Boralex
Annual Report 2023

Plain-text annual report

Beacon Lighting Group Limited ANNUAL REPORT 2023 Contents Chairman and Chief Executive Officer’s Report Board of Directors Management Team Corporate Governance Statement Directors’ Report Auditor’s Independence Declaration Index to the Financial Statements Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report to the Members of Beacon Lighting Group Limited Shareholders’ Information Corporate Directory Store Locations 1 4 5 6 12 29 30 31 32 33 34 35 84 86 92 94 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 Level 1, 295 Whitehorse Road, Nunawading, Victoria 3131. 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 16 August 2023. The Directors have the power to amend and reissue the financial statements. CHAIRMAN & Chief Executive Officer’s Report The Beacon Lighting Group is pleased to release the financial result for FY2023. Throughout FY2023, Beacon Lighting has been able to achieve a sales result of $312.0 million and a Net Profit After Tax result of $33.6 million. In achieving this financial result, the Board of Directors would like to thank the hard work of the Beacon Lighting team and the continued support of our retail customers, trade customers, business partners and the general community. GROUP OVERVIEW The Beacon Lighting Group finished FY2023 with 119 Beacon Lighting stores serving both our retail and trade customers. There were 117 company stores and two franchised stores. Beacon Commercial has sales offices in Brisbane (QLD), Sydney (NSW), Melbourne (VIC), Adelaide (SA), and Perth (WA). The supply chain in Australia includes Group operated warehouses in Brisbane (QLD), Melbourne (VIC), and a 3PL warehouse in Perth (WA). At the end of FY2023 and the start of FY2024, Beacon Lighting relocated the Beacon Group Support Office from Mulgrave (VIC) to be above the new Nunawading (VIC) store. Beacon International has sales offices in Hong Kong, Germany, and the United States of America, with a support office in China. Connected Light Solutions has a team based on the eastern seaboard supporting customers throughout Australia. Light Source Solutions has a sales office in New Zealand, Custom Lighting has a designer showroom in Malvern (VIC), and Masson For Light has an architectural lighting showroom in Richmond (VIC). FY2023 IN REVIEW Building lasting relationships with our trade customers has remained Beacon Lighting's number one objective throughout FY2023. Our trade customers have responded very well to our many trade initiatives, which have continued to underpin the Beacon Lighting Group sales result at a time when consumer confidence continued to be pessimistic. Beacon Lighting Commercial and Custom Lighting had record sales results demonstrating the potential for these businesses. Some sales channels for Beacon International remain exciting. Still, overall sales growth for Beacon International was slightly down last year because some customers were overstocked at the end of FY2022, and the less elevated sales through the eCommerce sales channel in the USA. Rising interest rates, inflation, and economic uncertainty have impacted the retail consumer in Australia. Despite operating in this environment, Beacon Lighting has achieved a sales result of $312.0 million compared to $304.3 million last year. With an exciting product range and outstanding customer service, Beacon Lighting has achieved a gross profit margin of 67.7% despite experiencing product inflation at various stages throughout FY2023 and a relatively subdued AUD/USD FX rate. Inflation is making it challenging to manage the growth of some expenses, with operating expenses increasing by 6.9%. Overall, Beacon Lighting achieved a Net Profit After Tax result of $33.6 million compared to $40.7 million last year. Beacon Lighting Group’s sales growth was constrained by new store openings in FY2023 caused by the delay in property projects across Australia. Beacon Lighting opened new stores at Pimpama (QLD) and Armadale (WA), relocated to new stores at Southport (QLD) and Nunawading (VIC), and closed two stores at Clarkson (WA) and Crossroads (NSW). These property constraints in FY2023 provide Beacon Lighting with a very significant store opening program in FY2024. Company store comparative sales increased by 0.4% in FY2023, with positive comparative growth in H1 FY2023 followed by a decline in H2 FY2023. South Australia, Victoria, and Western Australia achieved the best comparative sales results in FY2023. Supported by many new trade initiatives, Beacon Lighting has strengthened our relationships with our trade customers. The re-launch of the Beacon Trade Club in December 2022 was a critical enabler of the Beacon Lighting trade strategy. Total trade sales increased by 21.6%, trade sales through stores increased by 22.5%, and online trade sales increased by 36.0%. There were numerous supply chain disruptions and risks throughout the COVID years and into early FY2023. Given this uncertainty, Beacon Lighting responded with orders for increased safety stock. Combined with an increased factory manufacturing capacity in FY2023, factories shipped stock early, resulting in a record stock investment in December 2022. Throughout H2 FY2023, the Group managed a gradual decline in the stock investment to $96.9 million at the end of June 2023. The Beacon Lighting Group has a 50% investment in the Large Format Property Fund. The Fund made no new property acquisitions in FY2023. Despite the lack of recent acquisitions, Beacon Lighting has continued to invest in supporting property development projects in Southport (QLD), Auburn (NSW), and Bathurst (NSW). The Large Format Property Fund project at Southport (NSW) opened as a Beacon Lighting store in June 2023. 1 BEACON LIGHTING GROUP ANNUAL REPORT 2023FY2023 Highights Sales result of $312.0m Net Profit After Tax result of $33.6m To better service the needs of our TRADE CUSTOMERS we continued to roll out + NEW PRODUCT RANGES + MERCHANDISING DISPLAYS and + WEBSITE ENHANCEMENTS RE-LAUNCHED THE BEACON TRADE CLUB onto an industry leading technology platform ONLINE TRADE SALES increased by 36.0% TOTAL TRADE SALES increased by 21.6% Record sales for STORES, BEACON LIGHTING COMMERCIAL and CUSTOM LIGHTING Number of USA showroom customers INCREASED BY 32.8% Opened NEW stores at • PIMPAMA (QLD) • ARMADALE (WA) TRADES SALES through stores increased by 22.5% Relocated to new stores at • SOUTHPORT (QLD) • NUNAWADING (VIC) 2 STRATEGIC pillars of growth The Beacon Lighting Group’s Strategic Pillars of Growth remain as follows: STORES 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 loyalty program. Beacon Trade, key partner for lighting, ceiling fans and electrical accessories for the Australian home. 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 Directors of Beacon Lighting are delighted to be able to offer our shareholders the flexibility to take their dividends as a cash payment or to reinvest into new Beacon Lighting Group shares. For FY2023, the annually fully franked dividend was 8.3 cents per share while the H2 FY2023 fully franked dividend was 4.0 cents per share. OUTLOOK Going into FY2024, improving the lives and businesses of our trade and retail customers continues to be the number one goal for the Beacon Lighting Group. Given the property project delays in FY2023, Beacon Lighting will have an extensive company store opening program in FY2024. Expanding the product range and selling these products to new and existing customers continues to be the growth strategy for the Beacon Lighting Group. In FY2024, the Beacon Lighting Group has already committed to the following: • Service to our trade customers will continue to be enhanced by the rollout of trade-specific products, further enhancements to the Beacon Trade system, new trade merchandising and marketing initiatives, and making it easy for our Trade Customers to shop online. • The planned opening of eight new company stores: Mt Barker (SA), Mildura (VIC), Auburn (NSW), Warrawong (NSW), Busselton (WA), Devonport (TAS), Gregory Hills (NSW), and Ballina (NSW). • Relocation of the Cranbourne store. • Complete the Large Format Property Fund development project in Auburn (NSW) featuring a new Beacon Lighting company store. • Continue expanding the Australian designed fan and lighting products into the North American, Asian, and European markets. Ian Robinson Executive Chairman Glen Robinson Chief Executive Officer 3 BEACON LIGHTING GROUP ANNUAL REPORT 2023BOARD of Directors Ian Robinson Executive Chairman 49 years of service Ian Robinson purchased the first Beacon Lighting store in 1975. Over the subsequent 48 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, Large Format Retailers Association and Large Format Property Group. Glen Robinson Chief Executive Officer 29 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 9 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 9 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 2023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 Group. 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 2023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 16 August 2023. 