Level 2, 315 Ferntree Gully Rd, Mount Waverley VIC 3149, Australia Ph: (03) 9081 9100 Fax: (03) 9081 9199 Email: investor-relations@toysrus.com.au www.toysrus.com.au ABN 94 063 886 199 25 OCTOBER 2024 ANNUAL REPORT Toys”R”Us ANZ Limited (ASX:TOY) (TOY or Company) attaches it’s Annual Report for Shareholders attention and advises that the report released earlier today should be disregarded. This Announcement has been approved for release by the Chair of the Board. About Toys“R”Us ANZ Limited Toys"R"Us ANZ Limited (ASX: TOY) is an Australian-based company with a vision of 'A lifetime journey with every child'. The Company trades under 4 leading e-commerce brands: Toys “R” Us, Babies “R” Us, RIOT and Hobby Warehouse. The Company changed its name from Funtastic Limited to Toys"R"Us ANZ Limited on 24 June 2021. Further information is available at corporate.toysrus.com.au. For further information please contact Toys“R”Us ANZ Email: investor-relations@toysrus.com.au For personal use only 2024 ANNUAL REPORT TOYS“R”US ANZ LIMITED For personal use only Contents Our Story 01 Chair and CEO’s Letter 02 Directors’ Report 04 Auditor’s Independence Declaration 24 Financial Statements 25 Consolidated Entity Disclosure Statement 86 Directors’ Declaration 87 Independent Auditor’s Report 88 Shareholder Information 94 Corporate Directory 97 For personal use only At Toys “R” Us ANZ Limited, we believe that creativity and play have the power to change lives. Play enables children and adults alike to develop their imagination, collaborate, problem solve, explore and create. We’re proud to be home to some of Australia’s most trusted brands. Our house of brands enriches every stage of a child’s life journey, from infancy through to adulthood. Our Story 01 Toys“R”Us ANZ Limited Annual Report 2024 01 For personal use only Chair and CEO’s Letter Dear Shareholders, On behalf of the Board, it is a pleasure to present the Toys “R” Us ANZ Limited FY24 Annual Report. As we reflect on FY24, we are pleased to report that TOY has made significant strides in addressing the challenges we’ve faced to reposition the Company. During the year we successfully executed several key initiatives as outlined in our transformation plan: • Completed our exit from the UK market, allowing us to focus our resources on more promising opportunities. • Acquired the assets of RIOT Art and Craft, expanding our product offering and strengthening our position in the creative play segment. • Significantly reduced overheads, renegotiating key contracts, right sizing our cost base to better align with current operations and future goals. • Cleared a significant amount of obsolete and aged inventory which, although impacting short-term profitability in H1, has set the stage for improving margins into the future. Our financial performance this year reflects both the challenges we’ve faced and the progress we’ve made. While we experienced a 65% reduction in revenue year on year, gross profit dropped by only 27%, while our aggressive cost-cutting measures reduced operating costs by $4.1 million and delivered a stable and scalable cost base. Most importantly, we saw the, overall gross margin in the ANZ B2C business growing from 16% in H1 to 33% in the second half of the year indicating that our strategies are beginning to yield positive results. The leaner underlying cost base and higher margins, combined with optimized inventory management will allow us to operate more efficiently and productively and respond more nimbly to market demands. While our journey to full recovery is ongoing, we believe that we have laid a solid foundation for future growth and profitability. 02 For personal use only The Board and Management Team remain committed to creating value for shareholders through delivering our strategic pillars: House of Brands: investment in our core brands, further enhancing our product range, with a particular focus on the Baby category and our newly acquired art and crafts segment. Adding complementary brands to the portfolio through acquisition or organic growth. Channels to Market: Introducing new ways to shop online, exploring new channels to market and expanding wholesale channels. Operational Excellence: Using technology to support scalability and to leverage data to strengthen our marketing initiatives and increase market share. The success of our strategic pillars is underpinned by delivering outstanding customer experience. We have implemented same-business-day shipping as well as improving on all our customer service metrics. We have improved marketing efficiency and effectiveness through the implementation of new systems and processes. With a database of over 1.3 million loyal customers and some of the most well-known and trusted brands in the region, we have a strong base upon which to build. Our goal of growing market share in Toys and Hobbies to 5% over the next three years remains firmly in our sights. During the year Mr Kevin Moore, Chair of the Board, stepped down and we note our appreciation for his contribution to TOY. Ms Teresa Smith joined our Board as Non-Executive Director bringing an impressive marketing, retail and ecommerce skillset. We express our gratitude and thanks to our dedicated team for their hard work and resilience during this transformative period. We also extend thanks to you, our loyal shareholders for your continued faith in our vision. While challenges remain, we are confident that the significant steps taken this year have position TOY for a stronger future. We look forward to delivering increased value to our customers, partners, and shareholders. Yours sincerely, Kelly Humphreys Penny Cox Chair of the Board CEO Toys“R”Us ANZ Limited Annual Report 2024 03 For personal use only Directors’ Report The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘Group’) consisting of Toys “R” Us ANZ Limited (referred to hereafter as the ‘Company’) and the entities it controlled at the end of, or during, the year ended 31 July 2024. Directors The following persons were Directors of Toys “R” Us ANZ Limited during or since the end of the year: • Kelly Humphreys – Chair and Independent Non‑Executive Director (appointed 5 October 2023 and Chair effective 21 December 2023); • Teresa Smith – Independent Non‑Executive Director (appointed on 1 April 2024); • John Tripodi – Independent Non‑Executive Director; • Kevin Moore – Independent Non‑Executive Director (Chair until 21 December 2023, resigned on 1 April 2024); • Silvio Salom – Independent Non‑Executive Director (resigned on 2 January 2024); and • Penny Cox – Chief Executive Officer (and Managing Director from 24 August 2023 to 18 October 2023). Principal activities Toys “R” Us ANZ Limited is an Australian based listed company with a vision to enrich the lives of people by encouraging exploration, creativity and living life more fully through the enjoyment of toys, hobbies, art and craft. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Review of operations Financial results 31 July 2024 $’000 31 July 2023 $’000 Change % Revenue from continuing operations 7,668 21,642 (64.6%) EBITDA from continuing operations (6,080) (9,510) (36.1%) Profit/(Loss) before Tax from continuing operations (11,818) (26,107) (54.7%) Net profit/(loss) after tax from continuing operations (11,501) (25,791) (55.4%) Basic EPS (cents) from continuing operations (11.24) (29.89) (62.4%) ROE1 283.9% (183.1%) 255.0% Net cash balance/(Net debt) (17,496) (10,845) 61.3% Gearing2 (119.9%) 830.7% (114.4%) 1. NPAT/average shareholder equity. 2. Debt/shareholder equity. The Group’s statutory loss after income tax for the year ended 31 July 2024 was $19.4 million (2023: Loss after income tax $32.7 million). 04 For personal use only Operating Results During FY24, the Group achieved Sales Revenues of $17.4 million ($7.7 million from continuing operations, $9.8 million from discontinued operations) as compared to $37.3 million in the previous comparative period ($21.6 million from continuing operations, $15.7 million from discontinued operations). During FY24, the reduction in revenue compared to the previous year, in part, was due to a strategic decision to cutback unprofitable sales and focus on higher-margin customers and orders. In H2, the Company completed the exit from the unsustainable UK market, allowing for a refocus of resources on more promising opportunities, and discharging debt obligations from this business. As laid out in the Financial Report for FY23, the Company has been focused on initiatives that drive the business towards profitability: reduction of operating costs, focus on margin improvement, exiting the UK business, clearing of the aged inventory, and upgrade of business systems, all which have been achieved in FY24. At the beginning of FY24, Toys “R” Us ANZ Limited welcomed a new CEO, Penny Cox, marking the start of a significant transformation in the Company’s leadership and strategic direction. The CEO has since recruited a fresh leadership team, bringing in new perspectives and expertise. The Board also appointed a new Chair, Kelly Humphreys, and a new board member, Teresa Smith. The refreshed Board and management team has worked together to deliver significant progress in the turnaround of the Company. Aggressive cost-rationalisation reduced operating costs by approximately $6.0 million from FY23, delivering a more stable and scalable cost base. The Company’s focus on clearing aged inventory and optimizing inventory management for new products, while impacting short-term profitability in FY24, has set the stage for improving margins. The acquisition of RIOT Art and Craft in H2 has strengthened the House of Brands business model. Integration of RIOT into the TOY operation was completed swiftly and affordably, meaning synergies between the brands have been realised almost immediately, with minimal additional cost. Importantly, overall gross margin in the ANZ B2C business grew from 16% in H1 to 33% in the second half of the year, indicating that the implemented strategies are beginning to yield positive results. Overall, EBITDA losses narrowed, despite significantly lower revenues and a challenging macro-economic environment. With the new right-sized cost base, the Company is well positioned to grow profitably in future. Outlook and Strategic Plan The Company’s efforts in FY24 were guided by three strategic pillars with notable progress made in each area, and provide a clear roadmap for progression on each in FY25 and beyond. House of Brands: • Successfully acquired the assets of RIOT Art and Craft, expanding the product offering and strengthening the Company’s position in the creative play, and art and craft segments. • Continued investment in core brands, with a particular focus on optimising product ranges in the Toys “R” Us and RIOT Brands. • FY25 and Beyond: Rebuild healthy inventory levels across all brands, new product development including Private Label. New Channels to Market: • Technical groundwork has been laid in FY24 to support a wider variety of channels to market. • FY25 and beyond: Continued focus on growing existing and adding new online shopping methods, including expansion of drop-shipping and introduction of click and collect. • Expansion via RIOT’s existing wholesale channel to diversify revenue streams and bring in new types of customers such as schools and childcare centres. Toys“R”Us ANZ Limited Annual Report 2024 05 For personal use only Directors’ Report (Cont.) Operational Excellence: • Significantly reduced overheads by renegotiating key contracts and right-sizing the cost base to better align with current operations and future goals. Aggressive cost-cutting and efficiency-enhancing measures reduced operating costs by $4.4 million (34%), which excludes the savings on the partial surrender of the Clayton lease. • Continued rebuilding of the technology and data stack to support scalability and leverage data for stronger marketing initiatives. Migration to Shopify for all websites has improved conversion rates and provided a more scalable platform. • Enhanced measurement of operational KPIs and effectiveness to drive data-informed decision-making. • The Company maintains an active database of over 1.3 million loyal customers, which has grown with the acquisition of RIOT. • FY25 and beyond: Continue to deliver an excellent customer experience to all customers. The Company’s automated fulfilment centre ships orders on the same-business-day if ordered before 2pm, and CSAT Scores (our measure of customer satisfaction) have been consistently above benchmark of 4.5 (out of 5). The Company maintains its goal to grow its market share in Toys and Hobbies to 5% over the next three years, this remains firmly in sight given the strong foundation laid in FY24. While challenges remain, the significant steps taken this year have positioned Toys “R” Us ANZ Limited for a stronger future. The Company is now more agile and better equipped to respond to market demands, setting the stage for improved performance and increased value creation for customers, partners, and shareholders alike. Funding and Capital Developments Since the half year, the Group has successfully raised new capital and funding from a convertible securities facility, a summary is below: Up to $4.2 million Additional Funding from Mercer Street Global Fund Following their initial equity investment of $200,000, plus the provision of an unsecured $600,000 Loan, US-based Investment Fund Mercer agreed to provide up to a further $4.2 million in funding via Convertible Securities subject to the mutual agreement of the parties and subject to shareholder approval being provided. TRUK loan Facility Under the Exit Agreements the Company will transfer ownership of all UK business assets to TRUK in settlement of its US$1.8 million outstanding loan balance, which TRUK provided to support the transition of the UK business. TRUK has agreed to release the Group from all remaining liabilities and obligations. Private Placement of $0.6 million In February 2024, the Group raised $550,000 through a placement to new and existing institutional and sophisticated investors. Successful Completion of $2.49 million Placement On 9 July 2024, The Group announced it had secured $2.49 million through a placement to new and existing institutional and sophisticated investors. This placement was subject to shareholder approval, which was received on 23 August 2024. 06 For personal use only Significant changes in the state of affairs Apart from the developments outlined above, there were no significant changes in the state of affairs of the group during the financial year ended 31 July 2024. Matters subsequent to the end of the financial year On 23 August 2024, the shareholders approved the drawdown of up to $2.715 million from the convertible securities facility, subject to further agreement between the parties. On 23 August 2024, the Group raised $2.49 million through a placement to new and existing institutional and sophisticated investors. On 20 September 2024, the Company received a letter from the lender waiving the requirement to comply with the financial covenants of the facility agreement for the period ended 31 July 2024. No other matter or circumstance has arisen since 31 July 2024 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. Likely developments and expected results of operations Information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the Group. Environmental regulation The Group is not subject to any significant environmental regulation under Australian Commonwealth or State law. Toys“R”Us ANZ Limited Annual Report 2024 07 For personal use only Directors’ Report (Cont.) Information on Directors Kelly Humphreys Chair and Independent Non-Executive Director (appointed 5 October 2023 and Chair effective 21 December 2023) Experience and expertise: Ms Humphreys is an experienced ASX director, currently serving as Chair of Raiz Invest Limited (ASX: RZI) and Non-Executive Director and Chair of Audit, Risk and Finance Committees on the Boards of The National Stock Exchange (ASX: NSX) and Latrobe Health Services. Prior to her board career, Ms Humphreys had an extensive senior executive career in insurance and lending and has deep technical expertise in operations, risk management and governance. She brings a strong commercial approach to achieving objectives in complex regulatory environments and demonstrated ability in engaging stakeholders and working effectively to deliver business growth and improved performance. Ms Humphreys holds a Master of Management, a Diploma of Financial Services and is a fellow member of the Australian Institute of Company Directors. Other current directorships: National Stock Exchange of Australia (ASX: NSX), Raiz Invest (ASX: RZI) Former directorships (last three years): Victory Office Limited (ASX: VOL) from 1 December 2021 to 23 May 2022 Special responsibilities: None Interests in shares: 350,000 Interests in options: None Interests in rights: 818,182 08 For personal use only Teresa Smith Independent Non-Executive Director (appointed 1 April 2024) Experience and expertise: Ms Smith is highly skilled in building and enhancing brand equity, with a proven track record in structuring and empowering teams to achieve impactful results. She is recognised as an expert in multi-channel marketing, adept at developing and executing comprehensive strategies that drive brand awareness and foster deep customer engagement. Ms Smith is the former Head of Marketing at Country Road Group, former Brand Manager and Digital Marketing Manager at Bunnings and is currently a Non-Executive Deputy Chair of the Yea & District Memorial Hospital, and Non-Executive Director of Urban Camp. Other current directorships: None Former directorships (last three years): None Interests in shares: None Interests in options: None Interests in rights: None John Tripodi Independent Non‑Executive Director Experience and expertise: John is a business leader with extensive multinational FMCG experience in various strategic and operational roles with a track record of championing innovative brand strategies that deliver successful commercial outcomes. He is currently the CEO of the diversified sport, entertainment and consumer lifestyle agency, Twenty3 Group. Prior to co‑founding the Twenty3 Group, John held senior sales and marketing roles with Mars Inc. before moving into general management with the L’Oréal Group. Other current directorships: None Former directorships (last three years): None Special responsibilities: Chair of the Audit and Risk Committee Interests in shares: 147,444 Interests in options: None Interests in rights: 868,182 Toys“R”Us ANZ Limited Annual Report 2024 09 For personal use only Directors’ Report (Cont.) ‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. ‘Former directorships (last three years)’ quoted above are directorships held in the last three years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. Company secretary Kim Larkin is the Company Secretary of the Group. Kim is the Head of Corporate Services for Boardroom Pty Limited’s Queensland office and currently acts as Company Secretary for various ASX listed and unlisted companies in Australia. Kim is an experienced business professional with 23 years’ experience in banking and finance and six years as in-house Company Secretary of an ASX 300 company prior to joining Boardroom in April 2013. Meetings of Directors The number of meetings of the Company’s Board of Directors (‘the Board’) and of each Board committee held during the year ended 31 July 2024, and the number of meetings attended by each director were: Board of Directors Remuneration & Nomination Committee* Audit and Risk Committee Attended Held Attended Held Attended Held Kelly Humphreys 33 33 – – 1 1 Teresa Smith 16 16 – – 1 1 John Tripodi 36 36 2 2 4 4 Kevin Moore 19 20 2 2 3 3 Silvio Salom 8 8 2 2 2 2 Penny Cox 2 2 – – – – Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. * The Remuneration & Nomination Committee is part of the full board and not a separate committee from 16 May 2024. 