Appendix4E For the year ended 30 June 2020 ACN 167 320 470 (Previous corresponding period being the year ended 30 June 2019) Results for announcement to the market Revenue from continuing operations Profit before impairment. interest, taxes. depreciation and amortisation (EBITDA) from continuing operations Loss before tax from continuing operations (Loss) I Profit from continuing operations attributable to shareholders Net loss after tax from continuing and discontinued operations attributable to shareholders Net tangible assets Net tangible assets cents per share 2020 $000 2019 $000 87,402 5,223 (42,280) (39,660) (51,413) 65,779 11.9 130,005 16,291 (7,881) 5,362 (48,258) 92,878 16.7 Dividends No dividend has been paid or declared during the period. Auditor's Report This Appendix 4E is based on the Annual Report for the year ended 30 June 2020 (as attached) which has been audited by Experience Co Limited's auditors. Other Information The remainder of the information requiring disclosure to comply with the Listing Rule 4.3A is contained in the Annual Report that follows. ACN 167 320 470 PAGE INTENTIONALLY BLANK ANNUAL REPORT 1 2 3 • • • • • • • 4 5 6 7 8 • • • • 9 10 • • 11 12 • • • • 13 • • • • • 14 • • • 15 • • • • • • 16 17 18 19 20 21 22 23 24 . • • • • • 25 • • • • • • • • • • • • • 26 • • • • • • 27 28 • • • • 29 30 • • • • • • 31 • • • 32 33 34 35 ` 36 37 38 39 • • • • • 40 • • • • • • • 41 42 • • • • 43 44 45 • • • 46 47 48 49 • • • 50 • • • • • 51 • • • 52 53 54 RSM Australia Partners Level 13, 60 Castlereagh Street Sydney NSW 2000 GPO Box 5138 Sydney NSW 2001 T +61 (0) 2 8226 4500 F +61 (0) 2 8226 4501 www.rsm.com.au AUDITOR’S INDEPENDENCE DECLARATION As lead auditor for the audit of the financial report of Experience Co Limited and controlled entities for the year ended 30 June 2020, I declare that, to the best of my knowledge and belief, there have been no contraventions of: (i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (ii) any applicable code of professional conduct in relation to the audit. RSM AUSTRALIA PARTNERS C J Hume Partner Sydney, NSW Dated: 27 August 2020 55 RSM Australia Partners Level 13, 60 Castlereagh Street Sydney NSW 2000 GPO Box 5138 Sydney NSW 2001 T +61 (0) 2 8226 4500 F +61 (0) 2 8226 4501 www.rsm.com.au INDEPENDENT AUDITOR’S REPORT To the Members of Experience Co Limited Opinion We have audited the financial report of Experience Co Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2020, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial statements, including 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: (i) giving a true and fair view of the Group's financial position as at 30 June 2020 and of its financial performance for the year then ended; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board's APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor's report.* We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 56 Key Audit Matter How our audit addressed this matter Our audit procedures in relation to the valuation of goodwill included the following: Assessing management’s allocation of the goodwill across the three CGUs, based on the nature of the Group’s business and the manner in which results are monitored and reported the assumptions and Evaluating methodologies used by the Company in preparing the value in use calculation, in particular those relating to the sales growth rate, projected future expenditure, and pre- tax discount rate. The cash flow projections for each cash- generating unit have been assessed and challenged by us and includes an assessment of the historical accuracy of management’s estimates and evaluation of business plans. Assessing the adequacy of the disclosures in financial statement for Goodwill assumptions to which the outcome of the impairment test is most sensitive, that is, those that have the most significant effect on the determination of the recoverable amount of goodwill. Goodwill and Other Intangible Assets Refer to Note 14 in the financial statements The group had significant amount of goodwill and other intangible assets before carrying out impairment assessment as at 30 June 2020. Goodwill and Trade Names have an indefinite useful economic life. Therefore, they are not amortised, but are subject to annual testing for impairment in accordance with AASB 136 Impairment. We determined this area to be a key audit matter due to the size of the goodwill and other intangible assets balance, and apparent existence of impairment indicators. In addition, the directors’ assessment of the recoverable amount of the cash generating unit (“CGU”) to relate which involves judgements about the future underlying cashflows of the business and discount rates applied to them. the goodwill and intangibles • • • For the year ended 30 June 2020 management have performed an impairment assessment over the goodwill and other intangible balance by: • • • • Determining that the entity has 3 CGUs, and allocating goodwill across the three CGUs expenses calculating the value in use for each CGU using a discounted cash flow model. These models used cash flows (revenues, capital expenditure) for the CGU for 5 years, with a terminal growth rate applied to the 5th year. These cash flows were then discounted to net present value using the Company’s weighted average cost of capital (WACC); and and the comparing receivables amount of each CGU to their respective carrying amount. resulting 57 Revenue Refer to the financial statements The recognition of revenue and associated unearned revenue liabilities is significant to the audit and is considered to be a key audit matter due to the nature of the revenue, which is often