Cleanaway
Annual Report 2021

Plain-text annual report

Drivin g t h e c i r c u l a r e c o n o m y A N N U A L R EP O R T 2021 Cleanaway Waste Management Limited ABN 74 101 155 220 Contents OVERVIEW How we create value FY21 snapshot Executive Chairman’s Report CEO’s Report COO’s Report BUSINESS REVIEW Solid Waste Services Industrial & Waste Services Liquid Waste & Health Services SUSTAINABILIT Y Highlights 2 4 6 10 12 14 16 18 20 CORPOR ATE INFORMATION Board of Directors Senior Executive Team FINANCIAL REPORT Financial Statements Directors’ Report OTHER INFORMATION Other information Corporate directory 22 24 27 28 134 136 The Company’s 2021 Annual General Meeting will be held at 11am (Australian Eastern Daylight Time) on Friday 22 October 2021. The meeting will be held as a virtual meeting. There will be no physical venue for shareholders to attend. Shareholders may attend the meeting virtually by visiting https://web.lumiagm.com on their smartphone, tablet or computer. The 2021 Corporate Governance Statement and Appendix 4G Disclosures are available on our website at https://www.cleanaway.com.au/about-us/for-investor/corporate-governance/ Our progress continues... We are proud to be leaders in closing the loop for commodities such as PET, HDPE and PP plastics, and we will do more where opportunities present. During the year we completed the rebuild of the high specification Perth MRF and we will begin commissioning the PET plastic pelletising plant in Albury in the second quarter of FY22. Planning is also well progressed for the Sydney MRF and the HDPE and PP plastic pelletising plant in Melbourne. Dedicated bunkers at our Perth MRF contain and protect recyclable commodities before they are sold. 1 234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTHow we create value STR ATEGIC PILL ARS OUR BUSINESS MODEL People Our people comprise purpose driven teams, technical experts and a large workforce that share a strong operating culture Earth We utilise natural resources including energy, materials and water in our daily operations Markets We collaborate with joint venture partners and regulators to serve millions of customers across all market sectors Assets We have a network of prized infrastructure, a large fleet of specialised mobile assets and strong stakeholder relationships Financials We are disciplined in our capital allocation and reinvest profits wisely C O L L E CTION We see all waste as a resource L SA O P S I D D N A T N E M T A E R T C O M M O D I T I E S OUR MISSION To make a sustainable future possible R E S O U R C E R E C O V E R Y E T S A W M O R F Y G R E N E R E- M ANUFAC T U R E / S E U - E R OUR VALUES Home safe Stronger together 2 Our Value Creation Story takes our strategic pillars of PEMAF and shows how the inputs we draw on are transformed through our business activities, applying Our Cleanaway Way, to create outcomes for our stakeholders. It also shows how these outcomes align to the UN Sustainable Development Goals (SDGs). CREATING LONG-TERM SUSTAINABLE VALUE RELEVANT SDGs We provide secure and meaningful employment for our people. We develop our people’s skills and strive to provide a safe working environment. Our recycled commodities reduce demand for primary raw materials and the associated impacts. We strive to minimise the environmental impacts of waste management, including greenhouse gas emissions, toxic and hazardous waste, water and air pollution. We reduce the waste going to landfill by recovering resources from waste streams. The low carbon electricity we generate displaces carbon intensive alternatives. We help our customers and partners achieve their sustainability goals. We contribute to policy evolution. As a sector leader, we are advancing waste management in Australia. Our investments in an integrated value chain with prized infrastructure assets, creates competitive advantage for our business and ensures we keep pace with growing sustainability demand and expectations. We contribute to a cleaner and safer environment, while seeking to minimise the impacts of our operations on local communities. We enable better regulatory outcomes through education. We deliver strong and predictable financial performances. We contribute to the Australian economy through dividends and interest to our capital providers, salaries to employees and taxes to governments. We see waste as a resource and leverage our strategic pillars. We extract value from waste streams to create long‑term sustainable value for our stakeholders and the environment. We work with our partners to advance resource recovery in Australia, through education, supporting markets for recycled commodities and regulatory advocacy. Integrity We make a difference 3 234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTFY21 snapshot Financial highlights 1,2 Our financial performance enables us to continue investing in better and more sustainable solutions. $2,406 million revenue 3.2% $2,199 million net revenue 3 4.7% $535.1 million EBITDA $258.7 million EBIT $153.2 million NPAT 4 3.8% 0.8% 2.1% 4.6¢ dividends per share 12.2% 7.3¢ earnings per share No change Net Revenue ($m) EBITDA ($m) $2,199m 4.7% Net Revenue 358.1 $535.1m 3.8% EBITDA 17 18 19 20 21 17 18 19 20 21 Operating Cash Flow ($m) Dividend (¢) $424.4m 5.7% Operating Cash Flow 4.6¢ 12.2% Dividend 358.1 17 18 19 20 21 17 18 19 20 21 Represents underlying results. 1 2 Cleanaway applied the modified retrospective approach on adoption of AASB 16 Leases on 1 July 2019, as such FY17, FY18 and FY19 comparatives have not been restated. 3 Net revenue is a non-IFRS measure and excludes landfill levies. 4 Attributable to ordinary equity holders. Operations at a glance Community investments Cleanaway is Australia’s leading waste management, industrial and environmental services company. With our dedicated team, national network of specialised infrastructure assets, and one of the largest fleets of waste collection vehicles on Australian roads, we’re working towards Our Mission of making a sustainable future possible, for all Australians. We work in partnership with the community to ensure our contribution is more than just as an essential service provider. Education, social procurement and community donations are just some of the ways we aim to make a difference. 6,300+ Employees 5,300+ Vehicles $10.1m+ Spent with Aboriginal and Torres Strait Islander and social business enterprises $530,000+ Community sponsorships and donations Community and education sessions nationally ~250 Sites 125+ Prized infrastructure assets 1,241 Events held 29,000+ People attended 4 What we recovered Each year we focus on recovering more resources from waste and returning commodities to the value chain. ~474 kt ~29 kt ~35 kt Paper and cardboard Plastic Steel and aluminium >113 ML Used oil ~108 Mm3 Landfill gas captured Closed loop in oil recycling Our lubricating and engine oil collection and recycling services close the loop in oil usage, helping to reduce Australia’s reliance on virgin refined oil. Landfill gas captured We’re capturing the gas generated from the natural breakdown of waste in our landfills, turning it into electricity, then sending it to the grid, thus contributing to a reduction in our reliance on fossil fuels. ~906 ktCO2-e Greenhouse gas emissions Managing greenhouse gas emissions Cleanaway’s resource recovery activities go to reducing greenhouse gas emissions; both Cleanaway’s direct emissions and emissions that would otherwise have occurred throughout our operations. We are continually looking at ways to support further emission reduction, from expanding the footprint of our recycling capability to fuel and energy efficiency. ~130 GWh of renewable energy generated Renewable energy generated By using the gas that we capture from our landfills to generate electricity we have produced enough renewable energy to power ~27,000 average homes. Scope 1 + Scope 2 5 234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTEXECUTIVE CHAIRMAN’S REPORT Great momentum for a new and exciting phase in our journey I am pleased to present to you Cleanaway Waste Management Limited’s 2021 Annual Report. This year I write to you as Executive Chairman, having assumed executive responsibilities on a temporary basis as part of our leadership transition. This process culminated in the commencement of Mark Schubert as Chief Executive and Managing Director on 30 August 2021 and my return to the role of Non-Executive Chairman on 1 October 2021. It is gratifying to be able to hand over leadership of a business that has delivered a strong financial and operational performance despite the ongoing challenges of COVID-19, alongside an improved safety performance, better environmental outcomes and a more engaged workforce. Safety remains a key priority for Cleanaway. During the year, our Total Recordable Injury Frequency Rate (TRIFR) reduced to 3.6, a 20% improvement on the prior year, as we continue to strive for Zero Harm. We undertook a significant safety initiative during the year to reduce the potential for driver distraction, which was identified as a critical risk for road accidents involving our vehicles. We rolled out the Mobileye system across our national fleet. The system comprises a driver interface with advanced driver-assistance systems that provides early warnings to drivers to prevent or mitigate front and side collisions. We will continue to invest towards developing and implementing new ways to protect our people, who are our most valuable asset. Financial performance Cleanaway delivered another strong financial performance this financial year, notwithstanding the ongoing challenges presented by COVID-19. The company reported underlying net profit after tax of $153.2 million, 2.1% higher than the prior year, translating to earnings of 7.3 cents per share. On a statutory basis, net profit after tax of $147.7 million was 31.2% higher than the prior year, largely reflecting lower acquisition and integration costs and the adjustment associated with the Perth Material Recovery Facility fire in the prior year. Each of our operating segments – Solid Waste Services, Industrial & Waste Services and Liquid Waste & Health Services – reported higher EBITDA and EBIT compared to the prior corresponding period: • Solid Waste Services reported increases in net revenue, EBITDA and EBIT of 7.5%, 4.4% and 0.1% respectively; Industrial & Waste Services reported increases in EBITDA and EBIT of 4.6% and 5.6% respectively, with revenue 2.5% lower; and • • Liquid Waste & Health Services reported increases in EBITDA and EBIT of 3.5% and 5.1% respectively, with revenue marginally lower. A more detailed analysis of the performance of our operating segments can be found on subsequent pages of this Annual Report. Our FY21 underlying Group results include: • Net revenue increased 4.7% to $2.2 billion; • EBITDA increased 3.8% to $535.1 million; • EBIT increased 0.8% to $258.7 million; and • NPAT increased 2.1% to $153.2 million. 6 6 “It is gratifying to be able to hand over leadership of a business that has delivered a strong financial and operational performance despite the ongoing challenges of COVID-19, alongside an improved safety performance, better environmental outcomes and a more engaged workforce.” FY21 highlights Net revenue ($b) $2.2b 4.7% EBITDA ($m) $535.1m 3.8% TRIFR 3.6 20% Net cash from operating activities increased by $22.9 million to $424.4 million compared to FY20. Higher EBITDA and reduced landfill remediation costs were offset by the reversal of working capital increases in the prior period due to government payment deferrals. This resulted in a strong cash conversion ratio of 102.4%. Our cash capital expenditure of $246.2 million and finance leases of $93.6 million reflected our increased investment in growth assets and successful tenders for municipal contracts, together with sustaining our existing assets and operations. We will continue to apply a disciplined approach to capital allocation while allowing flexibility to seize on accretive growth opportunities. Strategy Throughout the year we continued to execute our strategy, enabling Cleanaway to strengthen its network of prized infrastructure assets, which are key to sustainably managing the waste generated across Australia. During the financial year we announced that we had entered into an agreement with Suez to acquire two landfills and five transfer stations in Sydney. We expect to complete that transaction in the middle of FY22. We also acquired the Stawell landfill in regional Victoria and the Grasshopper C&D collections business in NSW and, we completed the rebuild of the Perth MRF, which reopened towards the end of the financial year. I am also pleased to report that during the year we made significant progress on several infrastructure projects that support the transition to a circular economy. Our PET plastic pelletising facility that we are developing with Pact and Asahi Beverages in Albury, NSW is well advanced, with operations expected to commence 7 234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT“People and culture will always be central to the sustainability of our business. I am pleased to report that over the course of the year we improved our health and safety performance, improved our overall employee engagement, continued to address areas where there is a gender pay gap and introduced a series of wellbeing programs for our employees as they continue to work through the impacts of COVID-19.” later this calendar year, ahead of schedule. The proposed Energy-from-Waste facility that we are developing with Macquarie Capital is being assessed by the Department of Planning, Industry and Environment and we are hopeful that we will receive a favourable planning decision towards the middle of FY22. This project will provide a long-term solution to Sydney’s putrescible waste disposal needs and deliver a superior carbon emissions profile relative to landfilling. We have a strong pipeline of projects and initiatives that will further contribute to a circular economy that we will continue to pursue in FY22 and beyond. Importantly, one of the key building blocks of a circular economy is an extensive collections network and good consumer recycling behaviours. We continue to grow and invest in our fleet to meet the needs of the community and our growing business. We also developed a freely accessible educational platform, Greenius, that helps the community to better understand how it can better contribute to a circular economy. The business remains in very strong financial health. During the year we secured a three-year $500 million committed debt facility to support the funding of the Suez’s assets. We have $930 million of undrawn debt facilities and an average debt maturity of 4.7 years as at 30 June 2021. Our net debt to EBITDA ratio of 1.61x as at 30 June 2021 is well inside our limit for covenant testing purposes. We will continue to monitor the market for accretive acquisition opportunities and remain disciplined with respect to capital allocation. Our strong financial performance and financial position enable us to continue increasing our dividend and the Board was pleased to declare a final fully franked dividend of 2.35 cents per share, taking the total dividend for the year to 4.60 cents per share, payable on 5 October 2021. This was a 12.2% increase on the prior year and represented a 62.9% payout ratio, in line with our committed target range of paying out 50–75% of underlying profits. Sustainability and governance During FY21 we further expanded and enhanced our sustainability reporting. The central theme of this year’s report is around Cleanaway’s role in a circular economy and how we can contribute to lowering carbon emissions. One of our key commitments this year is to undertake the necessary work that will allow us to set credible interim targets that align the reductions in our carbon emissions to the 2015 Paris Agreement goal; keeping the increase in global temperature to “well below 2 degrees C” above pre-industrial levels. People and culture will always be central to the sustainability of our business. I am pleased to report that over the course of the year we improved our health and safety performance, improved our overall employee engagement, continued to address areas where there is a gender pay gap and introduced a series of wellbeing programs for our employees as they continue to work through the impacts of COVID-19. Whilst we made progress in relation to gender diversity, it is an area where we will continue to focus as we have not met our expectations. I am pleased to report that we have steadily improved employee engagement, with our most recent survey in June 2021 resulting in an all-time high level of engagement. During the year, the Board was advised of claims made about overly assertive workplace behaviour involving our former CEO Vik Bansal. We initiated a thorough independent investigation into the issues raised. Following this investigation, the Board implemented a range of measures, including executive leadership mentoring, enhanced reporting, and monitoring of the CEO’s conduct. The Board and Mr Bansal reached a mutual agreement in January that it was the right time for Cleanaway to move forward under new leadership. On behalf of the Board, I thank Vik for his significant contribution to the success and growth of the organisation during his time as CEO and wish him all the very best for the future. 8 Mark has a reputation for being a highly visible and engaged leader with a keen focus on building alignment among teams. He inherits a business in a strong financial position, which is well positioned to further leverage our leading market footprint and infrastructure. I know that Mark is looking forward to working with our executive team to build on the momentum in our business, including our recently announced asset acquisitions from Suez. I would like to take this opportunity to thank Brendan Gill, who was coaxed out of pending retirement to support the leadership transition, and who has done an outstanding job. I would also like to thank the executive management team and all Cleanaway employees for responding efficiently and effectively to the various challenges the business faced during the year, while delivering another strong financial and operational performance. I thank my fellow Board members for their continued support during the year and welcome Ms Ingrid Player as an Independent Non-Executive Director of the Company. Her diverse background and skills, including extensive corporate transactional, risk and governance experience in highly regulated industries, will complement the expertise on the Board and prove invaluable to Cleanaway. Additionally, her appointment will further strengthen the Board’s sustainability skill set. Finally, I would like to thank our shareholders for the continuing support you have given the Board and Management of Cleanaway. I look forward to speaking to you at our Annual General Meeting on 22 October 2021. Making a sustainable future possible is a mission that unites the more than 6,000 people who make Cleanaway the company it is. It has been my privilege to lead a team of committed people in an executive capacity and I look forward to celebrating our future successes together. Mark Chellew Executive Chairman 9 “It’s so rewarding visiting kindergartens and seeing how passionate and excited children are about waste, recycling and the garbage truck. It makes me love what I do even more. Kids are the future!” – Lauren Grimshaw, Education Officer, Solid Waste Services – QLD Board and leadership transition After a comprehensive search process, I was very pleased to be able to announce the appointment of Mark Schubert as Cleanaway’s new Chief Executive Officer and Managing Director towards the end of the financial year. Mark brings a wealth of senior executive experience, has proven his ability to lead large and complex businesses, and is a strong fit with our strategy and culture. He joins us at a time when we have great momentum and we are entering a new and exciting phase in our growth journey. Mark joins Cleanaway from Origin Energy where he has served as Executive General Manager, Integrated Gas for the past four years. Prior to joining Origin in 2015, he held several senior positions during an 18-year international career with the Shell Group of companies. He has a track record of operating and transforming major assets, including world class LNG projects and oil refineries. 234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTCEO’S REPORT Dear Shareholder, I am proud to write to you as Cleanaway’s new Chief Executive Officer and Managing Director and to present Cleanaway’s 2021 Annual Report. Since joining Cleanaway in August, I have spent a lot of time meeting our teams and from the outset I have been impressed by the dedication, commitment and passion for delivering our mission to make a sustainable future possible. I look forward to meeting more of our team members over the balance of the year and beyond. Throughout my career I have been fortunate to work in a range of diverse roles within the oil and gas industry, spanning strategy, commercial, trading, marketing, portfolio management and operations. I believe my deep and varied experience gives me a balanced perspective and an understanding of the strategic challenges and opportunities facing large and multifaceted businesses like Cleanaway. As a leader, I am passionate about creating inclusive and high-performing teams that embrace individuality and encourage people to bring their whole self to work. I look forward to leveraging my skills and those of our 6,000 employees to help Cleanaway capture the significant opportunities ahead of us. It is a fascinating time to join the waste management industry as it becomes the engine room of the transition to a circular economy. I have observed keenly the industry’s transformation from longstanding provider of essential waste services to the community, to an innovative powerhouse responsible for developing new ways to collect, recover, reuse, reprocess and treat waste materials for our customers. 1 0 1 0 “Producers, consumers, governments, regulators and industry participants all have important roles to play in improving the circularity of our economy and I see this as a great opportunity for Cleanaway.” I look forward to contributing to Cleanaway’s mission to make a sustainable future possible The strong operational and financial performance that Cleanaway has delivered despite the various challenges thrown up by COVID-19 is a testament to the strength of our teams across the business. That these outcomes were delivered alongside an improved safety performance, better environmental outcomes and a more engaged workforce, is additionally impressive. I am excited to be joining Cleanaway at such an important time for the company. I look forward to working with our team to continue to build on our strategy in support of our mission to make a sustainable future possible, as well as engaging with our key stakeholders over the coming months, including you, our shareholders, who I hope to meet in due course. Mark Schubert CEO and Managing Director Tackling climate change and advancing a circular economy are two essential and interrelated goals where I see an exciting opportunity to bring to life Cleanaway’s mission for our customers, shareholders, community and the planet. Carbon emissions are a natural consequence of waste ending up in landfill, so we must seek to reuse materials where possible, and where that cannot be achieved, to reduce and remove the emissions from waste. Producers, consumers, governments, regulators and industry participants all have important roles to play in improving the circularity of our economy and I see this as a great opportunity for Cleanaway. By continuing to invest towards resource recovery and innovation, I look forward to being part of the solution as Cleanaway continues to grow and serve our customers and communities around Australia. I am pleased to see that Cleanaway has continued to innovate and invest towards evolving existing infrastructure in order to meet the challenges and opportunities of a circular economy. I have been impressed by Cleanaway’s deep integration throughout the industry’s value chains, and the many projects underway to extend the value chain and further enhance our position within it. With the impact of COVID-19 continuing to be felt, there has never been a more important time to focus on our people. I would like to take this opportunity to thank our workforce, particularly our frontline workers, for their dedication and commitment and their flexibility to safely serve our customers and our communities through all the challenges they continued to face this year. 1 1 234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTCHIEF OPER ATING OFFICER’S REPORT Strong foundations for a sustainable future In what has been a challenging operating environment, I am pleased with the way our business and our people have responded to deliver a strong set of financial results. This once again reflects the strength of Cleanaway. FY21 presented ongoing challenges and disruption caused by the COVID-19 pandemic and severe weather events. Some regions were more affected than others and we adapted how we work and operate to ensure we could continually service the needs of our customers and the community. The safety, health and wellbeing of all Cleanaway’s staff, contractors, customers and members of the public remains paramount. As a shared responsibility amongst our people, we continue to work towards our target of Zero Harm. During the year we commenced the roll out of our safe, compliant, reliable and optimised asset management framework, which focuses on the HS&E risks of our assets. We continue to raise awareness, enhance our training, and identify and respond to health and safety risks. The defensive characteristics of our revenue streams continue to underpin our financial performance. Each of our three operating segments grew their earnings during the year. The Industrial & Waste Services and Liquid Waste & Health Services segments also delivered EBITDA and EBIT margin improvement. The Solid Waste Services business grew its collections market share, including new municipal contracts and large national accounts. This, together with winning a large long-term post collections contract at MRL and lower volumes at Erskine Park, contributed to the changing mix of margin in that segment. Cleanaway continues to pursue and deliver accretive projects and acquisitions and in FY21 we: • Entered into an agreement to acquire two landfills and five transfer stations in Sydney from Suez and secured committed debt funding at attractive pricing to support the transaction; • Commenced construction of a PET plastic pelletising facility, which is progressing ahead of time and on budget; • Progressed the Energy-from-Waste project in Sydney, which is currently being assessed by the New South Wales Department of Planning, Industry and Environment; • Progressed value chain extension development projects in plastics and glass re-processing; and • Completed the acquisition of Grasshopper Environmental, Stawell Landfill, Oilwise and Pinkenba CDS businesses. Our mission to make a sustainable future possible and our objective to drive a circular economy in Australia continues at pace. The recently published sixth assessment report by the Intergovernmental Panel on Climate Change included some sobering climate statistics and predictions. We took another step forward this year on our sustainability reporting journey, outlining our ambition to align reduction in our carbon emissions to the 2015 Paris Agreement goal; keeping the increase in global temperature to ‘well below 2 degrees C’ above pre-industrial levels. We will identify carbon emissions reduction opportunities across our operations. We will set and disclose a credible long-term emissions reduction target acknowledging the complex nature of landfill emissions. Our interim targets will be based on our long-term target. 1 2 Group performance overview I am pleased to advise that we have continued to grow the business from top line, bottom line and cash flow perspectives. Group net revenue was up 4.7% to just under $2.2 billion, reflecting new customer contracts and recent acquisitions. Group Underlying EBITDA was up 3.8% to $535.1 million with each of the three segments delivering higher EBITDA compared to FY20. Underlying NPAT increased 2.1% to $153.2 million, while statutory NPAT was up 31.2% to $147.7 million. Operating cash flow increased 5.7% to $424.4 million, reflecting higher EBITDA, lower remediation costs and working capital movements. Underlying results Gross Revenue ($ million) Net Revenue ($ million) EBITDA ($ million) EBITDA margin EBIT ($ million) EBIT margin NPAT ($ million) EPS (cents per share) 1 NPATA 2 ($ million) Statutory results Gross Revenue ($ million) Net Revenue ($ million) EBITDA ($ million) EBITDA margin EBIT ($ million) EBIT margin NPAT ($ million) EPS (cents per share) NPATA 2 ($ million) Total dividend per share (cents) Cash from operating activities ($ million) Cash conversion ratio 3 Net Debt to EBITDA 4 FY21 2,406.4 2,198.9 535.1 24.3% 258.7 11.8% 153.2 7.3 164.1 FY21 2,406.4 2,198.9 528.8 24.0% 242.7 11.0% 147.7 7.1 158.6 4.60 424.4 102.4% 1.61x FY20 CHANGE 2,332.1 2,100.1 515.7 24.6% 256.6 12.2% 150.0 7.3 161.7 3.2% 4.7% 3.8% (30)bps 0.8% (40)bps 2.1% – 1.5% FY20 CHANGE 2,332.1 2,100.1 487.1 23.2% 204.9 9.8% 112.6 5.5 124.3 4.10 401.5 107.5% 1.46x 3.2% 4.7% 8.6% 80bps 18.4% 120bps 31.2% 29.1% 27.6% 12.2% 5.7% (510)bps 0.15x 1 2 3 4 Based on NPAT attributable to ordinary equity holders of $150.8 million (FY20: $150.3 million) and 2,057.4 million (FY20: 2,050.7 million) weighted average ordinary shares. Excludes tax effected amortisation of acquired customer and license intangibles. Calculated as net cash from operating activities before remediation of landfills, underlying adjustments, net interest and tax divided by underlying EBITDA before share of profits of equity accounted investments. Ratios presented are for finance agreements covenant testing purposes and calculated on a pre-AASB16 basis. Certain immaterial adjustments are made to the ratio calculations for covenant testing purposes. 1 3 234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTUNDERLYING UNDERLYING SEGMENT SEGMENT PERFORMANCE PERFORMANCE Solid Waste Services Cleanaway’s Solid Waste Services is Australia’s market leader for the collection, resource recovery and disposal of solid waste. The waste streams processed generally include putrescible, inert, household and recovered waste. Following collection from over 100,000 commercial & industrial (C&I) customers and over 100 municipal council customers, these waste streams are generally processed though our prized infrastructure assets, such as resource recovery and recycling facilities, waste transfer stations and highly engineered landfills. Solid Waste Services net revenue increased 7.5% or $103.5 million to $1,476.3 million. EBITDA increased 4.4% or $17.2 million to $405.5 million, and EBIT increased $0.3 million to $213.0 million. Solid Waste Services benefited from full year contributions from Statewide Recycling and the VCRR businesses (former SKM assets) and initial contributions from Stawell landfill, Grasshopper Environmental (NSW C&D collections) and the Pinkenba Recycling acquisitions. Municipal contract wins, including the City of Casey, Wyndham, Randwick and SA Council Solutions, together with the WA regional CDS contract, national C&I customer account wins and increased volumes from the Metropolitan Waste and Resource Recovery Group (MWRRG) contract, further benefited the segment. Headwinds included lower post collections volumes at the Erskine Park inert landfill in Sydney, where work being undertaken to construct a mechanically stabilised earth (MSE) wall was delayed and impeded its ability to accept volumes. In addition, we experienced lower Western Australian post collections volumes and prices at Dardanup landfill as municipal councils seek to fill their airspace ahead of Energy-from-Waste facilities commencing operations in Perth. To a lesser extent there were some impacts from weather events and COVID-19 related restrictions. The MSE wall at the Erskine Park landfill is expected to be completed in Q2 FY22 and will create 400,000 cubic metres of additional airspace. Subject to completion of the transaction with Suez, the Kemps Creek landfill will provide Cleanaway with a longer-term inert landfill solution for NSW. The Perth MRF rebuild was completed during the year and commissioned towards the end of the financial year. At this early-stage post commissioning it is producing high quality outputs within customer specifications. Whilst EBITDA was up, EBITDA margins declined 80bps across the year, reflecting several factors including lower post collections margins due to significantly lower volumes at the Erskine Park and Dardanup landfills, increased MWRRG volumes at Melbourne Regional Landfill, and a changing mix of earnings with the full year contribution from VCRR (including the former SKM assets), new acquisitions and new municipal and national account collections contract wins. The segment reported 9.6% higher depreciation and amortisation costs compared to FY20. The increase was due to new acquisitions, new municipal contracts, and increased landfill depreciation largely due to increased 1 4 405.5 388.3 352.8 285.7 25.8 25.9 28.3 27.5 14.4 15.0 15.5 14.4 2018 2019 2020 2021 EBITDA margin (%) EBIT margin (%) EBITDA ($m) EBITDA ($m) $405.5m 4.4% EBIT ($m) $213.0m 0.1% FY21 FY20 CHANGE 1,476.3 1,372.8 7.5% 405.5 388.3 4.4% 27.5% 28.3% 80bps 213.0 212.7 0.1% 14.4% 15.5% 110bps Net revenue ($ million) EBITDA ($ million) EBITDA margin EBIT ($ million) EBIT margin Cleanaway applied the modified retrospective approach on adoption of AASB 16 Leases on 1 July 2019, as such FY18 and FY19 comparatives have not been restated. 1 5 Perth recycling capacity restored with $26m redevelopment In May Cleanaway officially opened the Perth Material Recovery Facility (Perth MRF) after a $26 million redevelopment that reinstated capacity for local governments and other customers in Western Australia to manage recycling and resource recovery. Destroyed by fire in November 2019, the new facility in South Guildford can process 200,000 tons of recyclables a year, which is more than half of commingled recycling across WA, and can deliver output purity of up to 99.5%. We incorporated into the facility a range of fire safety enhancements that exceed National Construction Code requirements, and kept the local community informed through the Perth MRF Community Reference Group. With the re-opening of the facility, Perth’s recyclables processing capacity can continue to grow into the future. volumes at Melbourne Regional Landfill attributable to the MWRRG contract and a higher depreciation rate at Erskine Park, which was fully depreciated prior to the investment in the MSE wall. FY22 depreciation and amortisation is expected to be higher, reflecting full year contributions from acquisitions and municipal contracts that partially contributed in FY21, new municipal contracts that start in FY22 (Logan, Hornsby), commencement of operations at the rebuilt Perth MRF and higher landfill depreciation. 3456SUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION1OVERVIEW2BUSINESS REVIEWCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTUNDERLYING SEGMENT PERFORMANCE Industrial & Waste Services Cleanaway’s Industrial & Waste Services provides a wide variety of specialised services to the Infrastructure and Resources markets. These services include drain cleaning, non-destructive digging, vacuum loading, high pressure cleaning and pipeline maintenance. tenor. We also secured contracts with Southern Ports Authority and ASC Sullage Services. IWS also undertook significant uncontracted project activity with Beach Energy, Lochard Energy, Viva Energy, Roy Hill, Santos and Rio Tinto through FY21, with a positive outlook in FY22 for similar works. As COVID-19 continues to be managed across Australia, we are closely monitoring our asset and people movements to ensure we can deliver safe, reliable and efficient industrial waste services. Industrial & Waste Services (IWS) reported EBITDA of $48.0 million, 4.6% higher than FY20. EBITDA margin was 110 bps higher than the FY20, reflecting the successful execution of the strategy of exiting low value workstreams. EBIT increased by $1.2 million to $22.6 million and EBIT margin increased 60bps to 7.4%. The IWS segment performed strongly and consolidated the quality of earnings delivered in previous years. It was particularly strong in the mining sector in the Western Australia market despite the challenges of COVID-19 and the labour shortages resulting from border closures. Building on its leading market position in the mining sector in WA, the segment is also expanding its platform for growth across the oil and gas and infrastructure markets. The segment experienced challenging business conditions in Queensland during the year, but it has developed a strong pipeline of activity in the region. IWS remains extremely competitive across all markets, and particularly in infrastructure where our focus is on major road and rail infrastructure projects, along with a targeted market plan for the oil and gas segment. During the year IWS renewed several key contracts including South32, Eurobodalla Shire Council and BHP Olympic Dam, and commenced its contract with Fortescue Metals Group, with most contracts having a three-year 1 6 48.0 15.7 46.6 45.9 14.6 13.6 6.6 6.8 7.4 10.2 18.9 2.7 2018 2019 2020 2021 EBITDA margin (%) EBIT margin (%) EBITDA ($m) EBITDA ($m) $48.0m 4.6% EBIT ($m) $22.6m 5.6% FY21 FY20 CHANGE 305.6 313.4 2.5% 48.0 45.9 4.6% 15.7% 14.6% 110bps 22.6 21.4 5.6% 7.4% 6.8% 60bps Net revenue ($ million) EBITDA ($ million) EBITDA margin EBIT ($ million) EBIT margin Cleanaway applied the modified retrospective approach on adoption of AASB 16 Leases on 1 July 2019, as such FY18 and FY19 comparatives have not been restated. 1 7 Emergency pump out services at Booragoon fire site Cleanaway’s IWS team received a call from a key client to provide an emergency pump out service at the site of a large fire in Booragoon. Led by Operations Supervisor Joshua Gard, and Operators Richard Woods and Travis Rhodes, the team quickly mobilised within ninety minutes and worked alongside the fire department to prevent contaminated water from entering storm water drains. Over the next two days the team worked tirelessly to remove over 130 kilolitres of water from pits in the area surrounding 276 Leach Highway. Key Account Manager Joanna Laughton thanked the crew for their work and said, “Our client was very happy with the progress we made and that our pump out operations went smoothly and according to plan. We’re pleased to have moved quickly to minimise any potential environmental impacts to the surrounding area and the local community.” The Department of Water and Environmental Regulation tested the air quality and smoke fumes and the area was deemed safe later in the day. 3456SUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION1OVERVIEW2BUSINESS REVIEWCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTUNDERLYING SEGMENT PERFORMANCE Liquid Waste & Health Services Cleanaway’s Liquid Waste & Health Services comprises three national strategic business units: Liquid Waste and Technical & Environmental Services, Hydrocarbons and Health Services. The segment generates revenue and earnings from the collection, treatment, processing, refining, recycling and destruction of hazardous and non-hazardous liquids, hydrocarbons (used oil recycling), chemical waste, specialised package and hazardous waste and e-waste. of customers and transport challenges that the business effectively managed. Lower elective surgeries resulted in lower sharps and related medical waste and the international border closures has resulted in substantially lower quarantine work from airlines and cruise ships. Services to the health sector includes the safe treatment and disposal of health-related waste which includes sharps management, medical waste, pharmaceutical waste, healthcare hazardous waste and quarantine waste. During the year, the Health Services business upgraded its incinerator at Laverton, commenced the redevelopment of its Queensland site and commissioned a shredder to handle product destruction at its Sydney site. Liquid Waste & Health Services reported steady revenue and increased EBITDA by 3.5% to $110.0 million. EBITDA margins increased 80 basis points to 21.5%. EBIT increased 5.1% to $67.6 million and EBIT margins increased 70 basis points to 13.2%. In the Hydrocarbons business the lingering effects of COVID-19 lockdowns resulted in lower east coast oil collections volumes, particularly in Victoria and south-east Queensland. A temporary increase in product stewardship receipts for high quality recycled base oil offset the lower first half benchmark oil commodity prices. Pricing, service improvements and business efficiency initiatives helped to improve margins in the equipment services (industrial cleaning) part of the business. The Liquids and Technical Services (LTS) business realised higher earnings than the prior year notwithstanding lower volumes from tourist heavy states, hospitality (grease trap), cruise ships and automotive sectors resulting from COVID-19. Competition remained stable throughout the year. Increased regulatory pressures impacted interstate waste movements across the market. New technology was developed at our Dandenong site to handle asbestos contaminated soils and to deal with residual waste from the Tottenham chemical storage plant fire. The segment also benefitted from the treatment of contaminated soils from the Parramatta Light Rail project and other clean-up projects. Seasonally high rain events in NSW and QLD resulted in an increase in leachate volumes across the network. The Health Services business realised higher earnings from COVID-19 related activity at aged care facilities (in Victoria in particular), hotel quarantine, and mass testing and vaccination centres. This waste was predominantly light and bulky and introduced increased service requirements The Victorian EPA implemented a waste tracking system for hazardous waste that went live in July 2021, which has resulted in an increase in resources (Health Services and LTS) required for both Cleanaway and its customers to remain compliant. 