Murray Year 2023 2022 2023** 2022 2023*** 2022 2023 2022 Maximum potential STI bonus ($)* Percentage of target STI award granted Percentage of maximum STI award granted Percentage of maximum STI award forfeited STI award ($) 525,000 525,000 180,000 180,000 187,500 - 318,750 318,750 514,500 408,800 - 141,000 186,000 - 318,750 255,000 100% 88% - 91% 100% - 100% 91% 98% 78% - 78% 99% - 100% 80% 2% 22% 100% 22% 1% - - 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. In accordance with terms of STI Plan, Ian’s entitlement to participate in the FY23 STI Plan was forfeited upon retiring from his executive position on 31 January 2023). Brent Polites' participation in the STI Plan commenced on 1 January 2023. 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: 19 ANNUAL REPORT 2023 29 Autosports Group Limited Directors' report 30 June 2023 Nick Pagent Ian Pagent Brent Polites Aaron Murray 75% of base salary 45% 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. 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) 100% Nil 50% Straight-line pro rata vesting between 50% and 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. 30 AUTOSPORTS GROUP 20 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 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. 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 Nick Pagent – $700,000 per annum base salary plus other benefits valued at $87,407. Brent Polites - $500,000 per annum base salary plus other benefits valued at $87,000 (from 1 January 2023). Aaron Murray – $425,000 per annum base salary plus other benefits valued at $95,418. Periods of notice required to terminate and termination payments Nick Pagent – either party may terminate the contract by giving 12 months’ notice. Brent Polites – either party may terminate the contract by giving 6 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. FY24 Senior Executive remuneration There are no proposed changes to the remuneration structure of Senior Executives for FY24. (3) Non-Executive Director remuneration Principles of Non-Executive Director remuneration As outlined in section 2, in remunerating Non-Executive 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 Non-Executive of other comparable Australian companies; and the size and complexity of the Group’s operations. Non-Executive Director remuneration for the financial year Board fees The current Non-Executive Director fee pool is set at $800,000 per annum. The Non-Executive Directors’ fees are $200,000 for the Chairman and $100,000 for other Non-Executive 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, Non-Executive Directors do not have any ‘at risk’ remuneration component. We do not pay benefits (other than statutory entitlements) on retirement to Non-Executive Directors. Committee fees Non-Executive 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. 21 ANNUAL REPORT 2023 31 Autosports Group Limited Directors' report 30 June 2023 (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 $ Non-Executive Directors James Evans Marina Go Robert Quant Ian Pagent Tom Pockett Senior Executives Nick Pagent Ian Pagent Brent Polites Aaron Murray 2023 20223 2023 2022 2023 2022 20234 2022 20227 2023 2022 20235 2022 20236 2022 2023 2022 180,989 132,855 108,590 109,091 108,590 109,091 31,326 - 90,000 700,000 594,231 259,357 300,000 230,769 - 425,000 395,192 - - - - - - - - - 62,115 69,817 37,489 61,717 16,566 - 70,126 61,317 19,011 13,285 11,410 10,909 11,410 10,909 3,289 - - 25,292 23,568 17,492 23,568 12,646 - 25,292 23,568 - - - - - - - - - - - - - - - - - - 200,000 146,140 120,000 120,000 120,000 120,000 34,615 - 90,000 11,800 21,399 (35,453) 6,447 6,514 - 7,167 12,065 1,039,500 933,800 (266,990) 321,000 298,500 - 510,000 446,250 1,838,707 1,642,815 11,895 712,732 564,995 - 1,037,585 938,392 1 2 3 4 5 6 7 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 from 1 February 2023. Represents remuneration until 31 January 2023. Represents remuneration from 1 January 2023. Represents remuneration until 30 November 2021. 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 Non-Executive Directors do not hold performance rights, except for Ian Pagent who continues to hold a pro-rated portion of performance rights that were entitled to remain in the applicable STI and LTI Plan in accordance with its terms following his retirement from his executive position. Brent Polites was appointed as KMP on 1 January 2023 and is entitled to participate in the FY23 STI Plan and FY23 LTI Plan pro-rated for the applicable performance periods from 1 January 2023. Performance rights in respect of these plans will be granted in FY2024 and reported in the FY2024 remuneration report. 32 AUTOSPORTS GROUP 22 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 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 - FY20 11 Dec 2019 LTI - FY21 9 Dec 2020 LTI - FY22 15 Dec 2021 STI - FY21 17 Dec 2021 LTI - FY23 16 Dec 2022 STI - FY22 16 Dec 2022 Ian Pagent LTI - FY20 11 Dec 2019 LTI - FY21 9 Dec 2020 LTI - FY22 15 Dec 2021 STI - FY21 17 Dec 2021 LTI - FY23 16 Dec 2022 STI - FY22 16 Dec 2022 Aaron Murray LTI - FY20 11 Dec 2019 LTI - FY21 9 Dec 2020 LTI - FY22 15 Dec 2021 STI - FY21 17 Dec 2021 LTI - FY23 16 Dec 2022 STI - FY22 16 Dec 2022 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 2022 - 30 June 2025 1 July 2022 - 30 June 2023 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 2022 - 30 June 2025 1 July 2022 - 30 June 2023 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 2022 - 30 June 2025 1 July 2022- 30 June 2023 $1.44 304,465 $1.40 350,467 $2.18 232,419 $2.18 157,779 - - - - (304,465) - - (157,779) - 254,028 - $2.05 $2.05 - - - - - - 350,467 232,419 - 254,028 - 1,045,130 197,803 451,831 - (462,244) - - 197,803 1,034,717 $1.44 202,977 $1.40 233,644 $2.18 79,686 $2.18 68,619 - - - - (121,788) (81,189) - - - (112,662) 120,982 (37,517) 42,169 (68,619) - - $2.05 $2.05 - 87,095 - (70,010) 17,085 - 584,926 68,224 155,319 - (190,407) (28,038) (329,416) 40,186 220,422 $1.44 114,175 $1.40 131,425 $2.18 84,662 $2.18 59,661 - - - - (114,175) - - (59,661) $2.05 $2.05 - 92,538 - - 389,923 123,385 215,923 - (173,836) - - - - - - - - 131,425 84,662 - 92,538 123,385 432,010 All performance rights outstanding at year end were unvested. * Upon Ian Pagent’s retirement as an executive on 31 January 2023, Ian was entitled to retain a pro-rated number of performance rights proportionate to the part of the performance period served, and the balance was forfeited in accordance with the terms of the STI and LTI plans. 