Boralex
Annual Report 2022

Plain-text annual report

Beacon Lighting Group Limited ANNUAL REPORT 2022 Contents Chairman and Chief Executive Officer’s Report 1 Board of Directors 4 Management Team 5 Corporate Governance Statement 6 Directors’ Report 12 Auditor’s Independence Declaration 29 Index to the Financial Statements 30 Consolidated Statement of Comprehensive Income 31 Consolidated Balance Sheet 32 Consolidated Statement of Changes in Equity 33 Consolidated Statement of Cash Flows 34 Notes to Consolidated Financial Statements 35 Directors’ Declaration 85 Independent Auditor’s Report to the Members of Beacon Lighting Group Limited 86 Shareholders’ Information 92 Corporate Directory 94 Store Locations 96 Important Notice This financial report is the consolidated financial report of the consolidated entity consisting Beacon Lighting Group Limited, ACN 164 122 785 and its subsidiaries. Beacon Lighting Group Limited is a Company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is 5 Bastow Place Mulgrave Victoria 3170. A description of the nature of the consolidated entity’s operations and its principal activities is included in the Directors’ Report on page 12, which is not part of the financial report. The financial report was authorised for issue by the Directors on 17 August 2022. The Directors have the power to amend and reissue the financial statements. CHAIRMAN & Chief Executive Officer’s Report Beacon Lighting is very pleased to announce the financial result for FY2022. Despite numerous challenges, Beacon Lighting was able to achieve two significant milestones for the first time, with sales exceeding $300 million and Net Profit After Tax exceeding $40 million. The Board of Directors would like to thank the adaptable Beacon Lighting team and the continued support of our retail customers, trade customers, business partners and the general community. GROUP OVERVIEW Beacon Lighting finished FY2022 with 119 Beacon Lighting stores, consisting of 117 company stores and 2 franchised stores. During FY2022, new company stores were opened in Ellenbrook (WA), Bundaberg (QLD), Traralgon (VIC), Tuggerah (NSW) and Butler (WA). Company stores were relocated at Port Macquarie (NSW), Burleigh (QLD) and the Camberwell (VIC) store was relocated to Hawthorn (VIC). During FY2022, the Parramatta (NSW) store was closed in anticipation of a new store opening in Auburn (NSW) in FY2023. Beacon Commercial has sales offices in Brisbane (QLD), Sydney (NSW), Melbourne (VIC), Adelaide (SA) and Perth (WA). The Australian businesses are supported by Beacon Lighting operated warehouses in Brisbane (QLD) and Melbourne (VIC) and a 3PL warehouse in Perth (WA). Beacon Lighting also has a Store Support Centre located in Mulgrave (VIC). Beacon International has sales offices in Hong Kong, Germany and the United States of America with a support office in China. Light Source Solutions has sales offices in Australia and New Zealand while Connected Light Solutions supports customers across Australia. Masson For Light has an architectural lighting showroom in Richmond (VIC) and Custom Lighting has a designer showroom in Malvern (VIC). FY2022 IN REVIEW Supporting our trade customers and growing trade sales remained Beacon Lighting’s number one objective in FY2022. Our trade customers responded very well to the various trade strategies which resulted in strong growth in trade club members, trade sales and online visitations to the trade website. FY2022 also proved to be very challenging with COVID lockdowns and supply chain disruptions. COVID trading restrictions occurred across the country, but were severe in Sydney, Melbourne and Canberra markets throughout Q1 FY2022. The Beacon Lighting team continued to be adaptive to the changing environment and our retail customers embraced the online sales channel when they were not able to visit the Beacon Lighting stores. Given the priorities and challenges, FY2022 proved to be a very successful year for Beacon Lighting. A record sales result of $304.3 million compared to $288.7 million last year was an increase of 5.4%. With continued product innovation supported by outstanding customer service, Beacon Lighting was able to achieve a gross profit margin of 69.1%. Operating expenses continued to be carefully managed and were in line with last year at 39.0% of sales. Overall, Beacon Lighting was able to a record a Net Profit After Tax result of $40.7 million compared to $37.7 million last year which was an increase of 8.1%. In FY2022, Beacon Lighting sales increased by 5.4% over FY2021. Throughout H1 FY2022, retail sales were impacted by COVID lockdowns which resulted in a company stores comparative sales decrease of 7.1%. During H2 FY2022, there was a strong recovery in comparative sales with an increase of 9.0%. Overall, throughout FY2022, company stores comparative sales increased by 0.3% compared to FY2021. The best comparative sales results were achieved in Victoria and Western Australia. Beacon Lighting implemented many new strategies to better service our trade customers. The results of these strategies were an increase in Trade Club sales by 24.0% and an increase in total trade sales by 22.3%. Throughout the COVID-19 pandemic, many retail and trade customers have turned to the online sales channel to meet their residential lighting needs. Total online sales have increased by 31.3% to be $34.1 million, which included an increase in Trade Club online sales of 67.6%. Beacon Lighting USA continued to be a very exciting opportunity with sales growth of 51.9%. Beacon International sales increased to $15.7 million in FY2022. Beacon Lighting has continued to maintain good gross profit margins throughout FY2022 by delivering innovative products and outstanding value to our retail and trade customers. Expenses have continued to be carefully managed. Given the sales, gross profit and operating expense results, Beacon Lighting was able to further build on the outstanding FY2021 result with a Net Profit After Tax result of $40.7 million in FY2022. Despite the numerous supply chain disruptions and the risks in the supply chain, Beacon Lighting has been able to recover the in stock position and maintain good service levels to our customers. Throughout FY2022, inventory costs have increased and premiumisation and technology changes has resulted in an increased investment in higher priced products. Beacon Lighting also made an additional investment into inventory for the Beacon Trade product range and Beacon International to optimise the sales opportunities during the Northern Hemisphere fan season. The Beacon Lighting Group has continued to invest in the Large Format Property Fund during FY2022 by $4.8 million to a total investment of $20.0 million, new properties were invested in at Bathurst (NSW), Modbury (SA) and Mildura (VIC). Pleasingly, the Fund development property at Traralgon (VIC) opened as a Beacon Lighting store in December 2021. Beacon Lighting would like to thank our retail and trade customers throughout Australia and abroad for their continued support during FY2022. 1 BEACON LIGHTING GROUP ANNUAL REPORT 2022FY2022 Highights The Beacon Lighting Group highlights for FY2022 include: Sales result of $304.3m Net Profit After Tax result of $40.7m H2 FY2022 company store comparative sales increased by 9.0% Online sales increased by 31.3% TO $34.1m Introduced many TRADE INITIATIVES to better serve our trade customers INTERNATIONAL sales increased to $15.7m ONLINE TRADE SALES increased by 67.6% TRADE SALES increased by 22.3% BEACON LIGHTING USA sales increased by 51.9% Opened NEW stores at - ELLENBROOK WA - BUNDABERG QLD - TRARALGON VIC - TUGGERAH NSW - BUTLER WA TRADE CLUB SALES increased by 24.0% Relocated to new stores at - PORT MACQUARIE NSW - BURLEIGH QLD - HAWTHORN VIC 2 BEACON LIGHTING USA sales increased by 51.9% STRATEGIC pillars of growth The Beacon Lighting Group’s Strategic Pillars of Growth remain as follows: RETAIL TRADE eCOMMERCE NEW BUSINESS Providing our customers with a rewarding customer experience, the latest range of lighting and fans, inspirational store design, VIP member benefits and store network expansion and optimisation. Having an industry leading trade club, trade product extensions and building trade and commercial partnerships. Providing our customers with engaging websites, enabling online sales growth and providing for a seamless customer experience in-store and online. Includes the emerging businesses, international sales expansion, new business acquisitions and property. DIVIDENDS The Beacon Lighting Group is very pleased to be able to provide a record dividend for shareholders. For FY2022, the annual fully franked dividend is 9.3 cents per share (compared to 8.8 cents per share in FY2021). In H1 FY2022, the fully franked dividend was 4.3 cents per share (compared to 4.2 cents per share in H1 FY2021) while in H2 FY2022, the fully franked dividend was 5.0 cents per share (compared to 4.6 cents per share in H2 FY2021). OUTLOOK Beacon Lighting’s primary objective for FY2023 is to grow trade sales in Australia by more than 25.0%. Beyond trade sales, Beacon Lighting will continue to focus on the development and roll out of new company stores throughout Australia. Wholesale growth in international markets will involve selling the exciting ceiling fan and lighting ranges to new and existing customers through the various sales channels that are available to Beacon International. The Beacon Lighting Group is already committed to the following growth activities in FY2023: • The Trade Strategy Group will continue to focus on improving the trade customer experience through the continued development and enhancement of trade strategies. the existing • The re-launch of the Beacon Trade Club with an improved digital presence and making it easier for our members to encourage and be rewarded by referral sales. • The sourcing and developing of new trade products in order to create a comprehensive range of products for our trade customers. • Introduce endless aisle technology into stores, presenting the full range of products and prices to our retail and trade customers via an engaging touch screen. • The conversion of the Large Format Property Fund properties at Auburn (NSW) and Southport (QLD) into Beacon Lighting stores. Auburn (NSW) will be a new store while Southport (QLD) will be a store relocation. • The relocation of the Nunawading (VIC) store and the relocation of the Store Support Centre above the new Nunawading store. • The opening of new stores in Pimpama (QLD), Warrawong (NSW), Armadale (WA), Mt Barker (SA) and Melton (VIC). • Continued expansion of the Australian Designed products into the USA, China, Asian and European markets. Beacon Lighting will continue to remain at the forefront of the changes that are occurring in the lighting industry involving new technologies, fashion and energy efficient lighting solutions. The growth will be supported by market leading customer service and partnering with both our retail and trade customers. Beacon Lighting will be looking to build on its market position as Australia’s leading lighting business and to grow its presence in international markets. Beacon Lighting is excited about the opportunities moving into FY2023 and beyond. Ian Robinson Executive Chairman Glen Robinson Chief Executive Officer 3 BEACON LIGHTING GROUP ANNUAL REPORT 2022BOARD of Directors Ian Robinson Executive Chairman 48 years of service Ian Robinson purchased the first Beacon Lighting store in 1975. Over the subsequent 47 years, his role has grown from store management, to CEO and in July 2013 to his current role as Executive Chairman. Ian remains actively involved in the operations of the Group. Ian is a Director of Lighting Council of Australia, Carbonetix Pty Ltd, Large Format Retailers Association and Large Format Property Group. Glen Robinson Chief Executive Officer 28 years of service Glen Robinson assumed his current role of Chief Executive Officer in July 2013 after joining the Group in 1994. Glen has a strong understanding of the business having started with the Group on the sales floor, progressing to trainee buyer, merchandising manager and then taking responsibility for Beacon Lighting’s product range from development to in-store presentation. Glen is a Director of Large Format Property Group. Glen holds a BBus (Management). (James) Eric Barr Deputy Chairman / Non-Executive Director 8 years of service Eric Barr is Deputy Chairman and Chairman of the Remuneration and Nomination Committee of the Group. Eric retired in 2000 as a Partner with PricewaterhouseCoopers after 20 years of service. Since then Eric has been a Director of public companies in the United States of America and Australia, including 10 years as lead director of Reading International Inc. Eric is a Non-Executive Director of Generation Life Limited (formerly known as Austock Group Limited) where he holds the positions of Chairman of the Audit Committee, Chairman of Risk Committee and Chairman of the Remuneration Committee and is an independent Director of Large Format Property Group. Eric was previously a Non-Executive Director of the Sydney Stock Exchange Limited, holding the positions of Chairman of Directors and Chairman of the Audit Committee. Eric is a Chartered Accountant. Neil Osborne Non-Executive Director 8 years of service Neil Osborne is a Non-Executive Director and is also Chairman of the Group’s Audit Committee. Neil has over 35 years experience in the retail industry. Neil was formerly an Accenture Partner, leading large strategic projects in Australia and Asia. Neil also spent 18 years with Coles Myer Ltd in senior positions including finance (including CFO Myer), operations and strategic planning. Neil is Chairman of Australian United Retailers (trading as Foodworks) and an independent Director of Large Format Property Group. Neil was previously a Non- Executive Director of Vita Group (ASX Listed) holding the position of Chairman of the Audit and Risk Committee. Neil holds a BComm, is a CPA and a FAICD. 4 BEACON LIGHTING GROUP ANNUAL REPORT 2022MANAGEMENT Team David Speirs Chief Financial Officer Joined Beacon Lighting in 2003 after six years of business consulting and a career working with various Coles Myer businesses. David holds a BBus (Accounting), MBus (Accounting), Post Grad Dip (Finance) and is a FCPA. Michael (Mick) Tan Chief Information Officer Joined Beacon Lighting in 2000 and has more than 30 years information technology experience including a career with Fujitsu Systems. Mick holds a Dip (Management). Prue Robinson Marketing Director Joined Beacon Lighting in 2006 following a variety of roles in Sydney and London and four years in marketing with Spotlight. Prue is a Director of the Large Format Management Company Pty Ltd. Prue holds a BBus (Management & Marketing). Monique Cook General Manager - eCommerce Joined Beacon Lighting in 2007 and has had 15 years marketing and ecommerce experience across various B2B and B2C businesses within the home and lighting categories. Monique holds a BBus (Marketing and Human Resource Management). Eva Zelos Group Human Resources Manager team joined operations the Beacon Eva Zelos in 2020 with nearly 20 years of experience organisational in HR planning across various businesses. Eva holds a Diploma of Management and various executive certificates through the Melbourne Business School. and Barry Martens Chief Operating Officer Joined Beacon Lighting in 1996 following a retail advertising career with Clemenger Harvey and retail marketing experience with Klein’s Jewellery. Tracey Hutchinson Financial Controller & Company Secretary financial management Joined Beacon Lighting in 2011 having had roles with senior various ASX businesses, including Eyecare Partners. Tracey holds a BBus (Accounting), a MBus (Administration), a Graduate Diploma of Corporate Governance and is a CPA. Peter Morgan General Manager - Retail Peter joined Beacon Lighting in 2005 after working for Big W, Coles Myer and Shell Australia. Peter has spent over 35 years in Retail. Peter holds a Diploma in Retail. Damien Cummins Executive General Manager - Trade industry Joined Beacon Lighting in 2021 with over 25 years in management roles within the including CEO building products Clipsal and EGM of Gerard Lighting. Damien holds a Graduate Diploma Marketing and various executive certificates from Harvard Business School and INSEAD Business School. Rodney Brown General Manager – Supply Chain Joined Beacon Lighting in 2012 with experience extensive including management roles with Cadbury Schweppes and Fosters Brewing. supply chain 5 BEACON LIGHTING GROUP ANNUAL REPORT 2022CORPORATE Governance Statement The Board of Directors of Beacon Lighting Group Limited is responsible for the corporate governance of the Group. This statement outlines the corporate governance policies and practices formally approved by the Board of Beacon Lighting. This statement is current as at 17 August 2022. These policies and practices are in accordance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (4th Edition) unless otherwise stated. The Board considers that the Group’s corporate governance practices and procedures substantially reflect the principles. The full content of the Group’s Corporate Governance policies and charters can be found on the Group’s website (www.beaconlightinggroup.com.au). PRINCIPLE 1 PRINCIPLE 2 Lay Solid Foundations for Management and Oversight Structure the Board to be Effective and Add Value The Board’s responsibilities are defined in the Board Charter and there is a clear delineation between the matters expressly reserved to the Board and those delegated to the Chief Executive Officer and senior management. The Board Charter outlines: • The guidelines for Board composition, including the processes around Director appointments and resignations. • The operation of the Board and the Board Committees. • The roles of the Board, the Chairperson, CEO and senior management. • Specifically includes risk management responsibilities (rather than these being delegated to a separate Risk Committee). A copy of the Board Charter is available on the Group’s website. The Board and Committee Charters sets out the processes for the annual review of the performance of the Board as a whole, each Director and the Board Committees. The Board has established a Remuneration and Nomination Committee which is responsible for reviewing executive remuneration and incentive policies and practices. The Group has a written agreement with each Director and senior executive setting out the terms of their appointment. The Group has adopted a Diversity Policy. The Group does not propose to establish measurable objectives for achieving gender diversity in the foreseeable future as recommended by Recommendation 1.5 of the ASX Corporate Governance Principles and Recommendations. The Group is strongly committed to making all selection decisions on the basis of merit. The Diversity Policy affirms the commitment of the Group to embrace diversity and sets out the principles and work practices to ensure that all associates have the opportunity to achieve their full potential. The policy is periodically reviewed to check it is operating effectively. The Group undertakes appropriate background checks before appointing a Director or senior executive including checks as to the person's character, experience, education, criminal record and bankruptcy history. The experience and expertise relevant to the position of Director held by each Director in office at the date of the annual report is included in the Directors’ Report. The term in office held by each Director in office at the date of this report is as follows: NAME TERM IN OFFICE Ian Robinson Eric Barr Glen Robinson Neil Osborne 9 years 8 years 8 years 8 years Note: These terms of office relate to the listed entity Beacon Lighting Group Limited only and do not relate to the subsidiary or operating entities. Ian Robinson is a substantial shareholder. He has been Executive Chairman since July 2013 having previously held the position of Chief Executive Officer. Eric Barr and Neil Osborne are shareholders of Beacon Lighting Group Limited. They are independent Non-Executive Directors and bring objective judgment to bear on Board decisions commensurate with their commercial knowledge, experience and expertise. Glen Robinson is a senior executive of Beacon Lighting and has been Chief Executive Officer since July 2013. Recommendation 2.1 of the ASX Corporate Governance Principles and Recommendations recommends that the Board establishes a nomination committee and that the committee have at least three members, a majority of whom are independent and be chaired by an independent Director. The Remuneration and Nominations Committee has four members. Three are independent: Eric Barr and Neil Osborne, as independent Directors and Andrew Hanson as an external consultant (until June 2022). Ian Robinson, Executive Chairman, is the other member. The Committee is chaired by Eric Barr. 6 BEACON LIGHTING GROUP ANNUAL REPORT 2022A copy of the Remuneration and Nomination Committee Charter is available on the Group’s website. In relation to nominations, the Remuneration and Nomination Committee is responsible for: • Assessing current and future Director skills and experiences and identifying suitable candidates for succession. • Annually enquiring of the Executive Chairman and the Chief Executive Officer their processes for evaluating their direct reports. An internal process of evaluation is undertaken annually on the performance, skills and knowledge of the Board and its committees, utilising a board skills matrix and by reference to the Board & Committee Evaluation Policy. The review provides comfort to the Board that its structure and performance is effective and appropriate to Beacon Lighting and that the Board has the range of skills, knowledge and experience to direct the Group. The Board skills matrix sets out the requisite skills, expertise, experience and other desirable attributes for the Board. The following attributes have been identified which Beacon seeks to achieve across its Board membership: other Board experience, retail industry experience, financial management experience and governance experience. The Directors have been selected for their relevant expertise and experience. They bring to the Board a variety of skills and experience, including industry and business knowledge, financial management, accounting, operational and corporate governance experience. The annual report includes details of the Directors, including their specific experience, expertise and term of office. To enable performance of their duties, all Directors: • Are provided with appropriate information in a timely manner and can request additional information at any time. • Have access to the Company Secretary. • Have access to appropriate continuing professional development opportunities. • Are able to seek independent professional advice at the Group’s expense in certain circumstances. the ASX Corporate Recommendations 2.4 and 2.5 of Governance Principles and Recommendations recommends that the Board comprise a majority of Directors who are independent, and the Chairperson should be an independent Director. The Board, as currently composed, does not comply with these recommendations. The Board considers that the composition of the Board is appropriate given the Group's present circumstances. that PRINCIPLE 3 Instill a Culture of Acting Lawfully, Ethically and Responsibly The Group has adopted a written Code of Conduct in accordance with Recommendation 3.2 which applies to the Directors and all associates employed by the Group, including senior management. The objective of