10 For personal use only Remuneration report (audited) The Directors present the Remuneration report for the Group and its controlled entities for the year ended 31 July 2024. The Remuneration report forms a part of the Directors report and has been prepared in accordance with section 300A of the Corporations Act 2001. The information provided in the Remuneration report has been audited by the Company auditors as required by section 308(3C) of the Corporations Act 2001. The Remuneration report outlines the remuneration policies and arrangements for the Company’s Key Management Personnel (KMP) including Directors and Senior Executives who have authority and responsibility for planning, directing and controlling the activities of the Group. Remuneration policy The remuneration policy has been designed to align KMP objectives with the Company’s strategy, culture and performance. The aim of the remuneration policy is to attract, retain and motivate KMP to sustainably manage and grow the business. Senior Executive remuneration packages include a balance of fixed remuneration and may also include, short-term cash incentives and long-term equity incentives based on key performance areas. The framework endeavours to align executive reward with market conditions and creating shareholder value. Principles of compensation The Remuneration & Nomination Committee makes specific recommendations to the Board on compensation packages and other terms of employment for Directors and other Senior Executives. The Board then considers these recommendations and makes appropriate determinations, with compensation packages set in line with market and at a level that is intended to attract and retain Directors and executives capable of managing the consolidated entity’s diverse operations. Compensation of the Directors reflects the demands and responsibilities of their role. Director remuneration is reviewed on an annual basis by the Remuneration and Nomination Committee. Compensation for Directors comprises both fixed compensation and an “at risk” component and may include share-based payments. Compensation of the Senior Executives is reviewed on an annual basis by the Remuneration & Nomination Committee having regard to personal and corporate performance and relevant comparative information. Compensation for Senior Executives comprises both fixed compensation and an “at risk” component. The “at risk” component comprises a short‑term incentive payment based on a combination of the Company’s results and individual performance levels, and a long‑term incentive component pursuant to the Employee Incentive Plan. The payment of short‑term incentives (in the form of cash bonus) is dependent on the achievement of operating and financial targets set at the beginning of each year and assessed on an annual basis by the Board. Compensation and other terms of employment for Senior Executives are formalised in service agreements. The Senior Executive remuneration is directly related to the performance of the Group through the linking of short and long‑term incentives to certain financial performance measures. These performance measures, as described below, are selected by the Board of Directors and considered relevant to the management of the operations of the Group and to effectively align the long‑term interests of the Directors, Senior Executives and shareholders. The performance conditions are assessed periodically by the Remuneration & Nomination Committee to ensure they remain relevant. The Remuneration & Nomination Committee is part of the full Board and not a separate committee from 16 May 2024. Toys“R”Us ANZ Limited Annual Report 2024 11 For personal use only Directors’ Report (Cont.) Compensation and Company performance Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) has been the key performance measure for the Company’s incentive plan for Senior Executives, linked to individual key performance objectives. Details of remuneration Fixed compensation The terms of employment for all Senior Executives is based on a fixed compensation component. This fixed component is set in accordance with the market rate for a comparable role by reference to appropriate external benchmark information and having regard to an individual’s responsibilities, performance, qualifications, experience and location. Senior Executive’s compensation may also be reviewed on promotion. Fixed compensation includes contributions to superannuation and pension plans in accordance with relevant legislation or as contractually required. Fixed compensation is structured as a total employment cost package which may be delivered to the Senior Executive as a mix of cash and prescribed non‑financial benefits at the Senior Executive’s discretion. There are no guaranteed pay increases in any Senior Executive’s contract. Benefits for termination of employment may be payable subject to the circumstances of the termination and within the terms of the employment contract. At risk compensation Short‑Term Incentives • The Short‑Term Incentive (STI) plan is linked to specific targets (predominantly financial) with the opportunity to earn incentives based on a percentage of fixed compensation. • Performance measurements have been applied to each component of STI and accordingly, entitlements were determined with consideration to the executive’s level and area of responsibility. Performance against the objectives was determined and incentives and entitlements assessed against the audited financial results. Voting and comments made at the Company’s 2023 Annual General Meeting (‘AGM’) At the 2023 AGM, 98.76% of the votes received supported the adoption of the remuneration report for the year ended 31 July 2023. The Company did not receive any specific feedback at the AGM regarding its remuneration practices. The table below shows the Group’s earnings in the reporting period and the previous four financial periods/years as well as an indication of the Group’s value over the corresponding period: Year Ended 31-Jul-24 Year Ended 31-Jul-23 Year Ended 31-Jul-22 Year Ended 31-Jul-21 Year Ended 31-Jul-20 Post Share Consolidation NPAT ($’000) (19,393) (32,658) (24,759) (3,113) (9,313) Basic EPS (Cents) (18.94) (37.84) (28.90) (4.80) (39.40) Diluted EPS (Cents) (18.94) (37.84) (28.90) (4.80) (39.40) Total Dividends ($’000) – – – – – Year End Share Price ($) 0.10 0.11 0.61 1.60 0.22 Shares on Issue (No.) 115,690,728 86,308,667 86,186,118 84,835,886 24,040,408 Market Capitalisation ($’000) 11,569 9,494 52,574 135,737 5,289 12 For personal use only Remuneration of Key Management Personnel The aggregate compensation of the key management personnel of the Group is set out below: Short-term benefits Post- employment benefits Long-term benefits Share-based payments Total $ 31 July 2024 Cash salary and fees $ Cash bonus $ Non– monetary $ Super annuation $ AL/LSL & Termin. Payout $ Shares Rights $ Share Options $ Directors: Kelly Humphreys(i) 68,750 – – 6,038 – 17,500 – 92,288 Teresa Smith(ii) 21,666 – – 2,492 – – – 24,158 John Tripodi 65,000 – – 7,312 – 17,500 – 89,812 Kevin Moore(iii) 70,000 – – 7,813 – – – 77,813 Silvio Salom(iv) 31,146 – – 3,426 – – – 34,572 Executives: Penny Cox(v) 395,897 – – 32,715 – 31,111 – 459,723 Wei Si(vi) 35,000 52,500 – 9,625 16,806 – – 113,931 Lian Yu(vii) 115,909 57,955 – 19,125 – – – 192,989 803,368 110,455 – 88,546 16,806 66,111 – 1,085,286 (i) Appointed 5 October 2023, and Chair effective 21 December 2023. (ii) Appointed 1 April 2024. (iii) Resigned 1 April 2024. (iv) Resigned 2 January 2024. (v) Appointed as CEO from 23 August 2023, and managing director from 24 August 2023 to 18 October 2023. (vi) Appointed as CFO on 31 March 2022, resigned 29 September 2023. (vii) Resigned 9 February 2024. Toys“R”Us ANZ Limited Annual Report 2024 13 For personal use only Directors’ Report (Cont.) 31 July 2023 Short-term benefits Post- employment benefits Other long‑term employee benefits Termin ation Benefits $ Share-based payments Total $ Cash salary and fees $ Cash bonus $ Super annuation $ Long service leave $ Shares $ Share Options $ Directors: Kevin Moore(iv) 137,500 – 12,388 – – – 16,385 166,273 Louis Mittoni(ii) 374,515 26,250 27,500 – 278,419 – – 706,684 Nicki Anderson(i) 5,000 – 525 – – 62,500 – 68,025 John Tripodi 64,417 – 6,791 – – – 30,000 101,208 Silvio Salom(iii) 43,333 – 4,577 – – – – 47,910 Executives: Wei Si 200,833 10,000 22,225 3,556 – – – 236,614 Lian Yu 240,734 15,000 24,913 4,186 – – 32,406 317,239 1,066,332 51,250 98,919 7,742 278,419 62,500 78,791 1,643,953 (i) Appointed 25 October 2018, resigned 31 August 2022. (ii) Appointed 26 November 2020, resigned 27 July 2023. (iii) Appointed 11 November 2022. (iv) Interim CEO & Executive Chair appointed 15 May and resigned 20 July 2023. The proportion of remuneration linked to performance and the fixed proportion are as follows: Name Fixed remuneration Remuneration linked to performance* 31 July 2024 31 July 2023 31 July 2024 31 July 2023 Non-Executive Directors: Kelly Humphreys 100.0% – – – Teresa Smith 100.0% – – – John Tripodi 100.0% 100.0% – – Kevin Moore 100.0% 100.0% – – Silvio Salom 100.0% 100.0% – – Louis Mittoni – 96.3% – 3.7% Nicki Anderson – 100.0% – – Other Key Management Personnel: Wei Si 53.9% 95.8% 46.1% 4.2% Lian Yu 70.0% 95.3% 30.0% 4.7% Penny Cox 100.0% – – – * Represents cash bonus. 14 For personal use only Short-term incentives In FY24, STI payments made in the form of cash bonus were $110,455 (2023: $51,250). During the year, 100% of the eligible cash bonus was paid. Long-term incentives In FY24, LTI payments of $66,111 were made in the form of share rights (2023: share options $78,791). Service agreements Remuneration and other terms of appointment and employment for the Chair, Executive Director, Non‑Executive Directors and the other Senior Executives are formalised in service agreements/employment letters. In the case of the Executive Director and Senior Executives, these allow for the provision of performance‑related short‑term incentives and, where eligible, participation in the Toys “R” Us ANZ Limited Employee Incentive Plan. Additionally, other benefits including car allowances can be provided to all KMP. Kelly Humphreys – Chair and Independent Non‑Executive Director (appointed 5 October 2023 and Chair effective 21 December 2023) Term of agreement: Full‑time and no specific term. Details: Payment of a termination benefit on early termination by the employer is not applicable. Teresa Smith – Independent Non‑Executive Director (appointed 1 April 2024) Agreement commenced: Full‑time and no specific term. Details: Payment of a termination benefit on early termination by the employer is not applicable. John Tripodi – Independent Non‑Executive Director Term of agreement: Full‑time permanent and no specific term. Details: Payment of a termination benefit on early termination by the employer is not applicable. Kevin Moore – Independent Non‑Executive Director (Chair until 21 December 2023, resigned on 1 April 2024) Term of agreement: Full‑time and no specific term. Details: Payment of a termination benefit on early termination by the employer is not applicable. Silvio Salom – Independent Non‑Executive Director (resigned on 2 January 2024) Term of agreement: Full‑time permanent and no specific term. Details: Payment of a termination benefit on early termination by the employer is not applicable. Penny Cox – Chief Executive Officer and (Managing Director from 24 August 2023 to 18 October 2023) Term of agreement: Full‑time permanent and no specific term. Details: Payment of a termination benefit on early termination by the employer, other than for gross misconduct, equal to six months base salary. Notice period six months. Toys“R”Us ANZ Limited Annual Report 2024 15 For personal use only Directors’ Report (Cont.) Wei Si – Chief Financial Officer (resigned on 29 September 2023) Term of agreement: Full‑time permanent and no specific term. Details: Payment of a termination benefit on early termination by the employer, other than for gross misconduct, equal to three months base salary. Notice period three months. Lian Yu – Chief Operating Officer Term of agreement: Full‑time permanent and no specific term. Details: Payment of a termination benefit on early termination by the employer, other than for gross misconduct, equal to six months base salary. Notice period six months. The Board has considered what constitutes independence of Directors and assesses the materiality of Directors interests, positions, associations or relationships on a case-by-case basis to determine whether it might influence, or reasonably be perceived to influence, in a material respect, the capacity to apply independent judgment on matters that come before the Board and to act in the best interest of the Company. All Directors are noted as being independent from the date of their appointment. Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation The number of ordinary shares and options/rights over ordinary shares in the Company held during the financial year by each director of Toys ”R” Us ANZ Limited and each of the key management personnel of the consolidated entity, including their related entities, are set out below. Issue of shares There were no shares issued to Directors and other key management personnel as part of compensation during the year ended 31 July 2024. Options There were no options over ordinary shares issued to Directors and other key management personnel as part of compensation that were outstanding as at 31 July 2024. There were no options over ordinary shares granted to or vested by Directors and other key management personnel as part of compensation during the year ended 31 July 2024. 16 For personal use only Service rights The terms and conditions of each grant of service rights over ordinary shares affecting remuneration of Directors and other key management personnel in this financial year or future reporting years are as follows: Name Number of rights granted1 Grant date Vesting date and exercisable date Expiry date Exercise price Fair value per right at grant date1 Kelly-Anne Humphreys 272,727 27/12/2023 27/12/2024 27/12/2025 – $0.1100 Kelly-Anne Humphreys 272,727 27/12/2023 27/12/2025 27/12/2026 – $0.1100 Kelly-Anne Humphreys 272,727 27/12/2023 27/12/2026 27/12/2027 – $0.1100 John Anthony Tripodi 272,727 27/12/2023 27/12/2024 27/12/2025 – $0.1100 John Anthony Tripodi 272,727 27/12/2023 27/12/2025 27/12/2026 – $0.1100 John Anthony Tripodi 272,727 27/12/2023 27/12/2026 27/12/2027 – $0.1100 Silvio Salom2 272,727 27/12/2023 27/12/2024 27/12/2025 – $0.1100 Silvio Salom2 272,727 27/12/2023 27/12/2025 27/12/2026 – $0.1100 Silvio Salom2 272,727 27/12/2023 27/12/2026 27/12/2027 – $0.1100 1. The appreciation rights numbers, share price and fair value are post consolidation of shares (1:10). 2. Lapsed during the year due to failure to meet vesting conditions. Service rights granted carry no dividend or voting rights. Appreciation rights The terms and conditions of each grant of appreciation rights over ordinary shares affecting remuneration of Directors and other key management personnel in this financial year or future reporting years are as follows: Name Number of rights granted Grant date Vesting date and exercisable date Expiry date Exercise price Fair value per right at grant date1 Penny Cox 484,848 27/12/2023 1/09/2024 27/12/2028 – $0.1100 Penny Cox 484,848 27/12/2023 1/09/2025 27/12/2028 – $0.1100 Penny Cox 484,848 27/12/2023 1/09/2026 27/12/2028 – $0.1100 1. The appreciation rights numbers, share price and fair value are post consolidation of shares (1:10). Appreciation rights granted carry no dividend or voting rights. Toys“R”Us ANZ Limited Annual Report 2024 17 For personal use only Directors’ Report (Cont.) Key management personnel equity holdings The number of ordinary shares and options/rights over ordinary shares in the Company held during the financial year by each Director of Toys ”R” Us ANZ Limited and each of the key management personnel of the consolidated entity, including their related entities, are set out below. Ordinary shares The number of shares in the Company held during the financial year by each Director and other members of key management personnel of the Group, including their personally related parties, is set out below: Year ended 31 July 2024 Balance at the start of the year Shares purchased on market Shares issued as remuneration Others Balance at the end of the year Ordinary shares Kelly Humphreys – 350,000 – – 350,000 John Tripodi 11,080 – – 136,364 147,444 Kevin Moore(i) 403,246 – – (403,246) – Silvio Salom(ii) 2,482,500 – – (2,482,500) – Penny Cox(iii) – – – 1,063,830 1,063,830 2,896,826 350,000 – (1,685,552) 1,561,274 The ordinary shares numbers are post consolidation of shares (1:10). (i) Resigned 1 April 2024. (ii) Resigned 2 January 2024. (iii) Appointed as CEO from 23 August 2023, and managing director from 24 August 2023 to 18 October 2023. Year ended 31 July 2023 Balance at the start of the year Shares purchased on market Shares issued as remuneration Others Balance at the end of the year Ordinary shares Kevin Moore 302,746 100,500 – – 403,246 Louis Mittoni(i) 29,145,582 – – (29,145,582) – John Tripodi 11,080 – – – 11,080 Nicki Anderson(ii) 107,547 – 122,549 (230,096) – Silvio Salom(iii) – – – 2,482,500 2,482,500 29,566,955 100,500 122,549 (26,893,178) 2,896,826 The ordinary shares numbers are post-consolidation of shares (1:10). (i) Resigned 27 July 2023. (ii) Resigned 31 August 2022. (iii) Appointed on 11 November 2022. 