23 ANNUAL REPORT 2023 33 Autosports Group Limited Directors' report 30 June 2023 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/ others2 Shares held at the end of financial year - 40,833 62,499 - - - 39,615,703 65,644,224 154,302 1,747,095 462,244 190,407 - 173,836 88,612 - - 100,000 - 2,450 - - - - 88,612 40,833 62,499 - - - (30,000) 40,177,947 65,834,631 156,752 1,890,931 107,264,656 826,487 191,062 (30,000) 108,252,205 Non-Executive Directors James Evans Marina Go Robert Quant Senior Executives Nick Pagent Ian Pagent Brent Polites Aaron Murray 1 2 On-market purchase of shares. On-market sale 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 24 DIRECTORS’ REPORT continued30 June 2023 Autosports Group Limited Directors' report 30 June 2023 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 During the financial year, the Group paid the following marketing expenses to an entity controlled by Ian Pagent. Related party purchases Customer events New Bathers Pavilion Balmoral Pty Ltd Marketing - customers events 990,780 856,429 776,662 580,350 1,388,886 3,136,790 7,729,897 The Group paid $ 211,841 The event is a luxury dining experience that Autosports Group will use to enhance customer relationships. The amount is within the current marketing budget and strategy and will also attract marketing rebates from some of the OEMs whose customers the experience is offered to. 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 23 August 2023 Sydney ___________________________ Nicholas Pagent Chief Executive Officer 25 ANNUAL REPORT 2023 35 36 AUTOSPORTS GROUP AUDITOR’S INDEPENDENCE DECLARATION 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 Quay Quarter Tower 50 Bridge Street Sydney, NSW, 2000 Australia Phone: +61 2 9322 7000 www.deloitte.com.au 23 August 2023 The Board of Directors Autosports Group Limited 555 Parramatta Road Leichhardt NSW 2040 Australia Dear Directors AAuuddiittoorr’’ss IInnddeeppeennddeennccee DDeeccllaarraattiioonn ttoo 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 2023, 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 the audit; and (ii) any applicable code of professional conduct in relation to the audit. Yours faithfully DELOITTE TOUCHE TOHMATSU DDaavviidd HHaayynneess Partner Chartered Accountants Autosports Group Limited Consolidated statement of profit or loss and other comprehensive income Autosports Group Limited For the year ended 30 June 2023 Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2023 Consolidated Revenue Revenue Interest revenue Interest revenue Expenses Changes in inventories Expenses Raw materials and consumables purchased Changes in inventories Employee benefits expense Raw materials and consumables purchased Depreciation and amortisation expense Employee benefits expense Impairment of property, plant and equipment Depreciation and amortisation expense Occupancy costs Impairment of property, plant and equipment Acquisition and restructure expenses Occupancy costs Other expenses Acquisition and restructure expenses Finance costs Other expenses Finance costs Profit before income tax expense Profit before income tax expense Income tax expense Income tax expense Profit after income tax expense for the year Profit after income tax expense for the year Other comprehensive income Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the year, net of tax Other comprehensive income for the year, net of tax Total comprehensive income for the year Total comprehensive income for the year Profit for the year is attributable to: Non-controlling interest Profit for the year is attributable to: Owners of Autosports Group Limited Non-controlling interest Owners of Autosports Group Limited Total comprehensive income for the year is attributable to: Non-controlling interest Total comprehensive income for the year is attributable to: Owners of Autosports Group Limited Non-controlling interest Owners of Autosports Group Limited Basic earnings per share Diluted earnings per share Basic earnings per share Diluted earnings per share Note 30 June 2023 30 June 2022 Consolidated $'000 $'000 Note 30 June 2023 30 June 2022 $'000 2,371,296 $'000 1,875,954 5 5 2,371,296 129 1,875,954 8 129 (123,069) (1,772,724) (123,069) (188,993) (1,772,724) (52,028) (188,993) (6,004) (52,028) (7,964) (6,004) (6,027) (7,964) (80,657) (6,027) (33,658) (80,657) (33,658) 100,301 100,301 (33,652) (33,652) 66,649 8 (42,143) (1,460,060) (42,143) (146,721) (1,460,060) (52,339) (146,721) - (52,339) (6,334) - (2,417) (6,334) (69,157) (2,417) (16,431) (69,157) (16,431) 80,360 80,360 (25,780) (25,780) 54,580 66,649 54,580 (579) (579) (579) (579) 66,070 66,070 1,223 65,426 1,223 65,426 66,649 66,649 1,223 64,847 1,223 64,847 66,070 - - - - 54,580 54,580 1,204 53,376 1,204 53,376 54,580 54,580 1,204 53,376 1,204 53,376 54,580 66,070 Cents 54,580 Cents Cents 32.55 32.28 32.55 32.28 Cents 26.56 26.29 26.56 26.29 6 11 6 6 11 6 6 6 7 7 19 19 20 20 20 20 31 31 31 31 The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying 27 notes 27 ANNUAL REPORT 2023 37 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 30 JUNE 2023 Autosports Group Limited Consolidated statement of financial position As at 30 June 2023 Autosports Group Limited Consolidated statement of financial position As at 30 June 2023 Assets Note 30 June 2023 30 June 2022 Consolidated $'000 Consolidated $'000 Note 30 June 2023 30 June 2022 $'000 $'000 Assets Current assets Cash and cash equivalents Trade and other receivables Current assets Inventories Cash and cash equivalents Other assets Trade and other receivables Total current assets Inventories Other assets Total current assets Non-current assets Property, plant and equipment Right-of-use assets Non-current assets Intangibles Property, plant and equipment Deferred tax Right-of-use assets Total non-current assets Intangibles Deferred tax Total non-current assets Total assets Liabilities Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Current liabilities Income tax payable Trade and other payables Employee benefits Contract liabilities Borrowings Income tax payable Lease liabilities Employee benefits Total current liabilities Borrowings Lease liabilities Total current liabilities Non-current liabilities Trade and other payables Deferred tax Non-current liabilities Employee benefits Trade and other payables Borrowings Deferred tax Lease liabilities Employee benefits Total non-current liabilities Borrowings Lease liabilities Total non-current liabilities Total liabilities Net assets Total liabilities Equity Net assets Issued capital Reserves Accumulated losses Equity attributable to the owners of Autosports Group Limited Non-controlling interest Equity Issued capital Reserves Accumulated losses Equity attributable to the owners of Autosports Group Limited Non-controlling interest Total equity Total equity 8 9 10 8 9 10 11 12 13 7 11 12 13 7 14 7 15 16 17 14 7 15 16 17 14 7 15 16 17 14 7 15 16 17 18 19 18 19 20 20 41,999 89,569 373,755 41,999 17,660 89,569 522,983 373,755 17,660 522,983 295,519 227,846 551,638 295,519 21,343 227,846 1,096,346 551,638 21,343 1,619,329 1,096,346 90,817 58,731 217,454 14,617 381,619 90,817 58,731 217,454 14,617 381,619 172,298 203,147 445,784 21,721 842,950 172,298 203,147 445,784 21,721 1,224,569 842,950 1,619,329 1,224,569 189,396 970 13,723 189,396 25,141 970 449,104 13,723 38,194 25,141 716,528 449,104 38,194 716,528 4,594 332 3,792 4,594 195,070 332 220,608 3,792 424,396 195,070 220,608 1,140,924 424,396 152,762 1,610 