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.beaconlighting.com.au/investor). 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. 6 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 10 years 9 years 9 years 9 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, independent external as consultant. Ian Robinson, Executive Chairman, is the other member. The Committee is chaired by Eric Barr. independent Directors and an BEACON LIGHTING GROUP ANNUAL REPORT 2023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 behavioral 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. 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 and 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. Recommendations 2.4 and 2.5 of the ASX Corporate 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 7 BEACON LIGHTING GROUP ANNUAL REPORT 2023PRINCIPLE 4 PRINCIPLE 5 Safeguard the Integrity of Corporate Reporting Make Timely and Balanced Disclosure 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 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 an independent external consultant. 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 and Eric Barr 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. recommends and Recommendations Recommendation 5.1 of the ASX Corporate Governance that Principles 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 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. • Its relationship with the external auditor. This policy specifically includes: 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. • 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. beaconlighting.com.au/investor) 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. 8 BEACON LIGHTING GROUP ANNUAL REPORT 2023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. 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. 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 FY2023, 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 2023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 an independent external consultant. 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 ‘Company’) present their report together with the Consolidated Financial Statements of the Company and its controlled entities (the ‘Consolidated Entity’ or ‘Group’) for the 52 weeks ended 25 June 2023. 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 FY2023 $’000 Actual FY2022 $’000 Profit before Income Tax 48,182 58,029 4.1 Overview of Operations Beacon Lighting is the leading retail, trade and eCommerce lighting, ceiling fan and electrical accessories 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 fan wholesale 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 FY2023, 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 sales office in New Zealand • Connected Light Solutions • Masson For Light store • Custom Lighting store • 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 Beacon Group Support Centre in Melbourne (VIC). It is pleasing that throughout FY2023, Beacon Lighting was able to operate without the impact of COVID or COVID lockdowns. FY2023 was a period of relative high inflation and rising interest rates which had a negative impact upon consumer confidence. During FY2023, some of the operating highlights included: • Re-launch of the Beacon Trade Club onto an industry leading Income Tax Expense (14,539) (17,303) technology platform Net profit after tax attributable to the members of Beacon Lighting Group Limited 33,643 40,726 • Continued roll out of new trade products, merchandising displays and website enhancements to better service the needs of our Beacon Trade Customers • Opened new stores at Pimpama (QLD) and Armadale (WA) • Relocated to new stores at Southport (QLD) and Nunawading (VIC) 12 BEACON LIGHTING GROUP ANNUAL REPORT 2023Throughout FY2023, the Beacon Lighting Group had a 50% interest in the Large Format Property Fund which owns seven retail properties. Four of these properties are fully tenanted, one property is a recently completed development project and is partially tenanted and two properties remain development projects. The Large Format Property Fund did not make any new property acquisitions in FY2023. Beacon Lighting continues to be a vertically integrated business which designs, develops, sources, imports, distributes, merchandises, markets and sells our own product range to meet 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. 13 BEACON LIGHTING GROUP ANNUAL REPORT 20234.2 FINANCIAL SUMMARY 4.2.1 Financial Result In presenting the financial results for FY2023, the Directors of Beacon Lighting believe the presentation of non-IFRS measures are useful for the users of these financial reports as they provide additional insights 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 FY2023 result compared to the FY2022 result is presented in the following table: Consolidated Entity FY2023 $’000 FY2022 $’000 Change $’000 Sales Gross Profit Other Income (1) Operating Expenses (2) EBITDA (3) EBIT (3) Net Profit After Tax 311,955 211,333 1,062 (126,756) 85,639 54,830 33,643 304,299 210,368 991 (118,628) 92,731 63,793 40,726 7,656 965 71 (8,128) (7,092) (8,963) (7,083) (1) Other Income includes other revenue, other income and a share of net profit of associates (2) Operating Expenses excludes interest, depreciation and amortization (3) Non-IFRS financial measures Change % 2.5% 0.5% 7.2% 6.9% (7.6%) (14.1%) (17.4%) 14 BEACON LIGHTING GROUP ANNUAL REPORT 20234.2.2 Sales 4.2.8 Financial Position In FY2023, Beacon Lighting achieved a sales result of $312.0 million compared to $304.3 million last year. Company store comparative sales were 0.4% ahead of last year with a strong comparative increase in H1 FY2023 and with a decline in H2 FY2023. The best comparative sales results were achieved in South Australia, Victoria and Western Australia. Record sales results were achieved for Beacon Lighting Commercial and Custom Lighting. Some sales channels for Beacon International remain very exciting but overall growth for Beacon International was slightly down on last year which was the result of some customers being overstocked at the end of FY2022 and the less elevated eCommerce sales channel in the USA. 4.2.3 Gross Profit Product costs have been a challenge with a subdued AUD/USD exchange rate and product inflation impacting the cost base at various stages throughout FY2023. In addition, the margin mix has been changing with stronger sales growth being achieved with our trade customers and Beacon Lighting Commercial, compared to our traditional retail customers. Given these changes, Beacon Lighting has been able to achieve a gross profit margin of 67.7% in FY2023 compared to 69.1% last year. 4.2.4 Other Income Other income includes other income, other revenue and a share in the income from the investment in the Large Format Property Fund and increased by 7.2% in FY2023. 4.2.5 Operating Expenses Total operating expenses have increased by 6.8% to $126.8 million. Inflation impacted some of our selling and distribution expenses resulting in a 7.5% increase in FY2023. There has continued to be a deliberate investment in marketing to support the growth of the retail, trade and international strategies. General and administration expenses increased modestly in FY2023. Overall, operating expenses % to sales in FY2023 was 40.6% compared to 39.0% in FY2022. 4.2.6 Earnings In FY2023, Beacon Lighting achieved a Net Profit After Tax result of $33.6 million compared to $40.7 million in FY2022. 4.2.7 Dividends The Directors of Beacon Lighting have declared an annual fully franked dividend of 8.3 cents per share for FY2023, compared to 9.3 cents per share for FY2022. For H2 FY2023, the Directors have declared a fully franked dividend of 4.0 cents per share compared to 5.0 cents per share last year. Beacon Lighting continues to offer a dividend reinvestment plan for our shareholders. 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 two new stores, the relocation of two stores and the significant investment in our technical infrastructure including the new Beacon Trade Club. Overall, Beacon Lighting made a capital expenditure investment of $11.6 million in FY2023. There were no further capital investments made to the Large Format Property Fund in FY2023, instead, interest bearing loans were made to support the three property development projects of the Fund. Beacon Lighting investment in inventory peaked in December 2022. Throughout H2 FY2023 with the reliability of stock supply improving and the need for safety stock reducing, stock has been managed down to $96.9 million. Beacon Lighting also finished FY2023 with a cash balance of $20.7 million. 4.3 Strategic Pillars of Growth Throughout FY2023, Beacon Lighting has remained focused on the four strategic pillars of growth. 