18 For personal use only Share options The number of options over ordinary shares in the Company held during the financial year by each Director and other members of key management personnel of the Group, including their personally related parties, is set out below: The tables below include balances for unlisted options. Year ended 31 July 2024 Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year Options over ordinary shares Kevin Moore(i) 511,447 – – (511,447) – Lian Yu 169,196 – – – 169,196 680,643 – – (511,447) 169,196 The share options numbers are post consolidation of shares (1:10). (i) Resigned on 1 April 2024. The ordinary shares numbers are post consolidation of shares (1:10). Year ended 31 July 2023 Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year Options over ordinary shares Kevin Moore 338,829 172,618 - - 511,447 Louis Mittoni(i) 1,694,146 863,086 - (2,557,232) - Executives - - - - - Lian Yu 169,196 - - - 169,196 2,202,171 1,035,704 - (2,557,232) 680,643 The share options numbers are post consolidation of shares (1:10). (i) Resigned on 27 July 2023, share options was forfeited upon resignation. Service Rights The number of performance rights over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Year ended 31 July 2024 Balance at the start of the year Granted Vested Expired/ forfeited/ other Balance at the end of the year Service rights over ordinary shares Kelly-Anne Humphreys – 818,182 – – 818,182 John Tripodi 50,000 818,182 – – 868,182 50,000 1,636,364 – – 1,686,364 The service rights numbers are post consolidation of shares (1:10). Toys“R”Us ANZ Limited Annual Report 2024 19 For personal use only Directors’ Report (Cont.) Year ended 31 July 2023 Balance at the start of the year Granted Exercised Exercised/ forfeited/ other Balance at the end of the year Service rights over ordinary shares Nicki Anderson 50,000 – (34,749) (15,251) – John Tripodi 50,000 – – – 50,000 100,000 – (34,749) (15,251) 50,000 The service rights numbers are post consolidation of shares (1:10). Share Appreciation Rights The number of share appreciation rights over ordinary shares in the Company held during the financial year by each director and other members of key management personnel of the Group, including their personally related parties, is set out below: Year ended 31 July 2024 Balance at the start of the year Granted Vested Expired/ forfeited/ other Balance at the end of the year Share appreciation rights over ordinary shares Penny Cox – 1,454,545 – – 1,454,545 – 1,454,545 – – 1,454,545 The share appreciation rights numbers are post consolidation of shares (1:10). Other statutory disclosures Loans to key management personnel and their related parties During FY24 and to the date of this report, the Group made no loans to Directors and other KMP. As at 31 July 2024, Louis Mittoni owed the Company $Nil (2023: $28,575) related to personal expenses incurred on a company credit card. Transactions with Key Management Personnel During FY24 there were no other reportable transactions between the Group and its Directors, KMP, or their personally related entities (Related Parties). This concludes the remuneration report, which has been audited. 20 For personal use only Shares under option Unissued ordinary shares of Toys “R” Us ANZ Limited under option at the date of this report are as follows: Grant date Expiry date Exercise price Number under option1 23‑Nov‑20 1‑Nov‑25 $1.9900 172,618 23‑Nov‑20 1‑Nov‑24 $1.6600 169,672 1‑May‑21 1‑May‑25 $1.3800 169,196 31-May-24 31-May-27 $0.1162 5,593,804 6,105,290 1. Post consolidation of shares (1:10). No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the Company or of any other body corporate. Shares under service rights Unissued ordinary shares of Toys “R” Us ANZ Limited under performance rights at the date of this report are as follows: Grant date Expiry date Exercise price Number under rights1 23‑Nov‑20 10‑Dec‑26 $1.8000 50,000 27‑Dec‑23 11-Dec-24 $0.1100 545,454 27‑Dec‑23 11-Dec-25 $0.1100 545,454 27‑Dec‑23 11-Dec-26 $0.1100 545,456 1,686,364 1. Post consolidation of shares (1:10). No person entitled to exercise the service rights had or has any right by virtue of the service right to participate in any share issue of the Company or of any other body corporate. Shares under share appreciation rights Unissued ordinary shares of Toys “R” Us ANZ Limited under retention rights at the date of this report are as follows: Grant date Expiry date Exercise price Number under rights1 14-Oct-21 21-Sep-26 $1.8000 8,001 27-Dec-23 27-Dec-28 $0.1300 1,454,545 1,462,546 1. Post consolidation of shares (1:10). Toys“R”Us ANZ Limited Annual Report 2024 21 For personal use only Directors’ Report (Cont.) No person entitled to exercise the share appreciation rights had or has any right by virtue of the share appreciation right to participate in any share issue of the Company or of any other body corporate. Shares issued on the exercise of options During the financial year, there were no employees or executives that exercised options to acquire ordinary shares in the Company. Shares issued on the exercise of service rights There were no ordinary shares of Toys “R” Us ANZ Limited issued on the exercise of service rights during the year ended 31 July 2024 and up to the date of this report. Shares issued on the exercise of share appreciation rights There were no ordinary shares of Toys “R” Us ANZ Limited issued on the exercise of share appreciation rights during the year ended 31 July 2024 and up to the date of this report. Indemnity and insurance of officers The Company has indemnified the Directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the Directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor To the extent permitted by law, the Company has agreed to indemnify its auditors, RSM Australia Partners, as a part of its audit engagement agreement against claims by third parties arising from the audit (for an unspecified amount), other than a loss arising from RSM Australia Partners negligent, wrongful or wilful acts or omissions. No payment has been made to indemnify RSM Australia Partners during the financial year or up to the date of this report. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Non-audit services Details of amounts paid or payable to the auditor for non‑audit services provided during the year by the auditor are outlined in note 29 to the financial statements. The Directors are satisfied that the provision of non‑audit services, during the year, by the auditor (or by another person or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. 22 For personal use only The Directors are of the opinion that the services as disclosed in note 29 to the financial statements do not compromise the external auditor’s independence, based on advice received from the Audit & Risk Committee, for the following reasons: • all non‑audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in Code of Conduct APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional & Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision‑making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 29 to the financial statements. Officers of the Company who are former partners of RSM Australia Partners There are no officers of the Company who are former partners of RSM Australia Partners. Rounding of amounts The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the Directors’ report and the financial statements are rounded off to the nearest thousand dollars, unless otherwise indicated. Auditor’s independence declaration A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on the following page. Auditor RSM Australia Partners continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the Directors Kelly Humphreys Chair 30 September 2024 Toys“R”Us ANZ Limited Annual Report 2024 23 For personal use only 18 THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 27, 120 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 (0) 3 9286 8000 F +61 (0) 3 9286 8199 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Toys“R”Us ANZ Limited and its controlled entities for the year ended 31 July 2024, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS R J MORILLO MALDONADO Partner Dated: 30 September 2024 Melbourne, Victoria Auditor’s Independence Declaration 24 For personal use only Financial Statements Consolidated Statement of Profit or Loss and Other Comprehensive Income 26 Consolidated Statement of Financial Position 28 Consolidated Statement of Changes in Equity 29 Consolidated Statement of Cash Flows 31 Notes to the Consolidated Financial Statements 32 Consolidated Entity Disclosure Statement 86 Directors’ Declaration 87 Independent Auditor’s Report 88 Shareholder Information 94 Corporate Directory 97 25 Toys“R”Us ANZ Limited Annual Report 2024 For personal use only Consolidated Statement of Profit or Loss and Other Comprehensive Income For the year ended 31 July 2024 Note Consolidated 31 July 2024 $’000 31 July 2023 $’000 Revenue from continuing operations Revenue from contracts with customers 4 7,668 21,642 Cost of goods sold (5,630) (18,819) Gross profit 2,038 2,823 Other Income 5 469 344 Expenses Administration expense (2,432) (2,458) Employee benefits expense 5 (3,430) (4,748) Marketing and selling expenses (2,203) (4,167) Warehouse and distribution expenses (522) (1,304) Total expenses (8,587) (12,677) Earnings before interest, taxation, depreciation and amortisation (EBITDA) (6,080) (9,510) Finance income 64 7 Depreciation and amortisation expense 5 (3,036) (2,915) Impairment of goodwill – (11,128) Finance costs 5 (2,766) (2,561) Loss before income tax benefit from continuing operations (11,818) (26,107) Income tax benefit 6 317 316 Loss after income tax benefit from continuing operations (11,501) (25,791) Loss after income tax expense from discontinued operations 7 (7,892) (6,867) Loss after income tax benefit for the year (19,393) (32,658) Other comprehensive loss Items that may be reclassified subsequently to profit or loss Foreign currency translation (400) (234) Other comprehensive loss for the year, net of tax (400) (234) Total comprehensive loss for the year (19,793) (32,892) Total comprehensive loss for the year is attributable to: Continuing operations (11,501) (25,791) Discontinued operations (8,292) (7,101) (19,793) (32,892) 26 For personal use only Note Consolidated 31 July 2024 Cents 31 July 2023 Cents Loss per share from continuing operations Basic loss per share 41 (11.24) (29.89) Diluted loss per share 41 (11.24) (29.89) Loss per share from discontinued operations Basic loss per share 41 (7.72) (7.95) Diluted loss per share 41 (7.72) (7.95) Loss per share Basic loss per share 41 (18.96) (37.84) Diluted loss per share 41 (18.96) (37.84) The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes. Toys“R”Us ANZ Limited Annual Report 2024 27 For personal use only Consolidated Statement of Financial Position As at 31 July 2024 Note Consolidated 31 July 2024 $’000 31 July 2023 $’000 Assets Current assets Cash and cash equivalents 8 708 1,766 Trade and other receivables 9 – 837 Inventories 10 594 4,905 Other assets 12 905 208 2,207 7,716 Assets of disposal group classified as held for sale 13 16 3,119 Total current assets 2,223 10,835 Non-current assets Property, plant and equipment 14 2,023 2,767 Right-of-use assets 11 8,186 11,167 Goodwill and other intangibles 15 2,837 6,899 Other assets 12 2,756 2,935 Total non-current assets 15,802 23,768 Total assets 18,025 34,603 Liabilities Current liabilities Trade payables 16 1,871 3,405 Contract liabilities/deferred revenue 66 114 Borrowings 17 14,838 12,084 Lease liabilities 18 564 576 Derivative financial instruments 19 505 – Employee benefits 20 233 460 Provisions 222 280 Contingent consideration 21 210 – Other current liabilities 23 1,779 2,044 20,288 18,963 Liabilities directly associated with assets classified as held for sale 24 3,128 1,565 Total current liabilities 23,416 20,528 Non-current liabilities Borrowings 17 390 526 Lease liabilities 18 8,728 11,284 Deferred tax 6 421 738 Employee benefits 20 – 9 Contingent consideration 21 252 – Total non-current liabilities 9,791 12,557 Total liabilities 33,207 33,085 Net assets/(liabilities) (15,182) 1,518 Equity Issued capital 25 295,540 292,920 Reserves 549 476 Accumulated losses (311,271) (291,878) Total equity/(deficiency) (15,182) 1,518 The above consolidated statement of financial position should be read in conjunction with the accompanying notes. 28 For personal use only Consolidated Statement of Changes in Equity For the year ended 31 July 2024 Consolidated Issued capital $’000 Equity- settled employee benefits reserve $’000 Convertible note options reserve $’000 Foreign currency translation reserve $’000 Accumulated losses $’000 Total equity $’000 Balance at 1 August 2022 292,965 2,121 – 20 (260,958) 34,148 Loss after income tax benefit for the year – – – – (32,658) (32,658) Other comprehensive loss for the year, net of tax – – – (234) – (234) Total comprehensive loss for the year – – – (234) (32,658) (32,892) Transactions with owners in their capacity as owners: Purchase of unmarketable parcels (107) – – – – (107) Issue of stock warrants – 113 – – – 113 Issue of options – 131 – – – 131 Options forfeited/cancelled – (1,738) – – 1,738 – Issue of share appreciation/ service rights (net) 62 57 – – – 119 Issue of employee options – 6 – – – 6 Balance at 31 July 2023 292,920 690 – (214) (291,878) 1,518 Toys“R”Us ANZ Limited Annual Report 2024 29 For personal use only Consolidated Statement of Changes in Equity (Cont.) Consolidated Issued capital $’000 Equity- settled Employee benefits reserve $’000 Convertible note options reserve $’000 Foreign currency translation reserve $’000 Accumulated Losses $’000 Total deficiency in equity $’000 Balance at 1 August 2023 292,920 690 – (214) (291,878) 1,518 Loss after income tax benefit for the year – – – – (19,393) (19,393) Other comprehensive loss for the year, net of tax – – – (400) – (400) Total comprehensive loss for the year – – – (400) (19,393) (19,793) Transactions with owners in their capacity as owners: Issue of ordinary shares, net of issue cost 1,260 – – – – 1,260 Sale of unmarketable parcels 55 – – – – 55 Share issue for conversion of convertible note 655 – – – – 655 Share-based payments – 176 – – – 176 Shares issued for Riot Acquisition 350 – – – – 350 Share issued to Penny Cox – conversion of Loan 100 – – – – 100 Shares and options issued pursuant to the convertible note facility 200 – 297 – – 497 Balance at 31 July 2024 295,540 866 297 (614) (311,271) (15,182) The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 30 For personal use only Consolidated Statement of Cash Flows For the year ended 31 July 2024 Note Consolidated 31 July 2024 $’000 31 July 2023 $’000 Cash flows from operating activities Receipts from customers (inclusive of GST) 20,283 40,542 Receipts from other income (including government grants) – 347 Payments to suppliers (inclusive of GST) and employees (26,517) (50,906) Cash utilised in operations (6,234) (10,017) Interest and other finance costs paid (1,772) (2,448) Other income received 469 – Net cash used in operating activities 38 (7,537) (12,465) Cash flows from investing activities Payment for acquisition of business 34 (300) – Payments for property, plant and equipment 14 (5) (1,014) Payments for intangible assets 15 (292) – Interest and other investment income received 64 56 Proceeds from disposal of property, plant and equipment – 9 Proceeds from disposal of intangibles – (16) Proceeds from refund of security deposits 179 828 Net cash used in investing activities (354) (137) Cash flows from financing activities Proceeds from issue of shares 25 2,118 – Proceeds from issue of convertible notes (net of transaction costs) 1,396 – Proceeds from borrowings 4,256 2,610 Share issue transaction costs (149) – Repayment of lease liabilities (795) (673) Payments for buyback of unmarketable parcels – (107) Net cash from financing activities 6,826 1,830 Net decrease in cash and cash equivalents (1,065) (10,772) Cash and cash equivalents at the beginning of the financial year 1,766 12,538 Effects of exchange rate changes on cash and cash equivalents 7 – Cash and cash equivalents at the end of the financial year 8 708 1,766 The above consolidated statement of cashflows include cashflow in relation to discontinued operations. Refer to note 7 for further details. The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Toys“R”Us ANZ Limited Annual Report 2024 31 For personal use only Notes to the Consolidated Financial Statements 31 July 2024 General information The financial statements cover Toys “R” Us ANZ Limited as a Group consisting of Toys “R” Us ANZ Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars., which is Toys “R” Us ANZ Limited’s functional and presentation currency. Toys “R” Us ANZ Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are: Registered office Level 8, 210 George Street Sydney, NSW 2000 Principal place of business Unit 3, 45-49 McNaughton Road Clayton, VIC 3168 A description of the nature of the Group’s operations and its principal activities are included in the Directors’ report, which is not part of the financial statements. The financial statements were authorised for issue, in accordance with a resolution of Directors, on 30 September 2024. Note 1. Material accounting policy information The accounting policies that are material to the Group are set out below. The accounting policies adopted are consistent with those of the previous financial year, unless otherwise stated. Going concern basis of accounting The financial report has been prepared on the going concern basis which contemplates the continuity of normal business activities and the realisation of assets and the discharge of liabilities in the normal course of business. As disclosed in the financial report, the Group has incurred a net loss after income tax of $19.4 million and has cash outflows from operating activities of $7.5 million for year ended 31 July 2024, and as of that date, the group’s current liabilities exceeded its current assets by $21.2 million and group’s total liabilities exceeded total assets by $15.2 million. These factors indicate a material uncertainty which may cast significant doubt as to whether the Group will continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. The Directors believe that there are reasonable grounds to believe that the Group will be able to continue as a going concern, after consideration of the following factors: • As disclosed in note 37, in August 2024, the Company raised approximately $2.49 million in capital from existing and new investors and intends to raise additional capital in the next 6–12 months; • As disclosed in note 37, in August 2024, shareholders approved the drawdown of up to $2.715 million from the convertible securities facility, subject to further agreement between the parties; • The ongoing strategic plan to ‘right-size’ the Australian business to significantly reduce operational costs and release working capital tied up to Lease Bond; 32 For personal use only • Included in current liabilities is an amount of $2.98 million of loan payable to TRU UK Kids, Inc. (“TRUK”), which has been agreed to be fully offset against the assets of the UK operations upon wind down of the UK entity, in satisfaction of all debts and liabilities owed to TRUK; and • The budget and cashflow forecast prepared by the Group for the twelve‑month period from the date of signing the financial statements, which are based on the Directors’ estimates and assumptions about certain economic factors, and the operating and trading performance of the Group, support the Directors’ assertion, and suggest that the Group has cash and other financial resources sufficient to support its operations for the relevant period. Accordingly, the Directors believe that the Group will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report. The financial report does not include any adjustments relating to the amounts or classification of recorded assets or liabilities that might be necessary if the Group does not continue as a going concern. New or amended Accounting Standards and Interpretations adopted Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board (‘IASB’). Historical cost convention The financial statements have been prepared under the historical cost convention, except for derivative financial instruments that have been measured at fair value. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 2. Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the Group only. Supplementary information about the parent entity is disclosed in note 33. Principles of consolidation The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Toys “R” Us ANZ Limited (‘Company’ or ‘parent entity’) as at 31 July 2024 and the results of all subsidiaries for the year then ended. Toys “R” Us ANZ Limited and its subsidiaries together are referred to in these financial statements as the ‘Group’. Note 1. Material accounting policy information (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 33 For personal use only Notes to the Consolidated Financial Statements (Cont.) Subsidiaries are all those entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between entities in the Group are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. The acquisition of subsidiaries is accounted for using the acquisition method of accounting. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Where the Group loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The Group recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. Operating segments Operating segments are presented using the ‘management approach’, where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers (‘CODM’). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. Foreign currency translation The financial statements are presented in Australian dollars, which is Toys “R” Us ANZ Limited’s functional and presentation currency. Foreign currency transactions Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign operations The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity. The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed of. Note 1. Material accounting policy information (Cont.) 34 For personal use only Revenue recognition The Group recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the Group is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the Group: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. Variable consideration within the transaction price, if any, reflects concessions provided to the customer such as discounts, rebates and refunds, any potential bonuses receivable from the customer and any other contingent events. Such estimates are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. The measurement constraint continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a refund liability. Sale of goods The Group generates the majority of its revenue from the sales of goods. Revenue from the sale of goods is recognised at the point in time when the customer obtains control of the goods, which is generally at the time of delivery. Rendering of services Revenue from a contract to provide services is recognised over time as the services are rendered based on either a fixed price or an hourly rate. Interest Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. Other revenue Other revenue is recognised when it is received or when the right to receive payment is established. Income tax The income tax expense or benefit for the period is the tax payable on that period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Note 1. Material accounting policy information (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 35 For personal use only Notes to the Consolidated Financial Statements (Cont.) Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: • When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or • When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. A deferred tax asset in respect to tax losses is only recognised where there is a reasonable certainty that future taxable profits will be guaranteed. Management assesses continuity of ownership test and same business test hurdles bi-annually. The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. Tax Consolidation The Company and its wholly-owned Australian resident entities are part of a tax-consolidated Group under Australian taxation law. Toys “R” Us ANZ Limited is the head entity in the tax-consolidated Group. Tax expense/revenue, deferred tax liabilities and deferred tax assets arising from temporary differences of the members of the tax-consolidated Group are recognised in the separate financial statements of the members of the tax-consolidated Group using the “separate taxpayer within Group” approach by reference to the carrying amounts in the separate financial statements of each entity and the tax values applying under tax consolidation. Due to the existence of a tax funding arrangement between the entities in the tax-consolidated Group, amounts are recognised as payable to or receivable by the Company and each member of the Group in relation to the tax contribution amounts paid or payable between the parent entity and the other members of the tax-consolidated Group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in note 6 to the financial statements. Discontinued operations A discontinued operation is a component of the Group’s business, the operations, and cash flows of which can be clearly distinguished from the rest of the Group and which: • represents as a separate major line of business or geographical area of operations; • is a part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or • is a subsidiary acquired exclusively with a view to re-sell. Note 1. Material accounting policy information (Cont.) 36 For personal use only The results of discontinued operations are presented separately on the face of the statement of profit or loss and other comprehensive income. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held-for-sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and other comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the Group’s normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. Cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Trade and other receivables Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any allowance for expected credit losses. Trade receivables are generally due for settlement within 30 days. The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Inventories Stock on hand is stated at the lower of cost and net realisable value. Costs are assigned to individual items of stock on the basis of weighted average costs. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. Stock write downs occur where the estimated selling price of stock, in the ordinary course of business, is less than the estimated costs of completion and costs necessary to make the sale. Excess stock levels are reviewed on a regular basis, where discussions with the sales teams are undertaken. Note 1. Material accounting policy information (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 37 For personal use only Notes to the Consolidated Financial Statements (Cont.) Derivative financial instruments 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. Derivatives are classified as current or non-current depending on the expected period of realisation. Non-current assets or disposal groups classified as held for sale Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. For non-current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities. Property, plant and equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and equipment over their expected useful lives as follows: Leasehold improvements 3–5 years Plant and equipment 3–7 years The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. Leasehold improvements are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Note 1. Material accounting policy information (Cont.) 38 For personal use only Right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Intangible assets Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Goodwill Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Licenses and trademarks Significant costs associated with licenses and trademarks are amortised on a straight-line basis over the period of their expected benefit, being their finite life ranging from 3 to 20 years. Customer database Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 5 years. Software Significant costs associated with software are deferred and amortised on a straight-line basis over the period of their expected benefit, being their finite life of 5 years. Note 1. Material accounting policy information (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 39 For personal use only Notes to the Consolidated Financial Statements (Cont.) Impairment of non-financial assets Goodwill and other 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 non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit. Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. Contract liabilities Contract liabilities represent the Group’s obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the Group recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the Group has transferred the goods or services to the customer. Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the statement of financial position, net of transaction costs. On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in shareholders equity as a convertible note reserve, net of transaction costs. The carrying amount of the conversion option is not remeasured in the subsequent years. The corresponding interest on convertible notes is expensed to profit or loss. Borrowings with variable equity conversion features Upon initial recognition, the Directors assess borrowings with conversion clauses for fixed or variable conversion terms. Where terms are variable, at initial recognition an embedded derivative is recognised at fair value, and the difference received between the consideration received for the note and the fair value of the derivative is recognised in the underlying host (debt) contract. Thereafter at each reporting date, the embedded derivative is reassessed at its fair value, with changes in fair value taken to the profit or loss. The underlying host contract is recognised at amortised cost. Costs of issuing the convertible note are amortised over the life of the underlying host contract. Note 1. Material accounting policy information (Cont.) 40 For personal use only Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. Provisions Provisions are recognised when the Group has a present (legal or constructive) obligation as a result of a past event, it is probable the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Employee benefits Short-term employee benefits Liabilities for wages and salaries, including non-monetary benefits, annual leave and long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date 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 reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution plans Contributions to defined contribution superannuation plans are expensed when incurred. Note 1. Material accounting policy information (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 41 For personal use only Notes to the Consolidated Financial Statements (Cont.) Share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the Group receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: • during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by the expired portion of the vesting period; and • from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the Group or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the Group or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. Note 1. Material accounting policy information (Cont.) 42 For personal use only Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Issued capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Business combinations The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the Group assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the Group remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Note 1. Material accounting policy information (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 43 For personal use only Notes to the Consolidated Financial Statements (Cont.) Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of Toys “R” Us ANZ Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Goods and Services Tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Rounding of amounts The Company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to ‘rounding-off’. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the Group for the annual reporting period ended 31 July 2024. The Group has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. Note 1. Material accounting policy information (Cont.) 44 For personal use only Note 2. Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Key sources of estimation uncertainty The following are the key assumptions concerning the future, and other key sources of estimation uncertainty at the end of the reporting period, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Share-based payment transactions The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by using either the Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit or loss and equity. Revenue from contracts with customers involving sale of goods When recognising revenue in relation to the sale of goods to customers, the key performance obligation of the Group is considered to be the point of delivery of the goods to the customer, as this is deemed to be the time that the customer obtains control of the promised goods and therefore the benefits of unimpeded access. Goodwill and other indefinite life intangible assets The Group tests annually, or when impairment indicators are identified, whether goodwill and other intangible assets have suffered any impairment in accordance with the accounting policy. The recoverable amount of the cash generating units has been determined based on either relief from royalty models or the present value of the expected cash flows. These calculations require the use of assumptions. A significant change to these assumptions may affect the recoverable amount of the cash generating units. The Group defines its cash generating units (CGU) as the smallest identifiable group of assets that generates cash inflows. Under this interpretation, for the purpose of impairment of goodwill, the Group has identified two CGUs, being the business-to-consumer (B2C) and business-to-business (B2B) CGUs. This goodwill was assessed for indicators of impairment and no indicators were present. Recoverability of inventory The Group regularly assesses whether the net realisable value (NRV) of its inventories is reasonable in light of changing market conditions. Whilst the Group has provided to recognise the best estimate for the amount for which its inventory will be realised, the final amounts will be subject to the prevailing market conditions and may differ from the amounts provided. Toys“R”Us ANZ Limited Annual Report 2024 45 For personal use only Notes to the Consolidated Financial Statements (Cont.) Intangible assets and goodwill Intangible assets are amortised, based on the useful life assessed by management, as follows: Software 3 years Customer database 5 years Patents 20 years Trademarks 3–5 years Licensed distribution agreements 1–20 years Whilst the current useful lives are management’s best estimate, a periodic review is undertaken to ensure these remain appropriate. Goodwill and other 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. Valuation of conversion features attached to the convertible notes The Group has issued convertible debt instruments that contain embedded conversion features. The debt component is valued based on discounting the contractual cash flows by the interest rate that would apply to an otherwise identical debt instrument with no conversion feature, which usually involves significant judgment in relation to identifying benchmark debt with similar features. The fair valuation of conversion features requires significant judgment due to the reliance on various assumptions and market variables. The fair value of the conversion feature is determined using a Monte Carlo simulation model, which incorporates inputs such as the Company’s stock price, volatility, risk-free interest rate, and expected terms until conversion. Changes in these inputs could result in significantly different fair value estimates. Management continually assesses market conditions and updates assumptions as required. Note 3. Operating segments Identification of reportable operating segments Based on the internal reports reviewed by the Board of Directors and key management personnel (who are identified as the Chief Operating Decision Makers (‘CODM’)) to make strategic and operating decisions, assess business performance and in determining the allocation of resources, management has determined that the Group has two operating segments, being Business to Consumer (B2C) and Business to Business (B2B). The CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation). The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on a monthly basis. Note 2. Critical accounting judgements, estimates and assumptions (Cont.) 46 For personal use only Information about products and services The principal products of each of these operating segments are follows: • B2C – direct-to-consumer sale of consumer products (toys, hobby and baby goods); • B2B – wholesaling and distribution of IT products; and • Corporate – relates to the corporate running costs of the Group. Pursuant to classification of B2B segment as a discontinued operation (see note 7), operating segment information from continuing operations have only been provided for B2C segment. Intersegment transactions were made at market rates and are eliminated on consolidation. All intersegment balances are eliminated on consolidation. There were no intersegment transactions during the year or account balances at 31 July 2024. The Directors have assessed that there are no major customers. Operating segment information from continuing operations Consolidated – ended 31 July 2024 B2C $’000 Corporate $’000 Total $’000 Revenue Sales to external customers 7,668 – 7,668 Other income – 469 469 Cost of goods sold (5,630) – (5,630) Other expenses (7,417) (1,170) (8,587) EBITDA (5,379) (701) (6,080) Consolidated – ended 31 July 2023 B2C $’000 Corporate $’000 Total $’000 Revenue Sales to external customers 21,642 – 21,642 Other revenue – 344 344 Cost of goods sold (18,819) – (18,819) Other expenses (10,618) (2,059) (12,677) EBITDA (7,795) (1,715) (9,510) Note 3. Operating segments (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 47 For personal use only Notes to the Consolidated Financial Statements (Cont.) Reconciliation from segment reporting to net profit/(loss) after tax from continuing operations Consolidated 31 July 2024 31 July 2023 EBITDA (6,080) (9,510) Depreciation, amortisation and impairment expenses (3,036) (14,043) Finance costs (net) (2,702) (2,554) Loss before income tax expense from continuing operations (11,818) (26,107) Income tax benefit 317 316 Loss after income tax expense from continuing operations (11,501) (25,791) Depreciation, amortisation and impairment expenses by segment Consolidated 31 July 2024 $’000 31 July 2023 $’000 B2C 1,581 12,692 Corporate 1,455 1,351 3,036 14,043 Geographical information The Group’s revenue from continuing operations are generated in Australia. The Group’s non‑current assets are situated in Australia. The geographical non‑current assets below are exclusive of, where applicable, financial instruments. Consolidated 31 July 2024 $’000 31 July 2023 $’000 B2C 3,598 4,100 B2B – 4,067 Corporate 9,488 12,667 Total 13,046 20,834 Note 3. Operating segments (Cont.) 48 For personal use only Note 4. Revenue Revenue Consolidated 31 July 2024 $’000 31 July 2023 $’000 Continuing operations Revenues from contracts with customers Revenue from the sale of goods 7,329 21,562 Other revenue Other revenue 339 80 7,668 21,642 Disaggregation of revenue The disaggregation of revenue from contracts with customers from continuing operations is as follows: Consolidated 31 July 2024 $’000 31 July 2023 $’000 Operating segments B2C 7,668 21,642 Geographical regions Australia 7,668 21,642 Timing of revenue recognition Goods transferred at a point in time 7,668 21,642 Toys“R”Us ANZ Limited Annual Report 2024 49 For personal use only Notes to the Consolidated Financial Statements (Cont.) Note 5. Profit/(loss) for the year Consolidated 31 July 2024 $’000 31 July 2023 $’000 Loss before income tax from continuing operations includes the following specific expenses: Depreciation Property, plant and equipment 715 614 Right-of-use assets 1,207 1,085 Total depreciation 1,922 1,699 Amortisation Other intangible assets 1,114 1,215 Total depreciation and amortisation 3,036 2,914 Employee benefit expense Other employee benefits 3,074 4,259 Post‑employment benefits – Defined contribution superannuation expense 292 361 Share‑based payments 64 128 Total employee benefits expense 3,430 4,748 Finance costs Interest and finance charges paid/payable on borrowings 1,634 1,045 Interest and finance charges paid/payable on lease liabilities 857 1,053 Amortisation of interest on convertible notes 28 – Other borrowing cost 247 463 Total Finance costs expenses 2,766 2,561 Other income Rental income from sub‑lease of right‑of‑use assets 469 343 Cost of goods sold includes an amount of inventories recognized as an expense of $6,831,000 (2023: $17,819,000) and reversal of provision for stock obsolescence of $1,201,000 (2023: expense of $1,000,000) 50 For personal use only Note 6. Income tax Consolidated 31 July 2024 $’000 31 July 2023 $’000 Income tax benefit Current tax (benefit)/expense in respect of the current year (4,007) (4,160) Deferred tax expense comprises: – – Deferred tax (benefit)/expense relating to the origination and reversal of temporary differences 3,690 3,844 Aggregate income tax benefit (317) (316) Income tax benefit is attributable to: Loss from continuing operations (317) (316) Loss from discontinued operations – – Aggregate income tax benefit (317) (316) Numerical reconciliation of income tax benefit and tax at the statutory rate Loss before income tax benefit from continuing operations (11,818) (26,107) Loss before income tax expense from discontinued operations (7,892) (6,867) (19,710) (32,974) Tax at the statutory tax rate of 25% (4,928) (8,244) Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Impairment of goodwill and other intangible assets 1,017 3,337 Other expenses that are not deductible in determining taxable loss 17 32 Effect of current year’s unrecognised and unused tax losses and temporary differences 3,894 4,875 Effect of reversal of deferred tax liabilities (317) (316) Income tax benefit (317) (316) Deferred tax assets The following deferred tax assets relating to tax losses which have not been brought to account as tax assets: Consolidated 31 July 2024 $’000 31 July 2023 $’000 Tax losses – revenue (gross) 102,696 90,080 Tax losses – capital (gross) 32,499 32,834 Total deferred tax assets not recognised 135,195 122,914 The above potential tax benefit at 25% on revenue losses of $25,674,000 (2023: $22,520,000) has not been recognised in the statement of financial position as the recovery of this benefit is uncertain. Toys“R”Us ANZ Limited Annual Report 2024 51 For personal use only Notes to the Consolidated Financial Statements (Cont.) Deferred tax liabilities Consolidated 31 July 2024 $’000 31 July 2023 $’000 Deferred tax liability Deferred tax liability comprises temporary differences attributable to: Amounts recognised in profit or loss: Customer database intangible assets 421 738 Deferred tax liability 421 738 Movements: Opening balance 738 1,054 Credited to profit or loss (317) (316) Closing balance 421 738 Unrecognised taxable temporary differences associated with investments and interests in subsidiaries Under the tax law, the taxable profit made by a tax‑consolidated group in relation to an entity leaving the group depends on a range of factors, including the tax values and/or carrying values of the assets and liabilities of the leaving entities, which vary in line with the transactions and events recognised in each entity. The taxable profit or loss ultimately made on any disposal of the investments within the tax‑consolidated group will therefore depend upon when each entity leaves the tax‑consolidated group and the assets and liabilities that the leaving entity holds at that time. The Group considers the effects of entities entering or leaving the tax‑consolidated group to be a change of tax status that is only recognised when those events occur. As a result, temporary differences and deferred tax liabilities have not been measured or recognised in relation to investments remaining within the tax‑consolidated group. Tax consolidation (i) Relevance of tax consolidation to the Group The Company and its wholly owned Australian resident entities formed a tax‑consolidated Group with effect from 1 January 2003 and are therefore taxed as a single entity from that date. The head entity within the tax‑consolidated Group is Toys ”R” Us ANZ Limited. The members of the tax‑consolidated Group are identified in note 35. (ii) Nature of tax funding arrangement and tax sharing agreement Entities within the tax‑consolidated Group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, Toys ”R” Us ANZ Limited and each of the entities in the tax‑consolidated Group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to the other entities in the tax consolidated Group. The tax sharing agreement entered into between members of the tax‑consolidated Group provide for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations or if an entity should leave the tax consolidated Group. The effect of the tax sharing agreement is that each member’s liability for tax payable by the tax consolidated Group is limited to the amount payable to the head entity under the tax funding arrangement. Note 6. Income tax (Cont.) 52 For personal use only Note 7. Discontinued operations Description B2B Business At the end of the year, following a strategic review, the Board concluded that the Mittoni business was not core to its ongoing operations and decided to stop operating the business and focus on building its core brands. UK business During the previous year, following a strategic review, the Board concluded to restructure its operations in order to reduce its operating costs and has reached agreement in principle with TRU Kids Inc to facilitate an orderly transition of the UK business and the transfer of its UK licence to TRU Kids Inc. Consequent to the above, the Mittoni business operations and the UK business operations have been classified as discontinued operations and its assets and liabilities have been classified as disposal group held for sale in accordance with AASB 5 Non-current Assets Held for Sale and Discontinued Operations. Financial performance information Consolidated 31 July 2024 $’000 31 July 2023 $’000 Revenue 9,778 15,718 Cost of goods sold (9,434) (12,556) Total revenue 344 3,162 Other income – 49 Marketing and selling expenses (143) (2,445) Warehouse and distribution expenses (2,256) (2,273) Employee benefits expenses (1,640) (1,988) Administration expenses (130) (871) Impairment of goodwill and other intangible assets (refer note 15) (4,067) (2,221) Restructuring costs – (280) Total expenses (8,236) (10,078) Loss before income tax expense (7,892) (6,867) Income tax expense – – Loss after income tax expense from discontinued operations (7,892) (6,867) Toys“R”Us ANZ Limited Annual Report 2024 53 For personal use only Notes to the Consolidated Financial Statements (Cont.) Consolidated 31 July 2024 $’000 31 July 2023 $’000 Net cash used in operating activities (2,012) (2,659) Net cash from financing activities 1,842 814 Net decrease in cash and cash equivalents from discontinued operations (170) (1,845) Restructuring costs As at 31 July 2024, the Group has provided for an amount of $222,000 (2023: $280,000) towards restructuring and legal costs in association with exiting the UK operations and surrender of the UK licence. Consolidated 31 July 2024 $’000 31 July 2023 $’000 Carrying amount at the start of the year 280 – Provision used during the year (58) – Provisions recognised during the year – 280 Carrying amount at the end of the period 222 280 Note 8. Cash and cash equivalents Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current assets Cash at bank 708 1,766 Note 7. Discontinued operations (Cont.) 54 For personal use only Note 9. Trade and other receivables Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current assets Trade receivables – 811 Less: Allowance for expected credit losses – (2) – 809 Other receivables – 28 – 837 The Group does not hold any collateral over these balances. The Group’s trade and other receivables have been reviewed for indicators of impairment and include an allowance for expected credit losses. The Group has recognised a gain of $14,746 in profit and loss in respect of the expected credit losses for the year ended 31 July 2024 (2023: $Nil) Allowance for expected credit losses The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Consolidated Expected credit loss rate Carrying amount Allowance for expected credit losses 31 July 2024 % 31 July 2023 % 31 July 2024 $’000 31 July 2023 $’000 31 July 2024 $’000 31 July 2023 $’000 Not overdue – – – 655 – – 1 – 60 days overdue – – – 128 – – 61 – 90 days overdue – – – 11 – – Over 90 days overdue – 12% – 17 – 2 – 811 – 2 Movements in the allowance for expected credit losses are as follows: Consolidated 31 July 2024 $’000 31 July 2023 $’000 Opening balance (2) (2) Additional provisions recognised – (1) Provisions reversed/utilized 2 1 Closing balance – (2) In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for impairment. Toys“R”Us ANZ Limited Annual Report 2024 55 For personal use only Notes to the Consolidated Financial Statements (Cont.) Note 10. Inventories Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current assets Stock on hand – at cost 713 6,344 Less: Provision for impairment (119) (1,439) 594 4,905 Movement in provision for obsolescence Year ended 31‑Jul‑24 $’000 31‑Jul‑23 $’000 Balance at the beginning of the year (1,439) (473) Additional provisions recognised - (1,000) Provisions utilised/adjusted 1,320 34 Balance at the end of the year (119) (1,439) Note 11. Right-of-use assets Consolidated 31 July 2024 $’000 31 July 2023 $’000 Non-current assets Land and buildings – right-of-use 10,089 12,252 Less: Accumulated depreciation (1,903) (1,085) 8,186 11,167 56 For personal use only Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Land and buildings $’000 Balance at 1 August 2022 – Additions 12,252 Depreciation expense (1,085) Balance at 31 July 2023 11,167 Disposals (1,774) Depreciation expense (1,207) Balance at 31 July 2024 8,186 The Company entered into to an arrangement with the landlord on 20 July 2021 for lease of office and warehouse space in Clayton, Victoria for a period of ten years (with an option to extend for a further two terms of five years each) with an objective to consolidate all of its office and warehouse operations. The lease commenced in September 2022. During the year, the Group surrendered a portion of the warehouse space in Clayton, Victoria back to the landlord. Refer note 37 for further information on events after the reporting period. As at 31 July 2024, the Group leased office and warehouse premises under agreements of less than one year. These leases are either short-term or low-value, so have been expensed as incurred and not capitalised as right-of-use assets. Note 12. Other assets Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current assets Prepaid expenses 905 135 Prepaid deposits for purchase of inventory – 73 905 208 Non-current assets Bonds and security deposits 2,756 2,935 3,661 3,143 Note 11. Right-of-use assets (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 57 For personal use only Notes to the Consolidated Financial Statements (Cont.) Note 13. Assets of disposal group classified as held for sale Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current assets Trade and other receivables – 336 Inventories 16 2,173 Other current assets – 610 16 3,119 Note 14. Property, plant and equipment Consolidated 31 July 2024 $’000 31 July 2023 $’000 Non-current assets Leasehold improvements – at cost 939 951 Less: Accumulated depreciation (170) (81) 769 870 Plant and equipment – at cost 2,942 2,990 Less: Accumulated depreciation (1,688) (1,093) 1,254 1,897 2,023 2,767 Reconciliations Reconciliations of the carrying amounts of each class of plant and equipment at the beginning and end of the current financial year are set out below: Consolidated Plant and equipment $’000 Leasehold improvements $’000 Total $’000 Balance at 1 August 2022 2,372 12 2,384 Additions 564 442 1,006 Disposals (6) (3) (9) Transfers in/(out) (498) 498 – Depreciation expense (535) (79) (614) Balance at 31 July 2023 1,897 870 2,767 Additions 5 – 5 Disposals (29) (5) (34) Depreciation expense (619) (96) (715) Balance at 31 July 2024 1,254 769 2,023 58 For personal use only Note 15. Goodwill and other intangibles Consolidated 31 July 2024 $’000 31 July 2023 $’000 Non-current assets Goodwill – at cost 30,522 29,695 Less: Impairment (29,695) (25,628) 827 4,067 Licenses and trademarks – at cost 375 375 Less: Accumulated amortisation (63) (44) 312 331 Customer database – at cost 5,271 5,271 Less: Accumulated amortisation (3,867) (2,810) 1,404 2,461 Software – at cost 576 281 Less: Accumulated amortisation (282) (241) 294 40 2,837 6,899 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Goodwill $’000 Licences and trademarks $’000 Customer database $’000 Software $’000 Total $’000 Balance at 1 August 2022 15,195 2,692 3,515 45 21,447 Additions – – – 16 16 Impairment of assets (11,128) (2,221) – – (13,349) Amortisation expense – (139) (1,054) (22) (1,215) Balance at 31 July 2023 4,067 332 2,461 39 6,899 Additions through business combinations (note 34) 827 – – – 827 Additions – – – 292 292 Impairment of assets (4,067) – – – (4,067) Amortisation expense – (20) (1,057) (37) (1,114) Balance at 31 July 2024 827 312 1,404 294 2,837 Toys“R”Us ANZ Limited Annual Report 2024 59 For personal use only Notes to the Consolidated Financial Statements (Cont.) Impairment testing – Goodwill The Group has identified that there are two cash-generating units which are aligned with the operating segments disclosed in note 3 and against which goodwill and other intangible assets are allocated and tested. Goodwill Consolidated 31 July 2024 $’000 31 July 2023 $’000 Business to consumer (B2C) 827 – Business to business (B2B) – 4,067 Total 827 4,067 Recoverability of software, licences and customer database has been assessed at the time of creation/ subscription based on their useful life and is then amortised accordingly. All software, licences and customer database are reviewed for their usefulness and validity annually and impaired if required. As the operations of the B2B CGU have been discontinued during the year, the recoverable value of the B2B CGU was below the carrying value of the CGU. As a result of this, the Group has recognised an impairment charge of $4.07 million in the current year against goodwill. The impairment charge was recorded as a separate line in the statement of profit or loss. Key assumptions for B2C CGU: Key assumptions are those to which the recoverable amount of the cash-generating units is most sensitive. The following key assumptions were used in the discounted cash flow model for the B2C CGU: Revenue and expenses for FY25 B2C Based on approved budgets Projected average revenue and cost of sales growth rate p.a. after budget period 16.00% Projected operating costs and overheads increase after budget period 5.00% Pre‑tax discount rate 21.43% Long‑term growth rate 3.00% The pre-tax discount rates reflect management’s estimate of the time value of money and the Group’s weighted average cost of capital, the risk-free rate and the volatility of the share price relative to market movements. Management believes the projected revenue growth rates are prudent and justified, based on historical performance of the businesses. Outcome of impairment assessment Based on the above, the recoverable amount of the B2C CGU exceeded the carrying amount by $7.1 million. Note 15. Goodwill and other intangibles (Cont.) 60 For personal use only Sensitivity As disclosed in note 2, the Directors have made judgements and estimates in respect of impairment testing of goodwill. Should these judgements and estimates not occur, the resulting goodwill carrying amount may decrease. The sensitivities are as follows: (1) Revenue growth during the budget period would need to decrease by more than 10% before goodwill would need to be impaired, with all other assumptions remaining constant. (2) The pre-tax discount rate would need to increase by 9% or more before goodwill would need to be impaired, with all other assumptions remaining constant. Management believes that other reasonable changes in the key assumptions on which the recoverable amount of B2C CGU’s goodwill is based would not cause the CGU’s carrying amount to exceed its recoverable amount. Note 16. Trade payables Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current liabilities Trade payables 1,871 3,405 Refer to note 27 for further information on financial instruments. Note 15. Goodwill and other intangibles (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 61 For personal use only Notes to the Consolidated Financial Statements (Cont.) Note 17. Borrowings Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current liabilities Term loan – secured 1 14,238 11,500 UK Loan facility – secured – 584 Short-term loan – Mercer (unsecured)2 600 – 14,838 12,084 Non-current liabilities UK Loan facility – secured – 526 Convertible note payable – at amortised cost3 390 – 390 526 15,228 12,610 1. Term loan In July 2022, the Company obtained a three‑year secured loan facility of $15 million to support working capital and capital expenditure requirements for the Group, including the acquisition of inventory. The facility is secured against all assets of the Group, both present and future. During the year, the Group entered into amended facility with the lender wherein the total facility was limited to $13.4 million (excluding interest and fees) of which $13.0 million (Facility A) is repayable by July 2025 and $0.4 million (Facility B) is repayable by September 2024. Facility A carried an interest rate of 11.5% p.a. with an additional 1.5% p.a. line fees and Facility B carries an interest rate of 15% p.a. Covenant breach The term loan provided is subject to the provision of customary financial covenants, including maintaining specified asset‑backed ratio, holding a minimum amount of cash balance and maintaining shareholders’ funds above a specified amount. At 31 July 2024, the Group is in breach of the financial covenants. The Company is in active communication with the lender in relation to the breach and has requested the lender for a waiver of the shareholders’ funds covenant for the reporting period ended 31 July 2024. Due to the breach of the covenant clause, the lender could be contractually entitled to request immediate repayment of the outstanding loan facility amount of $14.2 million. However, the lender has not requested early repayment of the loan. Refer note 37 ‘Events after the reporting period’ for information on the waiver obtained from the lender subsequent to year‑end. 2. Short-term finance – Mercer During March 2024, the Group entered into a loan facility agreement with mercer Street Global Opportunity Fund II LP for a short-term loan of $600,000. The repayment amount is $690,000 payable within six months from the date of the loan or a date mutually agreed between the parties, whichever is later. The loan is unsecured. 