17,331 152,762 20,887 1,610 249,826 17,331 36,653 20,887 479,069 249,826 36,653 479,069 - - 3,339 - 93,936 - 198,732 3,339 296,007 93,936 198,732 296,007 775,076 478,405 1,140,924 449,493 775,076 478,405 475,637 2,761 (5,914) 475,637 472,484 2,761 5,921 (5,914) 472,484 478,405 5,921 449,493 475,637 4,506 (35,978) 475,637 444,165 4,506 5,328 (35,978) 444,165 449,493 5,328 478,405 449,493 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 28 The above consolidated statement of financial position should be read in conjunction with the accompanying notes 28 AUTOSPORTS GROUP 38 CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS AT 30 JUNE 2023 Autosports Group Limited Consolidated statement of changes in equity For the year ended 30 June 2023 Autosports Group Limited Consolidated statement of changes in equity For the year ended 30 June 2023 Consolidated Balance at 1 July 2021 Consolidated Profit after income tax expense for the year Balance at 1 July 2021 Other comprehensive income for the year, net of tax - 475,637 - Profit after income tax expense for the year Total comprehensive income for the year Other comprehensive income for the year, net of tax Transactions with owners in their capacity as Total comprehensive income for the year owners: Share-based payments (note 19) Transactions with owners in their capacity as Dividends paid (note 21) owners: Share-based payments (note 19) Balance at 30 June 2022 Dividends paid (note 21) - - - - - - - 475,637 - Issued capital $'000 Issued capital $'000 Reserves $'000 475,637 Reserves 3,306 $'000 Balance at 30 June 2022 Consolidated Balance at 1 July 2022 Consolidated 475,637 Issued capital $'000 Issued capital $'000 Reserves $'000 475,637 Reserves 4,506 $'000 Profit after income tax expense for the year Balance at 1 July 2022 Other comprehensive income for the year, net of tax - 475,637 - Profit after income tax expense for the year Total comprehensive income for the year Other comprehensive income for the year, net of tax Transactions with owners in their capacity as Total comprehensive income for the year owners: Share-based payments (note 19) Transactions with owners in their capacity as Transfer to accumulated losses owners: Dividends paid (note 21)  Share-based payments (note 19) Transfer to accumulated losses Balance at 30 June 2023 Dividends paid (note 21)  - - - - - - - - - 475,637 - - 4,506 (579) - (579) (579) (579) (348) (818) - (348) (818) 2,761 - - 3,306 - - - - - 1,200 - 1,200 4,506 - 4,506 Accumulated losses $'000 Accumulated losses $'000 (61,214) Non- controlling interest Non- $'000 controlling interest $'000 4,376 Total equity $'000 Total equity 422,105 $'000 53,376 (61,214) - 53,376 53,376 - 53,376 - (28,140) - (35,978) (28,140) (35,978) Accumulated losses $'000 Accumulated losses $'000 (35,978) 65,426 (35,978) - 65,426 65,426 - 65,426 - 818 (36,180) - 818 (5,914) (36,180) 1,204 4,376 - 1,204 1,204 - 1,204 - (252) - 5,328 (252) 5,328 Non- controlling interest Non- $'000 controlling interest $'000 5,328 1,223 5,328 - 1,223 1,223 - 1,223 - - (630) - - 5,921 (630) 54,580 422,105 - 54,580 54,580 - 54,580 1,200 (28,392) 1,200 449,493 (28,392) 449,493 Total equity $'000 Total equity 449,493 $'000 66,649 449,493 (579) 66,649 66,070 (579) 66,070 (348) - (36,810) (348) - 478,405 (36,810) Balance at 30 June 2023 475,637 2,761 (5,914) 5,921 478,405 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 29 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 29 ANNUAL REPORT 2023 39 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2023 Autosports Group Limited Consolidated statement of cash flows For the year ended 30 June 2023 Autosports Group Limited Consolidated statement of cash flows For the year ended 30 June 2023 Cash flows from operating activities Profit before income tax expense for the year Cash flows from operating activities Profit before income tax expense for the year Adjustments for: Depreciation and amortisation Impairment of property, plant and equipment Adjustments for: Net loss on disposal of property, plant and equipment Depreciation and amortisation Share-based payments Impairment of property, plant and equipment Interest received Net loss on disposal of property, plant and equipment Interest and other finance costs Share-based payments Interest received Interest and other finance costs Note 30 June 2023 30 June 2022 Consolidated $'000 Consolidated $'000 Note 30 June 2023 30 June 2022 $'000 100,301 $'000 80,360 6 6 6 6 6 6 100,301 52,028 6,004 2,667 52,028 938 6,004 (129) 2,667 33,658 938 (129) 195,467 33,658 80,360 52,339 - 1,555 52,339 2,811 - (8) 1,555 16,431 2,811 (8) 153,488 16,431 Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Decrease/(increase) in inventories Change in operating assets and liabilities: Increase in other operating assets Decrease/(increase) in trade and other receivables Increase in trade and other payables Decrease/(increase) in inventories Increase/(decrease) in contract liabilities Increase in other operating assets Increase in employee benefits Increase in trade and other payables Increase/(decrease) in bailment finance Increase/(decrease) in contract liabilities Increase in employee benefits Increase/(decrease) in bailment finance Interest received Interest and other finance costs paid Income taxes paid Interest received Interest and other finance costs paid Net cash from operating activities 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 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 Net cash used in investing activities Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Dividends paid Dividends paid to non-controlling interest On market share purchase to settle share-based payments Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Dividends paid Dividends paid to non-controlling interest On market share purchase to settle share-based payments Net cash from/(used in) financing activities 28 11 28 11 32 32 32 21 20 19 32 32 32 21 20 19 Net cash from/(used in) financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Net decrease 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 Effects of exchange rate changes on cash and cash equivalents 195,467 (25,414) (123,069) (2,443) (25,414) 28,913 (123,069) (640) (2,443) 2,539 28,913 164,275 (640) 2,539 239,628 164,275 129 (33,658) 239,628 (40,097) 129 (33,658) (40,097) 166,002 153,488 16,718 42,143 (4,782) 16,718 8,541 42,143 783 (4,782) 1,680 8,541 (41,897) 783 1,680 176,674 (41,897) 8 (16,431) 176,674 (25,217) 8 (16,431) (25,217) 135,034 166,002 (116,791) (133,666) - (116,791) (133,666) - (250,457) 135,034 (20,211) (69,127) 1,165 (20,211) (69,127) (88,173) 1,165 (250,457) 136,049 (25,709) (36,861) (36,180) (630) (1,182) 136,049 (25,709) (36,861) (36,180) (630) 35,487 (1,182) (88,173) 40,709 (29,174) (34,420) (28,140) (252) (1,611) 40,709 (29,174) (34,420) (28,140) (252) (52,888) (1,611) 35,487 (48,968) 90,817 150 (48,968) 90,817 41,999 150 (52,888) (6,027) 96,844 - (6,027) 96,844 90,817 - Cash and cash equivalents at the end of the financial year 41,999 90,817 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 30 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 30 AUTOSPORTS GROUP 40 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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: Autosports Group Head Office 555 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 23 August 2023. 