1 8 110.0 106.3 86.9 54.2 16.8 17.6 11.4 10.9 20.7 21.5 12.5 13.2 2018 2019 2020 2021 EBITDA margin (%) EBIT margin (%) EBITDA ($m) EBITDA ($m) $110.0m 3.5% EBIT ($m) $67.6m 5.1% FY21 FY20 CHANGE 512.7 513.6 0.2% 110.0 106.3 3.5% 21.5% 20.7% 80bps 67.6 64.3 5.1% 13.2% 12.5% 70bps Net revenue ($ million) EBITDA ($ million) EBITDA margin EBIT ($ million) EBIT margin Cleanaway applied the modified retrospective approach on adoption of AASB 16 Leases on 1 July 2019, as such FY18 and FY19 comparatives have not been restated. 1 9 Supporting the COVID‑19 vaccination program When the New South Wales Health Department decided to open a COVID-19 mass vaccination centre at a former department store in Wollongong, NSW, Cleanaway Daniels had to work quickly to install collectors to hold sharp objects, including needles. The account management team had already set up more than 10 such centres across NSW, where Cleanaway Daniels has a long-standing relationship with the department providing reusable sharps collectors and clinical waste bins to hospitals and other sites. The team worked closely with the customer to understand the scope of the task and visited the former David Jones building, which had been transformed into the Illawarra Shoalhaven Mass Vaccination Centre in less than six weeks since it was first announced on 2 July 2021. In a single day, team members assembled trolleys to hold the 75 sharps collectors before travelling to the location and installing them beside the vaccination stations to ensure the centre was ready to open to thousands of people as scheduled on 9 August. We expect to see increased regulatory controls and monitoring across all elements of dangerous goods storage and transport, composting and PFAS management. In principle, Cleanaway supports such initiatives and is well positioned to deliver customer solutions. 3456SUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION1OVERVIEW2BUSINESS REVIEWCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTSUSTAINABILIT Y Making a sustainable future possible It has been a challenging time during the pandemic and our people have stood up to those challenges and made it possible for us to continue to provide an essential service for society. We have improved our Total Recordable Incident Frequency Rate by 20% to 3.6, which measures incidences per million hours worked. We are always striving to improve our safety performance and Zero Harm remains our goal. We conducted an employee engagement survey in October last year, which had been delayed from the usual timeslot due to COVID-19. We reported a record level of engagement at 64%. We completed another survey in June 2021, with engagement improving even further to 66%. Overall voluntary turnover rates were slightly higher than last year at 15.4% largely due to increased workforce participation rates and high demand for experienced labour. From a leadership perspective we have a stable and effective team in place with no changes to the executive committee through the recent leadership transition. Female representation in absolute numbers continues to increase but further work is required to meet our percentage targets. Gender diversity targets have now been included as a management KPI for FY22 to help improve the rate of change. Societal demands, policies and regulations continue to encourage greater circularity in the economy. We are proud to be leaders in completing the circle for commodities such as PET, HDPE and PP plastics, and we will do more where opportunities present. We are equally proud of our significant role in the other processes that make closed loop recycling possible. This is where others purchase our high purity recovered materials as a feedstock in their manufacturing processes. We continue to explore the value chain for opportunities to create value and we have recently invested in construction and demolition resource recovery capability in Victoria, Queensland, and South Australia. Our acquisition of the Grasshopper C&D collections business during the year complements our resource recovery processes in NSW. Of course, there will always be residual materials that end up in landfill. Where it does so, we seek to capture the methane produced and beneficially reuse it as direct fuel or to produce renewable energy. At Cleanaway, we recognise the need to reduce our carbon emissions and contribute to mitigating global warming and climate change. Our ambition is to align the reduction in our carbon emissions to the 2015 Paris Agreement goal. We see this as a significant challenge but one we must face. We will be action orientated and in FY22 we will be setting short- and long-term emission reduction targets supported by credible actions. Our 2021 Sustainability Report expands on each of these topics and is available at www.cleanaway.com.au/sustainability-report/ 2 0 TRIFR Total Recordable Incident Frequency Rate (incidences per million hours worked) 5.7 in FY19 4.5 in FY20 3.6 in FY21 Aligning with recognised standards We undertook a mapping exercise to identify the SDGs that were most aligned to our business and that we could have the greatest impact on. Through engagement with internal stakeholders we selected seven SDGs on which to focus our efforts: For us, it means leveraging our strategic pillars People Focusing on the safety and wellbeing of our people, our customers and the communities in which we operate; and a workplace which values diversity, equality and inclusion. Markets Working in partnership with our customers to improve service and help them achieve their sustainability goals. Assets Minimising our environmental impact through the responsible management of our assets as well as exploring and investing in new technologies. To deliver enduring results Financial Managing risks and creating value for all our stakeholders through a focus on sustainable financial performance to deliver financial returns for our investors, and the strength to continue to invest in new infrastructure and technologies to deliver on Our Mission. Earth By continuing to invest in the necessary infrastructure, technology and innovation to close the loop and contribute to a viable circular economy in Australia, we will help to change the landscape of recycling and residual waste management in Australia. 2 1 456CORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATION1OVERVIEW2BUSINESS REVIEW3SUSTAINABILITYCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTCORPOR ATE INFORMATION Board of Directors Mark Chellew Mark Schubert Mike Harding Philippe Etienne Chief Executive Officer and Managing Director Mark joined Cleanaway as Chief Executive Officer and Managing Director in August 2021. Mark was formerly the Executive General Manager, Integrated Gas at Origin Energy for four years. Prior to joining Origin Energy in 2015, Mark held a number of senior positions during an 18-year international career with the Shell Group of companies. He has a track record of operating and transforming major assets, including world class LNG projects and oil refineries. Mark has a Bachelor of Engineering (Chemical) degree from the University of Sydney and Masters of Finance and Financial Law from the University of London. Mark is on the advisory board of Women & Leadership Australia. Independent Non-Executive Director, Chairman of the Human Resources Committee, Member of the Sustainability Committee Independent Non-Executive Director, Chairman of the Sustainability Committee, Member of the Audit and Risk Committee Independent Non-Executive Director since 1 March 2013. Independent Non-Executive Director since 29 May 2014. Mike is the Chairman of Downer EDI Limited (since November 2010) and Horizon Oil Limited (since November 2018). Mike was formerly Chairman of Roc Oil Company Limited (resigned December 2014) and Non-Executive Director of Santos Limited (resigned May 2014), and former Chairman and Non-Executive Director of Lynas Corporation (resigned 30 September 2020). Mike has significant experience within industrial (BP), including President and General Manager of BP Exploration Australia. He holds a Masters in Science, majoring in Mechanical Engineering. Philippe is a Non-Executive Director of Lynas Corporation Limited (since January 2015) and Aristocrat Leisure Limited (since 1 October 2019). Formerly the Managing Director and Chief Executive Officer of Innovia Security Pty Ltd (retired September 2014) and Non-Executive Director of Sedgman Limited (February 2015 to November 2015). Philippe has held a range of other senior executive positions with Orica in Australia, the USA and Germany. He holds a Bachelor of Science in Physiology and Pharmacology and a Master of Business Administration (MBA). Philippe is a Graduate of the Australian Institute of Company Directors and has completed post-graduate qualifications in marketing. Independent Non-Executive Director and Chairman of the Board Independent Non-Executive Director since 1 March 2013 and was appointed Chairman on 30 September 2016. Mark is a Non-Executive Director of Downer EDI Limited (since September 2021) and Caltex Australia Limited (since April 2018). Formerly the Executive Chairman of Manufacturing Australia Limited (retired September 2017), the Managing Director and Chief Executive Officer of Adelaide Brighton Limited (retired May 2014) and Non-Executive Director of Virgin Australia Holdings Limited (resigned January 2020) and Infigen Energy (retired August 2020). Mark has over 40 years of experience in the building materials and related industries, including roles such as Managing Director of Blue Circle Cement in the United Kingdom and senior management positions within the CSR group of companies in Australia and the United Kingdom. He holds a Bachelor of Science (Ceramic Engineering), Masters of Engineering (Mechanical Engineering) and a Graduate Diploma in Management. 2 2 Ray Smith Ingrid Player Samantha Hogg Terry Sinclair Independent Non-Executive Director, Chairman of the Audit and Risk Committee, Member of the Human Resources Committee Independent Non Executive Director since 1 April 2011. Formerly he was Non- Executive Director of K&S Corporation Ltd (resigned 26 November 2019), Non- Executive Director of Crowe Horwath Australasia Limited (resigned January 2015) and Warrnambool Cheese and Butter Factory Company Holdings Limited (resigned May 2014) and Trustee of the Melbourne and Olympic Parks Trust (retired November 2016). Ray has significant corporate and financial experience in the areas of strategy, acquisitions, treasury and capital raisings, and was Chief Financial Officer of Smorgon Steel Limited Group for 11 years. He holds tertiary qualifications in Commerce. He is a Fellow of CPA Australia and a Fellow of the Australian Institute of Company Directors. Independent Non-Executive Director, Member of the Sustainability Committee Independent Non-Executive Director since 1 March 2021. Ingrid Player is a Non-Executive Director at Cogstate Ltd (since August 2019) and HealthShare Victoria (since January 2021). Ingrid is an experienced executive with international commercial and regulatory experience in mergers and acquisitions, corporate governance, capital developments, risk and sustainability. She has held senior executive roles with Healthscope Ltd, including the former positions of Group Executive – Legal, Governance and Sustainability, and General Counsel and Company Secretary. Ingrid holds a Bachelor of Economics and Bachelor of Laws (Hons) and is a member of the Australian Institute of Company Directors and Fellow of the Governance Institute of Australia. Independent Non-Executive Director, Member of the Audit and Risk Committee, Member of the Human Resources Committee Independent Non-Executive Director, Member of the Audit and Risk Committee, Member of the Human Resources Committee Independent Non-Executive Director since 1 November 2019. Samantha is a Non-Executive Director of Infrastructure Australia (since April 2019) and Chair of Tasmanian Irrigation. Samantha was formerly a Non-Executive Director of Australian Renewable Energy Agency (retired July 2020), TasRail (resigned December 2019), MaxiTRANS Industries Limited (resigned March 2021) and Hydro Tasmania (retired August 2021), and formerly a Board member of the National COVID-19 Commission (NCC) Advisory Board (ceased March 2021). Samantha is an experienced executive with international experience across the transport, infrastructure, energy and resources sectors. She has held senior executive positions at Transurban Group and Western Mining Company across a broad range of portfolios including finance, strategic projects, marketing and corporate services. Her most recent executive role was as the Chief Financial Officer of Transurban Group. Samantha holds a Bachelor of Commerce and is a member of the Australian Institute of Company Directors. Independent Non-Executive Director since 1 April 2012. He currently serves as an Industry Advisor to Australian Super (effective October 2019), Chairman Silk Logistics Holdings Limited (ASX:SLH) (formerly Marrakech Road Pty Ltd) (effective July 2020), and Faethm.ai Pty Ltd (effective February 2020). Formerly he was a Non-Executive Director of Ovato Limited and Zoom2U Technologies, Managing Director of Service Stream Limited, Chairman of AUX Investments (jointly owned by Qantas and Australia Post), Chairman of Star Track Express, Director of Sai Cheng Logistics (China), Director of Asia Pacific Alliance (HK) and Head of Corporate Development at Australia Post. Terry has significant operations and corporate development experience across Industrial, Resources and Consumer Services sectors, including 20 years in senior management roles in BHP (Minerals, Steel and Transport/Logistics). 2 3 56FINANCIAL REPORTOTHER INFORMATION1OVERVIEW2BUSINESS REVIEW4CORPORATE INFORMATION3SUSTAINABILITYCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTCORPOR ATE INFORMATION Senior Executive Team Mark Schubert Chief Executive Officer and Managing Director Mark joined Cleanaway as Chief Executive Officer and Managing Director in August 2021. Mark was formerly the Executive General Manager, Integrated Gas at Origin Energy for four years. Prior to joining Origin Energy in 2015, Mark held a number of senior positions during an 18-year international career with the Shell Group of companies. He has a track record of operating and transforming major assets, including world class LNG projects and oil refineries. Mark has a Bachelor of Engineering (Chemical) degree from the University of Sydney and Masters of Finance and Financial Law from the University of London. Mark is on the advisory board of Women & Leadership Australia. Paul Binfield Chief Financial Officer Paul joined Cleanaway as Chief Financial Officer in February 2021. He has held the CFO role at a number of public companies including Nufarm, Mayne Pharma and Mayne Group. He has broad finance experience, having led finance functions in listed and private companies, both in Australia and the United Kingdom. Paul holds a Bachelor of Mathematics and is a member of the Institute of Chartered Accountants in Australia and New Zealand. Brendan Gill Chief Operating Officer Brendan joined Cleanaway in September 2014 as Chief Financial Officer and was promoted to Chief Operating Officer in February 2021. Brendan has more than 35 years’ finance experience, mainly in the mining, steel and energy sectors. His career included 26 years at BHP, including as Vice President Finance Carbon Steel, CFO for both the Stainless Steel Materials and Nickel businesses and Global Lead Risk Management & Audit. Since leaving BHP, Brendan has held public company CFO roles, including as CFO for Inova Resources (previously named Ivanhoe Australia). Brendan has a Bachelor of Business, is a Fellow of CPA Australia and a Graduate of the Australian Institute of Company Directors. Johanna Birgersson Executive General Manager, Human Resources Johanna joined Cleanaway in May 2014 and was appointed Executive General Manager, Human Resources in December 2015. Johanna has more than 15 years’ human resources experience gained in senior and executive roles. Prior to joining Cleanaway, Johanna was the Director People & Culture of TSC Group Holdings. She has also worked across a number of industry sectors, including fire & electronic security, plumbing & HVAC and hospitality. Johanna has a Bachelor of Arts, holds Post Graduate qualifications in Employee Relations and Human Resources Management from the University of Melbourne and is a Graduate of the Australian Institute of Company Directors. Dan Last General Counsel and Company Secretary Dan joined Cleanaway as General Counsel and Company Secretary in March 2014. Dan is an experienced General Counsel and Company Secretary with over 20 years’ experience in law firms and senior in-house legal roles. Prior to joining Cleanaway, Dan was the General Counsel and Company Secretary of Foster’s Group Limited. He has also worked in top tier law firms in Australia and overseas. Dan has a Bachelor of Laws (Hons), a Bachelor of Commerce and is a Fellow of the Governance Institute of Australia and a Graduate of the Australian Institute of Company Directors. 2 4 Frank Lintvelt Executive General Manager, Strategy, Mergers & Acquisitions Frank first joined Cleanaway in 2013 and was appointed Executive General Manager, Strategy, Mergers & Acquisitions in November 2019. His current responsibilities also include oversight of Cleanaway’s investor relations and corporate affairs. Frank has more than 20 years’ experience in senior corporate development, strategy and investment banking roles. Prior to joining Cleanaway, he spent 13 years in investment banking in London and Sydney, most recently with Morgan Stanley. Frank holds a Bachelor of Business Administration, a Masters of Business Administration from York University in Toronto (Canada) and is CPA qualified. Mark Crawford Executive General Manager, Solid Waste Services Mark joined Cleanaway as Executive General Manager, Enterprise Services in February 2014 and became Executive General Manager, Solid Waste Services in August 2017. Mark has more than 20 years’ operational experience gained in senior and executive roles. He has worked across Australia and Asia Pacific to integrate complex business models and has extensive transformation experience across all business disciplines. Prior to joining Cleanaway, Mark has held a number of General Management roles at Australia Post, most recently as General Manager for the International business. Mark holds qualifications in Information Technology. Michael Bock Executive General Manager, Enterprise Services and Integration Michael joined Cleanaway in March 2018 as Executive General Manager (EGM), Integration and appointed as EGM, Enterprise Services and Integration in August 2019. Before joining Cleanaway, Michael was a Senior Vice President in McKinsey & Company’s transformation practice. Michael has spent more than 20 years in executive roles, including seven years at ANZ Bank where he led the mortgages business and business improvement program; and 12 years at General Electric (GE), responsible for the trailer and fleet leasing businesses in both Australia and Mexico. He also served as the Global Lean Six Sigma Leader across 54 countries for one of GE’s largest divisions. Michael holds a Bachelor’s Degree in Economics from Harvard University and a Masters of Business Administration from the Kellogg School of Management. Tim Richards Executive General Manager, Liquid Waste & Health Services and Industrial & Waste Services Tim joined Cleanaway as Executive General Manager, Liquid Waste & Health Services in August 2018. Prior to joining Cleanaway, Tim was the CEO for Tomra Cleanaway, the network operator for the NSW Container Deposit Scheme. He has held various senior and executive roles, including as CEO for Dexion Group and Divisional Chief Executive at Fletcher Building. Tim has over 20 years’ experience in manufacturing industries across Australia and New Zealand and holds a Bachelor of Business, Accountancy and is a member of the Institute of Chartered Accountants in Australia and New Zealand. Tim also completed the Advanced Management Program at Wharton. Chris Avramopoulos Executive General Manager, Growth and Customer Chris joined Cleanaway in February 2020 as Executive General Manager, Growth and Customer. Prior to joining Cleanaway, Chris held several senior positions at Orica, including General Manager Mining Chemicals, Vice President Asia and Chief Transformation Officer. Chris has over 20 years’ experience in the mining, industrial chemical trading and chemical manufacturing industries. Chris has a Bachelor of Science, majoring in Mathematics & Computer Science, having graduated with distinction at Swinburne University. 2 5 56FINANCIAL REPORTOTHER INFORMATION1OVERVIEW2BUSINESS REVIEW4CORPORATE INFORMATION3SUSTAINABILITYCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTA circular economy for plastic Our development of advanced plastics pelletising facilities continues to ensure Australia has the right infrastructure to process material onshore and extend the value chain for consumer plastics. Australian plastics consumption by polymer TOTAL OF 3.4 m t 1 11% 363kt 2 19% 654kt PET 5 PP 15% 502kt HDPE 4 LDPE PVC 12% PS 4% Nylon 3% Other 11% Unknown 15% 10% 352kt Cross value chain collaboration to develop the Albury PET and Laverton HDPE and PP pelletising facilities $45 million facility to process 30kt per annum of PET, providing a bottle-to-bottle recycling solution for the equivalent of almost one billion bottles each year. $40 million facility to process 20kt per annum of HDPE and PP, converting locally collected kerbside materials into high quality food grade rHDPE and rPP. Equivalent to over 500m plastic milk bottles. Finalising feasibility study for a Perth flaking facility. Signed MOU with Pact, Asahi Beverages and Coca-Cola Europacific Partners to form a JV and develop a 20kt PET pelletising facility. Source: Envisage Works - 2018–19 Australian Plastics Recycling Survey (March 2020), prepared for the Department of Agriculture, Water and the Environment. 2 6 Contents of Financial Statements For the financial year ended 30 June 2021 Directors’ Report Remuneration Report Auditor’s Independence Declaration Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report 28 40 59 60 61 62 63 64 65 128 129 Notes to the Consolidated Financial Statements Information about the Group and basis of preparation 1. Corporate information 2. Statement of compliance 3. Basis of preparation 4. Critical accounting estimates and judgements Information about our financial performance 5. Segment reporting 6. Revenue 7. Other income 8. Net finance costs 9. Income tax 10. Earnings per share Information about working capital 11. Cash and cash equivalents 12. Trade and other receivables 13. Inventories 14. Trade and other payables Information about our capital structure 15. Interest-bearing liabilities 16. Issued capital 17. Reserves 18. Dividends 19. Capital management Other information about our financial position 20. Property, plant and equipment 21. Right-of-use assets 22. Intangible assets 23. Equity accounted investments 24. Other assets 25. Employee entitlements 26. Provisions 27. Other liabilities Information about our group structure 28. Business combinations and loss of control of subsidiary 29. Subsidiaries 30. Deed of cross guarantee 31. Parent entity Information about financial risks and unrecognised items 32. Financial risk management 33. Contingent liabilities 34. Commitments Other information 35. Share-based payments 36. Auditor’s remuneration 37. Events occurring after the reporting date 38. Related party transactions Accounting policies 39. Significant accounting policies 40. New standards adopted 41. New standards and interpretations not yet adopted C L E A N AWAY WA S T E M A N A G E M E N T L I M I T E D 2 0 2 1 A N N U A L R E P O R T 2 7 234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFOR-MATION The Directors present their Report (including the Remuneration Report) together with the Consolidated Financial Statements of the Group, consisting of Cleanaway Waste Management Limited (the Company) and its controlled entities (Cleanaway or the Group), for the financial year ended 30 June 2021 and the Independent Auditor’s Report thereon. Directors The names of Directors of the Company at any time during or since the end of the financial year are set out below. Directors were in office for this entire period unless otherwise stated. M P Chellew V Bansal R M Smith E R Stein T A Sinclair R M Harding P G Etienne S L Hogg I A Player Executive Chairman Chief Executive Officer and Managing Director (retired on 5 March 2021) Non-Executive Director Non-Executive Director (retired on 31 December 2020) Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director (appointed Non-Executive Director on 1 March 2021) The office of Company Secretary is held by D J F Last, LLB (Hons), B.Com, FGIA, GAICD. On 10 May 2021, the Group announced the appointment of Mark Schubert as Chief Executive Officer and Managing Director. The appointment will be effective from 30 August 2021. Particulars of Directors’ qualifications, experience and special responsibilities can be found on pages 22 to 23. Principal activities During the financial year the principal activities of Cleanaway were: • Commercial and industrial, municipal and residential collection services for all types of solid waste streams, including general waste, recyclables, construction and demolition waste and medical and washroom services; • Ownership and management of waste transfer stations, resource recovery and recycling facilities, secure product destruction, quarantine treatment operations and landfills; • Sale of recovered paper, cardboard, metals and plastics to the domestic and international marketplace; • Collection, treatment, processing and recycling of liquid and hazardous waste, including industrial waste, grease trap waste, oily waters and used mineral and cooking oils in packaged and bulk forms; • Industrial solutions, including industrial cleaning, vacuum tanker loading, site remediation, sludge management, parts washing, concrete remediation, CCTV, corrosion protection and emergency response services; • Refining and recycling of used mineral oils to produce fuel oils and base oils; and • Generation and sale of electricity produced utilising landfill gas. Dividends The Company declared fully franked dividends on ordinary shares for the financial year ended 30 June 2021 of 4.60 cents per share, being an interim dividend of 2.25 cents per share and final dividend of 2.35 cents per share. The record date of the final dividend is 13 September 2021 with payment to be made 5 October 2021. The financial effect of the final dividend has not been brought to account in the Financial Statements for the financial year ended 30 June 2021 and will be recognised in a subsequent Financial Report. Details of distributions paid in the financial year are as follows: RECOGNISED (PAID AMOUNTS) Fully paid ordinary shares Final dividend for 2020: 2.10 cents per share (2019: 1.90 cents per share) Interim dividend for 2021: 2.25 cents per share (2020: 2.00 cents per share) Total dividends paid 2021 $'M 43.2 46.4 89.6 2020 $'M 38.9 41.0 79.9 2 8 Directors’ ReportOperating and financial review Review of financial results The Group’s statutory profit after income tax (attributable to ordinary equity holders) for the financial year ended 30 June 2021 was $145.3 million (2020: $112.9 million). The Group has incurred acquisition and integration related expenses, (net of tax) of $5.2 million (2020: $27.9 million) during the year ended 30 June 2021, principally related to; the acquisitions of the Grasshopper Group and the Stawell landfill, the expected acquisition of the Suez Sydney assets and the integration of acquisitions completed in the current and prior periods. Revenue from ordinary activities increased by 3.2% to $2,406.4 million (2020: $2,332.1 million). Excluding the collection of levies, net revenue increased by 4.7% to $2,198.9 million (2020: $2,100.1 million). Total expenses increased marginally by 0.1% to $1,882.1 million (2020: $1,879.6 million). Excluding levies collected and paid, total expenses increased by 1.6% to $1,674.6 million (2020: $1,647.6 million). Depreciation and amortisation expense increased by $13.8 million to $276.4 million (2020: $262.6 million). The Group’s underlying profit after income tax (attributable to ordinary equity holders) for the year ended 30 June 2021 of $150.8 million was up marginally by 0.3% on the prior year (2020: $150.3 million). A reconciliation of underlying profit to statutory profit is set out below. Group results for the financial year ended 30 June 2021 UNDERLYING ADJUSTMENTS ACQUISITION & INTEGRATION COSTS 5 $'M CEO TRANSITION COSTS 6 CHANGE IN REMEDIATION PROVISION DISCOUNT RATE 7 STATUTORY 1 $'M MRF FIRE 4 $'M OTHER 8 $'M UNDERLYING 1 $'M Solid Waste Services Industrial & Waste Services Liquid Waste & Health Services Equity accounted investments Waste management Corporate EBITDA 2 Depreciation and amortisation Write-off of plant and equipment Impairment of assets EBIT 3 Net finance costs 9 Profit/(loss) before income tax Income tax expense  Profit/(loss) after income tax  Attributable to: Ordinary equity holders Non-controlling interest 528.8 (276.4) (5.4) (4.3) 242.7 (35.9) 206.8 (59.1) 147.7 145.3 2.4 7.0 – – – 7.0 – 7.0 (2.1) 4.9 4.9 – 5.2 – 2.7 – 7.9 0.1 8.0 (2.8) 5.2 5.2 – 4.3 – – – 4.3 – 4.3 (1.3) 3.0 3.0 – 405.5 48.0 110.0 (2.0) 561.5 (26.4) 535.1 (3.4) (6.8) – – – (3.4) – (3.4) 1.0 (2.4) (2.4) – – (276.4) 2.7 4.3 0.2 (7.7) (7.5) 2.3 (5.2) (5.2) – – – 258.7 (43.5) 215.2 (62.0) 153.2 150.8 2.4 1 The use of the term ‘Statutory’ refers to IFRS financial information and ‘Underlying’ refers to non-IFRS financial information. Underlying earnings are categorised as non-IFRS financial information and therefore have been presented in compliance with ASIC Regulatory Guide 230 – Disclosing non-IFRS information. The exclusion of underlying adjustments provides a result which, in the Directors’ view, more closely reflects the ongoing operations of the Group. The non-IFRS financial information is unaudited. EBITDA represents earnings before interest, income tax, and depreciation, amortisation and impairments. EBIT represents earnings before interest and income tax. 2 3 4 On 25 November 2019 a fire occurred at the Materials Recycling Facility in Guildford, Western Australia. Business interruption costs of $7.0 million have been incurred in the current period. 5 Acquisition and integration costs of $5.2 million include transaction costs and other costs associated with the acquisition of businesses during the period of $2.0 million, the ongoing integration costs related to acquisitions of $2.0 million, costs of $4.3 million incurred to date on the expected acquisition of the Suez Sydney assets, offset by $3.1 million related to the remeasurement of contingent consideration in relation to the acquisition of the Grasshopper Group (refer note 28 to the Financial Statements). The write-off of assets of $2.7 million relates to software assets acquired which, following integration activities, no longer have any use. 6 On 21 January 2021 the Group announced that Mr Vik Bansal would be stepping down from the role as CEO and as a Director of the Company. CEO transition 7 costs of $4.3 million relate principally to expenses in relation to Mr Bansal’s resignation and costs incurred to recruit Mr Mark Schubert. Relates to the decrease in remediation provisions related to closed landfill sites and industrial properties as a result of the increase in the discount rate (refer note 26 to the Financial Statements). 8 Other EBIT adjustments of $0.2 million comprise $7.0 million reversal of employee entitlements expense as result of amendments to the Fair Work Act 2009 passed in March 2021 which clarifies a May 2020 court decision, offset by $4.5 million in costs incurred on the West Gate Tunnel spoils contract which is no longer considered probable of being awarded to the Group, including $4.3 million of impairment of assets, and $2.7 million write-off of plant and equipment destroyed in a fire at the Welshpool transfer station, Western Australia. 9 Underlying adjustments to net finance costs include the gain on modification of CEFC fixed rate borrowing of $7.9 million, the fair value gain on USPP Notes of $60.7 million, offset by the fair value loss on cross currency interest rate swaps of $60.9 million. 2 9 Directors’ Report234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTOperating and financial review (continued) Review of financial results (continued) Group results for the financial year ended 30 June 2020 STATUTORY 1 $'M MRF FIRE 4 $'M UNDERLYING ADJUSTMENTS ACQUISITION & INTEGRATION COSTS 5 $'M GAIN ON SALE OF PROPERTIES 6 $'M OTHER 7 $'M UNDERLYING 1 $'M Solid Waste Services Industrial & Waste Services Liquid Waste & Health Services Equity accounted investments Waste management Corporate EBITDA 2 Depreciation and amortisation Write-off of plant and equipment EBIT 3 Net finance costs 8 Profit before income tax Income tax expense  Profit after income tax  Attributable to: Ordinary equity holders Non-controlling interest 487.1 (262.6) (19.6) 204.9 (49.7) 155.2 (42.6) 112.6 112.9 (0.3) (5.0) – 19.6 14.6 0.3 14.9 (4.5) 10.4 10.4 – 32.8 3.5 – 36.3 0.1 36.4 (8.5) 27.9 27.9 – (8.1) – – (8.1) – (8.1) – (8.1) (8.1) – 8.9 – – 8.9 1.9 10.8 (3.6) 7.2 7.2 – 388.3 45.9 106.3 (2.1) 538.4 (22.7) 515.7 (259.1) – 256.6 (47.4) 209.2 (59.2) 150.0 150.3 (0.3) 1 The use of the term ‘Statutory’ refers to IFRS financial information and ‘Underlying’ refers to non-IFRS financial information. Underlying earnings are categorised as non-IFRS financial information and therefore have been presented in compliance with ASIC Regulatory Guide 230 – Disclosing non-IFRS information. The exclusion of underlying adjustments provides a result which, in the Directors’ view, more closely reflects the ongoing operations of the Group. The non-IFRS financial information is unaudited. EBITDA represents earnings before interest, income tax, and depreciation, amortisation and impairments. EBIT represents earnings before interest and income tax. 2 3 4 On 25 November 2019 a fire occurred at the Materials Recycling Facility in Guildford, Western Australia. Insurance recovery income of $20.8 million has been recognised. This income is offset by business interruption and clean-up costs of $15.8 million expensed to date. In addition, $19.6 million of plant and equipment has been written off. 5 Acquisition and integration costs include transaction costs and other costs associated with the acquisition of businesses during the period of $8.5 million, the ongoing integration costs related to the acquisition of Toxfree which occurred on 11 May 2018 of $18.8 million and integration costs of other acquisitions of $5.5 million. The depreciation of $3.5 million relates to the depreciation of right-of-use assets on property leases which were vacated early as part of the integration activities. 6 On 15 April 2020 the buffer land surrounding the old Tullamarine landfill site was sold for consideration of $17.0 million. 7 Other adjustments of $8.9 million comprise $8.0 million following the reassessment of employee entitlements as result of a May 2020 court decision, $2.0 million of increase in remediation provisions related to closed landfill sites and industrial properties as a result of the reduction in the discount rate (refer note 26 to the Financial Statements), offset by a gain on loss of control of Cleanaway ResourceCo RRF Pty Ltd of $1.1 million, which occurred effective 1 January 2020 (refer note 28 to the Financial Statements). 8 Underlying adjustments to net finance costs of $2.3 million relate to the fair value loss on USPP borrowings of $34.0 million offset by the fair value gain on cross currency interest rate swaps of $33.4 million, the write-off of costs related to financing facilities closed out early of $1.3 million and interest costs of $0.4 million related to lease liabilities on vacated properties. Review of financial position Operating cash flows increased by 5.7% to $424.4 million (2020: increase of 14.5% to $401.5 million). The Group’s net assets have increased from $2,571.0 million to $2,636.3 million. At 30 June 2021 the Group had a net current asset deficiency of $71.5 million (30 June 2020: net current asset deficiency of $61.9 million). The Group has sufficient unutilised committed debt facilities at 30 June 2021 and therefore the Directors are satisfied that the Group can meet its financial obligations as and when they fall due. At balance date the Group had total syndicated debt facilities of $1,150.0 million (2020: $650.0 million), US Private Placement Notes of $366.7 million (2020: $426.9 million), financing arrangements with the Clean Energy Finance Corporation of $90.0 million (2020: $90.0 million) and an uncommitted bank guarantee facility of $95.0 million (2020: $60.0 million). The headroom available in the Group’s facilities at 30 June 2021 was $930.3 million (2020: $421.1 million) and cash on hand was $69.4 million (2020: $79.8 million). Further information on the Group’s financing facilities is provided in note 15 to the Financial Statements. 