62 For personal use only 3. Convertible notes On 20 March 2024 the Company entered into a Convertible Securities Agreement with Mercer Street Global Opportunity Fund II LP to provide funding to the Company up to $4,200,000 (Convertible Securities Agreement or ‘CSA’). The initial drawdown was $700,000 (Tranche 1) and a further $785,000 (Tranche 2) was drawn following shareholder approval granted on 17 May 2024. The Company issued 793,000 convertible securities (CS) at $0.8827 per CS with a face value of $1.00 on 31 May 2024 (“Tranche 1”). Subsequently, on 17 July 2024 the Company issued 863,500 additional CS at $0.9091 per CS with a face value of $1.00 (“Tranche 2”). Subject to CSA, further investment of up to $2,715,000 CS can be issued in the future (“Further Tranche”). The maturity date for Tranche 1 is 18 months from the issue date (30 November 2025) and Tranche 2 is 15 months from the date issue (16 October 2025). The convertible notes have a zero coupon and therefore no interest is payable with the exception of a default event. The convertible notes are unsecured. Total transactions costs were $388,574 at the date of issue of the convertible notes and unamortised transaction costs of $360,000 have been offset against the convertible notes payable liability. The conversion features attached to the notes represent embedded derivatives which were recognised at fair value at the time of issue and thereafter at fair value at the end of each reporting period (see note 19). The Directors appointed an external valuation expert to perform a fair valuation of the embedded derivatives as at the respective issue dates and as at 31 July 2024. The fair value methodology adopted by the external valuer was the Monte Carlo Simulation model. Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit: Consolidated 31 July 2024 $’000 31 July 2023 $’000 Total facilities Secured loan 13,400 18,000 Used at the reporting date Secured loan (excluding capitalised interest and fees) 13,400 12,610 Unused at the reporting date Secured loan – 5,390 Note 17. Borrowings (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 63 For personal use only Notes to the Consolidated Financial Statements (Cont.) Note 18. Lease liabilities Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current liabilities Lease liability 564 576 Non-current liabilities Lease liability 8,728 11,284 9,292 11,860 Reconciliation: Consolidated 31 July 2024 $’000 31 July 2023 $’000 Opening balance 11,860 281 Additions during the year – 12,252 Terminations (1,770) – Interest expense 857 1,053 Lease payments (1,655) (1,726) Closing balance 9,292 11,860 64 For personal use only Maturity analysis of lease liabilities 2024 Within 1 year $’000 1‑2 years $’000 2‑3 years $’000 3‑4 years $’000 4‑5 years $’000 After 5 years $’000 Total $’000 Lease payments 1,423 1,493 1,564 1,638 1,714 5,846 13,678 Less: Finance charge (859) (800) (728) (642) (539) (818) (4,386) Discounted Lease Liabilities 564 693 836 996 1,175 5,028 9,292 2023 Within 1 year $’000 1‑2 years $’000 2‑3 years $’000 3‑4 years $’000 4‑5 years $’000 After 5 years $’000 Total $’000 Lease payments 1,677 1,728 1,813 1,900 1,989 9,180 18,287 Less: Finance charge (1,101) (1,043) (972) (884) (779) (1,648) (6,427) Discounted Lease Liabilities 576 685 841 1,016 1,210 7,532 11,860 Note 19. Derivative financial instruments Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current liabilities Convertible note – fair value of embedded derivatives 505 – Refer to note 27 for further information on financial instruments. Note 20. Employee benefits Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current liabilities Annual leave 175 366 Long service leave 58 94 233 460 Non-current liabilities Long service leave – 9 233 469 Note 18. Lease liabilities (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 65 For personal use only Notes to the Consolidated Financial Statements (Cont.) Note 21. Contingent consideration Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current liabilities Contingent consideration 1 210 – Non-current liabilities Contingent consideration 1 252 – 462 – 1. Represents management estimate of earn-out consideration payable calculated on expected contribution margin of the acquired business over the earn-out period being two years ending 30 June 2026. The maximum earn-out payable under the agreement is $1,000,000. Refer note 34 ‘Business combinations’ for further details on the RIOT acquisition. Note 22. Assets pledged as security In accordance with the security arrangements of liabilities as disclosed in note 17 to the financial statements, all assets of the Group, present and future, have been pledged as security. The Group does not have the right to sell or re‑pledge the assets. Note 23. Other current liabilities Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current liabilities Accrued royalties 807 57 GST payable/(receivable) – net (8) 12 Payroll Accruals 271 375 Other accrued expenses 709 1,600 1,779 2,044 66 For personal use only Note 24. Liabilities directly associated with assets classified as held for sale Consolidated 31 July 2024 $’000 31 July 2023 $’000 Current liabilities Trade payables 40 1,249 Other payables 37 316 Deferred revenue 6 – Loan – Tru Kids Inc 1 2,977 – Employee benefits 68 – 3,128 1,565 1. UK loan facility The Company entered into a secured loan agreement on 22 June 2023 with TRU Kids Inc (TRUK) as lender for a commitment of up to USD$2 million (circa. AUD$3 million) for the UK business, in particular to support working capital requirement related to the retail Toys “R” Us branded stores within WH Smith High Street Limited stores in the UK. During the year, the Group entered into an agreement with TRUK wherein the Group shall execute an instrument conveying any and all remaining assets of the UK operations to TRUK in full and final satisfaction of the debt and liabilities owed by the Group to TRUK, including the loan. The parties agreed that the instrument shall be executed at a mutually agreed later date. Note 25. Issued capital Consolidated 31 July 2024 Shares 31 July 2023 Shares 31 July 2024 $’000 31 July 2023 $’000 Ordinary shares – fully paid 115,690,728 863,086,674 295,540 292,920 Toys“R”Us ANZ Limited Annual Report 2024 67 For personal use only Notes to the Consolidated Financial Statements (Cont.) Movements in ordinary share capital Details Date Number of Shares Issue price $’000 Balance 01–Aug–22 861,861,184 292,965 Shares issued as consideration for remuneration 31–Aug–22 1,225,490 $0.0510 62 Buy‑back of Unmarketable Parcels 4–Jul–23 – – (107) Balance 31–Jul–23 863,086,674 292,920 Placement 17–Aug–23 59,831,374 $0.0110 658 Sale unmarketable parcels – 55 Conversion of Convertible Notes 27–Oct–23 59,545,457 $0.0110 655 Placement to Mercer 26–Feb–24 84,615,385 $0.0065 550 Mercer Advisor shares-Jaszac Pty Ltd 26–Feb–24 2,307,692 $0.0065 15 Placement to Mercer 28–Mar–24 21,276,596 $0.0094 200 Riot Acquisition – part consideration 21–May–24 35,000,000 $0.0100 350 Penny Cox – conversion of Loan 23–May–24 10,638,298 $0.0094 100 Consolidation of shares (1:10) 31–May–24 (1,022,671,060) – Shares issued to Mercer 31–May–24 2,060,312 $0.0968 200 Capital raising costs – (163) Balance 31 July 2024 115,690,728 295,540 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. At members’ meetings, each fully paid ordinary share is entitled to vote when ta poll is called, otherwise each shareholder has one vote on a show of hands. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. Note 26. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Note 25. Issued capital (Cont.) 68 For personal use only Note 27. Financial instruments Capital risk management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which comprises the borrowings detailed in note 16, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, accumulated losses and reserves as disclosed in the Statement of Changes in Equity. The Board reviews the capital structure on a regular basis. As part of this review the cost of capital and the risks associated with each class of capital is considered. The Group balances its overall capital structure through the payment of dividends, new share issues and share buy‑backs as well as the issue of new debt and the repayment of debt. Material accounting policies Details of significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset, financial liability and equity instrument are disclosed in note 1 to the financial statements. These policies were consistent throughout the current year and the previous year. Categories of financial instruments1 Consolidated 31 July 2024 $’000 31 July 2023 $’000 Financial assets Cash and cash equivalents 708 1,766 Trade and other receivables – 1,173 Other assets 2,756 2,935 Total financial assets 3,464 5,874 Financial liabilities Non‑interest bearing 1,911 4,655 Other liabilities 2,286 2,349 Fixed interest rate instruments – Lease liabilities 9,292 11,860 Fixed interest rate instruments – Borrowings 18,204 12,610 Total non-derivative financial liabilities 31,693 31,474 Derivative financial instruments 505 – Derivative financial liabilities 505 – Total financial liabilities 32,198 31,474 1. Balances include financial instruments pertaining to discontinued operations (assets and liabilities directly associated with classified as held for sale) as well. Toys“R”Us ANZ Limited Annual Report 2024 69 For personal use only Notes to the Consolidated Financial Statements (Cont.) Financial risk management objectives The Group’s finance function provides services to the business, co‑ordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyse exposures by degree and magnitude of risk. These risks include market risk (including currency risk, interest rate risk), credit risk and liquidity risk. The Group seeks to minimise the effects of these risks, by using various financial instruments to hedge these exposures. The use of financial instruments is governed by the Group’s policies approved by the Board of Directors, who provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non‑derivative financial instruments and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed on a continual basis. The Group does not enter into any trade financial instruments, including derivative financial instruments, for speculative purposes. Market risk The Group’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. At a Group level, market risk exposures are measured through sensitivity analysis and stress scenario analysis. In FY24, while there have been interest rate increases, there has been no material change to the Group’s exposure to market risk or the manner in which it manages and measures the risk. Foreign currency risk management Foreign currency risk refers to the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to foreign exchange risk arises from the net investment in the UK operations and the undertaking of certain transactions denominated in foreign currencies. The carrying amount of the Group’s foreign currency denominated financial assets and financial liabilities at the reporting date were as follows: Consolidated Assets Liabilities 31 July 2024 $’000 31 July 2023 $’000 31 July 2024 $’000 31 July 2023 $’000 US dollars – 697 4,120 – GBP 334 691 40 258 SGD – 22 – – 334 1,410 4,160 258 The Group undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rates fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the Group’s functional currency. This is measured using sensitivity and cash flow forecasting. Note 27. Financial instruments (Cont.) 70 For personal use only Foreign currency sensitivity The Group is mainly exposed to the US dollar (USD) and the UK Pound Sterling (GBP). The following table details the Group’s sensitivity to a 10% increase and 10% decrease in the Australian dollar against the relevant foreign currencies. 10% is the sensitivity rate which represents management’s assessment of the possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number indicates an increase in profit or loss where the Australian dollar strengthens against the respective currency. For a weakening of the Australian dollar against the respective currency there would be an equal and opposite impact on profit or loss and the balances below would be equal and opposite. A positive number indicates an increase in other equity where the Australian dollar weakens against the respective currency. For a strengthening of the Australian dollar against the respective currency there would be an equal and opposite impact on other equity and the balances below would be negative. Impact on profit or loss Gain/(loss) 31 July 2024 $’000 31 July 2023 $’000 10% increase in AUD against foreign currency USD 412 70 GBP (29) 43 SGD – 2 383 115 Impact on profit or loss Gain/(loss) 31 July 2024 $’000 31 July 2023 $’000 10% decrease in AUD against foreign currency USD (412) (70) GBP 29 (43) SGD – (2) (383) (115) Forward foreign exchange contracts At 31 July 2024, there were no foreign exchange contracts (2023: Nil). Interest rate risk Interest rate risk refers to the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section below. Note 27. Financial instruments (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 71 For personal use only Notes to the Consolidated Financial Statements (Cont.) Interest rate sensitivity As at 31 July 2024, the Group has a fixed interest rate of 11.5% p.a. (plus 1.5% line fees) on its secured borrowings of $13.82 million (2023: $11.50 million) and a fixed interest rate of 15% p.a. on secured borrowings of $0.42 million (2023: $Nil) as at the balance sheet date. It is the Group’s policy to protect part of the loans from exposure to increasing interest rates. The Group has a loan facility with its Licensor TRU Kids Inc. (TRUK) as at 31 July 2024 amounting to $2.98 million (2023: $1.11 million). The loan carries a fixed interest rate of 10.56% p.a. The Group has a short-term loan facility with Mercer amounting to $0.6 million as at 31 July 2024 (2023: $Nil), which carries a fixed interest of 15% p.a. The convertible notes issued during the year have a zero coupon and therefore no interest is payable with the exception of a default event. The Group does not have any variable rate borrowings as at the balance sheet date. Credit risk management Credit risk refers to the risk that a counter party will default on its contractual obligations resulting in a financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group’s exposure and the credit ratings of its counterparties are monitored continuously and the aggregate value of transactions concluded is spread amongst approved counterparties. Trade receivables consist of a large number of customers spread across diverse industries. Ongoing credit evaluation is performed on the financial condition of accounts receivable. The carrying amount of financial assets recorded in the financial statements, net of any allowance for losses, represents the Group’s maximum exposure to credit risk. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than one year. Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Board of Directors, who have built an appropriate liquidity risk management framework for the management of the Group’s short, medium and long‑term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Note 27. Financial instruments (Cont.) 72 For personal use only Liquidity and interest tables – financial liabilities The following table details the Group’s remaining contractual maturity for its financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. Consolidated – 31 July 2024 Weighted average interest rate % 0–3 months $’000 3 months to 1 year $’000 1–5 years $’000 Over 5 years $’000 Total $’000 Non-derivatives Non-interest bearing – 1,911 – – – 1,911 Other liabilities – 1,824 210 252 – 2,286 Fixed interest rate instruments 12.44% 2,977 14,837 390 – 18,204 Total non-derivatives 6,712 15,047 642 – 22,401 Derivatives Embedded derivatives – convertible notes – – 505 – 505 – – 505 – 505 Consolidated – 31 July 2023 Weighted average interest rate % 0–3 months $’000 3 months to 1 year $’000 1–5 years $’000 Over 5 years $’000 Remaining contractual maturities $’000 Non-derivatives Non‑interest bearing - 4,655 - - - 4,655 Other liabilities - 2,349 - - - 2,349 Fixed interest rate Instruments 11.42% 11,500 584 526 - 12,610 Total non-derivatives 18,504 584 526 - 19,614 Refer note 18 for maturity analysis of lease liabilities. Note 27. Financial instruments (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 73 For personal use only Notes to the Consolidated Financial Statements (Cont.) Liquidity and interest tables – financial assets The following table details the Group’s expected maturity for its financial assets. The table below has been drawn up based on the understood contractual maturities of the financial assets including interest that will be earned on those assets except where the Group anticipates that the cash flow will occur in a different period. Weighted average effective interest rate % 0–3 months $’000 3 months to 1 year $’000 1–5 years $’000 5+ years $’000 Total $’000 2024 Cash – 708 – – – 708 Non‑interest bearing – – – – – – Fixed interest rate instruments 4.19% 2,756 2,756 3,484 – – – 3,464 2023 Cash – 1,766 – – – 1,766 Non‑interest bearing – 1,173 – – – 1,173 Fixed interest rate instruments 1.37% – – 2,935 – 2,935 2,939 – 2,935 – 5,874 Fair value of financial instruments The fair values of financial assets and financial liabilities are determined as follows: • The fair value of other financial assets and financial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices from observable current market transactions; and • The fair value of derivative instruments are calculated using quoted prices. Where such prices are not available, discounted cash flow analysis using the applicable yield curve for the duration of the instruments for non‑optional derivatives and option pricing models for optional derivatives is used. The Directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximates their fair values. Fair value measurements recognised in the consolidated statement of financial position Fair value measurements are discussed in note 1 and in the notes specific to that asset or liability. Note 27. Financial instruments (Cont.) 74 For personal use only Note 28. Key management personnel disclosures Details of key management compensation The aggregate compensation made to key management personnel of the Group is set out below: Consolidated 31 July 2024 $ 31 July 2023 $ Short-term employee benefits 913,823 1,117,583 Post-employment benefits 88,546 98,918 Other long‑term benefits 16,806 7,743 Termination benefits – 278,419 Share-based payments 66,111 141,290 1,085,286 1,643,953 Note 29. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by RSM Australia Partners, the auditor of the Company and its network firms: Consolidated 31 July 2024 $ 31 July 2023 $ Audit services – RSM Australia Partners Audit or review of the financial statements 141,700 122,899 Other services – network firms Compliance Services1 – 29,986 141,700 152,885 1. Relates to services performed by network firms of RSM Australia Partners in relation to winding down and deregistration of overseas subsidiaries Note 30. Contingent liabilities and contingent assets As at 31 July 2024, the Group had issued bank guarantees of $2.76 million (2023: $2.96 million). The Group has placed an equivalent amount of cash deposit with the banks in relation to these bank guarantees (see note 12). There are no contingent assets as at 31 July 2024 (2023: $Nil). Toys“R”Us ANZ Limited Annual Report 2024 75 For personal use only Notes to the Consolidated Financial Statements (Cont.) Note 31. Licence guarantee commitments Under the terms of various License Agreements, the Company guarantees the minimum level of license payments. The commitment in relation to these guarantees not already recognised is as follows: Consolidated 31 July 2024 $’000 31 July 2023 $’000 Committed at the reporting date but not recognised as liabilities, payable: Within one year 769 4,780 One to five years 2,953 24,683 More than five years 19,797 56,781 23,519 86,244 Note 32. Related party transactions (a) Equity interests in related parties Equity interests in subsidiaries Details of the percentage of ordinary shares held in subsidiaries are disclosed in note 35 to the financial statements. (b) Transactions with Key Management Personnel Key management personnel Details of key management personnel compensation are disclosed in note 28 the financial statements. Loans to key management personnel and their related parties During the financial year and to the date of this report, the Group made no loans to Directors and other KMP. As at 31 July 2023 Louis Mittoni owed the Company $28,575 related to personal expenses incurred on a company credit card. During the financial year, there were no other reportable transactions between the Group and its Directors, KMP, or their personally related entities (Related Parties) (2023: $Nil). (c) Transactions with other related parties Transactions between Toys”R”Us ANZ Limited and other entities in the wholly owned Group during the financial years ended 31 July 2024 and 31 July 2023, which were eliminated on consolidation, consist of: • loans advanced by Toys”R”Us ANZ Limited; • management services provided by Toys”R”Us ANZ Limited; • management services provided to Toys”R”Us ANZ Limited; and • payment to/from Toys”R”Us ANZ Limited for the above services. 76 For personal use only Note 33. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Parent 31 July 2024 $’000 31 July 2023 $’000 Loss after income tax (5,666) (30,984) Total comprehensive loss (5,666) (30,984) Statement of financial position Parent 31 July 2024 $’000 31 July 2023 $’000 Total current assets 1,223 1,447 Total assets 29,424 38,406 Total current liabilities 18,704 16,519 Total liabilities 28,579 27,857 Equity Issued capital 295,540 292,920 Equity-settled employee benefits reserve 865 689 Convertible note equity reserve 297 – Accumulated losses (295,857) (283,060) Total equity 845 10,549 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity and some of its subsidiaries are party to a deed of cross guarantee under which each company guarantees the debts of the others. Contingent liabilities The parent entity had no contingent liabilities as at 31 July 2024 (31 July 2023: $Nil). Capital commitments – Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 31 July 2024 (31 July 2023: $Nil). Toys“R”Us ANZ Limited Annual Report 2024 77 For personal use only Notes to the Consolidated Financial Statements (Cont.) Material accounting policy information The accounting policies of the parent entity are consistent with those of the Group, as disclosed in note 1, except for the following: • Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. • Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an indicator of an impairment of the investment. Note 34. Business combinations Acquisition of RIOT Art & Craft During March 2024, Toys “R” Us ANZ Limited entered into an Asset Sale Agreement with the vendors of RIOT Arts and Crafts business for the strategic acquisition of key assets (including inventory, brands and other intellectual property) of the retail brand RIOT for the total consideration $1.12 million. This is an art and craft business and operates in the B2C division of the Group. The acquisition of RIOT assets strengthens the Group’s position in the growing e-commerce market and expands its House-of-Brands offering by adding additional, complementary products across a number of highly profitable categories. The goodwill represents brand synergy in the online sector, customer and wholesale expansion and operational efficiencies. The acquired business contributed revenues of $0.50 million and loss after tax of $0.10 million to the Group for the period from 22 March 2024 to 31 July 2024. The values identified in relation to the acquisition of Riot Art & Craft are provisional as at 31 July 2024. Details of the acquisition are as follows: Fair value $’000 Inventories 310 Other payables (25) Net assets acquired 285 Goodwill 827 Acquisition-date fair value of the total consideration transferred 1,112 Representing: Cash paid or payable to vendor 300 Toys “R” Us ANZ Limited shares issued to vendor 350 Contingent consideration 462 1,112 Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred 1,112 Less: Contingent consideration (462) Less: Shares issued by Company as part of consideration (350) Net cash used 300 Acquisition costs charged to expensed to profit or loss 44 Note 33. Parent entity information (Cont.) 78 For personal use only Note 35. Interests in subsidiaries Name of Entity Principal place of business/Country of incorporation Ownership interest 31 July 2024 % 31 July 2023 % Company Toys”R”Us ANZ Limited (i),(iii) Australia 100.00% 100.00% Subsidiaries UK TRU Limited (formerly UK Toys R Us Limited) (iii) United Kingdom 100.00% 100.00% Mittoni Pty Limited (ii),(iii) Australia 100.00% 100.00% Hobby Warehouse Pty Limited (ii),(iii) Australia 100.00% 100.00% Toys R Us Licensee Pty Limited (ii),(iii) Australia 100.00% 100.00% (i) Toys”R”Us ANZ Limited is the head entity within the tax consolidated Group. (ii) These companies are members of the Australian tax consolidated Group. (III) These subsidiaries are parties to a Deed of Cross Guarantee with Toys”R”Us ANZ Limited created on 15 June 2022 pursuant to ASIC Class Order 2016/785 and are relieved from the requirement to prepare and lodge an audited Financial Report. Note 36. Deed of cross guarantee The following entities are party to a deed of cross guarantee created on 15 June 2022 under which each company guarantees the debts of the others: Toys”R”Us ANZ Limited (‘head entity’) UK TRU Limited (UK Toys R Us Limited) Mittoni Pty Limited Hobby warehouse Pty Limited Toys R Us Licensee Pty Limited By entering into the deed, the wholly-owned entities have been relieved from the requirement to prepare financial statements and Directors’ report under Corporations Instrument 2016/785 issued by the Australian Securities and Investments Commission. The above companies represent a ‘Closed Group’ for the purposes of the Corporations Instrument, and as there are no other parties to the deed of cross guarantee that are controlled by Pinnacle Listed Comprehensive Limited, they also represent the ‘Extended Closed Group’. The consolidated statement of profit or loss and other comprehensive income and consolidated statement of financial position of the ‘Closed Group’ are substantially the same as the Group and therefore have not been separately disclosed. Toys“R”Us ANZ Limited Annual Report 2024 79 For personal use only Notes to the Consolidated Financial Statements (Cont.) Note 37. Events after the reporting period On 23 August 2024, the shareholders approved the drawdown of up to $2.715 million from the convertible securities facility, subject to further agreement between the parties. On 23 August 2024, the Group raised $2.49 million through a placement to new and existing institutional and sophisticated investors. On 20 September 2024, the Company received a letter from the lender waiving the requirement to comply with the financial covenants of the facility agreement for the period ended 31 July 2024. No other matter or circumstance has arisen since 31 July 2024 that has significantly affected, or may significantly affect the Group’s operations, the results of those operations, or the Group’s state of affairs in future financial years. Note 38. Reconciliation of profit/(loss) after income tax to net cash flow from/(used in) operating activities Consolidated 31 July 2024 $’000 31 July 2023 $’000 Loss after income tax benefit for the year (19,393) (32,658) Adjustments for: Depreciation and amortisation 3,036 2,915 Impairment of goodwill and other intangible assets 4,067 13,349 Share-based payments expense 176 369 Foreign exchange differences (296) – Other revenue (64) (106) Loss on disposal of property, plant and equipment 33 – Non-cash interest and other finance costs 866 – Changes in net assets and liabilities, net of effects from acquisition and disposal of business: Decrease/(increase) in trade and other receivables 1,202 (380) Decrease in inventories 6,795 2,773 (Increase)/decrease in prepayments and other assets 164 (139) Increase/(decrease) in trade and payables (3,640) 1,664 Decrease in deferred tax liabilities (317) (316) Decrease in employee benefits (166) 64 Net cash used in operating activities (7,537) (12,465) 80 For personal use only Note 39. Non-cash investing and financing activities Consolidated 31 July 2024 $’000 31 July 2023 $’000 Additions to the right–of–use assets – 12,252 Disposal of right–of–use assets (1,774) – Shares issued as consideration for RIOT acquisition 350 – Shares issued as consideration for entering into convertible notes arrangement 200 – Shares issued as consideration for capital raising 15 – (1,209) 12,252 Note 40. Changes in liabilities arising from financing activities Consolidated Borrowings $’000 Convertible Notes $’000 Lease Liabilities $’000 Total $’000 Balance at 1 August 2022 10,000 – 281 10,281 Net cash from/(used in) financing activities 2,610 – (673) 1,937 Additions of leases – – 12,252 12,252 Balance at 31 July 2023 12,610 – 11,860 24,470 Net cash from financing activities 4,256 1,396 (795) 4,857 Termination of leases – – (1,770) (1,770) Other changes 949 (501) (3) 445 Balance at 31 July 2024 17,815 895 9,292 28,002 Note 41. Earnings per share 31 July 2024 Cents per share 31 July 2023 Cents per share Basic earnings/(loss) per share From continuing operations (11.24) (29.89) From discontinued operations (7.72) (7.95) Total Basic Earnings/(loss) per share (18.96) (37.84) Diluted earnings/(loss) per share From continuing operations (11.24) (29.89) From discontinued operations (7.72) (7.95) Total Diluted Earnings/(loss) per share (18.96) (37.84) Toys“R”Us ANZ Limited Annual Report 2024 81 For personal use only Notes to the Consolidated Financial Statements (Cont.) Consolidated 31 July 2024 $’000 31 July 2023 $’000 Loss per share from continuing operations Loss after income tax (11,501) (25,791) Cents Cents Basic loss per share (11.24) (29.89) Diluted loss per share (11.24) (29.89) Consolidated 31 July 2024 $’000 31 July 2023 $’000 Loss per share from discontinued operations Loss after income tax (7,892) (6,867) Cents Cents Basic loss per share (7.72) (7.95) Diluted loss per share (7.72) (7.95) Consolidated 31 July 2024 $’000 31 July 2023 $’000 Loss per share Loss after income tax (19,393) (32,658) Cents Cents Basic loss per share (18.96) (37.84) Diluted loss per share (18.96) (37.84) Number Number Weighted average number of ordinary shares* Weighted average number of ordinary shares used in calculating basic earnings per share 102,271,556 86,298,595 Weighted average number of ordinary shares used in calculating diluted earnings per share 102,271,556 86,298,595 * Potential shares comprising convertible notes, share options, service rights and share appreciation rights have not been considered in the calculation of weighted average number of ordinary shares for diluted earnings per share as they are anti-dilutive in nature, due to the losses incurred. Share numbers have been adjusted for the effects of share consolidation. Note 41. Earnings per share (Cont.) 82 For personal use only Note 42. Share-base payments (a) Expenses recognised An expense of $176,501 (2023: $368,964) has been recognised in the profit and loss in relation to share-based payments granted. (b) Share options and share appreciation rights An employee incentive plan has been established by the Group and approved by shareholders at a general meeting whereby the Group may, at the discretion of the Remuneration and Nomination Committee, grant options and rights over ordinary shares in the Company to Directors and employees. The grant of options and rights forms a part of the Company’s long-term incentive objectives to encourage Directors and employees to have a greater involvement in the achievement of the Company’s objectives. Options and rights provide an incentive to strive to that end by participating in the future growth and prosperity of the Company through share ownership. The options and rights are issued for nil consideration and are only subject to a vesting condition relating to the participant’s continued employment with the Company. The options and rights must be exercised before their expiry date, or they will lapse. On the exercise of an option, the holder must pay to the Company the relevant exercise price multiplied by the number of options being exercised by the holder. The Company will issue the holder with a share for each option or right that the participant validly exercises. (c) Reconciliation Set out below are the summaries of options granted under the employee incentive plan as at 31 July 2024: Grant date Expiry date Exercise price Balance at the start of the year1 Granted Exercised Expired/ cancelled Balance at the end of the year 23/11/2020 01/11/2023 $1.3800 169,158 – – (169,158) – 23/11/2020 01/11/2024 $1.6600 169,672 – – – 169,672 23/11/2020 01/11/2025 $1.9900 172,618 – – – 172,618 01/05/2021 01/05/2025 $1.3800 169,196 – – – 169,196 31/05/2024 31/05/2027 $0.1162 – 5,593,804 – – 5,593,804 680,644 5,593,804 – (169,158) 6,105,290 Weighted average exercise price $1.6045 $0.1162 $0.0000 $1.3800 $0.2471 1. The options numbers have been adjusted for the effects of share consolidation. The weighted average remaining contractual life of options outstanding at the end of the financial year was 2.66 years (2023: 1.39 years). Toys“R”Us ANZ Limited Annual Report 2024 83 For personal use only Notes to the Consolidated Financial Statements (Cont.) Set out below are the summaries of service rights granted under the employee incentive plan as at 31 July 2024: Grant date Expiry date Exercise price Balance at the start of the year1 Granted Exercised Expired/ forfeited/ other Balance at the end of the year 23/11/2020 10/12/2036 $1.8000 50,000 – – – 50,000 27/12/2023 27/12/2025 $0.0000 – 818,182 – (272,727) 545,455 27/12/2023 27/12/2026 $0.0000 – 818,182 – (272,727) 545,455 27/12/2023 27/12/2027 $0.0000 – 818,181 – (272,727) 545,454 50,000 2,454,545 – (818,181) 1,686,364 Weighted average exercise price $1.8000 $0.0000 $0.0000 $0.0000 $0.0534 1. The service rights numbers have been adjusted for the effects of share consolidation. The weighted average remaining contractual life of service rights outstanding at the end of the financial year was 2.70 years (2023: 13.37 years). Set out below are the summaries of share appreciation rights granted under the employee incentive plan as at 31 July 2024: Grant date Expiry date Exercise price Balance at the start of the year1 Granted Exercised Expired/ forfeited/ other Balance at the end of the year 21/09/2021 21/09/2026 $1.8000 13,000 – – (5,000) 8,000 27/12/2023 27/12/2028 $0.0000 – 1,454,545 – – 1,454,545 13,000 1,454,545 – (5,000) 1,462,545 Weighted average exercise price $1.8000 $0.0000 $0.0000 $1.8000 $0.0098 1. The share appreciation rights numbers have been adjusted for the effects of share consolidation. The weighted average remaining contractual life of share appreciation rights outstanding at the end of the financial year was 4.40 years (2023: 3.15 years). Set out below is a summary of share warrants granted to the lender