4.3.1 Stores At the end of FY2023, Beacon Lighting had 117 company stores and two franchised stores strategically located throughout Australia. During the year, Beacon Lighting opened two new company stores at Pimpama (QLD) and Armadale (WA). Beacon Lighting also relocated to new stores at Southport (QLD) and Nunawading (VIC) and closed the Clarkson (WA) and Crossroads (NSW) stores. The Store Benchmarking and Network Plan was updated in March 2023 and identified a potential store network in Australia of 195 stores. Beacon Lighting has a core range of 3,500 products with more than 600 products being identified as “trade essentials”. In FY2023, Beacon Lighting continued to innovate and introduced 636 new products, including 200 new trade products to ensure that our customers have the latest, innovative range of lighting, fan and energy efficient products that are available in the market. In the 119 Beacon Lighting stores, there are more than 850 sales associates throughout Australia who continue to provide outstanding service to our retail and trade customers. Beacon Lighting also has 225 Accredited Lighting Design Consultants, 119 Trade Consultants and 40 Lighting Design Studios which conducted nearly 2,700 premium lighting design consultations in FY2023. The Beacon Lighting team ensures that our retail and trade customers always receive a unique and outstanding customer service experience. 15 BEACON LIGHTING GROUP ANNUAL REPORT 20234.3.2 Trade 4.3.4 New Business Building lasting relationships with our trade customers has remained Beacon Lighting’s number one objective throughout FY2023. A key investment in this relationship was the re-launch of Beacon Trade onto an industry leading loyalty technology platform. The key benefits of the re-launched Beacon Trade has made it easier and more rewarding for our trade customers and their customers to do business with Beacon Lighting. The rewards for our trade customers include receiving Beacon Cash and special prices for all trade and referral purchases. Beacon Lighting has continued to roll out trade rooms and trade walls to specific stores. New trade switch displays have been rolled out to all stores along with other new trade merchandise displays. Beacon Lighting has continued with the weekly trade seminars and a trade training program to ensure that the capabilities of the Beacon Lighting team to service our trade customers continues to be enhanced. The value added services of the Beacon Design Studio has been able to offer outstanding value to our trade customers and their customers, while at the same time reducing their workloads. The dedicated marketing program has continued to build the Beacon Trade brand and enhance the benefits associated with being a Beacon Trade member. Many of the trade initiatives associated with the Beacon Trade strategy have been very well received by our trade customers. Since the relaunch of the Beacon Trade Club in December 2022, nearly 4,000 new members have since joined the Club for a total membership base of 50,700 Beacon Trade members. In FY2023, total trade sales have increased by 21.6% and trade sales through stores have increased by 22.5%. Online trade sales continue to be a very exciting sales channel with an increase of 36.0% in FY2023. 4.3.3 eCommerce Beacon Lighting now has 16 dedicated business websites with the primary websites being www.beaconlighting.com.au and www.beacontrade.com.au. Two new branded websites were launched in FY2023 being “GE Imagine Smart Lighting” and “Made by Mayfair”. The exclusive Beacon Trade website continues to be very well supported by our Beacon Trade members and enables them to shop 24/7 with Beacon Trade while still enjoying the rewards and special pricing of the Beacon Trade Club. In FY2023, Beacon Trade online visitation increase by 47.0% and online trade sales increased by 36.0%. Beacon Trade members are now able to make online purchases with Afterpay, ZipPay and the Beacon Trade charge accounts. During FY2023, as Beacon Lighting customers were able to shop in store without any COVID restrictions, the store sales mix moved away from the online sale channel. Despite this change in customer behaviour, the online sales channel remains very important for Beacon Lighting with online sales being 10.0% of all Beacon Lighting store sales. Beacon Lighting continues to pursue growth in the new businesses, specifically being Beacon International, Custom Lighting, Masson For Light, Connected Light Solutions and Light Source Solutions. These businesses enjoyed sales success throughout FY2023, with a sales increase of 32.5% for Custom Lighting, 29.3% for Connected Light Solutions, 16.4% for Masson For Light and 6.7% for Light Source Solutions (in New Zealand). Beacon International is the most significant of these new businesses. The sales highlight in FY2023 was Beacon Lighting Europe with a sales increase of 53.0%. Sales did decline for Beacon Lighting USA in FY2023, as a result of some customers being overstocked at the end of FY2022 and the less elevated eCommerce sales in the USA. The USA showroom sales channel did achieve some exciting growth with an increase of 32.8% in customer numbers. Despite the USA sales decline in FY2023, USA sales in FY2023 are still 22.6% ahead of the sales from FY2021. Beacon Lighting did not invest any significant capital into the Large Format Property Fund in FY2023. Instead, Beacon Lighting has continued to loan money to the property fund to support development projects at Southport (QLD), Auburn (NSW) and Bathurst (NSW). Pleasingly, the Large Format Property Fund project at Southport (QLD) opened as a Beacon Lighting store in June 2023. 4.4 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 does have some mitigation strategies to manage the impact of these risks should they occur. The most material risks and how they are managed are presented in the following sections. 4.4.1 Product Sourcing, Quality and Supply Beacon Lighting is a vertically integrated business which relies upon key agents, key factories 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. 4.4.2 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, pandemics and natural disasters. 16 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 the Beacon Lighting Group if required. 4.4.3 Foreign Currency Exposures Beacon Lighting is a vertically integrated business where most of the products that are sold by the Group 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 carrying all stock in Australia in AUD and by using FX forward contracts to secure future FX positions. Beacon Lighting also has the ability to manage selling prices with our retail and trade customers. 4.4.4 Growth Strategies Beacon Lighting growth strategies are based on the strategic pillars of growth. There is however 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. 4.4.5 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 are continuity and succession plans in place for the key associates within Beacon Lighting. 4.4.6 Management Systems 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 these management systems and the Beacon Lighting Group. 4.4.7 Environment Beacon Lighting operates in a complex environment involving a variety of environmental, social and governance requirements. Any changes to this environment could adversely impact upon Beacon Lighting’s current and future financial position. Beacon Lighting aims to maintain effective environmental, social and governance processes to manage the risks associated with this complex operating environment. 4.4.8 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 could have an adverse impact upon 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. 17 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 25 June 2023, 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 10 10 10 10 A 10 10 10 10 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 124,564,216 124,564,216 276,489 300,000 (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 FY2023 $'000 Actual FY2022 $'000 Fully franked dividends paid during the period 20,769 19,876 18 BEACON LIGHTING GROUP ANNUAL REPORT 2023 10. INSURANCE OF OFFICERS 13. EVENTS SUBSEQUENT TO REPORTING 10.1. Indemnification of Directors DATE A fully franked dividend of $8,983,852 was declared on 16 August 2023 (4.0 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 $245,000 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 202314.2 Audit and Non-Audit Services Provided by the External Auditor During the 52 weeks ended 25 June 2023, 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 FY2023 $ FY2022 $ Audit & review of financial statements 308,400 270,350 Other Services Tax compliance services Total Remuneration of PwC 10,000 318,400 19,510 289,860 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. 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 25 June 2023. 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 2023Remuneration Framework Element Purpose Performance Metrics Potential Value Changes for FY2023 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 FY2023 the actual fixed and variable remuneration was: Fixed Remuneration % Short Term Incentive (Cash Bonus) % Short Term Incentive (Performance Rights) % Total % Executive Chairman Chief Executive Officer Chief Financial Officer Chief Operating Officer 100.00% 78.93% 86.00% 84.65% 0.00% 0.00% 0.00% 0.00% 0.00% 100.00% 21.07% 100.00% 14.00% 100.00% 15.35% 100.00% The Remuneration and Nomination Committee is responsible for assessing performance against KPIs and determining the short term incentives 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 2023 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) (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 25 June 2023, 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 FY2023 fixed remuneration was increased for the three executives at an average increase of 4.45%. 