3 0 Directors’ ReportOperating and financial review (continued) Review of financial position (continued) The Group’s gearing ratio at period end, defined as net debt over net debt plus equity, was 28.2% (2020: 27.1%). During the financial year Cleanaway entered into an agreement with the banks, which are party to its Syndicated Facility Agreement, and one new bank, which commits the banks to providing a three-year $500.0 million term loan facility to fund the acquisition of the Sydney Suez assets. Refer to Key business strategies and prospects below. The weighted average debt maturity is 4.7 years (2020: 5.4 years). Review of Operations The Group comprises three operating segments, being Solid Waste Services, Industrial & Waste Services and Liquid Waste & Health Services. Unallocated items include the Group’s share of profits from equity accounted investments and corporate balances. A description of the operating segments and a summary of the associated segment results are set out on pages 14 to 19. Key business strategies and prospects Our Cleanaway Way, which has been refined over the years, is the Group’s strategy on a page and it represents the business that Cleanaway is today. It was designed to create a common language and narrative across the organisation and ensure all employees are aligned in their efforts to execute the following strategic business objectives: Delivering Footprint 2025 Cleanaway’s Footprint 2025 strategy, which was developed in 2016, is a plan to optimise the waste value chain from collection to disposal, with a particular focus on resource recovery. Through that strategy, Cleanaway continues to strengthen its network of prized infrastructure assets that are key parts of the infrastructure necessary to sustainably manage the waste generated across Australia. These infrastructure assets also provide a strategic moat to the business. During the financial year the Group announced that it had entered into an agreement with Suez to acquire two landfills and five transfer stations in Sydney (the Sydney Assets). We expect to complete that transaction in the second quarter of the year ending 30 June 2022. The Group also acquired the Stawell landfill in regional Victoria and the Grasshopper C&D collections business in NSW. The construction of a PET plastic pelletising facility in Albury, NSW is well underway and expected to be completed by the end of calendar year 2021. The location of the plant will provide access to both the New South Wales and Victorian markets for feedstock and customers. The Group completed the rebuild of the Perth MRF, which reopened towards the end of the financial year. Cleanaway expects further investment opportunities to emerge as state and federal waste policies, strategies and goals are developed and enhanced. These will complement the opportunities the Group continues to investigate with its customers in helping them achieve their sustainability goals. The pursuit of a circular economy The Group’s journey in pursuit of a circular economy continues and in the coming years Cleanaway is pursuing several key projects that are strategically important for its business. The Group’s energy-from-waste project in western Sydney provides a more environmentally friendly solution to Sydney’s growing waste disposal needs. It also supports Cleanaway’s preference for internalisation of waste and enhances the service offering to our customers in that region. During the financial year the project team responded to the submissions it received following the public exhibition of the project’s Environmental Impact Statement. The project will now be assessed by the Independent Planning Commission. Subject to planning approval and a final investment decision, it will be Cleanaway’s largest single asset investment to date. Opportunities for energy-from-waste projects in Melbourne and Brisbane are also being explored to support the expected transition away from putrescible landfill over time. The Group is also pursuing several other circular economy opportunities including, the development of HDPE and PP plastic flaking and pelletising facilities with the possibility of including LDPE plastic and the development of a glass beneficiation facility. The plastic pellets will be used in the production of new milk bottles, household and personal care containers and other industrial applications, while the glass facility will create furnace-ready cullets to be used in glass manufacturing as a substitute to virgin materials. These facilities will provide an opportunity to extract greater value from the raw materials that Cleanaway currently recovers. Data and automation Cleanaway’s strategy is most successful when it is complemented by a strong customer service culture. The Group has commenced a data and automation project that seeks to improve the customer and employee experience from ‘call to cash’. The project aims to simplify and streamline systems and processes. Over the coming years Cleanaway will also be looking to harvest the wealth of data that it has generated over many years to develop greater insights that can support and improve the profitability of the business. 3 1 Directors’ Report234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTOperating and financial review (continued) Key business strategies and prospects (continued) Optimisation of margins across the business Understanding our customers’ needs and improved customer satisfaction, internalisation of waste, synergies through acquisitions and continuous improvement in the Group’s operations should result in an improvement in the quality of its earnings and the long-term profitability of the business. A strong balance sheet The Group’s balance sheet remains strong and Cleanaway will continue to maintain its culture of financial discipline. The Group’s debt and gearing levels are within target levels, with a net debt to underlying EBITDA ratio of 1.61 times (measured on a pre AASB 16 basis in line with our banking covenants). This is a level that provides the Group the flexibility to fund selected earnings accretive projects and acquisitions. The Group has secured additional debt facilities to support the acquisition of the Sydney Assets, with the final funding structure of that acquisition to be determined closer to completion. Principal risks The Board has adopted a Risk Management, Compliance and Assurance Policy that sets out Cleanaway’s commitment to proactive enterprise risk management and compliance. The policy is supplemented by an Enterprise Risk Management Framework that seeks to embed risk management processes into Cleanaway’s business activities. The material business risks that could adversely impact the Group’s financial prospects in future periods and the broad approach Cleanaway takes to manage these risks are outlined below. These risks are not to be taken to be a complete or exhaustive list of the risks Cleanaway is exposed to nor are they listed in order of significance. RISK DESCRIPTION MITIGATION Economic growth Regulatory environment Cleanaway provides its services and products to individuals, companies and government across a range of economic sectors in Australia. Changes in the state of the economy and the sectors of the economy to which the Group is exposed may have an adverse impact on the demand and pricing for Cleanaway’s services and products and the Group's operating and financial performance. Factors which have impacted results in recent periods include increases and decreases in GDP and CPI, increases and decreases in the manufacturing, industrial and construction industries and resource sector activity. Cleanaway’s operations are subject to a variety of federal, state and local laws and regulations in Australia. These laws and regulations establish various standards about the types of operations that can be undertaken and the manner in which they are undertaken. Regulatory requirements which have impacted historical results include state-based waste levies, carbon tax, environmental regulation and planning regulations. Changes in regulatory requirements or failure to comply with conditions of permits and licences could adversely affect Cleanaway’s ability to continue operations on a site and in turn the Group's financial performance. To the extent possible, the Group manages these risks by incorporating a consideration of economic conditions and future expectations into its corporate and financial plans. Cleanaway manages these risks by developing and implementing appropriate systems, policies and procedures to ensure compliance with applicable regulatory requirements. Furthermore, to the extent possible, the Group incorporates consideration of changes in regulatory requirements into its corporate and financial plans and forecasts. 3 2 Directors’ ReportOperating and financial review (continued) Principal risks (continued) RISK DESCRIPTION MITIGATION Health and Safety Cleanaway’s operations involve risks to both property and personnel. A health and safety incident may lead to serious injury or death, which may result in reputational damage and adverse operating impacts with consequential effects to Cleanaway’s financial performance and position. Cleanaway manages these risks by developing and implementing appropriate strategies, systems, policies and procedures in respect of operational health and safety matters to ensure compliance with legal and regulatory obligations. Attract and retain key management Operational risks Cleanaway’s operations are dependent upon the continued performance, efforts, abilities and expertise of its senior management. The loss of services of such personnel may have an adverse effect on the operations of Cleanaway as the Company may be unable to recruit suitable replacements within a short time frame. A prolonged and unplanned interruption to Cleanaway’s operations could significantly impact the Company’s financial performance and reputation. Cleanaway is exposed to a variety of operational risks, including risk of site loss or damage, environmental and climatic events, global pandemic risks, industrial disputes, technology failure or incompetency and systems security or data breaches. Operational risks also include the ability of Cleanaway to continue to build a strong customer service culture to ensure we service and retain our customers. Industry consolidation Cleanaway believes the waste industry will continue to consolidate as evidenced by recent corporate activity. Risks of industry consolidation include a more aggressive competitive landscape in the medium term, potential loss of market share and new market entrants. Cleanaway embraces fit for purpose technologies which enhance fleet and equipment safety. Cleanaway has in place human resource strategies and remuneration and employment policies to attract, retain and motivate executives and align their interests with those of stakeholders. Cleanaway has a range of controls and strategies in place to manage such risks, including site business continuity and crisis management plans, inspection and maintenance procedures, compliance programs, training, site and business interruption insurance and systems security testing and improvements. Customer requirements and service levels for the treatment and recycling of waste are constantly changing. There is a heightened expectation from customers for waste providers to fulfil requirements for appropriate disposal/recycling of waste once collected. By understanding our customers needs and executing on this, Cleanaway can use our capability as a differentiator to drive growth and value. Cleanaway mitigates these risks by maintaining a strong understanding of the industry, key drivers of success, improving business performance and identifying potential acquisitions. Maintaining a strong balance sheet also allows Cleanaway to respond decisively to emerging opportunities. 3 3 Directors’ Report234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTOperating and financial review (continued) Principal risks (continued) RISK DESCRIPTION MITIGATION Integration of acquisitions Financial risks Sustainability risks There are potential integration risks associated with any acquisition, including due diligence risks, potential delays or unplanned costs in implementing operational changes, difficulties in integrating operations and distracting management’s attention from other activities. There is also a risk that the synergies relating to acquisitions are lower than anticipated. Any failure to fully integrate the operations of an acquired business, or failure to achieve anticipated synergies, could adversely impact the operational performance and profitability of the Group. Cleanaway is exposed to a variety of financial risks, including credit risk, adverse movements in interest rates and foreign currency exchange rates, as well as liquidity risk. These risks may have an adverse effect on the Company’s operating and financial performance. Cleanaway faces a variety of risks that could impact on its sustainability. How risk is managed is integral to ensuring the Group achieves its vision of making a sustainable future possible. Sustainability encompasses building a resilient business focussed on sustainable performance, investing in people and relationships with customers and the communities in which Cleanaway work, and leading industry to leave the planet in better shape for future generations. Managing these risks effectively is critical to ensuring that Cleanaway maintains its social licence to operate in the communities in which it has significant operations. Cleanaway manages these risks by putting in place dedicated resources to manage and monitor the integration process and closely monitors the timing, quantum and cost to achieve synergies from acquisitions. The Group has in place a Treasury Policy that focuses on managing these risks. The policy is reviewed by the Audit and Risk Committee and approved by the Board. The treasury activities are reported to the Audit and Risk Committee and Board on a regular basis with the ultimate responsibility being borne by the Chief Financial Officer (CFO). Information on how Cleanaway manages financial risks is included in note 32 to the Financial Statements. Cleanaway manages these risks in accordance with its Enterprise Risk Management Framework which is aligned to the international Standard AS/NZS ISO 31000 and industry-leading practice. This includes regularly reviewing risk tolerance, the risks that have been identified and how these risks are controlled and mitigated. Cleanaway has bolstered its focus on Environmental, Social and Governance (ESG) risks and has enhanced its disclosures in relation to ESG matters. 3 4 Directors’ ReportOperating and financial review (continued) Principal risks (continued) RISK DESCRIPTION MITIGATION Environment risks There is potential for damage to the environment arising from Cleanaway’s operations. If mishandled, waste can pose hazards to the environment, such as contaminating waterways, harmful air emissions, and fires. Failing to operate in accordance with environmental standards not only has the potential to result in environmental harm but also increases compliance costs, jeopardises our social license to operate, and causes reputational damage with our stakeholders and investors. Climate change Climate change is an emerging risk and presents complex challenges for companies, governments and society. We believe that the transition to a zero-carbon economy presents opportunities for our business as well as risks. These risks include de-carbonisation of the economy leading to contraction in carbon-intensive industries; the introduction of a carbon price; and an increase of frequency and severity of extreme weather events. Opportunities for Cleanaway may include increased regulation to reduce embodied carbon emissions favouring the domestic recycling industry, and increased incentives to invest in energy-from-waste plants. Commodity risks Cleanaway is exposed to changes in the prices of commodities, particularly paper, cardboard, glass and plastics from recycling activities. The demand for, and the price of, commodities is highly dependent on a variety of factors, including international supply and demand, the price and availability of substitutes, actions taken by governments such as the Council of Australian Governments’ (COAG) decision to ban waste exports, and global economic and political developments. Upholding the highest standards in environmental performance is crucial to the success and sustainability of our business. Our collection, sorting, treatment and disposal processes are designed to mitigate the risk of these hazards. Our approach to managing environment risk is aligned to the Cleanaway Way and there are various internal systems, processes and toolkits that support our approach to compliance with environmental regulations, standards and requirements. Our Environmental Policy sets out our commitment to achieving our mission, and to continually improve our environmental standards for the benefit of the environment, our employees, stakeholders and the community. Cleanaway has committed to align with the Task-force on Climate-Related Financial Disclosures (TCFD) framework. The TCFD recommends companies assess and disclose the financial impacts of climate-related risks and opportunities. Our Sustainability Report sets out our response to the TCFD recommendations. Cleanaway has developed a multi-year plan to improve our management and disclosure of climate-related risks and opportunities. A major part of this will be to incorporate climate change into our ongoing strategic decision making. We will continue to strengthen our governance capability and perform deep-dive analysis into key climate-related risks to better understand how to mitigate or manage these impacts. Cleanaway closely monitors global commodity markets and market conditions relating to production of commodities to minimise potential exposures to commodity risks. Collection contracts are also economically hedged via the use of rebates linked to underlying commodity prices. 3 5 Directors’ Report234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTOperating and financial review (continued) Principal risks (continued) RISK DESCRIPTION MITIGATION Cyber risks Cleanaway, like any large organisation faces an ever-changing cyber security threat, and needs to prevent, detect and respond to cyber security threats by maintaining a high standard of information security control. Cleanaway has a range of user access controls that restrict and contain the ability for a user to have wide-reaching access. We utilise extensive technology-based controls and undertake both in-house and independent technology controls testing, validation and maintenance to actively prepare for, monitor and respond to potential threats. Business continuity plans are in place and assessed on an ongoing basis. Significant changes in the state of affairs Other than matters mentioned in this Report, no other significant changes in the state of affairs of the Group occurred during the financial year ended 30 June 2021. Events subsequent to reporting date There have been no matters or circumstances that have arisen since 30 June 2021 that have affected the Group’s operations not otherwise disclosed in this Report. Likely developments and expected results of operations The Group will continue to pursue strategies aimed at improving the profitability, return on capital employed and market position of its principal activities during the next financial year. Disclosures of information regarding the likely developments in the operations of the Group and the expected results of those operations in future financial years have been included in the Operating and Financial Review section of this Report. Environmental regulation The Group’s operations are subject to significant environmental regulation and the Group holds environmental licences for its sites. The Group is committed to achieving the highest standards of environmental performance. There were no material breaches of environmental statutory requirements and no material prosecutions during the year. Aggregate fines paid during the year to the date of signing this Annual Report were $144,883 (2020: $65,276). The Group is registered under the National Greenhouse and Energy Reporting Act 2007, under which it is required to report energy consumption and greenhouse gas emissions for its Australian facilities. Indemnification of auditors To the extent permitted by law, the Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement, against claims by third parties arising from the audit (for an unspecified amount). No payment has been made to indemnify Ernst & Young during or since the end of the financial year. Directors’ and officers’ insurance During the financial year, the Company paid insurance premiums to insure the Directors and Officers of the Company. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the Directors and Officers in their capacity as Directors and Officers of entities in the Group, and any other payments arising from liabilities incurred by the Directors and Officers or the Company in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the Directors and Officers or the improper use by the Directors and Officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Disclosure of the premium paid is not permitted under the terms of the insurance contract. 3 6 Directors’ ReportDirectors’ meetings The number of Directors’ meetings and Committee meetings, and the number of meetings attended by each of the Directors who was a member of the Board and the relevant Committee, during the financial year were: BOARD MEETINGS AUDIT AND RISK COMMITTEE SUSTAINABILITY COMMITTEE HUMAN RESOURCES COMMITTEE MEETINGS HELD WHILE A DIRECTOR NUMBER ATTENDED MEETINGS HELD WHILE A DIRECTOR NUMBER ATTENDED MEETINGS HELD WHILE A DIRECTOR NUMBER ATTENDED MEETINGS HELD WHILE A DIRECTOR NUMBER ATTENDED Directors M P Chellew 1 V Bansal 2 R M Smith 3 E R Stein 4 T A Sinclair  R M Harding 5 P G Etienne 6 S L Hogg I A Player 7 28 19 28 13 28 28 28 28 9 28 10 28 12 27 23 28 27 9 – – 4 1 4 – 4 4 – – – 4 1 4 – 4 4 – – – – 2 – 4 4 – 1 – – – 2 – 4 4 – 1 – – 4 – 4 4 – 4 – – – 4 – 4 4 – 4 – Executive Chairman of the Board. Retired as Managing Director and CEO on 5 March 2021. 1 2 3 Chairman of the Audit and Risk Committee. Retired as Director on 31 December 2020. 4 5 Chairman of the Human Resources Committee. 6 Chairman of the Sustainability Committee. 7 Appointed Non-Executive Director on 1 March 2021. Directors’ interests The relevant interests of each Director in the shares and performance rights over such instruments issued by Cleanaway Waste Management Limited, as notified by the Directors to the Australian Securities Exchange in accordance with section 205G(1) of the Corporations Act 2001, as at the date of this report is as follows: Directors  M P Chellew R M Smith T A Sinclair R M Harding P G Etienne S L Hogg I A Player ORDINARY SHARES PERFORMANCE RIGHTS 156,548 126,120 49,417 29,696 82,715 – – – – – – – – – Shares under option and performance rights During the financial year ended 30 June 2021 and up to the date of this Report, no options were granted over unissued shares. As at the date of this Report there are no unissued ordinary shares of the Company under option. Details of performance rights granted under the short-term incentive and long-term incentive offers in the 2021 and 2020 financial years are set out in the Remuneration Report. Total performance rights outstanding as at 30 June 2021 are 6,904,473 (2020: 10,315,392). Performance rights outstanding at the date of this report are 6,812,706. Shares issued on the exercise of performance rights During the financial year ended 30 June 2021 and up to the date of this report, the Company issued 2,469,025 shares as a result of the exercise of performance rights that vested during the year. During the financial year ended 30 June 2020 and up to the date of the 2020 report, the Company issued 4,604,526 ordinary shares as a result of the exercise of performance rights that vested on 30 June 2020. 3 7 Directors’ Report234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTNon-audit services The Company may decide to employ the auditors on assignments additional to their statutory audit duties where the auditors’ expertise and experience with the Company and/or the Group are relevant. During the financial year ended 30 June 2021, non-audit services provided by Ernst & Young included services relating to the Group’s Sustainability Report. The Directors have considered the position and in accordance with written advice provided by resolution from the Audit and Risk Committee, are satisfied that the provision of the non-audit services is compatible with, and did not compromise, the auditor independence requirements of the Corporation Act 2001 for the following reasons: • The value of non-audit services of $208,842 provided by Ernst & Young during the period was not significant, representing less than 12.9% of the total services; • All non-audit services were subject to the corporate governance procedures adopted by the Company to ensure they do not impact the integrity and objectivity of the auditor; and • The non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve the reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as an advocate for the Company or jointly sharing risks and rewards. Ernst & Young: Audit services Audit related services Non-audit services: Other advisory services Total  2021 $ 2020 $ 1,335,657 1,315,526 83,945 277,585 208,842 248,068 1,628,444 1,841,179 A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 59. Auditor rotation On 30 June 2020, on the recommendation of the Audit and Risk Committee, the Directors granted an approval for the extension of the Group’s audit partner, Brett Croft, for a further one year when the initial five years as permitted under the Corporations Act 2001 (the Corporations Act) expired in June 2020. The Audit and Risk Committee’s recommendation was based on the following reasons: • The Committee was satisfied that it would not give rise to a conflict of interest situation as defined in section 324CD of the Corporations Act due to the auditor independence policies operated by Ernst & Young and the Company; • The Committee was satisfied with the skills and personal qualities of the audit partner which were consistent with maintaining the quality of the audit provided to the Company; • The Committee was satisfied that the audit partner’s knowledge of the Company would assist to provide the Board with an appropriate level of independent assurance given the significant projects and transactions that were underway; and • Given the potential impact of COVID-19 on audit activities, processes and planning, in particular that the June 2020 audit was executed remotely, the Committee considered that continuity of the existing audit partner was prudent and appropriate. 3 8 Directors’ ReportRounding of amounts The Company is of a kind referred to in ASIC Legislative Instrument 2016/191 issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the Directors’ Report. Amounts in the Directors’ Report have been rounded off in accordance with that Legislative Instrument to the nearest hundred thousand dollars or, in certain cases, to the nearest dollar. This Report, including the Remuneration Report set out on pages 40 to 58, is made in accordance with a resolution of the Board. M P Chellew Executive Chairman Melbourne, 19 August 2021 3 9 Directors’ Report234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTContents The Report contains the following sections: 1. 2. 3. 4. 5. 6. 7. 8. Key management personnel Governance and role of the Board Non-Executive Directors’ remuneration Executive reward strategy and framework Executive key management personnel – reward outcomes Executive key management personnel – contract terms Executive key management personnel – additional remuneration tables Shareholdings and other related party transactions PAGE 42 43 44 45 47 54 56 58 Introduction The Directors of Cleanaway Waste Management Limited present the Company’s Remuneration Report (the Report) which forms part of the Directors’ Report for the financial year ended 30 June 2021. This Report outlines the remuneration arrangements for Key Management Personnel (KMP) of the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. The information in this Report has been audited as required by section 308(3C) of the Corporations Act 2001. Overview and context for the remuneration outcomes set out in this Report Over the last financial year, Cleanaway continued its growth trajectory, with increases in: Net revenue; Underlying Net Profit after Tax (NPAT); Underlying Earnings before Interest and Tax (EBIT); Underlying Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA); and Dividend payments. Cleanaway has continued to progress key initiatives in line with our Footprint 2025 Strategy including strengthening our network of prized infrastructure assets. During the financial year we announced that we had entered into an agreement with Suez to acquire two landfills and five transfer stations in Sydney. Additionally, we have made significant progress on several infrastructure projects that support a circular economy. Our PET plastic pelletising facility that we are developing with Pact and Asahi Beverages in Albury, NSW is well advanced as well as our proposed Energy-from-Waste facility that we are developing with Macquarie Capital. These financial and strategic outcomes were delivered in the context of ongoing challenging market and operating conditions, in particular the impact of the COVID-19 pandemic. During the year Cleanaway has demonstrated resilience as the business has operated through varied restrictions and movement orders imposed to reduce the spread of COVID-19. The pandemic has disrupted the Group’s operations and reduced the demand for services in some segments and locations, and likewise increased demand in other segments such as for medical waste and municipal collections. Our priority has been to ensure that we provide reliable and consistent services to our customers in our capacity as an essential service provider. In response to these challenges, our priority has remained the health and safety of our employees, continuity of employment for team members and the servicing of our customers. Cleanaway did not receive any direct assistance from government and did not benefit from the federal government’s Job Keeper program. With this context, the Directors have sought to ensure that the remuneration outcomes set out in this Report align with shareholders’ experience and market expectations. Whilst Cleanaway continued to improve its performance across most financial metrics during the year, the impact of COVID-19 resulted in slightly below target outcomes for KMP who participate in the Company’s STI program. Pleasingly the health and safety performance was better than our minimum improvement goal, as measured by the Group’s Total Recordable Injury Frequency Rate (TRIFR) and the Group did not have any significant or major rated environmental incidents. For the year ended 30 June 2021, the Board included two people and culture measures in the STI program relating to employee engagement and voluntary turnover. Cleanaway conducted two employee engagement surveys during the financial year, both recording improved employee experience from prior years. The engagement score in the second engagement survey resulted in an outcome that was slightly above target. Voluntary turnover performance did not meet the Company’s target and hence Executive KMPs were not eligible for STI payments related to this metric. 4 0 Remuneration Report(Audited)Introduction (continued) The Group’s TSR, EPS and ROIC outcomes, measured over a three-year period for the purpose of assessing LTIs, resulted in it achieving its relative TSR metric hurdle at target however the EPS and ROIC metric hurdles were not reached. This led to a below target outcome for Executive KMP that participated in the LTI Plan. The Group’s performance in relation to these metrics is set out in the tables below and detailed elsewhere in this Report. As announced on 21 January 2021, the Board and former CEO Vik Bansal reached a mutual agreement whereby Mr Bansal agreed to step down from the position of CEO. Following an extensive search, on 10 May 2021, Mark Schubert was appointed as the Chief Executive Officer and Managing Director, and will commence in the role on 30 August 2021. To support the leadership transition, Mark Chellew assumed the role of Executive Chairman and Brendan Gill was appointed to the role of Chief Operating Officer. Details around the arrangements with Mr Bansal, Mr Schubert, Mr Chellew and Mr Gill are detailed in section 6B. Special exertion fees were agreed with two Non-Executive Directors, Mr Etienne and Mr Sinclair, to recognise additional support provided to the Executive management team during the leadership transition and in maintaining momentum to progress strategic initiatives mentioned within this Report. Details of the special fees are outlined in section 3A. During the year, the Board introduced shareholding guidelines for Non-Executive Directors. These guidelines are set out in section 4C. Given the Group’s overall performance for the year ended 30 June 2021 (FY21), as set out above, Directors of Cleanaway consider that there is appropriate alignment between Cleanaway shareholders’ experience over FY21 and the remuneration outcomes for KMP as set out in this Report. Total Shareholder Return: CWY vs ASX 200 Industrials Sector Index (XNJ) 300% 260% 220% 180% 140% 100% 60% 20% -20% CWY ASX 200 Industrials Sector Index 30 June 2016 30 June 2017 30 June 2018 30 June 2019 30 June 2020 30 June 2021 EPS 1 (cents) 7.5 7.4 6.9 5.3 4.7 Dividends Per Share (cents) 4.60 4.10 3.55 2.50 2.10 ROIC 2 (%) 5.2 4.8 5.4 5.6 5.2 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 FY17 FY18 FY19 FY20 FY21 1 2 Basic EPS on Underlying results. FY20 and FY21 excludes the impact of AASB 16 to enable consistent comparison. Return on Invested Capital is calculated as tax effected EBIT divided by average net assets plus net debt. FY20 and FY21 excludes the impact of AASB 16 reflecting the way in which the FY2019 LTI plan has been assessed to enable consistent comparison. 4 1 Remuneration Report (Audited)234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT1 Key management personnel For the purposes of this Report, KMP are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether Executive or otherwise) of the Company. KMP for the year ended 30 June 2021 are the Non-Executive Directors, the Chief Executive Officer (CEO) and Managing Director, the Chief Operating Officer (COO), the Chief Financial Officer (CFO), the Executive General Manager – Solid Waste Services and the Executive General Manager – Liquid Waste & Health Services and Industrial & Waste Services. The KMP disclosed in this Report for the year ended 30 June 2021 are detailed in the following table: NAME TITLE NON-EXECUTIVE DIRECTORS M P Chellew 1 R M Smith E R Stein 2 T A Sinclair R M Harding P G Etienne S L Hogg I A Player 3 EXECUTIVES V Bansal 4 B J Gill 5 P A Binfield 6 M Crawford T Richards Chairman and Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Chief Executive Officer (CEO) and Managing Director Chief Operating Officer (COO) Chief Financial Officer (CFO) Executive General Manager – Solid Waste Services Executive General Manager – Liquid Waste & Health Services and Industrial & Waste Services 1 Mr Chellew was appointed Executive Chairman on 21 January 2021. Further details regarding the terms of Mr Chellew’s appointment as Executive Chairman are set out in section 6B below. 2 Ms Stein retired as Non-Executive Director on 31 December 2020. 3 Ms Player was appointed Non-Executive Director on 1 March 2021. 4 Mr Bansal stepped down from his role as CEO as part of the leadership transition announced by the Company on 21 January 2021. Details of the terms of Mr Bansal’s separation from the Company are set out in section 6B below. 5 Mr Gill was appointed Chief Operating Officer as part of the leadership transition announced by the Company on 21 January 2021. Details of the terms of Mr Gill’s appointment are set out in section 6B below. 6 Mr Binfield commenced with Cleanaway on 1 February 2021. 4 2 Remuneration Report (Audited)2 Governance and role of the Board 2A. Human Resources Committee The Human Resources Committee (Committee) assists the Board in its oversight of the Group’s remuneration and incentives strategy and arrangements; recruitment; retention and succession plans for the Board and executive management team; corporate culture and engagement; and diversity and inclusion strategy. The Committee’s charter is available online at: http://www.cleanaway.com.au/for-investors/corporate-governance/ The Committee is comprised entirely of independent Non-Executive Directors: Mike Harding (Chairman), Ray Smith, Terry Sinclair and Samantha Hogg. Non-Executive Directors, who are not Committee members, are entitled to attend meetings as observers. The CEO and other Executives are invited to attend Committee meetings, as required, however they do not participate in discussions concerning their own remuneration arrangements. 2B. Engagement of remuneration consultants Under the Committee’s charter, the Committee, or any individual member, has the authority, with the Chairperson’s consent, to seek any information it requires from any employee or external party. In accordance with the Corporations Act 2001, any engagement of a remuneration consultant to provide a remuneration recommendation in respect of KMP must be received and approved by the Committee. The remuneration recommendation must be accompanied by a declaration from the remuneration consultant that it was free from undue influence of KMP. During the year ended 30 June 2021, remuneration consultants were engaged to provide services to the Group, including the provision of benchmarking data for the senior executive team and Non-Executive Directors, equity incentive design and LTI target setting. The fees paid for these services were $83,472 (2020: $57,500). The services include advising in relation to the Separation Agreement entered into with Vik Bansal, terms of appointment of Mark Schubert, terms of appointment of Mark Chellew as Executive Chairman, base fees and special exertion fees for Non-Executive Directors, benchmarking data for the Executive Committee and equity incentive design and target setting. 4 3 Remuneration Report (Audited)234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT3 Non-Executive Directors’ remuneration 3A. Current Non-Executive Director fees The remuneration received by Non-Executive Directors for the years ended 30 June 2021 and 30 June 2020 is set out in the following table: FINANCIAL YEAR SALARY AND FEES $ ADDITIONAL FEES $ SUPERANNUATION BENEFITS $ NON-EXECUTIVE DIRECTORS M P Chellew 1 R M Smith E R Stein 2 T A Sinclair 3 R M Harding P G Etienne 4 S L Hogg I A Player 5 Total 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2021 2020 348,306 348,997 184,018 184,018 110,198 165,297 165,297 165,297 175,799 175,799 192,500 184,150 165,297 106,088 50,989 325,000 – – – – – 15,000 – – – 25,000 – – – – 21,694 21,003 17,482 17,482 10,469 15,703 15,703 15,703 16,701 16,701 – 8,350 15,703 10,078 4,844 TOTAL $ 695,000 370,000 201,500 201,500 120,667 181,000 196,000 181,000 192,500 192,500 217,500 192,500 181,000 116,166 55,833 1,392,404 1,329,646 365,000 – 102,596 105,020 1,860,000 1,434,666 Following his appointment as Executive Chairman on 21 January 2021, Mr Chellew receives an additional fee of $54,167 per month. 1 2 Non-Executive Director Ms Stein retired from the Cleanaway Board on 31 December 2020. 3 Mr Sinclair received a special exertion fee for additional services provided in connection with the Company’s proposed energy from waste project, following the leadership transition of the Company announced in January 2021. 4 Mr Etienne received a special exertion fee for additional services provided in connection with the Company’s acquisition of Suez’s Sydney post-collection assets, following the leadership transition of the Company announced in January 2021. 5 Ms Player was appointed as an Independent Non‐Executive Director of the Company from 1 March 2021. 3B. Aggregate fee limit The current aggregate amount of remuneration that can be paid to Non-Executive Directors of $1,900,000 was approved by shareholders at the Company’s 2020 Annual General Meeting. For the year ended 30 June 2021, the aggregate remuneration paid to all Non-Executive Directors was $1,860,000. This represents an increase of 29.6% compared with the year ended 30 June 2020. This is due to additional fees paid to Directors and the Executive Chairman. 3C. Fee structure The fee structure (inclusive of superannuation) for the year ended 30 June 2021 is detailed in the following table: Chairman Non-Executive Director BOARD $ 370,000 154,000 AUDIT AND RISK COMMITTEE $ SUSTAINABILITY COMMITTEE $ HUMAN RESOURCES COMMITTEE $ 34,000 13,500 25,000 13,500 25,000 13,500 4 4 Remuneration Report (Audited)4 Executive reward strategy and framework 4A. Strategy and framework The Group’s remuneration strategy is designed to attract, retain and motivate high calibre senior executives to ensure the sustainable success of the Group for the benefit of all stakeholders. In an environment of heightened community expectations around executive remuneration, the Board continues to review the remuneration framework annually to ensure it is fit for purpose. This ensures remuneration is competitive and fair, aligned with the achievements of Cleanaway and aligned to the creation of long-term shareholder value. The remuneration structure is driven by these principles and comprises a mix of fixed and variable (at risk) remuneration components illustrated below. CLEANAWAY REMUNERATION STRATEGY Remunerate competitively to attract, motivate and retain talent Align remuneration to CWY’s business strategy Link outcomes to CWY’s financial performance and individual strategic objectives Align to long term shareholder value CLEANAWAY REMUNERATION STRUCTURE TFR Total Fixed Remuneration STI Short-term Incentive (at risk) LTI Long-term Incentive (at risk) CASH EQUITY Annual TFR (Base Salary plus superannuation) Set based on market and internal relativities, performance and experience 80% of STI outcome paid in September after financial year end STI outcome based on CWY Group performance, business unit and individual performance 20% of STI outcome is deferred as Performance Rights (for certain senior executives) Performance Rights are restricted for one year LTI Performance Rights subject to performance conditions over three years 50% subject to TSR 50% subject to EPS CAGR ROIC in year three acts as gateway to EPS achievement 4 5 Remuneration Report (Audited)234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT4 Executive reward strategy and framework (continued) 4B. Remuneration elements and mix Cleanaway aims to provide a competitive mix of remuneration components that reflect the Board’s commitment to performance-based reward. For the year ended 30 June 2021, the target remuneration mix for Executive KMP is illustrated below. REMUNERATION MIX AT TARGET CEO 40.0% 24.0% 6.0% 30.0% CFO/COO Operational EGMs 52.6% 55.5% 25.3% 6.3% 15.8% 22.2% 5.6% 16.7% TFR STI Cash STI Deferred (equity) LTI (equity) Under the terms of his appointment, the Executive Chairman does not participate in the LTI or STI Plans. 