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 2023. 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 $193,545,000 as at 30 June 2023 (2022: $97,450,000). During the financial year ended 30 June 2023, the Group made a profit after income tax expense of $66,649,000 (2022: profit after income tax expense of $54,580,000). The directors have reviewed the cash flow forecast for the Group at least through to 30 August 2024. 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 $166,002,000 (2022: $135,034,000) of cash flow from operating activities; during the financial year the Group used $116,791,000 of available cash to fund business acquisitions which will contribute to future cashflows and $133,666,000 to fund additions to property, plant and equipment; as at 30 June 2023, the Group has undrawn capital finance facilities of $15,200,000 (2022: $15,199,000) out of which $11,200,000 is earmarked for specific purposes and undrawn bailment finance facilities of $196,352,000 (2022: $281,715,000); as at 30 June 2023, the Group has cash and cash equivalents amounting to $41,999,000 (2022: $90,817,000); 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. 31 ANNUAL REPORT 2023 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 2023 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. Foreign currency translation The financial statements are presented in Australian dollars, which is Autosports Group Limited's functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rate at the date of the transaction, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. 42 AUTOSPORTS GROUP 32 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) 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. 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. 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. 33 ANNUAL REPORT 2023 43 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) 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. 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 (ECL), which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. For all other financial instruments, the Group recognises lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group  measures the loss allowance for that financial instrument at an amount equal to 12-month ECL. 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. 44 AUTOSPORTS GROUP 34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) 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. 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. 35 ANNUAL REPORT 2023 45 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) 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. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than the carrying amount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. On disposal of a cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. 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. 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. 46 AUTOSPORTS GROUP 36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) 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. 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. 37 ANNUAL REPORT 2023 47 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) 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. 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. 48 AUTOSPORTS GROUP 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) 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 2023. The adoption of these Accounting Standards and Interpretations is not expected to have any significant impact on the Group’s financial statements. 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. 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 13 for further information. 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. 39 ANNUAL REPORT 2023 49 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 and New Zealand, 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. Note 5. Revenue Consolidated 30 June 2023 30 June 2022 $'000 $'000 1,435,427 543,348 175,147 157,508 59,866 1,139,845 444,082 126,300 120,866 44,861 2,371,296 1,875,954 Consolidated 30 June 2023 30 June 2022 $'000 $'000 2,204,258 167,038 1,875,954 - 2,371,296 1,875,954 2,213,788 157,508 1,755,088 120,866 2,371,296 1,875,954 Revenue for contracts with customers New and demonstrator vehicles Used vehicles Parts Service Other revenue Revenue Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Geographical regions Australia New Zealand Timing of revenue recognition Revenue recognised at a point in time Revenue recognised over time 50 AUTOSPORTS GROUP 40 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 Net loss on disposal Net loss on disposal of property, plant and equipment Leases Variable lease payments Short-term lease payments Rental outgoings Superannuation expense Defined contribution superannuation expense Other provisions Inventory write down to net realisable value Consolidated 30 June 2023 30 June 2022 $'000 $'000 1,454 5,432 3,035 1,598 1,563 35,579 1,020 3,796 3,181 1,033 1,191 38,150 48,661 48,371 3,367 3,968 52,028 52,339 938 2,811 15,126 9,408 9,124 4,990 7,101 4,340 33,658 16,431 2,667 1,555 843 293 6,828 7,964 401 589 5,344 6,334 15,719 12,277 1,565 708 Included in 'raw materials and consumables' in profit or loss is $25,839,000 (2022: $20,864,000) of salaries and wages relating to direct service labour costs. 41 ANNUAL REPORT 2023 51 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 Decrease in deferred tax liabilities Deferred tax - origination and reversal of temporary differences 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 Prior year temporary differences now recognised Tax rate differential Other Income tax expense Consolidated 30 June 2023 30 June 2022 $'000 $'000 35,042 (1,390) 27,828 (2,048) 33,652 25,780 (1,067) (323) (2,048) - (1,390) (2,048) 100,301 80,360 30,090 24,108 3,065 281 33,436 554 (114) (224) 119 843 25,070 710 - - 33,652 25,780 52 AUTOSPORTS GROUP 42 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 7. Income tax (continued) Net deferred tax asset Net 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 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 Net deferred tax liability Net deferred tax liability comprises temporary differences attributable to: Amounts recognised other than in equity: Customer relationships Property, plant and equipment Other items Accrued expenses Inventories Right of return assets Employee benefits Deferred tax liability Movements: Opening balance Credited to profit or loss Additions through business combinations (note 28) Closing balance Consolidated 30 June 2023 30 June 2022 $'000 $'000 8,457 9,821 826 2,915 993 830 477 250 4 (2,099) (197) (934) 9,599 8,270 995 1,907 630 1,023 437 236 743 (2,049) (149) 79 21,343 21,721 21,721 1,067 (1,445) 18,948 2,048 725 21,343 21,721 Consolidated 30 June 2023 30 June 2022 $'000 $'000 770 (2) (3) (6) (116) (118) (193) 332 - (323) 655 332 - - - - - - - - - - - - 43 ANNUAL REPORT 2023 53 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 2023 30 June 2022 $'000 $'000 13,723 17,331 Consolidated 30 June 2023 30 June 2022 $'000 $'000 79,657 11,108 (1,196) 54,653 5,185 (1,107) 89,569 58,731 Allowance for expected credit losses The Group has recognised a net loss of $141,000 in profit or loss in respect of the expected credit losses for the year ended 30 June 2023 (2022: Net loss of $248,000). 