Annual Report
Canberra, 19 April 2024
Electro Optic Systems Holdings Limited (EOS or Company) (ASX: EOS) provides the attached Annual
Report for the year ended 31 December 2023.
Authorised for release by the board of Electro Optic Systems Holdings Limited.
Further information:
Marguerite Wilson
enquiry@eos-aus.com
ABOUT ELECTRO OPTIC SYSTEMS (ASX: EOS)
EOS operates in two divisions: Defence Systems and Space Systems
Defence Systems specialises in technology for weapon systems optimisation and integration, as well
as ISR (Intelligence, Surveillance and Reconnaissance) and C4 systems for land warfare. Its key
products include next-generation remote weapon systems, vehicle turrets, high-energy laser weapons
(directed energy), as well as fully integrated and modular counter-UAS and C4 systems.
Space Systems includes all EOS space and communications businesses, and operates as two entities –
Space Technologies and EM Solutions. Space Technologies specialises in applying EOS-developed
optical sensors and effectors to detect, track and characterise objects in space. It includes capabilities
in the domain of space control and space warfare. EM Solutions delivers world-leading RF and optical
space communications technology. Its core product range centres around the development and
production of high-end, broadband radio transceivers for satellite communications as well as satellite
communications-on-the-move terminals for defence and government customers.
ELECTRO OPTIC SYSTEMS HOLDINGS LIMITED
ANNUAL REPORT
2023
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Electro Optic Systems Holdings Limited
Annual Report 2023
IT’S WHAT WE DO NEXT THAT MATTERS MOSTIT’S WHAT WE DO NEXT THAT MATTERS MOST
IT’S WHAT WE DO NEXT THAT MATTERS MOST Electro Optic Systems Holdings Limited
ANNUAL REPORT
2023
COPYRIGHT
ATTRIBUTION
HEAD OFFICE
Electro Optic Systems Holdings Limited
EOS’ preference is that if you attribute
Electro Optic Systems Holdings Limited
(EOS) encourages the dissemination
this publication and any material
ACN 092 708 364
and exchange of information provided
sourced from it, the following wording
in this publication. Except as otherwise
is used: Source: Electro Optic Systems
18 Wormald Street, Symonston
specified, all material presented in
Holdings Limited Annual Report 2023.
Canberra ACT 2609
this publication is provided under the
Creative Commons Attribution 4.0
International Licence.
MORE INFORMATION
T: +61 2 6222 7900
E: enquiry@eos-aus.com
www.eos-aus.com
This excludes:
• the EOS logo
• content supplied by third parties.
For enquiries regarding copyright,
including requests to use material in
a way that is beyond the scope of the
terms of use that apply to it, please
The Creative Commons Attribution 4.0
contact us through our website or email
International Licence is a standard form
us at enquiry@eos-aus.com
licence agreement that allows you to
copy, distribute, transmit and adapt this
publication provided that you attribute
the work. The details of the version
4.0 of the licence are available on the
Creative Commons website, as is the full
legal code for that licence.
148
Electro Optic Systems Holdings Limited | Annual Report 2023
Contents
Chairman’s Report
CEO’s Report
EOS Target Markets
EOS Directors
Executive Team
EOS at a Glance
Company Overview
Defence Systems
Space Technologies
EM Solutions
Innovation Portfolio
EOS People
Advancing EOS’ Global Supply Chain
Corporate Social Responsibility
Review of Operations
Directors’ Report
Financial Statements and Notes
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
Corporate Directory
2
4
6
8
11
12
13
15
17
19
20
22
25
26
27
41
66
138
139
144
147
Electro Optic Systems Holdings Limited | Annual Report 2023
1
Contents
Chairman’s Report
CEO’s Report
EOS Target Markets
EOS Directors
Executive Team
EOS at a Glance
Company Overview
Defence Systems
Space Technologies
EM Solutions
Innovation Portfolio
EOS People
Advancing EOS’ Global Supply Chain
Corporate Social Responsibility
Review of Operations
Directors’ Report
Financial Statements and Notes
Directors’ Declaration
Independent Auditor’s Report
ASX Additional Information
Corporate Directory
2
4
6
8
11
12
13
15
17
19
20
22
25
26
27
41
66
138
139
144
147
Electro Optic Systems Holdings Limited | Annual Report 2023
1
Chairman’s Report
For the year ended 31 December 2023
I am pleased to address shareholders in
the wake of a positive 12-month period
for the EOS Group.
When I last wrote to investors in this forum, the Company was in a challenging position.
At that time, the Board and the Group’s senior leadership team were in the early stages of a long-term project of
stabilisation.
It is gratifying to report that EOS is now in a far more solid position than it was 12 months ago.
However, I wish to emphasise, at the outset of this Report, that the Board does not see this as a moment for
complacency. We remain in the early stages of a multi-year project to strengthen the foundations of our business
and secure a sustainable, long-term future for EOS. Much remains to be done – and determination, perseverance and
ongoing humility will serve us far better than overconfidence.
With all of those caveats, it is appropriate to acknowledge that the Company has achieved a great deal during
the period under review – both domestically and globally – and to recognise those successes, which are detailed
throughout this Report.
On behalf of the Board, I extend my thanks to the many and varied stakeholders, both internal and external, who
have played a role in EOS’ ongoing turnaround – among them, the Australian Defence Force (ADF); the Australian
Government; our domestic and international suppliers; our funding partners and industry collaborators; and our people
– at all levels of the organisation. The support of our global customers has been unwavering and indespensable.
Our fundamental focus remains on commercialising our innovations and significant intellectual property.
The industries in which we operate are complex, highly competitive and – given their intrinsic connection with
geopolitical forces – unpredictable. Contract cycles run over many years; the priorities of defence forces and civilian
organisations evolve over time; and as governments and affairs of state change, anticipated opportunities can be
delayed or cancelled, while others can materialise at short notice.
Thriving, rather than merely surviving, in such an environment requires agility, flexibility, resilience and continuous
innovation.
At present, market demand for our products and services is buoyant. We anticipate that it will remain so in the short to
medium term.
EOS is, and will remain, an international business with deep Australian roots, and the ADF is a highly valued customer,
collaborator and supporter. The period under review has seen our satellite communications business, EM Solutions,
deepen its already close collaborative relationship with the Royal Australian Navy (RAN), for example, via the signing of
the SEA1442 Phase 5 Acquisition contract to upgrade the RAN’s SATCOM systems across many Australian vessels.
We also see the greatest potential for future growth of EOS in international markets. It is therefore promising that we
are finding opportunities and successes in global settings, including Europe, North America, the Middle East and Asia.
Chairman’s Report
arena.
advertisement for that fact.
investors to participate.
We take these successes and ongoing negotiations as confirmation that our current and emerging products – which
we regard as highly aligned with current and emerging technological trends – can be truly competitive in the global
The adoption of EOS products in real-world conflict zones over the past 12 months is perhaps the best possible
We are grateful for the ongoing support from our investors in the recent Placement undertaken to raise $35m funding
to support our ongoing growth. At time of writing the Company has a Share Purchase Plan (SPP) in place to allow retail
To conclude, I stress again that, while we are heartened by the progress we have made to date, new challenges will
emerge – and our future results will hinge on how well we are able to plan for and navigate them.
Our short- to medium-term goal is to continue our progress by building on the successes of the last 12 months, armed
with lessons from the Company’s long history.
There is much to feel positive about in relation to EOS’ present position and its prospects.
I and the Board fully believe that with the right plans, the right personnel and your support, we will realise the full
commercial potential of our unique technologies.
Mr Garry Hounsell
3 April 2024
Director and Chair of the Board of Directors
2
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
3
Chairman’s Report
For the year ended 31 December 2023
I am pleased to address shareholders in
the wake of a positive 12-month period
for the EOS Group.
When I last wrote to investors in this forum, the Company was in a challenging position.
At that time, the Board and the Group’s senior leadership team were in the early stages of a long-term project of
stabilisation.
It is gratifying to report that EOS is now in a far more solid position than it was 12 months ago.
However, I wish to emphasise, at the outset of this Report, that the Board does not see this as a moment for
complacency. We remain in the early stages of a multi-year project to strengthen the foundations of our business
and secure a sustainable, long-term future for EOS. Much remains to be done – and determination, perseverance and
ongoing humility will serve us far better than overconfidence.
With all of those caveats, it is appropriate to acknowledge that the Company has achieved a great deal during
the period under review – both domestically and globally – and to recognise those successes, which are detailed
throughout this Report.
On behalf of the Board, I extend my thanks to the many and varied stakeholders, both internal and external, who
have played a role in EOS’ ongoing turnaround – among them, the Australian Defence Force (ADF); the Australian
Government; our domestic and international suppliers; our funding partners and industry collaborators; and our people
– at all levels of the organisation. The support of our global customers has been unwavering and indespensable.
Our fundamental focus remains on commercialising our innovations and significant intellectual property.
The industries in which we operate are complex, highly competitive and – given their intrinsic connection with
geopolitical forces – unpredictable. Contract cycles run over many years; the priorities of defence forces and civilian
organisations evolve over time; and as governments and affairs of state change, anticipated opportunities can be
delayed or cancelled, while others can materialise at short notice.
Thriving, rather than merely surviving, in such an environment requires agility, flexibility, resilience and continuous
innovation.
medium term.
At present, market demand for our products and services is buoyant. We anticipate that it will remain so in the short to
EOS is, and will remain, an international business with deep Australian roots, and the ADF is a highly valued customer,
collaborator and supporter. The period under review has seen our satellite communications business, EM Solutions,
deepen its already close collaborative relationship with the Royal Australian Navy (RAN), for example, via the signing of
the SEA1442 Phase 5 Acquisition contract to upgrade the RAN’s SATCOM systems across many Australian vessels.
We also see the greatest potential for future growth of EOS in international markets. It is therefore promising that we
are finding opportunities and successes in global settings, including Europe, North America, the Middle East and Asia.
Chairman’s Report
We take these successes and ongoing negotiations as confirmation that our current and emerging products – which
we regard as highly aligned with current and emerging technological trends – can be truly competitive in the global
arena.
The adoption of EOS products in real-world conflict zones over the past 12 months is perhaps the best possible
advertisement for that fact.
We are grateful for the ongoing support from our investors in the recent Placement undertaken to raise $35m funding
to support our ongoing growth. At time of writing the Company has a Share Purchase Plan (SPP) in place to allow retail
investors to participate.
To conclude, I stress again that, while we are heartened by the progress we have made to date, new challenges will
emerge – and our future results will hinge on how well we are able to plan for and navigate them.
Our short- to medium-term goal is to continue our progress by building on the successes of the last 12 months, armed
with lessons from the Company’s long history.
There is much to feel positive about in relation to EOS’ present position and its prospects.
I and the Board fully believe that with the right plans, the right personnel and your support, we will realise the full
commercial potential of our unique technologies.
Mr Garry Hounsell
Director and Chair of the Board of Directors
3 April 2024
2
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
3
CEO’s Report
We have won new business around the world and are in negotiations with potential allied customers across the
continents. Ongoing diversification of our customer base is having the positive effect of “balancing” our revenue
sources and reducing our reliance on single large customers.
Our continuing expansion into Europe – a diverse, highly competitive market that offers great potential commercial
rewards – is of particular note.
export markets.
Meanwhile, our Huntsville, Alabama (US), facility offers great utility for production for the North American and larger
A major short- to medium-term goal is the ongoing conversion of our high-power laser and space domain awareness
capabilities into sustainable, profitable operations. These areas are important pillars of our long-term growth strategy.
The transformation, over time, of our Space Technologies business into one focused on space control and space
warfare is ongoing. These are product development areas where we are primarily seeking third-party funding, and we
are actively engaging with a range of stakeholders to secure that funding.
There has been a steady drumbeat of positive news for EOS over the period under review. Now, we must build on that
CEO’s Report
For the year ended 31 December 2023
The 2023 year has seen EOS make
great progress. Since our last annual
report, we have widened our customer
base and our product range.
Taking advantage of global tailwinds in the defence industry, we have serviced existing contracts and won new
business, including in overseas markets. In the process, we have strengthened our commercial position and prospects.
The future
During this period, EOS secured record revenues, record cash receipts and record operating cashflow, demonstrating
the potential of our businesses. We have implemented a strict cash control regime. Our financial situation, including our
debt position, is significantly improved.
While it would be premature to say the strategic plans we laid out last year – which we have not deviated from – have
been fully executed, I can state with confidence that they are well underway.
Strategic priorities
On commencing as CEO in August 2022, I saw EOS as a business with great global potential. I believe this today more
than ever.
We are continuing EOS’ heritage as an Australia-based enterprise with strong ties to the Australian Defence Force
(ADF). The ADF is, and will remain, a highly valued customer and collaborator.
We are also devoting significant resources to penetrating international markets, where we see great potential for our
products.
momentum.
Our focus is on our core commercial and technical strengths – namely:
I wish to acknowledge that the successes of 2023 are a testament to the incredible talent of our people.
• our evolving remote weapon system (RWS) and counter-drone product portfolios, which I believe are “setting the
My confidence in the foundations of our business is real. We will continue to work hard to realise EOS’ full potential, and
benchmark” globally
I thank you for your ongoing support on that journey.
• EM Solutions, our fast-growing naval satellite communications business, which has had a highly successful year in
Australia and Europe
• our developing high-energy laser weapon and space warfare programs, where we see considerable long-term
commercial potential.
Product developments
As an executive as well as an engineer, I am excited by our current and developing products.
They include our growing range of RWS, which we have expanded via the successful launches of the R150 and R800
RWS, and our counter-drone solutions, including the recently released Slinger.
As has been apparent during the Ukraine conflict, the nature of warfare has changed. The threat of mass-produced
drones is no longer an abstract future risk; it is a clear and present danger – and one for which conventional missile-
based air defence systems have no commercially viable solution. The effectiveness of EOS systems in anti-drone
warfare is a major commercial asset and EOS will position itself as a major player in the anti-drone market by enlarging
its product offering in this domain.
Dr Andreas Schwer
Managing Director and
Chief Executive Officer
3 April 2024
4
Electro Optic Systems Holdings Limited | Annual Report 2023
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5
CEO’s Report
CEO’s Report
For the year ended 31 December 2023
The 2023 year has seen EOS make
great progress. Since our last annual
report, we have widened our customer
base and our product range.
During this period, EOS secured record revenues, record cash receipts and record operating cashflow, demonstrating
the potential of our businesses. We have implemented a strict cash control regime. Our financial situation, including our
debt position, is significantly improved.
While it would be premature to say the strategic plans we laid out last year – which we have not deviated from – have
been fully executed, I can state with confidence that they are well underway.
On commencing as CEO in August 2022, I saw EOS as a business with great global potential. I believe this today more
We are continuing EOS’ heritage as an Australia-based enterprise with strong ties to the Australian Defence Force
(ADF). The ADF is, and will remain, a highly valued customer and collaborator.
We are also devoting significant resources to penetrating international markets, where we see great potential for our
Our focus is on our core commercial and technical strengths – namely:
• our evolving remote weapon system (RWS) and counter-drone product portfolios, which I believe are “setting the
• EM Solutions, our fast-growing naval satellite communications business, which has had a highly successful year in
• our developing high-energy laser weapon and space warfare programs, where we see considerable long-term
Strategic priorities
than ever.
products.
benchmark” globally
Australia and Europe
commercial potential.
Product developments
As an executive as well as an engineer, I am excited by our current and developing products.
They include our growing range of RWS, which we have expanded via the successful launches of the R150 and R800
RWS, and our counter-drone solutions, including the recently released Slinger.
As has been apparent during the Ukraine conflict, the nature of warfare has changed. The threat of mass-produced
drones is no longer an abstract future risk; it is a clear and present danger – and one for which conventional missile-
based air defence systems have no commercially viable solution. The effectiveness of EOS systems in anti-drone
warfare is a major commercial asset and EOS will position itself as a major player in the anti-drone market by enlarging
its product offering in this domain.
Taking advantage of global tailwinds in the defence industry, we have serviced existing contracts and won new
business, including in overseas markets. In the process, we have strengthened our commercial position and prospects.
The future
We have won new business around the world and are in negotiations with potential allied customers across the
continents. Ongoing diversification of our customer base is having the positive effect of “balancing” our revenue
sources and reducing our reliance on single large customers.
Our continuing expansion into Europe – a diverse, highly competitive market that offers great potential commercial
rewards – is of particular note.
Meanwhile, our Huntsville, Alabama (US), facility offers great utility for production for the North American and larger
export markets.
A major short- to medium-term goal is the ongoing conversion of our high-power laser and space domain awareness
capabilities into sustainable, profitable operations. These areas are important pillars of our long-term growth strategy.
The transformation, over time, of our Space Technologies business into one focused on space control and space
warfare is ongoing. These are product development areas where we are primarily seeking third-party funding, and we
are actively engaging with a range of stakeholders to secure that funding.
There has been a steady drumbeat of positive news for EOS over the period under review. Now, we must build on that
momentum.
I wish to acknowledge that the successes of 2023 are a testament to the incredible talent of our people.
My confidence in the foundations of our business is real. We will continue to work hard to realise EOS’ full potential, and
I thank you for your ongoing support on that journey.
Dr Andreas Schwer
Managing Director and
Chief Executive Officer
3 April 2024
4
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
5
EOS Target Markets
EOS
Deggendorf, Germany
EUROPE
MIDDLE
EAST
SE ASIA
EOS
Singapore
EOS
Abu Dhabi, UAE
OCEANIA
EM Solutions
Brisbane, Australia
EOS
Canberra and Melbourne, Australia
KiwiStar Optics
Wellington, New Zealand
Our legacy customers are located in:
Australia
Singapore
Thailand
Canada
Spain
USA
UAE
Germany
Japan
France
Portugal
India
South Korea
Netherlands
Mexico
NORTH AMERICA
EOS
Hunstville, USA
Western Europe
EOS signed two contracts
to supply remote weapon
systems to a Western European
Government for a total value of
approximately A$77m.
Southeast Asia
EOS signed a contract to
supply R600 remote weapon
system spares to a customer
in Southeast Asia valued at
approximately A$28m.
Australia
EM Solutions signed a contract
for up to A$202m to modernise
communications across the Royal
Australian Navy fleet over seven
years, using the King Cobra and
Cobra SATCOM terminals.
6
6
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7
EOS Target Markets
Deggendorf, Germany
EOS
EUROPE
MIDDLE
EAST
SE ASIA
EOS
Singapore
EOS
Abu Dhabi, UAE
OCEANIA
EM Solutions
Brisbane, Australia
Canberra and Melbourne, Australia
EOS
KiwiStar Optics
Wellington, New Zealand
Our legacy customers are located in:
Australia
Singapore
Thailand
Canada
Spain
USA
UAE
Germany
Japan
France
Portugal
India
South Korea
Netherlands
Mexico
NORTH AMERICA
EOS
Hunstville, USA
Western Europe
EOS signed two contracts
to supply remote weapon
systems to a Western European
Government for a total value of
approximately A$77m.
Southeast Asia
EOS signed a contract to
supply R600 remote weapon
system spares to a customer
in Southeast Asia valued at
approximately A$28m.
Australia
EM Solutions signed a contract
for up to A$202m to modernise
communications across the Royal
Australian Navy fleet over seven
years, using the King Cobra and
Cobra SATCOM terminals.
6
6
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7
7
EOS Directors
EOS Directors
EOS Directors
Garry is currently Chair of the Commonwealth Superannuation Corporation
and Chair of Helloworld Travel Limited (since 2016). He is also a Non-executive
Director at Treasury Wine Estates Limited (since 2012), a Director of Findex
(since January 2020), and a member of Commencer Capital’s (formally Investec
Emerging Companies) Investment Committee (since 2019).
Garry was previously the Chair of Myer Holdings Limited (2017–2020; Executive
Chair Feb–Jun 2018), Chair and a Non-executive Director of Spotless Group
Holdings Limited (2014–2017), and Chair of Emitch Limited (2006–2008) and
PanAust Limited (2008–2015). He was also previously an Advisory Board Member
of PanAust Limited (2015–2017), Rothschild Australia Limited (2012–2017), and
Investec Global Aircraft Fund (2007–2019). He was a Director at Orica Limited
(2004–2013), Nufarm Limited (2004–2012), Qantas Airways Limited (2005–2015),
Mitchell Communication Group Limited (2008–2010), Integral Diagnostics Limited
(2015–2017), Dulux Group Limited (2010–2017) and Investec Aircraft Syndicate
Limited (2012–2018). Garry was a Senior Partner at Ernst & Young (2002–2004),
CEO and Managing Partner of Arthur Andersen (2001–2002) and a Partner at
Arthur Andersen (1989–2002).
Garry has a Bachelor of Business (Accounting) from the Swinburne Institute of
Technology (1975) and is a Fellow of Chartered Accountants Australia and New
Zealand and a Fellow of the Australian Institute of Company Directors.
Directorships of other listed entities in the last three years:
Treasury Wine Estates Limited (1 September 2012–present), Helloworld Travel
Limited (4 October 2016–present), and Hiro Brands Limited (6 December 2021–
30 November 2023)
Dr Schwer was appointed as Chief Executive Officer in August 2022 and appointed
as Managing Director on 11 December 2023.
An accomplished executive leader with deep international experience – including
in Asia, the Middle East, Europe, and North America – Dr Schwer has had a varied
career in the defence and space domains. His previous experience includes senior
positions in the global defence industry, including fourteen years at Airbus Group
and five years at the German defence company Rheinmetall AG. Dr Schwer has a
thorough understanding of the Company’s global operations, having acted, most
recently, as President of EOS EMEA (Europe, Middle East, and Africa) for two
years, during which time he oversaw the expansion of the Company’s operations
in NATO and Middle Eastern markets. Among his qualifications, he holds a PhD in
the field of system modelling and satellite engineering.
He is a member of the Nominations Committee.
Directorships of other listed entities in the last three years:
Independent Director at Titomic Ltd. (1 January 2020–present)
Mr Garry Hounsell
B.Bus (Acc), FCA, FAICD
Independent Non-executive Chair
Appointed: 24 November 2022
Board Committees:
Nomination Committee (Chair)
Dr Andreas Schwer
PhD, MSc, MSE
Managing Director and
Chief Executive Officer
Appointed: 11 December 2023
Board Committees:
Nomination Committee
Kate served as a Senator representing the Australian Capital Territory from
1996 to 2015. During this time, she held various front bench positions in both
Government and Opposition, including the Minister for Sport, Multicultural Affairs
and Assisting on Industry and Innovation and the Digital Economy.
Kate continues to be passionate about technology and innovation. Her focus is
the positive impact of technology on society, culture and the economy. In 2017,
the Australian National University awarded her a Doctor of Letters (honorary
doctorate) for her “exceptional contributions to advocacy and policy for
information communications and technology, for the ACT and nationally.”
In 2017 Ms Lundy was inducted into the Pearcey Hall of Fame for “distinguished
achievement and contribution to the development and growth of the Information
and Communication Technology Industry”. The Pearcey Foundation is named
in honour of Dr Trevor Pearcey, an outstanding Australian ICT Pioneer, notable
Kate is a Non-executive Director of the National Roads and Motoring Association,
the Geospatial Council of Australia, the National Youth Science Forum and Chair
to the Board of the Cyber Security Cooperative Research Centre and Chair of the
Canberra Institute of Technology Board.
Directorships of other listed entities in the last three years:
Nil
The Hon Kate Lundy
HonLittD, GAICD
Independent Non-executive Director
Appointed: 23 March 2018
Data Security & Data Governance
Committee (Chair)
Audit and Risk Committee
People and Culture Committee
Nomination Committee
Board Committees:
for his leadership of the project team that built one of the world’s earliest digital
computers, the CSIR Mark 1, later known as CSIRAC.
Geoffrey retired from the Royal Australian Air Force in July 2015 as Air Marshal
in the position of Chief of Air Force. Among his qualifications he holds a BEng
(Mech), a Master of Arts (Strategic Studies), Fellow of the Institution of Engineers
Australia and is a Fellow of the Royal Aeronautical Society. He is Chair of the Sir
Richard Williams Foundation and Chairman of the Advisory Board of CAE Asia
Pacific. He is Chair of the People and Culture Committee, a member of the Audit
and Risk Committee and a member of the Nominations Committee.
Directorships of other listed entities in the last three years:
Air Marshal
Geoffrey Brown AO
Nil
BEng (Mech), M.A.
(Strategic Studies)
Independent Non-executive Director
Appointed: 21 April 2016
Board Committees:
People and Culture Committee (Chair)
Nomination Committee
8
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9
EOS Directors
EOS Directors
EOS Directors
Mr Garry Hounsell
B.Bus (Acc), FCA, FAICD
Independent Non-executive Chair
Appointed: 24 November 2022
Board Committees:
Nomination Committee (Chair)
CEO and Managing Partner of Arthur Andersen (2001–2002) and a Partner at
Arthur Andersen (1989–2002).
Garry is currently Chair of the Commonwealth Superannuation Corporation
and Chair of Helloworld Travel Limited (since 2016). He is also a Non-executive
Director at Treasury Wine Estates Limited (since 2012), a Director of Findex
(since January 2020), and a member of Commencer Capital’s (formally Investec
Emerging Companies) Investment Committee (since 2019).