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 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 award is paid in cash after financial results have been audited and approved by the Board the 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 25 June 2023 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. The Board will review the nature of potential issues of performance incentives moving forward to reflect market practice and to reflect the principles underlying the Group’s remuneration policy. BEACON LIGHTING GROUP ANNUAL REPORT 2023Structure of Short Term Performance Rights Feature Description Maximum Opportunity 125% of on target cash bonus value Performance Metric Budgeted NPAT Delivery of STI 33.34% of STI performance rights awarded vest after the financial results have been audited and approved by the Board. 33.33% in twelve months and 33.33% in 24 months if the executive remains an employee of the Group at that time 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 FY2023 Performance and Impact on Remuneration Beacon Lighting’s NPAT financial performance in FY2023 was below the FY2023 budget. For the 52 weeks ended 25 June 2023, the Group’s financial performance targets were not met when compared to budget. Senior management will not be awarded the short term incentive cash bonus and the short term incentive performance rights. 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 the Net Profit After Tax, earnings per share, dividend payments and share price over that period of time. Statutory Key Performance Indicators of the Group FY2023 FY2022 FY2021 FY2020 FY2019 Net profit after tax ($’000) 33,643 40,726 37,658 22,225 16,044 Basic earnings per share (cents) 15.05 18.24 16.94 10.11 7.37 Dividend payments ($’000) 20,769 19,876 14,696 10,110 10,986 Share Price (Period End) 1.49 1.76 1.86 1.08 1.04 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 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 25 June 2023 and the 52 weeks ended 26 June 2022 unless otherwise stated 23 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 $ DIRECTORS I Robinson (Chairman) 2023 2022 192,728 192,728 G Robinson (Chief Executive Officer) 2023 2022 E Barr (Non-Executive) 2023 2022 393,504 383,681 111,312 110,946 N Osborne (Non-Executive) 2023 2022 102,262 101,853 Total Remuneration Directors 2023 2022 EXECUTIVES 799,806 789,208 D Speirs (Chief Financial Officer) 2023 2022 306,465 301,044 B Martens (Chief Operating Officer) 2023 2022 260,532 258,171 - - - - - - - - - - - - - - Share Based Payments Total $ - - 204,908 209,768 118,549 562,638 19,229 19,017 (7,049) (1,977) 25,292 25,293 - - - 23,568 10,408 112,000 124,994 654,741 11,687 11,521 10,737 10,577 - - - - 66,945 18,244 - - - - - - - - - 122,999 122,467 112,999 112,430 118,549 1,003,544 64,683 8,431 112,000 124,994 1,099,406 25,292 (6,366) - 52,975 378,366 23,568 20,073 50,000 56,246 450,931 25,292 6,390 - 52,975 345,189 23,568 33,620 50,000 56,246 421,605 I Bunnett (Managing Director – Sales) (resigned August 2021) 2023 2022 - 172,815 Total Remuneration Executives 2023 2022 566,997 732,030 - - - - - - 19,307 (132,080) 50,584 24 - - - - - 73,642 133,684 105,950 723,555 66,443 (78,387) 100,000 186,134 1,006,220 24 BEACON LIGHTING GROUP ANNUAL REPORT 2023 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 20/08/2020 99,074 Refer below 107,000 100.00% 99,074 - - - 39,338 71,333 - - 33,032 2,463 19/08/2021 76,087 Refer below 140,000 66.67% 50,727 25,360 18/08/2022 57,436 Refer below 112,000 33.34% 19,149 38,287 - - 28,302 87,784 Total 343,268 521,640 279,621 63,647 143,703 118,549 The fair value of performance rights granted on 24 August 2017 (grant date) was $1.36, with a final vesting date of 25 August 2020. The fair value of performance rights granted on 16 August 2018 (grant date) was $1.53, with a final vesting date of 16 August 2020. The fair value of performance rights granted on 20 August 2020 (grant date) was $1.08, 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 $1.84, 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 fair value of performance rights granted on 18 August 2022 (grant date) was $1.95, with a final vesting date of 18 August 2024. All unvested performance rights will vest by 18 August 2024 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 2023 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 50,000 100.00% 46,296 - - - 21/08/2021 33,967 Refer below 62,500 66.67% 22,646 11,321 18/08/2022 25,641 Refer below 50,000 33.34% 8,549 17,092 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 50,000 100.00% 46,296 - - - 21/08/2021 33,967 Refer below 62,500 66.67% 22,646 11,321 18/08/2022 25,641 Refer below 50,000 33.34% 8,549 17,092 12,867 22,223 - - - 12,867 22,223 - - - - - 1,151 12,635 39,189 - - 1,151 12,635 39,189 Total 315,238 477,000 258,412 56,826 70,180 105,950 The fair value of options granted on 24 August 2017 (grant date) was $1.36. 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 $1.53. 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 $1.08. 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 $1.84, 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 fair value of performance rights granted on 18 August 2022 (grant date) was $1.95, with a final vesting date of 18 August 2024. All unvested performance rights will vest by 18 August 2024 provided the executive remains employed by the Group at the vesting date. The options and performance rights have a zero exercise price. Subject to meeting the relevant vesting conditions, shares or cash 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 2023 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) 2023 2022 123,791,815 123,757,815 G Robinson (Chief Executive Officer) 2023 2022 E Barr (Non-Executive) 2023 2022 N Osborne (Non-Executive) 2023 2022 EXECUTIVES D Speirs (Chief Financial Officer) 2023 2022 B Martens (Chief Operating Officer) 2023 2022 132,925 132,925 250,000 225,000 300,000 300,000 115,022 115,022 146,220 146,220 I Bunnett (Managing Director – Sales)(4) 2023 2022 Total 2023 2022 - 43,276 101,320 - - - - - - - - - - - - - - 636,096 34,000 - - - 20,762 25,000 - - - - - - - - 3,380 - 5,727 - - - - - - - - - - - - - - - - - - - - - - 144,596 124,427,911 123,791,815 136,305 132,925 276,489 250,000 300,000 300,000 115,022 115,022 146,220 146,220 - - 124,735,982 - 20,762 645,203 - 125,401,947 124,720,258 101,320 59,000 - 144,596 124,735,982 (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 2023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 D Speirs B Martens Contract Type Rolling contract Rolling contract Rolling contract Notice of termination by Group Employee notice 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 FY2022. 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, 16 August 2023 Glen Robinson Chief Executive Officer 28 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 25 June 2023, 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. Matthew Probert Partner PricewaterhouseCoopers Melbourne 16 August 2023 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 2023 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 2023 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 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)(ii) PROFIT BEFORE INCOME TAX Income tax expense PROFIT FOR THE PERIOD ATTRIBUTABLE TO THE OWNERS OF THE PARENT ENTITY Profit is attributable to: Owners of Beacon Lighting Group Limited 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 Income tax relating to these items Other comprehensive income for the period, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO THE OWNERS OF THE PARENT ENTITY Total comprehensive income is attributable to: Owners of Beacon Lighting Group Limited EARNINGS PER SHARE Basic earnings per share Diluted earnings per share 7 25(a) 25(a) 29 29 FY2023 $’000 311,955 489 312,444 277 FY2022 $’000 304,299 494 304,793 280 (100,622) (93,931) (15,558) (123,686) (18,321) (6,648) 296 48,182 (14,539) 33,643 33,643 33,643 (298) 153 45 (100) (14,459) (115,341) (17,766) (5,764) 217 58,029 (17,303) 40,726 40,726 40,726 497 807 (390) 914 33,543 41,640 33,543 33,543 CENTS 15.05 15.05 41,640 41,640 CENTS 18.24 18.24 The above consolidated statement of comprehensive income should be read in conjunction with the accompanying Notes. 