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 2023 30 June 2022 30 June 2023 30 June 2022 30 June 2023 30 June 2022 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 0.04% 6.77% 0.42% 13.57% 30.26% 0.09% 13.50% 1.80% 8.60% 65.50% 68,101 5,357 2,513 1,943 1,743 48,110 2,491 544 2,777 731 31 363 11 264 527 43 336 10 239 479 79,657 54,653 1,196 1,107 The profile of the Group's trade debtors has improved throughout the period due to improvement of supply chains and increased level of Original Equipment Manufacturer (OEM) receivables. As a result, the calculation of expected credit loss has been revised. 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 54 AUTOSPORTS GROUP 44 Consolidated 30 June 2023 30 June 2022 $'000 $'000 1,107 372 (52) (231) 1,196 943 543 (84) (295) 1,107 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 2023 30 June 2022 $'000 $'000 271,815 (6,361) 265,454 80,472 (1,668) 78,804 27,928 (1,440) 26,488 136,999 (4,442) 132,557 64,274 (1,629) 62,645 21,233 (1,270) 19,963 3,009 2,289 373,755 217,454 Consolidated 30 June 2023 30 June 2022 $'000 $'000 5,008 12,652 5,134 9,483 17,660 14,617 45 ANNUAL REPORT 2023 55 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 11. Property, plant and equipment Non-current assets Land and buildings - at cost* Less: Accumulated depreciation Less: Impairment 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 2023 30 June 2022 $'000 $'000 203,121 (2,876) (6,004) 194,241 84,265 (19,548) 64,717 38,044 (16,748) 21,296 14,699 (5,251) 9,448 6,318 (2,764) 3,554 100,183 (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 2,263 14,899 295,519 172,298 * 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 operates; 120 - 124 Pacific Highway, Waitara, NSW, from which Mercedes-Benz Hornsby operates; 363 Nepean Highway, Brighton, Victoria, from which Brighton Jaguar Land Rover operates; 62 Enterprise Drive, Bundoora, Victoria 3083 from which Bundoora BMW dealership operates; 98 O'Riordan Street, Alexandria from which Alexandria Mazda operates; and 586 Wickham Street and 10 Light Street Fortitude Valley from which Audi Centre Brisbane, Bentley Brisbane, Maserati Brisbane and Lamborghini Brisbane operate. ● ● ● ● ● Property acquisition: On 15 June 2023, the Group acquired the land and buildings from which its Audi Centre Brisbane, Bentley Brisbane, Maserati Brisbane and Lamborghini Brisbane dealerships operate. The total consideration transferred amounted to $103,877,000 including purchase taxes. 56 AUTOSPORTS GROUP 46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 2021 Additions Additions through business combinations (note 28) Disposals Transfers in/(out) Depreciation expense Balance at 30 June 2022 Additions Additions through business combinations (note 28) Disposals Exchange differences Impairment of assets 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 56,500 43,282 - - - (1,020) 98,762 103,877 - - - (6,004) (940) (1,454) 30,179 955 219 (1,093) 7,589 (3,796) 34,053 1,141 6,556 - (108) - 28,507 (5,432) 13,766 2,407 410 (163) 508 (3,181) 13,747 1,866 4,113 (1,023) (27) - 5,655 (3,035) 5,758 965 1 (44) (976) (1,033) 4,671 4,151 586 (145) (14) - 1,797 (1,598) 2,723 6,179 - (1,282) (263) (1,191) 6,166 429 21 (1,499) - - - (1,563) 6,556 15,339 115,482 69,127 - (138) (6,858) - 630 (2,720) - (10,221) 14,899 22,202 172,298 133,666 181 - - - (35,019) - 11,457 (2,667) (149) (6,004) - (13,082) Balance at 30 June 2023 194,241 64,717 21,296 9,448 3,554 2,263 295,519 Property impairment arose as a result of the acquisition of 586 Wickham Street, Fortitude Valley on 15 June 2023. Due to the proximity of the acquisition to year end there has been no opportunity for appreciation in value of the property and as such capitalised acquisition costs including stamp duty resulted in the carrying value of the property exceeding its valuation. Note 12. Right-of-use assets Non-current assets Right-of-use asset Less: Accumulated depreciation Consolidated 30 June 2023 30 June 2022 $'000 $'000 433,248 (205,402) 371,781 (168,634) 227,846 203,147 The Group leases dealership operating premises under agreements of between 1 to 17 years with, in some cases, options to extend. The leases have various escalation clauses. On renewal, the terms of the leases are renegotiated. 47 ANNUAL REPORT 2023 57 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 12. Right-of-use assets (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 2021 Additions* Additions through business combinations (note 28) Depreciation expense Balance at 30 June 2022 Additions/changes * Additions through business combinations (note 28) Exchange differences Depreciation expense Balance at 30 June 2023 * Additions/changes 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. Property lease $'000 215,784 14,060 11,453 (38,150) 203,147 1,342 58,126 810 (35,579) 227,846 Note 13. Intangibles Non-current assets Goodwill - at cost Less: Accumulated impairment Customer relationships - at cost Less: Accumulated amortisation Consolidated 30 June 2023 30 June 2022 $'000 $'000 647,894 (109,174) 538,720 41,610 (28,692) 12,918 548,126 (109,174) 438,952 32,157 (25,325) 6,832 551,638 445,784 58 AUTOSPORTS GROUP 48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 13. Intangibles (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 2021 Additions through business combinations (note 28) Amortisation expense Balance at 30 June 2022 Additions through business combinations (note 28) Exchange differences Amortisation expense Goodwill $'000 Customer relationships $'000 Total $'000 420,926 18,026 - 438,952 99,771 (3) - 6,522 4,278 (3,968) 6,832 9,454 (1) (3,367) 427,448 22,304 (3,968) 445,784 109,225 (4) (3,367) Balance at 30 June 2023 538,720 12,918 551,638 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 five year period (2022: 2.0%); (c) (d) New vehicle motor growth between FY24 to FY28 including other income and rebates of 1.5% - 20.0% (2022: (0.7%) – 14.8% FY23 Pre-tax discount rate 14.84% (2022: 15.61%); and to FY27). 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 $200,921,000. 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. 