Garry was previously the Chair of Myer Holdings Limited (2017–2020; Executive
Chair Feb–Jun 2018), Chair and a Non-executive Director of Spotless Group
Holdings Limited (2014–2017), and Chair of Emitch Limited (2006–2008) and
PanAust Limited (2008–2015). He was also previously an Advisory Board Member
of PanAust Limited (2015–2017), Rothschild Australia Limited (2012–2017), and
Investec Global Aircraft Fund (2007–2019). He was a Director at Orica Limited
(2004–2013), Nufarm Limited (2004–2012), Qantas Airways Limited (2005–2015),
Mitchell Communication Group Limited (2008–2010), Integral Diagnostics Limited
(2015–2017), Dulux Group Limited (2010–2017) and Investec Aircraft Syndicate
Limited (2012–2018). Garry was a Senior Partner at Ernst & Young (2002–2004),
Garry has a Bachelor of Business (Accounting) from the Swinburne Institute of
Technology (1975) and is a Fellow of Chartered Accountants Australia and New
Zealand and a Fellow of the Australian Institute of Company Directors.
Directorships of other listed entities in the last three years:
Treasury Wine Estates Limited (1 September 2012–present), Helloworld Travel
Limited (4 October 2016–present), and Hiro Brands Limited (6 December 2021–
30 November 2023)
Dr Schwer was appointed as Chief Executive Officer in August 2022 and appointed
as Managing Director on 11 December 2023.
An accomplished executive leader with deep international experience – including
in Asia, the Middle East, Europe, and North America – Dr Schwer has had a varied
career in the defence and space domains. His previous experience includes senior
positions in the global defence industry, including fourteen years at Airbus Group
and five years at the German defence company Rheinmetall AG. Dr Schwer has a
thorough understanding of the Company’s global operations, having acted, most
recently, as President of EOS EMEA (Europe, Middle East, and Africa) for two
years, during which time he oversaw the expansion of the Company’s operations
in NATO and Middle Eastern markets. Among his qualifications, he holds a PhD in
the field of system modelling and satellite engineering.
He is a member of the Nominations Committee.
Directorships of other listed entities in the last three years:
Independent Director at Titomic Ltd. (1 January 2020–present)
Dr Andreas Schwer
PhD, MSc, MSE
Managing Director and
Chief Executive Officer
Appointed: 11 December 2023
Board Committees:
Nomination Committee
Kate served as a Senator representing the Australian Capital Territory from
1996 to 2015. During this time, she held various front bench positions in both
Government and Opposition, including the Minister for Sport, Multicultural Affairs
and Assisting on Industry and Innovation and the Digital Economy.
Kate continues to be passionate about technology and innovation. Her focus is
the positive impact of technology on society, culture and the economy. In 2017,
the Australian National University awarded her a Doctor of Letters (honorary
doctorate) for her “exceptional contributions to advocacy and policy for
information communications and technology, for the ACT and nationally.”
In 2017 Ms Lundy was inducted into the Pearcey Hall of Fame for “distinguished
achievement and contribution to the development and growth of the Information
and Communication Technology Industry”. The Pearcey Foundation is named
in honour of Dr Trevor Pearcey, an outstanding Australian ICT Pioneer, notable
for his leadership of the project team that built one of the world’s earliest digital
computers, the CSIR Mark 1, later known as CSIRAC.
Kate is a Non-executive Director of the National Roads and Motoring Association,
the Geospatial Council of Australia, the National Youth Science Forum and Chair
to the Board of the Cyber Security Cooperative Research Centre and Chair of the
Canberra Institute of Technology Board.
Directorships of other listed entities in the last three years:
Nil
The Hon Kate Lundy
HonLittD, GAICD
Independent Non-executive Director
Appointed: 23 March 2018
Board Committees:
Data Security & Data Governance
Committee (Chair)
Audit and Risk Committee
People and Culture Committee
Nomination Committee
Geoffrey retired from the Royal Australian Air Force in July 2015 as Air Marshal
in the position of Chief of Air Force. Among his qualifications he holds a BEng
(Mech), a Master of Arts (Strategic Studies), Fellow of the Institution of Engineers
Australia and is a Fellow of the Royal Aeronautical Society. He is Chair of the Sir
Richard Williams Foundation and Chairman of the Advisory Board of CAE Asia
Pacific. He is Chair of the People and Culture Committee, a member of the Audit
and Risk Committee and a member of the Nominations Committee.
Directorships of other listed entities in the last three years:
Air Marshal
Geoffrey Brown AO
Nil
BEng (Mech), M.A.
(Strategic Studies)
Independent Non-executive Director
Appointed: 21 April 2016
Board Committees:
People and Culture Committee (Chair)
Nomination Committee
8
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
9
EOS Directors
Executive team
Before retiring from the Deloitte Touche Tohmatsu Australia partnership in 2016,
David spent 25 years with Deloitte in the UK and Australia. During that time David
provided services to a range of clients including in the Defence, Manufacturing and
Government sectors. David’s experience includes working with growing start-up
businesses, multinational corporations and the boards of ASX listed entities on
complex accounting, internal and external auditing, risk management, corporate
governance and due diligence engagements. David previously served as the audit
partner of Deloitte Touche Tohmatsu for the Company for the years ending from
June 2005 to December 2009 and June 2012 to June 2016.
Since his retirement from Deloitte, David has established a growing family
business, The Coastal Brewing Company, and serves on six Government sector
audit committees as an independent member, chairing one of those committees.
Directorships of other listed entities in the last three years:
Nil
Robert was a Partner at Herbert Smith Freehills (and predecessor firms) for 28
years. He served on the Freehills Board of Partners for 10 years and was the
Chairman for 3 years in the lead-up to the firm’s merger with Herbert Smith to
create a global firm with 500 partners and 24 offices.
Robert is a director of Port of Melbourne, Alinta Energy, Baker Heart and Diabetes
Institute, Landcare Australia and European Australian Business Council. He is a
Senior Advisor to Herbert Smith Freehills.
Directorships of other listed entities in the last three years:
Nil
Mr David Black
BA(Hons) (Economics), FCA,
MBA, GAICD
Independent Non-executive Director
Appointed: 1 January 2021
Board Committees:
Audit and Risk Committee (Chair)
People and Culture Committee
Data Security & Data Governance
Committee
Nomination Committee
Mr Robert Nicholson
BSc, LLB, LLM, MBA, GAICD
Independent Non-executive Director
Appointed: 24 May 2023
Board Committees:
Audit and Risk Committee
Data Security & Data Governance
Committee
Nomination Committee
Company Secretaries
Ms Leanne Ralph
BBus (Acc & Fin majors), FGIA, GAICD
Ms Melanie Andrews
BComm, MBA, FCPA, GAICD
Appointed: 25 August 2022
Appointed: 26 March 2024
Executive team
Dr Andreas Schwer
Managing Director and
Chief Executive Officer
We have never been in a better position than
today. We have an unmatched innovation
portfolio and roadmap ahead of us. And all
the market mega trends are very much in our
favour.
EOS is benefiting from two mega trends
on the market. The first trend is the trend
towards robotic platforms on the battlefield.
“For customers,
EOS is a
synonym for
accuracy,
reliability and
performance.”
Here, the systems of choice are systems with the highest level of
reliability and performance. EOS is perfectly suited in this domain.
Secondly, we are benefiting from the trend towards cannon-based
counter UAS systems.
We are agile and we can deliver customised solutions. That’s why
we get preference over other suppliers as we meet customer
expectations and even exceed them.
At EOS, it’s what we do next that matters most.
Clive Cuthell
Christian Tobergte
Ian Cook
Dr James Bennett
Chief Financial Officer,
Executive Vice President,
Executive Vice President,
Executive Vice President,
Chief Operations Officer
EOS Defence Systems
EOS Defence Systems
EOS Space Systems
Appointed:
September 2022
International
Appointed:
April 2024
Australia
Appointed:
November 2023
Appointed:
November 2023
10
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
11
EOS Directors
Executive team
Executive team
“For customers,
EOS is a
synonym for
accuracy,
reliability and
performance.”
Dr Andreas Schwer
Managing Director and
Chief Executive Officer
We have never been in a better position than
today. We have an unmatched innovation
portfolio and roadmap ahead of us. And all
the market mega trends are very much in our
favour.
EOS is benefiting from two mega trends
on the market. The first trend is the trend
towards robotic platforms on the battlefield.
Here, the systems of choice are systems with the highest level of
reliability and performance. EOS is perfectly suited in this domain.
Secondly, we are benefiting from the trend towards cannon-based
counter UAS systems.
Before retiring from the Deloitte Touche Tohmatsu Australia partnership in 2016,
David spent 25 years with Deloitte in the UK and Australia. During that time David
provided services to a range of clients including in the Defence, Manufacturing and
Government sectors. David’s experience includes working with growing start-up
businesses, multinational corporations and the boards of ASX listed entities on
complex accounting, internal and external auditing, risk management, corporate
governance and due diligence engagements. David previously served as the audit
partner of Deloitte Touche Tohmatsu for the Company for the years ending from
June 2005 to December 2009 and June 2012 to June 2016.
Since his retirement from Deloitte, David has established a growing family
business, The Coastal Brewing Company, and serves on six Government sector
audit committees as an independent member, chairing one of those committees.
Directorships of other listed entities in the last three years:
Nil
Robert was a Partner at Herbert Smith Freehills (and predecessor firms) for 28
years. He served on the Freehills Board of Partners for 10 years and was the
Chairman for 3 years in the lead-up to the firm’s merger with Herbert Smith to
create a global firm with 500 partners and 24 offices.
Robert is a director of Port of Melbourne, Alinta Energy, Baker Heart and Diabetes
Institute, Landcare Australia and European Australian Business Council. He is a
Senior Advisor to Herbert Smith Freehills.
Directorships of other listed entities in the last three years:
Mr David Black
BA(Hons) (Economics), FCA,
MBA, GAICD
Independent Non-executive Director
Appointed: 1 January 2021
Board Committees:
Audit and Risk Committee (Chair)
People and Culture Committee
Data Security & Data Governance
Committee
Nomination Committee
Mr Robert Nicholson
BSc, LLB, LLM, MBA, GAICD
Nil
Independent Non-executive Director
Appointed: 24 May 2023
Board Committees:
Audit and Risk Committee
Data Security & Data Governance
Committee
Nomination Committee
Company Secretaries
Ms Leanne Ralph
Ms Melanie Andrews
BBus (Acc & Fin majors), FGIA, GAICD
BComm, MBA, FCPA, GAICD
Appointed: 25 August 2022
Appointed: 26 March 2024
We are agile and we can deliver customised solutions. That’s why
we get preference over other suppliers as we meet customer
expectations and even exceed them.
At EOS, it’s what we do next that matters most.
Clive Cuthell
Christian Tobergte
Ian Cook
Dr James Bennett
Chief Financial Officer,
Executive Vice President,
Executive Vice President,
Executive Vice President,
Chief Operations Officer
EOS Defence Systems
EOS Defence Systems
EOS Space Systems
Appointed:
September 2022
International
Appointed:
April 2024
Australia
Appointed:
November 2023
Appointed:
November 2023
10
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
11
EOS at a Glance
Company Overview
Company Overview
Activities
spanning 18
countries
446
Employees
worldwide
7 Global offices
Operating
cash inflow
$113.1m
Underlying
EBITDA*
$5.7m
* Before foreign exchange gains
and other adjustments
Revenue
$219.3m
59%
EOS designs, develops and builds the world’s most accurate remote weapon
systems.
Driven by innovation, precision and performance for 40 years, EOS is a world leader in developing advanced technology
products and services for the global defence and space domains. Our core markets are in defence, where we produce
state-of-the-art remote weapon and counter-drone systems; on-the-move satellite communications; and advanced
space technologies.
What do we do best?
What propels us?
What is our passion?
We develop and produce systems
We depend on trusted and enduring
We design and harness electro-
that can detect, identify, stabilise,
relationships with agencies that
optical engineering to solve unique
control and communicate to inform
seek to enhance national security
customer challenges.
strategic decision-making.
and prosperity.
Electro Optic Systems Holdings Limited (’the Company’)
EOS Space Systems, a global industry leader in
and the entities it controls (‘the Group’) operates in two
producing accurate knowledge of the space environment,
business divisions:
• EOS Defence Systems;
• EOS Space Systems.
The Group’s core technologies – advanced optical and
laser assemblies, thermal imagers, day cameras, gimbal
units, laser rangefinders – offer great utility for both of
these business areas.
Organisation
EOS Defence Systems specialises in technologies that
enable the integration of weapon systems to a diverse
range of platforms used in both land and naval warfare.
Its current key products are:
•
remote weapon systems (RWS), including our
high-performance R150 (ultra-lightweight), R400
(lightweight), R400-M (marine), and heavyweight
R600 and R800 variants;
•
the next-generation Slinger counter-drone system;
• high-energy laser systems.
specialises in:
• space surveillance and intelligence services;
• space control and warfare capabilities;
• optical and satellite communications products.
EOS Space Systems operates as three separate entities:
• Canberra-based EOS Space Technologies, which
supplies space domain intelligence and control
services to both domestic and international
customers.
• Brisbane-based EM Solutions, which creates
innovative satellite communications systems that
are breaking new ground in the domain of high-speed
telecommunications.
• New Zealand-based KiwiStar Optics, which specialises
in precision optical systems and has designed and
installed bespoke components for many of the
world’s leading space observatories.
The Group has had a global mindset and a strong export
business ever since its earliest years and today is a
well-established member of the international defence
and space communities. In recent years, the Group has
become a genuinely global enterprise, with on-the-ground
operations in the US, UAE, Singapore and New Zealand.
12
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
13
EOS at a Glance
Company Overview
Company Overview
Activities
spanning 18
countries
446
Employees
worldwide
7 Global offices
Operating
cash inflow
$113.1m
Underlying
EBITDA*
$5.7m
* Before foreign exchange gains
and other adjustments
Revenue
$219.3m
59%
EOS designs, develops and builds the world’s most accurate remote weapon
systems.
Driven by innovation, precision and performance for 40 years, EOS is a world leader in developing advanced technology
products and services for the global defence and space domains. Our core markets are in defence, where we produce
state-of-the-art remote weapon and counter-drone systems; on-the-move satellite communications; and advanced
space technologies.
What do we do best?
What propels us?
What is our passion?
We develop and produce systems
that can detect, identify, stabilise,
control and communicate to inform
strategic decision-making.
We depend on trusted and enduring
relationships with agencies that
seek to enhance national security
and prosperity.
We design and harness electro-
optical engineering to solve unique
customer challenges.
Electro Optic Systems Holdings Limited (’the Company’)
and the entities it controls (‘the Group’) operates in two
business divisions:
EOS Space Systems, a global industry leader in
producing accurate knowledge of the space environment,
specialises in:
• EOS Defence Systems;
• EOS Space Systems.
The Group’s core technologies – advanced optical and
laser assemblies, thermal imagers, day cameras, gimbal
units, laser rangefinders – offer great utility for both of
these business areas.
Organisation
EOS Defence Systems specialises in technologies that
enable the integration of weapon systems to a diverse
range of platforms used in both land and naval warfare.
Its current key products are:
•
remote weapon systems (RWS), including our
high-performance R150 (ultra-lightweight), R400
(lightweight), R400-M (marine), and heavyweight
R600 and R800 variants;
•
the next-generation Slinger counter-drone system;
• high-energy laser systems.
• space surveillance and intelligence services;
• space control and warfare capabilities;
• optical and satellite communications products.
EOS Space Systems operates as three separate entities:
• Canberra-based EOS Space Technologies, which
supplies space domain intelligence and control
services to both domestic and international
customers.
• Brisbane-based EM Solutions, which creates
innovative satellite communications systems that
are breaking new ground in the domain of high-speed
telecommunications.
• New Zealand-based KiwiStar Optics, which specialises
in precision optical systems and has designed and
installed bespoke components for many of the
world’s leading space observatories.
The Group has had a global mindset and a strong export
business ever since its earliest years and today is a
well-established member of the international defence
and space communities. In recent years, the Group has
become a genuinely global enterprise, with on-the-ground
operations in the US, UAE, Singapore and New Zealand.
12
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
13
Review of Operations
Company Overview
Defence Systems
Photo by Kate Geraghty
EOS Defence Systems accomplished a great deal during
Business developments
2023, launching new products, widening our customer
base and product range, and delivering record cash
receipts. Amid the backdrop of ongoing conflicts in
Europe and the Middle East, we delivered product to
diverse allied customers around the world – including for
deployment in Ukraine – and saw a marked increase in
customer enquiries.
Remote weapons systems (RWS)
During this period, we secured two conditional contracts
to supply RWS to Ukraine; two contracts to supply RWS
to Western European customers; and a contract to supply
R600 spares to a Southeast Asian customer.
We also continued to service our large contract for
our allied Middle Eastern customer and supported the
integration and deployment of four R400 RWS-equipped
uncrewed ground vehicles (UGVs) for a NATO customer.
Having played a lead role, almost two decades ago, in the
development of the world’s first ever RWS, EOS’ technical
Counter-drone systems
pedigree is unmatched.
Our goal is to ‘play to our strengths’ and realise the full
commercial potential of our family of RWS products, and,
particularly, our counter-drone technologies. We believe
the key characteristics of these products – including
The market for counter-drone products is forecast to
increase robustly over the coming decades, and we believe
EOS is well positioned to capitalise on that demand.
We recently released the Slinger, which incorporates a
cutting-edge four-axis sighting system and can easily
exceptional accuracy and cost-effectiveness – make
track and defeat moving drones beyond 800 m. The
them unique.
Our RWS product range currently comprises:
initial response to this product has been positive: we
have already sold evaluation systems to a US customer
for donation to the war effort in Ukraine and received an
• our lightweight R150. Production of this new system,
additional order from Germany.
which can mount and fire weapons up to 12.7 mm
on the move and over long ranges, has begun, and an
initial order for 14 R150 gimbals has been fulfilled;
• our medium-calibre R400 and R600, which
permit single- and dual-weapon configurations,
accommodate an array of firepower options and
provide outstanding accuracy. These systems are
currently in service in Australia, North America, Europe
and Southeast Asia;
• our next-generation heavy calibre R800, which enables
the use not only of higher-calibre kinetic ammunition
We are also progressing in the use of directed energy
(DE) as a counter-drone measure and recently staged
successful demonstrations of our DE-based prototypes
at a remote test range in Australia.
Outlook
Our goal is to be the market leader in the global RWS,
counter-drone and UGV domains – and we have made
real progress towards that goal during 2023. Now we
must build on that progress by continuing to gain new
but also high-power laser systems, as an effective
customers – including through increased marketing and
counter-drone solution. The innovative R800 is a
sales activity. We are proud of our achievements in 2023,
potential ‘game-changer’ for the global RWS and
but much remains to be done. We are enthusiastic about
counter-drone markets.
the opportunities that lie ahead.
14
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
15
WHEN THE FIRST SHOT MATTERSWHEN THE FIRST SHOT MATTERS Review of Operations
Company Overview
Defence Systems
Photo by Kate Geraghty
EOS Defence Systems accomplished a great deal during
2023, launching new products, widening our customer
base and product range, and delivering record cash
receipts. Amid the backdrop of ongoing conflicts in
Europe and the Middle East, we delivered product to
diverse allied customers around the world – including for
deployment in Ukraine – and saw a marked increase in
customer enquiries.
Remote weapons systems (RWS)
Having played a lead role, almost two decades ago, in the
development of the world’s first ever RWS, EOS’ technical
pedigree is unmatched.
Our goal is to ‘play to our strengths’ and realise the full
commercial potential of our family of RWS products, and,
particularly, our counter-drone technologies. We believe
the key characteristics of these products – including
exceptional accuracy and cost-effectiveness – make
them unique.
Our RWS product range currently comprises:
• our lightweight R150. Production of this new system,
which can mount and fire weapons up to 12.7 mm
on the move and over long ranges, has begun, and an
initial order for 14 R150 gimbals has been fulfilled;
• our medium-calibre R400 and R600, which
permit single- and dual-weapon configurations,
accommodate an array of firepower options and
provide outstanding accuracy. These systems are
currently in service in Australia, North America, Europe
and Southeast Asia;
• our next-generation heavy calibre R800, which enables
the use not only of higher-calibre kinetic ammunition
but also high-power laser systems, as an effective
counter-drone solution. The innovative R800 is a
potential ‘game-changer’ for the global RWS and
counter-drone markets.
Business developments
During this period, we secured two conditional contracts
to supply RWS to Ukraine; two contracts to supply RWS
to Western European customers; and a contract to supply
R600 spares to a Southeast Asian customer.
We also continued to service our large contract for
our allied Middle Eastern customer and supported the
integration and deployment of four R400 RWS-equipped
uncrewed ground vehicles (UGVs) for a NATO customer.
Counter-drone systems
The market for counter-drone products is forecast to
increase robustly over the coming decades, and we believe
EOS is well positioned to capitalise on that demand.
We recently released the Slinger, which incorporates a
cutting-edge four-axis sighting system and can easily
track and defeat moving drones beyond 800 m. The
initial response to this product has been positive: we
have already sold evaluation systems to a US customer
for donation to the war effort in Ukraine and received an
additional order from Germany.
We are also progressing in the use of directed energy
(DE) as a counter-drone measure and recently staged
successful demonstrations of our DE-based prototypes
at a remote test range in Australia.
Outlook
Our goal is to be the market leader in the global RWS,
counter-drone and UGV domains – and we have made
real progress towards that goal during 2023. Now we
must build on that progress by continuing to gain new
customers – including through increased marketing and
sales activity. We are proud of our achievements in 2023,
but much remains to be done. We are enthusiastic about
the opportunities that lie ahead.
14
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
15
WHEN THE FIRST SHOT MATTERSWHEN THE FIRST SHOT MATTERS Review of Operations
Company Overview
Space Technologies
EOS Space Technologies has been improving its
complex. Globally, very few industry players have
commercial performance, as our business focuses on
the skills and competencies required to create viable
Space Domain Awareness (SDA), and products for the
emerging Space Control and Space Warfare markets.
and competencies.
commercial solutions in these areas. EOS has those skills
During this period, we:
EOS has deep expertise in space domain awareness,
• continued to provide high-quality SDA, satellite laser
telescope construction technology, laser weapons and
ranging (SLR) and other space services to long-time
adaptive optics – the key “ingredients” for effective space
control. EOS has been developing these competencies
• designed a beam director assembly for an
over decades.
customers;
international customer;
• secured several new contracts that, while modest in
scale, point to the commercial potential of our IP; and
• continued to explore emerging opportunities
with potential domestic and global partners and
customers.
In October, we signed a memorandum of understanding
with the Japanese laser fusion energy business EX-
Fusion to investigate the use of lasers for space debris
management – an area in which EOS has been highly
active for many years.
KiwiStar Optics, our highly-regarded precision optics
manufacturing business, continued to win business and
deliver to customers internationally. The business is
focussed on positioning for growth in core markets and
developing new products for emerging market needs.
The commercial growth we foresee will not materialise
immediately. As the tactical importance of the space
domain increases, however, we believe EOS is well placed
to capitalise on these future opportunities.
In the meantime, we will continue to refine and expand
our capabilities in the relevant technical fields and seek
out new partnerships to assist in commercialising our
products.
In space, EOS will no longer deploy large reserves of
capital into product development. Where major funding
is required, we will seek this from third-party sources. We
consider this the most pragmatic path to bringing our
technologies to commercial fruition – and the right thing
to do for investors.
Strategic Focus
Commercial Priorities
We believe space will be a decisive theatre of future
on realising the commercial potential of our capabilities.
warfare, due to its critical role in providing surveillance,
communication, and navigation infrastructure to people
We are optimistic that global demand for space control
and warfare technologies will grow and that this will create
on the ground.
significant opportunities for our business.
Our business is in a period of evolution and is fully focused
Tactical space intelligence, surveillance and
reconnaissance activities and platforms are technically
16
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
17
WE SEE FURTHERWE SEE FURTHER
Review of Operations
Company Overview
Space Technologies
EOS Space Technologies has been improving its
commercial performance, as our business focuses on
Space Domain Awareness (SDA), and products for the
emerging Space Control and Space Warfare markets.
complex. Globally, very few industry players have
the skills and competencies required to create viable
commercial solutions in these areas. EOS has those skills
and competencies.
During this period, we:
• continued to provide high-quality SDA, satellite laser
ranging (SLR) and other space services to long-time
customers;
• designed a beam director assembly for an
international customer;
• secured several new contracts that, while modest in
scale, point to the commercial potential of our IP; and
• continued to explore emerging opportunities
with potential domestic and global partners and
customers.
In October, we signed a memorandum of understanding
with the Japanese laser fusion energy business EX-
Fusion to investigate the use of lasers for space debris
management – an area in which EOS has been highly
active for many years.
KiwiStar Optics, our highly-regarded precision optics
manufacturing business, continued to win business and
deliver to customers internationally. The business is
focussed on positioning for growth in core markets and
developing new products for emerging market needs.
Commercial Priorities
We believe space will be a decisive theatre of future
warfare, due to its critical role in providing surveillance,
communication, and navigation infrastructure to people
on the ground.