31 BEACON LIGHTING GROUP ANNUAL REPORT 2023CONSOLIDATED BALANCE SHEET As at 25 June 2023 and as at 26 June 2022 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 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 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 FY2023 $’000 20,682 13,200 96,936 121 2,177 133,116 30 19,963 44,744 108,017 13,748 564 12,737 199,803 332,919 19,164 19,405 11,332 2,208 26,771 78,880 3,000 100,206 1,737 104,943 183,823 149,096 74,468 (42,336) 116,964 149,096 FY2022 $’000 27,996 8,591 93,094 330 1,751 131,762 67 19,971 38,957 105,186 13,718 232 12,653 190,784 322,546 29,096 20,315 10,956 1,783 26,718 88,868 - 97,742 1,801 99,543 188,411 134,135 72,312 (42,267) 104,090 134,135 BEACON LIGHTING GROUP ANNUAL REPORT 2023CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entities Consolidated Entity Notes Contributed Equity $’000 Reserves $’000 Retained Earnings $’000 Total Equity $’000 Balance as at 26 June 2022 72,312 (42,267) 104,090 134,135 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 - - - 2,156 - - - Total contributions by and distributions to owners 2,156 - 33,643 33,643 (100) (100) - 123 (92) - 31 - (100) 33,643 33,543 - - - 2,156 123 (92) (20,769) (20,769) (20,769) (18,582) Balance as at 25 June 2023 74,468 (42,336) 116,964 149,096 Balance as at 27 June 2021 72,312 (43,356) 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) - 175 40,726 40,726 - 914 40,726 41,640 - - - - 327 (153) (19,876) (19,876) (19,876) (19,701) Balance as at 26 June 2022 72,312 (42,267) 104,090 134,135 The above consolidated statement of changes in equity should be read in conjunction with the accompanying Notes. 33 BEACON LIGHTING GROUP ANNUAL REPORT 2023For the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entities CONSOLIDATED STATEMENT OF CASH FLOWS Consolidated Entity CASH FLOWS FROM OPERATING ACTIVITIES Notes FY2023 $’000 FY2022 $’000 Receipts from customers (inclusive of goods and services tax) 340,817 333,410 Payments to suppliers and employees (inclusive of goods and services tax) (271,283) (258,815) Interest received Borrowing costs Income taxes paid 187 171 (6,648) (5,764) (14,148) (17,348) Net cash inflow from operating activities 36 48,925 51,654 CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant and equipment Payments for interest in associates Loan to associates Payments for acquisitions Proceeds from interest in associates Proceeds from sale of property, plant and equipment 33 33 33 (11,644) (125) (2,518) (50) 429 224 (9,604) (4,840) - - 286 31 Net cash (outflow) from investing activities (13,684) (14,127) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings (Repayment) of borrowings (Payments) for principal portion of lease liabilities 92,760 78,762 (89,916) (77,064) (26,786) (25,183) Dividends paid to Company's shareholders 26 (18,613) (19,876) Net cash (outflow) from financing activities (42,555) (43,361) 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. (7,314) 27,996 20,682 (5,834) 33,830 27,996 34 BEACON LIGHTING GROUP ANNUAL REPORT 20231. Summary of Significant Accounting (iii) Compliance with IFRS 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 (the ‘Company’ or ‘Beacon Lighting Group’) and its controlled entities (the ‘Consolidated Entity’ or ‘Group’). 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. (a) Basis of Preparation (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 25 June 2023 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. 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 25 June 2023 (2022: 52 week period ending 26 June 2022). 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 25 June 2023 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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023(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 (i) 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 operates a loyalty program where trade customers accumulate award points for purchases made which entitle them to discounts on future purchases. The award points are recognised as a separately identifiable component of the initial sale transaction, by allocating the fair value of the consideration received between the award points and the other components of the sale such that the award points are recognised at their fair value. Revenue from the award points is recognised when the points are redeemed. The amount of revenue recognised is based on the number of points redeemed relative to the total number expected to be redeemed. The Group’s obligation to repair or replace faulty products under the standard warranty terms is recognised as a provision, see Note 19. (ii) 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. (iii) Franchise Royalty Fee Income Franchise royalty fee income includes advertising contributions and management fee, which is based upon a percentage of sales. 37 BEACON LIGHTING GROUP ANNUAL REPORT 2023(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. 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. 38 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight- line basis. 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 39 BEACON LIGHTING GROUP ANNUAL REPORT 2023effective interest method. 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. (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 Accounting 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. (i) 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 40 income statement within finance costs. The gain or loss relating to the effective portion of forward foreign exchange contracts which hedge imported inventory purchases are ultimately recognised in the profit or loss as cost of goods sold. to hedge forward contracts are used forecast When 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 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023adjusted if appropriate, at the end of each reporting period. (s) Provisions An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains 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. 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. (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 41 BEACON LIGHTING GROUP ANNUAL REPORT 2023of the reporting period of government bonds with terms and 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. (i) 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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 Lease Liabilities FY2023 $’000 20,682 13,200 121 34,003 19,164 22,405 126,977 168,546 FY2022 $’000 27,996 8,591 330 36,917 30,694 19,561 124,460 173,871 43 BEACON LIGHTING GROUP ANNUAL REPORT 2023(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 25 June 2023 the average term of outstanding foreign exchange contracts is three months with an average forward rate for AUD/ USD of 0.6758. The Group holds the following foreign exchange derivatives: Consolidated Entity Forward exchange contracts - buy cash flow hedges (notional amount) FY2023 $’000 11,048 FY2022 $’000 2,967 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 27.93% (2022: 35.47%) of the variable loan principal outstanding. The fixed interest rate of the swap used to hedge is 2.47% (2022: 2.47%) and the variable rate of the loan 4.15% (2022: 0.42%). 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) FY2023 $’000 6,188 FY2022 $’000 6,188 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 (net of tax) FY2023 $’000 (209) FY2022 $’000 348 44 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023Group Sensitivity At 25 June 2023, 27.93% (2022: 35.47%) 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 Intrinsic value of outstanding hedging instruments FY2023 $’000 (1,105) 1,105 11 (11) FY2023 $’000 73 11,048 FY2022 $’000 (296) 296 27 (27) FY2022 $’000 (271) 2,967 September 2023 September 2022 to October 2022 1:1 (73) 1:1 271 Weighted average strike rate for the year USD$0.6758 : AUD$1 USD$0.7606 : AUD$1 Interest rate swap contracts Carrying amount - asset / (liability) Notional amount Maturity Date Hedge Ratio Intrinsic value of outstanding hedging instruments Weighted average strike rate for the year 48 6,188 329 6,937 15 November 2023 15 November 2023 1:1 (48) 2.47% 1:1 (329) 2.47% 45 BEACON LIGHTING GROUP ANNUAL REPORT 2023(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 FY2023 $’000 FY2022 $’000 500 10,000 25,500 4,000 4,041 15,000 500 10,000 6,347 4,000 1,202 12,000 500 10,000 25,500 4,000 4,023 15,000 500 10,000 5,939 3,825 3,268 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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023The amounts disclosed in the table are the contractual undiscounted cash flows. Contractual maturities of financial liabilities including lease liabilities: Consolidated Entity At 25 June 2023 NON-DERIVATIVES Trade and other payables Borrowings Lease liabilities Total non-derivatives DERIVATIVES Forward exchange contracts Interest rate swap contract Net settled (cash flow hedges) At 26 June 2022 NON-DERIVATIVES Trade and other payables Borrowings Lease liabilities Total non-derivatives DERIVATIVES Forward exchange contracts Interest rate swap contract Net settled (cash flow hedges) Less Than 12 months $’000 Between 1 and 5 Years $’000 Over 5 Years $’000 Total Contractual Cash Flows $’000 Carrying Amount (Assets) Liabilities $’000 19,164 19,526 26,771 65,461 73 48 121 29,096 20,438 26,718 76,252 271 - 271 - 3,000 80,090 83,090 - - 20,116 20,116 - - - - - - - - - - 79,428 79,428 18,314 18,314 - 59 59 - 59 59 19,164 22,526 126,977 168,667 73 48 121 29,096 20,438 124,460 173,994 271 59 330 19,164 22,405 126,977 168,546 