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 FY2024 to FY2028 5.3% - 5.9% 10.70% 14.84% 2.0% 1.5% - 20.0% 4.4% - 5.0% 13.05% 18.24% (1.9)% (5.6)%-13.0% Change 0.9% 2.4% 3.4% 3.9% 7.0% 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 (2022: 1-4 years). 49 ANNUAL REPORT 2023 59 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 14. Trade and other payables Current liabilities Trade and other payables GST payable Accrued expenses Non-current liabilities Deferred consideration on business combinations Refer to note 22 for further information on financial instruments. The average credit period on purchase of goods is 30 days. 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. 60 AUTOSPORTS GROUP 50 Consolidated 30 June 2023 30 June 2022 $'000 $'000 107,441 37,381 44,574 92,304 29,108 31,350 189,396 152,762 4,594 - 193,990 152,762 Consolidated 30 June 2023 30 June 2022 $'000 $'000 25,141 20,887 3,792 3,339 28,933 24,226 Consolidated 30 June 2023 30 June 2022 $'000 $'000 421,532 27,572 231,460 18,366 449,104 249,826 195,070 93,936 644,174 343,762 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 16. Borrowings (continued) Total secured liabilities The total secured liabilities are as follows: Bailment finance Capital loans Consolidated 30 June 2023 30 June 2022 $'000 $'000 421,532 222,642 231,460 112,302 644,174 343,762 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 5.99% (2022: 3.07%). 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 6.49% (2022: 3.40%). 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 Consolidated 30 June 2023 30 June 2022 $'000 $'000 617,884 237,842 855,726 421,532 222,642 644,174 196,352 15,200 211,552 513,175 127,501 640,676 231,460 112,302 343,762 281,715 15,199 296,914 Consolidated 30 June 2023 30 June 2022 $'000 $'000 38,194 36,653 220,608 198,732 258,802 235,385 Refer to note 22 for information on the maturity analysis of lease liabilities. 51 ANNUAL REPORT 2023 61 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 18. Issued capital Consolidated 30 June 2023 30 June 2022 30 June 2023 30 June 2022 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 2022 Annual Report. Note 19. Reserves Foreign currency reserve Share-based payments reserve Consolidated 30 June 2023 30 June 2022 $'000 $'000 (579) 3,340 2,761 - 4,506 4,506 Foreign currency reserve The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. 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. 62 AUTOSPORTS GROUP 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 19. Reserves (continued) Movements in reserves Movements in the reserve during the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Share-based payments On market share purchase in the Company to settle vested long term incentives Balance at 30 June 2022 Foreign currency translation Share-based payments On market share purchase in the Company to settle vested long term incentives Cash settled Transfer to accumulated losses Balance at 30 June 2023 Note 20. Non-controlling interest Foreign currency reserve $'000 Share-based payments $'000 Total $'000 - - - - (579) - - - - (579) 3,306 2,811 (1,611) 4,506 - 938 (1,182) (104) (818) 3,306 2,811 (1,611) 4,506 (579) 938 (1,182) (104) (818) 3,340 2,761 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 2023 30 June 2022 $'000 $'000 5,328 1,223 (630) 5,921 4,376 1,204 (252) 5,328 Consolidated 30 June 2023 30 June 2022 $'000 $'000 Final dividend for the year ended 30 June 2022 of 9.0 cents (2021: 7.0 cents) per ordinary share 18,090 14,070 Interim dividend for the year ended 30 June 2023 of 9.0 cents (2022: 7.0 cents) per ordinary share 18,090 14,070 36,180 28,140 On 23 August 2023, the directors declared a fully franked final dividend for the year ended 30 June 2023 of 10.0 cents per ordinary share, to be paid on 15 November 2023 to eligible shareholders on the register as at 1 November 2023. This equates to a total estimated distribution of $20,100,000, based on the number of ordinary shares on issue as at 30 June 2023. The financial effect of the dividends declared after the reporting date are not reflected in the 30 June 2023 financial statements and will be recognised in the subsequent financial period. 53 ANNUAL REPORT 2023 63 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 21. Dividends (continued) Franking credits Consolidated 30 June 2023 30 June 2022 $'000 $'000 Franking credits available for subsequent financial years based on a tax rate of 30% 89,370 67,121 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 the subsidiaries' functional currency being Australian dollars or New Zealand 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 2023 30 June 2022 Balance $'000 Balance $'000 421,532 222,642 (41,999) 231,460 112,302 (90,817) 602,175 252,945 An official increase/decrease in interest rates of 50 (2022: 50) basis points per annum applied to borrowing at the reporting date would have an adverse/favourable effect on the profit before tax of $3,011,000 (2022: $1,265,000) and equity of $2,108,000 (2022: $885,000) (assuming 30% tax). The percentage change is based on the expected volatility of interest rates using market data and analyst's forecasts. 64 AUTOSPORTS GROUP 54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 2023 30 June 2022 $'000 $'000 196,352 15,200 211,552 281,715 15,199 296,914 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 2023 Non-derivatives Non-interest bearing Trade payables Deferred consideration 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 $'000 107,441 - - 4,594 - - - - 107,441 4,594 421,532 40,917 - 34,282 - 166,678 - 30,963 421,532 272,840 48,742 618,632 45,639 84,515 102,118 268,796 114,968 145,931 311,467 1,117,874 55 ANNUAL REPORT 2023 65 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 22. Financial instruments (continued) 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 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. Contingent liabilities 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. Note 25. 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 2023 30 June 2022 $ $ 2,230,917 125,842 (9,972) 1,581,010 1,923,311 105,807 39,911 1,701,050 3,927,797 3,770,079 66 AUTOSPORTS GROUP 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 26. 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: Consolidated 30 June 2023 30 June 2022 $ $ 647,000 546,500 101,000 158,000 254,908 120,000 259,000 374,908 906,000 921,408 29,000 15,000 110,000 - 44,000 110,000 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 Deloitte New Zealand - tax compliance 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 25 and the remuneration report included in the directors' report. Transactions with related parties The following transactions occurred with related parties: Consolidated 30 June 2023 30 June 2022 $ $ 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 Marketing - customer events to entity controlled by Ian Pagent* 7,729,897 211,841 7,447,389 - * The event is a luxury dining experience that Autosports Group will use to enhance customer relationships. The amount is within the current marketing budget and strategy and will also attract marketing rebates from some of the OEMs whose customers the experience is offered to. 