Tactical space intelligence, surveillance and
reconnaissance activities and platforms are technically
EOS has deep expertise in space domain awareness,
telescope construction technology, laser weapons and
adaptive optics – the key “ingredients” for effective space
control. EOS has been developing these competencies
over decades.
The commercial growth we foresee will not materialise
immediately. As the tactical importance of the space
domain increases, however, we believe EOS is well placed
to capitalise on these future opportunities.
In the meantime, we will continue to refine and expand
our capabilities in the relevant technical fields and seek
out new partnerships to assist in commercialising our
products.
In space, EOS will no longer deploy large reserves of
capital into product development. Where major funding
is required, we will seek this from third-party sources. We
consider this the most pragmatic path to bringing our
technologies to commercial fruition – and the right thing
to do for investors.
Strategic Focus
Our business is in a period of evolution and is fully focused
on realising the commercial potential of our capabilities.
We are optimistic that global demand for space control
and warfare technologies will grow and that this will create
significant opportunities for our business.
16
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
17
WE SEE FURTHERWE SEE FURTHER
Review of Operations
Company Overview
EM Solutions
EM Solutions continued its growth trajectory in 2023,
government ministers for their critical logistical and
delivering high-performance satellite communications
other support throughout the SEA1442 tender process.
(SATCOM) products to existing customers, securing new
business in Australia and internationally, and achieving a
strong commercial result.
International
Resilient, reliable, high-speed connectivity – for voice,
data and streaming video; to maintain situational
awareness; and for tactical communications, including
rapid dissemination of command-and-control decisions
– is a critical capability for modern naval and other
defence forces.
The breadth and depth of EM Solutions’ SATCOM
expertise – which we have been developing, from our
Brisbane headquarters, for more than 25 years – is,
we believe, second to none, and our products give our
customers tangible operational advantages.
With a strong order backlog, a recently completed factory
We are continuing to successfully deliver and install King
Cobra satellite terminals to our valued European naval
customers.
We see international expansion as the key pillar of our
next phase of growth and are actively pursuing and
negotiating a range of global sales opportunities.
EM Solutions will continue to seek out new international
business – not only in Europe but also in markets where
we have not previously been active.
We are devoting significant resources to this goal by
increasing our sales and marketing activities and by
ramping up our export capability and global service
upgrade and development of new products well underway,
and support footprint, including by establishing on-the-
it is an exciting phase in the history of our business.
ground operations in Europe.
Domestic
Outlook
In June, we were pleased to finalise an agreement with
EM Solutions is now among the world’s leading providers
the Australian Government Capability Acquisition and
of on-the-move radio and SATCOM solutions.
Sustainment Group (CASG) to upgrade the maritime
communications capabilities of the Royal Australian
Navy’s (RAN’s) existing fleet of vessels under the
SEA1442 Phase 5 program.
This major, multi-year program of work will involve
modernising the RAN’s primary and alternate SATCOM
systems using EM Solutions’ state-of-the-art King Cobra
and Cobra terminals.
The rapid upward trajectory of the global military
communications systems market is forecast to continue
over the coming decade, and we consider our business
well placed to capitalise on that trend.
Our recent successes have already created the need for
around 30 new jobs, as we scale up our infrastructure to
match our current and anticipated growth.
We are committed to managing that growth sustainably,
We thank the RAN – with whom we have had a
while continuing EM Solutions’ evolution into a genuinely
longstanding, highly productive working relationship
global enterprise that is recognised as operating at the
– as well as CASG, the Department of Defence and
very top of its field.
18
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
19
WORLD LEADING TECHNOLOGYWORLD LEADING TECHNOLOGY Review of Operations
Company Overview
EM Solutions
EM Solutions continued its growth trajectory in 2023,
delivering high-performance satellite communications
(SATCOM) products to existing customers, securing new
business in Australia and internationally, and achieving a
strong commercial result.
Resilient, reliable, high-speed connectivity – for voice,
data and streaming video; to maintain situational
awareness; and for tactical communications, including
rapid dissemination of command-and-control decisions
– is a critical capability for modern naval and other
defence forces.
The breadth and depth of EM Solutions’ SATCOM
expertise – which we have been developing, from our
Brisbane headquarters, for more than 25 years – is,
we believe, second to none, and our products give our
customers tangible operational advantages.
With a strong order backlog, a recently completed factory
upgrade and development of new products well underway,
it is an exciting phase in the history of our business.
government ministers for their critical logistical and
other support throughout the SEA1442 tender process.
International
We are continuing to successfully deliver and install King
Cobra satellite terminals to our valued European naval
customers.
We see international expansion as the key pillar of our
next phase of growth and are actively pursuing and
negotiating a range of global sales opportunities.
EM Solutions will continue to seek out new international
business – not only in Europe but also in markets where
we have not previously been active.
We are devoting significant resources to this goal by
increasing our sales and marketing activities and by
ramping up our export capability and global service
and support footprint, including by establishing on-the-
ground operations in Europe.
Domestic
Outlook
In June, we were pleased to finalise an agreement with
the Australian Government Capability Acquisition and
Sustainment Group (CASG) to upgrade the maritime
communications capabilities of the Royal Australian
Navy’s (RAN’s) existing fleet of vessels under the
SEA1442 Phase 5 program.
This major, multi-year program of work will involve
modernising the RAN’s primary and alternate SATCOM
systems using EM Solutions’ state-of-the-art King Cobra
and Cobra terminals.
We thank the RAN – with whom we have had a
longstanding, highly productive working relationship
– as well as CASG, the Department of Defence and
EM Solutions is now among the world’s leading providers
of on-the-move radio and SATCOM solutions.
The rapid upward trajectory of the global military
communications systems market is forecast to continue
over the coming decade, and we consider our business
well placed to capitalise on that trend.
Our recent successes have already created the need for
around 30 new jobs, as we scale up our infrastructure to
match our current and anticipated growth.
We are committed to managing that growth sustainably,
while continuing EM Solutions’ evolution into a genuinely
global enterprise that is recognised as operating at the
very top of its field.
18
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
19
WORLD LEADING TECHNOLOGYWORLD LEADING TECHNOLOGY Company Overview
Company Overview
Innovation Portfolio
2023 Milestones
Future Strategic Growth Opportunities
EM Solutions
Defence Systems
King Cobra – SATCOM
-on-the-move
• Continued delivery and
installation for naval
customers in Australia
and Europe
• 2 m class naval maritime
SATCOM terminal
• Full extended Ka-Band
and simultaneous X-Band
coverage
• Designed to access GEO,
MEO, HEO and LEO satellite
constellations
Space Technologies
Advances in Space
Sustainability
• EOS signed an MOU with
EX-Fusion for laser fusion
energy collaboration
• High-power laser
technologies aimed at
space debris removal
• EOS’ optical ground station
to be equipped with lasers
for tracking and altering
space debris orbits
R150 – Lightweight
Force Protection
• New production line opened
in 2023
• Suitable for light vehicles,
offering tactical
self-defence
• Potential for future UGV
integration
• Gimbals used in L3Harris
VAMPIRE systems
in Ukraine
R800 – Heavy calibre
Firepower
• Launched in 2023, with
market introduction set for
2024
• Provides heavy firepower at
low cost and reduced weight
Space Warfare
Satellites are vital for defence, providing surveillance, navigation
and communication capabilities. EOS has extensive expertise in
space domain awareness, telescope technology, laser weapons
and adaptive optics, which are crucial for effective space control.
This expertise has been built over many years. Commercial
growth is expected, but it may not be immediate. However, as the
strategic value of space increases, EOS is well-placed to capitalise
on future opportunities. We will continue to enhance our technical
capabilities and seek partnerships to commercialise our products.
High-Energy Laser Weapon (HELW)
In response to the urgent market need for cost-effective drone and
missile defence systems, EOS has developed a HELW prototype.
This prototype, with a designed power output ranging from 36 to
54 kW, was successfully demonstrated in August 2023.
Access to HELW systems is increasingly becoming a strategic
requirement for modern militaries worldwide. EOS is targeting
global markets outside the United States and is currently in
negotiations with potential customer partners to fund further
development of this innovative technology.
Slinger – Kinetic Counter-drone Lethality
• Officially launched in 2023
• Effective drone defeat capabilities for military and
security forces
• Combination of advanced software, specialised proximity
ammunition and radar technology provides unparalleled
accuracy and flexibility
• Mounts on military and commercial vehicles,
or at a fixed site
• Requires minimal training and is easy to use
Current Growth
Future Growth Opportunity
RWS & Turrets
EM Solutions
HEL Weapons
Space
R400 family
R150 family
Naval terminals
Titanis CUAS
Commercial space
Land terminals
HELW 36 kW
R800 family
Medium-size terminals
HELW 50 kW
Slinger counter-drone
Submarine terminals
HELW 100 kW
intelligence
Military space control
Space warfare
• Widen product and market range
• Increase presence in Europe
• Demonstrate capability
• Seek product development funding
20
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
21
Company Overview
Company Overview
Innovation Portfolio
EM Solutions
Defence Systems
2023 Milestones
Future Strategic Growth Opportunities
King Cobra – SATCOM
-on-the-move
• Continued delivery and
installation for naval
customers in Australia
and Europe
• 2 m class naval maritime
SATCOM terminal
• Full extended Ka-Band
and simultaneous X-Band
coverage
• Designed to access GEO,
MEO, HEO and LEO satellite
constellations
Space Technologies
Advances in Space
Sustainability
• EOS signed an MOU with
EX-Fusion for laser fusion
energy collaboration
• High-power laser
technologies aimed at
space debris removal
• EOS’ optical ground station
to be equipped with lasers
for tracking and altering
space debris orbits
R150 – Lightweight
Force Protection
• New production line opened
in 2023
• Suitable for light vehicles,
offering tactical
self-defence
• Potential for future UGV
integration
• Gimbals used in L3Harris
VAMPIRE systems
in Ukraine
R800 – Heavy calibre
Firepower
• Launched in 2023, with
market introduction set for
2024
• Provides heavy firepower at
low cost and reduced weight
Space Warfare
Satellites are vital for defence, providing surveillance, navigation
and communication capabilities. EOS has extensive expertise in
space domain awareness, telescope technology, laser weapons
and adaptive optics, which are crucial for effective space control.
This expertise has been built over many years. Commercial
growth is expected, but it may not be immediate. However, as the
strategic value of space increases, EOS is well-placed to capitalise
on future opportunities. We will continue to enhance our technical
capabilities and seek partnerships to commercialise our products.
High-Energy Laser Weapon (HELW)
In response to the urgent market need for cost-effective drone and
missile defence systems, EOS has developed a HELW prototype.
This prototype, with a designed power output ranging from 36 to
54 kW, was successfully demonstrated in August 2023.
Access to HELW systems is increasingly becoming a strategic
requirement for modern militaries worldwide. EOS is targeting
global markets outside the United States and is currently in
negotiations with potential customer partners to fund further
development of this innovative technology.
Slinger – Kinetic Counter-drone Lethality
• Officially launched in 2023
• Effective drone defeat capabilities for military and
security forces
• Combination of advanced software, specialised proximity
ammunition and radar technology provides unparalleled
accuracy and flexibility
• Mounts on military and commercial vehicles,
or at a fixed site
• Requires minimal training and is easy to use
Current Growth
Future Growth Opportunity
RWS & Turrets
EM Solutions
HEL Weapons
Space
R400 family
R150 family
Naval terminals
Land terminals
Titanis CUAS
HELW 36 kW
R800 family
Medium-size terminals
HELW 50 kW
Slinger counter-drone
Submarine terminals
HELW 100 kW
Commercial space
intelligence
Military space control
Space warfare
• Widen product and market range
• Increase presence in Europe
• Demonstrate capability
• Seek product development funding
20
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
21
EOS People
EOS People
EOS People
EOS recognises the critical role of a highly skilled and dedicated workforce
in achieving its business goals. This focus remained central throughout
2023, driving the implementation of various action plans aimed at attracting,
developing and retaining top talent. These initiatives are ongoing and will
extend into 2024 and beyond.
Workforce Profile
Workforce Culture
Our commitment to a diverse
and inclusive culture is one of the
cornerstones of our success, and
enables us to attract and retain the best talent in the
industry.
In 2023, EOS revised and enacted a suite of employee-
related policies, working practices and benefits aimed
at attracting and retaining high-performing employees.
These included:
• generous parental leave entitlements;
• offering all employees professional learning
opportunities relevant to their roles and career
development;
•
implementing a ‘nine-day fortnight’ work schedule in
certain parts of the business.
Other measures included:
• maintaining our strong focus on workplace health
and safety;
• actively managing the on-the-job performance of all
employees;
• continuously enhancing our internal communications
to foster transparency and collaboration, including
through regular updates and “Town Hall” meetings;
• creating and maintaining positive work environments
that appeal to current and prospective employees.
Our annual EOS global staff survey process allows us
to receive feedback directly from all EOS employees
globally. This feedback becomes the basis for our action
plans to continuously improve our work environments.
The profile of EOS’ global workforce changed
significantly during 2023, most notably in its size, as
shown below:
538
569
404
446
Dec-21
Jun-22
Dec-22
Dec-23
Size of EOS Workforce
As at December 2023, the largest proportion of EOS’
workforce (74 per cent) is based in Australia.
A breakdown of EOS’ entire global workforce is given
below:
NZ
9
GER
1
SNG
20
UAE
40
USA
46
AUS
330
EOS Global Workforce
Working Arrangements
EOS recognises the importance of attracting and
retaining talented employees throughout its workforce.
To achieve this, the Company actively seeks to balance
business requirements with employee preferences when
determining working arrangements, adopting practical
solutions where possible.
Examples include:
•
increasing the number of part-time employees;
• engaging employees to work on a “fixed term” or
per-project basis.
A breakdown of the employment status of EOS’
workforce is provided below:
Casual
2%
Part-time
5%
Full-time
93%
Employment status
Diversity and Inclusion
• As an equal-opportunity employer, EOS values
the efforts and contributions of all employees,
irrespective of gender, age, gender identity, disability,
race, sex or sexual orientation.
• EOS does not discriminate on the basis of these
attributes when making recruitment, appointment
and other employment-related decisions.
• EOS maintains a range of policies and procedures to
prevent any forms of discrimination or harassment
from occurring at its workplaces.
•
In 2023, women comprised 20 per cent of EOS’ global
workforce and 20 per cent of its Board of Directors.
EOS Directors and Staff 2023
Number
Female
Female %
Male
Male %
EOS Workforce Breakdown
Senior Management (CEO/EVP)*
Board*
Australia
New Zealand
Singapore
United States
Germany
Totals
United Arab Emirates
5
4
9
326
20
46
40
1
446
1
0
66
12
0
6
6
1
91
20%
0%
20%
0%
30%
26%
15%
100%
20%
4
4
9
260
14
34
34
0
355
80%
100%
80%
100%
70%
74%
85%
0%
80%
* ”Board” excludes the Managing Director, who is included under “Senior Management” as CEO. “Senior Management” is defined as a manager who has a relatively high
leadership role in the day-to-day responsibilities of managing the Company.
22
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
23
EOS People
EOS People
EOS People
EOS recognises the critical role of a highly skilled and dedicated workforce
in achieving its business goals. This focus remained central throughout
2023, driving the implementation of various action plans aimed at attracting,
developing and retaining top talent. These initiatives are ongoing and will
extend into 2024 and beyond.
Workforce Profile
Workforce Culture
The profile of EOS’ global workforce changed
Our commitment to a diverse
significantly during 2023, most notably in its size, as
and inclusive culture is one of the
shown below:
cornerstones of our success, and
enables us to attract and retain the best talent in the
industry.
In 2023, EOS revised and enacted a suite of employee-
related policies, working practices and benefits aimed
at attracting and retaining high-performing employees.
These included:
• generous parental leave entitlements;
• offering all employees professional learning
opportunities relevant to their roles and career
development;
•
implementing a ‘nine-day fortnight’ work schedule in
certain parts of the business.
Other measures included:
• maintaining our strong focus on workplace health
• actively managing the on-the-job performance of all
• continuously enhancing our internal communications
to foster transparency and collaboration, including
through regular updates and “Town Hall” meetings;
• creating and maintaining positive work environments
that appeal to current and prospective employees.
Our annual EOS global staff survey process allows us
to receive feedback directly from all EOS employees
globally. This feedback becomes the basis for our action
plans to continuously improve our work environments.
538
569
404
446
Dec-21
Jun-22
Dec-22
Dec-23
Size of EOS Workforce
As at December 2023, the largest proportion of EOS’
workforce (74 per cent) is based in Australia.
A breakdown of EOS’ entire global workforce is given
below:
and safety;
employees;
NZ
GER
9
1
SNG
20
UAE
40
USA
46
AUS
330
EOS Global Workforce
Working Arrangements
EOS recognises the importance of attracting and
retaining talented employees throughout its workforce.
To achieve this, the Company actively seeks to balance
business requirements with employee preferences when
determining working arrangements, adopting practical
solutions where possible.
Examples include:
•
increasing the number of part-time employees;
• engaging employees to work on a “fixed term” or
per-project basis.
A breakdown of the employment status of EOS’
workforce is provided below:
Casual
2%
Part-time
5%
Full-time
93%
Employment status
Diversity and Inclusion
• As an equal-opportunity employer, EOS values
the efforts and contributions of all employees,
irrespective of gender, age, gender identity, disability,
race, sex or sexual orientation.
• EOS does not discriminate on the basis of these
attributes when making recruitment, appointment
and other employment-related decisions.
• EOS maintains a range of policies and procedures to
prevent any forms of discrimination or harassment
from occurring at its workplaces.
•
In 2023, women comprised 20 per cent of EOS’ global
workforce and 20 per cent of its Board of Directors.
EOS Workforce Breakdown
EOS Directors and Staff 2023
Number
Female
Female %
Male
Male %
Board*
Senior Management (CEO/EVP)*
Australia
New Zealand
Singapore
United States
United Arab Emirates
Germany
Totals
5
4
326
9
20
46
40
1
446
1
0
66
0
6
12
6
1
91
20%
0%
20%
0%
30%
26%
15%
100%
20%
4
4
260
9
14
34
34
0
355
80%
100%
80%
100%
70%
74%
85%
0%
80%
* ”Board” excludes the Managing Director, who is included under “Senior Management” as CEO. “Senior Management” is defined as a manager who has a relatively high
leadership role in the day-to-day responsibilities of managing the Company.
22
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
23
EOS People
Advancing EOS’ Global Supply Chain
Advancing EOS’ Global Supply
Chain
EOS has continued to foster strong relationships with our supply chain partners
– both international and local – throughout 2023. All of our partners play a
distinct role in contributing to EOS’ technologies , positioning us for future
growth in a dynamic environment.
Our Australian industry partners have shown exceptional
Embracing a global supply chain perspective, EOS aims to:
flexibility and responsiveness and have been instrumental
in our ability to meet customers’ requirements.
• consolidate system and component quantities from
various production facilities, achieving more efficient
We also maintain a critical and highly valued network of
international suppliers, and in 2024 we will take further
steps to expand our participation in emerging international
commercial opportunities. To support this strategic
direction, we will enhance our internal supply chain
production;
• enhance responsiveness to urgent customer needs,
ensuring the timely delivery of critical solutions;
• optimise local inventories, embedding the flexibility
to transfer inventory across our global operations as
senior management capabilities , preparing for offshore
required;
production to meet the demands of new programs.
Expansion into global markets brings its own set of
challenges, including meeting international local content
growth.
• provide Australian suppliers with access to overseas
markets, encouraging international collaboration and
requirements, managing international offset obligations,
As we commence this new phase in evolving our global
complying with international licensing regulations and
supply chain, EOS remains committed to engaging
safeguarding corporate intellectual property.
with potential suppliers for the technological areas in
which we operate . We look forward to continuing these
discussions and collaborating on the development of
next-generation products that meet the evolving needs of
our existing and potential global customers.
Learning and Development
EOS is committed to fostering
an environment that promotes
continuous learning and professional
growth for our employees.
We provide employees with opportunities to self-direct
their learning journeys by nominating themselves for
courses and programs that align with their career
aspirations. We also offer a variety of technical and
professional development programs, encompassing
leadership development, personal growth, and
participation in industry conferences and seminars. We
also ensure that all employees receive thorough training
in areas critical to regulatory compliance and industry
standards.
Work Health and Safety
Throughout 2023, EOS continued to
maintain a strong focus on WHS.
As a result:
• no significant accident or incident occurred in any
EOS workplace that required mandatory reporting to
the WHS regulator;
• across global work sites, there were only 12 minor
WHS incidents. These incidents did not result in
physical or psychological harm to employees or
necessitate extended time off work.
We continually maintain and update our safety
procedures and Safety Data Sheets to ensure the
highest standards of WHS at our Australian sites.
Regular inspections are conducted at these sites,
and any findings are addressed and resolved by our
dedicated process owners. This proactive approach
underscores our strong commitment WHS management
and our ongoing dedication to making it a central focus
of our operations.
Anthony Farr
joined EOS in
2018 after 18
years of service
with the ADF
Employment of Veterans
EOS is proud to be an employer of choice for defence
force veterans, and recognises the distinctive, valuable
skills and experiences they bring to our workforce.
Veterans and active defence force reservists comprise
approximately 15 per cent of our global workforce.
Our dedication to the veteran community is demonstrated
by our ongoing platinum-level sponsorship of the Soldier
On organisation, which plays a crucial role in assisting
Australian Defence Force veterans and their families.
EOS actively seeks to provide employment opportunities
to military veterans wherever possible.
Commitment to STEM
EOS fosters a culture of innovation
and excellence by actively supporting
science, technology, engineering
and mathematics (STEM) education
and talent development across our diverse operations.
We believe in nurturing the next generation of
STEM professionals by providing practical learning
opportunities and financial support.
Our related initiatives include offering internships and
scholarships, contributing to scholarship programs,
and partnering with leading universities and research
institutions on collaborative research projects. These
efforts not only enhance the skills and knowledge of
our workforce but also contribute to the growth and
sustainability of the industries we serve. Through its
investments in STEM, EOS is helping to build a pipeline
of skilled professionals who will be ready to tackle future
challenges in our industry.
24
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
25
EOS People
Advancing EOS’ Global Supply Chain
Advancing EOS’ Global Supply
Chain
EOS has continued to foster strong relationships with our supply chain partners
– both international and local – throughout 2023. All of our partners play a
distinct role in contributing to EOS’ technologies , positioning us for future
growth in a dynamic environment.
Our Australian industry partners have shown exceptional
flexibility and responsiveness and have been instrumental
in our ability to meet customers’ requirements.
We also maintain a critical and highly valued network of
international suppliers, and in 2024 we will take further
steps to expand our participation in emerging international
commercial opportunities. To support this strategic
direction, we will enhance our internal supply chain
senior management capabilities , preparing for offshore
production to meet the demands of new programs.
Expansion into global markets brings its own set of
challenges, including meeting international local content
requirements, managing international offset obligations,
complying with international licensing regulations and
safeguarding corporate intellectual property.
Embracing a global supply chain perspective, EOS aims to:
• consolidate system and component quantities from
various production facilities, achieving more efficient
production;
• enhance responsiveness to urgent customer needs,
ensuring the timely delivery of critical solutions;
• optimise local inventories, embedding the flexibility
to transfer inventory across our global operations as
required;
• provide Australian suppliers with access to overseas
markets, encouraging international collaboration and
growth.
As we commence this new phase in evolving our global
supply chain, EOS remains committed to engaging
with potential suppliers for the technological areas in
which we operate . We look forward to continuing these
discussions and collaborating on the development of
next-generation products that meet the evolving needs of
our existing and potential global customers.
Learning and Development
EOS is committed to fostering
an environment that promotes
continuous learning and professional
growth for our employees.
Anthony Farr
joined EOS in
2018 after 18
years of service
with the ADF
We provide employees with opportunities to self-direct
their learning journeys by nominating themselves for
courses and programs that align with their career
aspirations. We also offer a variety of technical and
professional development programs, encompassing
leadership development, personal growth, and
participation in industry conferences and seminars. We
also ensure that all employees receive thorough training
in areas critical to regulatory compliance and industry
Employment of Veterans
standards.
EOS is proud to be an employer of choice for defence
force veterans, and recognises the distinctive, valuable
skills and experiences they bring to our workforce.
Veterans and active defence force reservists comprise
approximately 15 per cent of our global workforce.
Our dedication to the veteran community is demonstrated
by our ongoing platinum-level sponsorship of the Soldier
As a result:
On organisation, which plays a crucial role in assisting
Australian Defence Force veterans and their families.
EOS actively seeks to provide employment opportunities
• across global work sites, there were only 12 minor
to military veterans wherever possible.
Work Health and Safety
Throughout 2023, EOS continued to
maintain a strong focus on WHS.
• no significant accident or incident occurred in any
EOS workplace that required mandatory reporting to
the WHS regulator;
WHS incidents. These incidents did not result in
physical or psychological harm to employees or
necessitate extended time off work.
We continually maintain and update our safety
procedures and Safety Data Sheets to ensure the
highest standards of WHS at our Australian sites.