73 48 121 29,096 20,315 124,460 173,868 271 59 330 47 BEACON LIGHTING GROUP ANNUAL REPORT 2023(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 25 June 2023, on a recurring basis. At 25 June 2023 Derivatives used for hedging - Net Position Level 2 $’000 121 Total $’000 121 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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 FY2023 $’000 FY2022 $’000 311,955 304,299 489 - 489 484 10 494 312,444 304,793 FY2023 $’000 90 187 277 FY2022 $’000 109 171 280 49 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 FY2023 $’000 FY2022 $’000 5,227 4,792 25,119 23,707 443 419 20 20 6,648 (36) 5,764 (23) 72,459 69,141 Net foreign exchange (gains)/losses recognised in profit before income tax for the period (as either other income or expense) (177) (357) 50 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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% (2022: 30%) Tax effect of amounts which are not deductible in calculating taxable income: Entertainment Sundry items Income tax expense FY2023 $’000 14,411 84 44 14,539 39 - 39 48,182 14,455 45 39 14,539 FY2022 $’000 17,548 (245) - 17,303 145 - 145 58,029 17,409 29 (135) 17,303 51 BEACON LIGHTING GROUP ANNUAL REPORT 20238. CASH AND CASH EQUIVALENTS Consolidated Entity Cash at bank and in hand (a) Classification as Cash Equivalents FY2023 $’000 20,682 FY2022 $’000 27,996 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 FY2023 $’000 9,842 (398) 9,444 3,756 13,200 FY2023 $’000 9,014 309 393 126 FY2022 $’000 8,331 (426) 7,905 686 8,591 FY2022 $’000 7,833 281 (24) 241 9,842 8,331 Consolidated Entity Trade receivables (a) Provision for impairment of receivables (b) Net amounts receivable from customers Other debtors (c) (a) Aging of Trade Receivables Trade receivables ageing analysis at period end is: Consolidated Entity Not past due Past due 31-60 days Past due 61-90 days Past due more than 91 days 52 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023(b) Provision for Impairment of Receivables Trade receivables are non-interest bearing with terms that vary between 30 and 60 days end of month. The Group applies the AASB 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due. The expected loss rates are based on the payment profiles of sales over a period of 36 months before 25 June 2023 or 26 June 2022 respectively and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reflect current and forward looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. On that basis, the loss allowance as at 25 June 2023 and 26 June 2022 was determined as follows for both trade receivables: 25 June 2023 Expected loss rate Gross carrying amount - trade receivables ($’000) Loss allowance ($’000) Current 31-60 days past due 61 - 90 days past due More than 90 days past due Total - 9,014 - - 309 - 69.2% 100.00% 393 272 126 126 9,842 398 26 June 2022 Current 31-60 days past due 61 - 90 days past due More than 90 days past due Total Expected loss rate 1.65% 20.00% - 100.00% Gross carrying amount - trade receivables ($’000) Loss allowance ($’000) 7,833 129 281 56 (24) - 241 241 8,331 426 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 2023 (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. As at 25 June 2023, other debtors substantially related to loans to the related party the Large Format Property Fund. Details regarding the interest rate and repayment terms of the loan are outlined in Note 33 Related Party Transactions. 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 FY2023 $’000 96,294 642 96,936 FY2022 $’000 87,800 5,294 93,094 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 25 June 2023 and included in cost of sales of goods amounted to $100,622,312 (2022: $93,930,976). Write-downs of inventories to net realisable value recognised as an expense during the 52 week period ended 25 June 2023 amounted to $823,366 (2022: $17,629). Included in the valuation of inventory is a provision for stock obsolescence of $2,373,004 (2022: $1,549,637). 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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 FY2023 $’000 FY2022 $’000 73 48 121 121 271 59 330 330 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 25 June 2023 there were no gains or losses (2022: 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 FY2023 or FY2022 in relation to the interest rate swaps. 55 BEACON LIGHTING GROUP ANNUAL REPORT 2023Hedge Reserves The Group’s hedging reserves disclosed in Note 25 relate to the following hedging instruments: Consolidated Entity Opening balance 26 June 2022 Add Change in fair value of hedging instrument recognised in Other Comprehensive Income Less Deferred Tax Closing balance 26 June 2022 Add Change in fair value of hedging instrument recognised in Other Comprehensive Income Less Deferred Tax Closing balance 25 June 2023 Currency Forwards $'000 328 (81) (24) 271 (283) (85) 73 Interest Rate Swaps $'000 (346) 578 173 59 (16) (5) 48 Total Hedge Reserves $'000 (18) 497 149 330 (299) (90) 121 56 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 202312. OTHER CURRENT ASSETS Consolidated Entity Prepayments and other current assets 13. PROPERTY, PLANT AND EQUIPMENT FY2023 $’000 2,177 FY2022 $’000 1,751 Consolidated Entity 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 Year ended 25 June 2023 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 25 June 2023 Cost Accumulated depreciation Net book amount Furniture, Fittings and Equipment $’000 Vehicles $’000 Land and Buildings $’000 Total $’000 31,929 9,043 (672) (4,766) 35,534 67,218 (31,684) 35,534 35,534 11,135 (158) (5,201) 41,310 78,015 (36,704) 41,311 1,698 561 (16) (419) 1,824 3,762 (1,938) 1,824 1,824 509 (30) (443) 1,860 4,040 (2,180) 1,860 1,625 35,252 - - (26) 1,599 1,673 (74) 1,599 1,599 - - (26) 1,573 1,673 (100) 1,573 9,604 (688) (5,211) 38,957 72,653 (33,696) 38,957 38,957 11,644 (188) (5,670) 44,743 83,727 (38,984) 44,744 57 BEACON LIGHTING GROUP ANNUAL REPORT 202314. INVESTMENT IN ASSOCIATES ACCOUNTED FOR USING THE EQUITY METHOD Consolidated Entity Shares in associates at carrying amount at start of period Acquisitions Cash distributions received Net Share of associates profit / (Losses) Carrying amount at end of period Refer to note 34(b) for details of the Group’s associates FY2023 $’000 19,971 125 (429) 296 FY2022 $’000 15,241 4,730 - - 19,963 19,971 58 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 Total deferred tax liabilities MOVEMENTS IN NET DEFERRED TAX ASSETS FY2023 $’000 FY2022 $’000 2,372 1,971 208 105 904 147 38,299 1,136 45,142 2,441 1,235 207 124 295 442 37,286 2,001 44,031 32,763 32,763 31,378 31,378 Opening balance 12,653 13,528 Charged/(credited) to the consolidated statement of comprehensive income (Note 7) Charged/(credited) amounts recognised on acquisitions Charged/(credited) amounts recognised directly in equity 39 - 45 145 (630) (390) Net deferred tax assets 12,737 12,653 59 BEACON LIGHTING GROUP ANNUAL REPORT 202316. INTANGIBLE ASSETS Consolidated Entity 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 Year ended 25 June 2023 Opening net book amount Additions Amortisation charge for the year Closing net book amount At 25 June 2023 Cost Accumulated amortisation Net book amount Goodwill $’000 Patents, Trademarks and Other Rights $’000 13,578 - - 13,578 13,578 - 13,578 13,578 50 - 13,628 13,628 - 13,628 160 - (20) 140 500 (360) 140 140 - (20) 120 500 (380) 120 Total $’000 13,738 - (20) 13,718 14,078 (360) 13,718 13,718 50 (20) 13,748 14,128 (380) 13,748 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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023(a) Impairment Tests for Goodwill Goodwill is allocated to the Group’s one operating segment 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 2023 % 67.7 2022 % 65.0 2023 % 3.0 2022 % 3.0 2023 % 11.1 2022 % 11.1 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 units or operating segment. 17. TRADE AND OTHER PAYABLES Consolidated Entity Trade payables Customer deposits Sundry creditors Marketing fund Other payables FY2023 $’000 7,004 4,071 7,233 491 365 FY2022 $’000 12,457 5,977 8,004 1,474 1,184 19,164 29,096 (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 202318. CURRENT BORROWINGS Consolidated Entity Secured Trade finance (a) Interchange facility (b) FY2023 $’000 - 19,405 19,405 FY2022 $’000 - 20,315 20,315 (a) Trade Finance The Group utilises trade finance facilities to fund inventory. The total available facility in FY2023 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) 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 FY2023. 