4C. Shareholding guideline The CEO and Executive Committee are encouraged to build and maintain a shareholding in the Company equivalent to: • CEO – 100% of TFR; and • Executive Committee – 50% of TFR. It is expected that this shareholding will be accumulated within five years from the date of their appointment to the Executive Committee. The KMP that have served five years from the initial appointment date have all accumulated shareholdings in line with this guideline. The number of performance rights and ordinary shares in the Company held by each Executive KMP is set out in sections 7A, 7B and 8A. During the year, the Board introduced guidelines regarding shareholdings for Non-Executive Directors. Under the guidelines, Non-Executive Directors will have 5 years from the later of 1 July 2021 or the date of their appointment to accumulate a shareholding in the Company equivalent to one year of their base fee. 4 6 Remuneration Report (Audited)5 Executive key management personnel – reward outcomes 5A. Remuneration received The remuneration received or receivable by Executive KMP for the years ended 30 June 2021 and 30 June 2020 is set out in the following table: FINANCIAL YEAR SALARY AND FEES $ STI CASH $ NON- MONETARY BENEFITS $ TERMINATION BENEFITS $ SHARE-BASED PAYMENTS 1 $ POST EMPLOYMENT BENEFITS $ PERFORM - ANCE RELATED TOTAL$ V Bansal 2 2021 1,478,306 979,362 24,720 1,500,000 (55,272) 21,694 3,948,810 B J Gill 3 P A Binfield M Crawford T Richards 2020 1,447,747 339,769 90,402 2021 2020 2021 2021 2020 2021 2020 816,062 469,290 1,686 696,463 145,344 – 324,294 154,287 1,490 596,381 246,287 196 590,139 126,801 489,243 201,403 471,810 100,421 – – – – – – – – – – – Total 2021 3,704,286 2,050,629 28,092 1,500,000 2020 3,206,159 712,335 90,402 – 709,207 191,577 123,714 79,069 146,698 108,975 119,805 23,836 481,877 965,732 21,003 2,608,128 21,694 1,500,309 21,003 986,524 23.4% 40.2% 44.0% 27.3% 9,039 568,179 41.1% 21,694 1,011,256 38.9% 21,003 846,918 27.8% 21,694 832,145 38.6% 21,003 617,070 20.1% 95,815 7,860,699 84,012 5,058,640 1 Share-based payments consist of performance rights. The fair value of the performance rights is measured at the date of grant using Monte Carlo simulation and the Black Scholes model and is allocated to each reporting period evenly over the period from grant date to vesting date. The value disclosed is the portion of the fair value of the performance rights recognised as an expense in each reporting period, net of any reversals for forfeited performance rights or changes in the probability of performance rights vesting. Performance rights include the expense relating to the deferred share component of STI. 2 Mr Bansal’s remuneration and termination benefits are further detailed in section 6B. Non-monetary benefits comprise costs associated with Mr Bansal’s accommodation in Melbourne and travel between Sydney and Melbourne. Share Based Payments expense includes the acceleration of expenses in relation to 2020 LTI which does not vest until 14 days after the release of the financial results for the financial year ending 30 June 2022. Remuneration received by Mr Gill in FY21 in his capacity as CFO and COO. 3 An explanation of the key remuneration elements (TFR, STI and LTI), as well as outcomes for the year ended 30 June 2021, is provided in the following sections. 5B. Total Fixed Remuneration TFR consists of base salary plus statutory superannuation contributions. Senior executives receive a fixed remuneration package which is reviewed annually by the Committee and the Board with reference to Company and individual performance, size and complexity of the role and benchmark market data. There are no guaranteed base pay increases included in any Executive KMP contract. Executive KMP TFR was reviewed during the annual remuneration review and no TFR increase was recommended for any KMP’s except Mr Richards. Effective 1 October 2020, Mr Richards’ TFR was increased from $498,750 to $514,999. As set out in section 6B, Mr Gill’s TFR increased to $1,000,000 following his appointment as COO to reflect his broader operational responsibilities. 5C. FY2021 Short-term Incentive For the year ended 30 June 2021, Executive KMP and other senior executives and eligible employees participated in the Group STI plan. The table below represents the target and maximum annual STI opportunity as a percentage of TFR for Executive KMP in 2021: EXECUTIVE KEY MANAGEMENT PERSONNEL V Bansal B J Gill P A Binfield M Crawford T Richards FY2021 TARGET FY2021 MAXIMUM 75% 60% 60% 50% 50% 150% 120% 120% 100% 100% 4 7 Remuneration Report (Audited)234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT5 Executive key management personnel – reward outcomes (continued) 5C. FY2021 Short-term Incentive (continued) Key features of the FY2021 STI plan Purpose of the STI plan Reward the achievement of key financial, People and Culture, Health, Safety & Environment (HSE) and if applicable, individual KPI metrics that are key to the sustainable success of Cleanaway. Performance period 1 July 2020 to 30 June 2021. Gateway • Achievement of a gateway based on budgeted Group EBIT for Executive KMP. The use of EBIT as a gateway performance measure aligns senior executives’ focus on annual financial objectives related to their area of control. • Business Unit heads and other management roles also have gateways based on financial or key strategic non-financial objectives. Key performance metrics • Financial metrics: 70% weighting. • HSE metrics: 20% weighting. • People and Culture Metrics: 10% weighting. Financial metrics • Financial metrics and their respective weightings are: – Group EBIT: 30% weighting. Health, Safety & Environment (HSE) metrics and gateways – Group Net Revenue: 20% weighting. Included as it reflects growth in our business. – Group Net Profit After Tax Return on Invested Capital (ROIC): 20% weighting. Included as it aligns with Cleanaway’s focus on improving the returns from the net assets employed in our business. • HSE metrics and their respective weightings are: – Group Total Recordable Injury Frequency Rate (TRIFR): 15% weighting. Included as it measures the outcome of our injury prevention strategies and programs. – Group Environmental Incidents: 5% weighting. Included as it measures the outcome effectiveness of our environmental risk management strategies and programs. • TRIFR metric has a threshold, target and stretch level of performance with a corresponding STI outcome set out below. • There is a gateway condition for the TRIFR metric, which is that there are no at fault work-related fatalities. • Group Environment Incident metric has a target level performance and outcome only, which is that there are no significant or major rated environmental incidents. People and Culture metrics and gateways • People and their respective weightings are: – Group Engagement: 5% weighting. – Group Voluntary Turnover: 5% weighting. • There is a gateway condition for People metric, which is No breach of the Code of Conduct policy. Performance outcomes • Once gateways are achieved, performance against the financial and health & safety metrics have the following threshold, target and stretch STI outcomes: – Below threshold – 0%. – At threshold – 75% of on-target STI opportunity. – At target – 100% of on-target STI opportunity. – At stretch – 200% of on-target STI opportunity. Deferral • 20% of STI awarded to Executive KMP and certain senior executives is deferred for 12 months in the form of deferred performance rights. • Performance rights are granted at face value determined by the five-day volume weighted average price of Cleanaway’s shares on the ASX during the period 24 June to 30 June 2021. • Performance rights do not attract dividends during the deferral period. 4 8 Remuneration Report (Audited)5 Executive key management personnel – reward outcomes (continued) 5C. FY2021 Short-term Incentive (continued) FY2021 Short-term Incentive outcomes The following table details 2021 STI scorecard measures and assessment applied to Executive KMP. ELEMENT MEASURE Gateway to STI Scorecard KPIs Group EBIT – Threshold of on-target budget Group Net Revenue Group ROIC Group TRIFR Group Environmental Incidents Group Engagement Group Voluntary Turnover 2021 PERFORMANCE ASSESSMENT Slightly Above Threshold Between Target and Stretch Slightly Above Threshold Slightly Above Target Target Slightly Above Target Not Met The STI payments received or receivable by Executive KMP for the year ended 30 June 2021 are summarised in the following table: EXECUTIVE KEY MANAGEMENT PERSONNEL V Bansal 3 B J Gill P A Binfield M Crawford T Richards TOTAL STI $ CASH COMPONENT 1 $ DEFERRED SHARE COMPONENT 1 $ PERCENTAGE OF TARGET STI OPPORTUNITY 2 PERCENTAGE OF MAXIMUM STI OPPORTUNITY 2 2021 2020 2021 2020 2021 2021 2020 2021 2020 979,362 424,711 979,362 339,769 – 84,942 586,613 469,290 117,323 181,680 192,859 307,859 158,501 145,344 154,287 246,287 126,801 251,754 201,403 125,526 100,421 36,336 38,572 61,572 31,700 50,351 25,105 87% 38% 98% 50% 40% 98% 50% 98% 50% 45% 19% 50% 26% 21% 50% 26% 50% 26% 1 As summarised in section 4A and 4B, Executive KMP STI are subject to 20% deferral for one year as performance rights. 2 Calculated based on total STI as a percentage of target and maximum STI opportunities respectively. 3 Mr Bansal’s FY21 STI award was assessed against the December 2020 half-year financial results and pro rated to 31 March 2021. His short term incentive award will not be subject to any STI deferral. The deferred component of Mr Bansal’s FY20 STI was withdrawn and not granted during FY21. 5D. Prior year Short-term Incentive awards As participants in the FY2020 STI, Executives considered KMP during the year ended 30 June 2020 had part of their total STI award deferred as performance rights for 12 months. The vesting of these deferrals was subject to remaining employed by the Group throughout the deferral period. Accordingly, these awards have vested as follows: • Mr Gill’s FY2020 STI deferred component performance rights vested on 30 June 2021 (16,818); • Mr Crawford’s FY2020 STI deferred component performance rights vested on 30 June 2021 (14,673); and • Mr Richard’s FY2020 STI deferred component performance rights vested on 30 June 2021 (11,620). 5E. FY2021 Long-term Incentive Offers under the Cleanaway Long-Term Incentive (LTI) Plan are made on an annual basis. During the year ended 30 June 2021, LTI offer was made to Executive KMP, including Mr Gill, Mr Crawford, Mr Binfield and Mr Richards. The table below represents the target and maximum annual LTI opportunity as a percentage of TFR for Mr Gill, Mr Binfield, Mr Crawford and Mr Richards: EXECUTIVE KEY MANAGEMENT PERSONNEL B J Gill P A Binfield M Crawford T Richards FY2021 TARGET FY2021 MAXIMUM 30% 30% 30% 30% 60% 60% 60% 60% 4 9 Remuneration Report (Audited)234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT5 Executive key management personnel – reward outcomes (continued) 5E. FY2021 Long-term Incentive (continued) The details of the FY2021 LTI offer are summarised in the table below. The number of performance rights granted to each Executive KMP for the year ended 30 June 2021 is outlined in section 7A. The number of performance rights each Executive KMP had on issue as at 30 June 2021 is outlined in section 7B. Key features of the FY2021 LTI plan Purpose of the LTI plan • Focus Executive performance on drivers of shareholder value over a three-year performance period. • Align interests of Executive with those of shareholders. Performance period 1 July 2020 to 30 June 2023. Form of award Performance rights. Number of performance rights • Performance rights are granted at face value as a % of participant TFR. • The number of rights was determined by dividing a participant’s LTI opportunity by the volume weighted average price (VWAP) of Cleanaway’s shares on the ASX during the period 24 June 2020 to 30 June 2020. Performance hurdles Performance rights issued under the FY2021 plan are subject to two performance hurdles: • 50% of the performance rights will be subject to relative Total Shareholder Return (TSR) targets over the performance period. The Board considers relative TSR to be an appropriate performance measure for Executive KMP reward as it focuses on the extent to which shareholder returns (being income and capital gain) are generated relative to the performance of a comparator group of companies. The comparator group is the constituent companies that remain listed in the S&P/ASX 200 Index (excluding companies classified as mining, financial services and overseas domiciled companies) for the duration of the performance period. • 50% of the performance rights will be subject to Earnings per Share Compound Annual Growth Rate (EPS CAGR). The Board considers EPS CAGR to be an appropriate performance measure for Executive KMP reward as it represents an accurate measure of short-term and long-term sustainable profit. The Return On Invested Capital (ROIC) for year ending 30 June 2023 acts as a gateway to EPS CAGR. Vesting date 14 days after the release of the financial results for the financial year ending 30 June 2023. Retesting No retesting is available. LTI performance rights are only tested once at the end of the relevant performance period and unvested rights lapse. Dividends LTI performance rights do not attract dividends. Restriction on trading Vested shares arising from performance rights may only be traded during trading windows as stipulated in the Company’s Securities Trading Policy. Forfeiture and lapsing conditions Where a participant resigns or is terminated by the Company prior to the end of the performance period, the performance rights are forfeited unless the Board applies its discretion. The Board also has discretion to determine the extent of vesting in the event of a change of control, or where a participant dies, becomes permanently disabled, retires or is made redundant. Performance rights lapse when performance hurdles are not met. Number of performance rights remaining on issue as at 30 June 2021 1,991,571 5 0 Remuneration Report (Audited)5 Executive key management personnel – reward outcomes (continued) 5E. FY2021 Long-term Incentive (continued) FY2021 LTI performance hurdle vesting conditions Performance rights issued under the FY2021 plan are subject to two performance measures with the following performance vesting schedules: Relative TSR performance measured over three years from 1 July 2020 to 30 June 2023 EPS CAGR performance measured over three years from 1 July 2020 to 30 June 2023 Cleanaway’s relative TSR rank compared with the TSR comparator group Percentage of TSR performance rights that vest Less than 50th percentile Equal to 50th percentile Nil 50% Greater than 50th percentile and up to (and including) 75th percentile Straight line pro rata vesting between 50% and 100% Above 75th percentile 100% Gateway: Performance Rights under EPS CAGR will only vest if ROIC is at least 5.5% or more for the Financial Year ending 30 June 2023 Cleanaway EPS CAGR Less than 4% At 4% Greater than 4% and up to (and including) 8% Greater than 8% and up to (and including) 10% Percentage of EPS CAGR performance rights that vest Nil 40% Straight line pro rata vesting between 40% and 90% Straight line pro rata vesting between 90% and 100% Above 10% 100% 5 1 Remuneration Report (Audited)234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT5 Executive key management personnel – reward outcomes (continued) 5F. Prior Long-term Incentive awards The following table outlines the terms of prior LTI offers outstanding: FY2019 LTI 1 FY2020 LTI 1 Performance period Three years: 1 July 2018 to 30 June 2021 Three years: 1 July 2019 to 30 June 2022 Overview Performance rights vesting subject to: Performance rights vesting subject to: • Relative TSR (50%) • ROIC (25%) • EPS CAGR (25%) • Relative TSR (50%) • EPS CAGR (50%) • The Return on Invested Capital (ROIC) for year ending 30 June 2022 acts as a gateway to EPS CAGR. Relative TSR performance hurdles TSR Ranking against the constituents of the S&P/ASX200 Industrial Sector Index: • Below 50th percentile – 0% vesting • At the 50th percentile – 50% vesting • 50th to 75th percentile – straight line vesting between 50% and 100% • Above 75th percentile – 100% vesting ROIC performance hurdles ROIC: • Below 6.25% – 0% vesting • 6.25% – 20% vesting Gateway: Performance Rights under EPS CAGR will only vest if ROIC is at least 5.8% or more for the Financial Year ending 30 June 2022. • 6.25%–6.75% – straight line vesting between 20% and 50% • 6.75%–7.25% – straight line vesting between 50% and 100% • 7.25% – 100% vesting EPS CAGR performance hurdles EPS CAGR: • Below 13% – 0% vesting • At 13% – 20% vesting EPS CAGR: • Below 9% – 0% vesting • At 9% – 20% vesting • 13%–15% – straight line vesting between • 9%–10.5% – straight line vesting between 20% and 50% 20% and 50% • 15%–18% – straight line vesting between • 10.5%– 2.5% – straight line vesting 50% and 100% between 50% and 100% • At or above 18% – 100% vesting • At or above 12.5% – 100% vesting 2,597,532 2,223,603 Number of performance rights remaining on issue at 30 June 2021 1 As a share-based payment, the portion of the performance rights relating to market-based conditions were valued for accounting purposes using the Monte Carlo simulation method and the portion relating to EPS or ROIC using the Black Scholes Model. Grant dates and fair values are contained in note 35 to the Consolidated Financial Statements. 5 2 Remuneration Report (Audited)5 Executive key management personnel – reward outcomes (continued) 5F. Prior Long-term Incentive awards (continued) Prior Long-term Incentive outcomes FY2019 LTI The FY2019 LTI was tested as at 30 June 2021. Based on Cleanaway’s relative TSR, ROIC and EPS performance over the performance period from 1 July 2018 to 30 June 2021, the offer will partially vest – with the relative TSR tranche vesting at 100%. The ROIC tranche and the EPS CAGR tranche did not vest. Executive KMP Mr Bansal, Mr Gill, Mr Crawford and Mr Richards all participated in the FY2019 LTI. Therefore, the following performance rights will vest: • Mr Bansal: 604,308 of his FY2019 LTI rights will vest; • Mr Gill: 123,808 of his FY2019 LTI rights will vest; • Mr Crawford: 107,488 of his FY2019 LTI rights will vest; and • Mr Richards: 83,504 of his FY2019 LTI rights will vest. 5 3 Remuneration Report (Audited)234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT6 Executive key management personnel – contract terms 6A. Executive KMP All Executive KMP are employed on the basis of an Executive Service Agreement (Agreement) that contains a range of terms and conditions including remuneration and other benefits, notice periods and termination benefits. Notice periods for Executive KMP are as follows: EXECUTIVE SERVICE AGREEMENTS TERM OF AGREEMENT NOTICE PERIOD BY EXECUTIVE NOTICE PERIOD BY CLEANAWAY EXECUTIVE KEY MANAGEMENT PERSONNEL V Bansal B J Gill P A Binfield M Crawford T Richards Open Open Open Open Open 12 months 12 months 6 months 12 months 6 months 12 months 12 months 6 months 12 months 6 months Any payment in lieu of notice and/or redundancy is not to exceed average annual base salary as defined by the Corporations Act 2001 over the previous three years. The Company may terminate Agreements immediately for cause, in which case the Executive is not entitled to any payment in lieu of notice or contractual compensation. The Agreements also provide for an Executive’s participation in the STI and LTI plans subject to Board approval of their eligibility and in accordance with the terms and conditions of the respective plans. Mr Bansal was entitled to travel and accommodation support, with the Company covering the costs associated with Mr Bansal’s accommodation in Melbourne. The cost to the Group in providing this support to Mr Bansal for the year ended 30 June 2021 is provided in section 5A. 6B. Leadership transition – KMP remuneration arrangements On 21 January 2021, Cleanaway announced that the Board and Mr Bansal had agreed that Mr Bansal would step down as CEO during FY21 as part of an orderly leadership transition. As part of this transition, Mr Chellew was appointed Executive Chairman and Mr Gill was appointed as Chief Operating Officer whilst a search for a new CEO was undertaken. On 10 May 2021, Cleanaway announced the appointment of Mark Schubert as CEO and Managing Director to succeed Mr Bansal. Mr Schubert is expected to commence in the role from 30 August 2021. Further details in relation to the remuneration arrangements relating to these changes are set out below. Terms of Appointment of Mark Schubert As announced on 10 May 2021, Mr Schubert’s remuneration arrangements comprise: • Fixed annual salary of $1.4 million, inclusive of superannuation. • A short-term incentive opportunity of 100% of salary at target and 150% of salary at maximum. • A long-term incentive opportunity of 120% of salary. In addition, Mr Schubert will receive a sign on entitlement in recognition of the forfeiture of certain incentives upon resigning from his prior employment. This entitlement worth $1.8 million will comprise: • $400,000 in cash, payable three months after he commences with Cleanaway; • $1.4 million of rights to Cleanaway shares granted on commencement of employment which will convert to shares in three separate tranches on the 1st, 2nd and 3rd anniversary of commencement. These sign on entitlements are each subject to Mr Schubert being employed by Cleanaway on the relevant dates and Mr Schubert not having provided notice of resignation nor having been terminated for cause prior to the relevant dates. 5 4 Remuneration Report (Audited)6 Executive key management personnel – contract terms (continued) 6B. Leadership transition – KMP remuneration arrangements (continued) Terms of Separation of Mr Bansal Mr Bansal stepped down from the role of CEO following the announcement made by the Company regarding the leadership transition on 21 January 2021. Mr Bansal commenced a period of gardening leave in March 2021 during which he was available to assist with project and transitional issues for the remainder of FY21. The Board determined that Mr Bansal was eligible for a prorated FY21 STI for the period he was CEO. The Board calculated his award based on results for 31 December 2020 and pro-rated this for the period he remained actively in the position of CEO. The Board assessed his STI entitlement at 45% of maximum. Each of the financial targets, comprising Group EBIT, Group Net Revenue and Group ROIC achieved at or just above target. The Group’s health and safety targets were met at target for the period. Group engagement scores were between threshold and target and the Group’s voluntary employment turnover target was met at stretch. Mr Bansal also participated in the FY2019 LTI Plan which was tested at the end of FY21. As outlined in section 5F above, 50% of rights vested under the FY2019 LTI offer, which resulted in the issue of 604,308 shares to Mr Bansal. In recognition of Mr Bansal’s more than 5 years’ service to the Group as CEO and the exceptional financial performance of the Company over that time, the Board determined that Mr Bansal should be treated as a good leaver for the purpose of the FY2020 LTI (the vesting is to be tested at the end of FY22). Accordingly, Mr Bansal’s FY2020 LTI has been left on foot. Mr Bansal did not participate in the FY2021 LTI offer. As noted above, Mr Bansal commenced a period of gardening leave in March 2021. At the end of the period of gardening leave, Mr Bansal received his contractual entitlements including payment in lieu of his notice period and accrued leave. In addition to this period of gardening leave and in return for payment in lieu of notice, Mr Bansal agreed to a revised post- employment contractual restraint that was more broad reaching than that contained in his original employment agreement entered into in 2015 and to provide ongoing support to the leadership transition, in particular in relation to the acquisition of certain of Suez’s post-collection assets in Sydney. The Board believed these additional undertakings to be valuable given the significant changes in the Australian waste management industry during the year, in particular the industry consolidation that has occurred, combined with the entry of new participants and the strategic importance of the acquisition of certain of Suez’s post-collection assets in Sydney. Terms of Appointment of Mark Chellew as Executive Chairman Mark Chellew was appointed as Executive Chairman on 21 January 2021. In his role as Executive Chairman, Mr Chellew receives an additional fee of $54,167 per month to reflect his broader responsibilities. In determining this fee, the Board had regard to the additional responsibilities and time commitment required of Mr Chellew following his appointment, in particular that the position of CEO was vacant during this period and Mr Chellew’s involvement in the proposed acquisition of Suez’s Australian waste management business. Under the terms of his appointment as Executive Chairman Mr Chellew will not participate in the Company’s STI or LTI Plans. His appointment was deemed to take effect from 1 January 2021, is on a month-to-month basis and can be terminated by either party immediately upon notice. Mr Chellew will return to the position of Non-Executive Chairman from 1 October 2021. Terms of Appointment of Brendan Gill as Chief Operating Officer Mr Gill was in the role of Chief Financial Officer (CFO) prior to his appointment as Chief Operating Officer (COO). Mr Gill was appointed COO of the Company following Mr Bansal stepping down from the position of CEO. In recognition of his broader responsibilities as COO, Mr Gill’s annual total fixed remuneration was increased to $1,000,000 with effect from 1 February 2021 and his at target STI opportunity was increased to 60%. There were no other changes to Mr Gill’s remuneration arrangements or the terms of his employment with the Company following his appointment as COO. 5 5 Remuneration Report (Audited)234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT7 Executive key management personnel – additional remuneration tables 7A. Performance rights granted and movement during the year The aggregate number of performance rights in the Company that were granted as compensation, exercised or lapsed in relation to each Executive KMP for the year ended 30 June 2021 is set out in the following table: YEAR ENDED 30 JUNE 2021 BALANCE AT 1 JULY 2020 NUMBER EXECUTIVE KEY MANAGEMENT PERSONNEL RIGHTS GRANTED DURING THE YEAR 1 NUMBER VALUE OF RIGHTS GRANTED DURING THE YEAR 2 $ RIGHTS EXERCISED DURING THE YEAR NUMBER VALUE OF RIGHTS EXERCISED DURING THE YEAR 3 $ LAPSED/ CANCELLED DURING THE YEAR NUMBER BALANCE AT 30 JUNE 2021 NUMBER V Bansal B J Gill P A Binfield M Crawford T Richards 3,935,418 849,541 – 744,252 384,321 – 217,290 222,171 189,568 154,642 – (1,252,764) 3,089,938 (511,308) 2,171,346 437,634 (270,571) 662,945 (146,031) 650,229 439,898 – – – 222,171 381,800 (239,634) 587,967 (127,963) 566,223 311,304 (19,682) 42,276 (69,587) 449,694 1 2 Performance rights were granted under the FY2021 LTI Offer and FY2020 STI deferral on 16 December 2020, except for Mr Binfield’s FY2021 LTI Offer which was granted on 15 February 2021. The fair value of performance rights granted to Executive KMP was calculated using Monte Carlo simulation and the Black Scholes Model and is $1.57 to $2.30 per Performance Right under the FY2021 LTI Offer. Refer to note 35 to the Consolidated Financial Statements which sets out the fair value per tranche of performance rights granted. 3 Calculated as the market value of Cleanaway shares on the date of exercise. 4 All performance rights have no exercise price and once vested they have no expiry date. The grant date for each tranche of performance rights is set out in note 35 to the Consolidated Financial Statements. 7B. Performance rights as at 30 June 2021 The number of performance rights as at 30 June 2021 by plan for the Executive KMP is set out in the following table: ISSUED EXECUTIVE KEY MANAGEMENT PERSONNEL V Bansal B J Gill P A Binfield M Crawford T Richards 2020 STI 2019 LTI 2020 LTI 2021 LTI BALANCE AT 30 JUNE 2021 VESTED & EXERCISABLE AT THE END OF THE YEAR – 1,208,615 16,818 247,616 – 14,673 11,620 – 214,976 167,009 962,731 185,323 – 161,679 128,043 – 2,171,346 200,472 222,171 174,895 143,022 650,229 222,171 566,223 449,694 – 16,818 – 14,673 11,620 No terms of performance rights have been altered by the Group during the reporting period. The Board has not previously exercised its discretion to allow the early vesting of any performance rights under any of the incentive plans. 7C. Securities trading policy The Company prohibits Executives from entering into any hedging arrangements or acquiring financial products (such as equity swaps, caps and collars or other hedging products) over unvested performance rights which have the effect of reducing or limiting exposure to risks associated with the market value of the Company’s securities. No Directors or Executive KMP may directly or indirectly enter into any margin loan facility against the Company’s securities unless the prior written consent of the Chairman of the Board is obtained. 5 6 Remuneration Report (Audited)7 Executive key management personnel – additional remuneration tables (continued) 7D. Company performance The following table shows Cleanaway’s annual performance over the last five years. For further explanation of details of Cleanaway’s performance, see the Operating and Financial review section of Director’s Report. Net Revenue – $’M 1 Profit attributable to ordinary equity holders – $’M 2 EPS – cents 3 Underlying EPS – cents 3 Dividends per share – cents Shares on issue – number Market capitalisation – $’M Share price at 30 June – $ Change in share price – $ FY2017 1,350.7 FY2018 1,564.9 72.5 4.4 4.7 2.10 103.5 5.6 5.3 2.50 FY2019 2,109.1 120.4 5.9 6.9 3.55 FY2020 2,100.1 FY2021 2,198.9 112.9 5.5 7.5 4.10 145.3 7.1 7.4 4.60 1,592,889,317 2,036,684,232 2,044,507,391 2,053,944,831 2,059,434,558 2,198.2 3,442.0 4,763.7 4,518.7 5,436.9 1.38 0.58 1.69 0.31 2.33 0.64 2.20 (0.13) 2.64 0.44 1 Net Revenue is Revenue excluding landfill levies (FY2017: $103.7 million; FY2018: $149.4 million; FY2019: $174.0 million; FY2020: $232.0 million; and 2 3 FY2021: $207.5 million). Includes underlying adjustments after tax (FY2017: $5.0 million; FY2018: $(5.5) million; FY2019: $20.1 million; FY2020: $37.4 million; and FY2021: $5.5 million). The calculation of EPS for comparative periods prior to FY2018 were adjusted to reflect the bonus element in the non-renounceable entitlement offer which occurred during December 2017 and January 2018 and Underlying EPS excludes the impact of AASB 16 in FY2020 and FY2021. 5 7 Remuneration Report (Audited)234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT8 Shareholdings and other related party transactions 8A. Shareholdings The movement for the year ended 30 June 2021 in the number of ordinary shares in the Company held, directly or indirectly or beneficially, by each KMP, including their related parties, is detailed in the following table. NAME NON-EXECUTIVE DIRECTORS: M P Chellew R M Smith E R Stein 1 T A Sinclair R M Harding P G Etienne S L Hogg I A Player EXECUTIVE KEY MANAGEMENT PERSONNEL V Bansal 2 B J Gill P A Binfield M Crawford T Richards BALANCE AT THE START OF THE YEAR RECEIVED DURING THE YEAR ON THE EXERCISE OF RIGHTS OTHER CHANGES DURING THE YEAR BALANCE AT THE END OF THE YEAR 156,548 123,720 125,688 49,417 29,696 82,715 – – 5,418,844 842,927 – 500,000 – – – – – – – – – – 2,400 – – – – – – 156,548 126,120 125,688 49,417 29,696 82,715 – – 1,252,764 (4,000,000) 2,671,608 270,571 – 239,634 19,682 (300,000) 30,000 (405,000) – 813,498 30,000 334,634 19,682 1 2 The balance at the end of the year for Emma Stein reflects her shareholding on the date she ceased being a Director on 31 December 2020. The balance at the end of the year for Vik Bansal reflects his shareholding on the date he ceased being KMP on 5 March 2021. 8B. Loans to Executive key management personnel There were no loans to Executive KMP made during the period and no outstanding balances at reporting date. 8C. Other transactions and balances with Executive key management personnel and their related parties Some of the Directors hold, or have previously held, positions in companies with which Cleanaway has commercial relationships which are based on normal terms and conditions on an arm’s length basis. Transactions with entities where the relationship is limited to a common Non-Executive Directorship, including any Chairperson roles, are not considered related party transactions. The Board has assessed all of the relationships between the Group and companies in which Directors hold or held positions and has concluded that in all cases the relationships do not interfere with the Directors’ exercise of objective, unfettered or independent judgement or their ability to act in the best interest of the Group. 5 8 Remuneration Report (Audited)Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Auditor’s Independence Declaration to the Directors of Cleanaway Waste Management Limited As lead auditor for the audit of Cleanaway Waste Management Limited for the financial year ended 30 June 2021, I declare to the best of my knowledge and belief, there have been: (a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) no contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Cleanaway Waste Management Limited and the entities it controlled during the financial year. Ernst & Young Brett Croft Partner 19 August 2021 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 5 9 Auditor’s Independence Declaration234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTRevenue  Other income Labour related expenses Collection, recycling and waste disposal expenses Fleet operating expenses Property expenses Other expenses Gain on loss of control of subsidiary Share of losses from equity accounted investments Depreciation and amortisation expense Write-off of assets Impairment of assets Profit from operations Net finance costs Profit before income tax  Income tax expense Profit after income tax Attributable to: Ordinary equity holders  Non-controlling interest Profit after income tax NOTES 6 7 23 5 5 8 9 2021 $’M 2020 $’M 2,406.4 2,332.1 4.5 (900.7) (630.6) (243.7) (44.6) (60.5) – (2.0) (276.4) (5.4) (4.3) 242.7 (35.9) 206.8 (59.1) 147.7 145.3 2.4 147.7 34.6 (861.1) (649.8) (228.0) (45.7) (94.0) 1.1 (2.1) (262.6) (19.6) – 204.9 (49.7) 155.2 (42.6) 112.6 112.9 (0.3) 112.6 The above Consolidated Income Statement should be read in conjunction with the accompanying notes. 6 0 Consolidated Income Statement For the year ended 30 June 2021Profit after income tax Other comprehensive income (to be reclassified to profit or loss in subsequent periods) Net loss on cross-currency interest rate swaps (net of tax) Net comprehensive income recognised directly in equity Total comprehensive income for the year Attributable to: Ordinary equity holders  Non-controlling interest Total comprehensive income for the year NOTES 17 2021 $’M 147.7 (0.7) (0.7) 147.0 144.6 2.4 147.0 2020 $’M 112.6 (0.1) (0.1) 112.5 112.8 (0.3) 112.5 Earnings per share attributable to the ordinary equity holders of the Company: Basic earnings per share (cents) Diluted earnings per share (cents) 10 10 7.1 7.0 5.5 5.5 The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 6 1 Consolidated Statement of Comprehensive Income For the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTAssets Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Total current assets Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Equity accounted investments  Net deferred tax assets Derivative financial instruments Other assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Income tax payable Interest-bearing liabilities Employee entitlements  Provisions Other liabilities Total current liabilities Non-current liabilities Interest-bearing liabilities Derivative financial instruments Employee entitlements  Provisions Other liabilities  Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Parent entity interest Non-controlling interest Total equity NOTES 2021 $’M 2020 $’M 11 12 13 24 20 21 22 23 9 32 24 14 15 25 26 27 15 32 25 26 27 16 17 69.4 372.2 22.1 28.8 492.5 1,241.5 479.2 2,320.4 41.6 52.2 – 24.1 79.8 348.1 19.4 23.1 470.4 1,174.0 416.7 2,306.2 34.5 66.9 30.0 23.9 4,159.0 4,651.5 4,052.2 4,522.6 297.6 271.1 6.9 76.9 78.8 68.2 35.6 6.5 69.6 71.2 79.0 34.9 564.0 532.3 996.4 31.5 9.9 306.4 107.0 1,451.2 2,015.2 2,636.3 995.8 – 7.2 287.6 128.7 1,419.3 1,951.6 2,571.0 2,695.7 2,688.7 25.1 (86.9) 23.9 (142.6) 2,633.9 2,570.0 2.4 1.0 2,636.3 2,571.0 The above Consolidated Balance Sheet should be read in conjunction with the accompanying notes. 6 2 Consolidated Balance SheetAs at 30 June 2021At 1 July 2020 Profit for period Other comprehensive income Total comprehensive income for the year Share-based payment expense Dividends reinvested/(paid) Balance at 30 June 2021 At 1 July 2019 Adjustment on adoption of AASB 16 Adjusted balance at 1 July 2020 Profit for period Other comprehensive income  Total comprehensive income for the year Loss of control of subsidiary Acquisition of non-controlling interests Dividends reinvested/(paid) Balance at 30 June 2020 PARENT ENTITY INTEREST RESERVES $’M RETAINED EARNINGS $’M NON- CONTROLLING INTEREST $’M TOTAL $’M ORDINARY SHARES $’M 2,688.7 – – – – 7.0 2,695.7 2,678.2 – 2,678.2 – – – – – 10.5 23.9 (142.6) 2,570.0 – (0.7) (0.7) 1.9 – 25.1 24.0 – 24.0 – (0.1) (0.1) – – – 145.3 – 145.3 – (89.6) (86.9) 145.3 (0.7) 144.6 1.9 (82.6) 2,633.9 (167.9) 2,534.3 (7.6) (7.6) (175.5) 2,526.7 112.9 – 112.9 – (0.1) (79.9) 112.9 (0.1) 112.8 – (0.1) (69.4) TOTAL EQUITY $’M 2,571.0 147.7 (0.7) 147.0 1.9 (83.6) 2,636.3 2,536.6 (7.6) 2,529.0 112.6 (0.1) 112.5 (0.6) (0.3) (69.6) 2,571.0 1.0 2.4 – 2.4 – (1.0) 2.4 2.3 – 2.3 (0.3) – (0.3) (0.6) (0.2) (0.2) 1.0 2,688.7 23.9 (142.6) 2,570.0 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 6 3 Consolidated Statement of Changes in EquityFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTCash flows from operating activities Profit before income tax Adjustments for: Depreciation and amortisation expense Write-off of assets Impairment of assets Net finance costs Share-based payment expense Net gain on derecognition of right-of-use asset and lease liability Remediation and rectification provision remeasurement Share of losses from equity accounted investments Net gain on disposal of property, plant and equipment Net gain on disposal of assets held for sale Gain on loss of control of subsidiary Other non-cash items Net cash from operating activities before changes in assets and liabilities Changes in assets and liabilities: (Increase)/decrease in receivables Decrease/(increase) in other assets Increase in inventories Increase in payables Increase in employee entitlements Decrease in other liabilities Decrease in provisions Cash generated from operating activities Net interest paid Income taxes paid Net cash from operating activities Cash flows from investing activities Payments for property, plant and equipment Payments for intangible assets Payments for purchase of businesses (net of cash acquired) Proceeds from disposal of property, plant and equipment Investment in equity accounted investments Proceeds from sale of investments Proceeds on loss of control of subsidiary (net of cash derecognised) Dividends received from equity accounted investments Loans to equity accounted investments Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Payment of debt and equity raising costs  Payment of dividends to ordinary equity holders Payment of dividends to non-controlling interests Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year NOTES 2021 $’M 2020 $’M 206.8 155.2 276.4 5.4 4.3 35.9 1.1 (2.0) (3.4) 2.0 (3.1) – – 0.3 523.7 (21.4) 0.6 (3.3) 20.6 10.0 (1.5) (30.0) 498.7 (32.2) (42.1) 424.4 (239.0) (7.2) (46.9) 17.7 (11.5) – – 1.3 (5.5) (291.1) 290.0 (285.2) (64.0) (0.9) (82.6) (1.0) (143.7) (10.4) 79.8 69.4 262.6 19.6 – 49.7 – – (0.2) 2.1 (4.6) (8.1) (1.1) 0.3 475.5 28.5 (1.7) (0.2) 20.7 5.4 (0.4) (43.6) 484.2 (33.2) (49.5) 401.5 (200.2) (9.6) (84.8) 24.3 (12.0) 0.1 2.0 1.2 (3.2) (282.2) 397.6 (365.8) (55.2) (2.7) (69.4) (0.2) (95.7) 23.6 56.2 79.8 11 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. 6 4 Consolidated Statement of Cash FlowsFor the year ended 30 June 20211 Corporate information Cleanaway Waste Management Limited and its subsidiaries (Cleanaway or the Group) is a for-profit entity domiciled and incorporated in Australia. The Financial Report of Cleanaway Waste Management Limited consists of the Consolidated Financial Statements of the Group and the Group’s interests in equity accounted investments. The Consolidated Financial Statements of the Group for the year ended 30 June 2021 were authorised for issue in accordance with a resolution of the Directors on 19 August 2021. 