Regular inspections are conducted at these sites,
and any findings are addressed and resolved by our
dedicated process owners. This proactive approach
underscores our strong commitment WHS management
and our ongoing dedication to making it a central focus
and talent development across our diverse operations.
We believe in nurturing the next generation of
of our operations.
Commitment to STEM
EOS fosters a culture of innovation
and excellence by actively supporting
science, technology, engineering
and mathematics (STEM) education
STEM professionals by providing practical learning
opportunities and financial support.
Our related initiatives include offering internships and
scholarships, contributing to scholarship programs,
and partnering with leading universities and research
institutions on collaborative research projects. These
efforts not only enhance the skills and knowledge of
our workforce but also contribute to the growth and
sustainability of the industries we serve. Through its
investments in STEM, EOS is helping to build a pipeline
of skilled professionals who will be ready to tackle future
challenges in our industry.
24
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
25
Corporate Social Responsibility
Review of Operations
Corporate Social Responsibility
Review of Operations
As at 28 February 2024
Environment
EOS recognises the importance of
organisations taking active steps to
reduce their carbon footprint and other
environmental impacts of their operations
– on land, at sea and in space .
Our approach to environmental sustainability is
underpinned by compliance with relevant government
legislation and regulations. More broadly, EOS aims to:
• manage and mitigate the environmental effects of its
operations;
• contribute to the ongoing global transition to a low-
carbon economy.
In practice, this commitment involves, for example:
• attempting to minimise resource and energy usage;
• aiming to ensure that all waste is disposed of
appropriately;
•
fostering a culture of energy efficiency throughout the
business.
Our Commitment to Ethical
Exports and Human Rights
EOS operates under Australian and US
export controls that include elements
designed to protect human rights.
EOS defence products are exported from Australia and
are subject to a range of formal approvals in accordance
with relevant legislation.
Australia participates in a number of multilateral
export control regimes, and the Australian Government
assesses export applications against legislative criteria
that include considerations regarding human rights
and Australia’s international obligations and national
interests. The US controls the export and use of military
items under the International Traffic in Arms Regulations,
which operate separately from, and in addition to,
Australian controls.
To gain necessary export approvals, EOS products
undergo rigorous assessments under both Australian
and US export control systems that confirm they will not
be used to commit human rights abuses. As a result,
EOS products are among the most highly controlled in
the world.
Corporate Governance
Framework
EOS’ multifaceted global
business activities call for
robust corporate governance,
and the Company maintains
a governance framework to
achieve our environmental,
social and governance
initiatives by:
• promoting transparency;
• promoting accountability;
• managing risk
throughout the Company
appropriately;
• dealing with all
stakeholders respectfully.
The foundations of EOS’ corporate governance framework are shown below:
Environmental
• Energy efficiency management
• Safe disposal of chemical waste
• Waste management
• Water usage and conservation
Social
• Management of the wellbeing of the EOS workforce
• Employee Assistance Program
• Workplace health and safety
• Workplace benefits
Governance
• Board governance
• Board diversity
• Compliance with all relevant legislation
• Modern Slavery Statement
1. Results for the year ended 31 December
Key elements of financial performance are summarised
2023
below:
For Electro Optic Systems Holdings Limited (the
“Company”) and its subsidiaries (collectively, the “Group”
or “EOS”), revenue from continuing operations activities
was $219.3m, representing a $81.4m or 59 per cent
increase on the prior year (31 December 2022: $137.9m).
For the year ended 31 December 2023, the loss after
tax from continuing operations was $34.1m, compared
to the 2022 loss from continuing operations of $53.6m
(2022: operating loss after tax of $115.6m including the
results from SpaceLink’s discontinued operations).
Underlying EBITDA from continuing operations (prior
to foreign exchange gains) was a profit of $5.7m,
representing an increase of $48.6m on the underlying
EBITDA loss from continuing operations of $42.9m in
the prior year.
The Group reported net cash inflows from operations for
the year totalling $113.1m (31 December 2022: $51.6m
net cash outflows from operations, which included
$15.3m outflows relating to discontinued operations in
2022). In addition, the Group reported $34.7m of net cash
1.1 Revenue from Continuing Operations
For the year ended 31 December 2023 the Group
recorded revenue from continuing operations of
$219.3m (31 December 2022: $137.9m), representing an
increase of $81.4m or 59 per cent.
The increase in revenue was driven partly by higher
Defence Systems segment revenue, up from $105.9m in
2022 to $155.4m in 2023, an increase of $49.5m. More
detailed information is provided in Section 4.
Revenue in the Space segment also increased on prior
year to $63.9m (2022: $32.0m), driven by the growth in
the EM Solutions business. More detailed information is
provided in Section 4.
The underlying cause of this 2023 revenue increase
was higher activity levels, including on the delivery of a
Defence Systems contract to a customer in the Middle
East, delivery of a contract to a Western European
Government and the commencement of a new EM
Solutions contract with the Commonwealth of Australia.
outflows from investing activities (31 December 2022:
At 31 December 2023, the Group had a backlog of
$28.3m). The net cash outflow from financing activities
contracted future work of over $600m, including $181m
for the year was $29.1m, due primarily to the repayment
of conditional contracts. The unconditional contracts
of debt (31 December 2022: net cash inflows $45.4m).
represent work under customer contracts, mainly
At 31 December 2023, the Group held cash totalling
$71.0m (31 December 2022: $21.7m). In addition, the
Group had deposited $67.1m of restricted cash security
deposits at 31 December 2023 (31 December 2022:
$35.6m).
in Defence Systems and EM Solutions and work is
currently expected to be undertaken principally between
2024 and 2026. The conditional contracts are detailed in
section 4.
26
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Electro Optic Systems Holdings Limited | Annual Report 2023
27
Corporate Social Responsibility
Review of Operations
Corporate Social Responsibility
Review of Operations
As at 28 February 2024
Environment
EOS recognises the importance of
Our Commitment to Ethical
Exports and Human Rights
organisations taking active steps to
EOS operates under Australian and US
reduce their carbon footprint and other
export controls that include elements
environmental impacts of their operations
designed to protect human rights.
– on land, at sea and in space .
Our approach to environmental sustainability is
are subject to a range of formal approvals in accordance
EOS defence products are exported from Australia and
underpinned by compliance with relevant government
with relevant legislation.
legislation and regulations. More broadly, EOS aims to:
• manage and mitigate the environmental effects of its
export control regimes, and the Australian Government
Australia participates in a number of multilateral
assesses export applications against legislative criteria
that include considerations regarding human rights
and Australia’s international obligations and national
interests. The US controls the export and use of military
• contribute to the ongoing global transition to a low-
operations;
carbon economy.
In practice, this commitment involves, for example:
items under the International Traffic in Arms Regulations,
• attempting to minimise resource and energy usage;
which operate separately from, and in addition to,
• aiming to ensure that all waste is disposed of
Australian controls.
•
fostering a culture of energy efficiency throughout the
undergo rigorous assessments under both Australian
To gain necessary export approvals, EOS products
appropriately;
business.
and US export control systems that confirm they will not
be used to commit human rights abuses. As a result,
EOS products are among the most highly controlled in
the world.
The foundations of EOS’ corporate governance framework are shown below:
Corporate Governance
Framework
EOS’ multifaceted global
business activities call for
robust corporate governance,
and the Company maintains
a governance framework to
achieve our environmental,
social and governance
initiatives by:
• promoting transparency;
• promoting accountability;
• managing risk
throughout the Company
appropriately;
• dealing with all
stakeholders respectfully.
Environmental
• Energy efficiency management
• Safe disposal of chemical waste
• Waste management
• Water usage and conservation
Social
• Management of the wellbeing of the EOS workforce
• Employee Assistance Program
• Workplace health and safety
• Workplace benefits
Governance
• Board governance
• Board diversity
• Compliance with all relevant legislation
• Modern Slavery Statement
1. Results for the year ended 31 December
2023
Key elements of financial performance are summarised
below:
For Electro Optic Systems Holdings Limited (the
“Company”) and its subsidiaries (collectively, the “Group”
or “EOS”), revenue from continuing operations activities
was $219.3m, representing a $81.4m or 59 per cent
increase on the prior year (31 December 2022: $137.9m).
For the year ended 31 December 2023, the loss after
tax from continuing operations was $34.1m, compared
to the 2022 loss from continuing operations of $53.6m
(2022: operating loss after tax of $115.6m including the
results from SpaceLink’s discontinued operations).
Underlying EBITDA from continuing operations (prior
to foreign exchange gains) was a profit of $5.7m,
representing an increase of $48.6m on the underlying
EBITDA loss from continuing operations of $42.9m in
the prior year.
The Group reported net cash inflows from operations for
the year totalling $113.1m (31 December 2022: $51.6m
net cash outflows from operations, which included
$15.3m outflows relating to discontinued operations in
2022). In addition, the Group reported $34.7m of net cash
outflows from investing activities (31 December 2022:
$28.3m). The net cash outflow from financing activities
for the year was $29.1m, due primarily to the repayment
of debt (31 December 2022: net cash inflows $45.4m).
At 31 December 2023, the Group held cash totalling
$71.0m (31 December 2022: $21.7m). In addition, the
Group had deposited $67.1m of restricted cash security
deposits at 31 December 2023 (31 December 2022:
$35.6m).
1.1 Revenue from Continuing Operations
For the year ended 31 December 2023 the Group
recorded revenue from continuing operations of
$219.3m (31 December 2022: $137.9m), representing an
increase of $81.4m or 59 per cent.
The increase in revenue was driven partly by higher
Defence Systems segment revenue, up from $105.9m in
2022 to $155.4m in 2023, an increase of $49.5m. More
detailed information is provided in Section 4.
Revenue in the Space segment also increased on prior
year to $63.9m (2022: $32.0m), driven by the growth in
the EM Solutions business. More detailed information is
provided in Section 4.
The underlying cause of this 2023 revenue increase
was higher activity levels, including on the delivery of a
Defence Systems contract to a customer in the Middle
East, delivery of a contract to a Western European
Government and the commencement of a new EM
Solutions contract with the Commonwealth of Australia.
At 31 December 2023, the Group had a backlog of
contracted future work of over $600m, including $181m
of conditional contracts. The unconditional contracts
represent work under customer contracts, mainly
in Defence Systems and EM Solutions and work is
currently expected to be undertaken principally between
2024 and 2026. The conditional contracts are detailed in
section 4.
26
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27
Review of Operations
Review of Operations
1. Results for the year ended 31 December
1.4 Impairment
1.7 Contract Asset
2023 (continued)
1.2 Expenses from Continuing Operations
Expenses in continuing operations increased from
$215.3m in the prior year to $262.9m in this year. This
increase of $47.6m was partly driven by an increase in
material costs of $40.6m due to higher activity and an
increase in finance costs of $21.3m due to a full financial
year of interest incurred for the facilities entered into in
September 2022. This is offset by reduced employee
costs of $5.7m arising from cost savings implemented
in Q4 2022. The increase of $6.7m in administration
expenses in 2023 was driven by increased marketing
costs associated with new product launches and
increased travel costs associated with growing markets
in Europe and the resumption of travel post COVID.
The Group’s gross margin on materials (including
expenses of cost of goods sold and movements in
Inventory) was 44 per cent in 2023 (2022: 34 per cent).
This increase was driven by higher margin sales being
achieved in 2023 in the Defence Systems business.
1.3 Underlying EBITDA from Continuing
Operations
Underlying EBITDA from continuing operations (prior
to foreign exchange gains) was a profit of $5.7m,
compared to an EBITDA loss from continuing operations
of $42.9m (prior to foreign exchange gains and
impairment charges) in the prior year.
There were no impairments recognised in the year ended
31 December 2023.
During the prior year, the Group recognised an impairment
charge of $54.5m, including a charge of $7.3m relating to
continued operations and $47.2m relating to discontinued
operations.
1.5 Foreign Exchange
The results included a foreign exchange gain in the year
of $0.9m (2022: gain of $12.7m), which predominantly
arose on the translation of US dollar assets into
Australian dollars.
1.6 Discontinued Operations in Prior Year
During the prior year, the Group ceased investment in
SpaceLink and subsequently SpaceLink ceased normal
operations and entered an orderly wind-up process in the
United States, by way of an Assignment for the Benefit of
Creditors (“ABC”).
The Group no longer controls SpaceLink as it is controlled
by an Assignee under the ABC process, who acts in
the interest of the creditors. During the year ending
31 December 2023, the Group has not incurred any
significant cash outflows related to SpaceLink and it does
not expect to incur any future significant cash outflows
relating to SpaceLink.
The results of discontinued operations are disclosed in
Note 6 to the financial statements.
Underlying EBITDA from Continuing Operations
Continuing operations year ended 31 December $m
(Loss) for the year
Income tax (benefit)
(Loss) before tax
Finance costs
Impairment of assets
Foreign exchange (gain)
Underlying EBIT (loss) (before impairment and foreign exchange gains)
Depreciation & amortization
Other one-off (gain) adjustments
Underlying EBITDA profit/(loss) (before impairment and foreign exchange gains)
2023
(34.1)
(6.1)
(40.2)
35.6
-
(0.9)
(5.5)
12.4
(1.2)
5.7
2022
(53.6)
(9.3)
(62.9)
14.3
7.3
(12.7)
(54.0)
11.1
-
(42.9)
The Group recognises a contract asset, being revenue
recognised on projects that has not yet been invoiced
to customers. Revenue is recognised under Australian
Accounting Standards. Amounts are invoiced to
customers in accordance with legal arrangements
specified in customer contracts.
At 31 December 2023, the Group had a contract asset
totalling $68.0m (31 December 2022: $164.4m), being
revenue earned but not invoiced, mainly on a project
with a significant overseas customer in the Middle East.
The contract asset decreased by $96.4m during the
year, due to invoices issued to customers during the year
exceeding revenue recognised on customer contracts.
The invoicing of the amounts in the contract asset
balance and the realisation of cash has been a critical
focus for the Group during 2023 and the reduction in the
contract asset was in part due to a contract amendment
agreed with our customer in the Middle East in H1 2023.
1.8 Contract Liabilities – Amounts Received in
Advance
The Group recognises contract liabilities for amounts
that have been received from customers as advance
payments on projects. During the year, the amount
of contract liabilities decreased from $22.2m at 31
December 2022 to $20.6m at 31 December 2023.
1.9 Cash Balances
The cash balance increased from $21.7m at the start of
the year to $71.0m at the end of the year.
The Group continues to closely monitor the cash flow
of the Group and the outlook for the business, to ensure
that adequate funding is in place and, if necessary,
seek to amend the Group capital structure. The Group
continues to focus on maximising cash inflows,
including seeking contract amendments on existing
contracts where appropriate, and securing and delivering
on new sales contracts that are cash positive.
Cash Flows from Operating Activities
During the year, the Group had net cash inflows from
operating activities of $113.1m.
of $215.9m, increased from $188.6m in the prior year,
due to the increased supplier payments as the result
of increased activity. Cashflows from other operating
activities of $3.6m represent tax received and interest
paid during the year.
Cash Flows from Investing Activities
The Group had net cash outflows of $34.7m from
investing activities during the year. This included cash
outflows of $31.8m for security deposits for bonds
required under contracts with Australian and overseas
customers, and $2.9m in acquisitions of property, plant
and equipment.
Cash Flows from Financing Activities
The Group repaid $26.9m to retire the Working Capital
Facility which matured on 6 September 2023. For the
purposes of presentation in the Statement of Cash
Flows, this repayment has been split between interest
paid ($4.4m) and principal repayment ($22.5m). The
Group also repaid $1.9m of unsecured borrowings
during the reporting year.
As at 31 December 2023, the Group had the following
secured borrowing facilities outstanding:
• Additional Working Capital Facility, with $15.0m
principal drawn, maturing on 11 April 2024, with a
debt repayment obligation of $20.5m.
• Term Loan Facility, with $35.0m principal drawn,
maturing on 11 October 2025, with a debt repayment
obligation of $52.1m.
Under the borrowing facility agreements, during Q4
2023, EOS commenced the payment of monthly interest
and line fees to Washington H. Soul Pattinson (“WHSP”).
Interest and line fees had previously been capitalised
into the outstanding loan facility balance, up to an
agreed limit.
Following a fee claim that was received on 9 October
2023 and disputed by EOS, the Group resolved a
commercial dispute with its primary lender, WHSP on
22 December 2023. The commercial fee dispute was
in relation to a consent to a waiver previously provided
by WHSP for EOS to issue bank guarantees. This fee
was subsequently agreed between the parties in a
facility amendment executed between the parties on 22
December 2023, where EOS will pay WHSP a $4.5m fee
in full and final settlement of the previous disputed fee
claim, and WHSP has agreed to relax certain restrictions
Net cash from operating activities was impacted by an
increase in receipts from customers from $145.9m in
included in the borrowing facility agreements. The
flexibility afforded by this relaxation is expected to
the prior year to $325.4m in 2023. The increase was
allow EOS to take advantage of future business growth
driven by new contracts and higher activity on the delivery
opportunities as they arise. The agreement was
on continuing projects, including the realisation of
conditional on the approval of another finance provider,
contract assets. Payments to suppliers and employees
EFA, which was received subsequent to year-end,
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29
Review of Operations
Review of Operations
1. Results for the year ended 31 December
1.4 Impairment
2023 (continued)
1.2 Expenses from Continuing Operations
31 December 2023.
There were no impairments recognised in the year ended
Expenses in continuing operations increased from
During the prior year, the Group recognised an impairment
$215.3m in the prior year to $262.9m in this year. This
charge of $54.5m, including a charge of $7.3m relating to
increase of $47.6m was partly driven by an increase in
continued operations and $47.2m relating to discontinued
material costs of $40.6m due to higher activity and an
operations.
increase in finance costs of $21.3m due to a full financial
year of interest incurred for the facilities entered into in
September 2022. This is offset by reduced employee
costs of $5.7m arising from cost savings implemented
in Q4 2022. The increase of $6.7m in administration
expenses in 2023 was driven by increased marketing
costs associated with new product launches and
increased travel costs associated with growing markets
in Europe and the resumption of travel post COVID.
The Group’s gross margin on materials (including
expenses of cost of goods sold and movements in
Inventory) was 44 per cent in 2023 (2022: 34 per cent).
This increase was driven by higher margin sales being
achieved in 2023 in the Defence Systems business.
1.3 Underlying EBITDA from Continuing
Operations
Underlying EBITDA from continuing operations (prior
to foreign exchange gains) was a profit of $5.7m,
1.5 Foreign Exchange
The results included a foreign exchange gain in the year
of $0.9m (2022: gain of $12.7m), which predominantly
arose on the translation of US dollar assets into
Australian dollars.
1.6 Discontinued Operations in Prior Year
During the prior year, the Group ceased investment in
SpaceLink and subsequently SpaceLink ceased normal
operations and entered an orderly wind-up process in the
United States, by way of an Assignment for the Benefit of
Creditors (“ABC”).
The Group no longer controls SpaceLink as it is controlled
by an Assignee under the ABC process, who acts in
the interest of the creditors. During the year ending
31 December 2023, the Group has not incurred any
compared to an EBITDA loss from continuing operations
significant cash outflows related to SpaceLink and it does
of $42.9m (prior to foreign exchange gains and
impairment charges) in the prior year.
not expect to incur any future significant cash outflows
relating to SpaceLink.
The results of discontinued operations are disclosed in
Note 6 to the financial statements.
Underlying EBITDA from Continuing Operations
Continuing operations year ended 31 December $m
(Loss) for the year
Income tax (benefit)
(Loss) before tax
Finance costs
Impairment of assets
Foreign exchange (gain)
Depreciation & amortization
Other one-off (gain) adjustments
Underlying EBIT (loss) (before impairment and foreign exchange gains)
Underlying EBITDA profit/(loss) (before impairment and foreign exchange gains)
2023
(34.1)
(6.1)
(40.2)
35.6
-
(0.9)
(5.5)
12.4
(1.2)
5.7
2022
(53.6)
(9.3)
(62.9)
14.3
7.3
(12.7)
(54.0)
11.1
-
(42.9)
1.7 Contract Asset
The Group recognises a contract asset, being revenue
recognised on projects that has not yet been invoiced
to customers. Revenue is recognised under Australian
Accounting Standards. Amounts are invoiced to
customers in accordance with legal arrangements
specified in customer contracts.
At 31 December 2023, the Group had a contract asset
totalling $68.0m (31 December 2022: $164.4m), being
revenue earned but not invoiced, mainly on a project
with a significant overseas customer in the Middle East.
The contract asset decreased by $96.4m during the
year, due to invoices issued to customers during the year
exceeding revenue recognised on customer contracts.
The invoicing of the amounts in the contract asset
balance and the realisation of cash has been a critical
focus for the Group during 2023 and the reduction in the
contract asset was in part due to a contract amendment
agreed with our customer in the Middle East in H1 2023.
1.8 Contract Liabilities – Amounts Received in
Advance
The Group recognises contract liabilities for amounts
that have been received from customers as advance
payments on projects. During the year, the amount
of contract liabilities decreased from $22.2m at 31
December 2022 to $20.6m at 31 December 2023.
1.9 Cash Balances
The cash balance increased from $21.7m at the start of
the year to $71.0m at the end of the year.
The Group continues to closely monitor the cash flow
of the Group and the outlook for the business, to ensure
that adequate funding is in place and, if necessary,
seek to amend the Group capital structure. The Group
continues to focus on maximising cash inflows,
including seeking contract amendments on existing
contracts where appropriate, and securing and delivering
on new sales contracts that are cash positive.
Cash Flows from Operating Activities
During the year, the Group had net cash inflows from
operating activities of $113.1m.
Net cash from operating activities was impacted by an
increase in receipts from customers from $145.9m in
the prior year to $325.4m in 2023. The increase was
driven by new contracts and higher activity on the delivery
on continuing projects, including the realisation of
contract assets. Payments to suppliers and employees
of $215.9m, increased from $188.6m in the prior year,
due to the increased supplier payments as the result
of increased activity. Cashflows from other operating
activities of $3.6m represent tax received and interest
paid during the year.
Cash Flows from Investing Activities
The Group had net cash outflows of $34.7m from
investing activities during the year. This included cash
outflows of $31.8m for security deposits for bonds
required under contracts with Australian and overseas
customers, and $2.9m in acquisitions of property, plant
and equipment.
Cash Flows from Financing Activities
The Group repaid $26.9m to retire the Working Capital
Facility which matured on 6 September 2023. For the
purposes of presentation in the Statement of Cash
Flows, this repayment has been split between interest
paid ($4.4m) and principal repayment ($22.5m). The
Group also repaid $1.9m of unsecured borrowings
during the reporting year.
As at 31 December 2023, the Group had the following
secured borrowing facilities outstanding:
• Additional Working Capital Facility, with $15.0m
principal drawn, maturing on 11 April 2024, with a
debt repayment obligation of $20.5m.
• Term Loan Facility, with $35.0m principal drawn,
maturing on 11 October 2025, with a debt repayment
obligation of $52.1m.
Under the borrowing facility agreements, during Q4
2023, EOS commenced the payment of monthly interest
and line fees to Washington H. Soul Pattinson (“WHSP”).
Interest and line fees had previously been capitalised
into the outstanding loan facility balance, up to an
agreed limit.
Following a fee claim that was received on 9 October
2023 and disputed by EOS, the Group resolved a
commercial dispute with its primary lender, WHSP on
22 December 2023. The commercial fee dispute was
in relation to a consent to a waiver previously provided
by WHSP for EOS to issue bank guarantees. This fee
was subsequently agreed between the parties in a
facility amendment executed between the parties on 22
December 2023, where EOS will pay WHSP a $4.5m fee
in full and final settlement of the previous disputed fee
claim, and WHSP has agreed to relax certain restrictions
included in the borrowing facility agreements. The
flexibility afforded by this relaxation is expected to
allow EOS to take advantage of future business growth
opportunities as they arise. The agreement was
conditional on the approval of another finance provider,
EFA, which was received subsequent to year-end,
28
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29
Review of Operations
Review of Operations
1. Results for the year ended 31 December
In the management team, during the year:
4. Detailed Segment Update
2023 (continued)
resulting in the facility amendment becoming
unconditional and the $4.5m fee being paid to the lender.
At 31 December 2023, all borrowing facilities were fully
drawn. Total secured borrowings under these facilities,
including capitalised initial fees and interest were
$72.6m (31 December 2022: $83.6m). The Group has
$0.3m of undrawn bond facilities at 31 December 2023.
The facilities are secured on certain Group assets, and
terms of these facilities include financial covenants, and
minimum earn amounts. These are disclosed in Note 18
to the Financial Statements.
No new shares were issued during the year to 31
December 2023, however share options and share rights
were issued to staff, which are expected to be settled
from existing shares already on issue.
During the reporting year, the Group executed
agreements which required the provision of new
guarantees of $22.2m to an Australian Customer. The
guarantees were issued on the Group’s behalf by funding
providers and are secured by cash security deposits of
$21.1m as at 31 December 2023. These guarantees and
cash deposits are expected to be returned to the Group
during 2024 as obligations are fulfilled.
Pursuant to the terms of the new EM Solutions contract
with the Royal Australian Navy, a further $6m of bonds
were entered into by the Group during the year which is
fully secured by cash.