this Code is to ensure that high standards of corporate and individual behavior are observed by all associates in the context of their employment. The Code of Conduct includes the Group's statement of values that defines the behavioural expectations of all Directors, Officers, senior management and associates. In summary, the Code requires associates to always act: • In a professional, fair and ethical manner, in accordance with the Group values. • In accordance with applicable legislation and regulations, and internal policies and procedures. • In a manner that protects the Group interests, reputation, property and resources. The Code also reminds associates of their responsibility to raise any concerns in relation to suspected or actual breaches of the Code. All Directors and associates employed by the Group receive appropriate training on their obligations under the Code. Beacon Lighting has a whistleblower policy in accordance with Recommendation 3.3 and ensures that the Board is informed of any material incidents reported under that policy. The policy details the types of concerns that may be reported under the policy, how whistleblowers will be protected and the process for follow up and investigation. Beacon Lighting has an anti-bribery and corruption policy in accordance with Recommendation 3.4 and ensures that the Board is informed of any breaches of that policy. The policy prohibits the giving or receipt of bribes or other improper payments, includes appropriate controls around donations and offerings of gifts, entertainment or hospitality and provides training to all managers on how to recognise and deal with breaches of the policy. Beacon Lighting also has a modern slavery policy. PRINCIPLE 4 Safeguard the Integrity of Corporate Reporting Recommendation 4.1 of the ASX Corporate Governance Principles and Recommendations, recommends that the Audit Committee consist only of Non-Executive Directors and consists of a majority of independent Directors. The Audit Committee as currently composed does not comply with these 7 BEACON LIGHTING GROUP ANNUAL REPORT 2022recommendations. Beacon Lighting has an Audit Committee comprising four members, three of whom are considered independent. The Audit Committee presently comprises Neil Osborne (Chairman), Eric Barr, Glen Robinson (Directors) and Andrew Hanson (external consultant until June 2022). Two of the four members of the committee are Non-Executive Directors and have experience in, and knowledge of, the industry in which Beacon Lighting operates. Neil Osborne, Eric Barr and Andrew Hanson each have accounting qualifications. The details of the number of Audit Committee meetings held and attended are included in the Directors’ Report. Minutes are taken at each Audit Committee meeting, with the minutes tabled in the following full Board meeting. The Audit Committee has adopted a formal charter which outlines its role in assisting the Board in the Group’s governance and exercising of due care, diligence and skill in relation to: • Reporting of financial information. • The application of accounting policies. • Financial risk management. • The Group’s internal control system. • Its relationship with the external auditor. In accordance with Recommendation 4.2 the Board, before it approves the Group's statements for a financial period, ensures that it receives from its Chief Executive Officer and Chief Financial Officer a declaration that, in their opinion, the financial records of the Group have been properly maintained and that the financial statements comply with the appropriate accounting standards and give a true and fair view of the financial position and performance of the entity and that the opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively. In accordance with Recommendation 4.3, the Group shall disclose the process used to verify the integrity of periodic reports released to the market that are not audited or reviewed by the Group’s external auditor to ensure that the report is materially accurate, balanced and provides investors with appropriate information to make informed investment decisions. The Group's external auditor attends each annual general meeting and are available to answer shareholders questions about the audit. PRINCIPLE 5 Make Timely and Balanced Disclosure and Recommendations Recommendation 5.1 of the ASX Corporate Governance Principles that companies should establish a written policy designed to ensure compliance with ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance and disclose that policy or a summary of it. The Group has adopted a Continuous Disclosure Policy. This Policy recommends sets out the standards, protocols and the detailed requirements expected of all Directors, Officers, senior management and associates of the Group for ensuring the Group immediately discloses all price-sensitive information in compliance with the Listing Rules and Corporations Act relating to continuous disclosure. The Board receives copies of all material market announcements promptly after they have been made to ensure that the Board has timely visibility of the nature and quality of the information being disclosed to the market. Where appropriate the Group will release copies of new and substantive investor presentation materials on the ASX Market Announcements Platform prior to their presentation. PRINCIPLE 6 Respect the Rights of Security Holders The Group has adopted a Communications Policy governing its approach to communicating with its shareholders, market participants, customers, associates and other stakeholders. This policy specifically includes: • The approach to briefing institutional investors, brokers and analysts. • The approach to communications with investors whether by meetings, via the Group’s websites, electronically or by any other means. Beacon Lighting provides a printed copy of its annual report to all requesting shareholders. The annual report contains relevant information about the Group’s operations during the year, changes in the state of affairs and other disclosures required by the Corporations Act and Accounting Standards. The half year report contains summarised financial information and a review of Beacon Lighting operations during the period. The Beacon Lighting Group corporate website (www. beaconlightinggroup.com.au) provides all shareholders and the public access to our announcements to the ASX, and general information about Beacon Lighting and its business. It also includes a section specifically dedicated to governance, which includes links to the Group's Constitution, Code of Conduct and its various corporate governance charters and policies The format of general meetings aims to encourage shareholders to actively participate in the meeting through being invited to comment or raise questions of Directors on any matter relevant to the performance and operation of the Group. The Group will consider the use of technology to facilitate the remote participation of shareholders in general meetings. Any substantive resolutions at a general meeting will be decided by a poll rather than by a show of hands in accordance with Recommendation 6.4 raise questions of Directors on any matter relevant to the performance and operation of the Group. 8 BEACON LIGHTING GROUP ANNUAL REPORT 2022PRINCIPLE 7 Recognise and Manage Risk Recommendation 7.1 of the ASX Corporate Governance Principles and Recommendations recommends that a listed company either have a committee to oversee risk or otherwise disclose the processes it employs to for overseeing the Group's risk management framework. The Board does not currently have a committee to oversee risk. Instead, the Board Charter specifically includes risk management responsibilities (rather than these being delegated to a separate Risk Committee). The Board evaluates all risks to the Group on an annual basis. The risk matrix is then reviewed at regular intervals throughout the year to ensure that the Group is not being exposed to any new risks and that all existing risks are being monitored and managed effectively. The Board retains oversight responsibility for assessing the effectiveness of the Group’s systems for the management of material business risks. The Board reviews the Group's risk management on an annual basis to ensure it continues to be sound. The Board does not consider a separate internal audit function is necessary at this stage. One of the Audit Committee responsibilities is to evaluate compliance with the Group’s risk management and internal control processes. The Audit Committee periodically reviews whether there is a need for a separate internal audit function. The Board has received written assurances from management as to the effectiveness of the Group’s management of its material business risks. The Chief Executive Officer and Chief Financial Officer provide a written assurance in the form of a declaration in respect of each relevant financial period that, in their opinion, the declaration is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. Recommendation 7.4 of the ASX Corporate Governance Principles and Recommendations requires the Group to disclose details about whether it has any material exposure to economic, environmental and social sustainability risks (if any). The Group has considered the following risks and has risk mitigation strategies in place. Economic Risks include impacts to consumers’ willingness to spend on lighting products in particular. The Group mitigates the risk through the constant monitoring of the macro- economic environment and adjusting capital expenditure, new projects and operating expenses accordingly. The COVID-19 pandemic has continued to have an impact upon the Beacon Lighting Group in FY2022. Despite the impact of the COVID-19 restrictions, the Group was very well placed to service the changing needs of retail and trade customers as they have spent more time working from home, home schooling and completing projects at home. There however remains significant uncertainty associated with the COVID-19 pandemic and lockdowns. Exchange Rate Volatility can impact upon the Group’s ability to achieve margins. The Group can also lock in a forward position for this foreign exchange exposure for a period of up to 12 months. The Board believes this mitigates the Group’s exchange rate volatility risk to an acceptable level. Environmental Risks include impacts on the Group’s supply chain from suppliers through to stores. These risks can be reputational, regulatory and financial. The Board assesses its primary exposure to be in the production of its products. The Group continues to operate responsibly with the community and to work with supply chain stakeholders in order to reduce the Group’s impact upon the environment. Social Risks include workplace health and safety as well as personnel management and corporate conduct. The Group has an extensive workplace health and safety policy incorporating the early identification and correction of potential risks, both in store, at the distribution centres and at the support offices. The Board is informed of all material incidents and material potential risks at each Board meeting and the appropriate action taken. During FY2022, the safety and well being of our associates, customers, business partners and the community continued to be a priority of the Group. impact Corporate Conduct Risks could regulatory, reputational and financial performance. It includes stock loss and theft. The Group has a dedicated store operations team to regularly monitor and assess store related risks. The Group undertakes regular inventory counts and analysis of store performance to reduce the risk of material loss. 9 BEACON LIGHTING GROUP ANNUAL REPORT 2022PRINCIPLE 8 Remunerate Fairly and Responsibly Recommendation 8.1 of the Corporate Governance Principles and Recommendations, recommends that the remuneration committee should comprise a majority of independent Directors. The Remuneration and Nomination Committee as currently composed complies with this recommendation. The Remuneration and Nomination Committee has four members. Three are independent: Eric Barr and Neil Osborne, as independent Directors, and Andrew Hanson as an external consultant (until June 2022). Ian Robinson, Executive Chairman, is the other member. The Committee is chaired by Eric Barr. In relation to remuneration, the Remuneration and Nomination Committee is responsible for: • Ensuring the Group has remuneration policies and practices appropriate to attracting and retaining key talent. • Reviewing and making recommendations in relation to the remuneration of Directors and senior management. • Reviewing and recommending the design of any executive incentive plans and approving the proposed awards to each executive under those plans. In accordance with its Charter, the Remuneration and Nomination Committee clearly distinguishes the structure of Non-Executive Directors’ remuneration from that of Executive Directors and senior executives. Details of Directors’ and Executives’ remuneration, including the principles used to determine the nature and amount of remuneration, are disclosed in the remuneration report section of the annual report. The Group's Securities Trading Policy expressly prohibits relevant participants from entering into arrangements that limit the economic risk of participating in the Group's incentive schemes prior to the relevant securities becoming fully vested. 10 DIRECTORS' Report The Directors of Beacon Lighting Group Limited (the ‘Group’) present their report together with the Consolidated Financial Statements of the Group and its controlled entities (the ‘Consolidated Entity’) for the 52 weeks ended 26 June 2022. 1. DIRECTORS 4. OPERATING AND FINANCIAL REVIEW The Directors of the Group during the whole financial period and up to the date of the report were: Ian Robinson Executive Chairman Chairman of the Board, Member of the Remuneration and Nomination Committee. Glen Robinson Chief Executive Officer Member of the Audit Committee. Eric Barr Non-Executive Director Deputy Chairman of the Board, Chairman of the Remuneration and Nomination Committee and Member of the Audit Committee. Neil Osborne Non-Executive Director Chairman of the Audit Committee and Member of the Remuneration and Nomination Committee. Details of the expertise and experience of the Directors are outlined on page 4 of this annual report. 2. PRINCIPAL ACTIVITIES During the financial period the principal continuing activities of the Group consisted of the selling of light fittings, globes, ceiling fans and energy efficient products predominately in the Australian market. 3. RESULTS The consolidated profit for the year attributable to the members of Beacon Lighting Group Limited was: CONSOLIDATED ENTITY Actual FY2022 $’000 Actual FY2021 $’000 Profit before Income Tax 58,029 53,758 Income Tax Expense (17,303) (16,100) Net profit after tax attributable to the members of Beacon Lighting Group Limited 40,726 37,658 4.1 Overview of Operations Beacon Lighting is the leading retail, trade and eCommerce lighting and ceiling fan business in Australia. Beacon Lighting also has several other specialist lighting businesses in Australia operating under several different brands. Beacon International is also an emerging international wholesale ceiling fan and lighting business operating in various countries around the world. Beacon Lighting also has a 50% share in the Large Format Property Fund which owns seven retail properties in Australia. At the end of FY2022, Beacon Lighting operated the following trading businesses: • 117 Beacon Lighting company stores. • 2 Beacon Lighting franchised stores. • 5 Beacon Commercial sales offices. • Beacon International offices in Hong Kong, Germany, United States of America and China. • Light Source Solutions operating in Australia and New Zealand. • Connected Light Solutions. • Masson For Light. • Custom Lighting. • Beacon Lighting Wholesale. The trading businesses are supported by a supply chain with Beacon Lighting operated warehouses in Brisbane (QLD), Melbourne (VIC) and a 3PL warehouse in Perth (WA). Beacon Lighting also has a Store Support Centre in Mulgrave (VIC). During FY2022, some of the operational highlights included: • Introduction of many new trade initiatives to better service our trade customers. • Opening new company stores in Ellenbrook (WA), Bundaberg (QLD), Traralgon (VIC), Tuggerah (NSW) and Butler (WA). • Relocated company stores at Port Macquarie (NSW), Burleigh (QLD) and the Camberwell (VIC) store to Hawthorn (VIC). • Launched the new eCommerce website in the United States of America with beaconlighting.us • Opened a new sales channel with Tmall Global in China. 12 BEACON LIGHTING GROUP ANNUAL REPORT 2022During FY2022, through the Large Format Property Fund, Beacon Lighting acquired a 50% interest in large format retail properties in Modbury (SA), Bathurst (NSW) and Mildura (VIC). This property portfolio complements the other four large format retail properties which were acquired in FY2021. Currently, four of the properties are fully tenanted while the other three properties require further development. Beacon Lighting continues to be a vertically integrated imports, business which designs, develops, sources, distributes, merchandises, markets and sells its own product range to reach the needs of our retail, trade and eCommerce customers. More than 95% of the lighting and fan products sold by Beacon Lighting are supplied through the Beacon Lighting supply chain. More than 85% of the products sold by Beacon Lighting are exclusively branded. 4.2 FY2022 Operations Supporting our trade customers and growing our trade sales remained the number one objective of Beacon Lighting in FY2022. Many new trade initiatives were introduced including the recruitment of an Executive General Manager Trade, the roll out of a trade desk to all stores, a dedicated trade marketing plan, the enhancement of the Beacon Trade Club website, new Beacon Trade rewards and the development of the Trade Essentials product range consisting of more than 500 lighting, fan and electrical accessory products. These initiatives were very well supported by our trade customers resulting in strong growth in trade club members, trade sales and online trade visitation. The COVID-19 pandemic has continued to impact on Beacon Lighting throughout FY2022. COVID trading restrictions were implemented at various times across the country. The COVID trading restrictions were severe in the Sydney, Melbourne and Canberra markets throughout Q1 FY2022. Throughout this period, Beacon Lighting implemented a number of safety and wellbeing measures in response to this changing environment. When required, Beacon Lighting maintained social distancing, invested in extensive cleaning, provided hand sanitisers, implemented QR codes and closed our stores to retail customers. It was very pleasing that our online sales channel was able to grow to be able to support our retail and trade customers throughout FY2022. The COVID restrictions impacted upon the trading performance of Beacon Lighting in H1 FY2022 with a sales result of $151.3 million being in line with the same sales result achieved in H1 FY2021. The Net Profit After Tax result in H1 FY2022 at $22.6 million was 1.8% ahead of the result in H1 FY2021. Without the impact of the COVID restrictions and a much more supportive trading environment, Beacon Lighting was able to achieve a sales result of $153.0 million in H2 FY2022 which was an 11.4% increase compared to H2 FY2021. Beacon Lighting achieved a Net Profit After Tax result of $18.2 million in H2 FY2022 which was an increase of 17.2% compared to H2 FY2021. 13 BEACON LIGHTING GROUP ANNUAL REPORT 20224.3 FINANCIAL SUMMARY 4.3.1 Financial Performance The Directors believe the presentation of non-IFRS measures are useful for the users of this financial report as they provide additional insight into the financial performance of the Group. Non-IFRS financial measures contained within this report are not subject to audit or review. A summary of the Beacon Lighting Group FY2022 result compared to the FY2021 result is presented in the following table: Consolidated Entity Sales Gross Profit(1) Other Income & Other Revenue(2) FY2022 $’000 304,299 210,368 991 FY2021 $’000 288,679 197,999 817 Operating Expenses(3) (118,669) (112,854) EBITDA EBIT Net Profit After Tax 92,690 63,793 40,726 85,962 59,502 37,658 (1) Gross Profit includes all rebates received (2) Other income includes other revenue, other income and a share of net profits of associates (3) Operating Expenses excludes interest, depreciation and amortisation Change $’000 Change % 15,620 12,369 174 (5,815) 6,728 4,291 3,068 5.4% 6.2% 21.3% 5.2% 7.8% 7.2% 8.1% 14 BEACON LIGHTING GROUP ANNUAL REPORT 20224.3.2 Sales 4.3.8 Financial Position In FY2022, Beacon Lighting achieved a sales milestone with sales exceeding $300.0 million for the first time. Total sales were $304.3 million which was 5.4% ahead of FY2021. Company store comparative sales increased by 0.3% in FY2022, with a decline in comparative sales of 7.1% in H1 FY2022 (as a result of COVID trading restrictions) and an increase in comparative sales of 9.0% in H2 FY2022. The best performing states from a comparative sales perspective were Victoria and Western Australia. Trade Club sales increased by 24.0%, Online sales increased by 31.3%, Beacon Commercial sales increased by 15.8% and Beacon International USA sales increased by 51.9%. 4.3.3 Gross Profit Margin innovation supported by Through continued product outstanding customer service, Beacon Lighting has been able to increase the gross profit margin to 69.1% of sales in FY2022. This compares to a gross profit margin of 68.6% of sales in FY2021. 4.3.4 Other Income & Other Revenue Other income includes other income, other revenue and share in the income from the investment in the Large Format Property Fund. Other income has increased by 21.3% because of the income earned by Beacon Lighting from the investment in the Large Format Property Fund. 4.3.5 Operating Expenses Operating expenses increased by 5.2% to $118.7 million. A deliberate investment in marketing has been made to support the growth strategies being retail, trade and Beacon International. The increase in the selling and distribution expenses were in line with the sales increase whilst there was a modest increase in general and administration expenses. Overall, operating expenses % to sales in FY2022 was 39.0% compared to 39.1% in FY2021. 4.3.6 Earnings In FY2022, Beacon Lighting achieved a record Net Profit After Tax result of $40.7 million which consolidated the significant Net Profit After Tax gain that was achieved in FY2021. This year, the Net Profit After Tax result increased by 8.1% and $3.1 million. The Net Profit After Tax percentage of sales improved to 13.4% in FY2022 compared to 13.0% in FY2021. 4.3.7 Dividends The Directors of Beacon Lighting have declared an annual fully franked dividend of 9.3 cents per share for FY2022, compared to 8.8 cents per share for FY2021. For H1 FY2022, the Directors declared a fully franked dividend of 4.3 cents per share and for H2 FY2022, the Directors declared a fully franked dividend of 5.0 cents per share. In the future, it is expected that Beacon Lighting will continue to have an annual Net Profit After Tax dividend payout ratio between 50% and 60%. Beacon Lighting has continued to invest for the future with the opening of five new stores, three store relocations and continued investment in the eCommerce platform. Beacon Lighting has increased the investment in Property, Plant and Equipment by $9.6 million. Beacon Lighting has also invested in three new Large Format Investment Properties for a total of approximately $4.8 million. Throughout FY2022, the Beacon Lighting investment in inventory has been impacted by an increase in purchase prices. The premiumisation and technology changes in the products, has seen an increased investment in higher priced products. Beacon Lighting invested in additional inventory for the Beacon Trade product range and Beacon International to optimise sales during the Northern Hemisphere fan season. Despite the considerable investments in Property, Plant and Equipment, Investment Properties and Inventory, Beacon Lighting has been able to maintain a strong net cash position with a cash balance of $28.0 million and borrowings of $19.6 million. This reflects the strong cash flows that were generated by Beacon Lighting throughout FY2022. 