2 Statement of compliance The Financial Report is a general purpose financial report which has been prepared on a going concern basis and in accordance with the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The Financial Report also complies with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. 3 Basis of preparation The Financial Report has been prepared on the basis of historical cost, except for the revaluation of derivative financial instruments. Cost is based on the fair value of the consideration given in exchange for assets. The accounting policies and methods of computation adopted in the preparation of the Financial Report are consistent with those adopted and applied in the corresponding period. At 30 June 2021 the Group had a net current asset deficiency of $71.5 million (30 June 2020: net current asset deficiency of $61.9 million). As set out in note 15 to the Financial Statements, the Group has unutilised committed debt facilities of $930.3 million at 30 June 2021 available to repay the Group’s creditors as required and therefore the Directors are satisfied that the Group can meet its financial obligations as and when they fall due. The Financial Report is presented in Australian dollars and all values are rounded to the nearest hundred thousand dollars, except when otherwise indicated. This presentation is consistent with the requirements of Legislative Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial statements. Refer to note 39 for a summary of the Group’s significant accounting policies. 6 5 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT4 Critical accounting estimates and judgements The preparation of the Financial Report 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. Actual results may vary from these estimates under different assumptions and conditions. Significant accounting estimates and judgements in the Financial Report are: (a) Recoverable amount of property, plant and equipment, right-of-use assets and intangible assets Each asset or cash generating unit (CGU) is evaluated every reporting period to determine whether there are any indications of impairment. If any such indication exists, a formal estimate of recoverable amount is performed and where the carrying amount exceeds the recoverable amount, an impairment loss is recognised. Goodwill and other intangible assets with an indefinite life are tested for impairment on an annual basis, irrespective of whether there is an indication of impairment. The recoverable amount of each CGU is determined based on the higher of fair value less costs to dispose (FVLCD) and value-in-use. Both of these valuations utilised a discounted cash flow approachapproach which require the use of estimates and assumptions. In determining the net present value of the discounted cash flows of the CGUs, cash flow projections are based on forecasts determined by management. The discounted cash flows of the CGUs, other than those associated with landfill assets, are determined using five-year forecasted cash flows and a terminal value calculation. These cash flows include estimates and assumptions related to revenue growth, capital expenditure, terminal value growth rates, commodity prices expense profile, and costs to dispose in a FVLCD calculation. Cash flows from the landfill assets include estimates and assumptions in relation to: waste volumes over the life of the landfill, cell development capital expenditure, waste mix, revenue and growth, expense profile, and value and timing of land sales. These estimates and assumptions are subject to risk and uncertainty; such that there is a possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances some or all of the assets may be impaired, or a previous impairment charge reversed. Any potential impact arising from an impairment or reversal of an impairment would be recorded in the Consolidated Income Statement. Further details on the Group’s impairment assessment and policy are disclosed in note 22 and note 39(e). (b) Landfill asset depreciation Landfill assets comprise the acquisition of landfill land, airspace, cell development costs, site infrastructure and landfill site improvement costs, and remediation assets. Landfill airspace, cell development costs and remediation assets are depreciated on a usage basis. This depreciation method requires significant estimation of compaction rates, airspace and future costs. Therefore, changes in these estimates will cause changes in depreciation rates. The depreciation rates are calculated based on the most up to date accounting estimates and applied prospectively. Further details on the Group’s landfill asset accounting policy are disclosed in note 39(j). 6 6 Notes to the Consolidated Financial StatementsFor the year ended 30 June 20214 Critical accounting estimates and judgements (continued) (c) Lease terms for right-of-use assets and lease liabilities Extension and termination options are included in lease arrangements across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. In determining the lease term, all facts and circumstances are considered that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of Cleanaway. In determining the lease term, the Group has applied judgement over the facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. All property leases on which a prized asset is situated are considered reasonably certain to exercise an extension option. Further details on the Group’s lease accounting policy are disclosed in note 39(n). (d) Provision for remediation and rectification The Group’s remediation and rectification provisions related to landfills are calculated based on the present value of the future cash outflows expected to be incurred to remediate landfills which will include the costs of capping the landfill site, remediation and rectification costs and post-closure monitoring activities. The measurement of the provisions requires significant estimates and assumptions such as: discount rate, inflation rate, assessing the requirements of the Environment Protection Authority (EPA) or other government authorities, the timing, extent and costs of activity required and the area of the landfill to be remediated or rectified, which is determined by volumetric aerial surveys. These uncertainties may result in future actual expenditure differing from the amounts currently provided. The provisions for remediation and rectification for each landfill site are periodically reviewed and updated based on the facts and circumstances available at the time. Changes to the estimated future costs for remediating open sites, still accepting waste, are recognised in the Consolidated Balance Sheet by adjusting both the remediation asset and provision. For closed sites, changes to the estimated costs are recognised in the Consolidated Income Statement. Changes to estimated costs related to rectification provisions are recognised in the Consolidated Income Statement. Remediation and makegood provisions in relation to the Group’s owned and leased industrial properties are reviewed periodically and updated based on facts and circumstances known at the time, applying certain assumptions about the risk rating related to the relevant site and the timeframe of when the site may require remediation. Changes in estimates related to removing structures on leased sites and remediating those sites are recognised in the Consolidated Balance Sheet by adjusting the leasehold improvement asset and the remediation provision. For closed industrial sites or where subsurface remediation is identified, changes to the estimated costs are recognised in the Consolidated Income Statement. Further details on the Group’s remediation accounting policy are disclosed in note 39(o). (e) Taxation Deferred tax assets, including those arising from tax losses not recouped, capital losses and temporary differences, are recognised in the Consolidated Balance Sheet, only where it is considered probable that they will be recovered, which is dependent on the generation of sufficient future taxable profits. Management considers that it is probable that future taxable profits will be available to utilise those temporary differences. Judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future profits. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the Consolidated Balance Sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the Consolidated Income Statement. Further details on the Group’s taxation accounting policy are disclosed in note 39(d). 6 7 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT5 Segment reporting Operating segments are identified on the basis of how the Chief Operating Decision Maker reviews internal reports about components of the Group in order to assess the performance and allocation of resources to a particular segment. Information reported to the Group’s Chief Executive Officer (Chief Operating Decision Maker) for the purpose of performance assessment and resource allocation is specifically focused on the following segments: • Solid Waste Services Comprises the collection, recovery and disposal of all types of solid waste, including putrescible waste, inert waste, household waste and recovered waste. Waste streams are generally processed through our resource recovery and recycling facilities, transfer stations and landfills. • Industrial & Waste Services Comprises a wide variety of services provided to the Infrastructure, Industrial and Resources markets. Services include drain cleaning, non-destructive digging, vacuum loading, high pressure cleaning, pipeline maintenance and CCTV. • Liquid Waste & Health Services Liquid Waste comprises the collection, treatment, processing, refining and recycling and destruction of hazardous and non-hazardous liquids, hydrocarbons and chemical waste, specialised product destruction, hazardous waste and e-waste. Health Services comprises the provision of services to the health sector for the safe treatment and disposal of health-related waste which includes sharps management, medical waste, pharmaceutical waste, healthcare hazardous waste and quarantine waste. Unallocated items include the Group’s share of profits from equity accounted investments and corporate balances. Corporate balances relate to shared services functions that are not directly attributable to an identifiable segment. These functions include management, finance, legal, information technology, marketing, and human resources that provide support to the other segments identified above. No operating segments have been aggregated to form the reportable segments. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. The Group has the following allocation policies: • Sales between segments are on normal commercial terms; and • Corporate charges are allocated where possible based on estimated usage of corporate resources. Segment assets and liabilities have not been disclosed as these are not provided to the Chief Operating Decision Maker. This information is provided at a Group level only. Net finance costs are not allocated to individual segments as the underlying instruments are managed on a Group basis. Current taxes, deferred taxes and certain financial assets and liabilities are not allocated to those segments as they are also managed on a Group basis. Inter-segment revenues are eliminated on consolidation. 6 8 Notes to the Consolidated Financial StatementsFor the year ended 30 June 20215 Segment reporting (continued) OPERATING SEGMENTS UNALLOCATED SOLID WASTE SERVICES $’M INDUSTRIAL & WASTE SERVICES $’M LIQUID WASTE & HEALTH SERVICES $’M TOTAL OPERATING SEGMENTS $’M EQUITY ACCOUNTED INVEST- MENTS $’M ELIMINA- TIONS $’M CORPORATE $’M GROUP $’M 2021 Revenue Revenue from customers  1,615.9 298.9 Other revenue Inter-segment sales Total revenue Underlying EBITDA 1 Depreciation and amortisation  Underlying EBIT 1 Material recycling facility fire Acquisition and integration costs 2 CEO transition costs Change in discount rate on provisions Employee entitlements Westgate tunnel contract costs 3 Fire at Welshpool transfer station 4 Profit from operations (EBIT) Net finance costs  Profit before income tax Income tax expense Profit after income tax Capital expenditure: 12.0 55.9 0.1 6.6 1,683.8 305.6 456.3 23.2 33.2 512.7 405.5 (192.5) 213.0 48.0 110.0 (25.4) 22.6 (42.4) 67.6 – – (95.7) (95.7) – – – 2,371.1 35.3 – 2,406.4 563.5 (260.3) 303.2 – – – – (2.0) – (2.0) – – 2,371.1 35.3 – – – 2,406.4 (26.4) 535.1 (16.1) (276.4) (42.5) 258.7 (7.0) (7.9) (4.3) 3.4 7.0 (4.5) (2.7) 242.7 (35.9) 206.8 (59.1) 147.7 Property, plant and equipment Intangible assets 172.3 0.2 21.0 – 43.2 0.2 – – 236.5 0.4 – – 2.5 6.8 239.0 7.2 1 Underlying earnings are categorised as non-IFRS financial information and therefore have been presented in compliance with ASIC Regulatory Guide 230 – Disclosing non-IFRS information. The exclusion of underlying adjustments provides a result which, in the Directors’ view, more closely reflects the ongoing operations of the Group. Includes write-off of intangible assets of $2.7 million. Includes impairment of assets of $4.3 million. Includes write-off of property, plant and equipment of $2.7 million. 2 3 4 6 9 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT5 Segment reporting (continued) OPERATING SEGMENTS UNALLOCATED SOLID WASTE SERVICES $’M INDUSTRIAL & WASTE SERVICES $’M LIQUID WASTE & HEALTH SERVICES $’M TOTAL OPERATING SEGMENTS $’M EQUITY ACCOUNTED INVEST- MENTS $’M ELIMINA- TIONS $’M CORPORATE $’M GROUP $’M 2020 Revenue Revenue from customers 1,549.0 300.7 450.1 11.8 44.0 – 12.7 20.5 43.0 – – (99.7) 2,299.8 32.3 – 1,604.8 313.4 513.6 (99.7) 2,332.1 388.3 (175.6) 212.7 45.9 106.3 (24.5) 21.4 (42.0) 64.3 – – – 540.5 (242.1) 298.4 Other revenue Inter-segment sales Total revenue Underlying EBITDA Depreciation and amortisation  Underlying EBIT Material recycling facility fire Acquisition and integration costs Gain on sale of property Employee entitlements Change in discount rate on provisions Gain on loss of control of subsidiary Profit from operations (EBIT) Net finance costs  Profit before income tax Income tax expense Profit after income tax Capital expenditure: – – – – (2.1) – (2.1) – 2,299.8 – – 32.3 – – 2,332.1 (22.7) 515.7 (17.0) (259.1) (39.7) 256.6 (14.6) (36.3) 8.1 (8.0) (2.0) 1.1 204.9 (49.7) 155.2 (42.6) 112.6 Property, plant and equipment Intangible assets 143.8 2.6 20.0 0.1 34.6 – – – 198.4 2.7 – – 1.8 6.9 200.2 9.6 6 Revenue Revenue from customers 1 Other revenue 1 Refer to note 5 for disaggregation of revenue. 2021 $’M 2,371.1 35.3 2,406.4 2020 $’M 2,299.8 32.3 2,332.1 The Group has a right to invoice all revenue to date, except those amounts disclosed as contract assets in note 12. The Group has chosen not to disclose the amount of remaining performance obligations under contracts, where it has a right to invoice as services are performed. Remaining performance obligations for work which is priced on a fixed basis where the right to invoice is conditional on the work being completed are set out in note 12. 7 0 Notes to the Consolidated Financial StatementsFor the year ended 30 June 20217 Other income Gain on disposal of property, plant and equipment Other Insurance recoveries 8 Net finance costs Finance costs Interest on borrowings Interest on leases Amortisation of capitalised borrowing costs Unwind of discount on provisions and other liabilities  Gain on modification of fixed rate borrowings 1 Amortisation of gain on modification of fixed rate borrowings Fair value gain/(loss) on USPP Notes Fair value (loss)/gain on cross currency interest rate swaps (CCIRS) 2 Finance income Interest revenue Net finance costs 2021 $’M 3.1 1.4 – 4.5 2020 $’M 12.7 1.1 20.8 34.6 2021 $’M 2020 $’M (14.7) (16.0) (2.7) (9.2) 7.9 (1.3) 60.7 (60.9) (36.2) 0.3 0.3 (35.9) (19.7) (15.7) (4.6) (10.5) – – (34.0) 33.4 (51.1) 1.4 1.4 (49.7) 1 On 19 October 2020 the $90.0 million Clean Energy Finance Corporation term loan facility was amended including a reduction in the fixed interest rate. 2 The $7.9 million gain on modification of fixed rate debt is net of fees of $1.7 million, paid to the lender. Fair value (loss)/gain on CCIRS includes net loss of $60.9 million (2020: net gain of $33.4 million) relating to fair value and cash flow hedges (including net hedge ineffectiveness $2.8 million (2020: $0.4 million)) and other fair value changes during the period. Refer to note 17(a) for fair value amounts reclassified from the hedge reserve and 32(d) for all fair value movements on the CCIRS and USPP Notes. Refer to note 39(c) for the Group’s accounting policy on finance costs. 7 1 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT9 Income tax (a) Amounts recognised in the Consolidated Income Statement Current tax expense  Current year Adjustments in respect of prior years Deferred tax expense Origination and reversal of temporary differences Adjustments in respect of prior years Income tax expense 2021 $’M 41.1 1.6 42.7 18.5 (2.1) 16.4 59.1 2020 $’M 42.9 (4.8) 38.1 0.1 4.4 4.5 42.6 (b) Amounts recognised directly in other comprehensive income or equity Deferred income tax benefit recognised directly in other comprehensive income of $0.3 million (2020: benefit of $0.1 million) relates to the tax effect of items recognised in the hedge reserve. Deferred income tax benefit recognised directly in equity for the year of $0.8 million (2020: nil) relates to the tax effect of items recognised in the employee equity benefits reserve. (c) Reconciliation between tax expense and pre-tax net profit at the statutory rate Profit before tax  Income tax using the corporation tax rate of 30% (2020: 30%) Increase/(decrease) in income tax expense due to: Share of losses from equity accounted investments Non-deductible expenses  Business acquisition costs Adjustments in respect of prior years Research and development tax credits Non-assessable gain on sale of properties Non-deductible loss on loans Non-deductible gain on loss of control of subsidiary Employee share plan expenses Non-assessable gain on remeasurement of contingent consideration Income tax expense 2021 $’M 2020 $’M 206.8 155.2 62.0 46.6 0.9 0.3 0.5 (0.5) (3.1) (0.1) – – – (0.9) 59.1 0.9 0.1 1.0 (0.4) (3.1) (3.4) 1.1 (0.3) 0.1 – 42.6 7 2 Notes to the Consolidated Financial StatementsFor the year ended 30 June 20219 Income tax (continued) (d) Deferred tax Deferred tax in the Consolidated Balance Sheet relates to the following: 2021 Deferred tax assets PP&E Leases Employee benefits Provisions Tax losses Other Deferred tax liabilities Intangible assets Other Net deferred tax assets 2020 Deferred tax assets PP&E Leases Employee benefits Provisions Tax losses Other Deferred tax liabilities Intangible assets Other Net deferred tax assets OPENING BALANCE $’M RECOGNISED IN PROFIT OR LOSS $’M RECOGNISED IN OTHER COMPREHENSIVE INCOME $’M RECOGNISED DIRECTLY IN EQUITY $’M ACQUIRED IN BUSINESS COMBINATION $’M OTHER $’M CLOSING BALANCE $’M 45.1 7.0 26.0 87.8 – 42.5 (126.5) (15.0) 66.9 (7.0) (3.4) 2.3 (8.7) – 3.3 6.6 (9.5) (16.4) – – – – – – – 0.3 0.3 – – – – – 0.8 – – 0.8 (1.3) – 0.1 3.9 0.9 – (3.0) – 0.6 – – – – – – – – – 36.8 3.6 28.4 83.0 0.9 46.6 (122.9) (24.2) 52.2 OPENING BALANCE $’M RECOGNISED IN PROFIT OR LOSS $’M RECOGNISED IN OTHER COMPREHENSIVE INCOME $’M RECOGNISED DIRECTLY IN EQUITY $’M ACQUIRED IN BUSINESS COMBINATION $’M OTHER 1, 2 $’M CLOSING BALANCE $’M 49.8 0.6 23.2 92.0 0.2 41.4 (130.7) (13.8) 62.7 (4.1) 3.1 2.5 (10.5) 1.0 1.1 5.1 (2.7) (4.5) – – – – – – – 0.1 0.1 – – – – – – – – – (0.6) – 0.3 6.3 – – (1.3) – 4.7 – 3.3 – – (1.2) – 0.4 1.4 3.9 45.1 7.0 26.0 87.8 – 42.5 (126.5) (15.0) 66.9 1 Other leases includes tax effect of initial application of AASB 16 of $3.3 million. 2 Includes $0.6 million related to the derecognition of subsidiary on loss of control. Refer to note 28. 7 3 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT10 Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) 2021 7.1 7.0 2020 5.5 5.5 (i) Basic earnings per share Basic earnings per share is calculated by dividing the net profit after income tax attributable to ordinary equity holders of the Group by the weighted average number of ordinary shares outstanding during the financial year. Reconciliation of earnings used as the numerator in calculating basic earnings per share: Profit after income tax Net (profit)/loss attributable to non-controlling interests Profit after tax attributable to ordinary equity holders Reconciliation of weighted average number of ordinary shares: 2021 $’M 147.7 (2.4) 145.3 2020 $’M 112.6 0.3 112.9 2021 2020 Weighted average number of ordinary shares used as the denominator in calculating earnings per share Number for basic earnings per share Effect of potential ordinary shares Number for diluted earnings per share 2,057,379,071 2,050,673,797 7,184,608 10,379,638 2,064,563,679 2,061,053,435 (ii) Diluted earnings per share Diluted earnings per share adjusts 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. Dilutive potential ordinary shares are limited to performance rights issued under the Group’s Long-term and Short-term Incentive plans. Refer to note 35 for details. The dilutive effect of the performance rights on basic earnings per share reported above is not material. 11 Cash and cash equivalents Composition of cash and cash equivalents Cash at bank and on hand Refer to note 39(g) for the Group’s accounting policy on cash and cash equivalents. 2021 $’M 69.4 69.4 2020 $’M 79.8 79.8 74 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202112 Trade and other receivables Trade receivables Contract assets 1 Other receivables Provision for expected credit losses 2021 $’M 366.7 1.6 6.0 (2.1) 2020 $’M 347.6 1.5 4.8 (5.8) 372.2 348.1 1 Contract assets arise when the Group has performed work but does not yet have the right to invoice. This is the case in the Industrial & Waste Services operating segment when work is performed on a fixed price quote. Refer to note 39(h) for the Group’s accounting policy on trade and other receivables. The ageing of the Group’s trade receivables at the reporting date was: Not past due Past due 1 – 30 days Past due 31 – 120 days Past due 121 days or more The movement in the provision for expected credit losses during the year was as follows: Opening balance Provisions acquired Provisions recognised 1 Reversal of provisions Utilisation of provisions Closing balance 2021 $’M 292.7 52.5 15.0 6.5 366.7 2021 $’M 5.8 0.1 2.7 (3.8) (2.7) 2.1 2020 $’M 268.8 41.9 21.9 15.0 347.6 2020 $’M 5.8 – 6.0 (2.5) (3.5) 5.8 1 Expected credit losses related to COVID-19 have been considered in determining the provision for the current and comparative year. No single customer’s annual revenue is greater than 1.8% (2020: 1.7%) of the Group’s total revenue. Trade and other receivables that are neither past due or impaired are considered to be of a high credit quality. 13 Inventories Raw materials and consumables – at cost  Work in progress – at cost Finished goods – at cost Total inventory costs recognised as an expense were $89.3 million (2020: $93.2 million). Refer to note 39(i) for the Group’s accounting policy on inventories. 2021 $’M 9.7 0.2 12.2 22.1 2020 $’M 7.2 0.2 12.0 19.4 7 5 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT14 Trade and other payables Trade payables Other payables and accruals  2021 $’M 148.6 149.0 297.6 2020 $’M 116.2 154.9 271.1 Refer to note 39(l) for the Group’s accounting policy on trade and other payables. 15 Interest-bearing liabilities UNSECURED SECURED Opening balance at 1 July 2020 (Repayment)/proceeds of borrowings Borrowing costs paid Cash flows Lease drawdowns Remeasurement of lease liabilities Non-cash drawdowns Interest bearing liabilities acquired Gain on modification of fixed rate borrowings 2 Fair value changes Borrowing costs reversed/(accrued) Amortisation of gain on modification of fixed rate borrowings Amortisation of borrowing costs BANK LOANS $’M 111.1 US PRIVATE PLACEMENT NOTES $M CLEAN ENERGY FINANCE CORPORATION $’M 426.9 89.7 5.2 (0.9) 4.3 – – 8.2 – – – (0.3) – 2.4 – – – – – – – – (60.7) 0.3 – 0.2 – – – – – – – (9.6) – – 1.3 0.1 81.5 LEASE LIABILITIES 1 $’M TOTAL INTEREST- BEARING LIABILITIES $’M 437.3 1,065.4 (64.0) – (64.0) 112.2 8.3 – 5.6 – – – – – (59.2) (0.9) (60.1) 112.2 8.3 8.2 5.6 (9.6) (60.7) – 1.3 2.7 499.4 1,073.3 OTHER $’M 0.4 (0.4) – (0.4) – – – – – – – – – – Closing balance at 30 June 2021 125.7 366.7 Lease liabilities at 30 June 2021 consist of current lease liabilities of $76.9 million and non-current lease liabilities of $422.5 million. 1 2 On 19 October 2020 the $90.0 million Clean Energy Finance Corporation term loan facility was amended including a reduction in the fixed interest rate. The fixed rate debt was remeasured by calculating the net present value of the modified cash flows discounted using the effective interest rate used on initial recognition. The $9.6 million difference between the remeasured amount and the net present value of the remaining original cash flows was recorded as a modification gain on fixed rate debt. The following lease expenses are included in the Consolidated Income Statement and do not form part of lease liabilities: Expenses relating to short-term leases (included in property expenses and other expenses)  Expenses relating to low-value assets that are not short-term leases (included in other expenses) Expenses relating to variable lease payments (included in labour related expenses) 1 2021 $’M 17.2 1.9 49.2 68.3 2020 $’M 23.9 1.7 49.3 74.9 1 Variable lease payments included in labour-related expenses reflect payments made to owner drivers, whereby a subcontractor will be paid for both the use of their vehicle and collection services. Future cash outflows in respect of these leases are dependant upon owner driver jobs completed. 7 6 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202115 Interest-bearing liabilities (continued) Opening balance at 1 July 2019 Transfers on adoption of AASB 16 1 (Repayment)/proceeds of borrowings Borrowing costs paid Cash flows Lease drawdowns Remeasurement of lease liabilities Non-cash settlements Derecognition on loss of control of subsidiary Acquisition of businesses Fair value changes Non-cash transaction costs Amortisation of borrowing costs Closing balance at 30 June 2020 l UNSECURED SECURED US PRIVATE PLACEMENT NOTES $'M CLEAN ENERGY FINANCE CORPORATION $’M OTHER $’M LEASE LIABILITIES 2 $’M BANK LOANS $’M 480.1 – (365.1) (0.9) (366.0) – – (7.5) – – – 0.3 4.2 – – 397.6 (1.8) 395.8 – – – – – 34.0 (3.1) 0.2 99.4 – – – – – – – (9.9) – – – 0.2 89.7 TOTAL INTEREST- BEARING LIABILITIES $’M 714.7 297.0 (23.4) (2.7) (26.1) 64.1 16.3 (7.5) (29.8) 0.9 34.0 (2.8) 4.6 0.8 – (0.7) – (0.7) – – – (0.5) 0.8 – – – 134.4 297.0 (55.2) – (55.2) 64.1 16.3 – (19.4) 0.1 – – – 111.1 426.9 0.4 437.3 1,065.4 1 2 Lease liabilities at 30 June 2019 relate to finance leases as defined in AASB 117 Leases. Upon adoption of AASB 16 Leases on 1 July 2019, leases which were previously classified as operating leases have been brought on balance sheet as lease liabilities. Lease liabilities at 30 June 2020 consist of current lease liabilities of $69.2 million and non-current lease liabilities of $368.1 million. Refer to note 39(m) for the Group’s accounting policy on borrowings. Financing facilities The facility limits and maturity profile of the Group’s main financing facilities are as follows: FACILITY  Syndicated Facility Agreement Facility A Facility B Facility C Facility E AMOUNT MATURITY working capital tranche $135 million 31 July 2023 4 year revolver 5 year revolver $200 million 31 January 2025 $315 million 31 January 2026 3 year non-revolving term loan facility $500 million To be determined 1 11 February 2028 US Private Placement (USPP) Notes 8 year debt notes US$90 million Clean Energy Finance Corporation Uncommitted bank guarantee facility 10 year debt notes US$90 million 11 February 2030 12 year debt notes US$90 million 11 February 2032 8 year term loan $90 million 17 August 2025 $95 million 31 December 2021 1 Maturity date of facility is three years from the date of initial drawdown which is required to occur no later than 5 April 2022. 7 7 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT15 Interest-bearing liabilities (continued) The headroom available in the Group’s facilities at 30 June 2021 is summarised below: Syndicated Facility Agreement US Private Placement (USPP) Notes Clean Energy Finance Corporation 5 Bank guarantee facilities 1 Facility A 1, 2, 3 Facility B 3 Facility C 3 Facility E 3,4 AVAILABLE $’M 135.0 200.0 315.0 500.0 366.7 90.0 95.0 1,701.7 UTILISED $’M (114.1) (120.0) – – (366.7) (90.0) (80.6) (771.4) NOT UTILISED $’M 20.9 80.0 315.0 500.0 – – 14.4 930.3 1 2 These facilities include $174.5 million (2020: $145.7 million) in guarantees and letters of credit which only give rise to a liability where the Group fails to perform its contractual obligations. This facility includes $4.5 million (2020: $6.5 million) of corporate credit card limit utilisation and $15.0 million (2020: $15.0 million) of overdraft utilisation and nil (2020: $6.6 million) of outstanding finance lease commitments. 3 Amounts utilised exclude capitalised transaction costs of $2.4 million (2020: $3.9 million) and $7.6 million (2020: nil) of bank loans advanced under uncommitted facilities. This facility is available to fund purchase of the Suez Sydney assets and related transaction costs under the Business Purchase Agreement dated 5 April 2021. 4 5 Amount utilised excludes capitalised transaction costs of $0.4 million (2020: $0.4 million) and unamortised gains on fixed rate debt of $8.3 million (30 June 2020: nil). The headroom available in the Group’s facilities at 30 June 2020 is summarised below: Syndicated Facility Agreement US Private Placement (USPP) Notes Clean Energy Finance Corporation  Bank guarantee facilities  Facility A Facility B  Facility C  AVAILABLE $’M UTILISED $’M NOT UTILISED $’M 135.0 200.0 315.0 426.9 90.0 60.0 1,226.9 (118.2) (115.0) – (426.9) (90.0) (55.7) (805.8) 16.8 85.0 315.0 – – 4.3 421.1 7 8 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202116 Issued capital Issued and paid up capital is recognised at the fair value of the consideration received by the Company. Any transaction costs incurred by the Company arising on the issue of capital are recognised directly in equity as a reduction of the share capital received. Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Ordinary shares have no par value and all issued shares are fully paid. 2021 NUMBER OF SHARES 2020 $’M NUMBER OF SHARES Opening balance 2,053,944,831 2,688.7 2,044,507,391 Issue of shares under dividend reinvestment plan Issue of shares under employee incentive plans 3,112,469 2,377,258 7.0 – 5,053,889 4,383,551 $’M 2,678.2 10.5 – Closing balance 2,059,434,558 2,695.7 2,053,944,831 2,688.7 17 Reserves (a) Hedge reserve The Group’s hedge reserve includes net gains/(losses) relating to changes in AUD/USD currency basis included in the fair value of cross-currency interest rates swaps (CCIRS). Currency basis is excluded from the Group’s hedge relationships and accounted for as a cost of hedging recognised in other comprehensive income. The reserve also includes effective gains/(losses) included in the fair value of CCIRS that are part of cash flow hedges, net of amounts reclassified to net finance costs. Amounts in the hedge reserve will be reclassified to net finance costs in subsequent periods when the hedged item is recognised in the income statement. Refer to note 32(d). Opening balance Net loss on currency basis (net of tax)  Closing balance 2021 $’M (0.1) (0.7) (0.8) 2020 $’M – (0.1) (0.1) The effective portion of cash flow hedges was $31.1 million (2020: $6.5 million) and was reclassified to net finance costs during the period to offset the net gain/(loss) on the hedged items. (b) Employee equity benefits reserve The employee equity benefits reserve is used to record the value of equity benefits provided to employees as part of their remuneration. Refer to note 35 for further details on these share-based payment plans. Opening balance Share-based payment expense (net of tax) Closing balance 2021 $’M 24.0 1.9 25.9 2020 $’M 24.0 – 24.0 7 9 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT18 Dividends The Company declared fully franked dividends on ordinary shares for the financial year ended 30 June 2021 of 4.60 cents per share, being an interim dividend of 2.25 cents per share and final dividend of 2.35 cents per share. The record date of the final dividend is 13 September 2021 with payment to be made on 5 October 2021. Details of dividends in respect of the financial year are as follows: Dividends paid during the period Final dividend relating to prior period Interim dividend relating to current period Dividends determined in respect of the period Interim dividend relating to current period Final dividend relating to current period 2021 CENTS PER SHARE 2020 CENTS PER SHARE 2.10 2.25 4.35 2.25 2.35 4.60 1.90 2.00 3.90 2.00 2.10 4.10 2021 $’M 43.2 46.4 89.6 46.4 48.4 94.8 2020 $’M 38.9 41.0 79.9 41.0 43.2 84.2 Franking credit balance The available amounts are based on the balance of the franking account at year-end, adjusted for: (a) Franking credits or debits that will arise from the payment of current tax liabilities or receipt of current tax assets; (b) Franking debits that will arise from the payment of franked or partially franked dividends recognised as a liability at the year-end; and (c) Franking credits that will arise from the receipt of dividends recognised as receivables by the Tax Consolidated Group at the year-end. 30% franking credits available for subsequent financial years 1 1 The payment of the final 2021 dividend determined after 30 June 2021 will reduce the franking account by $20.7 million. The unadjusted balance of the franking account at 30 June 2021 was $21.7 million (2020: $19.0 million). 2021 $’M 27.7 2020 $’M 24.7 8 0 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202119 Capital management When managing capital, the Group’s objective is to ensure that it uses a mix of funding options to optimise returns to equity holders and manage risk. The facility limits and maturity profile of the Group’s main financing facilities are contained in note 15. The capital structure of the Group comprises: debt, which includes borrowings and lease liabilities; cash and cash equivalents; and equity attributable to equity holders of the parent, such equity comprising issued capital, reserves and retained earnings as disclosed in the Consolidated Balance Sheet. The Group is subject to and complies with externally imposed capital requirements. The gearing ratio of the Group at reporting date was as follows: Current interest-bearing liabilities Non-current interest-bearing liabilities Derivative financial instruments 1 Cash and cash equivalents Net debt Total equity Gearing ratio 2  2021 $’M 76.9 996.4 31.5 (69.4) 1,035.4 2,633.9 28.2% 2020 $’M 69.6 995.8 (30.0) (79.8) 955.6 2,570.0 27.1% 1 At 30 June 2021, the Group held cross currency interest rate swaps (CCIRS) to protect against interest rate and foreign currency movements in relation to the USPP notes. 2 The gearing ratio is calculated as Net debt divided by Net debt plus Total equity attributable to the parent. 20 Property, plant and equipment 2021 NON- LANDFILL LAND AND BUILDINGS $’M LANDFILL ASSETS 2 $’M LEASEHOLD IMPROVEMENTS $’M PLANT AND EQUIPMENT $’M CAPITAL WORK IN PROGRESS $’M TOTAL $’M Opening net book value 205.8 257.1 63.0 574.2 73.9 1,174.0 Additions Acquisitions of businesses Net movement in remediation assets 1 Disposals Transfers of assets Depreciation Impairment of assets Write-off of plant and equipment Closing net book value Cost Accumulated depreciation Net book value – 0.3 – (9.1) 1.1 (3.7) – – 194.4 208.0 (13.6) 194.4 – 2.1 28.2 – 26.4 (45.8) – – 268.0 769.6 (501.6) 268.0 – 0.4 (0.8) (1.3) 8.3 (7.5) – (2.3) 59.8 83.8 (24.0) 59.8 – 11.3 – (2.5) 141.0 (122.7) – (0.4) 600.9 1,804.1 (1,203.2) 600.9 225.9 225.9 – – – (177.1) – (4.3) – 14.1 27.4 (12.9) (0.3) (179.7) (4.3) (2.7) 118.4 118.4 1,241.5 2,983.9 – (1,742.4) 118.4 1,241.5 1 Net movement in remediation assets reflects adjustments to the remediation provision for open landfill sites and leasehold improvements. Refer to note 39(j) 2 for details on the Group’s accounting policy. Landfill assets are depreciated using airspace related to the current licensed areas and expected extensions of that landfill area. Total landfill assets related to the New Chum landfill are currently being depreciated assuming that the height rise application, currently subject to appeal by Cleanaway in the Land and Environment Court in Queensland, will be awarded in our favour. This position is based on our expectation that a height rise application will be granted, given all relevant facts and circumstances, our own internal analysis and the views expressed by our third party experts. Should the current appeal and any other future remedies available not be successful, the available airspace will need to be revised. Assets related to the New Chum landfill and subject to the appeal total $28.2 million at 30 June 2021. 8 1 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT20 Property, plant and equipment (continued) 2020 Opening net book value Adjustment on adoption of AASB 16 1 Additions Acquisitions of businesses Net movement in remediation assets  Disposals Derecognition on loss of control of subsidiary Transfer of assets  Depreciation Write off of plant & equipment Closing net book value Cost Accumulated depreciation Net book value . NON- LANDFILL LAND AND BUILDINGS $’M LANDFILL ASSETS $’M LEASEHOLD IMPROVEMENTS $’M PLANT AND EQUIPMENT $’M 152.9 237.2 64.3 – – 51.1 – (2.6) – 8.3 (3.9) – 205.8 215.8 (10.0) 205.8 – – – 4.9 – – 56.6 (41.6) – 257.1 713.0 (455.9) 257.1 – – – (0.5) (0.1) (1.0) 16.0 (7.6) (8.1) 63.0 82.0 (19.0) 63.0 711.5 (127.1) – 19.5 – (10.4) (12.3) 120.0 (116.3) (10.7) 574.2 1,736.4 (1,162.2) 574.2 CAPITAL WORK IN PROGRESS $’M 66.1 (5.2) 215.3 – – – (0.3) (201.2) – (0.8) 73.9 73.9 TOTAL $’M 1,232.0 (132.3) 215.3 70.6 4.4 (13.1) (13.6) (0.3) (169.4) (19.6) 1,174.0 2,821.1 – (1,647.1) 73.9 1,174.0 1 The carrying value of plant and equipment at 30 June 2019 included finance leases as defined under AASB 117 Leases. On 1 July 2019, on adoption of AASB 16 Leases, assets under finance lease were reclassified to right-of-use assets. Accounting for landfill assets The Group is responsible for a total of 15 landfills (2020: 14 landfills). Of the 15 landfills, nine are closed. Those that are open are expected to close between 2026 and 2066. The Group’s remediation provisions are based on an average 30 year post-closure period. It is the Group’s policy at time of development or acquisition of a landfill and at each reporting date to: (a) Capitalise the cost of cell development to landfill assets; (b) Capitalise the cost of purchased landfill assets; (c) Capitalise the estimated future costs of remediation; (d) Depreciate the capitalised landfill assets over the useful life of the landfill asset or site; and (e) Recognise income generated from the landfill assets in the reporting period earned. Refer to note 39(j) for further details on the Group’s accounting policy on landfill assets. 