2. Changes in Directors and Management
During the year, the following changes to Board
membership occurred:
• Ms Deena Shiff stepped down from her role as an
Independent Non-executive Director of the Company
on 31 January 2023;
• Mr Robert Kaye SC resigned from his role as an
Independent Non-executive Director of the Company
on 20 March 2023;
• Dr Ben Greene resigned as an Executive Director of
the Company on 27 March 2023;
• Mr Robert Nicholson was appointed as an
Independent Non-executive Director of the Company
on 24 May 2023; and
• Dr Andreas Schwer was appointed as an Executive
Director of the Company on 11 December 2023.
• Mr Matt Jones was Acting Executive Vice President
of Defence Systems until 2 November 2023; and
• Mr Ian Cook was appointed Executive Vice President
of Defence Systems (Australia) on 2 November 2023.
3. Comprehensive Program of Change
The Group continued with the implementation of its
change program during the year. The Board has further
strengthened the globalisation of EOS as an Australian-
headquartered international company.
This expansion requires a move to a more global
operating structure with greater focus on sales in
Europe, the United States of America, the Middle East
and Asia – all of which are markets offering significant
growth potential for EOS.
To realise this growth, a greater operational focus is
required in Australia, including on engineering, supply
chain and manufacturing as well as industrial and
commercial competencies.
Management is developing opportunities to further
improve these focus areas.
Further work is continuing in a number of other areas,
aimed at improving cash flow, profitability, funding and
returns, including:
• diversifying the range of products, markets and
customers, including initiatives to secure new
customer contracts, including improving sales and
marketing effectiveness;
• continued focus on realising cash from the Group’s
customer contracts. This includes seeking contract
amendments with customers where possible,
optimising the achievement of relevant milestones
and seeking more favourable terms on new contracts;
• careful management of costs, in line with the revenue
and activity levels of the business; and
•
rationing and prioritising capital expenditure, including
R&D spending, towards core Defence and Space
businesses, using commercial investment criteria,
and seeking third party product development funding
where appropriate.
vehicles to the ADF in 2027 and 2028. EOS expects
that it may receive the opportunity to provide RWS to
Hanwha as part of this project. In addition, EOS may
also have the opportunity for a share of work in support
of the manufacture of turrets for Hanwha. EOS expects
discussions to continue during 2024.
Work continued during the year on sales opportunities,
including significant projects in Australia and
internationally.
In the year to 31 December 2023, the Group executed
contracts with customers for the following new
business:
• a conditional contract to supply RWS to Ukraine,
valued at approximately $120m;
• a further conditional contract to supply RWS to
Ukraine, valued at approximately $61m;
• a contract with a Western European government to
supply RWS, valued at $52m;
• a contract to supply R600 RWS unit spares to a
customer in Southeast Asia, valued at approximately
4.1 EOS Defence Systems
Defence Systems had a positive year ended 31
December 2023, with revenue increasing from $105.9m
in the prior year to $155.4m in the year to 31 December
2023. This $49.5m increase was predominantly due to
the impact of the continued focus on the contract for a
large customer in the Middle East and a new contract
with a Western European government.
The main activity during the year was the manufacture
$28m; and
and delivery of Remote Weapon Systems (“RWS”) for
several different customers.
Market Overview and Sales Activity – Defence
Systems
The global market for EOS products continued to
develop positively during 2023. This was partly due
to the conflict in Ukraine, conflicts in the Middle East
and rising tensions in other locations. This positively
• a further contract with a Western European
government to supply additional RWS, valued at
approximately $25m.
In addition, in January 2024, a contract was signed
to supply EUR 9m (approximately A$15m) of Slinger
Counter-Drone Systems to Diehl Defence in Germany.
Following demonstration testing in August 2023,
EOS products have been approved by the Ukrainian
impacted on customer demand in NATO countries and
authorities for purchase as required. EOS is now working
other markets, resulting in increased overall customer
with the Ukrainian end-users and customers to allow
enquiry levels and continuing discussions.
Typically, EOS operates in an industry where it can take
an extended period of time (including up to, and beyond,
twelve months) for new market opportunities to be
converted into signed sales contracts. EOS continues to
pursue a number of material opportunities in different
markets, including Europe, the Middle East, North
America and other international markets.
The global market outlook strengthened as the 2023
year progressed, as many nations announced planned
increases in defence spending. This may lead to
increased opportunities in future.
In Australia, the Commonwealth of Australia published
the outcome of its Defence Strategic Review in April
committed orders to be placed under the conditional
contracts. Further demonstration testing is planned
to occur in Ukraine during 2024. These contracts are
also subject to early termination rights in favour of
the customer. There is no certainty or guarantee that
committed orders will be received by EOS under these
conditional contracts.
In July 2023, the Group delivered RWS to a Western
European government customer, under a contract valued
at EUR 32m (A$52m). An amendment to this contract
was executed in late December 2023 to supply this
customer with further RWS, valued at approximately
A$25m. The delivery of these additional units is
expected in early 2024.
The Group continues to be in active discussions and
2023. This review clarified the Australian Defence Force’s
contract negotiations for the provision of RWS and
(“ADF”) future plans on key projects. During the year,
related components with other potential customers.
EOS took part in discussions with Hanwha in relation
There is no certainty that any particular outcome or
to the Land 400 Phase 3 Project in Australia. Under
transaction will result from these discussions and
this project, Hanwha has been selected to deliver 129
negotiations.
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Review of Operations
1. Results for the year ended 31 December
In the management team, during the year:
4. Detailed Segment Update
2023 (continued)
resulting in the facility amendment becoming
unconditional and the $4.5m fee being paid to the lender.
At 31 December 2023, all borrowing facilities were fully
drawn. Total secured borrowings under these facilities,
including capitalised initial fees and interest were
$72.6m (31 December 2022: $83.6m). The Group has
$0.3m of undrawn bond facilities at 31 December 2023.
• Mr Matt Jones was Acting Executive Vice President
of Defence Systems until 2 November 2023; and
• Mr Ian Cook was appointed Executive Vice President
of Defence Systems (Australia) on 2 November 2023.
3. Comprehensive Program of Change
The Group continued with the implementation of its
change program during the year. The Board has further
The facilities are secured on certain Group assets, and
strengthened the globalisation of EOS as an Australian-
terms of these facilities include financial covenants, and
headquartered international company.
minimum earn amounts. These are disclosed in Note 18
to the Financial Statements.
This expansion requires a move to a more global
operating structure with greater focus on sales in
No new shares were issued during the year to 31
Europe, the United States of America, the Middle East
December 2023, however share options and share rights
and Asia – all of which are markets offering significant
were issued to staff, which are expected to be settled
growth potential for EOS.
from existing shares already on issue.
During the reporting year, the Group executed
agreements which required the provision of new
To realise this growth, a greater operational focus is
required in Australia, including on engineering, supply
chain and manufacturing as well as industrial and
guarantees of $22.2m to an Australian Customer. The
commercial competencies.
guarantees were issued on the Group’s behalf by funding
providers and are secured by cash security deposits of
$21.1m as at 31 December 2023. These guarantees and
cash deposits are expected to be returned to the Group
during 2024 as obligations are fulfilled.
Management is developing opportunities to further
improve these focus areas.
Further work is continuing in a number of other areas,
aimed at improving cash flow, profitability, funding and
Pursuant to the terms of the new EM Solutions contract
returns, including:
with the Royal Australian Navy, a further $6m of bonds
were entered into by the Group during the year which is
fully secured by cash.
• diversifying the range of products, markets and
customers, including initiatives to secure new
customer contracts, including improving sales and
marketing effectiveness;
• continued focus on realising cash from the Group’s
customer contracts. This includes seeking contract
amendments with customers where possible,
optimising the achievement of relevant milestones
and seeking more favourable terms on new contracts;
• careful management of costs, in line with the revenue
and activity levels of the business; and
•
rationing and prioritising capital expenditure, including
R&D spending, towards core Defence and Space
businesses, using commercial investment criteria,
and seeking third party product development funding
where appropriate.
2. Changes in Directors and Management
During the year, the following changes to Board
membership occurred:
• Ms Deena Shiff stepped down from her role as an
Independent Non-executive Director of the Company
on 31 January 2023;
• Mr Robert Kaye SC resigned from his role as an
Independent Non-executive Director of the Company
on 20 March 2023;
• Dr Ben Greene resigned as an Executive Director of
the Company on 27 March 2023;
• Mr Robert Nicholson was appointed as an
Independent Non-executive Director of the Company
on 24 May 2023; and
• Dr Andreas Schwer was appointed as an Executive
Director of the Company on 11 December 2023.
4.1 EOS Defence Systems
Defence Systems had a positive year ended 31
December 2023, with revenue increasing from $105.9m
in the prior year to $155.4m in the year to 31 December
2023. This $49.5m increase was predominantly due to
the impact of the continued focus on the contract for a
large customer in the Middle East and a new contract
with a Western European government.
The main activity during the year was the manufacture
and delivery of Remote Weapon Systems (“RWS”) for
several different customers.
Market Overview and Sales Activity – Defence
Systems
The global market for EOS products continued to
develop positively during 2023. This was partly due
to the conflict in Ukraine, conflicts in the Middle East
and rising tensions in other locations. This positively
impacted on customer demand in NATO countries and
other markets, resulting in increased overall customer
enquiry levels and continuing discussions.
Typically, EOS operates in an industry where it can take
an extended period of time (including up to, and beyond,
twelve months) for new market opportunities to be
converted into signed sales contracts. EOS continues to
pursue a number of material opportunities in different
markets, including Europe, the Middle East, North
America and other international markets.
The global market outlook strengthened as the 2023
year progressed, as many nations announced planned
increases in defence spending. This may lead to
increased opportunities in future.
In Australia, the Commonwealth of Australia published
the outcome of its Defence Strategic Review in April
2023. This review clarified the Australian Defence Force’s
(“ADF”) future plans on key projects. During the year,
EOS took part in discussions with Hanwha in relation
to the Land 400 Phase 3 Project in Australia. Under
this project, Hanwha has been selected to deliver 129
vehicles to the ADF in 2027 and 2028. EOS expects
that it may receive the opportunity to provide RWS to
Hanwha as part of this project. In addition, EOS may
also have the opportunity for a share of work in support
of the manufacture of turrets for Hanwha. EOS expects
discussions to continue during 2024.
Work continued during the year on sales opportunities,
including significant projects in Australia and
internationally.
In the year to 31 December 2023, the Group executed
contracts with customers for the following new
business:
• a conditional contract to supply RWS to Ukraine,
valued at approximately $120m;
• a further conditional contract to supply RWS to
Ukraine, valued at approximately $61m;
• a contract with a Western European government to
supply RWS, valued at $52m;
• a contract to supply R600 RWS unit spares to a
customer in Southeast Asia, valued at approximately
$28m; and
• a further contract with a Western European
government to supply additional RWS, valued at
approximately $25m.
In addition, in January 2024, a contract was signed
to supply EUR 9m (approximately A$15m) of Slinger
Counter-Drone Systems to Diehl Defence in Germany.
Following demonstration testing in August 2023,
EOS products have been approved by the Ukrainian
authorities for purchase as required. EOS is now working
with the Ukrainian end-users and customers to allow
committed orders to be placed under the conditional
contracts. Further demonstration testing is planned
to occur in Ukraine during 2024. These contracts are
also subject to early termination rights in favour of
the customer. There is no certainty or guarantee that
committed orders will be received by EOS under these
conditional contracts.
In July 2023, the Group delivered RWS to a Western
European government customer, under a contract valued
at EUR 32m (A$52m). An amendment to this contract
was executed in late December 2023 to supply this
customer with further RWS, valued at approximately
A$25m. The delivery of these additional units is
expected in early 2024.
The Group continues to be in active discussions and
contract negotiations for the provision of RWS and
related components with other potential customers.
There is no certainty that any particular outcome or
transaction will result from these discussions and
negotiations.
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Review of Operations
Review of Operations
• R800 RWS. This new product was unveiled at the
AUSA Trade Show in the United States during the
year. This product is a heavy-duty Remote Weapon
Station that delivers the lethality of a full-sized
medium calibre turret at a significantly lower weight
and cost than a turret.
• 1kW Laser Dazzler. This product was developed to
blind the optical cameras in all classes of unmanned
aerial systems (drones) and anti-tank guided
missiles. This is a new technology for countering air
and seaborne threats and is a silent, non-ballistic
countermeasure which can be integrated with the R800
RWS. The Laser Dazzler provides operators a flexible
range of kinetic and non-kinetic response options
against uncrewed aerial and surface vessel threats.
Discussions with a number of potential future
customers are continuing in relation to these new
products. Typically, new product launches in the defence
industry can take one to three years or more to achieve
sales and develop commercial maturity.
Prototype High Energy Laser Weapons
During the year, the Group demonstrated a prototype
34-kilowatt High Energy laser Weapon system engaging
drones. Discussions are underway with potential
customers with a view to agreeing customer-funded
product development programs for this product. This
could lead to development agreements being signed
in 2024 or 2025, and commercial sales occurring in
the period thereafter. It is expected to take some time
for Directed Energy products to achieve significant
commercial scale. There is no certainty that this will occur.
Supply Chain, Operations and Facilities – Defence
Systems
Delivery against customer contracts in 2023 continued
to face supply chain risks. The normalisation of global
supply chains has improved in some areas, however this
area continues to be a risk that is closely monitored and
managed by the Group.
4. Detailed Segment Update (continued)
Product Development – Defence Systems
Product development work continues on a range of
opportunities. Where development costs are significant,
the Group is focused on obtaining third party funding,
to speed delivery to the market and manage costs and
returns on capital.
Defence Systems continued work during the year to widen
its RWS product range from its longstanding successful
R400 RWS product, and to develop its intellectual property
and commercialise its product range:
• Slinger Counter Drone System. Defence Systems
launched its new “Slinger” counter-drone (or “CUAS”,
Counter Unmanned Aerial System) product during
May 2023, and conducted demonstrations. This new
product draws upon the Group’s deep expertise in
accurate pointing technology and applies it to the
growing threat of drones. During 2023, initial orders
for nine systems were received from a customer in
the United States. These are expected to be sent to
Ukraine as part of a USA security assistance package.
In addition, after the end of the year, a further $15m
of Slinger systems were ordered by a customer in
Germany in January 2024.
• R150 RWS. Defence Systems worked to secure
an initial order for the new lightweight R150 RWS
product. This new product has been completed and
is now entering the marketplace. An order of 14 R150
gimbals was received in January 2023, as part of the
L3 Harris Vampire portable rocket program, under
which the US is providing support to Ukraine. The
order is for less than $10m and was largely complete
as at the end of 2023.
• Uncrewed R400 RWS. Defence Systems also
supported the integration and subsequent deployment
of four R400 RWS equipped uncrewed ground
vehicles (UGV) for a NATO customer. This deployment
represents the first NATO operational deployment for a
UGV equipped with lethality systems.
• R600 RWS. Following supply in previous years,
a follow-on order was secured in Q4 2022 for 14
new heavy calibre R600 RWS, plus spares, for a
customer in Southeast Asia. The R600 RWS order
is being manufactured in the Groups US facilities in
Huntsville, Alabama. The total order is for up to $15m
and is expected to be delivered in 2023 and 2024.
In November 2023, a further follow-on contract was
secured to supply approximately $28m of R600 RWS
unit spares to the same customer.
4.2 EOS Space Systems
4.3 EM Solutions
For the year to 31 December 2023, revenue in the EOS
EM Solutions designs, builds, deploys and maintains on-
Space Systems segment increased to $63.9m from
the-move satellite communication equipment systems
the prior year (2022: $32.0m). EOS Space Systems
for defence forces. EM Solutions’ main products include
comprises two business units, Space Technologies and
satellite communication terminals and antennae for
naval vessels and other marine applications.
During 2023, EM Solutions continued to focus on
delivering growth through the delivery of satellite
communication systems to naval customers in Australia
and Europe and working closely with customers
to deliver leading products and continue to deliver
profitable growth.
business:
In the year to 31 December 2023, the EM Solutions
• executed a significant new contract for up to $202m
to modernise communications across the Royal
Australian Navy over the next seven years;
• continued work on its $26m three-year sustainment
contract for the Royal Australian Navy’s existing fleet
of Cobra Maritime SATCOM terminals;
• was part of the team selected as preferred tenderer
to deliver the Australian Defence Forces (“ADF”) new
military satellite communications capability;
terminals to customers in Europe; and
• secured new customer orders valued at $34.5m
for Satellite Communication Terminals and Radio
Frequency components.
EM Solutions continues to work closely with the ADF to
support the Royal Australian Navy and other customers.
EM Solutions.
Space Technologies
Space Technologies delivers space domain services
(providing information on objects in space) and
advanced manufacturing, (which includes the design,
building and deployment of telescope and observatory
equipment). Space Technologies also develops
technologies that support Optical Communications
(using lasers) and Space Control activities.
During 2023, Space Technologies continued to grow and
commercialise its technology. This included delivering
satellite laser ranging services to longstanding customers,
and the successful completion of a beam director
assembly for a foreign customer. Space Technologies
continued to secure small contracts with international
customers for Space Domain Awareness services and
have successfully delivered on contract requirements.
Our KiwiStar Optics business based in New Zealand
During the year, discussions were held with various
potential partners to develop opportunities for Space
Technologies in the market for Space Control and
Space Warfare solutions. This is an emerging market
opportunity in both the United States and several other
markets. Discussions to date have focused on the
Group’s unique capabilities and potential opportunities
for the Group to secure product development funding.
These discussions are expected to continue in 2024.
Space Technologies continues to develop sales
opportunities on a range of potentially significant future
projects for Australian and overseas customers. These
will help underpin future strategic growth initiatives,
including in Space Control and Space Warfare solutions.
Typically, it can take a year or more for opportunities to be
developed and converted to signed sales agreements.
continues to win contracts and deliver to customers.
• continued to deliver its Cobra Maritime SATCOM
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Review of Operations
Review of Operations
4. Detailed Segment Update (continued)
• R800 RWS. This new product was unveiled at the
Product Development – Defence Systems
Product development work continues on a range of
opportunities. Where development costs are significant,
the Group is focused on obtaining third party funding,
to speed delivery to the market and manage costs and
returns on capital.
Defence Systems continued work during the year to widen
its RWS product range from its longstanding successful
R400 RWS product, and to develop its intellectual property
and commercialise its product range:
• Slinger Counter Drone System. Defence Systems
launched its new “Slinger” counter-drone (or “CUAS”,
Counter Unmanned Aerial System) product during
May 2023, and conducted demonstrations. This new
product draws upon the Group’s deep expertise in
accurate pointing technology and applies it to the
growing threat of drones. During 2023, initial orders
for nine systems were received from a customer in
the United States. These are expected to be sent to
Ukraine as part of a USA security assistance package.
AUSA Trade Show in the United States during the
year. This product is a heavy-duty Remote Weapon
Station that delivers the lethality of a full-sized
medium calibre turret at a significantly lower weight
and cost than a turret.
• 1kW Laser Dazzler. This product was developed to
blind the optical cameras in all classes of unmanned
aerial systems (drones) and anti-tank guided
missiles. This is a new technology for countering air
and seaborne threats and is a silent, non-ballistic
countermeasure which can be integrated with the R800
RWS. The Laser Dazzler provides operators a flexible
range of kinetic and non-kinetic response options
against uncrewed aerial and surface vessel threats.
Discussions with a number of potential future
customers are continuing in relation to these new
products. Typically, new product launches in the defence
industry can take one to three years or more to achieve
sales and develop commercial maturity.
Prototype High Energy Laser Weapons
In addition, after the end of the year, a further $15m
During the year, the Group demonstrated a prototype
of Slinger systems were ordered by a customer in
34-kilowatt High Energy laser Weapon system engaging
Germany in January 2024.
• R150 RWS. Defence Systems worked to secure
an initial order for the new lightweight R150 RWS
product. This new product has been completed and
is now entering the marketplace. An order of 14 R150
gimbals was received in January 2023, as part of the
L3 Harris Vampire portable rocket program, under
which the US is providing support to Ukraine. The
drones. Discussions are underway with potential
customers with a view to agreeing customer-funded
product development programs for this product. This
could lead to development agreements being signed
in 2024 or 2025, and commercial sales occurring in
the period thereafter. It is expected to take some time
for Directed Energy products to achieve significant
commercial scale. There is no certainty that this will occur.
order is for less than $10m and was largely complete
Supply Chain, Operations and Facilities – Defence
as at the end of 2023.
Systems
• Uncrewed R400 RWS. Defence Systems also
Delivery against customer contracts in 2023 continued
supported the integration and subsequent deployment
to face supply chain risks. The normalisation of global
of four R400 RWS equipped uncrewed ground
supply chains has improved in some areas, however this
vehicles (UGV) for a NATO customer. This deployment
area continues to be a risk that is closely monitored and
represents the first NATO operational deployment for a
managed by the Group.
UGV equipped with lethality systems.
• R600 RWS. Following supply in previous years,
a follow-on order was secured in Q4 2022 for 14
new heavy calibre R600 RWS, plus spares, for a
customer in Southeast Asia. The R600 RWS order
is being manufactured in the Groups US facilities in
Huntsville, Alabama. The total order is for up to $15m
and is expected to be delivered in 2023 and 2024.
In November 2023, a further follow-on contract was
secured to supply approximately $28m of R600 RWS
unit spares to the same customer.
4.2 EOS Space Systems
4.3 EM Solutions
For the year to 31 December 2023, revenue in the EOS
Space Systems segment increased to $63.9m from
the prior year (2022: $32.0m). EOS Space Systems
comprises two business units, Space Technologies and
EM Solutions.
EM Solutions designs, builds, deploys and maintains on-
the-move satellite communication equipment systems
for defence forces. EM Solutions’ main products include
satellite communication terminals and antennae for
naval vessels and other marine applications.
During 2023, EM Solutions continued to focus on
delivering growth through the delivery of satellite
communication systems to naval customers in Australia
and Europe and working closely with customers
to deliver leading products and continue to deliver
profitable growth.
In the year to 31 December 2023, the EM Solutions
business:
• executed a significant new contract for up to $202m
to modernise communications across the Royal
Australian Navy over the next seven years;
• continued work on its $26m three-year sustainment
contract for the Royal Australian Navy’s existing fleet
of Cobra Maritime SATCOM terminals;
• was part of the team selected as preferred tenderer
to deliver the Australian Defence Forces (“ADF”) new
military satellite communications capability;
• continued to deliver its Cobra Maritime SATCOM
terminals to customers in Europe; and
• secured new customer orders valued at $34.5m
for Satellite Communication Terminals and Radio
Frequency components.
EM Solutions continues to work closely with the ADF to
support the Royal Australian Navy and other customers.
Space Technologies
Space Technologies delivers space domain services
(providing information on objects in space) and
advanced manufacturing, (which includes the design,
building and deployment of telescope and observatory
equipment). Space Technologies also develops
technologies that support Optical Communications
(using lasers) and Space Control activities.
During 2023, Space Technologies continued to grow and
commercialise its technology. This included delivering
satellite laser ranging services to longstanding customers,
and the successful completion of a beam director
assembly for a foreign customer. Space Technologies
continued to secure small contracts with international
customers for Space Domain Awareness services and
have successfully delivered on contract requirements.
Our KiwiStar Optics business based in New Zealand
continues to win contracts and deliver to customers.
During the year, discussions were held with various
potential partners to develop opportunities for Space
Technologies in the market for Space Control and
Space Warfare solutions. This is an emerging market
opportunity in both the United States and several other
markets. Discussions to date have focused on the
Group’s unique capabilities and potential opportunities
for the Group to secure product development funding.
These discussions are expected to continue in 2024.
Space Technologies continues to develop sales
opportunities on a range of potentially significant future
projects for Australian and overseas customers. These
will help underpin future strategic growth initiatives,
including in Space Control and Space Warfare solutions.
Typically, it can take a year or more for opportunities to be
developed and converted to signed sales agreements.
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Review of Operations
Review of Operations
5. Subsequent Events
Subsequent to year-end, EFA approval was received
and the amendment to the finance facility agreement
became effective and the $4.5m fee was paid to the
lender.
Apart from the above, there have been no transactions
or events of a material and unusual nature between the
end of the reporting period and the date of the report
likely, in the opinion of the Directors of the Company,
to significantly affect the operations of the Group, the
results of those operations, or state of affairs of the
Group in future years.
6. Material Business Risks
The following is a summary of the material business
risks of the Group. These are not listed in any order of
importance and do not constitute an exhaustive list. Any
of these risks may adversely impact on the financial and
operating performance and prospects of the Group and
on the ability of the Group to continue operating as a
going concern.
6.1 Cash Receipts, Liquidity, Borrowing
Covenants, Funding and Going Concern
The Group incurred a loss before tax from continuing
operations of $40.2m for the year ended 31 December
2023 and had a net cash inflow from operating activities
of $113.1m. The Group has borrowings that are
repayable as follows:
• $20.5m on 11 April 2024; and
• $52.1m on 11 October 2025.
In addition, the Group is required to comply with certain
borrowing covenants.