4.4 Business Strategies Throughout FY2022, the Beacon Lighting Group has continued to focus on four strategic pillars of growth. 4.4.1 Retail Beacon Lighting finished FY2022 with 117 company stores and two franchised stores. During the year, Beacon Lighting opened five new company stores at Ellenbrook (WA), Bundaberg (QLD), Traralgon (VIC), Tuggerah (NSW) and Butler (WA). Beacon Lighting also relocated to new stores at Port Macquarie (NSW), Burleigh (QLD) and Hawthorn (VIC) and closed the Parramatta (NSW) store. A Store Benchmarking and Network Plan from December 2020 identified the opportunity for 184 Beacon Lighting stores throughout Australia. With the continued expansion of the product range to meet the needs of our trade customers, Beacon Lighting now has a core range of 3,500 products, with more than 900 products being identified as being core to our trade customers. In FY2022, Beacon Lighting introduced 492 new products to ensure that our customers had the latest, innovative range of lighting, fan and energy efficient products that are available in the market. Beacon Lighting has more than 900 sales associates throughout Australia who continue to provide outstanding service to our retail and trade customers. Beacon Lighting also has 235 Accredited Lighting Design Consultants, 119 Trade Consultants and 29 Lighting Design Studios which ensure that all Beacon Lighting customers receive a unique customer service experience. 15 BEACON LIGHTING GROUP ANNUAL REPORT 20224.4.2 Trade Throughout FY2022, the number one Beacon Lighting objective was to have a positive impact upon the lives and businesses of our trade customers and in turn, increase sales to our trade customers. A critical appointment in FY2022 to support this objective, was the recruitment of a new Executive General Manager Trade who has championed the trade objective throughout Beacon Lighting. In FY2022, Beacon Lighting rolled out a trade desk to all Beacon Lighting stores and began the process of rolling out trade rooms and trade walls to specific stores. Beacon Lighting also introduced a weekly trade webinar and began a trade training program for key store team members. 200 new trade products have been developed and sourced and more than 500 products have been identified as “Trade Essential” products which ensures that Beacon Lighting is always competitive on key trade items. A dedicated trade marketing program, the Beacon Trade Club, a dedicated trade website and trade rewards have all been enhanced to improve the trade customer service experience. The success of the trade growth strategy has seen the number of Trade Club members increase by 7,800 to nearly 52,000 members. In FY2022, the Trade Club sales increased by 24.0%, total trade sales increased by 22.3% and online Trade Club sales increased by 67.6% over FY2021. Beacon Commercial, whose key customers include the Volume Residential Builders had a 15.8% increase in sales in FY2022 and have a record level of customer orders needing to be serviced in FY2023. 4.4.3 eCommerce Beacon Lighting has continued to re-platform many of the Group websites throughout FY2022. The most strategic of these developments has been the www.beaconlighting.us website which is now eCommerce enabled and has supported the sales of our ceiling fan range direct to the USA consumer. Another important eCommerce project has been the launch of a Beacon Lighting store on Tmall Global. This has enabled the selling of Australian designed ceiling fans direct to the Chinese consumer. The Australian www.beaconlighting.com.au website has proved to be critical during the COVID Pandemic. During the significant COVID trading restrictions in Sydney, Melbourne and Canberra throughout FY2022, many of our retail and trade customers turned to the online sales channel to get their lighting, fans and energy efficient products from Beacon Lighting. In FY2022, online sales to retail and trade customers increased by 31.3% to $34.1 million. 4.4.4 New Business Beacon Lighting continues to pursue growth in Beacon International, Custom Lighting, Masson For Light, Light Source Solutions and Connected Light Solutions. These businesses enjoyed success throughout FY2022, with a sales increase of 29.0% for Custom Lighting, 32.4% for Masson For Light and 23.8% for Connected Light Solutions. Beacon International is the most significant of these new businesses. In FY2022, new sales channels were established in the USA and China. The highlight in FY2022, involved the sales growth in the United States by 51.9%. Beacon International sales from Hong Kong, Europe and the USA increased by 27.9% to $15.7 million in FY2022. Beacon Lighting has continued to invest in the Large Format Property Fund. In FY2022, Beacon Lighting acquired a 50% share in three new properties being Modbury (SA), Bathurst (NSW) and Mildura (VIC). It was also pleasing that the Large Format Property Fund development project at Traralgon (VIC) opened as a Beacon Lighting store in December 2021. 4.5 BUSINESS RISKS Beacon Lighting is subject to risks that are specific to the Group and risks of a general nature. All these risks may threaten both the current and future operating and financial performance of Beacon Lighting and the outcome of an investment in Beacon Lighting. A number of these risks are beyond the control and influence of the Directors and management of Beacon Lighting, but Beacon Lighting has mitigation strategies in place to manage the impact of these risks should they occur. The material risks and how they are managed are presented in the following sections. 4.5.1 Retail Environment and General Economic Conditions Beacon Lighting is sensitive to the current and future state of the retail environment and general economic conditions. This includes, but is not limited to interest rates, consumer confidence, business confidence, unemployment, property prices, housing churn, dwelling approvals, renovations, government policy, global stability and natural disasters. The COVID pandemic and lockdowns has exposed Beacon Lighting to new and additional risks. An increase in COVID infections in Australia and overseas can result in lockdowns with consequential impacts upon customer demand, product supply and foreign currency volatility. A COVID outbreak in a store, commercial office, sales office or distribution centre may have a significant operational impact upon Beacon Lighting. Beacon Lighting plans to manage the Group according to the current retail and general economic environment. Beacon Lighting will also maintain a conservative cash position and bank facilities to support Beacon Lighting if required. 4.5.2 Product Sourcing, Quality and Supply Beacon Lighting is a vertically integrated business which relies upon key agents, factory relationships and quality assurance processes to ensure continuity of product supply. Beacon Lighting will continue to work on the supply chain so that it does not become critically dependent upon any one external third party. Beacon Lighting will consider additional investment in safety stocks, additional internal supply chain resources and diversifying the sources of supply should it be necessary. 16 BEACON LIGHTING GROUP ANNUAL REPORT 20224.5.3 Management Systems 4.5.7 Environment Beacon Lighting has several management systems which are critical to the ongoing operations of the Group. It is important that these management systems are secure and fit for purpose. Beacon Lighting needs to ensure that there is appropriate security, backup and recovery capabilities in place to safeguard the ongoing operation of our management system. 4.5.4 Foreign Currency Rates Beacon Lighting is a vertically integrated business where most products sold are imported into Australia and purchased in USD. As a result, the Group is exposed to fluctuations in the AUD/USD exchange rate. Beacon Lighting mitigates this risk by managing selling prices to our customers and from a cost perspective, carrying all stock in Australia in AUD and by using FX forward contracts to secure future FX positions. Beacon Lighting operates in a complex environment a variety of environmental, social and governance requirements. Any changes to this environment could adversely affect Beacon Lighting’s current and future financial position. Beacon Lighting continues to maintain effective environmental, social and governance processes to manage the risks associated with this complex operating environment. 4.5.8 Natural Events As has been shown over the last two years, external and unpredictable natural events such as pandemics, fires and floods can cause significant disruption to businesses, including Beacon Lighting. Beacon Lighting seeks to manage the impact of these risks through several means, including robust approaches to crisis and business continuity management. 4.5.5 Strategic Pillars of Growth 4.5.9 Legal and Regulatory Compliance Beacon Lighting is required to maintain compliance with all applicable laws and regulations. These include requirements related to consumer protection and product quality. Failure to comply with such laws and regulations could result in regulatory action or other claims which could have an adverse impact on Beacon Lighting’s reputation, financial performance and profitability. Beacon Lighting has management processes and product quality assurance processes to manage compliance with applicable laws and regulations. Beacon Lighting has several strategic pillars of growth. There is no guarantee that any one or all these pillars will succeed or be subject to delays or cost over-runs. Beacon Lighting will continue to invest in and support the strategic pillars that will increase value in the long term. If a strategic pillar cannot add value to Beacon Lighting in the long term, then resources will be reallocated to other strategic pillars. 4.5.6 Ability to Attract and Retain Key Associates The success of Beacon Lighting is dependent upon the ability to attract and retain key associates. The loss of key team members and the inability to find suitable replacements may adversely affect Beacon Lighting’s future financial performance. Beacon Lighting will aim to offer competitive remuneration packages for all associates and work to ensure that there is continuity and succession plans in places for the key associates within Beacon Lighting. 17 BEACON LIGHTING GROUP ANNUAL REPORT 20225. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no significant changes in the state of the affairs of the Group. 6. DIRECTORS’ MEETINGS The numbers of meetings of the Group’s Board of Directors held during the financial period ended 26 June 2022, and the numbers of meetings attended by each Director were: DIRECTOR’S MEETINGS COMMITTEE MEETINGS AUDIT REMUNERATION & NOMINATION DIRECTOR I Robinson G Robinson E Barr N Osborne H 13 13 13 13 A 13 13 13 13 H - 4 4 4 A - 4 4 4 H = Number of meetings held during the time the Director held office or was a member of the committee during the period. A = Number of meetings attended. H 3 - 3 3 A 3 - 3 3 7. DIRECTORS’ INTERESTS IN SHARES The relevant interest of each Director in the Company, as notified by the Directors to the ASX in accordance with section 205G(l) of the Corporations Act 2001 (Cth), at the date of the report is as follows: Director I Robinson (1) G Robinson (1) E Barr N Osborne Ordinary Shares in the Company 123,924,740 123,924,740 250,000 300,000 (1) Heystead Nominees and other Robinson Family member interests 8. DIRECTORS’ INTERESTS IN CONTRACTS Directors’ interests in contracts are disclosed in Note 33 of the financial statements. 9. DIVIDENDS Dividends paid to members during the financial period were as follows: Consolidated Entity Actual FY2022 $'000 Actual FY2021 $'000 Fully franked dividends paid during the period 19,876 14,696 18 BEACON LIGHTING GROUP ANNUAL REPORT 2022 10. INSURANCE OF OFFICERS 13. EVENTS SUBSEQUENT TO REPORTING 10.1. Indemnification of Directors DATE A fully franked dividend of $11,166,070 was declared on 17 August 2022 (5 cents per share). Other than the above, there has been no other matter or circumstance that has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial periods. 14. AUDIT SERVICES 14.1. Auditor’s Independence Declaration The auditor’s independence declaration to the Directors of the Consolidated Entity in relation to the auditor’s compliance with the independence requirements of the Corporations Act 2001 (Cth) and the professional code of conduct for external auditors, forms part of the Directors’ Report. No person who was an Officer of the Consolidated Entity during the financial year was a Director or Partner of the Consolidated Entity’s external auditor. The Group has indemnified each Director and external consultant referred to in this Report, the Company Secretary and previous Directors and Officers against all liabilities or loss (other than to the Group or a related body corporate) that may arise from their position as Officers of the Group and its controlled entities, except where the liability arises out of conduct involving a lack of good faith or where indemnification is otherwise not permitted under the Corporations Act. The indemnity stipulates that the Group will meet the full amount of any such liabilities, including costs and expenses, and covers an Officer after ceasing to be an Officer of the Group. The indemnity is contained in a Deed of Access, Insurance and Indemnity, which also gives each Officer access to the Group’s books and records. The Group has also indemnified the current and previous Directors of its controlled entities and certain members of the Company’s senior management for all liabilities or loss (other than to the Group or a related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith or where indemnification is otherwise not permitted under the Corporations Act. 10.2. Insurance Premiums During the financial period, Beacon Lighting Group Limited paid a premium of $222,297 to insure the Directors and Officers of the Group against any loss which he/she becomes legally obligated to pay on account of any claim first made against him/her during the policy period. 11. INDEMNITY OF AUDITORS Beacon Lighting Group Limited has agreed to indemnify their auditors, PricewaterhouseCoopers (PwC), to the extent permitted by law, against any claim by a third party arising from Beacon Lighting Group Limited’s breach of their agreement. The indemnity stipulates that Beacon Lighting Group Limited will meet the full amount of any such liabilities including a reasonable amount of legal costs. No liability has arisen under this indemnity as at the date of this report. 12. 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 Group for all or part of those proceedings. No proceedings have been brought or intervened in on behalf of the Group with leave of the Court under section 237 of the Corporations Act 2001 (Cth). 19 BEACON LIGHTING GROUP ANNUAL REPORT 202214.2 Audit and Non-Audit Services Provided by the External Auditor During the 52 weeks ended 26 June 2022, the following fees were paid or were due and payable for services provided by the external auditor, PwC, of the Consolidated Entity: Consolidated Entity Audit & Assurance Services FY2022 $ FY2021 $ Audit & review of financial statements 270,350 252,700 Other Services Tax compliance services Other Services Total Remuneration of PwC In addition to their statutory audit duties, PwC provided taxation services to the Group. The Board has a review process in relation to non-audit services provided by the external auditor. The Board considered the non-audit services provided by PwC and, in accordance with written advice provided, and endorsed, by a resolution of the Audit Committee, is satisfied that the provision of these non- audit services by the auditor is compatible with, and does not compromise, the auditor independence requirements of the Corporations Act 2001 (Cth) for the following reasons: • All non-audit services are subject to the corporate governance procedures adopted by the Group and are reviewed by the Audit Committee to ensure they do not impact the integrity and objectivity of the auditor. • Non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they do not involve reviewing or auditing the auditor’s own work, aiding in a management or decision making capacity for the Group, acting as an advocate for the Company or jointly sharing risks and rewards with the Group. 15. AUDITOR PwC continues in office in accordance with section 327 of the Corporations Act 2001 (Cth). 16. ROUNDING OF AMOUNTS The Group has relied on the relief provided by ASIC Corporations Instrument 2016/191, and in accordance with that Instrument, amounts in the financial statements have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. 19,510 - 289,860 44,300 8,745 305,745 17. REMUNERATION REPORT 17.1. Remuneration Policy and Link to Performance The Board recognises that the performance of the Group depends on the quality and motivation of our associates, including senior management and the more than 1,100 associates employed by the Group across Australia and Internationally. The Group remuneration strategy therefore seeks to appropriately attract, reward and retain associates at all levels in the business, but in particular for management and key executives. The Board aims to achieve this by establishing executive remuneration packages that include a mix of fixed remuneration and short term incentives. The Board has appointed the Remuneration and Nomination Committee whose objective is to assist the Board in relation to the Group remuneration strategy, policies and actions. In performing this responsibility, the Committee must give appropriate consideration to the Group’s performance and objectives, employment conditions and external remuneration relativities. The Committee reviews and determines our remuneration policy and structure annually to ensure it remains aligned to business needs and meets the Group’s remuneration principles. No specific advice or recommendations were sought from remuneration consultants during the 52 weeks ended 26 June 2022. The remuneration framework for senior executives comprises a mix of both fixed and variable remuneration components. Variable remuneration may be delivered in the form of cash and performance rights, subject to the achievement of short term performance targets. An outline of the remuneration framework is set out on page 21. 20 BEACON LIGHTING GROUP ANNUAL REPORT 2022Remuneration Framework Element Purpose Performance Metrics Potential Value Changes for FY2022 Link to Performance Fixed Remuneration Nil Provide competitive market salary including superannuation and non-monetary benefits Positioned at competitive market rates No change Consolidated Group as well as individual performance are considered during the annual review of fixed remuneration Short Term Incentive (Cash Bonus) Reward for in year performance Budgeted Net Profit After Tax (NPAT) 200% of the executives on target cash bonus* No change NPAT measures as determined by the Board Short Term Incentive (Performance Rights) Reward for in year performance Budgeted Net Profit After Tax (NPAT) 125% of the executives on target cash bonus* No change Grants are subject to achieving budgeted performance and vesting is subject to the executive remaining employed by the Group at the vesting date *On target cash bonus is the bonus as stipulated in the executives’ service agreements Remuneration Approach The proportion of fixed and variable remuneration is established for Key Management Personnel (KMP) by the Board following recommendations from the Remuneration and Nomination Committee which are subject to Board approval. For FY2022 the actual fixed and variable remuneration was: Fixed Remuneration % Short Term Incentive (Cash Bonus) % Short Term Incentive (Performance Rights or Options) % Total % Executive Chairman Chief Executive Officer Managing Director – Sales(1) Chief Financial Officer Chief Operating Officer (1) Managing Director – Sales resigned August 2021 100.00% 65.09% 44.91% 77.03% 75.38% 0.00% 16.10% 0.00% 10.81% 11.59% 0.00% 100.00% 18.81% 100.00% 55.09% 100.00% 12.16% 100.00% 13.03% 100.00% The Remuneration and Nomination Committee is responsible for assessing performance against KPIs and determining the STIs to be paid or issued. To assist in this assessment, the Committee receives detailed financial reports from management which are based on independently verifiable financial statements. In the event of serious misconduct or material misstatement in the Group’s financial statements the remuneration committee can cancel performance based remuneration and may also claw back performance based remuneration paid in previous financial years. 21 BEACON LIGHTING GROUP ANNUAL REPORT 2022 The Group’s Net Profit After Tax (NPAT) result has been determined as the appropriate financial performance target to trigger the payment of cash incentives for each period. The amount of any short term cash incentive paid in a year is dependent upon the level of performance achieved against the Group’s NPAT budget for the year. The Board considers NPAT to be an appropriate performance measure as it aligns the Group’s remuneration philosophy with creating value, and is within the scope of influence of participants. Structure of Short Term Cash Incentive Plan Feature Description Maximum Opportunity 200% of on target cash bonus value Performance Metric Budgeted NPAT Delivery of STI Board Discretion 100% of STI is paid in cash after the financial results have been audited and approved by the Board The Board has discretion to adjust remuneration outcomes up or down to prevent any inappropriate reward outcomes, including reducing down to zero if appropriate 3. Short Term Incentive (Performance Rights) During the 52 weeks ended 26 June 2022 the Group continued to maintain a short term performance rights incentive plan. Executives including the Chief Executive Officer but excluding the Chairman are eligible to participate in the plan subject to the achievement of the Group financial performance targets. The plan provides the opportunity to obtain shares or potentially be cash settled at the directors' discretion, subject to meeting the relevant conditions including remaining an employee at no cost to the executive. 100% of the grants are assessed by financial measures (subject to the right of the directors to adjust remuneration outcomes to prevent inappropriate outcomes). The financial measure used is the Group’s NPAT result against the Group’s NPAT budget. This is tested annually. The Board considers NPAT to be an appropriate performance measure as it aligns the Group’s remuneration philosophy with creating value and is within the scope of influence of participants. 