8 2 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202121 Right-of-use assets 2021 Opening net book value New leases Acquisition of businesses Remeasurement due to a variation in lease term Remeasurement due to rental increases Depreciation Closing net book value Cost Accumulated depreciation Net book value 2020 Opening net book value Adjustment on adoption of AASB 16 1 New leases Remeasurement due to a variation in lease term Remeasurement due to rental increases Derecognition on loss of control of subsidiary Depreciation Closing net book value Cost Accumulated depreciation Net book value PROPERTIES $’M PLANT AND EQUIPMENT $’M 233.1 18.1 5.6 2.1 4.6 (34.6) 228.9 292.9 (64.0) 228.9 183.6 93.6 – 4.6 – (31.5) 250.3 322.6 (72.3) 250.3 PROPERTIES $’M PLANT AND EQUIPMENT $’M – 265.8 6.4 12.1 4.1 (19.4) (35.9) 233.1 267.2 (34.1) 233.1 – 151.5 57.7 0.4 – – (26.0) 183.6 227.0 (43.4) 183.6 TOTAL $’M 416.7 111.7 5.6 6.7 4.6 (66.1) 479.2 615.5 (136.3) 479.2 TOTAL $’M – 417.3 64.1 12.5 4.1 (19.4) (61.9) 416.7 494.2 (77.5) 416.7 1 At 30 June 2019, the Group recognised assets under finance lease in property, plant and equipment in accordance with AASB 117 Leases, refer to note 21. On 1 July 2019, on adoption of AASB 16 Leases, assets under finance lease were reclassified to right-of-use assets. The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability or right-of-use asset until they take effect. When adjustments to lease payments based on an index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset. 8 3 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT22 Intangible assets 2021 GOODWILL $’M LANDFILL AIRSPACE $’M Opening net book value 1,827.6 226.9 Additions Acquisitions of businesses Write-off of intangibles Remeasurement of associated remediation liability Transfers to PP&E Amortisation Closing net book value Cost Accumulated amortisation Net book value 2020 Opening net book value Additions Acquisitions of businesses Derecognition on loss of control of subsidiary Transfers from PP&E Amortisation Closing net book value Cost Accumulated amortisation Net book value – 24.1 – – – – 1,851.7 1,851.7 – 1,851.7 GOODWILL $’M 1,827.3 – 23.1 (22.8) – – 1,827.6 1,827.6 – 1,827.6 – 8.3 – (0.7) – (7.4) 227.1 263.9 (36.8) 227.1 LANDFILL AIRSPACE $’M 233.5 0.2 – – – (6.8) 226.9 256.3 (29.4) 226.9 BRAND NAMES $’M 78.6 – – – – – – 78.6 78.6 – 78.6 BRAND NAMES $’M 78.6 – – – – – 78.6 78.6 – 78.6 CUSTOMER INTANGIBLES AND LICENCES $’M OTHER INTANGIBLES $’M TOTAL $’M 143.2 – 10.0 – – – (15.6) 137.6 223.1 (85.5) 137.6 29.9 2,306.2 7.1 – (2.7) – (0.3) (8.6) 25.4 88.0 (62.6) 25.4 7.1 42.4 (2.7) (0.7) (0.3) (31.6) 2,320.4 2,505.3 (184.9) 2,320.4 CUSTOMER INTANGIBLES AND LICENCES $’M OTHER INTANGIBLES $’M TOTAL $’M 156.6 28.9 2,324.9 – 4.5 (1.2) – (16.7) 143.2 213.1 (69.9) 143.2 9.1 – – 0.3 (8.4) 29.9 83.9 (54.0) 29.9 9.3 27.6 (24.0) 0.3 (31.9) 2,306.2 2,459.5 (153.3) 2,306.2 Goodwill and brand names are monitored at an operating segment level. The carrying amount of goodwill and non-amortising intangible assets (brand name) are allocated to operating segments or CGUs as follows: 2021 Goodwill Brand names Total 2020 Goodwill Brand names Total 8 4 SOLID WASTE SERVICES $’M 1,311.1 78.6 1,389.7 SOLID WASTE SERVICES $’M 1,287.0 78.6 1,365.6 INDUSTRIAL & WASTE SERVICES $’M LIQUID WASTE & HEALTH SERVICES $’M TOTAL $’M 168.2 372.4 1,851.7 – – 78.6 168.2 372.4 1,930.3 INDUSTRIAL & WASTE SERVICES $’M LIQUID WASTE & HEALTH SERVICES $’M TOTAL $’M 168.2 372.4 1,827.6 – – 78.6 168.2 372.4 1,906.2 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202122 Intangible assets (continued) Annual impairment testing After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill and brand names are not amortised but are subject to impairment testing. In accordance with the Group’s accounting policies, the Group performs its impairment testing annually at 30 June. Goodwill, brand names and other non- financial assets are however reviewed at each reporting period to determine whether there is an indicator of impairment. Where an indicator of impairment exists, a formal review is undertaken to estimate the recoverable amount of related assets. Results of impairment testing Based on impairment testing performed, the recoverable amounts of each CGU exceed the carrying amounts at 30 June 2021. Key assumptions used for annual impairment testing The recoverable amount of each operating segment or CGU is determined based on fair value less costs to dispose calculations using five-year forecasted cash flows of the CGUs and a terminal value calculation, other than those associated with landfill assets. Cash flows from the landfill assets are limited to the available airspace of the landfill. Capital projects which are reasonably expected to be developed because they have positive NPV and are approved have also been included in the determination of recoverable value. The fair value less costs to dispose calculations use cash flow projections based on actual operating results, the budget for the year ending 2022 and a five-year strategic plan adjusted for known developments and changes in information since the plan was formulated. As these forecasts are developed using the Group’s own data they are Level 3 inputs in the fair value hierarchy. The recoverable amount of each CGU at 30 June 2020 was determined based on a value in use method. The terminal value growth rate has been based on published long-term growth rates. The terminal growth rate for Solid Waste Services was 2.5% (2020: 2.5%). The terminal growth rate for Industrial & Waste Services and Liquid Waste & Health Services remains at 2.0% (2020: 2.0%). The discount rate has been based on an industry Weighted Average Cost of Capital (WACC) with cash flow projections being adjusted for CGU specific risks. Forecast revenue, EBITDA and capital spend assumptions used in 30 June 2021 impairment testing have been adjusted for known and anticipated future operational changes and additional potential risk identified since 30 June 2020. These changes are reflected in the following summary of key assumptions table. The table below provides a summary of the key assumptions used in the impairment testing: ASSUMPTIONS EBITDA growth 1 Capital spend rate 2 Terminal value growth rate Post-tax discount rate Pre-tax discount rate  SOLID WASTE SERVICES INDUSTRIAL & WASTE SERVICES LIQUID WASTE & HEALTH SERVICES JUNE 2021 JUNE 2020 7.1% 11.9% 2.5% 7.3% 10.4% 7.4% 10.7% 2.5% 7.3% 10.4% JUNE 2021 6.5% 7.1% 2.0% 7.3% JUNE 2020 6.3% 6.4% 2.0% 7.3% JUNE 2021 6.9% 7.6% 2.0% 7.3% JUNE 2020 7.7% 7.9% 2.0% 7.3% 10.4% 10.4% 10.4% 10.4% 1 Growth rates represent a compound annual growth rate over 5 years and have been calculated with 30 June 2021 underlying EBITDA as a base, excluding corporate overheads. Reflects capital spend as a percentage of revenue, calculated as the five-year average of forecast spend. 2 8 5 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT22 Intangible assets (continued) EBITDA growth assumptions Solid Waste Services EBITDA growth of 7.1% assumes long-term GDP of 2.75% and CPI of 2.0% across all activities. Short-term growth also considers major new commercial and municipal contract wins. Industrial & Waste Services EBITDA growth of 6.5% is mainly a result of GDP and CPI growth but also considers new and expiring contracts. Liquid Waste & Health Services EBITDA growth also assumes GDP and CPI growth but is adjusted for growth achievable in the current economic and competitive environment. Capital spend assumptions Capital spend incorporates consideration of industry benchmarks but also reflects continued capital discipline together with specific business requirements. The Solid Waste Services segment is the most capital-intensive part of the business and the Industrial & Waste Services CGU is the least as its primary source of revenue is technical labour services. Other assumptions • Climate change Climate change is an emerging risk and presents complex challenges for companies, governments and society. Cleanaway believes that the transition to a zero-carbon economy presents opportunities for the waste management sector as well as risks. These risks include decarbonisation of the economy leading to contraction in carbon-intensive industries; the introduction of a carbon price; and an increase of frequency and severity of extreme weather events. Opportunities for waste management companies may include increased regulation to reduce embodied carbon emissions favouring the domestic recycling industry; and increased incentives to invest in energy-from-waste plants. Whilst the fair value less costs to dispose (FVLCD) calculations do not include specific cash inflows or outflows associated with climate change related opportunities or risks, the calculations use a risk-adjusted discount rate reflecting that all estimates and assumptions are subject to risk and uncertainty. • COVID-19 pandemic Cleanaway has considered the impact of the COVID-19 pandemic in determining FVLCD. As the COVID-19 pandemic has evolved, we have noted that small and medium enterprise (SME) demand for waste management services has been negatively impacted, however we have also noted increased demand for other waste management services such as health, municipal collection and related post-collections activities have remained strong. Growth assumptions used in the Group’s five-year forecasted cash flows assume steady growth which is in contrast to forecasts published by the RBA in May 2021 which reflect slightly higher growth as the economy as a whole rebounds from the pandemic. The Group has the ability to manage costs and resources under current conditions, and the flexibility to change cost structures should conditions deteriorate. 8 6 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202122 Intangible assets (continued) Impact of possible changes in key assumptions Any variation in the key assumptions used to determine recoverable amount would result in a change to the estimated recoverable amount. If variations in assumptions had a negative impact on recoverable amount it could indicate a requirement for some impairment of non-current assets. If variations in assumptions had a positive impact on recoverable amount it could indicate a requirement for a reversal of previously impaired non-current assets, with the exception of goodwill. Estimated reasonably possible changes (absolute numbers) in the key assumptions would have the following approximate impact on impairment of each CGU as at 30 June 2021: Decrease in CAGR% – EBITDA  Increase in capital spend rate Decrease in terminal value growth rate Increase in post-tax discount rate REASONABLY POSSIBLE CHANGE 1% to 2% 0.5% to 1% 1% 0.3% to 1% SOLID WASTE SERVICES $’M nil nil nil nil INDUSTRIAL & WASTE SERVICES $’M nil nil nil nil LIQUID WASTE & HEALTH SERVICES $’M nil nil nil nil Whilst the table above outlines management’s best estimates of key assumptions and reasonably possible changes in key value drivers, changes in the level of business activity may also materially impact the determination of recoverable amount. Should the macroeconomic factors that are specific to the Australian domestic market change, this could impact the level of activity in the market, as well as competition and thereby affect the Group’s revenue and cost initiatives. If conditions change unfavourably, changes in recoverable amount estimates may arise. Each of the sensitivities above assumes that the specific assumption moves in isolation, whilst all other assumptions are held constant. In reality, a change in one of the aforementioned assumptions may accompany a change in another assumption. Action is also usually taken to respond to adverse changes in economic assumptions that may mitigate the impact of any such change. Modelling incorporating the assumptions identified in the key assumptions table provides that the recoverable amount exceeds the carrying amount (headroom) as outlined below. The recoverable amount of the operating segment or CGUs would equal its carrying amount if the key assumptions were to change as follows: Headroom $’M Decrease in CAGR% – EBITDA 1 Increase in capital spend rate 1 Decrease in terminal value growth rate 1, 2 Increase in post-tax discount rate 1 SOLID WASTE INDUSTRIAL & SERVICES WASTE SERVICES LIQUID WASTE & HEALTH SERVICES 886.2 5.4% 4.3% 3.6% 2.6% 108.7 3.6% 1.8% 2.7% 1.9% 411.5 6.3% 3.9% 4.9% 3.3% 1 2 Percentage changes presented above represent the absolute change in the assumption value (for example post-tax discount rate increasing by 2.6% from 7.3% to 9.9%). Terminal value for all segments would reflect negative value as they are currently modelled at 2.5% for Solid Waste Services and 2.0% for Industrial & Waste Services and Liquid Waste & Health Services. Refer to note 39(k) for further details on the Group’s intangible assets accounting policy. 8 7 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT23 Equity accounted investments The Group holds a 50% interest or greater than a 50% interest in some of the following equity accounted investments but does not have control. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. The Group does not have power over these entities either through management control or voting rights. OWNERSHIP INTEREST CARRYING VALUE OF INVESTMENT NAME OF ENTITY Joint ventures: COUNTRY REPORTING DATE 2021 % 2020 % Cleanaway ResourceCo RRF Pty Ltd Earthpower Technologies Sydney Pty Ltd Tomra Cleanaway Pty Ltd  Western Sydney Energy and Resource Recovery Centre Pty Ltd 1 Wonthaggi Recyclers Pty Ltd Associates: Circular Plastics Australia Pty Ltd 2 Australia Australia Australia Australia Australia 30 June 30 June 30 June 30 June 30 June Australia 30 June 45 50 50 51 50 40 45 50 50 51 50 – 2021 $’M 19.2 – 3.6 9.5 0.3 9.0 41.6 2020 $’M 20.9 – 2.5 10.5 0.6 – 34.5 1 Western Sydney Energy and Resource Recovery Centre Pty Ltd was formally known as A.C.N. 635 427 262 Pty Ltd. 2 On 3 August 2020 Cleanaway Pty Ltd subscribed for 9,008,640 shares in Circular Plastics Australia Pty Ltd, representing 40% of the paid-up capital of the entity. (a) Western Sydney Energy and Resource Recovery Centre Pty Ltd The Group has a 51% interest in Western Sydney Energy and Resource Recovery Centre Pty Ltd, an entity which holds the investment in the energy-from-waste project in western Sydney. The Group’s interest in Western Sydney Energy and Resource Recovery Centre Pty Ltd is accounted for using the equity method in the consolidated financial statements. Summarised financial information of the joint venture, based on its financial statements, and reconciliation with the carrying amount of the investment in the consolidated financial statements are set out below: Summarised statement of financial position of Western Sydney Energy and Resource Recovery Centre Pty Ltd: Current assets, including cash and cash equivalents $0.1 million (2020: $0.1 million) Non-current assets Equity Group’s share in equity Group’s carrying amount of the investment 2021 $’M 0.1 18.6 18.7 9.5 9.5 2020 $’M 1.9 18.7 20.6 10.5 10.5 The project is to be assessed by the Independent Planning Commission. Development of the energy-from-waste plant is subject to planning approval and a final investment decision. All costs in relation to feasibility costs and environmental approvals have been capitalised and accordingly the joint venture has not contributed profit to the Group during the year ended 30 June 2021. The joint venture had no contingent liabilities or capital commitments as at 30 June 2021 (2020: nil). Western Sydney Energy and Resource Recovery Centre Pty Ltd cannot distribute its profits without consent from both venture partners. 8 8 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202123 Equity accounted investments (continued) (b) Cleanaway ResourceCo RRF Pty Ltd The Group has a 45% interest in Cleanaway ResourceCo RRF Pty Ltd, a resource recovery facility located at Wetherill Park in Western Sydney. The Group’s interest in Cleanaway ResourceCo RRF Pty Ltd is accounted for using the equity method in the consolidated financial statements. Summarised financial information of the joint venture, based on its IFRS financial statements, and reconciliation with the carrying amount of the investment in the consolidated financial statements are set out below: Summarised statement of financial position of Cleanaway ResourceCo RRF Pty Ltd: Current assets, including cash and cash equivalents $2.9 million (2020: $0.5 million) and prepayments $1.1 million (2020: $0.7 million) Non-current assets Current liabilities Non-current liabilities, including deferred tax liabilities $0.1 million (2020: $0.1 million) and long-term borrowings $39.5 million (2020: $30.9 million) Equity Group’s share in equity Group’s carrying amount of the investment Summarised statement of profit or loss of Cleanaway ResourceCo RRF Pty Ltd: Revenue from contracts with customers Cost of sales Administrative expenses, including depreciation $2.8 million (2020: $1.0 million) Finance costs, including interest expense $1.9 million (2020: $0.5 million) Loss before tax Income tax benefit Loss for the year Total comprehensive loss for the year Group’s share of loss for the year 2021 $’M 9.4 81.4 (8.6) (39.6) 42.6 19.2 19.2 2021 $’M 15.4 (10.1) (8.8) (1.9) (5.4) 1.6 (3.8) (3.8) (1.7) 2020 $’M 6.1 80.5 (9.2) (31.0) 46.4 20.9 20.9 2020 $’M 1 4.3 (3.9) (3.5) (0.6) (3.7) 1.1 (2.6) (2.6) (1.2) 1 For the year ended 30 June 2020, the Group’s share of loss was equity accounted from 1 January 2020. The joint venture had capital commitments of $0.2 million as at 30 June 2021 (2020: nil). The joint venture had no contingent liabilities as at 30 June 2021 (2020: nil). ResourceCo RRF Pty Ltd cannot distribute its profits without consent from both venture partners. 8 9 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT23 Equity accounted investments (continued) (c) Other joint ventures (disclosed in aggregate) Summarised statement of profit or loss of all other joint ventures: Loss for the year Total comprehensive loss for the year Group’s share of loss for the year 2021 $’M (0.7) (0.7) (0.3) 2020 $’M (1.9) (1.9) (0.9) (d) Circular Plastics Australia Pty Ltd The Group has a 40% interest in Circular Plastics Australia Pty Ltd, which is currently constructing a PET recycling facility in Albury, NSW. The Group’s interest in Circular Plastics Australia Pty Ltd is accounted for using the equity method in the consolidated financial statements. Summarised financial information of the associate, based on its financial statements, and reconciliation with the carrying amount of the investment in the consolidated financial statements are set out below: Summarised statement of financial position of Circular Plastics Australia Pty Ltd: Current assets Non-current assets Current liabilities Non-current liabilities Equity Group’s share in equity Group’s carrying amount of the investment 2021 $’M 5.7 17.4 (0.6) – 22.5 9.0 9.0 2020 $’M – – – – – – – The construction of a PET plastic pelletising facility in Albury, NSW is well underway and expected to be completed by the end of calendar year 2021. All costs related to the development of the facility have been capitalised and accordingly the associate has not contributed profit to the Group during the year ended 30 June 2021. The associate had no contingent liabilities as at 30 June 2021. Circular Plastics Australia Pty Ltd cannot distribute its profits without the consent from all associate partners. 9 0 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202123 Equity accounted investments (continued) (e) Transactions with equity accounted investments The following table provides the total amount of transactions with equity accounted investments during the year ended 30 June 2021: Joint ventures Joint ventures SERVICES TO EQUITY ACCOUNTED INVESTMENTS PURCHASES FROM EQUITY ACCOUNTED INVESTMENTS INTEREST REVENUE FROM EQUITY ACCOUNTED INVESTMENTS 2021 $’M 85.7 85.7 2020 $’M 77.2 77.2 2021 $’M 4.0 4.0 2020 $’M 4.6 4.6 2021 $’M 0.4 0.4 2020 $’M 0.2 0.2 TRADE AMOUNTS OWED BY EQUITY ACCOUNTED INVESTMENTS TRADE AMOUNTS OWED TO EQUITY ACCOUNTED INVESTMENTS LOANS TO EQUITY ACCOUNTED INVESTMENTS 1 2021 $’M 0.9 0.9 2020 $’M 0.5 0.5 2021 $’M 2.5 2.5 2020 $’M 1.2 1.2 2021 $’M 17.6 17.6 2020 $’M 10.7 10.7 1 This represents an unsecured loan to Tomra Cleanaway Pty Ltd of $3.8 million (2020: $3.8 million) repayable in full on 22 November 2022, an unsecured loan to Cleanaway ResourceCo RRF Pty Ltd of $8.5 million (2020: $3.7 million) repayable on 30 June 2025 and an unsecured loan to Western Sydney Energy and Resource Recovery Centre Pty Ltd of $5.3 million (30 June 2020: $3.2 million), repayable when the project has progressed to the financing stage. 24 Other assets Current Finance lease receivable 1 Prepayments Other financial assets Total current other assets  Non-current Finance lease receivable 1 Costs to fulfil contracts 2 Prepayments Loans to equity accounted investments Other financial assets Total non-current other assets 2021 $’M 3.9 21.9 3.0 28.8 – 5.8 0.6 17.6 0.1 24.1 2020 $’M 4.5 18.6 – 23.1 3.9 5.5 0.8 10.7 3.0 23.9 1 2 The Group has constructed a dedicated landfill cell for a customer. The cell will be paid for at an agreed fixed amount. The lease receivable has been recognised at an implicit rate of 3.28%. The Group incurs costs to mobilise and set up significant new contracts. These costs are amortised over the life of the contract. 9 1 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT25 Employee entitlements Current Annual leave Long service leave Other  Total current employee entitlements  Non-current Long service leave Total non-current employee entitlements 2021 $’M 40.2 23.7 14.9 78.8 9.9 9.9 2020 $’M 37.9 22.2 11.1 71.2 7.2 7.2 Refer to note 39(q) for the Group’s accounting policy on employee entitlements. During the year the Group contributed $44.7 million (2020: $42.2 million) to defined contribution plans. These contributions are expensed as incurred. 9 2 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202126 Provisions Current Rectification provisions Remediation provisions Other Total current provisions Non-current Rectification provisions Remediation provisions Other Total non-current provisions 2021 $’M 6.1 32.0 30.1 68.2 9.8 274.8 21.8 306.4 2020 $’M 2.3 41.0 35.7 79.0 13.1 256.5 18.0 287.6 Included in other provisions is an amount of $20.0 million (2020: $18.7 million) in relation to workers compensation self-insurance of the Group under the Comcare scheme. This amount is comprised of $7.2 million (2020: $6.3 million) classified as current and $12.8 million (2020: $12.4 million) classified as non-current. The provision for workers compensation represents the future claim payments required under the Safety, Rehabilitation and Compensation Act 1998, and associated expenses, in respect of claims incurred from 1 July 2006, being the commencement of the self-insurance arrangements, up to 30 June 2021. The provision has been calculated using a claim inflation rate of 2.97% (2020: 1.80%) and a discount rate of 1.22% (2020: 0.83%). The workers compensation self-insurance provision is reassessed annually based on actuarial advice. The table below provides a roll forward of provisions: Opening balance Acquisitions of businesses Provisions made  Provisions used or reversed  Derecognition on loss of control of subsidiary Unwinding of discount Change in discount rate Change in assumptions 1 Rectification and remediation spend  RECTIFICATION REMEDIATION OTHER TOTAL 2021 $’M 15.4 2.5 – – – 0.2 (0.2) 0.1 (2.1) 2020 $’M 2021 $’M 2020 $’M 28.3 297.5 308.1 – – – – 0.2 0.2 (1.0) (12.3) 7.4 8.6 – – 3.0 (28.2) 42.2 (23.7) 19.3 7.0 – – 3.8 12.7 (12.0) (41.4) 2021 $’M 53.7 2.3 39.4 (43.5) – – – – – 2020 $’M 2021 $’M 2020 $’M 45.5 366.6 381.9 1.7 40.9 (34.7) (0.1) – 0.1 0.3 – 12.2 48.0 (43.5) – 3.2 (28.4) 42.3 (25.8) 21.0 47.9 (34.7) (0.1) 4.0 13.0 (12.7) (53.7) Closing balance 15.9 15.4 306.8 297.5 51.9 53.7 374.6 366.6 1 The change in assumptions represents changes in environmental guidelines and cost estimates. The provision for remediation has been estimated using current expected costs. These costs have been adjusted for the future value of the expected costs at the time of works being required. These costs have then been discounted to estimate the required provision at a rate of 1.72% (2020: 1.12%) for landfill remediation and rectification of landfills and 1.35% (2020: 0.64%) for industrial property remediation. Refer to note 39(o) for a summary of the accounting policy for provisions for remediation and rectification. 9 3 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT27 Other liabilities Current Deferred settlement liabilities 1  Contingent consideration 2 Landfill creation liability 3 Contract liabilities 4 Other liabilities  Total current other liabilities Non-current Deferred settlement liabilities 1 Landfill creation liability 3 Other liabilities 2021 $’M 5.5 1.9 22.5 5.7 – 35.6 77.9 27.8 1.3 2020 $’M 5.4 – 22.9 6.5 0.1 34.9 77.2 49.7 1.8 Total non-current other liabilities 107.0 128.7 1 Includes $83.4 million (2020: $82.6 million) relating to the acquisition of Melbourne Regional Landfill, acquired on 28 February 2015. The deferred consideration was recognised at the acquisition date resulting from transaction payments for site preparation and operation under the agreement to be paid to Boral over the life of the landfill and was determined using a discount rate of 7.0%. 2 Contingent consideration of $1.9 million relates to the acquisition of the Grasshopper Group. The contingent consideration is measured utilising Level 3 3 inputs. The range of the payment is nil to $2.0 million and is based on future potential earnings targets for the year ending 30 June 2022. The landfill creation liability relates to Melbourne Regional Landfill and is the amount payable to Boral in relation to airspace progressively made available by Boral. Cleanaway pay Boral for the airspace as the airspace is consumed, however the liability arises as Cleanaway takes control of the airspace. 4 A contract liability is the obligation to provide services to a customer for which the Group has received consideration from the customer. These liabilities generally arise when a customer is invoiced upon delivery of a container or bin, but Cleanaway still has the obligation to pick up the container or bin and dispose of the waste collected. Revenue for the period included $6.5 million (2020: $7.2 million) which was included in contract liabilities at the beginning of the year. 9 4 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202128 Business combinations and loss of control of subsidiary Year ended 30 June 2021 Business combinations During the year ended 30 June 2021, the Group acquired a 100% interest in the Grasshopper Holdings Pty Ltd and its wholly-owned subsidiary Grasshopper Environmental Pty Ltd (together referred to as the Grasshopper Group). Details of the business combination are provided below: BUSINESS ACQUIRED DATE OF ACQUISITION DESCRIPTION OF THE BUSINESS OPERATING SEGMENT Grasshopper Group 1 October 2020 Waste disposal business based in Sydney, NSW Solid Waste Services The fair values of the identifiable assets and liabilities, of the business combination at the date of acquisition were: Assets Cash and cash equivalents Trade and other receivables Property, plant and equipment Right-of-use assets Intangible assets Deferred tax asset Other assets Liabilities Trade and other payables Employee entitlements Provisions Interest-bearing liabilities Deferred tax liability Total identifiable net assets at fair value Goodwill arising on acquisition Purchase consideration 2021 $’M 1.0 4.2 7.4 2.9 8.3 2.2 0.5 26.5 2.5 0.2 0.5 2.9 4.6 10.7 15.8 13.5 29.3 The intangible assets identified as part of the acquisition included customer contracts and relationship intangibles and the trademarks transferred to the Group. The fair value of the intangible assets is based on the present value of the expected cash flows from the customers of the acquired business, applying an expected attrition rate of the customer base. The trademarks were valued using the capitalisation of future maintainable profits method. Goodwill acquired comprises the value of expected synergies arising from integration of the acquired businesses and is non-deductible for income tax purposes. Cash paid (included in cash flows from investing activities) Deferred consideration paid (included in cash flows from investing activities) Contingent consideration Total purchase consideration 2021 $’M (23.0) (1.3) (5.0) (29.3) Contingent consideration to a maximum value of $5.0 million was to be paid if certain earnings target were met by 30 June 2021, by the acquired entity. On acquisition it was expected that the maximum target would be achieved however, these targets were impacted by the delay in contracts being awarded due to COVID-19 and the contingent consideration was reset and remeasured based on new targets set for the year ending 30 June 2022. Refer note 27. 9 5 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT28 Business combinations and loss of control of subsidiary (continued) Year ended 30 June 2021 (continued) Net cash acquired (included in cash flows from investing activities) Cash paid (included in cash flows from investing activities) Deferred consideration paid Transaction costs of the acquisition (included in cash flows from operating activities) Net cash flow on acquisition 2021 $’M 1.0 (23.0) (1.3) (0.1) (23.4) From the date of acquisition to 30 June 2021, the business contributed $18.9 million of revenue and $0.1 million to profit before tax to the Group, after amortisation of customer intangibles of $0.7 million. If the business had been acquired at the beginning of the reporting period, revenue of $25.8 million and profit before tax of $0.6 million would have been contributed to the Group. During the year ended 30 June 2021, the Group acquired a business from Stawell Landfill Pty Ltd and Stawell Landfill Holdings Pty Ltd (Stawell landfill). Details of the business combination are provided below: BUSINESS ACQUIRED DATE OF ACQUISITION DESCRIPTION OF THE BUSINESS OPERATING SEGMENT Stawell landfill 14 August 2020 Landfill services business based in Stawell, Victoria Solid Waste Services The final fair values of the identifiable assets and liabilities of the business combination at the date of acquisition were: Assets Property, plant and equipment Deferred tax assets Intangible assets Liabilities Provisions Total identifiable net assets at fair value Goodwill arising on acquisition Purchase consideration 2021 $’M 3.2 3.5 8.3 15.0 11.7 11.7 3.3 6.7 10.0 The intangible assets identified as part of the acquisition included landfill airspace. The fair value of this intangible asset is based on the present value of the expected cash flows from the airspace. Goodwill acquired comprises the value of expected synergies arising from integration of the acquired business and is non-deductible for income tax purposes. Cash consideration paid (included in cash flows from investing activities) Transaction costs of the acquisition (included in cash flows from operating activities) Net cash flow on acquisition 2021 $’M (10.0) (0.5) (10.5) From the date of acquisition to 30 June 2021, the business contributed $4.7 million of revenue and $0.8 million to profit before tax to the Group. If the business had been acquired at the beginning of the reporting period, revenue of $5.3 million and profit before tax of $0.9 million would have been contributed to the Group. 9 6 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202128 Business combinations and loss of control of subsidiary (continued) Year ended 30 June 2021 (continued) During the year ended 30 June 2021, the Group acquired a business from NPL4152 Pty Ltd and Certified Destruction Services Pty Ltd (Pinkenba CDS) and a business from Oilwise Pty Ltd (Oilwise). Details of the business combinations are provided below: BUSINESS ACQUIRED DATE OF ACQUISITION DESCRIPTION OF THE BUSINESS OPERATING SEGMENT Pinkenba CDS 3 August 2020 Certified destruction services business in Pinkenba, Queensland Solid Waste Services Oilwise 30 October 2020 Oil collection business, NSW Liquid Waste & Health Services The fair values of the identifiable assets and liabilities of the business combinations at the date of acquisition were: Assets Property, plant and equipment Right-of-use assets Intangible assets Liabilities Employee entitlements Interest-bearing liabilities Deferred tax liabilities Total identifiable net assets at fair value Goodwill arising on acquisition Purchase consideration 2021 $’M 3.5 2.7 1.7 7.9 0.1 2.7 0.5 3.3 4.6 3.9 8.5 The intangible assets identified as part of the acquisitions included customer relationship intangibles. The fair value of the intangible assets is based on the present value of the expected cash flows from the customers of the acquired business, applying an expected attrition rate of the customer base. Goodwill acquired comprises the value of expected synergies arising from integration of the acquired businesses and is non-deductible for income tax purposes. Cash consideration paid (included in cash flows from investing activities) Transaction costs of the acquisition (included in cash flows from operating activities) Net cash flow on acquisition 2021 $’M (8.5) (0.3) (8.8) From the date of acquisition to 30 June 2021, the Pinkenba CDS and Oilwise acquisitions contributed $5.9 million of revenue and nil to profit before tax to the Group. If both businesses had been acquired at the beginning of the reporting period, revenue of $6.5 million and profit before tax of $0.1 million would have been contributed to the Group. 9 7 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT28 Business combinations and loss of control of subsidiary (continued) Year ended 30 June 2020 During the year ended 30 June 2020, the Group acquired a business from various entities in the SKM Recycling Group (receivers and managers appointed) (SKM). Details of the business combination are provided below: BUSINESS ACQUIRED DATE OF ACQUISITION DESCRIPTION OF THE BUSINESS OPERATING SEGMENT SKM 31 October 2019 Recycling business based in Victoria, Tasmania and South Australia Solid Waste Services At 30 June 2020, provisionally determined values were reported. Subsequent to 30 June 2020, final fair values for the business combination were determined. Comparative amounts for 30 June 2020 have been restated in this financial report for final determined fair values. The restated aggregated fair value of the identifiable assets and liabilities as at the date of acquisition were: Assets Property, plant and equipment 1 Deferred tax assets 2 Prepayments Liabilities Trade and other payables Employee entitlements Provisions 3 Interest-bearing liabilities Total identifiable net assets at fair value Goodwill arising on acquisition Purchase consideration PROVISIONAL FAIR VALUE REPORTED AT 30 JUNE 2020 $’M ADJUSTMENTS TO PROVISIONAL FAIR VALUE $’M FINAL FAIR VALUE $’M 68.3 3.3 0.1 71.7 0.5 0.9 8.8 0.9 11.1 60.6 5.4 66.0 (2.1) 2.7 0.1 0.7 0.1 – 12.2 – 12.3 (11.6) 11.6 – 66.2 6.0 0.2 72.4 0.6 0.9 21.0 0.9 23.4 49.0 17.0 66.0 1 A detailed review of the values placed on property, plant and equipment in the preliminary valuation has resulted in a net reduction in the fair value by $2.1 million. 2 Deferred tax assets increased by $2.7 million mainly as a result of the adjustment to provisions. 3 The increase in the fair value of provisions by $12.2 million comprises: $11.6 million related to remediation of the properties acquired to ensure they are compliant with the applicable laws and regulations and $0.6 million related to other provisions. Cash paid (included in cash flows from investing activities) Transaction costs of the acquisition (included in cash flows from operating activities) Net cash flow on acquisition 2020 $'M 66.0 7.5 73.5 The acquisition of SKM followed the public sale process conducted by KordaMentha, who were appointed Receivers and Managers of SKM by Cleanaway following the acquisition of the senior secured loans from SKM’s lender, on 21 August 2019. From the date of acquisition to 30 June 2020, the business contributed $30.4 million of revenue and $1.1 million loss to profit before tax to the Group. 9 8 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202128 Business combinations and loss of control of subsidiary (continued) Year ended 30 June 2020 (continued) During the year ended 30 June 2020, the Group acquired a business from Statewide Recycling Services Pty Ltd (Statewide). Details of the business combination are provided below: BUSINESS ACQUIRED DATE OF ACQUISITION DESCRIPTION OF THE BUSINESS OPERATING SEGMENTS Statewide 16 December 2019 Waste disposal and recycling business based in Warrnambool, Victoria Solid Waste Services The fair values of the identifiable assets and liabilities of the business combination at the date of acquisition were: Assets Property, plant and equipment Deferred tax assets Intangible assets Liabilities Employee entitlements Deferred tax liabilities Total identifiable net assets at fair value Goodwill arising on acquisition  Purchase consideration 2020 $’M 4.4 0.1 4.5 9.0 0.2 1.4 1.6 7.4 6.1 13.5 The intangible assets identified as part of the acquisition included customer relationship intangibles. These intangible assets were valued based on the expected cash flows from the customers of the acquired business, applying an expected attrition rate of the customer base. Goodwill acquired comprises the value of expected synergies arising from integration of the acquired businesses and is non-deductible for income tax purposes. Cash paid (included in cash flows from investing activities) Transaction costs of the acquisition (included in cash flows from operating activities) Net cash flow on acquisition 2020 $’M 13.5 0.4 13.9 From the date of acquisition to 30 June 2020, the business contributed $5.0 million of revenue and $1.4 million to profit before tax to the Group, including amortisation of customer intangibles of $0.2 million. If the business had been acquired at the beginning of the reporting period, revenue of $9.2 million and profit before tax of $2.5 million would have been contributed to the Group, including amortisation of customer intangibles of $0.5 million. 9 9 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT28 Business combinations and loss of control of subsidiary (continued) Year ended 30 June 2020 (continued) Loss of control of subsidiary On 1 January 2020 the Group sold down a 5% interest in Cleanaway ResourceCo RRF Pty Ltd and at the same time, due to a change in the shareholders’ agreement, also lost control of the entity. The Group now have joint control in Cleanaway ResourceCo RRF Pty Ltd. The assets and liabilities over which control was lost are as follows: Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Property, plant and equipment Right-of-use assets Intangible assets Liabilities Trade and other payables Employee entitlements Provisions Interest-bearing liabilities Deferred tax liabilities Net assets derecognised Fair value of consideration received Net assets derecognised Non-controlling interests derecognised Fair value retained in the former subsidiary 1 Gain on loss of control of subsidiary 1 The fair value of the investment retained in Cleanaway ResourceCo RRF Pty Ltd is included in equity accounted investments, refer to note 23. Cash consideration received (included in cash flows from investing activities) Cash derecognised on loss of control (included in cash flows from investing activities) Net cash flow on loss of control of subsidiary 2020 $'M 0.5 5.7 0.6 0.5 13.6 19.4 24.0 64.3 9.7 0.1 0.1 29.8 0.6 40.3 24.0 2.5 (24.0) 0.6 22.0 1.1 2020 $'M 2.5 (0.5) 2.0 100 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202129 Subsidiaries The Group’s principal subsidiaries at 30 June 2021 are set out below. EFFECTIVE INTEREST 3 2021 % 2020 % Active Industrial Solutions Pty Ltd 2 AJ Baxter Pty Ltd 2 ASP Plastics Pty Limited 2 ASP Healthcare Pty Limited 2 Baxter Business Pty Ltd 2 Baxter Recyclers Pty Ltd 2 Cleanaway Co Pty Ltd 2 Cleanaway Daniels Australia Pty Ltd 2 Cleanaway Daniels FMD Pty Ltd 2 Cleanaway Daniels Laboratory Products Pty Ltd 2 Cleanaway Daniels NSW Pty Ltd 2 Cleanaway Daniels Pty Ltd 2 Cleanaway Daniels Services Pty Ltd 2 Cleanaway Daniels VIC Pty Ltd 2 Cleanaway Daniels Waste Services Pty Ltd 2 Cleanaway Daniels Wollongong Pty Ltd 2 Cleanaway Equipment Services Pty Ltd 2 Cleanaway Hygiene Pty Ltd 2 Cleanaway Industrial Solutions Pty Ltd 2 Cleanaway Industries Pty Ltd 2 Cleanaway Landfill Holdings Pty Ltd 2 Cleanaway (No. 1) Pty Ltd 2 Cleanaway Operations Pty Ltd 2 Cleanaway Organics Pty Ltd 2 Cleanaway Pty Ltd 2 Cleanaway Recycling Pty Ltd 2 Cleanaway Refiners Pty Ltd 2 Cleanaway Resource Recycling Pty Ltd 2 Cleanaway Solid Waste Pty Ltd 2 Cleanaway Superior Pak Pty Ltd 2 Cleanaway Waste Management Limited (Parent entity) Daniels Manufacturing Australia Pty Ltd 2 Enviroguard Pty Ltd 2 Environmental Recovery Services Pty Ltd 2 Grasshopper Environmental Pty Ltd 2 Landfill Land Holdings Pty Ltd 2 Landfill Operations Pty Ltd 2 Mann Waste Management Pty Ltd 2 Max T Pty Ltd 2 Nationwide Oil Pty Ltd 2 NQ Resource Recovery Pty Ltd 2 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – 100 100 100 100 100 100 1 0 1 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT29 Subsidiaries (continued) Oil and Fuel Salvaging (Queensland) Pty Ltd 2 Pilbara Environmental Services Pty Ltd (formerly PTK Environmental Services Pty Ltd) 1 Pilbara Logistics Pty Ltd 2 PT Environmental Services Pty Ltd 2 PTW Environmental Services Pty Ltd QORS Pty Ltd Rubus Holdings Pty Ltd 2 Rubus Intermediate One Pty Ltd 2 Rubus Intermediate Two Pty Ltd 2 RWS Admin Pty Ltd 2 Sterihealth Sharpsmart Pty Ltd 2 T Environmental Services Pty Ltd 2 Transpacific Baxter Pty Ltd 2 Transpacific Cleanaway Holdings Pty Ltd 2 Transpacific Co Pty Ltd 2 Transpacific Environmental Services Pty Ltd 2 Transpacific Innovations Pty Ltd 2 Transpacific Paramount Service Pty Ltd Transpacific Resources Pty Ltd 2 Transwaste Technologies Pty Ltd 2 Transwaste Technologies (1) Pty Ltd 2 Waste Management Pacific (SA) Pty Ltd 2 Waste Management Pacific Pty Ltd 2 EFFECTIVE INTEREST 3 2021 % 2020 % 100 50 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 50 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 1 Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. As subsidiaries, the Group has power over the investees through management control and the casting vote. The Group has the capacity to dominate decision-making in relation to the relevant activities so as to enable those entities to operate as part of the Group in pursuing its objectives. These subsidiaries are parties to a Deed of Cross Guarantee with Cleanaway Waste Management Limited created on 25 June 2018 pursuant to ASIC Class Order 2016/785 and are relieved from the requirement to prepare and lodge an audited Financial Report. Refer to note 30 for Consolidated Statement of Profit or Loss and Other Comprehensive Income and Consolidated Balance Sheet of the entities who are a party to the Deed of Cross Guarantee. 