The Group is reliant on cash collections from customers,
including a large customer in the Middle East. The
receipt of adequate cash from this and other customers
depends on customers making timely payments for the
goods supplied in accordance with contractual terms,
the continued realisation of the Group’s contract asset,
and on the Group securing new additional cash positive
sales orders from customers.
The Group is a party to large contracts which can create
relatively large receipts and payments in short periods of
time. The Group is exposed to risk if receipts are delayed
and this can create additional liquidity requirements at
short notice. The Group manages this risk by monitoring
near-term cash forecasts and proactively pursuing cash
collections and other cash management strategies.
If adequate cash is not received, the Group may breach
borrowing covenants and/or may not have sufficient
liquidity and funds to continue operations. In addition,
it may be required to renegotiate with lenders and/or
other finance providers and to complete further debt or
equity raisings. There is no assurance that the Group
will be successful in any potential future recapitalisation
and/or refinancing should this be required. If the Group
is unable to receive adequate cash receipts from
customers, or to obtain additional funding as required, it
may have a material adverse effect on the Group’s ability
to continue operating and its ability to continue as a
going concern.
The Group is regularly asked to issue bank guarantees
under new customer contracts. The issuance thereof is
subject to constraints in borrowing facility agreements,
which in some circumstances require approval from
financiers. There is no guarantee that such approval will
be obtained and this can impact the Group’s ability to
secure customer contracts on attractive terms.
The Group is working to mitigate this risk to the
best of its ability by holding regular and constructive
discussions with customers and with lenders and
other finance providers, by maintaining pro-active cash
management processes and by exploring profitable
new business opportunities that, if converted, will be
cash flow positive. The Group has set management
performance targets for cash collected in the year.
More information on this risk is included in the Financial
Statements and Notes thereto.
6.2 Customer Concentration and Future Sales
Revenue Risks
Currently, the Group’s activities are concentrated with a
relatively small number of customers and the Group has
a contract backlog of over $600m. The Group’s ability
to continue operating depends on its ability to secure
profitable future sales contracts from existing and new
customers.
The results of the Defence Strategic Review in Australia
will impact on future sales opportunities in Australia. The
Group is working to mitigate any risk to the best of its
ability by implementing plans to diversify the business
with new customers. The Group has a detailed pipeline of
potential future opportunities and has set management
performance targets for new business won in the year
(which may span over multiple years) and revenue
delivered in the year. Management incentive schemes
have been established and are updated regularly.
Future sales revenue and cash receipts are likely to
continue to be dependent on the performance of
customers and others. For example, EOS sometimes
6.5 Cyber / Information Technology Risks
relies on the availability of customer vehicles, or critical
components (such as cannons) from suppliers.
The Group is dependent on the performance, reliability
and availability of technology platforms, data centres
The Group assesses this risk and takes steps to mitigate
and technology systems, including services provided by
this risk, for example by securing appropriate contract
third parties. The Group operates in the defence industry
terms where possible.
and has a higher inherent cyber/information technology
risk profile than other organisations.
There is no guarantee that the Group will be successful
in securing new sales orders, diversifying the business
There is a risk that technology systems may be
or mitigating potential future non-performance of
adversely affected by disruption, including by factors
exchange transactions. The Group may incur exchange
The Group is exposed to changes in geopolitical risks,
customers and others.
6.3 Foreign Exchange Risks
The Group typically incurs costs in Australian dollars
and United States dollars, and sells products priced
in Australian dollars, United States dollars and other
currencies. This can create a foreign exchange exposure,
particularly as costs are often incurred prior to sales
proceeds being received, and the Group holds assets
(including contract assets) denominated in foreign
currency. The Group works to monitor foreign exchange
exposures and mitigates these by factoring reasonably
possible foreign exchange movements into pricing.
In addition, receipts and payments with foreign
exchange risks are often incurred over extended periods
of time, protecting the Group from the impact of short-
term movements in foreign exchange rates. Except for
the natural hedge afforded by having operating assets
in different countries, the Group does not hedge foreign
gains and losses as a result of this approach.
6.4 Human Resources Risks
The Group’s ability to continue operating depends on
its ability to retain and attract (where required) high
quality managers and staff with skills aligned to the
future needs of the Group, particularly as our order book
expands.
The market for hiring new staff remains challenging
in several key areas. The Group employs a range of
initiatives to attract and retain appropriate resources,
including implementing remuneration strategies and
other employee benefits and evaluating the expansion of
our production capability in the United States and other
places. These are reviewed regularly.
There is no guarantee that the Group will be able to
retain or attract key managers and staff. This may
have an adverse impact on the Group’s financial and
operating performance.
outside the Group’s control. This could lead to a
prolonged disruption to the Group’s activities, with
adverse effects on the Group’s products and services,
operations, interactions with suppliers, employees and
others, delivery to customers, cash receipts and net cash
flows, and on the Group’s reputation.
The Group employs expert personnel and third-party
service providers to help mitigate these risks. These
mitigations include monitoring threats and other
processes and insurance. The technical nature of this risk
is subject to ongoing rapid evolution. If this risk arose,
there is no guarantee that the mitigation activities would
be effective and in this situation, it could have an adverse
effect on the ability of the Group to continue operating.
During the year a new Board subcommittee, the
Data Security and Data Governance Committee, was
established to oversee this risk.
6.6 Geo-Political Change Risks
including changes in the operating environment that
arise from wars, terrorist acts and tensions between
states that impact global security. The Group operates
in international markets in the defence industry and
has a higher inherent geo-political risk profile than other
organisations. The Group is also exposed to the risk of
political and economic instability in international markets,
inconsistent product regulation by national governments
or their agencies, imposition of product tariffs and
burdens, difficulty in enforcing intellectual property rights,
national taxes, and language and other cultural barriers.
Changes in geopolitical situations or legal requirements
could have an adverse impact on market development,
sales opportunities, revenues, operations, costs, profits,
and cash receipts and net cash flows, including the
ability of customers to pay for products and services
supplied. The Group addresses this by monitoring global
developments, including meeting with senior defence
and political leaders in different countries. The Group also
considers potential future situations, particularly when
developing and adapting market strategies and plans, as
well as working to influence critical decisions through
appropriate channels.
34
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35
Review of Operations
Review of Operations
5. Subsequent Events
Subsequent to year-end, EFA approval was received
and the amendment to the finance facility agreement
became effective and the $4.5m fee was paid to the
lender.
Apart from the above, there have been no transactions
or events of a material and unusual nature between the
end of the reporting period and the date of the report
likely, in the opinion of the Directors of the Company,
to significantly affect the operations of the Group, the
results of those operations, or state of affairs of the
Group in future years.
6. Material Business Risks
The following is a summary of the material business
risks of the Group. These are not listed in any order of
importance and do not constitute an exhaustive list. Any
of these risks may adversely impact on the financial and
If adequate cash is not received, the Group may breach
borrowing covenants and/or may not have sufficient
liquidity and funds to continue operations. In addition,
it may be required to renegotiate with lenders and/or
other finance providers and to complete further debt or
equity raisings. There is no assurance that the Group
will be successful in any potential future recapitalisation
and/or refinancing should this be required. If the Group
is unable to receive adequate cash receipts from
customers, or to obtain additional funding as required, it
may have a material adverse effect on the Group’s ability
to continue operating and its ability to continue as a
going concern.
The Group is regularly asked to issue bank guarantees
under new customer contracts. The issuance thereof is
subject to constraints in borrowing facility agreements,
which in some circumstances require approval from
financiers. There is no guarantee that such approval will
be obtained and this can impact the Group’s ability to
secure customer contracts on attractive terms.
operating performance and prospects of the Group and
The Group is working to mitigate this risk to the
on the ability of the Group to continue operating as a
best of its ability by holding regular and constructive
going concern.
6.1 Cash Receipts, Liquidity, Borrowing
Covenants, Funding and Going Concern
The Group incurred a loss before tax from continuing
operations of $40.2m for the year ended 31 December
2023 and had a net cash inflow from operating activities
of $113.1m. The Group has borrowings that are
repayable as follows:
• $20.5m on 11 April 2024; and
• $52.1m on 11 October 2025.
In addition, the Group is required to comply with certain
borrowing covenants.
The Group is reliant on cash collections from customers,
including a large customer in the Middle East. The
receipt of adequate cash from this and other customers
depends on customers making timely payments for the
goods supplied in accordance with contractual terms,
the continued realisation of the Group’s contract asset,
and on the Group securing new additional cash positive
sales orders from customers.
The Group is a party to large contracts which can create
relatively large receipts and payments in short periods of
time. The Group is exposed to risk if receipts are delayed
and this can create additional liquidity requirements at
short notice. The Group manages this risk by monitoring
discussions with customers and with lenders and
other finance providers, by maintaining pro-active cash
management processes and by exploring profitable
new business opportunities that, if converted, will be
cash flow positive. The Group has set management
performance targets for cash collected in the year.
More information on this risk is included in the Financial
Statements and Notes thereto.
6.2 Customer Concentration and Future Sales
Revenue Risks
Currently, the Group’s activities are concentrated with a
relatively small number of customers and the Group has
a contract backlog of over $600m. The Group’s ability
to continue operating depends on its ability to secure
profitable future sales contracts from existing and new
customers.
The results of the Defence Strategic Review in Australia
will impact on future sales opportunities in Australia. The
Group is working to mitigate any risk to the best of its
ability by implementing plans to diversify the business
with new customers. The Group has a detailed pipeline of
potential future opportunities and has set management
performance targets for new business won in the year
(which may span over multiple years) and revenue
delivered in the year. Management incentive schemes
have been established and are updated regularly.
near-term cash forecasts and proactively pursuing cash
Future sales revenue and cash receipts are likely to
collections and other cash management strategies.
continue to be dependent on the performance of
customers and others. For example, EOS sometimes
relies on the availability of customer vehicles, or critical
components (such as cannons) from suppliers.
The Group assesses this risk and takes steps to mitigate
this risk, for example by securing appropriate contract
terms where possible.
There is no guarantee that the Group will be successful
in securing new sales orders, diversifying the business
or mitigating potential future non-performance of
customers and others.
6.3 Foreign Exchange Risks
The Group typically incurs costs in Australian dollars
and United States dollars, and sells products priced
in Australian dollars, United States dollars and other
currencies. This can create a foreign exchange exposure,
particularly as costs are often incurred prior to sales
proceeds being received, and the Group holds assets
(including contract assets) denominated in foreign
currency. The Group works to monitor foreign exchange
exposures and mitigates these by factoring reasonably
possible foreign exchange movements into pricing.
In addition, receipts and payments with foreign
exchange risks are often incurred over extended periods
of time, protecting the Group from the impact of short-
term movements in foreign exchange rates. Except for
the natural hedge afforded by having operating assets
in different countries, the Group does not hedge foreign
exchange transactions. The Group may incur exchange
gains and losses as a result of this approach.
6.4 Human Resources Risks
The Group’s ability to continue operating depends on
its ability to retain and attract (where required) high
quality managers and staff with skills aligned to the
future needs of the Group, particularly as our order book
expands.
The market for hiring new staff remains challenging
in several key areas. The Group employs a range of
initiatives to attract and retain appropriate resources,
including implementing remuneration strategies and
other employee benefits and evaluating the expansion of
our production capability in the United States and other
places. These are reviewed regularly.
There is no guarantee that the Group will be able to
retain or attract key managers and staff. This may
have an adverse impact on the Group’s financial and
operating performance.
6.5 Cyber / Information Technology Risks
The Group is dependent on the performance, reliability
and availability of technology platforms, data centres
and technology systems, including services provided by
third parties. The Group operates in the defence industry
and has a higher inherent cyber/information technology
risk profile than other organisations.
There is a risk that technology systems may be
adversely affected by disruption, including by factors
outside the Group’s control. This could lead to a
prolonged disruption to the Group’s activities, with
adverse effects on the Group’s products and services,
operations, interactions with suppliers, employees and
others, delivery to customers, cash receipts and net cash
flows, and on the Group’s reputation.
The Group employs expert personnel and third-party
service providers to help mitigate these risks. These
mitigations include monitoring threats and other
processes and insurance. The technical nature of this risk
is subject to ongoing rapid evolution. If this risk arose,
there is no guarantee that the mitigation activities would
be effective and in this situation, it could have an adverse
effect on the ability of the Group to continue operating.
During the year a new Board subcommittee, the
Data Security and Data Governance Committee, was
established to oversee this risk.
6.6 Geo-Political Change Risks
The Group is exposed to changes in geopolitical risks,
including changes in the operating environment that
arise from wars, terrorist acts and tensions between
states that impact global security. The Group operates
in international markets in the defence industry and
has a higher inherent geo-political risk profile than other
organisations. The Group is also exposed to the risk of
political and economic instability in international markets,
inconsistent product regulation by national governments
or their agencies, imposition of product tariffs and
burdens, difficulty in enforcing intellectual property rights,
national taxes, and language and other cultural barriers.
Changes in geopolitical situations or legal requirements
could have an adverse impact on market development,
sales opportunities, revenues, operations, costs, profits,
and cash receipts and net cash flows, including the
ability of customers to pay for products and services
supplied. The Group addresses this by monitoring global
developments, including meeting with senior defence
and political leaders in different countries. The Group also
considers potential future situations, particularly when
developing and adapting market strategies and plans, as
well as working to influence critical decisions through
appropriate channels.
34
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35
Review of Operations
Review of Operations
6. Material Business Risks (continued)
6.7 Operational Continuity and Supply Chain Risks
In future, the Group’s continuing operations may be
affected by a range of factors, including the interruption
of availability of materials and components caused by
supply chain issues, access to operational premises and
access to high-level engineering skills and personnel and
to customer and supplier facilities and equipment. The
Group’s products are also subject to obsolescence risks,
including the ongoing availability of critical components
that may no longer be being manufactured by suppliers.
The Group continues to monitor these risks and develop
plans to mitigate them, including working to source and
hold inventories of critical parts. In addition, the Group
continues to work with customers and others to address
the risk of adverse financial impacts of delays in access
to firing ranges, vehicles, weapons and other critical
items. There is no guarantee that the Group’s plans will
cover all scenarios or be successful in fully mitigating
these risks, should they arise in future.
6.8 Stakeholder Dissatisfaction Risks
The Group interacts with a wide range of stakeholders.
These include customers (including various government,
defence force and other buyers) suppliers, industrial
partners, regulators, lenders and funding providers,
employees, equity investors and others. The ongoing
operation of the Group depends on the level of trust and
confidence of stakeholders in the Group.
To improve relationships with stakeholders, the Group
appointed new leadership during 2022 including a new
Chair of the Board of Directors, a new Chief Executive
Officer and a new Chief Financial Officer. The Group
is working to renew and improve relationships with
stakeholders and this work will continue into 2024. There
is no guarantee that the Group will be able to satisfy
stakeholder requirements. Ultimately this could lead to
stakeholders withholding co-operation and could disrupt
the Group’s ability to continue operating.
6.9 Product Development Risks
Ongoing sales of existing products to customers require
the maintenance and development of these existing
products and services to ensure that they remain
effective and saleable. In order to continue operating,
existing products require the maintenance of legacy
software, and the implementation of new software.
The Group employs software engineers to do this.
The Group sells high technology products and services
and there is the risk that fundamental technology
changes occur over time rendering the Group’s existing
products obsolete. For example, global security
endeavours could become more focused on missiles
than land-based technologies, presenting a risk and an
opportunity. The Group addresses this by monitoring
market trends and developing new technology
products. Product development work is subject to risk,
including that if the Group does not have access to the
necessary investment funding and the necessary skills
and capabilities, this could disrupt or delay product
development programs and ultimately the ongoing
operation of the Group.
The technical and commercial development of new
products depends on the assessment of evolving
market needs and a range of complex factors. Product
development can consume significant amounts of
investment and may not result in the development of
commercially viable products for extended periods of
time or ever. The Group’s access to appropriate sources
of development funding and technical, commercial and
strategic capability is a key determinant of future product
viability and the Group may not be able to access these.
The Group regularly reviews it product portfolio and
evolving market trends and continues to develop product
plans to mitigate these risks. There is no guarantee
that the Group will be able to maintain or develop
commercially viable products.
6.10 ESG: Environmental, Social and Governance
Risks
The Group is exposed to a wide range of Environmental,
Social and Governance risks. The Group’s products
(including Remote Weapons Systems) and other
services may be used in ways that impact human rights.
The Group is required to comply with export controls in
Australia, the United States and other countries and has
implemented controls designed to ensure compliance.
The Group is exposed to other social risks, including
evolving community expectations and obligations
relating to supply chain ethics, modern slavery, diversity
rights and behaviour of Directors and employees. The
Group works to monitor social risks and take steps to
monitoring evolving social expectations and ensure
compliance with obligations in good time.
The Group is subject to the impacts of changes in
environmental requirements and compliance obligations
(including reporting) and to the impacts of changes in
the environment on supply chain availability. The Group’s
activities, products and services may have an adverse
impact on the environment. The Group’s exposure to
environmental and climate change risks is set out in
more detail below.
The Group is exposed to governance risks, including
license is not granted and the Group works to manage
those relating to Board governance and diversity and
this risk.
the ability to retain and attract Board Directors with the
requisite skills and experience. In addition, there is the
risk that Board review and decision-making processes
may not be effective in ensuring compliance with
relevant obligations and the ongoing viability of the
Group at all times. The Board monitors its composition,
skills and processes to assess this risk and take steps to
mitigate risks where possible.
ESG risks continue to evolve rapidly and there is no
guarantee that the Group will be able to continue to
anticipate or fully mitigate these risks.
6.11 Regulatory and Legal risks
The Group is subject to a wide range of regulatory and
legal obligations in different countries. These include
data and classified activities) and compliance with the
requirements of the Australian Securities Exchange and
the Corporations Act 2001 (Cth) in Australia (and similar
legislation in other countries).
The Group’s regulatory and legal environment is subject
to change and the Group can face new regulatory
requirements. For example, in Australia, changes
are proposed to export legislation (and associated)
regulations under the Defence Trade Controls
Amendment Bill 2023 that is being considered by the
Parliament of Australia.
Changes in regulatory and legal requirements can impact
the Group’s ability to sell, manufacture or export key
There is the risk that the Group could be subject to
disputes, legal claims, litigation, investigations, class
actions and sanctions from customers, suppliers,
investors, lenders and other funding providers,
regulators, governments and others. These may relate
to past, current or future events or activities of the
Group, including actions or omissions by Directors
and employees. One such enquiry is an ongoing
investigation by ASIC in connection with compliance
with dislosure obligations and related duties in relation
to the Company’s 2022 revenue guidance. As with any
investigation of this nature, it is not possible to predict
whether any action may be taken by ASIC or third parties
and, with respect to this or other disputes, investigations
or sanctions. There is no guarantee that any past,
current or future such matters arising will be resolved
6.12 Additional Information on Climate Change
and Climate-related Risks
The Group is exposed to climate change and climate-
related risks. Directors are responsible for providing
oversight of the Group’s risks and opportunities in this area.
The main climate risks that the Group face in the short
term include compliance with evolving legislation,
including reporting obligations in different jurisdictions.
Reporting obligations are evolving and jurisdiction-
specific and the Group works to ensure compliance
with these requirements. Over the medium and long
regulations relating to Export Licenses for its products,
in a way that allows the Group to continue operating
security obligations (including relating to sites, people,
without short-term or long-term impacts.
products or components. The Group monitors changes
term, the Group has identified the risk that additional
in the regulatory and legal environment and seeks to
obligations will arise relating to potential mitigation of
take mitigating actions where appropriate. There is
adverse environmental activity within the group’s supply
no certainty that any mitigating actions taken may be
chains. The Group has an extensive and fragmented
effective in a way that allows the Group to continue
supply chain base which is involved in the manufacture
operating without short-term or long-term impacts.
of electronic and other equipment.
The Group’s relationships with counterparties (including
The Group’s strategy for managing climate-related
customers, suppliers, and others) are governed by
risks is under review which will include modelling of
contracts and relevant legislation in Australia, the United
different climate-related scenarios, such as a ‘2 degrees
States of America and other countries. In addition, the
Group’s ongoing operations depend on continuing to
meet regulatory and licensing requirements in different
parts of the business and different jurisdictions. In
particular, the Group requires specific government
permits (including Export Licences) under the applicable
export laws of the country of manufacture for each
centigrade or lower’ scenario.
The Group has identified ESG (including climate risks) as
a risk to the Group through it risk management process
which is overseen by the Directors. Assessing this risk
and developing mitigations and other actions (current
and planned) is the responsibility of management. The
export of defence equipment. Such permits are issued
Directors are responsible for monitoring compliance
and occasionally withdrawn for political and strategic
with the various evolving requirements (including
reasons by the issuing government. Delivery contracts
reporting obligations), progress being made and the
must be declined or terminated without fault if an export
development of future plans.
36
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37
Review of Operations
Review of Operations
6. Material Business Risks (continued)
6.7 Operational Continuity and Supply Chain Risks
In future, the Group’s continuing operations may be
affected by a range of factors, including the interruption
of availability of materials and components caused by
supply chain issues, access to operational premises and
access to high-level engineering skills and personnel and
to customer and supplier facilities and equipment. The
Group’s products are also subject to obsolescence risks,
including the ongoing availability of critical components
that may no longer be being manufactured by suppliers.
The Group continues to monitor these risks and develop
plans to mitigate them, including working to source and
hold inventories of critical parts. In addition, the Group
continues to work with customers and others to address
the risk of adverse financial impacts of delays in access
to firing ranges, vehicles, weapons and other critical
items. There is no guarantee that the Group’s plans will
cover all scenarios or be successful in fully mitigating
these risks, should they arise in future.
changes occur over time rendering the Group’s existing
products obsolete. For example, global security
endeavours could become more focused on missiles
than land-based technologies, presenting a risk and an
opportunity. The Group addresses this by monitoring
market trends and developing new technology
products. Product development work is subject to risk,
including that if the Group does not have access to the
necessary investment funding and the necessary skills
and capabilities, this could disrupt or delay product
development programs and ultimately the ongoing
operation of the Group.
The technical and commercial development of new
products depends on the assessment of evolving
market needs and a range of complex factors. Product
development can consume significant amounts of
investment and may not result in the development of
commercially viable products for extended periods of
time or ever. The Group’s access to appropriate sources
of development funding and technical, commercial and
strategic capability is a key determinant of future product
viability and the Group may not be able to access these.
6.8 Stakeholder Dissatisfaction Risks
The Group regularly reviews it product portfolio and
evolving market trends and continues to develop product
The Group interacts with a wide range of stakeholders.
plans to mitigate these risks. There is no guarantee
These include customers (including various government,
that the Group will be able to maintain or develop
defence force and other buyers) suppliers, industrial
commercially viable products.
partners, regulators, lenders and funding providers,
employees, equity investors and others. The ongoing
operation of the Group depends on the level of trust and
confidence of stakeholders in the Group.
To improve relationships with stakeholders, the Group
appointed new leadership during 2022 including a new
Chair of the Board of Directors, a new Chief Executive
Officer and a new Chief Financial Officer. The Group
is working to renew and improve relationships with
stakeholders and this work will continue into 2024. There
is no guarantee that the Group will be able to satisfy
stakeholder requirements. Ultimately this could lead to
stakeholders withholding co-operation and could disrupt
the Group’s ability to continue operating.
6.9 Product Development Risks
the maintenance and development of these existing
products and services to ensure that they remain
effective and saleable. In order to continue operating,
existing products require the maintenance of legacy
software, and the implementation of new software.
The Group employs software engineers to do this.
6.10 ESG: Environmental, Social and Governance
Risks
The Group is exposed to a wide range of Environmental,
Social and Governance risks. The Group’s products
(including Remote Weapons Systems) and other
services may be used in ways that impact human rights.
The Group is required to comply with export controls in
Australia, the United States and other countries and has
implemented controls designed to ensure compliance.
The Group is exposed to other social risks, including
evolving community expectations and obligations
relating to supply chain ethics, modern slavery, diversity
rights and behaviour of Directors and employees. The
Group works to monitor social risks and take steps to
monitoring evolving social expectations and ensure
The Group is subject to the impacts of changes in
environmental requirements and compliance obligations
(including reporting) and to the impacts of changes in
the environment on supply chain availability. The Group’s
activities, products and services may have an adverse
impact on the environment. The Group’s exposure to
Ongoing sales of existing products to customers require
compliance with obligations in good time.
The Group sells high technology products and services
environmental and climate change risks is set out in
and there is the risk that fundamental technology
more detail below.
The Group is exposed to governance risks, including
those relating to Board governance and diversity and
the ability to retain and attract Board Directors with the
requisite skills and experience. In addition, there is the
risk that Board review and decision-making processes
may not be effective in ensuring compliance with
relevant obligations and the ongoing viability of the
Group at all times. The Board monitors its composition,
skills and processes to assess this risk and take steps to
mitigate risks where possible.
ESG risks continue to evolve rapidly and there is no
guarantee that the Group will be able to continue to
anticipate or fully mitigate these risks.
6.11 Regulatory and Legal risks
The Group is subject to a wide range of regulatory and
legal obligations in different countries. These include
regulations relating to Export Licenses for its products,
security obligations (including relating to sites, people,
data and classified activities) and compliance with the
requirements of the Australian Securities Exchange and
the Corporations Act 2001 (Cth) in Australia (and similar
legislation in other countries).