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. 57 ANNUAL REPORT 2023 67 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 27. Related party transactions (continued) Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. Note 28. Business combinations 2023 acquisitions Auckland City BMW Ltd ('Auckland BMW') On 1 August 2022, the Group acquired 100% of the shares in Auckland City BMW Ltd. The total consideration transferred amounted to $61,807,000 (NZ$ 68,873,000), including a $4,487,000 (NZ$ 5,000,000) payment deferred for two years. The acquisition was funded by existing cash reserves and $12,115,000 (NZ$ 13,500,000) debt facility. The goodwill of $46,650,000 represents the future potential profits of the acquired business. From the date of acquisition, Auckland BMW contributed revenues of $167,038,000 and profit before tax of $6,543,000. Motorline BMW, Motorline MINI, Motorline Bodyshop, Gold Coast BMW and Gold Coast MINI ('Motorline and Gold Coast') On 1 February 2023, the Group acquired trading assets and liabilities of Motorline BMW, Motorline MINI, Motorline Bodyshop, Gold Coast BMW and Gold Coast MINI ("Motorline Group"). The total consideration transferred amounted to $65,754,000, funded by existing cash reserves and $30,000,000 debt facility. The goodwill of $53,121,000 represents the future potential profits of the acquired business. From the date of acquisition, Motorline businesses contributed revenues of $104,800,000 and profit before tax of $5,082,000. 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 Trade and other payables Provision for income tax Deferred tax liability Employee benefits Bailment finance Other provisions Lease liability Net assets acquired Goodwill Auckland BMW Fair value $'000 Motorline and Gold Coast Fair value $'000 Total $'000 6,283 5,424 21,209 358 6,531 24,803 3,355 (5,086) (1,692) (655) (884) (19,686) - (24,803) 15,157 46,650 - - 12,023 242 4,926 33,323 6,099 (1,682) - (1,445) (1,284) (6,111) (135) (33,323) 12,633 53,121 6,283 5,424 33,232 600 11,457 58,126 9,454 (6,768) (1,692) (2,100) (2,168) (25,797) (135) (58,126) 27,790 99,771 Acquisition-date fair value of the total consideration transferred 61,807 65,754 127,561 Acquisition costs expensed to profit or loss 173 4,066 4,239 Cash paid net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: cash and cash equivalents acquired Less: deferred consideration payable Net cash used 61,807 (6,283) (4,487) 65,754 - - 127,561 (6,283) (4,487) 51,037 65,754 116,791 68 AUTOSPORTS GROUP 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 28. Business combinations (continued) The purchase price allocation of the 2023 acquisitions are final as at 30 June 2023. 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. 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. 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. 59 ANNUAL REPORT 2023 69 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 29. Interests in subsidiaries 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 Auckland City BMW Ltd Autosports NZ Ltd Principal place of business / Country of incorporation Ownership interest 30 June 2023 30 June 2022 % % Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia New Zealand New Zealand 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - - The consolidated financial statements also incorporates the assets, liabilities and results of the following subsidiaries with non-controlling interests: Name Principal place of business / Country of incorporation New Centenary Mazda Pty Ltd Australia John Newell Holdings Pty Ltd Australia Principal activities Motor vehicle dealership Motor vehicle dealership Parent Non-controlling interest Ownership Ownership Ownership Ownership interest interest interest interest 30 June 2023 30 June 2022 30 June 2023 30 June 2022 % % % % 80% 80% 20% 20% 80% 80% 20% 20% 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. 70 AUTOSPORTS GROUP 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 Note 30. Deed of cross guarantee (continued) 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, John Newell Holdings Pty Ltd, Auckland City BMW Ltd and Autosports NZ Ltd. 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 Impairment of property, plant and equipment 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 Transfer from share premium reserve Accumulated losses at the end of the financial year 30 June 2023 30 June 2022 $'000 $'000 2,077,256 (123,069) (1,528,753) (166,598) (44,587) (6,004) (6,968) (5,997) (71,114) (29,038) 1,750,308 (36,180) (1,367,547) (135,741) (48,776) - (5,920) (2,417) (64,283) (15,411) 95,128 (27,989) 74,033 (22,937) 67,139 51,096 - - 67,139 51,096 30 June 2023 30 June 2022 $'000 $'000 (43,287) 67,139 (36,180) 818 (66,243) 51,096 (28,140) - (11,510) (43,287) 61 ANNUAL REPORT 2023 71 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 Right-of-use assets Intangibles Deferred tax Total assets Current liabilities Trade and other payables Contract liabilities Income tax payable Employee benefits Borrowings Lease liabilities Non-current liabilities Employee benefits Borrowings Lease liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity 72 AUTOSPORTS GROUP 62 30 June 2023 30 June 2022 $'000 $'000 36,879 79,744 338,598 16,014 471,235 75,625 287,241 463,629 178,218 20,320 1,025,033 84,684 56,668 209,862 13,892 365,106 30,392 170,441 184,694 406,514 20,359 812,400 1,496,268 1,177,506 190,082 271 12,899 23,077 407,469 32,695 666,493 2,744 185,914 173,650 362,308 151,864 486 16,274 18,998 240,483 34,336 462,441 3,012 93,936 181,261 278,209 1,028,801 740,650 467,467 436,856 475,637 3,340 (11,510) 475,637 4,506 (43,287) 467,467 436,856 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 2023 30 June 2022 $'000 $'000 66,649 (1,223) 54,580 (1,204) 65,426 53,376 Number Number 201,000,000 201,000,000 1,687,149 2,019,979 Weighted average number of ordinary shares used in calculating diluted earnings per share 202,687,149 203,019,979 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 2021 Net cash from/(used in) financing activities Acquisition of leases Changes through business combinations (note 28) Balance at 30 June 2022 Net cash from/(used in) financing activities Acquisition/changes to leases Changes through business combinations (note 28) Exchange differences Cents Cents 32.55 32.28 26.56 26.29 Capital loans $'000 Lease liabilities $'000 Total $'000 94,834 17,468 - - 112,302 110,340 - - - 243,962 (34,420) 14,060 11,783 235,385 (36,861) 1,342 58,126 810 338,796 (16,952) 14,060 11,783 347,687 73,479 1,342 58,126 810 Balance at 30 June 2023 222,642 258,802 481,444 63 ANNUAL REPORT 2023 73 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 $938,000 (2022: $2,811,000). 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 2023 audited full-year results. A performance right is a right to acquire a share at a nil exercise price upon the achievement of performance hurdles and the fair value was estimated by taking the market price of the Company’s shares on the grant date. 