17.2 Principles Used to Determine the Nature and Amount of Remuneration (a) Directors’ Fees The Executive Chairman and the Chief Executive Officer do not receive Directors’ fees but are remunerated as executives within the business. The Deputy Chairman and the Non-Executive Director are entitled to receive annual fees of $122,000 and $112,000 their relevant respectively. These responsibilities on the various Group Committees and are also inclusive of superannuation. These fees exclude any additional fees for special services which may be determined from time to time. No additional retirement benefits are payable. inclusive of fees are The Non-Executive Director fees are reviewed annually to ensure that the fees reflect market rates. There are no guaranteed annual increases in any Directors’ fees. The Executive Chairman and Non-Executive Directors do not participate in the short or long term incentive schemes. (b) Executive Remuneration The current executive salary and reward framework has three components: 1. Fixed Remuneration. 2. Short Term Incentive (STI) (Cash Bonus). 3. Short Term Incentive (Performance Rights). The combination of executives’ total remuneration. these components comprises the For the 52 weeks ended 26 June 2022, the Group did not have a long term incentive program in place. 1. Fixed Remuneration Executive base salaries are structured as a part of the total employment remuneration package which comprises the fixed component of pay and other financial benefits being car allowances. Fixed remuneration includes superannuation which is paid in accordance with legislated amounts. Fixed remuneration for executives is reviewed annually to provide competitiveness with the market, whilst also taking into account capability, experience, value to the organisation and performance of the individual. There are no guaranteed base salary increases included in executive contracts. An executive’s remuneration is also reviewed on promotion. In FY2022 fixed remuneration was increased for the five executives at an average increase of 6.67%. This was done to align remuneration with comparative roles. 2. Short Term Incentive (Cash Bonus) Executives including the Chief Executive Officer but not the Executive Chairman are eligible to participate in an annual short term cash incentive which delivers rewards by way of cash bonuses, subject to the achievement of the Group financial performance targets. 22 BEACON LIGHTING GROUP ANNUAL REPORT 2022Structure of Short Term Performance Rights Feature Description Maximum Opportunity 125% of on target cash bonus value Performance Metric Budgeted NPAT Delivery of STI 100% of STI award is paid in cash after the financial results have been audited and approved by the Board Board Discretion The Board has discretion to adjust remuneration outcomes up or down to prevent any inappropriate reward outcomes, including reducing down to zero if appropriate, subject to the terms of the plan 17.3 FY2022 Performance and Impact on Remuneration Beacon Lighting’s NPAT financial performance in FY2022 was equal to the FY2022 budget. For the 52 weeks ended 26 June 2022, the Group’s financial performance targets were met when compared to budget. Senior management will be awarded the short term cash incentive and the short term (performance rights), subject to Board approval. 17.4 Statutory Performance Indicators Beacon Lighting aims to align executive remuneration to strategic and business objectives and the creation of shareholder wealth. The table below shows measures of the Group’s financial performance over the last five years as required by the Corporations Act 2001 (Cth). The table below shows improvement in the Group’s performance over that period generating significant benefits for shareholders both in terms an appreciating share price and the payment of dividends. Statutory Key Performance Indicators of the Group FY2022 FY2021 FY2020 FY2019 FY2018 Net profit after tax ($’000) 40,726 37,658 22,225 16,044 19,590 Basic earnings per share (cents) 18.24 16.94 10.11 7.37 9.09 Dividend payments ($’000) 19,876 14,696 10,110 10,986 10,577 Share Price (Period End) 1.76 1.86 1.08 1.04 1.54 17.5. Details of Remuneration The following executives along with the Directors are identified as key management personnel with the authority and responsibility for planning, directing and controlling the activities of the Group, directly and indirectly, during the financial year. Ian Robinson Executive Chairman Glen Robinson Chief Executive Officer Ian Bunnett Managing Director – Sales (resigned August 2021) David Speirs Chief Financial Officer Barry Martens Chief Operating Officer All of the above executives were employed by Beacon Lighting and were key management personnel for the entire 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 unless otherwise stated. 23 BEACON LIGHTING GROUP ANNUAL REPORT 2022The details of the remuneration of the Directors and other key management personnel for the Beacon Lighting Group Limited and the consolidated entity for the current and prior financial periods are set out in the following table: Fixed Remuneration Variable Remuneration Cash Salary & Fees Non- Monetary Benefits $ $ Post Employment Super Contributions $ Annual & Long Service Leave $ Cash Performance Based Payment $ Share Based Payments Total $ - - 217,181 211,494 19,017 (1,977) 17,397 1,369 - - 23,568 10,408 112,000 124,994 669,408 21,694 (17,317) 214,000 81,098 681,290 11,521 10,104 10,577 9,236 - - - - - - - - - - - - 126,734 116,462 116,347 106,461 64,683 8,431 112,000 124,994 1,129,670 58,431 (15,948) 214,000 81,098 1,115,707 DIRECTORS I Robinson (Chairman) 2022 2021 200,141 192,728 G Robinson (Chief Executive Officer) 2022 2021 E Barr (Non-Executive) 2022 2021 398,438 381,815 115,213 106,358 N Osborne (Non-Executive) 2022 2021 105,770 97,225 Total Remuneration Directors 2022 2021 EXECUTIVES 819,562 778,126 - - - - - - - - - - I Bunnett (Managing Director – Sales) (resigned August 2021) 2022 2021 172,815 289,400 D Speirs (Chief Financial Officer) 2022 2021 312,623 289,296 B Martens (Chief Operating Officer) 2022 2021 268,101 249,072 Total Remuneration Executives 2022 2021 753,539 827,768 - - - - - - - - 19,307 (132,080) - 73,642 133,684 21,694 (1,137) 100,000 38,249 448,206 23,568 20,073 50,000 56,246 462,510 21,694 9,934 100,000 38,249 459,173 23,568 33,620 50,000 56,246 431,535 21,694 5,485 100,000 38,249 414,500 66,443 (78,387) 100,000 186,135 1,027,730 65,082 14,282 300,000 114,747 1,321,879 24 BEACON LIGHTING GROUP ANNUAL REPORT 2022 17.6. Share Based Compensation The number of performance rights granted to the Chief Executive are set out below: Grant Date Quantity Granted Vest Date Value at Grant Date $ Vested % Quantity Vested & Exercisable Quantity Unvested Quantity Exercised Value Expensed this Year $ G Robinson 24/08/2017 39,338 Refer below 53,500 100.00% 39,338 16/08/2018 71,333 Refer below 109,140 100.00% 71,333 - - 26,227 23,783 - - 20/08/2020 99,074 Refer below 107,000 66.67% 66,053 33,021 19/08/2021 76,087 Refer below 140,000 33.34% 25,367 50,720 - - 21,381 103,613 Total 285,832 409,640 202,091 83,741 50,010 124,994 The fair value of performance rights granted on 24 August 2017 (grant date) was $1.360, with a final vesting date of 25 August 2020. The fair value of performance rights granted on 16 August 2018 (grant date) was $1.530, with a final vesting date of 16 August 2020. The fair value of performance rights granted on 20 August 2020 (grant date) was $1.080, with a final vesting date of 20 August 2022. All unvested performance rights will vest by 20 August 2022 provided the executive remains employed by the Group at the vesting date. The fair value of performance rights granted on 19 August 2021 (grant date) was $1.840, with a final vesting date of 19 August 2023. All unvested performance rights will vest by 19 August 2023 provided the executive remains employed by the Group at the vesting date. The performance rights have a zero exercise price. Subject to meeting the relevant vesting conditions. If shares are issued, they will be issued at no cost to the executive. In the event an executive leaves the Group prior to the vesting date the performance rights will generally lapse, except at the discretion of the Directors. 25 BEACON LIGHTING GROUP ANNUAL REPORT 2022 The number of options and performance rights over shares in the Group granted to the Key Management Personnel are set out below. Grant Quantity Date Granted Vest Date Value at Grant Date $ Vested % Quantity Vested & Exercisable Quantity Quantity Unvested Exercised Value Expensed this Year $ D Speirs 24/08/2017 18,382 Refer below 25,000 100.00% 18,382 16/08/2018 33,333 Refer below 51,000 100.00% 33,333 - - 20/08/2020 46,296 Refer below 50,000 66.67% 30,865 15,431 21/08/2021 33,967 Refer below 62,500 33.34% 11,325 22,642 B Martens 24/08/2017 18,382 Refer below 25,000 100.00% 18,382 16/08/2018 33,333 Refer below 51,000 100.00% 33,333 - - 20/08/2020 46,296 Refer below 50,000 66.67% 30,865 15,431 21/08/2021 33,967 Refer below 62,500 33.34% 11,325 22,642 12,867 22,223 - - 12,867 22,223 - - - - 9,992 46,255 - - 9,992 46,255 Total 263,956 377,000 187,810 76,146 70,180 112,494 The fair value of options granted on 24 August 2017 (grant date) was $1.360. 40% vested on 24 August 2018, 30% vested on 24 August 2019 and 30% vested on 24 August 2020. The fair value of options granted on 16 August 2018 (grant date) was $1.530. 33.34% vested on 16 August 2018, 33.33% vested on 16 August 2019 and 33.33% vested on 16 August 2020. The fair value of options granted on 20 August 2020 (grant date) was $1.080. 33.34% vested on 20 August 2020, 33.33% vested on 20 August 2021 and 33.33% will vest on 20 August 2022. The fair value of performance rights granted on 19 August 2021 (grant date) was $1.840, with a final vesting date of 19 August 2023. All unvested performance rights will vest by 19 August 2023 provided the executive remains employed by the Group at the vesting date. The options have a zero exercise price. Subject to meeting the relevant vesting conditions, shares will be issued at no cost to the executive. In the event an executive leaves the Group prior to the vesting date the options will generally lapse, except at the discretion of the Directors. 26 BEACON LIGHTING GROUP ANNUAL REPORT 2022 17.7 Share Holdings The numbers of ordinary voting shares in the Company held during the financial year by each Director of Beacon Lighting Group and other key management personnel of Beacon Lighting Group, including their personally related parties, are set out below. Balance at Start of Year Received During Year (1) Purchase of Shares DRP Issue (2) Sales of Shares Balance at End of Year DIRECTORS I Robinson (Executive Chairman) (3) 2022 2021 123,757,815 122,479,786 G Robinson (Chief Executive Officer) 2022 2021 E Barr (Non-Executive) 2022 2021 N Osborne (Non-Executive) 2022 2021 EXECUTIVES 132,925 130,211 225,000 200,000 300,000 300,000 I Bunnett (Managing Director – Sales)(4) - - - - - - - - 2022 2021 D Speirs (Chief Financial Officer) 2022 2021 B Martens (Chief Operating Officer) 43,276 101,320 103,276 115,022 161,653 146,220 146,220 - - - - - 2022 2021 Total 2022 2021 34,000 - - - - 1,278,029 - 2,714 25,000 25,000 - - - - - - - - - - - - - - - - 123,791,815 123,757,815 132,925 132,925 250,000 225,000 300,000 300,000 144,596 - 60,000 43,276 - - - 115,022 115,022 146,220 146,220 - - - - - - - - - - 3,369 50,000 124,720,258 101,320 59,000 144,596 124,735,982 123,521,146 - 25,000 1,284,112 110,000 124,720,258 (1) There were shares received during the year as a result of options being exercised under the STI Plan. (2) Shares received during the year as a result of participating in the Dividend Reinvestment Plan. (3) Heystead Nominees Pty Ltd and other Robinson Family member interests, excluding Glen Robinson. (4) I Bunnett (Managing Director – Sales) resigned August 2021 27 BEACON LIGHTING GROUP ANNUAL REPORT 202217.8 Service Agreements All executives are employed on terms consistent with the remuneration framework outlined in this report. Each of the relevant executive agreements is for a continuing term but may be terminated by either party with a required notice period of 12 weeks. These agreements do not provide for any termination payments other than payment in lieu of notice. Name G Robinson Contract Type Rolling contract I Bunnett (resigned August 2021) Rolling contract D Speirs B Martens Rolling contract Rolling contract Notice of termination by Group Employee notice 12 weeks 12 weeks 12 weeks 12 weeks 12 weeks 12 weeks 12 weeks 12 weeks 17.9 Voting of Shareholders at Last Year’s Annual General Meeting Beacon Lighting Group received more than 90% of yes votes on its remuneration report for FY2021. The Group did not receive any specific feedback at the Annual General Meeting or throughout the year on its remuneration practices. Signed in accordance with a resolution of Directors Ian Robinson Executive Chairman Melbourne, 17 August 2022 Glen Robinson Chief Executive Officer 28 BEACON LIGHTING GROUP ANNUAL REPORT 2022AUDITOR'S Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Beacon Lighting Group Limited for the 52 week period ended 26 June 2022, I declare that to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Beacon Lighting Group Limited and the entities it controlled during the period. Jason Perry Partner PricewaterhouseCoopers Melbourne 17 August 2022 PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. 29 BEACON LIGHTING GROUP ANNUAL REPORT 2022 INDEX to the Financial Statements Page Page Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements 1. Summary of Significant Accounting Policies 2. Financial Risk Management 3. Segment Information 4. Revenue from Ordinary Activities and Other Revenue 5. Other Income 6. Expenses 7. Income Tax Expense 8. Cash and Cash Equivalents 9. Trade and Other Receivables 10. Inventories 11. Derivative Financial Instruments 12. Other Current Assets 13. Property, Plant and Equipment 14. Investments Accounted for Using the Equity Method 15. Deferred Tax Assets 16. Intangible Assets 17. Trade and Other Payables 31 32 33 34 35 35 43 48 49 49 50 51 52 52 54 55 57 57 58 59 60 61 18. Current Borrowings 19. Current Provisions 20. Current Tax Liabilities 21. Non Current Borrowings 22. Non Current Provisions 23. Leases 24. Contributed Equity 25. Reserves and Retained Profits 26. Dividends 27. Key Management Personnel Disclosures 28. Share Based Payments 29. Earnings Per Share 30. Remuneration of Auditors 31. Contingencies 32. Commitments 33. Related Party Transactions 34. Subsidiaries 35. Events Occurring After the Reporting Period 36. Cash Flow Information 37. Critical Accounting Estimates 38. Parent Entity Financial Information 39. Deed of Cross Guarantee 62 62 64 64 65 65 67 68 70 71 71 73 73 73 74 74 76 79 80 81 81 82 30 BEACON LIGHTING GROUP ANNUAL REPORT 2022 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entities Consolidated Entity Notes REVENUE FROM CONTRACTS WITH CUSTOMERS Sale of goods Other revenue Total revenue from contracts with customers Other income EXPENSES Cost of sales of goods Other expenses from ordinary activities Marketing Selling and distribution General and administration Finance costs 4 4 4 5 6 6 Share of net profits of associates accounted for using the equity method 34(b) PROFIT BEFORE INCOME TAX Income tax expense 7 PROFIT FOR THE PERIOD ATTRIBUTABLE TO THE MEMBERS OF THE PARENT ENTITY Profit is attributable to: Owners of Beacon Lighting Group Limited Non-controlling interests Other comprehensive income - Items that may be reclassified to profit or loss: Changes in the fair value of derivatives Exchange differences on translation of foreign operations 25(a) 25(a) Income tax relating to these items Other comprehensive income for the period, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO THE MEMBERS OF THE PARENT ENTITY FY2022 $’000 304,299 494 304,793 280 FY2021 $’000 288,679 635 289,314 182 (93,931) (90,680) (14,459) (114,878) (18,228) (5,764) 217 58,029 (17,303) 40,726 40,726 - 40,726 497 807 (390) 914 (13,045) (108,345) (17,924) (5,744) - 53,758 (16,100) 37,658 37,630 28 37,658 1,195 (200) (298) 697 41,640 38,355 Total comprehensive income is attributable to: Owners of Beacon Lighting Group Limited Non-controlling interests EARNINGS PER SHARE Basic earnings per share Diluted earnings per share 41,640 - 41,640 CENTS 18.24 18.24 29 29 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying Notes. 38,327 28 38,355 CENTS 16.94 16.92 31 BEACON LIGHTING GROUP ANNUAL REPORT 2022CONSOLIDATED BALANCE SHEET As at 26 June 2022 and as at 27 June 2021 Beacon Lighting Group and its controlled entities Consolidated Entity Notes CURRENT ASSETS Cash and cash equivalents Trade and other receivables Inventories Derivative financial instruments Other current assets Total current assets NON-CURRENT ASSETS Financial assets at fair value through profit or loss Investments in associates Property, plant and equipment Right of use assets Intangible assets Other non-current assets Deferred tax assets Total non-current assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Borrowings Derivative financial instruments Provisions Current tax liabilities Lease liabilities Total current liabilities NON-CURRENT LIABILITIES Borrowings Lease liabilities Provisions Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Other reserves Retained earnings TOTAL EQUITY 8 9 10 11 12 14 13 23 16 15 17 18 11 19 20 23 21 23 22 24 25(a) 25(b) The above consolidated balance sheet should be read in conjunction with the accompanying Notes. 32 FY2022 $’000 27,996 8,591 93,094 330 1,751 131,762 67 19,971 38,957 105,186 13,718 231 12,653 190,783 322,545 30,694 19,561 - 10,111 1,783 26,718 88,867 - 97,742 1,801 99,543 188,410 134,135 72,312 (42,267) 104,090 134,135 FY2021 $’000 33,830 7,788 67,936 - 1,337 110,891 213 15,241 35,252 100,746 13,738 416 13,528 179,134 290,025 23,417 18,617 18 9,413 2,666 25,079 79,210 - 97,680 939 98,619 177,829 112,196 72,312 (43,355) 83,239 112,196 BEACON LIGHTING GROUP ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entities Consolidated Entity Notes Contributed Equity $’000 Reserves $’000 Retained Earnings $’000 Total Equity $’000 Balance as at 27 June 2021 72,312 (43,355) 83,240 112,197 Profit for the year Other comprehensive income 25(a) Total comprehensive income for the period Transactions with owners in their capacity as owners: Issue of shares via dividend reinvestment plan Employee share scheme Treasury share reserve Dividends provided for or paid Total contributions by and distributions to owners 24 25(a) 25(a) 26 - - - - - - - - - 914 914 - 327 (153) 40,726 40,726 - 914 40,726 41,640 - - - - 327 (153) - (19,876) (19,876) 175 (19,876) (19,701) Balance as at 26 June 2022 72,312 (42,267) 104,090 134,135 Balance as at 28 June 2020 70,258 (43,567) 60,277 86,968 Profit for the year Other comprehensive income 25(a) Total comprehensive income for the period Transactions with owners in their capacity as owners: Issue of shares via dividend reinvestment plan Employee share scheme Treasury share reserve Dividends provided for or paid 24 25(a) 25(a) 26 - - - 2,054 - - - - 697 697 - (286) (199) 37,658 37,658 - 697 37,658 38,355 - - - 2,054 (286) (199) - (14,696) (14,696) Total contributions by and distributions to owners 2,054 (485) (14,696) (13,127) Balance as at 27 June 2021 72,312 (43,355) 83,240 112,197 The above consolidated statement of changes in equity should be read in conjunction with the accompanying Notes. 33 BEACON LIGHTING GROUP ANNUAL REPORT 2022For the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entities CONSOLIDATED STATEMENT OF CASH FLOWS Consolidated Entity CASH FLOWS FROM OPERATING ACTIVITIES Notes FY2022 $’000 FY2021 $’000 Receipts from customers (inclusive of goods and services tax) 333,410 318,869 Payments to suppliers and employees (inclusive of goods and services tax) (258,060) (234,508) Interest received Borrowing costs Income taxes paid Net cash inflow from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment Payments for interest in associates Payments for acquisitions Payments for financial assets Proceeds from interest in associates Proceeds from sale of property, plant and equipment 171 (5,764) (17,348) 52,409 (9,604) (4,840) - - 286 31 220 (5,744) (17,615) 61,222 (7,911) (15,240) (1,150) (250) - - 36 33 33 Net cash (outflow) from investing activities (14,127) (24,551) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings (Repayment) of borrowings (Payments) for principal portion of lease liabilities 78,007 70,058 (77,064) (81,839) (25,183) (23,274) Dividends paid to Company's shareholders 26 (19,876) (12,642) Net cash (outflow) from financing activities 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 8 The above consolidated statement of cash flows should be read in conjunction with the accompanying Notes. (44,116) (5,834) 33,830 27,996 (47,697) (11,026) 44,856 33,830 34 BEACON LIGHTING GROUP ANNUAL REPORT 20221. Summary of Significant Accounting (iii) Compliance with IFRS The consolidated financial report of the Group also complies with International Financial Reporting Standards as issued by the International Accounting Standards Board. (iv) Historical Cost Convention This financial report has been prepared in accordance with the historical cost convention, except for certain financial assets and liabilities (including derivative instruments) measured at fair value. (v) Critical Accounting Estimates The preparation of 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. Refer to Note 37 Critical Accounting Estimates for detailed explanation of items requiring assumptions and estimates. (b) Comparative Financial Information Unless otherwise stated, the accounting policies adopted are consistent with those of the previous year. Comparative information is reclassified where appropriate to enhance comparability and provide more appropriate information to users. (c) Principles of Consolidation and Equity Accounting (i) Subsidiaries The consolidated financial report incorporates the assets and liabilities of all subsidiaries of Beacon Lighting Group Limited (‘Group’ or ‘parent entity’) as at 26 June 2022 and the results of all subsidiaries for the period then ended. Beacon Lighting Group Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity. Subsidiaries are all 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 deconsolidated from the date that control ceases. Policies The principal accounting policies adopted in the preparation of this consolidated financial report is set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated. The financial report is for the consolidated entity consisting of Beacon Lighting Group Limited and its subsidiaries. (a) Basis of Preparation This general purpose financial report has been prepared in accordance with Australian Accounting Standards and interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001 (Cth). Beacon Lighting Group Limited is a for-profit entity for the purpose of preparing the financial report. Beacon Lighting Group Limited operates within a retail financial period. The current financial period was a 52 week retail period ending on 26 June 2022 (2021: 52 week period ending 27 June 2021). This treatment is consistent with section 323D of Corporations Act 2001 (Cth). (i) New, Revised or Amended Accounting Standards and Interpretations Adopted by the Group A number of new or amended standards became applicable for the current reporting period. The Group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards. IFRS Interpretations Committee - Costs Necessary to Sell Inventories (IAS 2 Inventories) Beacon Lighting Group is continuing to monitor developing practice in relation to the recently released IFRIC agenda item “Costs Necessary to Sell Inventories”. There is judgement required in the assessment of the costs necessary to make the sale when determining the net realisable value of inventories. Beacon Lighting Group considers the costs are the direct selling costs associated with the sale of certain product lines. These direct costs include, but not limited to, costs such as commissions, direct advertising and marketing campaigns to sell the inventory. Beacon Lighting Group considers the impact of the IFRIC agenda decision as not resulting in a material adjustment to the assessment of the net realisable value of inventory. (ii) Impact of Standards Issued but Not Yet Applied by Group Certain new accounting standards and interpretations have been published that are not mandatory for 26 June 2022 reporting periods and have not been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022The acquisition method of accounting is used to account for business combinations by the Group (refer to Note 1(i)). Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Where control of an entity is obtained during a financial period, its results are included in the consolidated statement of comprehensive income from the date on which control commences. Where control of an entity ceases during a financial period its results are included for that part of the period during which control existed. Investments in subsidiaries are accounted for at cost in accounting records of Beacon Lighting Group Limited. (ii) Associates Associates are all entities over which the Group has significant influence but not control or joint control. This is generally the case where the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting (see (iii) below), after initially being recognised at cost. (iii) Equity Method Under the equity method of accounting, the investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the investee in profit or loss, and the Group’s share of movements in other comprehensive income of the investee in other comprehensive income. Dividends received or receivable from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. Where the Group’s share of losses in an equity-accounted investment equals or exceeds its interest in the entity, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the other entity. Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s interest in these entities. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the Group. The carrying amount of equity-accounted investments is tested for impairment in accordance with the policy described in note 1(j). 36 (iv) Changes in Ownership Interests The Group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the Group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the Group. When the Group ceases to consolidate or equity account for an investment because of a loss of control, joint control or significant influence, any retained interest in the entity is remeasured to its fair value with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. (d) Segment Reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker for Beacon Lighting Group Limited and its controlled entities (the Group), is the Chief Executive Officer (CEO). The Group determines operating segments based on information provided to the CEO in assessing performance and determining the allocation of resources within the Group. Consideration is given to the manner in which products are sold, nature of the products supplied, the organisational structure and the nature of customers. Reportable segments are based on the aggregated operating segments determined by the manner in which products are sold, similarity of products, nature of the products supplied, the nature of customers, the methods used to distribute the product and materiality. The Group purchases goods in USD for sales predominately into Australia. The Group’s one reportable segment is the selling of light fittings, fans and energy efficient products. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022(e) Foreign Currency Translation (i) Functional and Presentation Currency Items included in the financial report of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial report is presented in Australian dollars, which is Beacon Lighting Group Limited’s functional and presentation currency. (ii) Transactions and Balances Foreign currency transactions are translated into the functional currency 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 year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss, except when they are deferred in equity as qualifying cash flow hedges. (iii) Specific Commitments Hedging is undertaken in order to avoid or minimise possible adverse financial effects of movements in exchange rates. Gains or costs arising upon entry into a hedging transaction intended to hedge the purchase or sale of goods and services, together with subsequent exchange gains or losses resulting from those transactions are deferred in the consolidated statement of comprehensive income from the inception of the hedging transaction up to the date of the purchase or sale and included in the measurement of the purchase or sale. Any gains or losses arising on the hedging transaction after the recognition of the hedge purchase or sale are included in the consolidated statement of comprehensive income. In the case of hedges of monetary items, exchange gains or losses are brought to account in the financial period in which the exchange rates change. (iv) Group Companies The results and financial position of foreign operations (none of which has the currency of a hyper inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet. • Income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions). • All resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. (f) Revenue Recognition Revenue The Group operates a chain of retail stores and sells a range of lighting products direct to customers. Revenue from the sale of goods is recognised when a Group entity sells a product to the customer at which point the control of products is transferred. Payment of the transaction price is due immediately when the customer purchases the lighting products and takes control of the products. It is the Group’s policy to sell its products to the end customer with a right of return within 30 days. The refund liability and a right to the returned goods is not material for the products expected to be returned. The Group’s obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision, see Note 19. Interest Income Interest income is recognised using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate. Franchise Royalty Fee Income Franchise royalty fee income includes advertising contributions and management fee, which is based upon a percentage of sales. (g) Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. 37 BEACON LIGHTING GROUP ANNUAL REPORT 2022Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. 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. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances are related to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in foreign operations where the Group is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. Beacon Lighting Group Limited and its wholly-owned Australian controlled entities have not implemented the tax consolidation legislation. (h) Leases The Group leases various offices, distribution centers and retail stores. Rental contracts are typically made for fixed periods of 7 to 14 years but may have extension options as described below. Contracts may contain both lease and non- lease components. The Group allocates the consideration in the contract to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate for which the Group is a lessee, it has elected not to separate lease and non-lease components and instead accounts for these as a single lease component. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • Fixed payments (including in-substance fixed payments), less any lease incentives receivable. • Variable lease payments that are based on an index or a rate. • Amounts expected to be payable by the lessee under residual value guarantees. • The exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and • Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. To determine the incremental borrowing rate, the Group: • Where possible, uses recent third-party financing received as a starting point, adjusted to reflect changes in financing conditions since third party financing was received. • Uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk for leases held by the Group, which does not have recent third party financing, and • The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following: • The amount of the initial measurement of lease liability. • Any lease payments made at or before the commencement date less any lease incentives received. • Any initial direct costs, and • Restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight- 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. While the Group revalues its land and buildings that are presented within property, plant and equipment, it has chosen not to do so for the right-of-use buildings held by the Group. Payments associated with short-term leases of equipment and vehicles and all leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less. Low- value assets comprise IT equipment and small items of office furniture. Extension and termination options Extension and termination options are included in a number of property and equipment leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension and termination options held are exercisable only by the Group and not by the respective lessor. (i) Business Combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition-date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred and the amount of any non-controlling interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired and the measurement of all amounts has been reviewed, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquire is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss. (j) Impairment of Assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested 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. The recoverable amount is the higher of an asset’s fair value less cost of disposal and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non- financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. (k) Cash and Cash Equivalents For the purpose of presentation in the consolidated statement of cash flows, 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, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the consolidated balance sheet. (l) Trade Receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement between 30 and 60 days from end of month and therefore are all classified as current. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The Group holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. The Group applies the AASB 9 simplified approach to measuring expected credit losses which 39 BEACON LIGHTING GROUP ANNUAL REPORT 2022uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. (m) Inventories Finished goods are stated at the lower of cost and net realisable value. Cost comprises direct materials, and an appropriate proportion of variable and fixed overhead expenditure. Costs are assigned to individual items of inventory on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. (n) Derivatives and Hedging Activities Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. At inception of the hedge relationship, the Group documents the economic relationship between hedging instruments and hedged items including whether changes in the cash flows of the hedging instruments are expected to offset changes in the cash flows of hedged items. The Group documents its risk management objective and strategy for undertaking its hedge transactions. Fair value is determined with reference to quoted market prices. The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. The method of recognising the resulting gain or loss depends on whether the derivative is designated and effective as a hedging instrument, and if so, the nature of the item being hedged. Cash Flow Hedge The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in the hedging reserve in equity. The gain or loss relating to the ineffective portion is recognised in the income statement in other income or other expenses. Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for instance, when the forecast purchase of inventory that is hedged takes place). The gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the income statement within finance costs. The gain or loss relating to the effective portion of forward foreign exchange contracts 40 which hedge imported inventory purchases are ultimately recognised in the profit or loss as cost of goods sold. to hedge forward contracts are used When forecast transactions, the Group generally designates only the change in fair value of the forward contract related to the spot component as the hedging instrument. Gains or losses relating to the effective portion of the change in the spot component of the forward contracts are recognised in the cash flow hedge reserve within equity. The change in the forward element of the contract that relates to the hedged item (‘aligned forward element’) is recognised within Other Comprehensive Income (OCI) within the cash flow hedge reserve. In some cases, the entity may designate the full change in fair value of the forward contract (including forward points) as the hedging instrument. In such cases, the gains or losses relating to the effective portion of the change in fair value of the entire forward contract are recognised in the cash flow hedge reserve within equity. When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. (o) Property, Plant and Equipment All property, plant and equipment is stated at historical cost less depreciation. 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. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the reporting period in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost, net of their residual values, over their estimated useful lives or, in the case of leasehold improvements and certain leased plant and equipment, the shorter lease term as follows: • Furniture, Fittings & Equipment 4 to 20 years. • Motor vehicles 5 to 8 years. • Buildings 40 years. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. (p) Intangible Assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired business at the date of acquisition. Goodwill on acquisitions of businesses is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. (ii) Patents, Trademarks and Other Rights Patents, Trademarks and Other Rights have a finite useful life and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method to allocate the cost of the patents, trademarks, and other rights over their useful life of 25 years. (q) Trade and Other Payables These amounts represent liabilities for goods and services provided to the Group prior to the end of financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. They are recognised initially at their fair value and subsequently measured at amortised cost using the effective interest method. (r) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the consolidated statement of comprehensive income over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. (s) Provisions Provisions for legal claims, product warranties and make good are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. The Group recognises the present value of the estimated costs that may be incurred in restoring leased premises to their original condition at the end of the respective lease terms as a provision for make good. The costs are recognised as the obligation is incurred either at commencement of the lease or as a consequence of using the asset and are included in the cost of the right of use assets. This estimate is reviewed at each reporting date after assessing factors such as lease status, commercial terms, probability of incurring make good costs; and adjusted for any known changes in the initial cost estimate. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the end of the reporting period. The discount rate used to determine the present value is a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. (t) Employee Benefits (i) Short-Term Obligations Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet. (ii) Other Long-Term Employee Benefit Obligations The liabilities for long service leave and annual leave are not expected to be settled wholly within 12 months after the end of the period in which the employees render the related service. They are therefore recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. 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 end of the reporting period of government bonds with terms and 41 BEACON LIGHTING GROUP ANNUAL REPORT 2022currencies that match, as closely as possible, the estimated future cash outflows. Re-measurements as a result of experience adjustments and changes in actuarial assumptions are recognised in profit or loss. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlement for at least twelve months after the reporting period, regardless of when the actual settlement is expected to occur. (iii) Share Based Payments Share based compensation benefits are provided to employees via the Beacon Lighting Short Term Incentive Plan. Information relating to this scheme is set out in the Remuneration Report and Note 27. The fair value of performance rights and options granted under the plan are recognised as an employee benefit expense over the period during which the employees become unconditionally entitled to the rights with a corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the rights granted, which includes any market performance conditions and the impact of any non-vesting conditions but excludes the impact of any service and non-market performance vesting conditions. Non-market vesting conditions are included in assumptions about the number of rights that are expected to vest which are revised at the end of each reporting period. The impact of the revision to original estimates, if any; is recognised in the consolidated statement of comprehensive income, with a corresponding adjustment to equity. The fair value is measured at grant date and the expense recognised over the life of the plan. The fair value is determined using a Black-Scholes pricing model that takes into account the exercise price, the term of the right, 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 rights. (u) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of 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 taxation authority is included with other receivables or payables in the consolidated balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. 42 (v) Store Opening Costs Non-capital costs associated with the setup of a new store are expensed in the period in which they are incurred. (w) Dividends Provision is made for the amount of any dividends declared, determined or publicly recommended by the Directors on or before the end of the financial period but not distributed at balance date. (x) Contributed Equity 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. (y) Earnings Per Share (i) Basic Earnings Per Share Basic earnings per share is determined by dividing net profit after income tax attributable to members of the Group, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial period, adjusted for bonus elements in ordinary shares issued during the period and excluding treasury shares. (ii) Diluted Earnings Per Share Diluted earnings per share adjusts the figure 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 (including performance rights) and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. (z) Rounding Amounts The Group has relied on the relief provided by ASIC Corporations Instrument 2016/191, and in accordance with that Instrument, amounts in the financial statements have been rounded off to the nearest thousand dollars, or in certain cases, to the nearest dollar. (aa) Parent Entity Financial Information The financial information for the parent entity, Beacon Lighting Group Limited, disclosed in Note 38 has been prepared on the same basis as the consolidated financial report, except as set out below. Investments in Subsidiaries Investments in subsidiaries are accounted for at cost in the financial report of Beacon Lighting Group Limited. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 20222. FINANCIAL RISK MANAGEMENT The consolidated entity is exposed to a variety of financial risks comprising: a) Market risk b) Credit risk and c) Liquidity risk Risk management is carried out under policies approved by the Chief Executive Officer. The Group’s activities expose it to a variety of financial risks: market risk (including foreign currency 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 derivative financial instruments such as foreign exchange contracts and interest rate swaps to hedge certain risk exposures. Derivatives are exclusively used for hedging purposes, i.e. not as trading or other speculative instruments. 