The Group’s regulatory and legal environment is subject
to change and the Group can face new regulatory
requirements. For example, in Australia, changes
are proposed to export legislation (and associated)
regulations under the Defence Trade Controls
Amendment Bill 2023 that is being considered by the
Parliament of Australia.
Changes in regulatory and legal requirements can impact
the Group’s ability to sell, manufacture or export key
products or components. The Group monitors changes
in the regulatory and legal environment and seeks to
take mitigating actions where appropriate. There is
no certainty that any mitigating actions taken may be
effective in a way that allows the Group to continue
operating without short-term or long-term impacts.
The Group’s relationships with counterparties (including
customers, suppliers, and others) are governed by
contracts and relevant legislation in Australia, the United
States of America and other countries. In addition, the
Group’s ongoing operations depend on continuing to
meet regulatory and licensing requirements in different
parts of the business and different jurisdictions. In
particular, the Group requires specific government
permits (including Export Licences) under the applicable
export laws of the country of manufacture for each
export of defence equipment. Such permits are issued
and occasionally withdrawn for political and strategic
reasons by the issuing government. Delivery contracts
must be declined or terminated without fault if an export
license is not granted and the Group works to manage
this risk.
There is the risk that the Group could be subject to
disputes, legal claims, litigation, investigations, class
actions and sanctions from customers, suppliers,
investors, lenders and other funding providers,
regulators, governments and others. These may relate
to past, current or future events or activities of the
Group, including actions or omissions by Directors
and employees. One such enquiry is an ongoing
investigation by ASIC in connection with compliance
with dislosure obligations and related duties in relation
to the Company’s 2022 revenue guidance. As with any
investigation of this nature, it is not possible to predict
whether any action may be taken by ASIC or third parties
and, with respect to this or other disputes, investigations
or sanctions. There is no guarantee that any past,
current or future such matters arising will be resolved
in a way that allows the Group to continue operating
without short-term or long-term impacts.
6.12 Additional Information on Climate Change
and Climate-related Risks
The Group is exposed to climate change and climate-
related risks. Directors are responsible for providing
oversight of the Group’s risks and opportunities in this area.
The main climate risks that the Group face in the short
term include compliance with evolving legislation,
including reporting obligations in different jurisdictions.
Reporting obligations are evolving and jurisdiction-
specific and the Group works to ensure compliance
with these requirements. Over the medium and long
term, the Group has identified the risk that additional
obligations will arise relating to potential mitigation of
adverse environmental activity within the group’s supply
chains. The Group has an extensive and fragmented
supply chain base which is involved in the manufacture
of electronic and other equipment.
The Group’s strategy for managing climate-related
risks is under review which will include modelling of
different climate-related scenarios, such as a ‘2 degrees
centigrade or lower’ scenario.
The Group has identified ESG (including climate risks) as
a risk to the Group through it risk management process
which is overseen by the Directors. Assessing this risk
and developing mitigations and other actions (current
and planned) is the responsibility of management. The
Directors are responsible for monitoring compliance
with the various evolving requirements (including
reporting obligations), progress being made and the
development of future plans.
36
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37
Review of Operations
Review of Operations
typically have several years in which to earn offset
credits. As an alternative to generating offset credits
through the Offset Program, in certain circumstances
offset credits can be generated through participation
in the Credit Purchase Program, which involves settling
obligations by making cash payments.
As part of the Offset Program, EOS is required to
develop, agree and submit an approved business plan
to the Offset Credit Authority. Following a series of
discussions, on 30 August 2023, the government agency
advised a deadline of 30 September 2023 for EOS to
submit a revised business plan, which EOS delivered
within the specified timeframe.
As at the date of this report, the business plan remains
under review by the Offset Credit Authority and the
Group continued to have advanced discussions with
the Offset Credit Authority towards finalising this
approval. Subsequent to year end, a Memorandum of
Understanding was executed between the Group and
the proposed JV partner that is being considered by
the Offset Credit Authority. As a result of the above,
EOS considers that it is currently not in default of its
obligations.
In the event that EOS does not comply with its
obligations in future, the Offset Credit Authority is
entitled to demand payment under the guarantee
outlined above. EOS intends to continue to work to
ensure it complies with its obligations.
As at the date of this report, EOS considers that it
is in compliance with its obligations and expects to
reach agreement on an approved business plan, and
to ultimately generate offset credits by executing that
business plan. EOS does not expect to settle the offset
obligation in cash, either through the Credit Purchase
Program or the bank guarantee.
The Group plans to renew its climate risk goals, strategy
and detailed plans, including setting metrics and targets
and preparing for climate-related reporting requirements.
7. Long-Term Incentive Plan
During 2023, a new LTI plan (‘The Omnibus Equity
Incentive Plan’ or ‘OEIP’) was launched for executives
and senior managers. This long-term incentive plan,
consisting of share rights and share options, is aimed
at aligning staff and shareholders’ long-term interests.
The rights and options are subject to service conditions,
performance hurdles and other customary terms and
may result in vesting from 31 December 2024 onwards.
There is no change in share capital as a result of these
allocations and it is anticipated that upon vesting, these
allocations will be satisfied, to the fullest extent possible,
by shares already issued and held in trust (as lapsed
shares) by the Legacy Loan-Funded Share Plan (LFSP).
During the year to 31 December 2023, 2,953,087 share
options and 1,341,117 share rights were issued to
executives and senior management as part of the OEIP
introduced during the year. Further information on these
Plans is included in the Remuneration Report.
In addition, shareholder approval will be sought at the
2024 Annual General Meeting for a grant of 2,100,000
share options and 1,260,000 share rights to the CEO and
Managing Director, Dr Andreas Schwer.
No share rights or share options were issued to directors
during or after the period.
8. Offset Credit Obligation
The Group is obligated as part of its contract to supply a
customer in the Middle East, to contribute to economic
development in the country in order to offset against
purchases of its products and services (“Offset Program”).
This commitment is secured by an offset bond of
US$16.9m (A$24.8m) which is guaranteed by Export
Finance Australia (EFA). In respect of the bond, a cash
security amount of US$10.5m (A$15.4m) has been placed
on deposit. The cash security and bonds are expected to
be released once the obligations are satisfied.
Under the Offset Program, offset credits can be earned by:
i
investing in the country;
ii engaging in contracts that support local industry; or
iii making other contributions.
This is a common requirement for suppliers like EOS.
Under the Offset Program guidelines, participants
9. Capital Management
10. Business Outlook
The Group’s continuing focus on capital management,
As outlined above, work continues throughout the Group
and the monetising of contracts on hand during 2023,
on several initiatives, to diversify its products, markets
contributed to increased cash inflows from operations of
and customers, manage costs, develop cash flow, and
$113.1m, compared with cash outflows of $51.6m in 2022.
improve profitability, funding and returns.
As at 31 December 2023 the Group had $71.0m of cash
at bank and $67.1m of restricted cash held on deposit
10.1 Market and Customer Outlook
as security for bank guarantees.
The Group repaid $26.9m to retire the Working Capital
Facility which matured on 6 September 2023. The Group
also repaid $1.9m of unsecured borrowings during the
reporting year.
As at 31 December 2023, the Group had the following
secured borrowing facilities outstanding:
The market outlook for the Group’s products continued
to develop positively. This was partly due to the conflict
in Ukraine, conflicts in the Middle East and rising
tensions in other locations. This positively impacted
on customer demand in NATO countries and other
markets. As a result, overall customer enquiry levels and
discussions continued to advance.
• Additional Working Capital Facility, with $15.0m
Typically, EOS operates in an industry where it can take
principal drawn, maturing on 11 April 2024, with a
an extended period of time (up to a year or more) for
debt repayment obligation of $20.5m.
• Term Loan Facility, with $35.0m principal drawn,
maturing on 11 October 2025, with a debt repayment
obligation of $52.1m.
new market opportunities to be converted into signed
sales contracts. EOS continues to pursue a number of
material opportunities in different markets, including
Europe, the Middle East and other international markets.
The debt repayment on these facilities include
capitalised interest and fees. The Group is a party to
large contracts which can create relatively large receipts
and payments in short periods of time. The Group is
exposed to risk if receipts are delayed and this can
create additional liquidity requirements at short notice.
The Group manages this risk by monitoring near-term
cash forecasts and proactively pursuing cash collections
and other cash management strategies.
10.2 Outlook for Revenue and Cash Receipts
The Group’s activities include the sale of products under
a small number of relatively large projects. Typically,
both the recognition of revenue and cash receipts
from customers are governed by the achievement of
project milestones and legal arrangements specified in
customer contracts.
Changes in project timing, and the timing of the Group’s
revenue and cash receipts, can arise due to unplanned
changes in circumstances. This can include delays at
the customer, delays at the customer’s other suppliers,
delays at the Group and delays at the Group’s suppliers.
The level of future revenue and future cash receipts from
customers will depend on the achievement of product
manufacturing and delivery milestones, compliance
with detailed contractual requirements, ongoing
customer relationships and the outcome of commercial
discussions and negotiations. Historically, owing to
a high level of customer concentration and specific
contractual arrangements, both revenue and cash
receipts have been difficult to predict with certainty.
The Group intends to continue providing regular updates
during the year in line with its continuous disclosure
obligations.
38
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
39
Review of Operations
Review of Operations
The Group plans to renew its climate risk goals, strategy
typically have several years in which to earn offset
and detailed plans, including setting metrics and targets
credits. As an alternative to generating offset credits
and preparing for climate-related reporting requirements.
through the Offset Program, in certain circumstances
9. Capital Management
10. Business Outlook
The Group’s continuing focus on capital management,
and the monetising of contracts on hand during 2023,
contributed to increased cash inflows from operations of
$113.1m, compared with cash outflows of $51.6m in 2022.
As outlined above, work continues throughout the Group
on several initiatives, to diversify its products, markets
and customers, manage costs, develop cash flow, and
improve profitability, funding and returns.
As at 31 December 2023 the Group had $71.0m of cash
at bank and $67.1m of restricted cash held on deposit
as security for bank guarantees.
The Group repaid $26.9m to retire the Working Capital
Facility which matured on 6 September 2023. The Group
also repaid $1.9m of unsecured borrowings during the
reporting year.
As at 31 December 2023, the Group had the following
secured borrowing facilities outstanding:
• Additional Working Capital Facility, with $15.0m
principal drawn, maturing on 11 April 2024, with a
debt repayment obligation of $20.5m.
• Term Loan Facility, with $35.0m principal drawn,
maturing on 11 October 2025, with a debt repayment
obligation of $52.1m.
The debt repayment on these facilities include
capitalised interest and fees. The Group is a party to
large contracts which can create relatively large receipts
and payments in short periods of time. The Group is
exposed to risk if receipts are delayed and this can
create additional liquidity requirements at short notice.
The Group manages this risk by monitoring near-term
cash forecasts and proactively pursuing cash collections
and other cash management strategies.
10.1 Market and Customer Outlook
The market outlook for the Group’s products continued
to develop positively. This was partly due to the conflict
in Ukraine, conflicts in the Middle East and rising
tensions in other locations. This positively impacted
on customer demand in NATO countries and other
markets. As a result, overall customer enquiry levels and
discussions continued to advance.
Typically, EOS operates in an industry where it can take
an extended period of time (up to a year or more) for
new market opportunities to be converted into signed
sales contracts. EOS continues to pursue a number of
material opportunities in different markets, including
Europe, the Middle East and other international markets.
10.2 Outlook for Revenue and Cash Receipts
The Group’s activities include the sale of products under
a small number of relatively large projects. Typically,
both the recognition of revenue and cash receipts
from customers are governed by the achievement of
project milestones and legal arrangements specified in
customer contracts.
Changes in project timing, and the timing of the Group’s
revenue and cash receipts, can arise due to unplanned
changes in circumstances. This can include delays at
the customer, delays at the customer’s other suppliers,
delays at the Group and delays at the Group’s suppliers.
The level of future revenue and future cash receipts from
customers will depend on the achievement of product
manufacturing and delivery milestones, compliance
with detailed contractual requirements, ongoing
customer relationships and the outcome of commercial
discussions and negotiations. Historically, owing to
a high level of customer concentration and specific
contractual arrangements, both revenue and cash
receipts have been difficult to predict with certainty.
The Group intends to continue providing regular updates
during the year in line with its continuous disclosure
obligations.
offset credits can be generated through participation
in the Credit Purchase Program, which involves settling
obligations by making cash payments.
As part of the Offset Program, EOS is required to
develop, agree and submit an approved business plan
to the Offset Credit Authority. Following a series of
discussions, on 30 August 2023, the government agency
advised a deadline of 30 September 2023 for EOS to
submit a revised business plan, which EOS delivered
within the specified timeframe.
As at the date of this report, the business plan remains
under review by the Offset Credit Authority and the
Group continued to have advanced discussions with
the Offset Credit Authority towards finalising this
approval. Subsequent to year end, a Memorandum of
Understanding was executed between the Group and
the proposed JV partner that is being considered by
the Offset Credit Authority. As a result of the above,
EOS considers that it is currently not in default of its
obligations.
In the event that EOS does not comply with its
obligations in future, the Offset Credit Authority is
entitled to demand payment under the guarantee
outlined above. EOS intends to continue to work to
ensure it complies with its obligations.
As at the date of this report, EOS considers that it
is in compliance with its obligations and expects to
reach agreement on an approved business plan, and
to ultimately generate offset credits by executing that
business plan. EOS does not expect to settle the offset
obligation in cash, either through the Credit Purchase
7. Long-Term Incentive Plan
During 2023, a new LTI plan (‘The Omnibus Equity
Incentive Plan’ or ‘OEIP’) was launched for executives
and senior managers. This long-term incentive plan,
consisting of share rights and share options, is aimed
at aligning staff and shareholders’ long-term interests.
The rights and options are subject to service conditions,
performance hurdles and other customary terms and
may result in vesting from 31 December 2024 onwards.
There is no change in share capital as a result of these
allocations and it is anticipated that upon vesting, these
allocations will be satisfied, to the fullest extent possible,
by shares already issued and held in trust (as lapsed
shares) by the Legacy Loan-Funded Share Plan (LFSP).
During the year to 31 December 2023, 2,953,087 share
options and 1,341,117 share rights were issued to
executives and senior management as part of the OEIP
introduced during the year. Further information on these
Plans is included in the Remuneration Report.
In addition, shareholder approval will be sought at the
2024 Annual General Meeting for a grant of 2,100,000
share options and 1,260,000 share rights to the CEO and
Managing Director, Dr Andreas Schwer.
No share rights or share options were issued to directors
during or after the period.
8. Offset Credit Obligation
customer in the Middle East, to contribute to economic
development in the country in order to offset against
purchases of its products and services (“Offset Program”).
This commitment is secured by an offset bond of
US$16.9m (A$24.8m) which is guaranteed by Export
Finance Australia (EFA). In respect of the bond, a cash
security amount of US$10.5m (A$15.4m) has been placed
on deposit. The cash security and bonds are expected to
be released once the obligations are satisfied.
Under the Offset Program, offset credits can be earned by:
i
investing in the country;
ii engaging in contracts that support local industry; or
iii making other contributions.
This is a common requirement for suppliers like EOS.
Under the Offset Program guidelines, participants
The Group is obligated as part of its contract to supply a
Program or the bank guarantee.
38
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
39
Director’s Report
Directors’ Report
The Directors of Electro Optic Systems Holdings Limited submit herewith the
annual financial report of the Company for the year ended 31 December 2023.
In order to comply with the provisions of the Corporations Act 2001 (Cth), the Directors report as follows:
The names and particulars of the Directors of the Company during or since the end of the financial year are:
Name
Particulars
1. Directors
Mr Garry Hounsell
B Bus (Acc), FCA, FAICD
Independent
Non-executive
Chair
Appointed:
24 November 2022
Board Committees:
Nomination Committee (Chair)
Dr Andreas Schwer
PhD, MSc, MSE
Managing Director and
Chief Executive Officer
Appointed:
11 December 2023
Board Committees:
Nomination Committee
Experience and Expertise
Garry is currently Chair of the Commonwealth Superannuation Corporation and Chair of Helloworld
Travel Limited (since 2016). He is also a Non-executive Director at Treasury Wine Estates Limited
(since 2012), a Director of Findex (since January 2020), and a member of Commencer Capital’s
(formally Investec Emerging Companies) Investment Committee (since 2019).
Garry was previously the Chair of Myer Holdings Limited (2017-2020; Executive Chair Feb-Jun
2018), Chair and a Non-executive Director of Spotless Group Holdings Limited (2014-2017), and
Chair of Emitch Limited (2006-2008) and PanAust Limited (2008-2015). He was also previously an
Advisory Board Member of PanAust Limited (2015-2017), Rothschild Australia Limited (2012-2017),
and Investec Global Aircraft Fund (2007-2019). He was a Director at Orica Limited (2004-2013),
Nufarm Limited (2004-2012), Qantas Airways Limited (2005-2015), Mitchell Communication Group
Limited (2008-2010), Integral Diagnostics Limited (2015-2017), Dulux Group Limited (2010-2017)
and Investec Aircraft Syndicate Limited (2012-2018). Garry was a Senior Partner at Ernst & Young
(2002-2004), CEO and Managing Partner of Arthur Andersen (2001-2002) and a Partner at Arthur
Andersen (1989-2002).
Garry has a Bachelor of Business (Accounting) from the Swinburne Institute of Technology (1975)
and is a Fellow of Chartered Accountants Australia and New Zealand and a Fellow of the Australian
Institute of Company Directors.
Directorships of other listed entities in the last three years:
Treasury Wine Estates Limited (1 September 2012 to present), Helloworld Travel Limited (4 October
2016 to present), and Hiro Brands Limited (6 December 2021 to 30 November 2023).
Experience and Expertise
Director on 11 December 2023.
Dr Schwer was appointed as Chief Executive Officer in August 2022 and appointed as Managing
An accomplished executive leader with deep international experience – including in Asia, the Middle
East, Europe, and North America – Dr Schwer has had a varied career in the defence and space
domains. His previous experience includes senior positions in the global defence industry, including
fourteen years at Airbus Group and five years at the German defence company Rheinmetall AG.
Dr Schwer has a thorough understanding of the Company’s global operations, having acted, most
recently, as President of EOS EMEA (Europe, Middle East, and Africa) for two years, during which
time he oversaw the expansion of the Company’s operations in NATO and Middle Eastern markets.
Among his qualifications, he holds a PhD in the field of system modelling and satellite engineering.
He is a member of the Nominations Committee.
Directorships of other listed entities in the last three years
Independent Director at Titomic Ltd (1 January 2020 to present).
Electro Optic Systems Holdings Limited | Annual Report 2023
41
EOS COMES INTO PLAY WHEN THE FIRST SHOT MATTERSEOS COMES INTO PLAY WHEN THE FIRST SHOT MATTERS
Director’s Report
Directors’ Report
The Directors of Electro Optic Systems Holdings Limited submit herewith the
annual financial report of the Company for the year ended 31 December 2023.
In order to comply with the provisions of the Corporations Act 2001 (Cth), the Directors report as follows:
1. Directors
The names and particulars of the Directors of the Company during or since the end of the financial year are:
Name
Particulars
Mr Garry Hounsell
B Bus (Acc), FCA, FAICD
Independent
Non-executive
Chair
Appointed:
24 November 2022
Board Committees:
Nomination Committee (Chair)
Dr Andreas Schwer
PhD, MSc, MSE
Managing Director and
Chief Executive Officer
Appointed:
11 December 2023
Board Committees:
Nomination Committee
Experience and Expertise
Garry is currently Chair of the Commonwealth Superannuation Corporation and Chair of Helloworld
Travel Limited (since 2016). He is also a Non-executive Director at Treasury Wine Estates Limited
(since 2012), a Director of Findex (since January 2020), and a member of Commencer Capital’s
(formally Investec Emerging Companies) Investment Committee (since 2019).
Garry was previously the Chair of Myer Holdings Limited (2017-2020; Executive Chair Feb-Jun
2018), Chair and a Non-executive Director of Spotless Group Holdings Limited (2014-2017), and
Chair of Emitch Limited (2006-2008) and PanAust Limited (2008-2015). He was also previously an
Advisory Board Member of PanAust Limited (2015-2017), Rothschild Australia Limited (2012-2017),
and Investec Global Aircraft Fund (2007-2019). He was a Director at Orica Limited (2004-2013),
Nufarm Limited (2004-2012), Qantas Airways Limited (2005-2015), Mitchell Communication Group
Limited (2008-2010), Integral Diagnostics Limited (2015-2017), Dulux Group Limited (2010-2017)
and Investec Aircraft Syndicate Limited (2012-2018). Garry was a Senior Partner at Ernst & Young
(2002-2004), CEO and Managing Partner of Arthur Andersen (2001-2002) and a Partner at Arthur
Andersen (1989-2002).
Garry has a Bachelor of Business (Accounting) from the Swinburne Institute of Technology (1975)
and is a Fellow of Chartered Accountants Australia and New Zealand and a Fellow of the Australian
Institute of Company Directors.
Directorships of other listed entities in the last three years:
Treasury Wine Estates Limited (1 September 2012 to present), Helloworld Travel Limited (4 October
2016 to present), and Hiro Brands Limited (6 December 2021 to 30 November 2023).
Experience and Expertise
Dr Schwer was appointed as Chief Executive Officer in August 2022 and appointed as Managing
Director on 11 December 2023.
An accomplished executive leader with deep international experience – including in Asia, the Middle
East, Europe, and North America – Dr Schwer has had a varied career in the defence and space
domains. His previous experience includes senior positions in the global defence industry, including
fourteen years at Airbus Group and five years at the German defence company Rheinmetall AG.
Dr Schwer has a thorough understanding of the Company’s global operations, having acted, most
recently, as President of EOS EMEA (Europe, Middle East, and Africa) for two years, during which
time he oversaw the expansion of the Company’s operations in NATO and Middle Eastern markets.
Among his qualifications, he holds a PhD in the field of system modelling and satellite engineering.
He is a member of the Nominations Committee.
Directorships of other listed entities in the last three years
Independent Director at Titomic Ltd (1 January 2020 to present).
Electro Optic Systems Holdings Limited | Annual Report 2023
41
EOS COMES INTO PLAY WHEN THE FIRST SHOT MATTERSEOS COMES INTO PLAY WHEN THE FIRST SHOT MATTERS
Director’s Report
Director’s Report
Name
Particulars
Name
Particulars
Air Marshal
Geoffrey Brown AO
BEng (Mech), MA
(Strategic Studies)
Independent
Non-executive
Director
Appointed:
21 April 2016
Board Committees:
• People and Culture Committee (Chair)
• Nomination Committee
The Hon Kate Lundy
HonLittD, GAICD
Independent
Non-executive
Director
Appointed:
23 March 2018
Board Committees:
• Data Security & Data Governance
Committee (Chair)
• Audit and Risk Committee
• People and Culture Committee
• Nomination Committee
Mr David Black
BA(Hons) (Economics),
FCA, MBA, GAICD
Independent
Non-executive
Director
Appointed:
1 January 2021
Board Committees:
• Audit and Risk Committee (Chair)
• People and Culture Committee
• Data Security & Data Governance
Committee
• Nomination Committee
Experience and Expertise
Geoffrey retired from the Royal Australian Air Force in July 2015 as Air Marshal in the position of
Chief of Air Force. Among his qualifications he holds a BEng (Mech), a Master of Arts (Strategic
Studies), Fellow of the Institution of Engineers Australia and is a Fellow of the Royal Aeronautical
Society. He is Chair of the Sir Richard Williams Foundation and Chairman of the Advisory Board of
CAE Asia Pacific. He is Chair of the People and Culture Committee, a member of the Audit and Risk
Committee and a member of the Nomination Committee.
Directorships of other listed entities in the last three years:
Nil
Experience and Expertise
Kate served as a Senator representing the Australian Capital Territory from 1996 to 2015. During
this time, she held various front bench positions in both Government and Opposition, including the
Minister for Sport, Multicultural Affairs and Assisting on Industry and Innovation and the Digital
Economy.
Kate continues to be passionate about technology and innovation. Her focus is the positive impact
of technology on society, culture and the economy. In 2017, the Australian National University
awarded her a Doctor of Letters (honorary doctorate) for her “exceptional contributions to advocacy
and policy for information communications and technology, for the ACT and nationally.”
In 2017 Ms Lundy was inducted into the Pearcey Hall of Fame for “distinguished achievement and
contribution to the development and growth of the Information and Communication Technology
Industry”. The Pearcey Foundation is named in honour of Dr Trevor Pearcey, an outstanding
Australian ICT Pioneer, notable for his leadership of the project team that built one of the world’s
earliest digital computers, the CSIR Mark 1, later known as CSIRAC.
Kate is a Non-executive Director of the National Roads and Motoring Association, the Geospatial
Council of Australia, the National Youth Science Forum and Chair to the Board of the Cyber Security
Cooperative Research Centre and Chair of the Canberra Institute of Technology Board.