2 3 All entities were incorporated in Australia. 1 02 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202130 Deed of cross guarantee The Consolidated Statement of Profit or Loss and Other Comprehensive Income and the Consolidated Balance Sheet of the entities who are a party to the Deed of Cross Guarantee are: STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME Revenue  Other income Labour related expenses Collection, recycling and waste disposal expenses Fleet operating expenses Property expenses Other expenses Gain on loss of control of subsidiary Share of losses from equity accounted investments  Depreciation and amortisation expense Impairment of assets Write-off of assets Profit from operations  Net finance costs Profit before income tax  Income tax expense Profit after income tax Other comprehensive income Net gain on cross currency interest rate swaps (net of tax) Net comprehensive loss recognised directly in equity Total comprehensive income for the year Refer to note 29 for details of subsidiaries who are a party to the Deed of Cross Guarantee. 2021 $’M 2020 $’M 2,366.1 2,302.1 5.5 (889.7) (608.7) (243.4) (44.6) (60.5) – (2.0) 34.6 (854.2) (631.1) (227.2) (45.7) (93.8) 1.1 (2.1) (276.4) (261.2) (4.3) (5.4) 236.6 (35.9) 200.7 (56.5) 144.2 (0.7) (0.7) 143.5 – (19.6) 202.9 (48.8) 154.1 (41.6) 112.5 (0.1) (0.1) 112.4 1 0 3 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT30 Deed of cross guarantee (continued) BALANCE SHEET Assets Current assets Cash and cash equivalents Trade and other receivables Inventories Other assets Total current assets Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Equity accounted investments  Net deferred tax assets Derivative financial instruments Other assets Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Income tax payable Interest-bearing liabilities Employee entitlements Provisions Other liabilities Total current liabilities Non-current liabilities Interest-bearing liabilities Derivative financial instruments Employee entitlements Provisions Other liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity 2021 $’M 2020 $’M 68.8 363.5 22.1 28.8 483.2 1,241.5 479.2 2,320.4 41.6 50.5 – 23.3 76.6 343.2 19.4 23.1 462.3 1,174.0 416.7 2,306.2 34.5 65.1 30.0 23.2 4,156.5 4,639.7 4,049.7 4,512.0 293.7 265.7 5.9 76.9 78.8 68.2 35.6 5.7 69.6 71.2 79.0 34.9 559.1 526.1 996.4 31.5 9.9 306.4 107.0 1,451.2 2,010.3 2,629.4 995.7 – 7.2 287.6 128.9 1,419.4 1,945.5 2,566.5 2,695.7 2,688.7 25.1 (91.4) 23.5 (145.7) 2,629.4 2,566.5 The effect of the deed is that all subsidiaries that are parties to the deed have guaranteed to pay any deficiency in the event of winding up of any subsidiary that is a party to the deed or if they do not meet their obligations under the terms of overdrafts, loans, leases or other liabilities subject to the guarantee. 10 4 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202131 Parent entity Current assets Total assets Current liabilities Total liabilities Issued capital Retained earnings Reserves Total equity Profit/(loss) for the period Total comprehensive income/(loss) for the period The parent entity guarantees the contractual commitments of its subsidiaries as requested. 32 Financial risk management 2021 $’M 0.1 2020 $’M – 3,573.4 3,568.6 8.5 624.3 7.7 646.5 2,695.7 2,688.7 227.8 25.6 209.2 24.2 2,949.1 2,922.1 108.0 108.7 (14.9) (14.9) The Group is exposed to market risk, credit risk and liquidity risk. The Group has in place a Treasury Policy that focuses on managing these risks. The policy is reviewed by the Audit and Risk Committee and approved by the Board. The treasury activities are reported to the Audit and Risk Committee and Board on a regular basis with the ultimate responsibility being borne by the Chief Financial Officer (CFO). The Group’s overall financial risk management focuses on mitigating the potential financial effects to the Group’s financial performance. The Group also enters into derivative transactions to manage the interest rate and currency risks arising from the Group’s operations and its sources of finance. It is the Group’s policy that no speculative trading in financial instruments shall be undertaken. (a) Market risk Market risk is the risk that the fair value of future cash flows will fluctuate because of changes in market prices. Market risk includes foreign currency risk, interest rate risk and commodity price risk. Foreign currency risk Foreign currency risk arises as a result of having assets and liabilities denominated in a currency that is not the Group’s functional currency (balance sheet risk) or from transactions or cash flows denominated in a foreign currency (cash flow risk). The Group holds cross-currency interest rate swaps (CCIRS) to protect against USD interest rate and currency exposures in relation to USD denominated USPP Notes. The Group does not have any other material foreign currency risk exposures. Interest rate risk Interest rate risk is the risk that the fair value of the financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. The Group’s exposures primarily relate to its exposure to variable interest rates on borrowings and fair value changes relating to USD denominated borrowings. 1 0 5 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT32 Financial risk management (continued) At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was: Fixed rate instruments CEFC facilities Lease liabilities Variable rate instruments Bank and other loans USPP Notes 1 30 JUNE 2021 30 JUNE 2020 WEIGHTED AVERAGE INTEREST RATE % BALANCE $’M WEIGHTED AVERAGE INTEREST RATE % 2.1 3.4 1.7 1.6 81.5 499.4 580.9 125.7 366.7 492.4 4.6 3.6 1.6 1.7 BALANCE $’M 89.7 437.3 527.0 111.5 426.9 538.4 1 At 30 June 2021, the Group held CCIRS to protect against USD interest rate and currency exposures in relation to USD denominated USPP Notes. The CCIRS economically transform the fixed rate USD denominated debt into variable rate AUD denominated debt. Under the terms of CCIRS the three month Bank Bill Swap Rate plus a weighted average margin of 1.61% (2020: 1.61%) is paid quarterly to the bank counterparties in AUD and fixed semi- annual amounts in USD are received equal to meet the interest payments due to the USPP Noteholders. The principal amounts of US$270.0 million (2020: $270.0 million) are also exchanged at drawdown and maturity for A$397.6 million (2020: $397.6 million) under the terms of the CCIRS. The maturity dates and principal amounts are equal to the USPP Notes (refer to financing facilities in Note 15). The carrying amount of the Group’s AUD fixed rate borrowings, carried at amortised cost, is not impacted due to interest rate movements, neither will future cash flows fluctuate due to a change in market interest rates. An analysis of the interest rates over the 12-month period was performed to determine a reasonably possible change in interest rates on the variable rate borrowings. A change of 100 basis points in interest rates, based on borrowings at the reporting date, would have decreased/increased net finance costs by an estimated $4.9 million (2020: $5.4 million). Commodity price risk The Group is exposed to market prices of various commodities. The primary sources of the Group’s exposures are: paper, cardboard, plastics and glass from its recycling and manufacturing activities; oil and oil-derived products used as inputs in its Group operations and sold through its hydrocarbons business; and electricity used in Group operations and sold through its landfill operations. Commodity price risk exposures are actively managed via various strategies including; a centralised commodity trading desk focused on maintaining and developing access to domestic and international markets; contracted sale and purchase agreements; improving the quality of commodity extracted through education, pricing structures and investment in technology; transferring or sharing commodity price risk with customers and suppliers; moving downstream in the supply chain; and maintaining offsetting exposures such as buying oil and oil-derived products but also selling oil products through the hydrocarbons business. The Group does not currently use derivative products to hedge its commodity price exposures. Following agreement in August 2019, the Council of Australian Governments (COAG) is moving to ban the export of certain waste recyclable materials progressively from early-2021 through to mid-2024. The exports bans will increase the amount of waste material that is recycled and processed into value added products in Australia. All levels of Government are committed to supporting the waste industry through this transformation through various initiatives, including making available direct grants of which Cleanaway has been a beneficiary. Cleanaway is actively working to manage the risks but also capture the downstream opportunities these changes present. 106 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202132 Financial risk management (continued) (b) Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet contractual obligations, with the maximum exposure being equal to the gross carrying amount of these instruments. Management has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The Group does not require collateral in respect of financial assets. For certain export sales the Group requires the vendor to provide a letter of credit from its bank. The Group minimises concentrations of credit risk by undertaking transactions with a large number of customers. In addition, receivable balances are monitored on an ongoing basis with the objective that the Group’s exposure to expected credit losses is minimised. Credit risk on foreign exchange contracts including cross-currency interest rate swaps (CCIRS) is mitigated as counterparties are large Australian and international banks with acceptable credit ratings determined by a recognised ratings agency. Credit risk from cash balances and other financial instruments with banks and financial institutions is managed by the Group in accordance with the Group’s Treasury Policy which permits only dealing with large reputable financial institutions. The Group’s maximum exposure to credit risk at the reporting date was: CARRYING AMOUNT Cash and cash equivalents Trade and other receivables 1 Other financial assets NOTE 11 12 2021 $’M 69.4 372.2 24.6 466.2 2020 $’M 79.8 348.1 22.1 450.0 1 Refer to note 12 for an analysis of credit risk and impairment associated with the Group’s trade receivables balance. (c) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s objective is that the Group has access to sufficient cash resources to meet its financial obligations as they fall due, including taxes and dividends, and to provide funds for capital expenditure and investment opportunities as they arise. The Group regularly reviews existing funding arrangements and assesses future funding requirements based upon known and forecast information. The Group’s liquidity position is reported to the Board on a monthly basis. The headroom in the Group’s syndicated facilities at 30 June 2021 is $930.3 million (2020: $421.1 million). The current portion of the Group’s borrowings at 30 June 2021 is nil (2020: $0.4 million). The Group considers liquidity risk to be mitigated due to the level of unutilised facilities available, the level of headroom in each covenant measure and the maturity profile of existing facilities. The following table discloses the contractual maturities of financial liabilities and derivative financial instruments, including estimated interest payments and excluding the impact of netting agreements: 2021 Non-derivatives Unsecured borrowings Lease liabilities 1 Trade and other payables Other financial liabilities Total Derivatives Cross-currency interest rate swaps inflow (outflow) Total < 1 YEAR $’M 1–2 YEARS $’M 2–5 YEARS $’M > 5 YEARS $’M CONTRACTUAL CASH FLOWS $’M CARRYING AMOUNT $’M 16.3 81.1 297.6 29.9 424.9 10.5 (6.6) 3.9 16.3 77.7 – 31.0 125.0 10.5 (6.6) 3.9 367.3 178.5 – 20.6 566.4 402.7 173.8 – 180.5 757.0 802.6 511.1 297.6 262.0 573.9 499.4 297.6 133.7 1,873.3 1,504.6 31.6 (19.7) 11.9 402.7 (422.7) (20.0) 455.3 (455.6) (0.3) n/a n/a (31.5) 1 0 7 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT32 Financial risk management (continued) 2020 Non-derivatives Unsecured borrowings Lease liabilities 1 Trade and other payables Other financial liabilities Total Derivatives Cross-currency interest rate swaps inflow (outflow) Total < 1 YEAR $’M 1–2 YEARS $’M 2–5 YEARS $’M > 5 YEARS $’M CONTRACTUAL CASH FLOWS $’M CARRYING AMOUNT $’M 19.7 72.4 271.1 28.3 391.5 19.3 66.8 – 31.6 117.7 282.0 175.7 – 41.4 499.1 539.2 161.8 – 186.6 887.6 860.2 476.7 271.1 287.9 628.1 437.3 271.1 155.2 1,895.9 1,491.7 11.4 (6.8) 4.6 11.4 (6.8) 4.6 34.3 (20.4) 13.9 448.9 (430.3) 18.6 506.0 (464.3) 41.7 n/a n/a 30.0 1 The contractual commitments of lease liabilities excludes extension options which are reasonably certain to occur but are not contractually committed. If these extension options were included it would increase the future commitments by $112.7 million (2020: $82.0 million). The Group has committed to future cash outflows of $11.2 million relating to leases that have not yet commenced. No lease liabilities or right-of-use assets have been recognised in relation to these leases at 30 June 2021. The Group has bank guarantees and insurance bonds in place in respect of its contractual performance related obligations. These guarantees and indemnities only give rise to a liability where the Group fails to perform its contractual obligations. In the event that the Group does not meet its contractual obligations, these bank guarantees and insurance bonds are callable and the Group becomes liable to repay amounts paid by the bank or insurer. Refer to note 34(c) for details of the Group’s bank guarantees and insurance bonds. (d) Fair value measurement and hedges All assets and liabilities for which fair value is measured or disclosed in the financial statements are classified within the fair value hierarchy on the basis of nature, characteristics and risks and described as follows based on the lower level of input that is significant to the fair value measurement as a whole. Level 1 – the fair value is calculated using prices in active markets. Level 2 – the fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices). Level 3 – the fair value is estimated using inputs for the asset or liability that are not based on observable market data. There were no transfers between levels during the year. 108 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202132 Financial risk management (continued) The following table provides the fair value measurement of the Group’s financial instruments which have been valued using market observable inputs (level 2), including interest and foreign currency rates and models using present value and future potential exposure calculations where applicable: 2021 Opening fair value of asset/(liability) as at 1 July 2020 Amortisation of fair value loss on recognition Movement relating to changes in AUD or USD interest rates Fair value hedges Other Movement relating to change in AUD/USD exchange rates Cash flow hedges Movement relating to change in AUD/USD currency basis Closing fair value of liability as at 30 June 2021 Carrying amount of liability as at 30 June 2021 Accumulated fair value adjustments on the hedged items 2020 Opening fair value of asset/(liability) as at 1 July 2019 Fair value on recognition/derecognition  Movement relating to changes in AUD or USD interest rates Fair value hedges Other Movement relating to change in AUD/USD exchange rates Cash flow hedges Movement relating to change in AUD/USD currency basis Closing fair value of (liability)/asset as at 30 June 2020 Carrying amount of (liability)/asset as at 30 June 2020 Accumulated fair value adjustments on the hedged items FIXED RATE BORROWINGS MEASURED AT AMORTISED COST CLEAN ENERGY FINANCE CORPORATION $’M USPP NOTES (HEDGED ITEMS) $’M DERIVATIVES MEASURED AT FAIR VALUE CCIRS 1 (HEDGING INSTRUMENTS) $’M (99.8) – – 8.2 – – (91.6) (81.5) – (109.9) 10.5 – (0.4) – – (99.8) (89.7) – (431.6) – 29.6 – 31.1 – (370.9) (366.7) 26.7 – (397.6) (40.5) – 6.5 – (431.6) (426.9) (34.0) 30.0 0.3 (28.2) (3.0) (29.7) (0.9) (31.5) (31.5) n/a – (3.1) 39.5 (1.0) (5.1) (0.3) 30.0 30.0 n/a 1 Fair value hedges fair value movements in the hedging instruments of $(28.2) million (2020: $39.5 million) includes an effective portion of $(29.6) million (2020: $40.5 million) and an ineffective portion of $1.4 million (2020: $(1.0) million). Cash flow hedges fair value movements of $(29.7) million (2020:$(5.1) million) includes an effective portion of $(31.1) million (2020: $(6.5) million) and an ineffective portion of $1.4 million (2020: $1.4 million). The notional amount of the derivatives are US$270.0/$397.6 million. 109 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT32 Financial risk management (continued) (d) Fair value measurement and hedges (continued) The cross-currency interest rates (CCIRS) are hedging instruments in designated fair value and cash flow hedging relationships. The hedging relationships are expected to remain effective as: • There is an economic relationship between each hedged item and hedging instrument where the fair value of the hedged item and the hedging instrument substantially offsets each other. This economic relationship is assessed on a qualitative basis by comparing the critical terms of the hedge items with the hedge instruments. These critical terms are contracted and expected to remain unchanged for the term of all hedged items and matching hedging instruments; • The effect of credit risk does not dominate the value changes that result from the economic relationship. The Group expects counterparties, and likewise itself, to maintain high creditworthiness over the period of the economic relationship; and • The hedge ratio of each hedging relationship is maintained at a ratio of 1:1. The 1:1 ratio is determined by allocating all amounts of the hedged items to notional amounts of hedging instruments with matching terms and vice versa. The main source of ineffectiveness expected in the hedging relationships relates to debit and credit adjustments (CVA/DVA) which reflect changes to future potential exposures and the credit risk of the counterparties as well as the credit risk of the Group. The hedged items in the fair value hedges are the US$270.0 million USPP Notes and the hedged risk is movements in fair value relating to changes in USD interest rates excluding credit margins. The fair value movements in the fair value hedges are recorded in net finance costs in the Consolidated Income Statement. The hedged items in the cash flow hedges are the US$270.0 million USPP Notes and the hedged risk is variability in expected payments relating to changes in the AUD/USD exchange rates. The effective portion of the cash flow hedge fair value movements relating to the CCIRS is recognised in the hedge reserve through other comprehensive income. Effective amounts accumulated in the hedge reserve relating to the cash flow hedges are reclassified through other comprehensive income to net finance costs in the same period that the cash flow hedge fair value movements relating to the USPP Notes are recorded in net finance costs in the Consolidated Income Statement. Any ineffective portion relating to the cash flow hedges are recorded directly in net finance costs in the Consolidated Income Statement. The fair value movements of the CCIRS relating to changes in AUD/USD currency basis are excluded from the hedging relationships and recognised in the hedge reserve through other comprehensive income. Refer to note 8 for amounts recorded in net finance costs and 17(a) for amounts recognised in the hedge reserve. 33 Contingent liabilities On 18 August 2014, a Cleanaway vehicle was involved in a motor vehicle accident on the South Eastern Freeway in Glen Osmond, South Australia. The incident resulted in the death of two members of the public, and two other persons were seriously injured. During the year ended 30 June 2017, Cleanaway was charged with work health and safety offences in relation to the incident. Cleanaway was found guilty of these health and safety offences in April 2021 but this decision has been appealed to the South Australian Supreme Court. There is a potential that other claims may emerge in due course and the extent of Cleanaway’s liability and the timing for these matters to be resolved is not known at this time. On 10 October 2020, the Victorian Environment Protection Authority (EPA) issued an invoice to the Group for $6.9 million in respect of landfill levies on materials purchased from the Boral quarry, which were used by Cleanaway at its Melbourne Regional Landfill as daily cover during the year ended 30 June 2018. Subsequent to this the EPA has issued its audit report in respect of landfill levies paid during the year ended 30 June 2019 which requires an additional $4.7 million be paid in respect of that period and also related to the cover materials. The EPA’s position is that the levy is payable as the cover material is ‘waste’ and no exemption applies. Cleanaway does not agree that this material is ‘waste’ as the material was purchased from Boral and used in its landfilling operations. It therefore intends to defend this position. Certain companies within the Group are party to various legal actions or commercial disputes or negotiations that have arisen in the normal course of business. It is expected that any liabilities or assets arising from these legal actions would not have a material effect on the Group. 1 1 0 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202134 Commitments (a) Capital expenditure Significant capital expenditure contracted at the end of the reporting period but not recognised as liabilities is as follows: Property, plant and equipment Intangible assets (b) Other commitments 2021 $’M 37.9 0.2 38.1 2020 $’M 28.9 0.2 29.1 Acquisition of Suez Sydney Assets The Group has entered into an agreement to acquire two landfills and five transfer stations located across the greater Sydney basin from Suez Group S.A.S. for consideration of $501.0 million. Based on the current timeline Cleanaway expects the acquisition to complete in the second quarter of the year ending 30 June 2022. The acquisition is contingent upon the completion of the takeover of Suez S.A by Veolia and various customary conditions including ACCC approval, no material adverse change and transfer of certain customer contracts. (c) Guarantees The Group is, in the normal course of business, required to provide guarantees and other security to third-parties on behalf of joint ventures and associates in respect of their contractual related obligations including financing agreements. The types of guarantees and other security include contract performance and financial guarantees and indemnities, mortgages over real property, bank guarantees and insurance bonds. The guarantees and other security only give rise to a liability or loss to the Group where the joint venture or associate concerned fails to perform its contractual obligations. Bank guarantees and insurance bonds are also issued in the normal course of business and held by beneficiaries as financial assurance in relation to subsidiary customer contracts, property leases and licenses. The bank guarantees and insurance bonds only give rise to a liability to the Group where the subsidiary concerned fails to perform its obligations. Guarantees and other security provided on behalf of joint ventures and associates 1 Bank guarantees issued in respect of subsidiaries Insurance bonds issued in respect of subsidiaries 2021 $’M 18.5 174.5 57.5 250.5 2020 $’M 16.8 145.7 46.2 208.7 1 Excludes performance related obligations and other amounts that can not be ascertained including enforcement and other costs and charges which the Group may become liable for in the event of non-performance. 1 1 1 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT 35 Share-based payments Total share-based payment expense included in the Consolidated Income Statement is set out in note 17(b). Performance rights outstanding at the reporting date consist of the following grants: OFFER GRANT DATE LONG-TERM INCENTIVE PLAN END OF PERFORMANCE OR SERVICE PERIOD PERFORMANCE RIGHTS AT 30 JUNE 2020 GRANTED DURING THE PERIOD VESTED DURING THE PERIOD FORFEITED/ EXPIRED DURING THE PERIOD PERFORMANCE RIGHTS AT 30 JUNE 2021 2018 LTI  2019 LTI 2020 LTI 2021 LTI 3 Nov 2017 30 Jun 2020 3,128,655 2 Nov 2018 30 Jun 2021 3,126,207 30 Oct 2019 30 Jun 2022 2,264,786 – – – 16 Dec 2020 30 Jun 2023 – 1,991,571 (2,156,283) (972,372) – – – – (528,675) 2,597,532 (41,183) 2,223,603 – 1,991,571 SHORT-TERM INCENTIVE PLAN 2019 STI 2020 STI OTHER GRANTS 2019 TII Total  30 Oct 2019 30 Jun 2020 220,975 – (220,975) 16 Dec 2020 30 Jun 2021 – 91,767 – – – – 91,767 26 Oct 2018 30 Jun 2020 1,574,769 – – (1,574,769) – 10,315,392 2,083,338 (2,377,258) (3,116,999) 6,904,473 Vested and exercisable at 30 June 2021 91,767 The vesting date for LTI offers is on or after 14 days after the date on which the annual financial results of the Group for the financial year associated with the end of the performance period is released to the ASX. Other offers vest on or after the end of the relevant performance or service period. (a) Long-term Incentive (LTI) plan The Cleanaway LTI plan is designed to provide long-term incentives for senior executives to deliver long-term shareholder returns. Under the plan, participants are granted performance rights which only vest if certain performance standards are met. Offers made in previous reporting periods The following table outlines the terms of the outstanding LTI offers made in previous reporting periods which remain on issue: PERFORMANCE PERIOD 2019 LTI AWARD UP TO THREE YEARS: 1 JULY 2018 TO 30 JUNE 2021 2020 LTI AWARD UP TO THREE YEARS: 1 JULY 2019 TO 30 JUNE 2022 Overview Performance rights, of which: Performance rights, of which: Measured over three years to 30 June 2021 Measured over three years to 30 June 2022 • Up to 50% vest if a certain relative Total • Up to 50% vest if a certain relative TSR Shareholder Return (TSR) ranking is achieved against the constituents of the S&P/ASX 200 Industrial Sector Index ranking is achieved against the constituents of the S&P/ASX 200 Industrial Sector Index • Up to 50% vest if a certain EPS CAGR target • Up to 25% vest if a certain Return on Invested is achieved Capital (ROIC) target is achieved • Up to 25% vest if a certain Earnings per Share (EPS) Compound Annual Growth Rate (CAGR) target is achieved • The ROIC for year ending 30 June 2022 acts as a gateway to EPS CAGR 1 1 2 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202135 Share-based payments (continued) Offer made in current reporting period – 2021 LTI award During the period, the Group issued performance rights attached to the Group’s LTI plan to the CEO and other senior executives. The performance rights are subject to three performance hurdles: • 50% of the performance rights vest if a certain relative TSR ranking is achieved against constituents of the S&P/ASX 200 Industrial Sector Index. • 50% of performance rights vest if a certain underlying EPS CAGR target is achieved. • The ROIC for year ending 30 June 2023 acts as a gateway to EPS CAGR. Performance rights granted during the period were fair valued by an external party using the Monte Carlo Simulation and Black Scholes model. The following table sets out the assumptions made in determining the fair value of these performance rights: SCHEME Number of rights Grant date Performance period Risk-free interest rate (%) Volatility (%) 1 Fair value – Relative TSR tranche 2 Fair value – EPS CAGR tranche 2 2021 LTI  1,991,571 16 December 2020 1 July 2020 – 30 June 2023 0.0% 35.0% $1.57 $2.30 1 2 Expected volatility is based on the historic volatility of Cleanaway shares over a range of periods. The fair value is reduced to reflect there is no dividend entitlement during the performance period. The performance targets of the 2021 LTI award are set out in the table below. Relative TSR performance measured over the period from 1 March 2020 to 30 June 2023 TSR Ranking against the constituents of the S&P/ASX200 Industrial Sector Index: • Below 50th percentile – 0% vesting • At 50th percentile – 50% vesting • 50th to 75th percentile – straight line vesting between 50% and 100% • Above 75th percentile – 100% vesting EPS CAGR performance as measured over three years from 1 July 2020 to 30 June 2023 EPS CAGR to be achieved: • < 4.0% – 0% vesting • 4.0% – 40% vesting • > 4.0% – ≤ 8.0% – straight line vesting between 40% and 90% • > 8.0% – ≤ 10% – straight line vesting between 90% and 100% • > 10.0% – 100% vesting ROIC performance for the year ending 30 June 2023 Performance rights under EPS CAGR will only vest if ROIC is at least 5.5% or more for the year ending 30 June 2023 1 1 3 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT35 Share-based payments (continued) (b) Short-term Incentive (STI) plan The Cleanaway STI plan is an annual plan that is used to motivate and reward senior executives across a range of performance measures over the financial year. Under the plan, participants are granted a combination of cash and rights to deferred shares if certain performance standards are met. The Group uses EBIT targets as the main performance standard for the STI plan. Vesting of the performance rights granted is deferred for one year. (c) Toxfree Integration Incentive (TII) plan The Company completed the acquisition of Cleanaway Industries Pty Ltd (formerly Tox Free Solutions Limited), a leading integrated waste management company, on 11 May 2018. The key benefits of the acquisition of Toxfree, in particular the $35.0 million of initially identified synergies, were targeted to be realised by 30 June 2020. The one-off TII offer was offered to executives to ensure that executives (including Executive KMP) involved in the acquisition and integration of Toxfree were focused on exceeding the synergy benefits from this acquisition beyond the synergies initially identified in our business case for acquisition and announced to the market. The TII is an offer of performance rights that was made to certain executives (including Executive KMP) which is equivalent to 50% of their STI opportunity. The key performance condition for the TII plan related to the achievement of Cleanaway EBITDA in the year ending 30 June 2020 that exceeds our internal targets which includes the initial $35.0 million of synergies identified from the Toxfree acquisition. The performance period under the plan is from 1 July 2018 to 30 June 2020. This plan does not reward the achievement of the forecast synergy benefits, it is designed to reward the delivery of additional savings and outperformance that enhances EBITDA. Whilst the synergies arising from the Toxfree acquisition exceeded the target of $35 million, the 30 June 2020 EBITDA performance condition for the plan was not achieved, due to the impact of COVID-19 and other factors. Accordingly, all rights issued under the plan lapsed. 36 Auditor’s remuneration Details of the amounts paid or payable to the auditor and its related practices for audit and non-audit services are set out below. 2021 $ 2020 $ Fees to Ernst & Young (Australia): Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities 1,386,642 1,593,111 Fees for assurance services that are required by legislation to be provided by the auditor – Fees for other assurance and agreed-upon-procedures services under other legislation or contractual arrangements where there is discretion as to whether the service is provided by the auditor or another firm 32,960 – – Fees for other services Total fees to Ernst & Young (Australia) Fees to other overseas member firms of Ernst & Young (Australia) Total fees to other overseas member firms of Ernst & Young (Australia) Total auditor’s remuneration 208,842 248,068 1,628,444 1,841,179 – – – – 1,628,444 1,841,179 37 Events occurring after the reporting date There have been no matters or circumstances that have arisen since 30 June 2021 that have significantly affected the Group’s operations not otherwise disclosed in this report. 1 1 4 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202138 Related party transactions (a) Key management personnel Disclosures relating to Key Management Personnel (KMP) are set out in the Remuneration Report on pages 40 to 58. The KMP compensation included in employee expenses are as follows: Short-term employee benefits Post-employment benefits Equity compensation benefits 2021 $ 2020 $ 9,040,411 5,338,542 198,411 481,877 189,032 965,732 9,720,699 6,493,306 Some of the Directors hold, or have previously held, positions in companies with which Cleanaway has commercial relationships which are based on normal terms and conditions on an arm’s length basis. Transactions with entities where the relationship is limited to a common Non-Executive Directorship, including any Chairperson roles, are not considered related party transactions. The Board has assessed all of the relationships between the Group and companies in which Directors hold or held positions and has concluded that in all cases the relationships do not interfere with the Directors’ exercise of objective, unfettered or independent judgement or their ability to act in the best interest of the Group. (b) Wholly-owned Group transactions The wholly-owned Group consists of Cleanaway Waste Management Limited and its subsidiaries listed at note 29. Transactions between Cleanaway Waste Management Limited and other entities in the wholly-owned Group during the years ended 30 June 2021 and 30 June 2020 consisted of: (i) Loans advanced by Cleanaway Waste Management Limited and other subsidiaries; (ii) Loans repaid to Cleanaway Waste Management Limited and other subsidiaries; (iii) The payment of interest on the above loans; (iv) The payment of dividends to Cleanaway Waste Management Limited and other subsidiaries; (v) Management fees charged to subsidiaries; and (vi) Sales between subsidiaries. The above transactions are all eliminated on consolidation. (c) Other related parties There were no material transactions with, or amounts receivable from or payable to, other related parties during the years ended 30 June 2021 and 30 June 2020, except as presented in note 23. 1 1 5 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT39 Significant accounting policies The following significant accounting policies have been adopted in the preparation and presentation of the Financial Report. These policies have been consistently applied to all years presented unless otherwise stated. (a) Revenue Revenue from sale of commodities Sale of commodities produced from recycling waste and processing used mineral oils, and the sale of electricity and gas produced from landfills, generally include one performance obligation. Revenue from the sale of commodities is recognised at the point in time when the product is transferred to the customer. Rendering of services • Solid Waste Services Revenue from collection and disposal of waste is recognised when the performance obligation to the customer has been fulfilled, which is generally when the waste has been collected from the customer. Costs to dispose of the waste are generally incurred at, or close to the time of collection. Variable consideration Some contracts for the collection of waste or acceptance of waste into the Group’s landfills provide the customer with volume rebates. For the majority of contracts, the variability in the contract price is resolved at each reporting date. Where the variability is not resolved at a reporting date the variable consideration is estimated and, where applicable, revenue will be deferred and reflected in contract liabilities. Non-cash consideration In some of the Group’s contracts, rebates are provided to customers or collection is provided at a reduced rate where waste is collected that has a value as a commodity to the Group. In these circumstances the Group allocates a fair value to the commodity collected, generally equal to the rebate paid and the value of the collection service, and recognises this as revenue. • Liquid Waste & Health Services Revenue from collection and treatment of liquid and health waste is recognised when the performance obligation to the customer has been performed, which is generally when the waste has been collected from the customer and Cleanaway takes title to the waste. In some circumstances the Group will charge the customer on delivery of a waste container. Under these circumstances the Group assigns a value to the separate performance obligations, being the provision of a container and the subsequent collection of the full container. Revenue received for the collection of the container where the service has not yet been performed will be deferred and is reflected in contract liabilities. • Industrial & Waste Services Contract revenue is recognised over time and is measured using the input method by reference to labour hours and actual costs incurred, relative to the total expected inputs required to satisfy the individual performance obligations. Costs to fulfil a contract For some larger long-term contracts the Group incurs costs up front to mobilise equipment and organise the workforce in order to commence performing under the contract. This is often the case when larger municipal council contracts, or industrial & waste services contracts in remote areas, are entered into. In these circumstances the upfront costs associated with the contract are capitalised as contract costs and amortised over the term of the contract. Interest Interest revenue is recognised based on the effective interest rate, taking into account the interest rates applicable to the financial assets. Dividends Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates or joint venture entities are accounted for in accordance with the equity method of accounting. 1 1 6 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202139 Significant accounting policies (continued) (b) Repairs and maintenance Plant and equipment of the Group is required to be overhauled on a regular basis. This is managed as part of an ongoing major cyclical maintenance program. The cost of this maintenance is recognised as an expense as incurred, except where it relates to the replacement of a component of an asset, or where it extends the useful life of the asset, in which case the costs are capitalised and depreciated in accordance with the Group’s policy. Other routine operating maintenance, repair and minor renewal costs are also recognised as expenses as incurred. (c) Finance costs Finance costs are recognised as expenses in the period utilisingutilising the effective interest rate method. Income tax (d) The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the reporting period in the countries where the Group’s subsidiaries and associates operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements. With the exception of deferred tax recognised on initial application of AASB 16 Leases, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted at the reporting date and are expected to apply when the related deferred income asset is realised or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. The Company and all its wholly-owned Australian resident entities are part of a Tax Consolidated Group under Australian taxation law. Cleanaway Waste Management Limited is the Head Entity in the Tax Consolidated Group and applies the stand-alone tax payer method. The Tax Consolidated Group has entered into a tax sharing and a tax funding agreement. Impairment of assets (e) Goodwill and intangible assets that have an indefinite useful life are not amortised but are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other 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. The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that previously suffered an impairment loss are reviewed for possible reversal of the impairment loss at each subsequent reporting date. 1 1 7 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT39 Significant accounting policies (continued) (f) Foreign currency Foreign currency transactions are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Consolidated Income Statement and are reported on a net basis. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. (g) Cash and cash equivalents Cash and cash equivalents comprise cash at banks, short-term deposits and petty cash balances. Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are at-call and earn interest at the respective short term deposit rates. (h) Trade and other receivables Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. Trade receivables are generally due for settlement within 30 days and therefore are all classified as current. Collectability of trade debtors is reviewed on an ongoing basis. Debts which are known as uncollectable are written off when identified. The Group accounts for impairment losses relating to financial assets by applying a forward-looking expected credit loss (ECL) approach. The Group has applied a simplified approach to determining ECLs and has calculated ECLs based on lifetime ECLs. The Group has established a provision matrix that is based on the Group’s historical credit losses against the debtors ageing profile, adjusted for forward looking information. The Group’s exposure to credit risk related to trade and other receivables is disclosed in note 32(b). Inventories (i) Inventories are valued at the lower of cost and net realisable value. The cost of inventories is based on the method most appropriate to each particular class of inventory and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. (j) Property, plant and equipment Landfill assets The Group owns landfill assets. A landfill site may be either developed or purchased by the Group. Landfill assets comprise the acquisition of landfill land, cell development costs, site infrastructure and landfill site improvement costs and the asset related to future landfill site restoration and aftercare costs (landfill remediation asset). Landfill land will be recognised separately from other landfill related assets when it is considered to have value at the end of the landfill site’s useful life for housing or commercial development. This land is not depreciated; it is carried at its original cost and tested for impairment. Cell development costs include excavation costs, cell lining costs and leachate collection costs. Cell development costs are capitalised as incurred. Closed cells are capped and may return a future revenue stream to the Group, such as from the sale of landfill gas. The landfill remediation assets comprise capping costs and costs to remediate and monitor the site over the life of the landfill including post closure. Capping costs together with cost of aftercare (see Provision for landfill remediation in note 39(o)) are recognised upon commencement of cell development. The depreciation, for cell development costs and the remediation asset, is calculated by the tonnes of airspace consumed during the reporting period divided into the total airspace available at the beginning of the reporting period, such that all costs are fully depreciated upon receiving last waste into the landfill. A landfill is deemed full when its permitted airspace is consumed and it cannot legally accept any more waste. Alternatively, a landfill may be deemed full earlier should other factors exist, for example, if it is not economically viable to continue accepting waste. Site infrastructure and landfill site improvement costs include capital works such as site access roads and other capital costs relating to multiple cells on the landfill site. These costs are capitalised as incurred and depreciated using the useful life of the asset or the life of the landfill up until receiving last waste. 1 1 8 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202139 Significant accounting policies (continued) (j) Property, plant and equipment (continued) Landfill sales A landfill may be disposed of as an operating landfill or it may be retained until post-closure and then sold. The Group’s policy on landfill sales is as follows: • • If the landfill is sold as an operating landfill, recognise the profit on sale of an asset; or If the completed landfill is intended to be sold and meet the relevant requirements, transfer the landfill balance to non-current assets held for sale. Non-landfill land and buildings Non-landfill land and buildings are shown at costs less accumulated depreciation. Non-landfill land is not depreciated. Plant and equipment Plant and equipment is stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for its intended use. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment and are recognised net within “other income” in the Consolidated Income Statement. Depreciation Depreciation is provided on property, plant and equipment, including freehold buildings but excluding land. Depreciation of assets, with the exception of landfill remediation and cell development assets, is calculated on a straight-line basis so as to write off the net cost of each asset over its expected useful life to the Group. Leasehold improvements are depreciated over the period of the lease or estimated useful lives, whichever is the shorter, using the straight-line method. Landfill remediation and cell development assets are depreciated on a usage basis over the individual landfill expected life. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. The expected useful lives are as follows: Buildings and site improvements 15 to 40 years Plant and equipment Leasehold improvements Landfill assets (k) Intangible assets 2.5 to 20 years 5 to 10 years 1 to 50 years Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired business, subsidiary or associate at the date of acquisition. Goodwill on the acquisition of businesses or subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of a business include the carrying amount of goodwill relating to the business sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. 1 1 9 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT39 Significant accounting policies (continued) (k) Intangible assets (continued) Research and development Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognised in the Consolidated Income Statement as an expense as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete development. The expenditure capitalised includes the costs of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Borrowing costs related to the development of qualifying assets are also capitalised. Other development expenditure is recognised in the Consolidated Income Statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Other intangible assets Other intangible assets include customer contracts recognised on business combinations and licences. Other intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Amortisation Amortisation is charged to the Consolidated Income Statement on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite (e.g. brand names). Goodwill and intangible assets with an indefinite useful life are systematically tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives of customer contracts are three to 10 years. (l) Trade and other payables These amounts represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period. Other payables and accruals includes tipping and disposal costs accruals as well as general accruals. (m) Borrowings Borrowings are initially recognised at fair value of the consideration received net of issue costs incurred. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with any difference between cost and redemption value being recognised in the Consolidated Income Statement over the period of the borrowings on an effective interest basis. Foreign currency exchange gains and losses arising on foreign currency denominated borrowings are recorded in net finance costs in the Consolidated Income Statement. Borrowings are derecognised when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in other income or other expenses. 12 0 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202139 Significant accounting policies (continued) (n) Leases The Group leases various property, equipment and vehicles. These leases typically do not exceed 10 years but in some cases contain further renewal rights. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. From 1 July 2019, leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • Fixed payments (including in-substance fixed payments), less any lease incentives receivable; • Variable lease payments that are based on a fixed index or a rate as at the commencement date; • Amounts expected to be payable by the lessee under residual value guarantees; • The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and • Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value, in a similar economic environment, with similar terms and conditions. Short-term leases and those where the underlying asset is of low value are recognised as an expense on a straight-line basis over the lease term. The Group has elected for the plant and equipment asset class, not to separate non-lease components from lease components, and instead accounts for all payments under the lease together as a single component. Variable lease payments Some leases contain lease payments that are linked to variable components such as volumes of waste collected or landfill revenue. Lease payments which are variable in nature and do not depend on a fixed index or rate are recognised in profit or loss in the period in which they relate. Extension and termination options Extension and termination options are included in several lease arrangements across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. In determining the lease term, all facts and circumstances are considered that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee. In determining the lease term, the Group has applied judgement over the facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. All property leases on which a prized asset is situated are considered reasonably certain to exercise an extension option. 1 2 1 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT39 Significant accounting policies (continued) (o) Provision for remediation and rectification Landfill remediation and rectification Landfill sites are constructed to receive waste in accordance with a licence. These licences generally require that once a landfill is full, it is left in a condition as specified by the Environmental Protection Authority (EPA) or other government authorities and monitored for a defined period of time (usually 30 years). Therefore, remediation occurs on an ongoing basis, as the landfill is operating, at the time the landfill closes and through post-closure. Remediation comprises: • The costs associated with capping landfills (covering the waste within the landfill); and • Costs associated with remediating and monitoring the landfill in accordance with the licence or environmental requirements. The constructive obligation to remediate the landfill sites is triggered upon commencement of cell development. Accordingly landfill remediation costs are provided for when development commences and at the same time a landfill remediation asset is recognised. The provision is stated at the present value of the future cash outflows expected to be incurred, which increases each period due to the passage of time and is recognised in current and non-current provisions in the Consolidated Balance Sheet. The annual change in the net present value of the provision due to the passage of time is recognised in the Consolidated Income Statement as a time value adjustment in net finance costs. Due to the long-term nature of remediation obligations, changes in estimates occur over time. Any change in the provision for future landfill site restoration and aftercare costs arising from a change in estimate of those costs, and related to landfill sites which are still accepting waste, is recognised as an addition or reduction to the remediation asset in the Consolidated Balance Sheet. Changes to the remediation provision once last customer waste is received are expensed to the Consolidated Income Statement. Rectification provisions differ to remediation. Rectification costs must be provided for at a reporting period end when there is an obligation to bring an asset back to the normal operating standard required under the licence and EPA or council requirements. Rectification provisions are calculated based on the net present value of all costs expected to rectify the site. All rectification costs are expensed to the Consolidated Income Statement. Industrial property remediation The Group leases and owns industrial properties and operates these sites under license and in accordance with the requirements of the EPA or other government authorities. In addition, under lease agreements, the Group is required to remove infrastructure placed on a site, during the tenancy, and in most cases, return the leased site to its original condition upon entering into the lease, taking into consideration usual wear and tear on the property. The constructive obligation to remediate industrial properties is triggered upon erecting leasehold improvements to leased sites, or upon any event occurring which has given rise to contamination requiring remediation. The provision is stated at the present value of the future cash outflows expected to be incurred, which increases each period due to the passage of time and is recognised in current and non-current provisions in the Consolidated Balance Sheet. The annual change in the net present value of the provision due to the passage of time is recognised in the Consolidated Income Statement as a time value adjustment in net finance costs. Changes in estimates can occur over time as industrial properties are operated over a long period. Any change in the provision related to site restoration will be adjusted against any related assets on the site. If there is no related asset, changes to the remediation provision are recognised through the Consolidated Income Statement. 12 2 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202139 Significant accounting policies (continued) (p) Provisions A provision is recognised in the Consolidated Balance Sheet when the Group has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. The costs of treating and disposing of waste collected, in accordance with government regulation, are provided for if they have not yet been incurred. (q) Employee entitlements Wages and salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and vesting sick leave expected to be settled within 12 months of the reporting date are recognised in other payables and employee benefits in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Long service leave The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in employee benefits and is measured in accordance with the other employee benefits described above. The liability for long service leave expected to be settled more than 12 months from the reporting date is recognised in employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on the corporate bond rate with terms to maturity and currency that match, as closely as possible, the timing of estimated future cash outflows. Short-term Incentive (STI) compensation plans A liability for employee benefits in the form of STIs is recognised when it is probable that STI criteria has been achieved and an amount is payable in accordance with the terms of the STI plan. Liabilities for STIs are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled. Share-based payment transactions Share-based payments are provided to Executives and employees via the Cleanaway Waste Management Limited Short-term Incentive plan and the Long-term Incentive plan. Share-based compensation payments are measured at fair value at the date of grant and expensed to employee benefit expense with a corresponding increase in the employee benefits reserve over the period in which the service and, where applicable, performance conditions are fulfilled. Fair value is measured by using the Monte Carlo simulation or the Black Scholes option pricing model, the term of the Performance Right, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the Performance Right. (r) Fair value measurement The Group measures certain assets and liabilities at fair value at each balance sheet date. Fair value is 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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either: • • In the principle market for the asset or liability, or In the absence of a principle market, in the most advantageous market for the asset or liability. The principle or the most advantageous market must be accessible by the Group. The fair value of an asset or liability is measured using the assumptions that the market participants act in their economic best interest. A fair value measurement of non-financial assets takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use. 1 2 3 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT39 Significant accounting policies (continued) (r) Fair value measurement (continued) The Group uses the following valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs: • Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities; • Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable; and • Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. (s) Basis of consolidation Subsidiaries The Consolidated Financial Statements comprise the financial statements of the Group and its subsidiaries. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including: • The contractual arrangement with the other vote holders of the investee; • Rights arising from the contractual arrangements; and • The Group’s voting rights and potential voting rights. The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the Consolidated Income Statement from the date the Group gains control until the date when the Group ceases to control the subsidiary. All intra-group balances, transactions and unrealised gains and losses resulting from intra-group transactions are eliminated in full. Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the Consolidated Income Statement and within equity in the Consolidated Balance Sheet, separately from parent shareholders’ equity. If the Group loses control over a subsidiary it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity, while any resultant gain or loss is recognised in the Consolidated Income Statement. Any investment retained is recognised at fair value. Equity accounted investments Equity accounted investments are those entities over which the Group has either significant influence (associate entities) or joint control and has rights to the net assets of the entity (joint venture entities). The Group does not have power over these entities either through management control or voting rights. Investments in associates and joint ventures are accounted for using the equity method of accounting and are collectively referred to as “equity accounted investments” in this report. Under the equity method of accounting, the investments in associates and joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses of the associate or joint venture in the Consolidated Income Statement. Dividends received from associates and joint ventures are recognised as a reduction in the carrying amount of the investment. Where the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture, including any other unsecured long-term receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. 12 4 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202139 Significant accounting policies (continued) (s) Basis of consolidation (continued) Equity accounted investments (continued) Unrealised gains on transactions with associates and joint ventures are eliminated to the extent of the Group’s interest in the associates and joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the associates and joint ventures have been changed where necessary to ensure consistency with the policies adopted by the Group. (t) Business combinations Business combinations are accounted for using the acquisition method, whereby the identifiable assets, liabilities and contingent liabilities (identifiable net assets) are measured using their fair values at the date of acquisition. Goodwill arises in a business combination when the consideration transferred to the acquiree is greater than the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. Acquisition related costs incurred in a business combination transaction are expensed as incurred. 1 2 5 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORT 40 New standards adopted The Group has adopted all new and revised Standards and Interpretations issued by the Australian Accounting Standards Board that are relevant to its operations and effective for the current reporting period. New and revised Standards, amendments thereof and Interpretations which became effective during the current year and relevant to the Group include: • Amendments to AASB 3 - Definition of a Business The amendment to AASB 3 Business Combinations clarifies that to be considered a business, an integrated set of activities and assets must include, at a minimum, an input and a substantive process that, together significantly contribute to the ability to create output. The new definition was considered in determining whether the acquisitions set out in Note 28 met the new definition of a business. This amendment has been applied prospectively and has not had an impact on any acquisitions entered into prior to 1 July 2020. • Amendments to AASB 101 and AASB 108 - Definition of Material The amendments provide a new definition of material that states, “information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity.” The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. These amendments had no impact on the Consolidated Financial Statements. • Conceptual Framework for Financial Reporting The Conceptual Framework is not a standard, and none of the concepts contained therein override the concepts or requirements in any standard. The purpose of the Conceptual Framework is to assist the AASB in developing standards, to help preparers develop consistent accounting policies where there is no applicable standard in place and to assist all parties to understand and interpret the standards. The revised Conceptual Framework includes some new concepts, updated definitions and recognition criteria for assets and liabilities and clarifies some important concepts. These amendments had no impact on the Consolidated Financial Statements of the Group. • Improvements to AASB 2018-2020 cycle - AASB 9 - Fees in the ‘10 per cent’ test for derecognition of financial liabilities The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender. Cleanaway has applied this guidance in determining that the modification of the CEFC fixed rate debt, which occurred on 19 October 2020, was not substantially different from the terms of the original facility. The Group has early adopted this amendment. Refer to note 8. 126 Notes to the Consolidated Financial StatementsFor the year ended 30 June 202141 New standards and interpretations not yet adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 July 2021 and have not been applied in preparing these Consolidated Financial Statements. Those which may be relevant to the Group are set out below. The Group does not plan to adopt these standards early. New standards STANDARD/INTERPRETATION Improvements to AASB 2018-2020 cycle – Reference to the Conceptual Framework – Amendments to AASB 3 The amendments are intended to update a reference to the new Conceptual Framework without significantly changing the requirements of AASB 3. The amendments also add a new paragraph to AASB 3 to clarify that contingent assets do not qualify for recognition at the acquisition date. This is not expected to have any impact on the Consolidated Financial Statements. This amendment will be applied to business combinations post adoption and is not expected to have a significant impact on the Group. CIassification of Liabilities as Current or Non-Current – Amendments to AASB 101 The AASB has issued amendments to AASB 101 Presentation of Financial Statements to specify the requirements for classifying liabilities as current or non-current. The amendments clarify: • What is meant by a right to defer settlement • That a right to defer must exist at the end of the reporting period • That classification is unaffected by the likelihood that an entity will exercise its deferral right • That only if an embedded derivative in a convertible liability is itself an equity instrument, would the terms of a liability not impact its classification Cleanaway does not intend to early adopt this amendment. The impact of the amendment to the Group’s Financial Statements is yet to be determined. Definition of Accounting Estimates - Amendments to AASB 108 The AASB has issued amendments to AASB 108 Accounting Policies, changes in Accounting Estimates and Errors in which it introduces a new definition of ‘accounting estimates’. The amendments clarify the distinction between changes in accounting estimates and changes in accounting policy and the correction of errors. Also, they clarify how entities use measurement techniques and inputs to develop estimates. Cleanaway does not intend to early adopt this amendment. Deferred Tax related to Assets and Liabilities arising from a Single Transaction - Amendments to AASB 112 The AASB issued amendments to AASB 112 Income Taxes which narrow the scope of the initial recognition exception under AASB 112 so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences. Cleanaway does not intend to early adopt this amendment. The impact of the amendment to the Group’s Financial Statements is yet to be determined. Disclosure of Accounting Policies - Amendments to AASB 101 and IFRS Practice Statement 2 The AASB has issued amendments to AASB 101 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements in which it provides guidance and examples to help entities apply materiality judgements to accounting policy disclosures with the aim to making the accounting policies more useful. Cleanaway does not intend to early adopt this amendment. EFFECTIVE FOR ANNUAL REPORTING PERIODS BEGINNING ON OR AFTER EXPECTED TO BE INITIALLY APPLIED IN THE FINANCIAL YEAR ENDING 1 January 2022 30 June 2023 1 January 2023 30 June 2024 1 January 2023 30 June 2024 1 January 2023 30 June 2024 1 January 2023 30 June 2024 1 2 7 Notes to the Consolidated Financial StatementsFor the year ended 30 June 2021234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTIn the Directors’ opinion: (a) the financial statements and notes together with the additional disclosures included in the Directors’ Report designated as audited, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations), and the Corporations Regulations 2001; (b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in note 2; (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; (d) this declaration has been made after receiving the declarations required to be made to the Directors in accordance with section s295A of the Corporations Act 2001 for the financial year ended 30 June 2021; and (e) as at the date of this declaration, there are reasonable grounds to believe that the members of the closed Consolidated Group identified in note 29 will be able to meet any obligation or liabilities to which they are or may become subject to, by virtue of the deed of cross guarantee. This declaration is made in accordance with a resolution of the Directors. M P Chellew Executive Chairman Melbourne, 19 August 2021 128 Directors’ DeclarationErnst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Report on the Audit of the Financial Report Opinion We have audited the financial report of Cleanaway Waste Management Limited (“the Company”) and its subsidiaries (collectively “the Group”), which comprises the consolidated balance sheet as at 30 June 2021, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes to the financial statements, including a summary of significant accounting policies, and the directors’ declaration. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: (a) Giving a true and fair view of the consolidated financial position of the Group as at 30 June 2021 and of its consolidated financial performance for the year ended on that date; and (b) 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 129 Independent Auditor’s Reportto the Members of Cleanaway Waste Management Limited234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTErnst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au 1. Carrying value of existing non-current assets, including brand name and goodwill WHY SIGNIFICANT HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER At 30 June 2021, the Group held $1,930.3 million in intangible assets with indefinite useful lives. These intangible assets comprise goodwill and brand names and are monitored by the Group at an operating segment level. In accordance with the requirements of Australian Accounting Standards, the Group tests these indefinite useful life assets for impairment at least annually using a discounted cash flow model to determine the recoverable amount. The assessment of the carrying value of the intangible assets (the impairment test) incorporates judgements and estimates relating to discount rates, forecast revenue, EBITDA growth rates and levels of capital expenditure. In addition, various assumptions have been made for economic variables such as commodity prices, GDP growth rates and inflation rates as well as expected outcomes from the execution of operational efficiencies. The Group also considered the potential impact of COVID-19 on their forecast revenue and expenditure. Given these judgements, this was a key audit matter. Our audit procedures included testing the integrity of the discounted cash flow models and evaluation of the assumptions and methodologies used by the Group. We involved our valuation specialists to assist in the execution of these audit procedures. In respect of the Group’s discounted cash flow models, we: • Assessed the assumptions in the Group’s board approved forecasts, including any underlying cashflow impacts from COVID-19; • Considered the current year actual results in comparison to prior year forecasts in order to assess forecast accuracy; • Assessed the key assumptions in comparison to available independent economic and industry forecasts; • Assessed the assumptions for terminal growth rates and costs to dispose; • Considered whether cost savings were reasonable; • Assessed the capital expenditure forecasts against comparable companies’ capital spend rate; Note 22 of the financial report provides disclosure related to the Group’s impairment testing and highlights the impact of reasonably possible changes to key assumptions. • Assessed the discount rates through comparison with the weighted average cost of capital of comparable businesses; • Considered comparable businesses valuation multiples as a cross-check of the Group’s cash flow model outcomes; • Considered key judgements made in relation to unapproved height extensions including New Chum; and • Performed a sensitivity analysis in respect of the key assumptions which would be required for the intangible assets to be impaired and assessed the likelihood of those changes arising. We also assessed the adequacy of the disclosures made in the financial report, in particular those that had the most significant effect on the determination of the recoverable amount of the intangible assets. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 13 0 Independent Auditor’s Reportto the Members of Cleanaway Waste Management LimitedErnst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au 2. Valuation and completeness of the rectification and remediation provisions WHY SIGNIFICANT HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER Under the National Environment Protection Council Act 1994 the Group has an obligation and responsibility to rectify and remediate the land in which landfill activities occur. These obligations must be accounted for in accordance with Australian Accounting Standards. Our audit procedures included testing the mathematical integrity of the discounted cash flow model and evaluation of the assumptions and methodologies used. We involved our land remediation specialists to assist in the execution of these procedures. At 30 June 2021, the Group held $322.7 million in rectification and remediation provisions. The rectification and remediation provisions were based on discounted cash flow models and incorporated critical estimates in relation to capping, post closure and rectification costs and an appropriate cost escalation rate, the timing of expected expenditure, the possibility of new practices and methodologies being available in the future and the determination of an appropriate discount rate. These estimates were developed based on the specific plans for each site, taking into consideration historical experience and emerging practice in relation to rectification and remediation activities. Because of the subjective nature of the estimates involved in accounting for rectification and remediation obligations, this is a key audit matter. Note 26 of the financial report provides further detail on the rectification and remediation provisions. With respect to the Group’s rectification and remediation provisions, we: • Assessed the competence, qualifications and objectivity of both the Group’s internal and external experts used in the determination of the provisions; • Assessed the cost estimates for capping, post closure and rectification activities with reference to available external data and relevant Environment Protection Authority regulations and correspondence; and • Assessed discount rates and the resultant impact on the provision balance with reference to observable market inputs. We also assessed the adequacy of the Group’s disclosures in the financial report regarding rectification and remediation obligations. Information Other than the Financial Report and Auditor’s Report Thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2021 Annual Report other than the financial report and our auditor’s report thereon. We obtained the Directors’ Report that is to be included in the Annual Report, prior to the date of this auditor’s report, and we expect to obtain the remaining sections of the Annual Report after the date of this auditor’s report. Our opinion on the financial report does not cover the other information and we do not and will not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 1 3 1 Independent Auditor’s Reportto the Members of Cleanaway Waste Management Limited234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTErnst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters relating 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. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. • Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 1 3 2 Independent Auditor’s Reportto the Members of Cleanaway Waste Management LimitedErnst & Young Ernst & Young 8 Exhibition Street 8 Exhibition Street Melbourne VIC 3000 Australia Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 Fax: +61 3 8650 7777 ey.com/au ey.com/au Auditor’s Responsibilities for the Audit of the Financial Report (continued) We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 40 to 58 of the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Cleanaway Waste Management Limited for the year ended 30 June 2021, 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. Ernst & Young Brett Croft Partner Melbourne 19 August 2021 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 1 3 3 Independent Auditor’s Reportto the Members of Cleanaway Waste Management Limited234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTTop 20 Shareholders as at 20 August 2021 RANK NAME UNITS % UNITS 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED CITICORP NOMINEES PTY LIMITED BNP PARIBAS NOMINEES PTY LTD NATIONAL NOMINEES LIMITED MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED BNP PARIBAS NOMS PTY LTD CITICORP NOMINEES PTY LIMITED CUSTODIAL SERVICES LIMITED MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED AUSTRALIAN FOUNDATION INVESTMENT COMPANY LIMITED MILTON CORPORATION LIMITED BNP PARIBAS NOMINEES PTY LTD HUB24 CUSTODIAL SERV LTD BNP PARIBAS NOMS (NZ) LTD BNP PARIBAS NOMINEES PTY LTD SIX SIS LTD PETER & LYNDY WHITE FOUNDATION PTY LTD

WARBONT NOMINEES PTY LTD NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT> BNP PARIBAS NOMINEES PTY LTD Top 20 holders of Fully Paid Ordinary Shares Total Remaining Holders Balance Total Fully Paid Ordinary Shares on Issue Substantial Shareholders The Company had no substantial shareholders as at 20 August 2021. 590,152,159 421,507,233 278,562,016 124,150,921 123,785,828 71,212,198 57,230,139 41,315,336 36,842,392 28,243,420 19,715,894 17,014,194 11,710,000 6,973,852 6,809,593 6,685,222 5,947,377 4,949,087 4,688,676 3,922,692 28.65 20.47 13.53 6.03 6.01 3.46 2.78 2.01 1.79 1.37 0.96 0.83 0.57 0.34 0.33 0.32 0.29 0.24 0.23 0.19 1,861,418,229 198,108,096 90.38 9.62 2,059,526,325 100.00 An entity has a substantial shareholding if the total votes attaching to shares in which the entity and their associates have a relevant interest is 5% or more. The list of the 20 largest shareholders is based on the number of shares held in the name of each shareholder on the register of members, even if the shareholder holds the share as a nominee (i.e. no beneficial or relevant interest in the shares). The list of the 20 largest shareholders of the Company and the list of substantial shareholders of the Company differ for this reason. Statement of Quoted Securities The Company’s total number of shares on issue as at 20 August 2021 was 2,059,526,325 ordinary fully paid shares. As at 20 August 2021, the total number of shareholders owning these shares was 17,614 on the register of members maintained by Computershare Investor Services Pty Ltd. 90.38% of total issued capital is held by or on behalf of the 20 largest shareholders. 13 4 Other informationVoting Rights Under the Company’s Constitution, every member present is entitled to vote at a general meeting of the Company in person or by proxy or by attorney or, in the case of a corporation, by representative, and shall, upon a show of hands, have one vote only. Proxies – Where a member is entitled to cast two or more votes it may appoint not more than two proxies or attorneys. Where a member appoints two proxies, neither proxy is entitled to a vote on a show of hands. Poll – On a poll, every member entitled to vote shall, whether present in person or by proxy or attorney or, in the case of a corporation, by representative, has one vote for every share held by the member. At 20 August 2021, there were 6,812,706 performance rights on issue to 26 executives under the Company’s incentive schemes. Voting rights are not attached to the performance rights unless they have been exercised into ordinary shares. Distribution Schedule of Shareholders NO. OF SHARES 1–1,000 4,582 1,001–5,000 5,001–10,000 10,001–100,000 100,001 AND OVER 6,215 3,016 3,589 212 TOTAL 17,614 The number of shareholders each holding less than a marketable parcel of the Company’s ordinary shares ($500 in value) based on the closing price of $2.66 on 20 August 2021 was 415. Securities Exchange Listing The shares of the Company are listed on the Australian Securities Exchange under the code CWY. 1 3 5 Other information234516OVERVIEWBUSINESS REVIEWSUSTAINABILITYCORPORATE INFORMATIONFINANCIAL REPORTOTHER INFORMATIONCLEANAWAY WASTE MANAGEMENT LIMITED 2021 ANNUAL REPORTCorporate directory Registered office Level 4 441 St Kilda Road Melbourne, VIC 3004 Australia Telephone: +61 3 8397 5100 Company Secretary Dan Last Website www.cleanaway.com.au Share Registry Computershare Investor Services Pty Limited 452 Johnston Street Abbotsford, VIC 3067 Australia Telephone: 1300 850 505 (within Australia) and +61 3 9415 4000 (outside Australia). If you are a shareholder, please contact the Share Registry if you have any questions in relation to your shareholding or wish to update your contact details, banking details, communication preference or DRP election. You can also update your details online by visiting http://www.computershare.com.au/easyupdate/CWY. 136 How to access information on Cleanaway Cleanaway produces a range of publications, which are available to download at cleanaway.com.au. If you are a shareholder, you can also elect to receive a paper copy of the Annual Report through the share registry. Cleanaway Waste Management Limited ABN 74 101 155 220 FOR THE FINANCIAL YEAR ENDED 30 JUNE 2020 TAX TRANSPARENCY REPORT 2020 Read our reports at cleanaway.com.au/ about-us/for-investor/ publications-and- presentations/ g the cir c in v i r D u l a r e conomy SUSTAINABILITY REPORT 2021 CLEANAWAY WASTE MANAGEMENT LIMITED ABN: 74 101 155 220 Sustainability Report 2021 Tax Transparency Report 2020 www.linkedin.com/company/cleanawayau www.facebook.com/CleanawayAU/ www.youtube.com/CleanawayAU www.twitter.com/CleanawayAU This Annual Report is printed on ecoStar. ecoStar is an environmentally responsible paper made Carbon Neutral. The greenhouse gas emissions of the manufacturing process including transportation of the finished product to BJ Ball Papers Warehouses has been measured by the Edinburgh Centre for Carbon Neutral Company and the fibre source has been independently certified by the Forest Stewardship Council (FSC®). ecoStar is manufactured from 100% Post Consumer Recycled paper in a Process Chlorine Free environment under the ISO 14001 environmental management system. Drivin g t h e c i r c u l a r e c o n o m y cleanaway.com.au 

Continue reading text version or see original annual report in PDF format above