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 foreign exchange risks and aging analysis for credit risk. The Group holds the following financial instruments: Consolidated Entity FINANCIAL ASSETS Cash and cash equivalents Trade and other receivables Derivative financial instruments FINANCIAL LIABILITIES Trade and other payables Borrowings Derivative financial instruments Lease Liabilities FY2022 $’000 27,996 8,591 330 36,917 30,694 19,561 - 124,460 174,715 FY2021 $’000 33,830 7,788 - 41,618 23,417 18,617 18 122,759 164,811 43 BEACON LIGHTING GROUP ANNUAL REPORT 2022(a) Market Risk Foreign Exchange Risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the USD. Foreign exchange risk arises when future commercial transactions and recognised financial assets and financial liabilities are denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The Group hedges its foreign exchange risk exposure arising from future commercial transactions and recognised assets and liabilities using forward contracts. The Group has a policy of hedging 100% of the Group’s inventory purchases in USD and sold in AUD. The Group can also lock in a forward position for this foreign exchange exposure for a period of up to 12 months. Inventory purchases in other currencies are insignificant. At 26 June 2022 the average term of outstanding foreign exchange contracts is two months with an average forward rate for AUD/ USD of 0.7606. The Group holds the following foreign exchange derivatives: Consolidated Entity Forward exchange contracts - buy cash flow hedges (notional amount) FY2022 $’000 2,967 FY2021 $’000 11,972 Interest Rate Risk The Group’s main interest rate risk arises from short term borrowings with variable rates, which expose the Group to cash flow interest rate risk. The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Interest rate swaps currently in place cover approximately 35.47% (2021: 41%) of the variable loan principal outstanding. The fixed interest rate of the swap used to hedge is 2.47% (2021: 2.47%) and the variable rate of the loan 0.42% (2021: 0.0575%). The swap contracts require settlement of net interest receivable or payable every 30 days. The settlement dates coincide with the dates on which interest is payable on the underlying debt. The Group’s exposure to foreign currency and interest rate risk at the end of the reporting period, expressed in AUD is per below: Consolidated Entity Interest rate swap contracts - buy cash flow hedges (notional amount) FY2022 $’000 6,937 FY2021 $’000 7,688 Amounts recognised in profit or loss and other comprehensive income During the year, the following gains were recognised in profit or loss and other comprehensive income in relation to forward exchange contracts and interest rate swaps. Consolidated Entity Gain recognised in other comprehensive income FY2022 $’000 348 FY2021 $’000 837 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022Group Sensitivity At 26 June 2022, 35.4% (2021: 41.3%) of Beacon Lighting Group’s short term borrowings are hedged using forward exchange contracts and interest rate swaps. The sensitivity of profit or loss to changes in the exchange rates arises mainly from USD denominated financial instruments and the impact on other components of equity arises from foreign forward exchange contracts designated as cash flow hedges. Inventory purchases in other currencies are insignificant. Impact on other components of equity Consolidated Entity Forward exchange contracts USD / AUD exchange rate – increase 10% USD / AUD exchange rate – decrease 10% Interest rate swap contracts Floating interest rate – increase 10% Floating interest rate – decrease 10% Effects of hedge accounting on the financial position and performance Consolidated Entity Forward exchange contracts Carrying amount - asset / (liability) Notional amount Maturity Date Hedge Ratio Change in intrinsic value of outstanding hedging instruments FY2022 $’000 (296) 296 27 (27) FY2022 $’000 (271) 2,967 FY2021 $’000 (1,197) 1,197 5 (5) FY2021 $’000 (328) 11,972 September 2022 to October 2022 August 2021 to December 2021 1:1 271 1:1 328 Weighted average strike rate for the year USD$0.7606 : AUD$1 USD$0.7601 : AUD$1 Interest rate swap contracts Carrying amount - asset / (liability) Notional amount Maturity Date Hedge Ratio Change in intrinsic value of outstanding hedging instruments Weighted average strike rate for the year 329 6,937 345 7,688 15 November 2023 15 November 2023 1:1 (329) 2.47% 1:1 (345) 2.47% 45 BEACON LIGHTING GROUP ANNUAL REPORT 2022(b) Credit Risk Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, favorable derivative financial instruments and deposits with banks as well as credit exposures to wholesale and retail customers, including outstanding receivables and committed transactions. Individual credit limits are set based on internal or external ratings in accordance with limits set by the Board. The compliance with credit limits by wholesale, retail and trade customers is regularly monitored by line management. Sales to retail customers are required to be settled in cash or using major credit cards, mitigating credit risk. There are no significant concentrations of credit risk, whether through exposure to individual customers, specific industry sectors and/or regions. An analysis of trade receivables is disclosed in Note 9. (c) Liquidity Risk Financing Arrangements The Group had access to the following financing facilities at the end of each reporting period: Consolidated Entity FLOATING RATE – TOTAL FACILITIES Overdraft Trade finance facility Interchange facility Asset finance facility Loan facility – multi currency Loan facility – floating rate FLOATING RATE – TOTAL UNDRAWN FACILITIES Overdraft Trade finance facility Interchange facility Asset finance facility Loan facility – multi currency Loan facility – floating rate Maturities of Financial Liabilities FY2022 $’000 FY2021 $’000 500 10,000 25,500 4,000 4,023 15,000 500 10,000 5,939 3,825 4,023 15,000 500 10,000 25,500 4,000 3,968 15,000 500 10,000 6,883 3,652 3,968 15,000 The tables below analyse the Group’s financial liabilities into relevant maturity groupings as follows: (a) Based on their contractual maturities: (i) All non-derivative financial liabilities, and (ii) Net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows. (b) Based on the remaining period to the expected settlement date: (i) Derivative financial liabilities for which the contractual maturities are not essential for an understanding of the timing of the cash flows. 46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022The amounts disclosed in the table are the contractual undiscounted cash flows. Contractual maturities of financial liabilities including lease liabilities: Less Than 6 months $’000 6 - 12 Months $’000 Between 1 and 5 Years $’000 Over 5 Years $’000 Total Contractual Cash Flows $’000 Carrying Amount (Assets) Liabilities $’000 Consolidated Entity At 26 June 2022 NON-DERIVATIVES Trade and other payables Borrowings Lease liabilities 30,694 19,683 - - - 26,718 Total non-derivatives 50,376 26,718 DERIVATIVES Forward exchange contracts Interest rate swap contract Net settled (cash flow hedges) At 27 June 2021 NON-DERIVATIVES Trade and other payables Borrowings Lease liabilities 271 - 271 23,417 18,653 - - - - - - 25,263 Total non-derivatives 42,070 25,263 DERIVATIVES Forward exchange contracts Interest rate swap contract Net settled (cash flow hedges) 328 - 328 - - - - - 97,742 97,742 - 59 59 - - 97,680 97,680 - (346) (346) - - - - - - - - - - - - - - 30,694 19,683 30,694 19,561 124,460 124,457 174,836 174,711 271 59 330 271 59 330 23,417 18,653 23,417 18,617 122,759 122,746 164,829 164,780 328 (346) (18) 328 (346) (18) 47 BEACON LIGHTING GROUP ANNUAL REPORT 2022(d) Fair Value Measurements For information about the methods and assumptions used in determining the fair value of derivatives please refer to Note 11. Fair value hierarchy AASB 13 requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); b) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2); and c) Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3). The following table presents the Group’s financial assets and financial liabilities measured and recognised at fair value at 26 June 2022, on a recurring basis. At 26 June 2022 Derivatives used for hedging - Net Position Level 2 $’000 330 Total $’000 330 The fair value of financial instruments that are not traded in an active market (for example, over–the–counter derivatives) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. All of the resulting fair value adjustments are included in level 2 and the adjustments are all based on valuations provided by third party banking institutions. There has been no change in valuation techniques during the period. There are no financial assets and liabilities in Level 1 and Level 3, and there are no transfers between the levels. 3. SEGMENT INFORMATION Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker for Beacon Lighting Group Limited and its controlled entities (the Group), is the Chief Executive Officer (CEO). The Group determines operating segments based on information provided to the CEO in assessing performance and determining the allocation of resources within the Group. Consideration is given to the manner in which products are sold, nature of the products supplied, the organisational structure and the nature of customers. Reportable segments are based on the aggregated operating segments determined by the manner in which products are sold, similarity of products, nature of the products supplied, the nature of customers, the methods used to distribute the product and materiality. The Group purchases goods mainly in USD for sales predominantly into Australia. The Group’s one reportable segment is the selling of light fittings, fans and energy efficient products. 48 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 20224. REVENUE FROM ORDINARY ACTIVITIES AND OTHER REVENUE The Group derives revenue from the transfer of goods and services over time and at a point in time as follows: • Sale of Goods - point in time. • Interest Income - point in time. • Franchise Royalty Fees - point in time. Consolidated Entity From Ordinary Activities Sale of goods Other Revenue Franchise fees Sundry revenue 5. OTHER INCOME Consolidated Entity Other Interest Income FY2022 $’000 FY2021 $’000 304,299 288,679 484 10 494 590 45 635 304,793 289,314 FY2022 $’000 109 171 280 FY2021 $’000 - 182 182 49 BEACON LIGHTING GROUP ANNUAL REPORT 20226. EXPENSES Consolidated Entity (a) PROFIT BEFORE INCOME TAX INCLUDES THE FOLLOWING SPECIFIC EXPENSES: Depreciation Furniture, fittings and equipment and buildings Depreciation – right of use assets Motor vehicles Amortisation Patents, trademarks and other rights Finance costs Interest and finance charges paid/payable Net (profit)/loss on disposal of property, plant and equipment Employee benefits (b) NET FOREIGN EXCHANGE GAINS AND LOSSES FY2022 $’000 FY2021 $’000 4,750 4,247 23,707 21,763 419 389 20 20 5,764 (23) 5,744 692 69,141 65,256 Net foreign exchange (gains)/losses recognised in profit before income tax for the period (as either other income or expense) (357) 217 50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 20227. INCOME TAX EXPENSE Consolidated Entity (a) INCOME TAX EXPENSE Current tax Deferred tax Adjustments for current tax of prior periods Deferred income tax (revenue) included in income tax expense comprises (Note 15): Decrease / (Increase) in deferred tax assets (Decrease) / increase in deferred tax liabilities (b) NUMERICAL RECONCILIATION OF INCOME TAX EXPENSE TO PRIMA FACIE TAX PAYABLE Profit from continuing operations before income tax expense Tax at the Australian tax rate of 30% (2021: 30%) Tax effect of amounts which are not deductible in calculating taxable income: Entertainment Sundry items Income tax expense FY2022 $’000 17,548 (245) - 17,303 246 (1) 245 58,029 17,409 29 (135) 17,303 FY2021 $’000 16,152 (220) 168 16,100 235 (15) 220 53,758 16,127 41 (68) 16,100 51 BEACON LIGHTING GROUP ANNUAL REPORT 20228. CASH AND CASH EQUIVALENTS Consolidated Entity Cash at bank and in hand (a) Classification as Cash Equivalents FY2022 $’000 27,996 FY2021 $’000 33,830 Term deposits are presented as cash equivalents if they have a maturity of three months or less from the date of acquisition and are repayable with 24 hours notice with no loss of interest. Risk Exposure The Group’s and the parent entity’s exposure to interest rate risk is discussed in Note 2. 9. TRADE AND OTHER RECEIVABLES FY2022 $’000 8,331 (426) 7,905 686 8,591 FY2022 $’000 7,833 281 (24) 241 8,331 FY2021 $’000 7,357 (294) 7,063 725 7,788 FY2021 $’000 6,052 571 124 610 7,357 Consolidated Entity Trade receivables (a) Provision for impairment of receivables (b) Net amounts receivable from customers Other debtors (c) (a) Aging of Trade Receivables Trade receivables ageing analysis at period end is: Consolidated Entity Not past due Past due 31-60 days Past due 61-90 days Past due more than 91 days 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022(b) Provision for Impairment of Receivables Trade receivables are non-interest bearing with terms that vary between 30 and 60 days end of month. The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 36 months before 26 June 2022 or 27 June 2021 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. On that basis, the loss allowance as at 26 June 2022 and 27 June 2021 (on adoption of AASB 9) was determined as follows for both trade receivables: 26 June 2022 Current 31-60 days past due 61 - 90 days past due More than 90 days past due Total Expected loss rate 1.65% 20.00% - 100.00% Gross carrying amount - trade receivables ($’000) Loss allowance ($’000) 7,832 129 281 56 (23) - 241 241 8,331 426 27 June 2021 Expected loss rate Gross carrying amount - trade receivables ($’000) Loss allowance ($’000) Current 31-60 days past due 61 - 90 days past due More than 90 days past due Total 0.10% 6,052 6 0.50% 5.00% 45.70% 571 3 124 6 610 279 7,357 294 Trade receivables are written off when there is no reasonable expectation of recovery. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group, and a failure to make contractual payments for a period of greater than 120 days past due. Impairment losses on trade receivables are presented as net impairment losses within operating profit. Subsequent recoveries of amounts previously written off are credited against the same line item. 53 BEACON LIGHTING GROUP ANNUAL REPORT 2022 (c) Other Debtors These amounts generally arise from transactions outside the usual operating activities of the Group. Interest may be charged at commercial rates where the terms of repayment exceed six months. Collateral is not normally obtained. Foreign Exchange and Interest Rate Risk Information about the Group’s exposure to foreign currency risk and interest rate risk in relation to trade and other receivables is provided in Note 2. Fair Value and Credit Risk Due to the short-term nature of these receivables, their carrying amount is assumed to approximate their fair value. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of receivables mentioned above. Refer to Note 2 for more information on the risk management policy of the Group and the credit quality of the entity’s trade receivables. 10. INVENTORIES Consolidated Entity Inventory at lower of cost and net realizable value Goods in transit - at cost FY2022 $’000 87,800 5,294 93,094 FY2021 $’000 64,554 3,382 67,936 Inventory Finance The Group utilises inventory finance facilities to fund inventory. The term of the facility is two years. Inventory Expense Inventories recognised as expense during the 52 week period ended 26 June 2022 and included in cost of sales of goods amounted to $93,930,976 (2021: $90,679,723). Write-downs of inventories to net realisable value recognised as an expense during the 52 week period ended 26 June 2022 amounted to $1,435,248 (2021: $728,310). Included in the valuation of inventory is a provision for stock obsolescence of $1,549,637 (2021: $1,532,088). Critical accounting judgements, estimates and assumptions: The provision for stock obsolescence assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the recent sales experience, the ageing of inventories and other factors that affect stock obsolescence. 54 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 202211. DERIVATIVE FINANCIAL INSTRUMENTS Consolidated Entity Current liabilities Forward foreign exchange contracts – cash flow hedges Interest rate swap contracts – cash flow hedges Total current derivative financial instrument liabilities Net current derivative financial instrument assets FY2022 $’000 FY2021 $’000 271 59 330 330 328 (346) (18) (18) The Group’s risk exposures are provided in Note 2. Forward Exchange Contracts and Interest Rate Swaps– Cash Flow Hedges The Group purchases products in USD. In order to protect against exchange rate movements, the Group has entered into forward exchange contracts to purchase USD and an interest rate swap to hedge against interest rate fluctuations. These contracts are hedging highly probable forecasted purchases for the ensuing financial year. The contracts are timed to mature when payments for major purchases of inventory are scheduled to be made. The portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other comprehensive income. When the cash flows occur, the Group adjusts the initial measurement of the component recognised in the balance sheet by removing the related amount from other comprehensive income. During the 52 weeks ended 26 June 2022 there were no gains or losses (2021: nil) recognised in profit or loss for the ineffective portion of these hedging contracts. Hedge ineffectiveness Hedge effectiveness is determined at the inception of the hedge relationship and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument. For hedges of foreign currency purchases, the Group enters into hedge relationships where the critical terms of the hedging instrument match exactly with the terms of the hedged item. The Group therefore performs a qualitative assessment of effectiveness. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical derivative method to assess effectiveness. In hedges of foreign currency purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated, or if there are changes in the credit risk of Australia or the derivative counterparty. The Group enters into interest rate swaps that have similar critical terms as the hedged item, such as reference rate, reset dates, payment dates, maturities and notional amount. Hedge ineffectiveness for interest rate swaps is assessed using the same principles as for hedges of foreign currency purchases. It may occur due to: • The credit value/debit value adjustment on the interest rate swaps which is not matched by the loan, and • Differences in critical terms between the interest rate swaps and loans. There was no ineffectiveness during FY2022 or FY2021 in relation to the interest rate swaps. 55 BEACON LIGHTING GROUP ANNUAL REPORT 2022Hedge reserves The Group’s hedging reserves disclosed in Note 25 relate to the following hedging instruments: Consolidated Entity Opening balance 27 June 2021 Add Change in fair value of hedging instrument recognised in Other Comprehensive Income Less Deferred Tax Closing balance 27 June 2021 Add Change in fair value of hedging instrument recognised in Other Comprehensive Income Less Deferred Tax Closing balance 26 June 2022 Currency Forwards $'000 Interest Rate Swaps $'000 Total Hedge Reserves $'000 (268) 851 (255) 328 (81) (24) 271 (587) 344 (103) (346) 578 173 59 (855) 1,195 (358) (18) 497 149 330 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 202212. OTHER CURRENT ASSETS Consolidated Entity Prepayments and other current assets FY2022 $’000 1,751 FY2021 $’000 1,337 13. PROPERTY, PLANT AND EQUIPMENT AND INVESTMENT PROPERTIES Investment Properties $’000 Furniture, Fittings and Equipment $’000 Vehicles $’000 Land and Buildings $’000 Total $’000 Consolidated Entity Year ended 27 June 2021 Opening net book amount - 29,560 1,636 1,651 32,847 Additions Disposals Depreciation charge Closing net book amount At 27 June 2021 Cost Accumulated depreciation Net book amount Year ended 26 June 2022 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 26 June 2022 Cost Accumulated depreciation Net book amount 15,212 (15,212) - - - - - - - - - - - - - 7,428 (804) (4,255) 31,929 476 (25) (389) 1,698 7 - 23,123 (16,041) (33) (4,677) 1,625 35,252 59,575 3,646 1,673 64,894 (27,646) (1,948) (48) (29,642) 31,929 1,698 1,625 35,252 31,929 1,698 1,625 35,252 9,043 (672) (4,766) 35,534 561 (16) (419) 1,824 - - 9,604 (688) (26) (5,211) 1,599 38,957 67,218 3,762 1,673 72,653 (31,684) (1,938) (74) (33,696) 35,534 1,824 1,599 38,957 57 BEACON LIGHTING GROUP ANNUAL REPORT 202214. INVESTMENT IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD Consolidated Entity Shares in associates at carrying amount at start of period Acquisitions Carrying amount at end of period Refer to note 34(b) for details of the Group’s associates FY2022 $’000 15,241 4,730 19,971 FY2021 $’000 - 15,241 15,241 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 202215. DEFERRED TAX ASSETS Consolidated Entity GROSS DEFERRED TAX ASSETS The balance comprises temporary differences attributable to: Employee benefits Inventory Franchise agreement termination fees Debtor provision Fixed assets Marketing fund Lease liabilities Other provisions/accruals Total deferred tax assets GROSS DEFERRED TAX LIABILITIES The balance comprises temporary differences attributable to: Right of use asset Other accruals and provisions Total deferred tax liabilities FY2022 $’000 FY2021 $’000 2,441 1,235 207 124 295 442 37,286 2,001 44,031 31,378 - 31,378 2,408 1,103 668 88 613 501 37,153 1,614 44,148 30,619 1 30,620 MOVEMENTS IN NET DEFERRED TAX ASSETS Opening balance 13,528 13,403 Charged/(credited) to the consolidated statement of comprehensive income (Note 7) Charged/(credited) amounts recognised on acquisitions Charged/(credited) amounts recognised directly in equity (245) (630) - (220) 345 - Net deferred tax assets 12,653 13,528 59 BEACON LIGHTING GROUP ANNUAL REPORT 202216. INTANGIBLE ASSETS Consolidated Entity Year ended 27 June 2021 Opening net book amount Additions Amortisation charge for the year Closing net book amount At 27 June 2021 Cost Accumulated amortisation Net book amount Year ended 26 June 2022 Opening net book amount Additions Amortisation charge for the year Closing net book amount At 26 June 2022 Cost Accumulated amortisation Net book amount Goodwill $’000 Patents, Trademarks and Other Rights $’000 12,773 805 - 13,578 13,578 - 13,578 13,578 - - 13,578 13,578 - 13,578 180 - (20) 160 500 (340) 160 160 - (20) 140 500 (360) 140 Total $’000 12,953 805 (20) 13,738 14,078 (340) 13,738 13,738 - (20) 13,718 14,078 (360) 13,718 The prior year acquisition accounting has been finalised in the current year and there were no changes to the amounts previously reported. 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022(a) Impairment Tests for Goodwill Goodwill is allocated to the Group’s one cash generating unit being the selling of light fittings, fans and energy efficient products (refer Note 3). The recoverable amount is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a five-year period. (b) Key Assumptions Used For Value-In-Use Calculations Gross Margin Growth Rate Discount Rate 2022 % 65.0 2021 % 65.0 2022 % 3.0 2021 % 3.0 2022 % 11.1 2021 % 9.1 Management determined gross margin based on past performance and its expectations for the future. The weighted average growth rates used are consistent with forecasts included in industry reports. Management has considered reasonably possible changes in the key assumptions used in the value-in-use calculations and has not identified any reasonably possible change that would cause a material impact in the carrying amount of the Group’s cash generating unit. 17. TRADE AND OTHER PAYABLES Consolidated Entity Trade payables Customer deposits Sundry creditors Marketing fund Other payables FY2022 $’000 13,212 5,977 8,847 1,474 1,184 FY2021 $’000 9,167 4,375 7,218 1,670 987 30,694 23,417 (a) Risk Exposure Information about the Group’s exposure to foreign exchange risk is provided in Note 2. (b) Fair Value Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are assumed to be the same as their fair values, due to their short-term nature 61 BEACON LIGHTING GROUP ANNUAL REPORT 202218. CURRENT BORROWINGS Consolidated Entity Secured Trade finance (a) Loan facility floating rate (b) Interchange facility (c) (a) Trade Finance FY2022 $’000 - - 19,561 19,561 FY2021 $’000 - - 18,617 18,617 The Group utilises trade finance facilities to fund inventory. The total available facility in FY2022 was $10,000,000. The interest rate is the base rate plus a margin for the drawing term. The term of the facility is one year. (b) Loan Facility – Floating Rate The Group utilises floating rate loan facilities to fund business activities. The total available facility is $15,000,000. The interest rate is BBSY plus a margin and this facility has a term of two years. (c) Interchange Facility The Group utilises the interchange facility to fund inventory and other activities of the Group. The total available facility is $25,500,000. The interest rate is the base rate plus a margin for the drawing term. The term of the facility is two years and was entered into during FY2022. Security and Fair Value Disclosures Information about the security relating to each of the secured liabilities and the fair value of each of the borrowings is provided in Note 21. Risk Exposures Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in Note 2. 19. CURRENT PROVISIONS Consolidated Entity Employee benefits (a) Warranty provision (b) Make good provision (c) Other provisions (c) 62 FY2022 $’000 7,215 2,030 26 840 10,111 FY2021 $’000 7,121 1,570 - 722 9,413 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022(a) Employee Benefits The current provision for employee benefits includes accrued annual leave and long service leave. For long service leave it covers all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount of the provision is presented as current, since the Group does not have an unconditional right to defer settlement for any of these obligations. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave or require payment within the next 12 months. The following amounts reflect leave that is not expected to be taken or paid within the next 12 months. Consolidated Entity Leave obligations not expected to be settled within 12 months FY2022 $’000 4,887 FY2021 $’000 5,339 (b) Warranty Provision The Group generally offers different warranties on different products. Provision is made for estimated warranty claims in respect of products sold which are still under warranty at the end of the reporting period. These claims are expected to be settled in the next financial year. Management estimates the provision based on historical warranty claim information and any recent trends that may suggest claims could differ from historical amounts. Critical accounting judgements, estimates and assumptions: Factors that could impact the estimated claim information include the success of the Group’s product and quality initiatives, as well as parts and labor costs. If claim costs differ by 10% from management’s estimates, the warranty provision would be an estimated $203,000 (2021: $157,000) higher or lower. Movement in Warranty Provision Consolidated Entity Carrying amount at the start of the year Charged/(credited) to profit or loss - amount incurred and charged Carrying amount at end of period (c) Other Provisions FY2022 $’000 1,570 460 2,030 Provision is made for fringe benefit tax payable and make good expense at the end of the reporting period. Movements in Other Provisions Consolidated Entity Carrying amount at the start of the year Charged to profit or loss - amount incurred and charged Amounts used during the year Carrying amount at end of period FY2022 $’000 722 205 (61) 866 FY2021 $’000 1,351 219 1,570 FY2021 $’000 476 796 (550) 722 63 BEACON LIGHTING GROUP ANNUAL REPORT 202220. CURRENT TAX LIABILITIES Consolidated Entity Provision for income tax 21. NON CURRENT BORROWINGS Consolidated Entity Secured Loan facility floating rate (a) (a) Loan Facility Floating Rate FY2022 $’000 1,783 FY2021 $’000 2,666 FY2022 $’000 FY2021 $’000 - - The Group utilises floating rate loan facilities to fund business acquisitions. The term of the facility is two years. Secured Liabilities and Asset Security The Group’s liabilities are secured by general security agreements and a deed of cross guarantee and indemnity over certain entities within the Group. Under the letter of offer the security arrangements cover entities that generate a minimum 85% EBITDA and hold a minimum 85% total assets. Compliance with Covenants Under the terms of the major borrowing facilities the Group is required to comply with the following financial covenants: • The debt to EBITDA ratio is not more than 2.25:1. • The fixed charge cover ratio is not less than 1.5:1. • The borrowing base is not more than 60%. • The distribution does not exceed 70% of NPAT. The Group has complied with the financial covenants of its borrowing facilities during the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021. Risk Exposures Information about the Group’s exposure to interest rate and foreign exchange risk is provided in Note 2. 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 202222. NON CURRENT PROVISIONS Consolidated Entity Employee benefits Make Good 23. LEASES This note provides information for leases where the Group is a lessee. Amounts recognized in the balance sheet The balance sheet shows the following amounts relating to leases: Consolidated Entity Right of use assets Buildings Equipment Vehicles Make good Lease liabilities Current Non current Amounts recognized in the statement of profit or loss Consolidated Entity Depreciation charge right of use assets Equipment Vehicles Buildings Make good Lease liabilities Interest expense FY2022 $’000 736 1,065 1,801 FY2021 $’000 939 - 939 FY2022 $’000 FY2021 $’000 104,046 100,155 444 104 592 471 120 - 105,186 100,746 26,718 97,742 124,460 25,079 97,680 122,759 FY2022 $’000 FY2021 $’000 26 16 23,665 98 23,805 4,572 4,572 26 16 21,721 - 21,763 4,423 4,423 65 BEACON LIGHTING GROUP ANNUAL REPORT 2022Total cash outflows for leases for the period ended 26 June 2022 were $29,754,868 (2021 : $27,696,918) Additions made to the right of use asset during the year were $27,005,554 (2021 : $35,258,678) Hire Purchase Liability The Group utilises hire-purchase plans to acquire assets (i.e. fixtures and fittings and motor vehicles). The terms range from one to four years. Details on the accounting for these hire-purchase plans is disclosed in Note 1(h) of this report. Critical judgements in determining the lease term In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee. The Group considers factors including historical lease durations and the costs and business disruption required to replace the leased asset. As at 26 June 2022, potential future cash outflows of $114,812,000 (undiscounted) have not been included in the lease liability because it is not reasonably certain that the leases will be extended (or not terminated). The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee. During the current financial year, the financial effect of revising lease terms to reflect the effect of exercising extension and termination options was an increase in recognised lease liabilities and right-of-use assets of $8,690,000. 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 202224. CONTRIBUTED EQUITY Consolidated Entity FY2022 FY2021 Number of ordinary shares, fully paid 223,321,406 223,321,406 Movements in ordinary share capital Balance at the beginning of the year Dividend reinvestment plan share issue Balance at the end of the year Consolidated Entity Movements in ordinary share capital Balance at the beginning of the year Dividend reinvestment plan share issue Balance at the end of the year 223,321,406 221,537,880 - 1,783,526 223,321,406 223,321,406 FY2022 $’000 72,312 - 72,312 FY2021 $’000 70,258 2,054 72,312 Ordinary Shares Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Group in proportion to the number of and amounts paid on the shares held. All shares carry one vote per share. Ordinary shares have no par value and the Group does not have a limited amount of authorised capital. Capital Risk Management The Group’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt (borrowings less cash) divided by total equity. 67 BEACON LIGHTING GROUP ANNUAL REPORT 202225. RESERVES AND RETAINED PROFITS Consolidated Entity (a) Other reserves Cash flow hedges reserve Share based payment reserve Foreign currency translation reserve Treasury shares reserve Common control reserve Total Other Reserves Movement in cash flow hedges reserve Opening balance Revaluation (net of tax effect) Closing balance Movement in share based payments reserve Opening balance Transactions arising from share based payments Closing balance Movement in foreign currency translation reserve Opening balance Revaluation (net of tax effect) Closing balance Movement in treasury shares reserve Opening balance Transactions arising from share based payments Closing balance Movement in common control reserve Opening balance Transactions arising from share capital restructure Closing balance 68 FY2022 $’000 330 30 1,307 (262) (43,672) (42,267) (18) 837 330 (297) 327 30 740 567 1,307 (108) (154) (262) FY2021 $’000 (18) (297) 740 (108) (43,672) (43,355) (855) 837 (18) (11) (286) (297) 882 (142) 740 89 (197) (108) (43,672) (43,672) - - (43,672) (43,672) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022Nature and Purpose of Other Reserves Foreign Currency Translation Reserve Cash Flow Hedges Reserve The hedging reserve is used to record gains or losses on a hedging instrument in a cash flow hedge that are recognised in other comprehensive income, as described in Note 1(n). Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss. Share Based Payments Reserve The share based payments reserve is used to recognise: Exchange differences arising on translation of the foreign controlled entity are recognised in other comprehensive income and accumulated in a separate reserve within equity. The cumulative amount is reclassified to profit or loss when the net investment is disposed of. Treasury Shares Reserve This reserve is used to record the elimination of shares in Beacon Lighting Group held by the incentive plan trust entity on behalf of the participants of the Groups incentive plan. • The grant date fair value of rights issued to employees but not exercised. Common Control Reserve • The grant date fair value of shares issued to employees. This reserve is used to record the differences which may arise as a result of transactions with non-controlling interests that do not result in a loss of control. Consolidated Entity (b) Retained earnings Movements in retained earnings were as follows: Opening balance Net profit for the period Dividends paid FY2022 $’000 FY2021 $’000 83,240 40,726 (19,876) 104,090 60,277 37,658 (14,696) 83,239 69 BEACON LIGHTING GROUP ANNUAL REPORT 202226. DIVIDENDS (a) Ordinary Shares Consolidated Entity Final dividend for period ended 27 June 2021 of 4.60 cents (2021: 2.40 cents) per fully paid share Interim dividend for period ended 26 June 2022 of 4.30 cents (2021: 4.20 cents) per fully paid share Total dividends paid Dividends paid in cash or satisfied by the issue of shares under the dividend reinvestment plan Dividends paid in cash Dividends satisfied by the issue of shares under the dividend reinvestment plan Dividend Reinvestment Plan The Group Dividend Reinvestment Plan was suspended in FY2021. (b) Dividends not recognised at the End of the Reporting Period FY2022 $’000 FY2021 $’000 10,273 5,317 9,603 19,876 19,876 - 19,876 9,379 14,696 12,642 2,054 14,696 Consolidated Entity In addition to the above dividends, since year end the Directors have recommended the payment of a final dividend of 5.00 cents per fully paid ordinary share (2021: 4.60 cents), fully franked based on tax paid at 30%. The proposed dividend is to be paid out of retained earnings at 26 June 2022, but not recognised as a liability at year end. FY2022 $’000 FY2021 $’000 11,166 10,273 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022c) Franked Dividends The franked portions of the final dividends recommended after 26 June 2022 will be franked out of existing franking credits or out of franking credits arising from the payment of income tax in the 52 week period ended 26 June 2022. Consolidated Entity Franking credits available for subsequent reporting periods based on a tax rate of 30% (2021: 30%) FY2022 $’000 FY2021 $’000 60,159 50,788 The above amounts represent the balance of the franking account as at the end of the reporting period, adjusted for: • Franking credits that will arise from the payment of the amount of the provision for income tax. • Franking debits that will arise from the payment of dividends recognised as a liability at the reporting date. • Franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date. The consolidated amounts include franking credits that would be available to the parent entity if distributable profits of subsidiaries were paid as dividends. 27. KEY MANAGEMENT PERSONNEL DISCLOSURES Consolidated Entity Key management personnel compensation Short-term employee benefits Post-employment benefits Long-term benefits – movements in leave provisions Performance based cash benefits Performance based share benefits FY2022 $’000 FY2021 $’000 1,352,118 1,402,311 109,028 (69,956) 212,000 311,129 104,173 (1,666) 514,000 195,845 1,914,319 2,214,663 Detailed remuneration disclosures are provided in the Remuneration Report on pages 20 to 28. 28. SHARE BASED PAYMENTS (a) Executive Short Term Incentive Scheme Subject to meeting the relevant vesting conditions, shares will be issued at no cost to the executive. In the event an executive leaves the Group prior to the vesting date the options will generally lapse. Participation in the plan is at the discretion of the Board and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. 71 BEACON LIGHTING GROUP ANNUAL REPORT 2022The number of rights and options to be granted is determined based on the average share price at 30 June (averaged over + / - 30 days). Number of performance rights granted Fair value of performance rights at grant date Number of options granted Fair value of options at grant date (b) Fair Value of Performance Rights Granted FY2022 144,021 $1.84 FY2022 33,967 $1.84 FY2021 99,074 $1.08 FY2021 138,889 $1.08 The fair value of the rights at the grant date was estimated using the Black Scholes Model which takes into account the share price at grant date, the impact of dilution (where material), expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate. The model inputs for the performance rights granted during the 52 weeks ended 26 June 2022 included: Exercise price Grant date Share price at grant date Expected dividend yield FY2022 $0.00 FY2021 $0.00 19 August 2021 20 August 2020 $1.84 4.25% $1.08 4.25% The expected volatility of the Group's shares and the risk free interest rate do not have a material impact on the fair value calculation of the performance rights granted. (c) Fair Value of Options Granted The fair value of the options at the grant date was estimated using the Black Scholes Model which takes into account the share price at grant date, the impact of dilution (where material), expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate. The model inputs for the options granted: Exercise price Grant date Share price at grant date Expected dividend yield FY2022 $0.00 FY2021 $0.00 19 August 2021 20 August 2020 $1.84 4.25% $1.08 4.25% The expected volatility of the Group's shares and the risk free interest rate do not have a material impact on the fair value calculation of the options granted. 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022(d) Expenses Arising from Share Based Payment Transactions Total expenses arising from share based payment transactions recognised during the period as part of employee benefits expense were as follows: FY2022 $’000 FY2021 $’000 Performance rights and options issued under employee STI plans 288 238 29. EARNINGS PER SHARE Consolidated Entity FY2022 FY2021 Basic earnings per share - cents Diluted earnings per share - cents 18.24 18.24 16.94 16.92 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 223,321,406 222,319,208 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 223,321,406 222,505,374 30. REMUNERATION OF AUDITORS During the period the following fees were paid or payable for services provided by PricewaterhouseCoopers, auditor of the parent entity. Consolidated Entity Audit and assurance services FY2022 $ FY2021 $ Audit and review of financial statements 270,350 252,700 Other services: Taxation services Other services Total remuneration of PwC 31. CONTINGENCIES 19,510 - 289,860 44,300 8,745 305,745 There were no significant or material contingent liabilities including legal claims as at 26 June 2022 or 27 June 2021. 73 BEACON LIGHTING GROUP ANNUAL REPORT 202232. COMMITMENTS (a) Hire Purchase Commitments Commitments in relation to finance leases are payable as follows: Consolidated Entity Within one year Later than one year but not later than five years Minimum lease payments Future finance charges Total lease liabilities Representing lease liabilities: Current (Note 23) Non-current (Note 23) FY2022 $’000 FY2021 $’000 178 - 178 (3) 175 175 - 175 183 178 361 (13) 348 173 175 348 (b) Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is $2.2m (2021: $1.9m). 33. RELATED PARTY TRANSACTIONS (a) Subsidiaries Interests in subsidiaries are set out in Note 34. (b) Key Management Personnel Disclosures relating to key management personnel are set out in Note 27. (c) Transactions With Other Related Parties Consolidated Entity The following transactions occurred with related parties: Purchases of goods FY2022 $ FY2021 $ Purchases of goods and supply of services from other related parties 16,827 14,850 Other transactions Income received from other related parties Rent paid to other related parties Payments for equity interest in associate Income from equity interest in associate 74 109,500 12,164 1,007,942 1,008,318 (4,840,000) (15,240,000) 286,366 - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022The Robinson family has a 100% interest as owner of the Heidelberg store leased by Beacon Lighting on arms length terms. The current rent is $194,165 per annum increasing by 3% annually. The lease expires in 2024. The Robinson family has a 100% interest as owner of the Fyshwick store leased by Beacon Lighting on arms length terms. The current rent is $260,711 per annum increasing by 3% annually. The lease expires in 2024 with one further right of renewal for a period of seven years. The Robinson family has a 100% interest as owner of the Bendigo store leased by Beacon Lighting on arms length terms. The current rent is $94,628 per annum increasing by CPI annually. The lease expired on 1 September 2019 and is being held over on month to month arrangements. These disclosures are made due to Beacon Lighting having obtained, at the time of listing, a waiver from Listing Rule 10.1 permitting the lease arrangements described above continuing without shareholder approval conditional on disclosure being made in the Annual Report as set out here. Ian Robinson has a 100% interest in Carbonetix Pty Ltd. The Beacon Lighting Group provides management services to Carbonetix which are charged at an arms length terms. The Large Format Property Fund was established to acquire properties for the purpose of leasing them to Beacon Lighting and other large format retailers. The Beacon Lighting Group has invested $19,971,000 in this Fund. (2021 : $15,241,000) The Large Format Property Fund is currently 50% owned by the Beacon Lighting Group and 50% owned by Rebeach Pty Ltd which is controlled by the Robinson Family. During FY2022 the Fund established three sub funds to acquire three properties. (2021: 4 funds were established) During FY2021, Farrlong Pty Ltd as trustee for the Bacalla Trust which is controlled by the Robinson Family subscribed for 55% of the shares of Large Format Management Company Pty Ltd which is the trustee, property manager and fund manager of the Large Format Property Fund. The Beacon Lighting Group holds the remaining 45% (previously 100%). Accordingly, the Large Format Management Company Pty Ltd and the Large Format Property Fund are recognised at 26 June 2022 in the accounts of the Beacon Lighting Group as investments in associates applying the equity method of accounting rather than on a consolidated basis. The Large Format Property Fund has a 100% interest as owner of the Cannington store leased by Beacon Lighting on arms length terms. The current rent is $226,000 per annum increasing by 3% annually. The lease expires in 2027 with one further right of renewal for a period of five years. The Large Format Property Fund has a 100% interest as owner of the Modbury store leased by Beacon Lighting on arms length terms. The current rent is $203,000 per annum increasing by 3% annually. The lease expires in 2029 with one further right of renewal for a period of five years. The Large Format Property Fund has a 100% interest as owner of the Traralgon store leased by Beacon Lighting on arms length terms. The current rent is $173,000 per annum increasing by 3% annually. The lease expires in 2029 with one further right of renewal for a period of five years. (d) Outstanding Balances As at 26 June 2022 Carbonetix Pty Ltd owed the Group $0 (2021: $27,009). No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or doubtful debts due from related parties. 75 BEACON LIGHTING GROUP ANNUAL REPORT 202234. SUBSIDIARIES (a) The consolidated financial report incorporates the assets, liabilities and results of the following principal subsidiaries in accordance with the accounting policy described in Note 1(c): Name of Entity Incorporation Shares Equity Holding(1) 2022 % 2021 % Beacon Lighting Corporation Pty Ltd Beacon Lighting Group Incentive Plan Pty Ltd Brightlite Unit Trust Beacon Lighting Wholesalers Unit Trust Beacon Lighting Franchising Unit Trust Tanex Unit Trust Enviro Renew Pty Ltd Manrob Investments Pty Ltd Masson Manufacturing Pty Ltd Beacon Property Company Pty Ltd Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Light Source Solutions New Zealand Limited Beacon Lighting Europe GmbH New Zealand Germany Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Beacon Lighting Corporation USA Inc. United States of America Ordinary Beacon Lighting America Inc. United States of America Ordinary Beacon Lighting Solutions (Zhongshan) Co. Ltd Light Source Solutions Limited Beacon International Limited Beacon Lighting International China Hong Kong Hong Kong Hong Kong Ordinary Ordinary Ordinary Ordinary (1)The proportion of ownership interest is equal to the proportion of voting power held. 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022(b) Interests in Associates Set out below are the associates of The Beacon Lighting Group which in the opinion of the Directors are material to the Group. The entities listed below have share capital consisting of ordinary shares and units issued which are held directly by the Beacon Lighting Group. The country of incorporation or registration is also their principal place of business and the proportion of ownership interest is the same as the proportion of voting rights held. Name of Entity Place of Incorporation Measurement Method % Ownership Interest 2022 % 2021 % Large Format Management Company Pty Ltd Large Format Property Fund Australia Australia Large Format Property Subfund (Southport Nerang Road) Australia Large Format Property Subfund (Argyle Street) Large Format Property Subfund (William Street) Large Format Property Subfund (Parramatta Road) Large Format Property Subfund (Bathurst) Large Format Property Subfund (Modbury) Large Format Property Subfund (Mildura) Australia Australia Australia Australia Australia Australia Equity Equity Equity Equity Equity Equity Equity Equity Equity 45 50 50 50 50 50 50 50 50 45 50 50 50 50 50 - - - The combined carrying value of the investment in associates at 26 June 2022 was $19,971,000 (FY2021 : $15,241,000) 77 BEACON LIGHTING GROUP ANNUAL REPORT 2022(i) Summarised Financial Information for Associates The tables below provide summarized financial information for those associates that are material to the Group. The information disclosed reflects the amounts presented in the financial statements of the relevant associates and not Beacon Lighting Group Limited share of those amounts. Balance sheet Current assets Cash and cash equivalents Trade and other receivables Other current assets Total current assets Non-current assets Property, plant and equipment Total non-current assets Total assets Current liabilities Trade and other payables Loan Total current liabilities Non-current liabilities Total non-current liabilities Total liabilities Net assets Equity Contributed equity Retained earnings / Undistributed profits Total equity Large Format Management Company Pty Ltd Large Format Property Fund and Sub Funds FY2022 $’000 FY2021 $’000 FY2022 $’000 FY2021 $’000 50 23 10 83 - - 83 1 - 1 - 1 82 200 (118) 82 152 - 4 156 - - 156 1 - 1 - 1 155 200 (45) 155 1,320 1 6 1,327 45,706 45,706 47,033 73 6,520 6,593 - 6,593 40,440 39,873 567 40,440 2,260 1,288 34 3,582 28,093 28,093 31,675 1,167 - 1,167 - 1,167 30,508 30,451 57 30,508 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022(ii) Summarised Statement of Comprehensive Income for Associates Statement of comprehensive income Revenue Other expenses (Loss) / Profit from continuing operations (Loss) / Profit for the period Other comprehensive income Total comprehensive income Large Format Management Company Pty Ltd Large Format Property Fund and Sub Funds FY2022 $’000 61 (134) (73) (73) - (73) FY2021 $’000 15 (60) (45) (45) - (45) FY2022 $’000 1,038 (528) 510 510 - 510 FY2021 $’000 264 (207) 57 57 - 57 35. EVENTS OCCURRING AFTER THE REPORTING PERIOD A fully franked dividend of $11,166,070 was declared on 17 August 2022. Other than the above, there has been no other matter or circumstance that has occurred subsequent to period end that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations or the state of affairs of the Group or economic entity in subsequent financial periods. 