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) Trade Loyalty Provision (c) Other provisions (c) 62 FY2023 $’000 7,271 1,655 26 1,988 392 FY2022 $’000 7,215 2,030 26 845 840 11,332 10,956 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023(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 FY2023 $’000 4,514 FY2022 $’000 4,887 (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 $165,000 (2022: $203,000) 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 FY2023 $’000 2,030 (375) 1,655 FY2022 $’000 1,570 460 2,030 Provision is made for trade loyalty expense, make good expense and fringe benefit tax payable at the end of the reporting period. The trade loyalty provision relates to the accumulation of award points for purchases which entitle the Trade Club members to discounts on future purchases. The Trade Club was relaunched during FY2023. Movements in Other Provisions Consolidated Entity Carrying amount at the start of the year Charged to profit or loss - amount incurred and charged Carrying amount at end of period FY2023 $’000 1,711 695 2,406 FY2022 $’000 1,359 352 1,711 63 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 FY2023 $’000 2,208 FY2022 $’000 1,783 FY2023 $’000 FY2022 $’000 3,000 - The Group utilises floating rate loan facilities to fund business acquisitions. The total available facility is $15,000,000. The term of the facility is two years and was entered into during FY2023. 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 25 June 2023 and the 52 weeks ended 26 June 2022. 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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 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 Lease liabilities Interest expense FY2023 $’000 672 1,065 1,737 FY2022 $’000 736 1,065 1,801 FY2023 $’000 FY2022 $’000 108,017 104,046 - - 444 104 108,017 105,186 26,771 100,206 126,977 FY2023 $’000 - - 25,251 25,251 4,919 4,919 26,718 97,742 124,460 FY2022 $’000 26 16 23,763 23,805 4,572 4,572 65 BEACON LIGHTING GROUP ANNUAL REPORT 2023Total cash outflows for leases for the period ended 25 June 2023 were $31,644,510 (2022 : $29,754,868) Additions made to the right of use asset during the year were $28,647,630 (2022 : $27,005,554) 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 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 $14,344,386. 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 202324. CONTRIBUTED EQUITY Consolidated Entity FY2023 FY2022 Number of ordinary shares, fully paid 224,596,289 223,321,406 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 223,321,406 223,321,406 1,274,883 - 224,596,289 223,321,406 FY2023 $’000 72,312 2,156 74,468 FY2022 $’000 72,312 - 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. The gearing ratio for FY2023 was 1.16% (FY2022: (5.73%)) 67 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 FY2023 $’000 121 155 1,414 (354) (43,672) (42,336) 330 (209) 121 30 125 155 1,307 107 1,414 (262) (92) (354) FY2022 $’000 330 30 1,307 (262) (43,672) (42,267) (18) 348 330 (297) 327 30 740 567 1,307 (108) (154) (262) (43,672) (43,672) - - (43,672) (43,672) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 FY2023 $’000 FY2022 $’000 104,090 33,643 (20,769) 116,964 83,240 40,726 (19,876) 104,090 69 BEACON LIGHTING GROUP ANNUAL REPORT 202326. DIVIDENDS (a) Ordinary Shares Consolidated Entity Final dividend for period ended 26 June 2022 of 5.0 cents (2021: 4.6 cents) per fully paid share Interim dividend for period ended 25 June 2023 of 4.30 cents (2022: 4.30 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 re-instated in FY2023. (b) Dividends not recognised at the End of the Reporting Period FY2023 $’000 FY2022 $’000 11,166 10,273 9,603 20,769 18,613 2,156 20,769 9,603 19,876 19,876 - 19,876 Consolidated Entity In addition to the above dividends, since year end the Directors have recommended the payment of a final dividend of 4.0 cents per fully paid ordinary share (2022: 5.0 cents), fully franked based on tax paid at 30%. The proposed dividend is to be paid out of retained earnings at 25 June 2023, but not recognised as a liability at year end. FY2023 $’000 FY2022 $’000 8,984 11,166 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023c) Franked Dividends The franked portions of the final dividends recommended after 25 June 2023 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 25 June 2023. Consolidated Entity Franking credits available for subsequent reporting periods based on a tax rate of 30% (2022: 30%) FY2023 $’000 FY2022 $’000 65,599 60,159 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 FY2023 $ FY2022 $ 1,153,229 1,308,440 95,105 18,268 - 224,499 109,028 (69,956) 212,000 311,128 1,491,101 1,870,640 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 2023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 FY2023 108,718 $1.95 FY2023 - - FY2022 144,021 $1.84 FY2022 33,967 $1.84 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 25 June 2023 included: Exercise price Grant date Share price at grant date Expected dividend yield FY2023 $0.00 FY2022 $0.00 18 August 2022 19 August 2021 $1.95 4.25% $1.84 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 FY2023 - - - - FY2022 $0.00 19 August 2021 $1.84 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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023(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: FY2023 $’000 FY2022 $’000 Performance rights and options issued under employee STI plans 307 288 29. EARNINGS PER SHARE Consolidated Entity FY2023 FY2022 Basic earnings per share - cents Diluted earnings per share - cents 15.05 15.05 18.24 18.24 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 223,598,913 223,321,406 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 223,598,913 223,321,406 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 FY2023 $ FY2022 $ Audit and review of financial statements 308,400 270,350 Other services: Taxation services Total remuneration of PwC 31. CONTINGENCIES 10,000 318,400 19,510 289,860 There were no significant or material contingent liabilities including legal claims as at 25 June 2023 or 26 June 2022. 73 BEACON LIGHTING GROUP ANNUAL REPORT 2023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) FY2023 $’000 FY2022 $’000 - - - - - - - - 178 - 178 (3) 175 175 - 175 (b) Significant capital expenditure contracted for at the end of the reporting period but not recognised as liabilities is $2.76m (2022: $2.2m). 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 FY2023 $ FY2022 $ Purchases of goods and supply of services from other related parties 1,488 16,827 Other transactions Income received from other related parties Rent and outgoings paid to other related parties Payments for equity interest in associate Loan to associate Cash Distribution from interest in associate Income from equity interest in associate 74 75,000 109,500 (1,417,405) (1,007,942) (125,000) (4,840,000) (2,518,000) (100,000) 429,474 296,307 286,366 216,532 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 $199,900 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 $255,000 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 $102,900 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. 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 $19,267,000 in this Fund (2022 : $19,971,000). 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. At 25 June 2023, the Fund controls seven sub funds and had acquired seven properties. Farrlong Pty Ltd as trustee for the Bacalla Trust which is controlled by the Robinson Family owns 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%. Accordingly, the Large Format Management Company Pty Ltd and the Large Format Property Fund are recognised at 25 June 2023 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 $233,398 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 $209,140 per annum increasing by 3% annually. The lease expires in 2029 with one further right of renewal for a period of eight 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 $178,410 per annum increasing by 3% annually. The lease expires in 2029 with two further rights of renewal for a period of seven years. The Large Format Property Fund has a 100% interest as owner of the Southport store leased by Beacon Lighting on arms length terms. The current rent is $366,600 per annum increasing by 3% annually. The lease expires in 2030 with two further rights of renewal for a period of seven years. (d) Outstanding Balances As at 25 June 2023 The Large Format Property Fund owed The Group $2,518,000 (FY2022 : $100,000). Interest is payable on the loan at a rate of BBSW plus 1.7% and repayment of the loan is a the discretion of the lender with at least 40 business days notice. 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 2023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) 2023 % 2022 % 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 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023(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 2023 % 2022 % Large Format Management Company Pty Ltd Large Format Property Fund Pty Ltd Large Format Property Fund Australia 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 Equity 45 45 50 50 50 50 50 50 50 50 45 45 50 50 50 50 50 50 50 50 The combined carrying value of the investment in associates at 25 June 2023 was $19,267,000 (FY2022 : $19,971,000) 77 BEACON LIGHTING GROUP ANNUAL REPORT 2023(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 and subsidiaries Large Format Property Fund and Sub Funds FY2023 $’000 FY2022 $’000 FY2023 $’000 FY2022 $’000 83 23 9 115 - - 115 1 - 1 - 1 114 200 (86) 114 50 23 10 83 - - 83 1 - 1 - 1 82 200 (118) 82 1,554 1,320 - - 1 6 1,554 1,327 50,668 50,668 52,222 5,538 6,520 12,058 - 12,058 40,164 39,032 1,132 40,164 45,706 45,706 47,033 73 6,520 6,593 - 6,593 40,440 39,873 567 40,440 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023(ii) Summarised Statement of Comprehensive Income for Associates Statement of comprehensive income Revenue Other expenses Interest income Depreciation and amortisation Interest expense Income tax expense (Loss) / Profit from continuing operations (Loss) / Profit for the period Other comprehensive income Total comprehensive income Large Format Management Company Pty Ltd and subsidiaries Large Format Property Fund and Sub Funds FY2023 $’000 96 (66) FY2022 $’000 61 (134) FY2023 $’000 1,607 (1,083) FY2022 $’000 1,038 (528) 2 - - - 32 32 - 32 - - - - (73) (73) - (73) 38 - - - 564 564 - 564 - - - - 510 510 - 510 35. EVENTS OCCURRING AFTER THE REPORTING PERIOD A fully franked dividend of $8,983,852 was declared on 16 August 2023. 