of the term loan as at 31 July 2024: Grant date Expiry date Exercise price Balance at the start of the year1 Granted Exercised Expired/ forfeited/ other Balance at the end of the year 28/07/2022 27/07/2025 $0.5000 1,800,000 – – – 1,800,000 1,800,000 – – – 1,800,000 1. The share warrants numbers have been adjusted for the effects of share consolidation. Note 42. Share-base payments (Cont.) 84 For personal use only (d) Fair value inputs For options granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Expiry date Share price at grant date Exercise price Expected volatility Dividend yield Risk-free interest rate Fair value at grant date 31/05/2024 31/05/2027 $0.0960 $0.1162 134.07% – 4.048% $0.0531 For the service rights and share appreciation granted during the current financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Expiry date Share price at grant date Exercise price Expected volatility Dividend yield Risk-free interest rate Fair value at grant date 27/12/2023 27/12/2025 $0.1100 $0.0000 153.75% – 4.440% $0.1100 27/12/2023 27/12/2026 $0.1100 $0.0000 153.75% – 4.440% $0.1100 27/12/2023 27/12/2027 $0.1100 $0.0000 153.75% – 4.440% $0.1100 27/12/2023 27/12/2028 $0.1100 $0.1100 153.75% – 4.060% $0.1100 (e) Other information The weighted average share price during the financial year was $0.111 (2023: $0.263). Note 42. Share-base payments (Cont.) Toys“R”Us ANZ Limited Annual Report 2024 85 For personal use only Consolidated Entity Disclosure Statement 31 July 2024 Entity name Entity type Place formed/ Country of incorporation Ownership interest % Tax residency Toys”R”Us ANZ Limited Body Corporate Australia 100.00% Australia UK TRU Limited Body Corporate United Kingdom 100.00% United Kingdom Mittoni Pty Limited Body Corporate Australia 100.00% Australia Hobby warehouse Pty Limited Body Corporate Australia 100.00% Australia Toys R Us Licensee Pty Limited Body Corporate Australia 100.00% Australia 86 For personal use only Directors’ Declaration 31 July 2024 In the Directors’ opinion: • the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; • the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; • the attached financial statements and notes give a true and fair view of the Group’s financial position as at 31 July 2024 and of its performance for the financial year ended on that date; • there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; • at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in note 36 to the financial statements; and • the information disclosed in the attached consolidated entity disclosure statement is true and correct. The Directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the Directors Kelly Humphreys Chair 30 September 2024 Toys“R”Us ANZ Limited Annual Report 2024 87 For personal use only 72 THE POWER OF BEING UNDERSTOOD AUDIT | TAX | CONSULTING RSM Australia Partners is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm which practices in its own right. The RSM network is not itself a separate legal entity in any jurisdiction. RSM Australia Partners ABN 36 965 185 036 Liability limited by a scheme approved under Professional Standards Legislation RSM Australia Partners Level 27, 120 Collins Street Melbourne VIC 3000 PO Box 248 Collins Street West VIC 8007 T +61 (0) 3 9286 8000 F +61 (0) 3 9286 8199 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT To the Members of Toys“R”Us ANZ Limited Opinion We have audited the financial report of Toys“R”Us ANZ Limited (‘the Company’) and its controlled entities (together referred to as ‘the Group’) which comprises the consolidated statement of financial position as at 31 July 2024, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including material accounting policy information, the consolidated entity disclosure statement and the directors' declaration. In our opinion the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 31 July 2024 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (including independence standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independent Auditor’s Report 88 For personal use only 73 Material Uncertainty Related to Going Concern We draw attention to Note 1 in the financial report, which indicates that the Group incurred a loss of $19.4 million and had cash outflows from operating activities of $7.5 million during the year ended 31 July 2024. Also, as at 31 July 2024, the Group’s current liabilities exceeded its current assets by $21.2 million, and the Group had a net liability position amounting to $15.2 million. As stated in Note 1, these events or conditions, along with other matters as set forth in Note 1, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition to the matter described in the Material Uncertainty Related to Going Concern section of our report, we have determined the matters described below to be the key audit matters to be communicated in our report. Key Audit Matter How our audit addressed this matter Revenue recognition Refer to Note 4 and Note 7 in the financial statements During the year the group recorded revenue transactions of $7.7 and $9.8 million for continued and discontinued operations, respectively. Revenue recognition is considered a Key Audit Matter because of its significance to the Group’s reported financial performance. Revenue recognition can be impacted by a failure to correctly measure revenue in accordance with applicable accounting standards and/or by applying an incorrect approach to period end cut-off. Our audit procedures in relation to revenue recognition included: • Assessing whether the Group’s revenue recognition policies were in compliance with the requirements of AASB 15 Revenues from Contracts with Customers; • Evaluating and testing the operating effectiveness of key controls related to revenue recognition; • Searching and reviewing any large or unusual transactions; • Performing cut-off testing over transactions recorded either side of the year end, to ensure that revenues were recorded in the appropriate period; • Conducting a combination of substantive analytical procedures and tests of details in respect of revenue transactions; and • Reviewing disclosures to corroborate they are appropriate and meet the requirements of AASB 15. Toys“R”Us ANZ Limited Annual Report 2024 89 For personal use only Independent Auditor’s Report (Cont.) 74 Key Audit Matters (continued) Key Audit Matter How our audit addressed this matter Impairment assessment of goodwill Refer to Note 15 in the financial statements At 31 July 2024, the Group had goodwill with a carrying amount of $827,000 (31 July 2023: $4.1 million) relating to business combinations in the current and previous years. As required by AASB 136 Impairment of Assets (‘AASB 136’), management has performed an impairment test over the goodwill balance at 31 July 2024 by: • calculating the recoverable amount of each identified cash generating unit (‘CGU’), which was determined to be the value-in-use of the CGUs, using a discounted cash flow model. This model used cashflow projections for the CGUs for 5 years, with a terminal growth rate applied to the 5th year; • discounting the cash flow projections to their net present value using the Group’s weighted average cost of capital (‘WACC’”); and • comparing the resulting value-in-use of each CGU to its carrying amount. Management identified that there were two CGUs for the purpose of performing impairment testing (being B2B and B2C businesses). In addition, management performed a sensitivity analysis over the value-in-use calculation, by varying the assumptions used (growth rates, terminal growth rate and WACC) to assess the impact on the valuations. As a result of these tests, an impairment expense of $4.1 million was recognised during the year in relation to the goodwill of the B2B CGU. We determined impairment testing of goodwill to be a Key Audit Matter due to the materiality of the goodwill balance. Also, because this test involves significant level of management judgements and estimates such as the determination of the existing CGUs, the estimation of future cash flows of the business, including the growth rates and the discount rates applied to the estimated cash flows. Our audit procedures in relation to the impairment testing of goodwill involved the assistance of our Corporate Finance team, and included: • Holding discussions with senior management, reviewing the Group’s ASX announcements and reading minutes of directors’ meetings and other available information to gather sufficient information regarding the operations of the current period, as well as the expectations going forward; • Assessing the reasonableness of management’s determination that goodwill should be allocated to two CGUs based on the Group’s business and the manner in which the results are monitored and reported; • Reviewing calculations of carrying amounts considered for each CGU to ensure that the amounts were appropriate; • Assessing and challenging the reasonableness of key assumptions used in the discounted cash flow model, including the cash flow projections, future growth rates, discount rate applied and terminal value. We also assessed whether the key assumptions adopted were applied on a consistent basis across the models; • Verifying the mathematical accuracy of the cash flow model and reconciling input data to supporting evidence, such as approved budgets and considering the reasonableness of these budgets; • Reviewing management’s sensitivity analysis over the key assumptions in the model and assessing the reasonableness of the changes in key assumptions used in the analysis; • Reviewing management’s calculation of the impairment loss determined as at 31 July 2024; and • Reviewing the disclosures in Note 15 to the financial statements to assess the appropriateness, completeness, and compliance with the disclosure requirements of AASB 136 and AASB 138 Intangible Assets. 90 For personal use only 75 Key Audit Matters (continued) Accounting for discontinued operations Refer to Note 7 in the financial statements During the year ended 31 July 2024, following a strategic review, the Board concluded to wind down the Mittoni operations (B2B business) agreeing that the business was a non-core business and that the business does not align with the House of Brands strategy. Pursuant to this, the Mittoni B2B operations have been classified as “discontinued operations”. During the prior year, the Board concluded to restructure its UK business and thereby classified the UK operations as “discontinued operations”. AASB 5 Non-current Assets Held for Sale and Discontinued Operations (‘AASB 5’) requires specific recognition, measurement and disclosure requirements relating to assets, liabilities, revenues and expenses of discontinued operations and disposal groups classified as held for sale. This was identified as a Key Audit Matter due to the significant of the transactions and balances classified as discontinued operations, as well the level of management’s estimates and judgements involve in identifying the account balances and revenue and expenses relating to the discontinued operations. Our audit procedures in relation to accounting and disclosure of discontinued operations included: • Obtaining and reviewing internal and external correspondences, minutes of the board meetings and other relevant information to assess the appropriate of the conclusion that the Mittoni B2B operations were discontinued, including verifying the timing of the management’s commitment to wind- down this business to corroborate this occurred prior to reporting period-end; • Assessing the calculations and accounting for assets held for sale, related liabilities and revenues and expenses relating to the discontinued operations to corroborate are accurately identified and reported; • Assessing management’s determination of the impairment of intangible assets relating to the discontinued operations; and • Assessing accounting policy, account balance classifications and Note disclosures to ensure that they are in accordance with the requirements of AASB 5. Accounting for Convertible Notes Refer to Note 17 and 19 in the financial statements During the year, the Group entered into a Convertible Securities Agreement with a lender to provide funding to the Group for up to $4.2 million, under which the Group issued 2 tranches of Convertible Notes having face value of $1.5 million as at 31 July 2024. Accounting for convertible loan notes has been considered a key audit matter, due to the complexity of the accounting treatment required under Australian Accounting Standards. Our audit procedures involved the assistance of our Corporate Finance team and included, among others: • Reviewing the convertible note deed, to evaluate its terms and conditions; • Evaluating the accounting treatment adopted to determine whether it is in compliance with Australian Accounting Standards, including confirming that the instrument is a hybrid instrument, consisting of a host liability and an embedded derivative, representing a financial liability; • Recalculating the fair value of the instrument at inception, and its subsequent measurement as at balance date; • Evaluating the reasonableness of key inputs to the valuation model; and • Assessing the appropriateness of the disclosures in respect of the borrowings and the derivative financial liability in the financial statements. Toys“R”Us ANZ Limited Annual Report 2024 91 For personal use only Independent Auditor’s Report (Cont.) 76 Other Information The directors of the Company are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 31 July 2024; but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report, or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of: a) the financial report (other than the consolidated entity disclosure statement) that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; and b) the consolidated entity disclosure statement that is true and correct in accordance with the Corporations Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of: (i) the financial report (other than the consolidated entity disclosure statement) that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and (ii) the consolidated entity disclosure statement that is true and correct and is free of 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 this 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/ar2_2020.pdf. This description forms part of our auditor's report. 92 For personal use only 77 Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors' report for the year ended 31 July 2024. In our opinion, the Remuneration Report of Toys“R”Us ANZ Limited for the year ended 31 July 2024, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM AUSTRALIA PARTNERS R J MORILLO MALDONADO Partner Dated: 30 September 2024 Melbourne, Victoria Toys“R”Us ANZ Limited Annual Report 2024 93 For personal use only Shareholder Information The shareholder information set out below was applicable as at 18 September 2024. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: Holding Ranges Fully Paid Ordinary shares Number of holders Total Units % of total shares Issued Options Total Units Service Rights Units Share Appreciation Rights Total Units 1 to 1,000 192 35,731 0.02% – – 5,000 1,001 to 5,000 275 875,027 0.58% – – 3,000 5,001 to 10,000 200 1,548,044 1.02% – – – 10,001 to 100,000 331 11,533,555 7.62% 285,713 50,000 – 100,001 and over 92 137,269,800 90.76% 27,084,900 1,636,364 1,454,546 1,090 151,262,157 100.00% 27,370,613 1,686,364 1,462,546 Holding less than a marketable parcel 538 1,325,766 0.88% – – 8,000 94 For personal use only Equity security holders Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Ordinary shares Number held % of total Shares Issued 1 Directed Electronics Australia Pty Ltd 28,571,430 18.89% 2 Citicorp Nominees Pty Limited 25,432,479 16.81% 3 UBS Nominees Pty Ltd 10,073,670 6.66% 4 Jaszac Two Investment Trust10,002,885 6.61% 5 Louis Mittoni 9,894,695 6.54% 6 Coalwell Pty Ltd 4,300,682 2.84% 7 Theo Andriopoulos 4,051,879 2.68% 8 Jaszac Two Pty Ltd CAN 106 712 096 3,636,364 2.41% 9 Toir Holdco Pty Ltd Halkin Business Partners 3,500,000 2.31% 10 HSBC Custody Nominees (Australia) Limited – A/C 2 3,447,459 2.28% 11 Zaza Operations Pty Ltd 3,068,710 2.03% 12 Mercer Street Global Opportunity Fund II LP 2,565,000 1.70% 13 BNP Paribas Nominees Pty Ltd 1,825,932 1.21% 14 Tucks Industrial Packings & Seals Pty Ltd 1,700,000 1.12% 15 Tru Kids Inc 1,699,816 1.12% 16 KA & SJ Moore Pty Ltd 1,340,815 0.89% 17 BNP Paribas Noms Pty Ltd 1,261,994 0.84% 18 Director Holdings 1,211,730 0.80% 19 BT Portfolio Services Limited 1,150,000 0.76% 20 Penny Cox 1,063,830 0.70% Total 119,799,370 79.20% Total issued capital – selected security class(es) 151,262,157 100.00% Toys“R”Us ANZ Limited Annual Report 2024 95 For personal use only Shareholder Information (Cont.) Unquoted equity securities as at the date of this report Security Classes Number on issue Number of holders Unlisted options/strike price $1.6600/Expiring on 01/11/2024 169,672 1 Unlisted options/strike price $1.3800/Expiring on 01/05/2025 169,196 1 Unlisted options/strike price $1.9900/Expiring on 01/11/2025 172,618 1 Unlisted options/strike price $0.1162/Expiring on 31/07/2027 5,593,804 1 Unlisted options/strike price $0.1128/Expiring on 27/08/2027 3,479,610 1 Unlisted options/strike price $0.1200/Expiring on 02/09/2027 17,785,713 9 Unlisted Service Rights 1,686,364 3 Unlisted Employee Share Appreciation Rights 1,462,546 7 Unlisted convertible notes 1,656,500 1 Substantial holders Substantial holders in the Company are set out below: Ordinary shares Number held % of total Shares Issued Apes with Wings Pty Ltd ATF the Salom Family 3 Trust 52,097,728 5.30% TIGA Trading Pty Ltd 10,073,670 6.66% Hobby Warehouse Holdings Pty Ltd ATF Hobby Warehouse Trust 105,696,949 9.88% Directed Electronics Australia Pty Ltd 28,571,430 18.89% Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Options, Share Rights, Share Appreciation Rights, Convertible Notes and Warrants No voting rights. 96 For personal use only Corporate Directory 31 July 2024 Directors Kelly Humphreys Teresa Smith John Tripodi Company secretary Kim Larkin Registered office Level 8, 210 George Street Sydney, NSW 2000 Principal place of business Unit 3, 45–49 McNaughton Road Clayton, VIC 3168 Share register Automic Pty Ltd Level 5, 126 Phillip Street Sydney NSW 2000 Auditor RSM Australia Partners Level 27, 120 Collins Street Melbourne VIC 3000 Solicitors McCullough Robertson Level 11, 66 Eagle Street Brisbane QLD 4000 Bankers Westpac Banking Corporation 4 Nexus Court Mulgrave VIC 3170 Stock Exchange Listing Toys “R” Us ANZ Limited shares are listed on the Australian Securities Exchange (ASX code: TOY) Website corporate.toysrus.com.au Corporate Governance Statement Refer to the Company’s website for all corporate governance information: https://corporate.toysrus.com.au/investors/ corporate-governance/ colliercreative.com.au #TOY0004 Toys“R”Us ANZ Limited Annual Report 2024 97 For personal use only toysrus.com.au For personal use only