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. 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 a combination of financial and non-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 and sustainable. 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. The rights are measured over a 3-year period. 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 Cancelled during the year Balance at the end of the year 2023 Number 2022 Number 2,019,979 856,942 (860,356) (329,416) 1,840,460 701,641 (522,122) - 1,687,149 2,019,979 Performance rights vested and exercisable as at 30 June 2023 was nil (2022: nil). As at year end, the weighted average remaining contractual life for the performance rights awarded were LTI – FY23: 2.18 years; LTI – FY22: 1.18 years; and LTI – FY21: 0.17 year (2022: LTI – FY22: 2.18 years; LTI – FY21: 1.17 years; and LTI FY20: 0.17 year). 74 AUTOSPORTS GROUP 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued30 June 2023 Autosports Group Limited Notes to the consolidated financial statements 30 June 2023 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 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 2023 30 June 2022 $'000 $'000 32,709 16,413 32,709 16,413 Parent 30 June 2023 30 June 2022 $'000 $'000 70,103 118,055 368,469 371,495 793 793 - - 477,495 3,340 (113,159) 477,495 4,506 (110,506) 367,676 371,495 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 2023 and 30 June 2022. 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 2023 and 30 June 2022. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2023 and 30 June 2022. 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 Apart from the dividend declared as disclosed in note 21, no other matter or circumstance has arisen since 30 June 2023 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. 65 ANNUAL REPORT 2023 75 Autosports Group Limited Directors' declaration 30 June 2023 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 2023 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 23 August 2023 Sydney ___________________________ Nicholas Pagent Chief Executive Officer 76 AUTOSPORTS GROUP 66 DIRECTORS’ DECLARATION30 June 2023 ANNUAL REPORT 2023 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 Quay Quarter Tower 50 Bridge 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 2023, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information, 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 2023 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 13, the Group has recognised Goodwill with a carrying value of $538.7 million as at 30 June 2023. The assessment of the recoverable amount of goodwill and other intangible assets allocated to the dealership requires management to exercise significant judgement, including: group of CGUs • • the identification of and allocation of goodwill to the dealership group of CGUs; and the determination of the following key assumptions used in the calculation of the recoverable amount of the group of CGUs: o the dealership group of CGU cash forecasts approved by the flow directors future growth rates terminal growth factors; and 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 dealership group of CGUs based on our understanding of the Group’s business and the requirements of relevant accounting standard. This evaluation includes an analysis of the Group’s internal reporting process; the 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 third party independent data for the Australian motor industry; rates with 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 13 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 FY23 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 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 FY23 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. ANNUAL REPORT 2023 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 14 to 25 of the Directors’ Report for the year ended 30 June 2023.. In our opinion, the Remuneration Report of Autosports Group Limited, for the year ended 30 June 2023, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. DELOITTE TOUCHE TOHMATSU David Haynes Partner Chartered Accountants Sydney, 23 August 2023 80 AUTOSPORTS GROUP INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF AUTOSPORTS GROUP LIMITED continued Autosports Group Limited Shareholder information 30 June 2023 The shareholder information set out below was applicable as at 1 August 2023. 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 (JIP PARRAMATTA) Sastempo Pty Ltd (NICHOLAS PAGENT FAMILY) Citicorp Nominees Pty Limited National Nominees Limited Livist Pty Ltd (VARINIA) Audi Parramatta Holdings Pty Ltd (AUDI PARRAMATTA) NIP Parramatta Pty Ltd (NIP PARRAMATTA) HSBC Custody Nominees (Australia) Limited Lambhill Pty Ltd (WILLIMS FINAL DISCRETION A/C) Pagent Family Investments Pty Ltd (PAGENT FAMILY INVESTMENT) J P Morgan Nominees Australia Pty Limited Five Dock DJC Pty Ltd Aalhuizen Nominees Pty Ltd (RENE AALHUIZEN FAMILY) Ogle Investments Pty Ltd (OGLE DISCRETIONARY UNIT) Ricgaz Pty Ltd (RWG FAMILY) Lambhill Pty Ltd (THE WILLIMS FINAL NO 2 A/C) Citicorp Nominees Pty Limited (COLONIAL FIRST STATE INV A/C) B & F Investments Pty Ltd Liverpool Street Investments (WARIMOO) Daniaron Pty Ltd (DANIARON FAMILY) Ordinary shares % of total Number of holders shares issued 440 399 184 240 59 0.11 0.58 0.71 3.28 95.32 1,322 100.00 87 Ordinary shares % of total Number held shares issued 23,657,626 22,114,671 16,531,020 16,401,374 15,455,897 15,310,969 10,401,678 7,966,642 7,548,311 7,193,635 6,958,597 6,436,189 4,722,374 4,000,000 2,866,808 2,792,647 2,435,660 2,289,305 2,078,757 1,674,863 178,837,023 11.77 11.00 8.22 8.16 7.69 7.62 5.17 3.96 3.76 3.58 3.46 3.20 2.35 1.99 1.43 1.39 1.21 1.14 1.03 0.83 88.96 71 ANNUAL REPORT 2023 81 SHAREHOLDER INFORMATION30 June 2023 Autosports Group Limited Shareholder information 30 June 2023 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 106,012,578 65,834,631 40,177,947 11,728,095 14,693,475 13,175,000 52.74 32.75 19.99 5.83 7.31 6.55 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 1,034,717 220,422 432,010 1,687,149 82 AUTOSPORTS GROUP 72 SHAREHOLDER INFORMATION continued30 June 2023 Autosports Group Limited Corporate directory 30 June 2023 Directors James Evans Nicholas ('Nick') Pagent Marina Go James ('Ian') Pagent Robert Quant Company secretary Caroline Raw Registered office Share register Auditor 555 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 Quay Quarter Tower, 50 Bridge 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 2023 AGM is scheduled for Friday, 24 November 2023. For the purposes of ASX Listing Rule 3.13.1 the Company gives notice that the last day to receive director nominations is 21 September 2023. ideate Co. 73 ANNUAL REPORT 2023 83 CORPORATE DIRECTORY 

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