paid in advance of the services being rendered. The group is therefore required to recognize such receipts as deferred revenue until such time as the services are rendered. There are potential risks in relation to the following: • • Sales may be deliberately overstated as a result of management override of internal controls. The management of the Group considers sales as a key performance measure which could create an incentive for sales to be recognized before the services been provided. from In accordance with AASB118 Revenue, Skydive the Beach Group is entitled to recognize variable revenue consideration, being the probabilities applied to gift card sales and advance bookings in respect of management’s assessment of the likelihood that the advance bookings and gift vouchers will result in a tandem jump occurring. This increases the risk that sales could be misstated due to errors in judgement or the estimation these assumptions used judgments. in making uncertainty around We obtained a detailed understanding of each of the sources of revenue and the related systems processes for quantifying and recording revenue and deferred revenue. Our audit procedures recognition and deferral included the following: relation to in revenue • • • • • • Considering the adequacy of the Group’s revenue recognition policies, and assessing them compliance with Australian Accounting Standards for Where applicable, the operating effectiveness of key controls in relation to bookings testing Performing predictive analytical techniques with regards to revenue and jump numbers in relation to the various drop zones. Selecting a sample of entries in the sales ledger accounts and testing that the amounts recognized are consistent with cash banked. verify that monthly adjusted Inspecting a sample of the monthly journals is to appropriately into consideration the deferred revenue in respect payments the services being rendered. revenue take in advance of received to Selecting a sample of transactions in relation to cash receipts and testing that the service has in fact been provided by verifying that the booking had been discharged as per the the customer booking systems or revenue was correctly the deferred revenue balance that in recorded Inspecting that the balances reflected in the deferred revenue accounts were properly reconciled to the deferred revenue reports as per the customer booking systems. 58 Property, Plant and Equipment Refer to Note 13 in the financial statements Skydive the Beach Group currently owns aircraft and other operating equipment with a carrying value of $68,626,000 The more significant classes of property, plant and equipment include following: Aircraft with carrying values of $32,238,000 Vessels with carrying values of $23,229,000 Plant and equipment with carrying values of $5,610,000. The accounting in respect of the property, plant and equipment for Skydive the Beach is complex and non-routine due to the nature of the equipment and the judgement required in determining useful lives, residual values, and the valuation of the major components of the assets. The company has revaluated its entire class of aircraft due to material impact of COVID-19 fair value by using director the on assessment. Our audit procedure in relation to property, plant and equipment included following: Residual Values, asset components and useful lives • • • • management aircraft of Obtaining accounting vessels memorandum depreciation estimates under AASB 116 and evaluate the assessment. appropriateness and the of the reasonableness of Assessing internal evidence provided by management to support the residual value, asset components and to external useful evidence and verified past practices and other industry data. lives by comparing it Reviewing fixed assets register to ensure the applied residual values, asset components and useful line with accounting memorandum. lives are in Assessing the adequacy of the disclosures in financial statements for the critical accounting estimates and judgements in the accounting policy notes and ensure the disclosures are consistent with the applied practices. Fair Values • • Obtaining revaluation calculation schedule to review and ensure the revaluation journal was quantified to recorded Accounting Standards. according and Where valuations have been prepared by using director assessment, we have performed the following ➢ ➢ ➢ accounting memoranda Obtain prepared by management outline the method of the valuation and evaluate the appropriateness. from Obtain supportable evidences external expert and related market data to critically assess the reasonableness of the director’s assessment. Assess the adequacy of the disclosures in financial statement for fair value measurements 59 Responsibilities of the Directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the Group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Other Information The directors are responsible for the other information. The other information comprises the information included in the Group's annual report for the year ended 30 June 2020, but does not include the financial report and the auditor's report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Auditor's Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our auditor's report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 13 to 19 of the directors' report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Experience Co Limited, for the year ended 30 June 2020, complies with section 300A of the Corporations Act 2001. 60 Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. RSM Australia Partners C J Hume Partner Sydney, 27 August 2020 61 62 63 64