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 2023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 Other expenses 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 FY2023 $’000 33,643 30,823 (36) 20 (210) 307 (177) (1,991) (3,842) (84) (758) (10,351) 424 1,157 48,925 Consolidated Entity Balance as at 27 June 2021 Additions / (Cash Inflows) Cash Outflows Balance as at 26 June 2022 Balance as at 26 June 2022 Additions / (Cash Inflows) Cash flows Leases due within 1 year $’000 Leases due after 1 year $’000 Borrowings due within 1 year $’000 Borrowings due after 1 year $’000 (25,079) (26,822) 25,183 (26,718) (26,718) (26,839) 26,786 (97,680) (62) - (97,742) (97,742) (2,464) - (18,617) (78,008) 77,064 (19,561) (19,561) (89,760) 89,916 - - - - (3,000) (122,063) - 116,702 Balance as at 25 June 2023 (26,771) (100,206) (19,405) (3,000) (149,382) 80 FY2022 $’000 40,726 28,877 (23) 20 564 288 (357) (803) (25,157) 875 (228) 5,351 (883) 2,404 51,654 Total $’000 (141,376) (104,892) 102,247 (144,021) (144,021) NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 FY2023 $’000 FY2022 $’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 25 June 2023 or 26 June 2022. 19,474 88,614 108,088 1,100 - 1,100 17,293 88,596 105,889 1,498 1 1,499 106,988 104,390 98,785 211 7,992 96,628 164 7,598 106,988 104,390 1,162 1,162 1,795 1,795 81 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 25 June 2023 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 General and administration expenses Profit before income tax Income tax expense Profit for the period attributable to the members of the closed Group FY2023 $’000 50,532 (3,546) 46,986 (14,174) 32,812 FY2022 $’000 59,837 (3,602) 56,235 (16,798) 39,437 Total comprehensive income for the period attributable to the members of the closed Group 32,812 39,437 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the 52 weeks ended 25 June 2023 and the 52 weeks ended 26 June 2022 Beacon Lighting Group and its controlled entitiesBEACON LIGHTING GROUP ANNUAL REPORT 2023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 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 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 FY2023 $’000 3,351 3,747 11 82,674 89,783 12,649 90,583 103,232 193,015 - 2,838 711 1,733 5,282 3,425 3,425 8,707 FY2022 $’000 5,187 593 9 75,271 81,060 12,581 90,604 103,185 184,245 935 755 642 960 3,292 3,425 3,425 6,717 184,308 177,528 74,427 (7,255) 117,136 184,308 72,271 164 105,093 177,528 83 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 25 June 2023 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, 16 August 2023 Glen Robinson Chief Executive Officer 84 BEACON LIGHTING GROUP ANNUAL REPORT 2023 85 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 25 June 2023 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 25 June 2023 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. 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. 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 2023 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 ● 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. topics, we communicated the following key audit matters to the Audit and Risk Committee: ● 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. − Existence and valuation of inventory ● These are further described in the Key audit matters section of our report. ● For the purpose of our audit we used overall Group materiality of $2.4 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. 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 matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Further, any commentary on the outcomes of a particular audit procedure is made in that context. 87 BEACON LIGHTING GROUP ANNUAL REPORT 2023 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BEACON LIGHTING GROUP LIMITED Key audit matter How our audit addressed the key audit matter Existence and valuation of inventory (Refer to note 10) Inventory management is a key business process for the Group. Inventory represents a significant asset on the consolidated balance sheet at $96.9m. 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 developed an understanding of the controls over inventory. 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 stores. Inspected the sales price of a sample of inventory items sold during July 2023 to determine whether items sold below cost were included in the Group's inventory net realisable value provision. ● Examined the appropriateness of the provisioning 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. 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 25 June 2023, 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. 88 BEACON LIGHTING GROUP ANNUAL REPORT 2023 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. 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 25 June 2023. In our opinion, the remuneration report of Beacon Lighting Group Limited for the 52 week period ended 25 June 2023 complies with section 300A of the Corporations Act 2001. 89 BEACON LIGHTING GROUP ANNUAL REPORT 2023 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF BEACON LIGHTING GROUP LIMITED 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 Matthew Probert Partner Melbourne 16 August 2023 90 BEACON LIGHTING GROUP ANNUAL REPORT 2023 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 14 July 2023, 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 630 753 412 696 82 2,573 - (b) Substantial Shareholdings The number of shares held by the substantial shareholders listed in the Company’s register of substantial shareholders as at 14 July 2023 were: Shareholder Number of Shares % Held Heystead Nominees Pty Ltd (plus Robinson Family members) 124,564,216 55.46% 92 BEACON LIGHTING GROUP ANNUAL REPORT 2023(c) Class of Shares and Voting Rights At 14 July 2023, there were 2,573 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 14 July 2023: 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 123,889,741 55.16% HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 29,702,271 13.22% CITICORP NOMINEES PTY LIMITED NATIONAL NOMINEES LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED RELIABLE BUSINESS CO LTD MR SPENCER RITCHEY KULP + MR BRIAN WALTER KULP KJA HOLDINGS PTY LTD 10,183,010 8,002,508 7,278,361 1,865,268 1,004,000 782,739 4.53% 3.56% 3.24% 0.83% 0.45% 0.35% BANJO SUPERANNUATION FUND PTY LTD 648,000 0.29% BLUE BOAT HOLDINGS PTY LTD CERTANE CT PTY LTD BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD D & G RITCHIE SUPER PTY LTD CARINDA PTY LTD MR ALISTAIR CAMPBELL NEWECONOMY COM AU NOMINEES PTY LIMITED WARREN SUPER NOMINEES PTY LTD BRETTON PTY LTD MR WAYNE FRANCIS WODE + MRS JULIE MARIE WODE JIGWAY PTY LTD 640,000 0.28% 611,442 605,112 0.27% 0.27% 500,000 0.22% 478,000 0.21% 453,775 0.20% 432,934 382,526 375,000 352,526 305,000 0.19% 0.17% 0.17% 0.16% 0.14% Total 20 holders of ISSUED CAPITAL 188,492,213 83.92% Total Remaining Holders Balance Total Shareholders 36,104,076 16.08% 224,596,289 100.00% 93 BEACON LIGHTING GROUP ANNUAL REPORT 2023 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 Level 1 295 Whitehorse Road Nunawading 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 www.imaginesmartlighting.com www.madebymayfair.com www.beacontrade.com.au 94 BEACON LIGHTING GROUP ANNUAL REPORT 2023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 & 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 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 West 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 Homemaker Centre 2 Patty’s Place 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 Super Centre Cnr Bryant Ave & Wynong 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 2023QLD Bundaberg 21 Johanna Bvd Bundall 61 Upton St Burleigh Heads Reedy Creek Road 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 Bald Hills 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 Prime Northlakes Cnr Lakes Dve & Mason St Rockhampton 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 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 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 2023 www.beaconlighting.com.au 

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