79 BEACON LIGHTING GROUP ANNUAL REPORT 202236. CASH FLOW INFORMATION (a) Reconciliation of Profit After Income Tax to Net Cash Inflow from Operating Activities Consolidated Entity Profit for the period Depreciation Net gain / (loss) on disposal of non-current assets Amortisation Impairment of fixed assets Share based payments Net exchange differences Change in operating assets and liabilities: (Increase) decrease in receivables (Increase) decrease in inventories (Increase) decrease in deferred tax assets (Increase) decrease in other operating assets (Decrease) increase in payables (Decrease) increase in provision for income taxes payable (Decrease) increase in other provisions Net cash inflow from operating activities (b) Reconciliation of Liabilities Arising from Financing Activities FY2022 $’000 40,726 28,877 (23) 20 564 288 (357) (803) (25,157) 875 (228) 6,950 (883) 1,560 52,409 Consolidated Entity Leases due within 1 year $’000 Leases due after 1 year $’000 Borrowings due within 1 year $’000 Borrowings due after 1 year $’000 FY2021 $’000 37,658 26,399 692 20 481 238 217 832 (4,855) (124) 979 (789) (1,798) 1,272 61,222 Total $’000 Balance as at 28 June 2020 (23,242) (90,076) Cash flows (1,837) (7,604) (17,198) (1,419) (13,200) (143,716) 13,200 2,340 Balance as at 27 June 2021 (25,079) (97,680) (18,617) Balance as at 27 June 2021 (25,079) (97,680) (18,617) Cash flows (1,639) (62) (944) Balance as at 26 June 2022 (26,718) (97,742) (19,561) - - - - (141,376) (141,376) (2,645) (144,021) 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 202237. CRITICAL ACCOUNTING ESTIMATES The preparation of 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 that involve a higher degree of judgement or complexity, and items which are more likely to be materially adjusted due to estimates and assumptions turning out to be wrong are detailed in Note 10, 19 and 23. The Group has assessed the calculation of inventory valuation provisions, warranty provision, make good provision and lease liabilities to be critical accounting estimates. 38. PARENT ENTITY FINANCIAL INFORMATION (a) Summary Financial Information The individual financial report for the parent entity shows the following aggregate amounts: BEACON LIGHTING GROUP LIMITED FY2022 $’000 FY2021 $’000 Balance sheet Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Contributed equity Reserves Retained profits Total equity Profit / (Loss) for the period Total comprehensive income (b) Contingent Liabilities of the Parent Entity The parent entity did not have any contingent liabilities as at 26 June 2022 or 27 June 2021. 17,293 88,596 105,889 1,498 1 1,499 35,879 88,675 124,554 2,239 8 2,247 104,390 122,307 96,628 164 7,598 104,390 1,795 1,795 96,628 28 25,651 122,307 1,778 1,778 81 BEACON LIGHTING GROUP ANNUAL REPORT 202239. DEED OF CROSS GUARANTEE Beacon Lighting Group Limited and Beacon Lighting Corporation are parties to a deed of cross guarantee under which each Group guarantees the debts of the others. By entering into the deed, the wholly owned entities have been relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations Instrument 2016/914 issued by the Australian Securities and Investment Commission. The above companies represent a closed Group for the purposes of the Class Order, and as there are no other parties to the deed of cross guarantee that are controlled by Beacon Lighting Group Limited, they also represent the extended closed Group. Set out below is a consolidated income statement, a consolidated statement of comprehensive income and a summary of movements in consolidated retained earnings for the 52 weeks ended 26 June 2022 of the closed Group consisting of Beacon Lighting Group Limited and Beacon Lighting Corporation. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME OF THE CLOSED GROUP Beacon Lighting Group Limited and Beacon Lighting Corporation Pty Ltd Distribution income Expenses General and administration Profit before income tax Income tax expense Profit for the period attributable to the members of the closed Group FY2022 $’000 59,837 (3,602) 56,235 (16,798) 39,437 FY2021 $’000 55,821 (5,100) 50,721 (15,524) 35,197 Total comprehensive income for the period attributable to the members of the closed Group 39,437 35,197 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022CONSOLIDATED BALANCE SHEET OF THE CLOSED GROUP Beacon Lighting Group Limited and Beacon Lighting Corporation Pty Ltd Current assets Cash and cash equivalents Trade and other receivables Current tax asset Other current assets Related party receivables Total current assets Non-current assets Deferred tax assets Investment in subsidiaries Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Derivative financial instruments Provisions Current tax liabilities Total current liabilities Non-current liabilities Provisions Non-current liabilities Total liabilities Net assets Equity Contributed equity Other reserves Retained earnings Total equity FY2022 $’000 5,187 593 - 9 75,271 81,060 12,581 90,604 103,185 184,245 FY2021 $’000 2,887 685 - - 63,065 66,637 13,433 85,874 99,307 165,944 1,690 1,586 - - 642 960 3,292 3,425 3,425 6,717 - - 656 2,440 4,682 3,432 3,432 8,114 177,528 157,830 72,271 164 105,093 177,528 72,271 28 85,531 157,830 83 BEACON LIGHTING GROUP ANNUAL REPORT 2022CONSOLIDATED STATEMENT OF CHANGES IN EQUITY OF THE CLOSED GROUP Beacon Lighting Group Ltd and Beacon Lighting Corporation Contributed equity $’000 Reserves $’000 Retained earnings $’000 Total equity $’000 Balance as at 28 June 2020 70,217 181 65,031 135,429 Profit for the year Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners: - - - Issue of shares via dividend reinvestment plan 2,054 Issue of shares to employees Employee share scheme Treasury shares Dividends provided for or paid - - - - - - - - - 39 (192) 35,197 35,197 - - 35,197 35,197 - - - - 2,054 - 39 (192) - (14,696) (14,696) Total contributions by and distributions to owners Balance as at 27 June 2021 2,054 72,271 (153) 28 (14,696) (12,795) 85,533 157,831 Balance as at 27 June 2021 72,271 28 85,533 157,831 Profit for the year Other comprehensive income Total comprehensive income for the period Transactions with owners in their capacity as owners: Issue of shares via dividend reinvestment plan Issue of shares to employees Employee share scheme Treasury shares Dividends provided for or paid Total contributions by and distributions to owners - - - - - - - - - Balance as at 26 June 2022 72,271 - - - - - 288 (152) - 136 164 39,437 39,437 - - 39,437 39,437 - - - - - - 288 (152) (19,876) (19,876) (19,876) (19,742) 105,093 177,528 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 26 June 2022 and the 52 weeks ended 27 June 2021 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2022DIRECTORS' Declaration In the opinion of the Directors: (a) The Financial Statements and notes set out on pages 30 to 84 are in accordance with the Corporations Act 2001, including: (i) (ii) Complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements, and Giving a true and fair view of the consolidated entity’s financial position as at 26 June 2022 and of its performance for the 52 weeks ended on that date. (b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable, (c) At the date of this declaration, there are reasonable grounds to believe that the members of the extended closed Group identified in Note 39 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 39, (d) Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board and (e) The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer required by the section 295A of the Corporations Act 2001 (Cth). This declaration is made in accordance with a resolution of the Directors. Ian Robinson Executive Chairman Melbourne, 17 August 2022 Glen Robinson Chief Executive Officer 85 BEACON LIGHTING GROUP ANNUAL REPORT 2022 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BEACON LIGHTING GROUP LIMITED Independent auditor’s report To the members of Beacon Lighting Group Limited Report on the audit of the financial report Our opinion In our opinion: The accompanying financial report of Beacon Lighting Group Limited (the Company) and its controlled entities (together the Group) is in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group's financial position as at 26 June 2022 and of its financial performance for the 52 week period (the period) then ended (b) complying with Australian Accounting Standards and the Corporations Regulations 2001. What we have audited The Group financial report comprises: ● ● ● ● ● ● the consolidated balance sheet as at 26 June 2022 the consolidated statement of comprehensive income for the period then ended the consolidated statement of changes in equity for the period then ended the consolidated statement of cash flows for the period then ended the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information the directors’ declaration. 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence 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. PricewaterhouseCoopers, ABN 52 780 433 757 2 Riverside Quay, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999 Liability limited by a scheme approved under Professional Standards Legislation. 86 BEACON LIGHTING GROUP ANNUAL REPORT 2022 Our audit approach An audit is designed to provide reasonable assurance about whether the financial report is free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial report. We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial report as a whole, taking into account the geographic and management structure of the Group, its accounting processes and controls and the industry in which it operates. Materiality Audit scope Key audit matters ● For the purpose of our audit we ● Our audit focused on where the ● Amongst other relevant Group made subjective judgements; for example, significant accounting estimates involving assumptions and inherently uncertain future events. ● The Group sells lighting products to customers primarily in Australia. The products are held at the Group’s warehouses and stores throughout Australia and several overseas locations. The accounting processes are structured around a Group finance function at its corporate head office in Melbourne. topics, we communicated the following key audit matter to the Audit and Risk Committee: − Existence and valuation of inventory ● This matter is further described in the Key audit matters section of our report. used overall Group materiality of $2.9 million, which represents approximately 5% of the Group’s profit before tax. ● We applied this threshold, together with qualitative considerations, to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements on the financial report as a whole. ● We chose Group profit before tax because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. ● We utilised a 5% threshold based on our professional judgement, noting it is within the range of commonly acceptable thresholds. 87 BEACON LIGHTING GROUP ANNUAL REPORT 2022 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BEACON LIGHTING GROUP LIMITED 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. The key audit matter was 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 this matter. Further, any commentary on the outcomes of a particular audit procedure is made in that context. Key audit matter Existence and valuation of inventories (Refer to note 10) How our audit addressed the key audit matter We developed an understanding of the controls over inventory. Inventory management is a key business process for the Group. Inventory represents a significant asset on the consolidated balance sheet at $93.1m. The inventory is held at Group managed and third party distribution centres in Australia and overseas, within stores or in transit to those locations. Inventory is valued at the lower of cost or net realisable value. This valuation is determined net of a provision, which is applied where the Group believes there is risk that the costs incurred in buying and preparing inventory for sale will not be realised through sale. This provision is made by the Group throughout the period based on identified slow moving and obsolete inventory. We considered this a key audit matter due to the: ● ● ● financial significance of the inventory balance in the consolidated balance sheet judgement required by the Group to determine which costs should be included in the cost of inventory judgement required by the Group to estimate future selling prices to determine the net realisable value of inventory on hand We performed the following procedures, amongst others: ● Traced a sample of inventory items from the Group’s inventory listing back to original invoices and shipping documents. ● Examined the appropriateness of the type of supply chain costs included in the cost of inventory. ● For a sample of inventory items, re-performed the system generated calculation of the weighted average cost of the individual inventory item. ● Re-performed a sample of inventory counts at selected locations that included attendance at a sample of the Group’s distribution centres and selected stores. ● Inspected the sales price of a sample of inventory items sold during July 2022 to determine whether items sold below cost were included in the Group's inventory net realisable value provision. ● Examined the appropriateness of the methodology and performed tests to evaluate the reliability and relevance of underlying data used to calculate the inventory obsolescence provision and assessed whether it was consistent with the Group’s accounting policy. ● Evaluated the appropriateness of the inventory obsolescence provision by considering the gross margins recognised by the Group, the inventory turnover ratio, ageing and compared the provision to the provision recognised in the prior period. 88 BEACON LIGHTING GROUP ANNUAL REPORT 2022 Other information The directors are responsible for the other information. The other information comprises the information included in the annual report for the 52 week period ended 26 June 2022, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed 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. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with 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 the financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our auditor's report. 89 BEACON LIGHTING GROUP ANNUAL REPORT 2022 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BEACON LIGHTING GROUP LIMITED Report on the remuneration report Our opinion on the remuneration report We have audited the remuneration report included in pages 20 to 28 of the directors’ report for the 52 week period ended 26 June 2022. In our opinion, the remuneration report of Beacon Lighting Group Limited for the 52 week period ended 26 June 2022 complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. PricewaterhouseCoopers Jason Perry Partner Melbourne 17 August 2022 90 BEACON LIGHTING GROUP ANNUAL REPORT 2022 SHAREHOLDERS' Information In accordance with Section 4.10 of the Australian Stock Exchange Limited Listing Rules, the Directors provide the following information. SHAREHOLDING ANALYSIS (a) Distribution of Shareholders At 13 July 2022, the distribution of shareholdings was as follows: Size of Shareholding Number of Shareholders 1 - 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 Over 100,000 Total number of shareholders Holdings of less than a marketable parcel 541 681 369 640 75 2,306 - (b) Substantial Shareholdings The number of shares held by the substantial shareholders listed in the Company’s register of substantial shareholders as at 13 July 2022 were: Shareholder Number of Shares % Held Heystead Nominees Pty Ltd (plus Robinson Family members) 123,924,740 55.49% 92 BEACON LIGHTING GROUP ANNUAL REPORT 2022(c) Class of Shares and Voting Rights At 13 July 2022, there were 2,306 holders of ordinary shares of the Company. All of the issued shares in the capital of the parent entity are ordinary shares and each shareholder is entitled to one vote per share. Twenty Largest Shareholders as at 13 July 2022: Rank Name Units % Units 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 HEYSTEAD NOMINEES PROPRIETARY LIMITED 123,262,894 55.20% HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED NATIONAL NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED RELIABLE BUSINESS CO LTD KJA HOLDINGS PTY LTD UBS NOMINEES PTY LTD 21,760,405 18,030,893 10,107,530 8,503,743 1,750,399 782,739 636,083 9.74% 8.07% 4.53% 3.81% 0.78% 0.35% 0.28% BANJO SUPERANNUATION FUND PTY LTD

593,000 0.27% BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD BLUE BOAT HOLDINGS PTY LTD D & G RITCHIE SUPER PTY LTD CARINDA PTY LTD 523,388 0.23% 500,000 500,000 0.22% 0.22% 478,000 0.21% NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> 440,115 0.20% MR ALISTAIR CAMPBELL WARREN SUPER NOMINEES PTY LTD CERTANE CT PTY LTD MR J MARSHALL PEARCE + MRS S A PEARCE HGT INVESTMENTS PTY LTD MR WAYNE FRANCIS WODE 433,775 389,000 328,036 315,000 300,000 300,000 0.19% 0.17% 0.15% 0.14% 0.13% 0.13% Total 20 holders of ISSUED CAPITAL 189,935,000 85.02% Total Remaining Holders Balance Total Shareholders 33,386,406 14.98% 223,321,406 100.00% 93 BEACON LIGHTING GROUP ANNUAL REPORT 2022 CORPORATE Directory LEGAL ADVISORS Baker & McKenzie Level 19 181 William Street Melbourne Victoria AUDITORS PricewaterhouseCoopers 2 Riverside Quay Southbank Victoria SHARE REGISTRY Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford Victoria STOCK EXCHANGE LISTING Beacon Lighting Group Limited (BLX) shares are listed on the ASX DIRECTORS Ian Robinson Executive Chairman Glen Robinson Chief Executive Officer (James) Eric Barr Deputy Chairman Neil Osborne Non-Executive Director COMPANY SECRETARY Tracey Hutchinson REGISTERED OFFICE 5 Bastow Place Mulgrave Victoria WEBSITE Corporate site www.beaconlightinggroup.com.au Retail site www.beaconlighting.com.au Other business websites www.beaconlightingtradeclub.com.au www.beaconlightingcommercial.com.au www.beaconinternational.com www.customlighting.com.au www.lightsourcesolutions.com.au www.lightsourcesolutions.co.nz www.lucciair.com www.fanaway.com www.massonforlight.com.au www.beaconlighting.us www.beaconlighting.eu 94 BEACON LIGHTING GROUP ANNUAL REPORT 2022STORE Locations Heidelberg 2-4 Dora St Hoppers Crossing 283 Old Geelong Rd Maribyrnong Harvey Norman Centre 169 Rosamond Rd Mentone 27-29 Nepean Hwy Moorabbin 867 Nepean Hwy Nunawading 262 Whitehorse Rd Oakleigh 1402-1404 Dandenong Rd Pakenham Lifestyle Centre 825 Princes Hwy Preston 23 Bell St Scoresby 1391 Ferntree Gully Rd South Melbourne 50-56 York St South Morang 825 Plenty Rd Springvale IKEA Homemaker Centre 917 Princes Hwy St Kilda 366 St Kilda Rd Thomastown Homemaker Centre Cnr Dalton and Settlement Rds Traralgon 73 Argyle St Warrnambool 1-49 Raglan St Watergardens Homemaker Centre 440 Keilor-Melton Hwy Waurn Ponds Homemaker Centre 235 Colac Rd (Princes Hwy) NSW Albury Wodonga Harvey Norman Centre 94 Borella Rd Albury Alexandria Homemaker Centre Cnr O’Riordan & Doody Sts Artarmon Home HQ North Shore Cnr Reserve Rd & Frederick St Bankstown Home Central 9 - 67 Chapel Rd South Belrose Supa Centa Belrose 4-6 Niangala Cl Brookvale 577-579 Pittwater Rd Carlton 367 Princes Hwy Campbelltown Homebase 24 Blaxland Rd Camperdown 139-143 Parramatta Rd Castle Hill Home Hub Hills Cnr Victoria & Hudson Ave Crossroads Homemaker Centre Parkers Farm Place Casula Crows Nest 118 Falcon St Gladesville Wharf Sqaure 8 Wharf Rd Gosford Hometown 356 Manns Rd Hornsby Cnr Pacific Hwy & Yardley Ave Waitara Killara 694 Pacific Hwy Kotara Kotara Home 108 Park Ave Lake Haven Home Mega Centre Lake Haven Drv Marsden Park Home Hub 9 Hollinsworth Rd McGraths Hill Home Central 264-272 Windsor Rd Mittagong Highlands Homemaker Centre 205 Old Hume Hwy Moore Park Supa Centa Moore Park Cnr Sth Dowling St & Todman Ave Penrith Cnr Mulgoa Rd & Wolseley St Port Macquarie 18 John Oxley Drive Prospect Homebase 19 Stoddart Rd Rutherford Harvey Norman Centre 366 New England Hwy Shellharbour 146 New Lake Entrance Rd Taren Point 105 Parraweena Rd Tuggerah Tuggerah Super Centre, Cnr Bryant Ave & Wyong Rd Tweed Heads 29-41 Greenway Dr Warners Bay Warners Bay Home 240 Hillsborough Rd ACT Fyshwick 175 Gladstone St Gungahlin 14/5 Hibberson St VIC Abbotsford 250 Hoddle St Ballarat Wendouree Homemaker Centre 333 Gillies St Balwyn North 304 Doncaster Rd Bayswater 216 Canterbury Rd Bayswater Nth Bendigo 285 High St Kangaroo Flat Burwood 110 Burwood Hwy Chirnside Park Showroom Centre 286 Maroondah Hwy Coburg Lincoln Mills Homemaker Centre 64-74 Gaffney St Craigieburn 440 Craigieburn Rd Cranbourne Cranbourne Home Cnr Sth Gippsland Hwy & Thompsons Rd Essendon Homemaker Hub 120 Bulla Rd Strathmore Fountain Gate Casey Lifestyle Centre 430 Princes Hwy Frankston 22 McMahons Rd Geelong 354 Melbourne Rd Hawthorn 291 Burwood Rd 96 BEACON LIGHTING GROUP ANNUAL REPORT 2022QLD Bundaberg 21 Johanna Bvd Bundall 61 Upton St Burleigh Home & Life 197-207 Reedy Creek Rd Cairns 331 Mulgrave Rd Cannon Hill Homemaker Centre 1881 Creek Rd Capalaba Freedom Home Centre 67 Redland Bay Rd Carseldine Homemaker Centre 1925 Gympie Rd Fortitude Valley Homemaker City North 111 McLachlan St Helensvale Homeworld 502 Hope Island Rd Hervey Bay 140 Boat Harbour Drv Ipswich Ipswich Riverlink Shopping Centre Cnr The Terrace & Downs St Jindalee Homemaker City 182 Sinnamon Rd Kawana 2 Eden St Minyama Macgregor 550 Kessels Rd Mackay 2/2 Heaths Rd Maroochydore Sunshine Homemaker Centre 72 Maroochydore Rd Morayfield Supa Centre 344 Morayfield Rd Noosa Noosa Civic Eenie Creek Rd Northlakes Primewest Northlakes Cnr Lakes Dve & Mason St Rockhampton Red Hill Homemaker Centre Cnr Yaamba & Richardson Rds Southport Bunnings Complex 542 Olsen Ave Toowoomba Harvey Norman Centre 910 Ruthven St Townsville - Fairfield Homemaker Centre 1 D’Arcy Dr Townsville - Garbutt Mega Centre Cnr Dalrymple Rd & Duckworth St Tweed Head 29-41 Greenway Dr Underwood 34 Compton Rd Virginia 1860 Sandgate Road Windsor Homemaker City 190 Lutwyche Rd WA Baldivis Safety Bay Rd Belmont 225 Great Eastern Hwy Bunbury Home Maker Centre 42 Strickland St Butler 220 Camborne Parkway Cannington 21 William St Claremont 201-207 Stirling Hwy Clarkson Ocean Keys Homemaker Centre 61 Key Largo Drv Ellenbrook 180 The Promenade Jandakot South Central Cockburn 87 Armadale Rd Joondalup 3 Sundew Rise Malaga Home Centre 655 Marshall Rd Mandurah Home City 430 Pinjarra Rd Midland Midland Central 4 Clayton St Myaree Melville Square 248 Leach Hwy Osborne Park Hometown 381 Scarborough Beach Rd SA Churchill Churchill Centre South 252 Churchill Rd Kilburn Gepps Cross Home HQ 750 Main North Rd Melrose Park Melrose Plaza 1039 South Rd Mile End Mile End Home 121 Railway Tce Modbury 985 North East Rd Munno Para Harvey Norman Centre 600 Main North Rd Smithfield Noarlunga Harvey Norman Centre 2 Seaman Dr NT Darwin Homemaker Village 356-362 Bagot Rd Millner TAS Launceston 40 William St Moonah 7-9 Derwent Park Rd 97 BEACON LIGHTING GROUP ANNUAL REPORT 2022 www.beaconlighting.com.au 

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