Directorships of other listed entities in the last three years:
Nil
Experience and Expertise
Before retiring from the Deloitte Touche Tohmatsu Australia partnership in 2016, David spent 25
years with Deloitte in the UK and Australia. During that time David provided services to a range
of clients including in the Defence, Manufacturing and Government sectors. David’s experience
includes working with growing start-up businesses, multinational corporations and the boards
of ASX listed entities on complex accounting, internal and external auditing, risk management,
corporate governance and due diligence engagements. David previously served as the audit partner
of Deloitte Touche Tohmatsu for the Company for the years ending from June 2005 to December
2009 and June 2012 to June 2016.
Since his retirement from Deloitte, David has established a growing family business, The Coastal
Brewing Company, and serves on six Government sector audit committees as an independent
member, chairing one of those committees.
Directorships of other listed entities in the last three years:
Nil
Mr Robert Nicholson
BSc, LLB, LLM, MBA, GAICD
Experience and Expertise
Independent
Non-executive
Director
Appointed:
24 May 2023
Board Committees:
• Audit and Risk Committee
• Data Security & Data Governance
Committee
• Nomination Committee
Ms Deena Shiff
MSc (Econ), BA (Law)
Independent
Non-executive
Director
Appointed:
7 December 2021
Resigned:
31 January 2023
Board Committees:
Audit and Risk Committee
Mr Robert Kaye
LLB LLM
Independent
Non-executive
Director
Appointed:
13 September 2022
Resigned:
20 March 2023
Board Committees:
Nil
Robert was a Partner at Herbert Smith Freehills (and predecessor firms) for 28 years. He served on
the Freehills Board of Partners for 10 years and was the Chairman for 3 years in the lead-up to the
firm’s merger with Herbert Smith to create a global firm with 500 partners and 24 offices.
Robert is a director of Port of Melbourne, Alinta Energy, Baker Heart and Diabetes Institute, Landcare
Australia and European Australian Business Council. He is a Senior Advisor to Herbert Smith
Freehills.
Nil
Directorships of other listed entities in the last three years:
Experience and Expertise
Ms Shiff resigned from the Board on 31 January 2023.
Deena has enjoyed a distinguished business career covering senior roles in corporate positions and
the legal profession. She was the founding CEO of Telstra’s corporate venture capital arm, Telstra
Ventures, and Group Managing Director, Telstra Business. Previously, Deena was a partner in the
leading law firm, Mallesons Stephen Jaques. She is currently Chair of the Advisory Board for the
ARC Centre of Excellence for Automated Decisions and Society, Chair of the Advisory Board of the
Australian Centre for China in the World, and Chair of the Australian Broadband Advisory Council.
Directorships of other listed entities in the last three years whilst a Director of the Company:
Chair of Marley Spoon A.G. (15 June 2018 to present), Pro Medicus Limited (1 August 2020 to
present), Appen Limited (15 May 2015 to 27 May 2022).
Experience and Expertise
Mr Kaye resigned from the Board on 20 March 2023.
Robert is a barrister, mediator and professional Non-executive Director. Recognised for his strategic
and commercially focused advice, Mr Kaye has acted for various commercial enterprises – both
public and private – across media, retail, FMCG, property development, mining and engineering
sectors.
Drawing on his experience as a senior member of the NSW Bar, including serving on the Professional
Conduct Committee and Equal Opportunity Committee, he has a strong emphasis on Board
governance and is well versed in Board processes. Mr Kaye has significant cross-border experience,
including corporate restructuring and M&A across North America, Europe, Asia, and the Australia
and New Zealand region.
In addition to his role as Non-executive Director of Electro Optic Systems Holdings Limited, he
is Chair and Non-executive Director of Collins Foods Limited, and a Non-executive Director of
Magontec Limited, and FAR Limited. Mr Kaye was formerly Non-executive Chair of Spicers Limited
and Non-executive Director of UGL Limited, HT&E Limited and Blue Sky Alternative Investments
Limited and the Chair of the Macular Disease Foundation Australia.
Directorships of other listed entities in the last three years whilst a Director of the Company:
Collins Foods Limited (7 October 2014 to present), Magontec Limited (29 July 2020 to present), FAR
Limited (30 June 2021 to present).
Dr Ben Greene
BE (Hons), PhD in Applied Physics
Experience and Expertise
Dr Greene resigned from the Board on 27 March 2023.
Executive
Director
Appointed:
11 April 2002
Resigned:
27 March 2023
Board Committees:
Nil
Ben was involved in the formation of Electro Optic Systems Pty Limited. He is published in the
subject areas of weapon system design, laser tracking, space geodesy, quantum physics, satellite
design, laser remote sensing, and the metrology of time. He is Deputy Chair of the Western Pacific
Laser Tracking Network (WPLTN) and has recently served as member of Australia’s Prime Ministers
Science, Engineering and Innovation Council (PMSEIC) and CEO of the Cooperative Research Centre
for Space Environment Management.
Directorships of other listed entities in the last three years whilst a Director of the Company:
Nil
42
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
43
Director’s Report
Director’s Report
Name
Particulars
Name
Particulars
Air Marshal
Geoffrey Brown AO
BEng (Mech), MA
(Strategic Studies)
Independent
Non-executive
Director
Appointed:
21 April 2016
The Hon Kate Lundy
HonLittD, GAICD
Independent
Non-executive
Director
Appointed:
23 March 2018
Board Committees:
• People and Culture Committee (Chair)
• Nomination Committee
Board Committees:
• Data Security & Data Governance
Committee (Chair)
• Audit and Risk Committee
• People and Culture Committee
• Nomination Committee
Mr David Black
BA(Hons) (Economics),
FCA, MBA, GAICD
Independent
Non-executive
Director
Appointed:
1 January 2021
Board Committees:
• Audit and Risk Committee (Chair)
• People and Culture Committee
• Data Security & Data Governance
Committee
• Nomination Committee
Nil
Nil
Nil
Experience and Expertise
Geoffrey retired from the Royal Australian Air Force in July 2015 as Air Marshal in the position of
Chief of Air Force. Among his qualifications he holds a BEng (Mech), a Master of Arts (Strategic
Studies), Fellow of the Institution of Engineers Australia and is a Fellow of the Royal Aeronautical
Society. He is Chair of the Sir Richard Williams Foundation and Chairman of the Advisory Board of
CAE Asia Pacific. He is Chair of the People and Culture Committee, a member of the Audit and Risk
Committee and a member of the Nomination Committee.
Directorships of other listed entities in the last three years:
Experience and Expertise
Kate served as a Senator representing the Australian Capital Territory from 1996 to 2015. During
this time, she held various front bench positions in both Government and Opposition, including the
Minister for Sport, Multicultural Affairs and Assisting on Industry and Innovation and the Digital
Economy.
Kate continues to be passionate about technology and innovation. Her focus is the positive impact
of technology on society, culture and the economy. In 2017, the Australian National University
awarded her a Doctor of Letters (honorary doctorate) for her “exceptional contributions to advocacy
and policy for information communications and technology, for the ACT and nationally.”
In 2017 Ms Lundy was inducted into the Pearcey Hall of Fame for “distinguished achievement and
contribution to the development and growth of the Information and Communication Technology
Industry”. The Pearcey Foundation is named in honour of Dr Trevor Pearcey, an outstanding
Australian ICT Pioneer, notable for his leadership of the project team that built one of the world’s
earliest digital computers, the CSIR Mark 1, later known as CSIRAC.
Kate is a Non-executive Director of the National Roads and Motoring Association, the Geospatial
Council of Australia, the National Youth Science Forum and Chair to the Board of the Cyber Security
Cooperative Research Centre and Chair of the Canberra Institute of Technology Board.
Directorships of other listed entities in the last three years:
Experience and Expertise
Before retiring from the Deloitte Touche Tohmatsu Australia partnership in 2016, David spent 25
years with Deloitte in the UK and Australia. During that time David provided services to a range
of clients including in the Defence, Manufacturing and Government sectors. David’s experience
includes working with growing start-up businesses, multinational corporations and the boards
of ASX listed entities on complex accounting, internal and external auditing, risk management,
corporate governance and due diligence engagements. David previously served as the audit partner
of Deloitte Touche Tohmatsu for the Company for the years ending from June 2005 to December
2009 and June 2012 to June 2016.
Since his retirement from Deloitte, David has established a growing family business, The Coastal
Brewing Company, and serves on six Government sector audit committees as an independent
member, chairing one of those committees.
Directorships of other listed entities in the last three years:
Mr Robert Nicholson
BSc, LLB, LLM, MBA, GAICD
Independent
Non-executive
Director
Appointed:
24 May 2023
Experience and Expertise
Robert was a Partner at Herbert Smith Freehills (and predecessor firms) for 28 years. He served on
the Freehills Board of Partners for 10 years and was the Chairman for 3 years in the lead-up to the
firm’s merger with Herbert Smith to create a global firm with 500 partners and 24 offices.
Robert is a director of Port of Melbourne, Alinta Energy, Baker Heart and Diabetes Institute, Landcare
Australia and European Australian Business Council. He is a Senior Advisor to Herbert Smith
Freehills.
Directorships of other listed entities in the last three years:
Board Committees:
• Audit and Risk Committee
• Data Security & Data Governance
Committee
• Nomination Committee
Nil
Ms Deena Shiff
MSc (Econ), BA (Law)
Independent
Non-executive
Director
Appointed:
7 December 2021
Resigned:
31 January 2023
Board Committees:
Audit and Risk Committee
Mr Robert Kaye
LLB LLM
Independent
Non-executive
Director
Appointed:
13 September 2022
Resigned:
20 March 2023
Board Committees:
Nil
Experience and Expertise
Ms Shiff resigned from the Board on 31 January 2023.
Deena has enjoyed a distinguished business career covering senior roles in corporate positions and
the legal profession. She was the founding CEO of Telstra’s corporate venture capital arm, Telstra
Ventures, and Group Managing Director, Telstra Business. Previously, Deena was a partner in the
leading law firm, Mallesons Stephen Jaques. She is currently Chair of the Advisory Board for the
ARC Centre of Excellence for Automated Decisions and Society, Chair of the Advisory Board of the
Australian Centre for China in the World, and Chair of the Australian Broadband Advisory Council.
Directorships of other listed entities in the last three years whilst a Director of the Company:
Chair of Marley Spoon A.G. (15 June 2018 to present), Pro Medicus Limited (1 August 2020 to
present), Appen Limited (15 May 2015 to 27 May 2022).
Experience and Expertise
Mr Kaye resigned from the Board on 20 March 2023.
Robert is a barrister, mediator and professional Non-executive Director. Recognised for his strategic
and commercially focused advice, Mr Kaye has acted for various commercial enterprises – both
public and private – across media, retail, FMCG, property development, mining and engineering
sectors.
Drawing on his experience as a senior member of the NSW Bar, including serving on the Professional
Conduct Committee and Equal Opportunity Committee, he has a strong emphasis on Board
governance and is well versed in Board processes. Mr Kaye has significant cross-border experience,
including corporate restructuring and M&A across North America, Europe, Asia, and the Australia
and New Zealand region.
In addition to his role as Non-executive Director of Electro Optic Systems Holdings Limited, he
is Chair and Non-executive Director of Collins Foods Limited, and a Non-executive Director of
Magontec Limited, and FAR Limited. Mr Kaye was formerly Non-executive Chair of Spicers Limited
and Non-executive Director of UGL Limited, HT&E Limited and Blue Sky Alternative Investments
Limited and the Chair of the Macular Disease Foundation Australia.
Directorships of other listed entities in the last three years whilst a Director of the Company:
Collins Foods Limited (7 October 2014 to present), Magontec Limited (29 July 2020 to present), FAR
Limited (30 June 2021 to present).
Dr Ben Greene
BE (Hons), PhD in Applied Physics
Experience and Expertise
Dr Greene resigned from the Board on 27 March 2023.
Executive
Director
Appointed:
11 April 2002
Resigned:
27 March 2023
Board Committees:
Nil
Ben was involved in the formation of Electro Optic Systems Pty Limited. He is published in the
subject areas of weapon system design, laser tracking, space geodesy, quantum physics, satellite
design, laser remote sensing, and the metrology of time. He is Deputy Chair of the Western Pacific
Laser Tracking Network (WPLTN) and has recently served as member of Australia’s Prime Ministers
Science, Engineering and Innovation Council (PMSEIC) and CEO of the Cooperative Research Centre
for Space Environment Management.
Directorships of other listed entities in the last three years whilst a Director of the Company:
Nil
42
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43
Director’s Report
Director’s Report
2. Company Secretary
Name
Particulars
Leanne was appointed as Company Secretary on 23 August 2022. She is an experienced Company
Secretary with over 15 years in this field and holds this position for a number of ASX-listed entities.
Ms Ralph is a fellow of the Governance Institute of Australia and a Graduate Member of the
Australian Institute of Directors.
Leanne Ralph
BBus (Acc & Fin majors),
FGIA, GAICD
Appointed:
23 August 2022
3. Principal Activities
The principal activities of the Group are in the Space Systems and Defence Systems business.
Shareholder approval will be sought at the 2024 Annual General Meeting for a grant of share options to the CEO and
The Company is listed on the Australian Securities Exchange.
4. Review of Operations
A detailed review of operations is included on pages 27 to 39 of this financial report.
5. Going Concern
The financial report has been prepared on the going concern basis which assumes continuity of normal business
activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. Note 1(c) to
the financial statements details the specific factors upon which the Group’s ability to continue as a going concern is
dependent.
6. Rounding of Amounts
The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/ Directors’ Reports)
Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the
financial report are rounded to the nearest thousand dollars, unless otherwise indicated.
7. Changes to the State of Affairs
There were no significant changes in the state of affairs of the Group during the financial year.
8. Share Issues
There were no shares issued during the reporting period.
9. Share Options / Rights
During the year the Board determined to replace the Legacy Loan Funded Share Plan (“LFSP”) and Legacy Employee
Share Option Plan with the Omnibus Employee Incentive Plan (“OEIP”). No further issues of shares under this Legacy
LFSP or Legacy Employee Share Option Plan are anticipated.
9.1 Share Options (OEIP)
Share options granted to Directors and Executives
No options were granted to any Director of Electro Optic Systems Holdings Limited during or since the financial year.
1,625,417 share options were granted to the five most highly remunerated officers of the Group during the year.
Managing Director, Dr Andreas Schwer.
Share options on issue at year end or exercised during the year
There were 3,323,087 unlisted options outstanding as at the date of this report as per the table below.
Issue Date
Expiry Date
Exercise Price
19 May 2020
18 May 2025
15 March 2021
16 March 2026
2,953,087
22 December 2023
31 December 2028
$4.75
$5.27
$0.50
Options
325,000
45,000
3,323,087
No share options were exercised during or since the financial year.
There were no shares or interests issued during or since the financial year as a result of exercise of an option.
During the year ended 31 December 2023, 220,000 share options lapsed due to the expiry of the exercise period and
130,000 share options were forfeited due to cessation of employment.
2,953,087 share options were issued on 22 December 2023 under the OEIP and remain outstanding as at the date of
this report.
To the extent that share options vest and are exercised in the future, the Company expects they will be settled from
existing ordinary share capital already on issue within the employee share trust from unallocated shares from the LFSP.
44
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
45
2. Company Secretary
Name
Particulars
Leanne was appointed as Company Secretary on 23 August 2022. She is an experienced Company
Secretary with over 15 years in this field and holds this position for a number of ASX-listed entities.
Ms Ralph is a fellow of the Governance Institute of Australia and a Graduate Member of the
Australian Institute of Directors.
Leanne Ralph
BBus (Acc & Fin majors),
FGIA, GAICD
Appointed:
23 August 2022
3. Principal Activities
4. Review of Operations
5. Going Concern
dependent.
6. Rounding of Amounts
The principal activities of the Group are in the Space Systems and Defence Systems business.
The Company is listed on the Australian Securities Exchange.
A detailed review of operations is included on pages 27 to 39 of this financial report.
The financial report has been prepared on the going concern basis which assumes continuity of normal business
activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. Note 1(c) to
the financial statements details the specific factors upon which the Group’s ability to continue as a going concern is
The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials/ Directors’ Reports)
Instrument 2016/191, dated 24 March 2016, and in accordance with that Corporations Instrument amounts in the
financial report are rounded to the nearest thousand dollars, unless otherwise indicated.
7. Changes to the State of Affairs
There were no significant changes in the state of affairs of the Group during the financial year.
8. Share Issues
There were no shares issued during the reporting period.
Director’s Report
Director’s Report
9. Share Options / Rights
During the year the Board determined to replace the Legacy Loan Funded Share Plan (“LFSP”) and Legacy Employee
Share Option Plan with the Omnibus Employee Incentive Plan (“OEIP”). No further issues of shares under this Legacy
LFSP or Legacy Employee Share Option Plan are anticipated.
9.1 Share Options (OEIP)
Share options granted to Directors and Executives
No options were granted to any Director of Electro Optic Systems Holdings Limited during or since the financial year.
1,625,417 share options were granted to the five most highly remunerated officers of the Group during the year.
Shareholder approval will be sought at the 2024 Annual General Meeting for a grant of share options to the CEO and
Managing Director, Dr Andreas Schwer.
Share options on issue at year end or exercised during the year
There were 3,323,087 unlisted options outstanding as at the date of this report as per the table below.
Issue Date
Expiry Date
Exercise Price
Options
325,000
45,000
19 May 2020
18 May 2025
15 March 2021
16 March 2026
2,953,087
22 December 2023
31 December 2028
3,323,087
$4.75
$5.27
$0.50
No share options were exercised during or since the financial year.
There were no shares or interests issued during or since the financial year as a result of exercise of an option.
During the year ended 31 December 2023, 220,000 share options lapsed due to the expiry of the exercise period and
130,000 share options were forfeited due to cessation of employment.
2,953,087 share options were issued on 22 December 2023 under the OEIP and remain outstanding as at the date of
this report.
To the extent that share options vest and are exercised in the future, the Company expects they will be settled from
existing ordinary share capital already on issue within the employee share trust from unallocated shares from the LFSP.
44
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Electro Optic Systems Holdings Limited | Annual Report 2023
45
Director’s Report
Director’s Report
The shares issued to Directors are subject to both ‘vesting conditions’ and ‘forfeiture conditions’. Directors are required
to satisfy the vesting conditions in order for their shares to vest. While Directors hold their shares, they will be subject
to forfeiture conditions and Directors will forfeit their shares if either they fail to satisfy the vesting conditions or they
cease to be employed or continue to provide services to a Group company in certain circumstances.
Once the vesting conditions have been satisfied, removed or lifted, the shares become vested and Directors may deal
with them in accordance with the rules of the legacy LFSP subject to sale restrictions and other legal restrictions (such
as under the Company’s trading policy).
Reconciliation of Loan Funded Shares balances:
Balance of shares
outstanding at
31 December 2022
Lapses and other
movements *
Balance of shares
outstanding at
31 December 2023
Directors
Mr David Black
Air Marshall Geoffrey Brown AO
The Hon Kate Lundy
Dr Ben Greene (resigned)
Other retired directors
Directors Total
Employees
Dr James Bennett
Mr Matthew Jones
Other senior employees
Employees Total
Total, Directors and Employees
150,000
200,000
200,000
2,000,000
550,000
3,100,000
97,500
40,000
4,164,375
4,301,875
7,401,875
(75,000)
(200,000)
(200,000)
(2,000,000)
(550,000)
(3,025,000)
(30,000)
(40,000)
(3,516,875)
(3,586,875)
(6,611,875)
75,000
-
-
-
-
75,000
67,500
-
647,500
715,000
790,000
* The following conditions were not met in 2023:
The share price hurdle of $9.50 by 30 June 2023, resulting in 75,000 shares issued to a Director lapsing.
The expiry of the exercise period and loan term in 2023 resulting in 4,101,875 shares issued to staff and 400,000 shares issued to current
•
•
Directors lapsing.
•
Certain employees resigned from subsidiaries of the Group, resulting in 2,035,000 shares issued to them lapsing.
9. Share Options / Rights (continued)
9.2 Share Rights (OEIP)
Share rights granted to Directors and executives
No share rights were granted to any Director of Electro Optic Systems Holdings Limited during or since the financial year.
875,250 share rights were granted to the five most highly remunerated officers of the Group during the year.
Shareholder approval will be sought at the 2024 Annual General Meeting for a grant of share rights to the CEO and
Managing Director, Dr Andreas Schwer.
Share rights on issue at year-end
1,341,117 share rights were issued on 22 December 2023 under the OEIP and remain outstanding as at the date of this
report.
No shares were issued during or since the financial year as a result of exercise of a share right.
To the extent that share rights vest and are exercised in the future, the Company expects they will be settled from
existing ordinary share capital already on issue within the employee share trust from unallocated shares from the LFSP.
9.3 Legacy Incentive Plans – Loan Funded Share Plan (LFSP) and Employee Share Option Plan
Legacy Loan Funded Share Plan
Prior issues made under these legacy LFSP consisted of:
Issue Date
20/6/2018
19/5/2020
29/5/2020
10/8/2020
14/10/2020
15/2/2021
31/5/2021
Shares Issued
Issue Price
5,135,000
2,315,000
2,500,000
860,000
150,000
1,250,000
150,000
$2.99
$4.75
$4.92
$5.62
$5.47
$5.27
$4.06
As no loan funded shares were issued during or since the financial year, the Company has provided no new interest free
loans to the Directors or staff to acquire the shares under the legacy LFSP.
As a result of a number of performance conditions and shares price hurdles not being met, as well as the resignation of
certain employees, 6,611,875 legacy LFSP shares lapsed during the year. This resulted in the total amount of the loans
outstanding under the legacy LFSP at year-end being $3,902,150 (2022: $27,785,506).
Loan funds under the legacy LFSP are limited recourse in nature, meaning that the Company’s recourse is limited to
the shares. If at the date that the loan becomes repayable the Directors or employees shares are worth less than the
outstanding balance of the loan, the Company cannot recover the difference from the Director or employee. Interest will
not be payable on the outstanding balance of the loan.
All shares issued under the legacy LFSP are held in an employee share trust, on behalf of all participants. The name of
the Trust is EOS Loan Plan Pty Ltd as trustee for the Share Plan Trust. All shares under the legacy LFSP are also subject
to a holding lock until all conditions are satisfied and the loan is repaid.
46
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47
Director’s Report
Director’s Report
Shareholder approval will be sought at the 2024 Annual General Meeting for a grant of share rights to the CEO and
Reconciliation of Loan Funded Shares balances:
The shares issued to Directors are subject to both ‘vesting conditions’ and ‘forfeiture conditions’. Directors are required
to satisfy the vesting conditions in order for their shares to vest. While Directors hold their shares, they will be subject
to forfeiture conditions and Directors will forfeit their shares if either they fail to satisfy the vesting conditions or they
cease to be employed or continue to provide services to a Group company in certain circumstances.
Once the vesting conditions have been satisfied, removed or lifted, the shares become vested and Directors may deal
with them in accordance with the rules of the legacy LFSP subject to sale restrictions and other legal restrictions (such
as under the Company’s trading policy).
Directors
Mr David Black
Air Marshall Geoffrey Brown AO
The Hon Kate Lundy
Dr Ben Greene (resigned)
Other retired directors
Directors Total
Employees
Dr James Bennett
Mr Matthew Jones
Other senior employees
Employees Total
Total, Directors and Employees
Balance of shares
outstanding at
31 December 2022
Lapses and other
movements *
Balance of shares
outstanding at
31 December 2023
150,000
200,000
200,000
2,000,000
550,000
3,100,000
97,500
40,000
4,164,375
4,301,875
7,401,875
(75,000)
(200,000)
(200,000)
(2,000,000)
(550,000)
(3,025,000)
(30,000)
(40,000)
(3,516,875)
(3,586,875)
(6,611,875)
75,000
-
-
-
-
75,000
67,500
-
647,500
715,000
790,000
* The following conditions were not met in 2023:
•
•
The share price hurdle of $9.50 by 30 June 2023, resulting in 75,000 shares issued to a Director lapsing.
The expiry of the exercise period and loan term in 2023 resulting in 4,101,875 shares issued to staff and 400,000 shares issued to current
Directors lapsing.
•
Certain employees resigned from subsidiaries of the Group, resulting in 2,035,000 shares issued to them lapsing.
9. Share Options / Rights (continued)
9.2 Share Rights (OEIP)
Share rights granted to Directors and executives
No share rights were granted to any Director of Electro Optic Systems Holdings Limited during or since the financial year.
875,250 share rights were granted to the five most highly remunerated officers of the Group during the year.
Managing Director, Dr Andreas Schwer.
Share rights on issue at year-end
report.
1,341,117 share rights were issued on 22 December 2023 under the OEIP and remain outstanding as at the date of this
No shares were issued during or since the financial year as a result of exercise of a share right.
To the extent that share rights vest and are exercised in the future, the Company expects they will be settled from
existing ordinary share capital already on issue within the employee share trust from unallocated shares from the LFSP.
9.3 Legacy Incentive Plans – Loan Funded Share Plan (LFSP) and Employee Share Option Plan
Legacy Loan Funded Share Plan
Prior issues made under these legacy LFSP consisted of:
Issue Date
20/6/2018
19/5/2020
29/5/2020
10/8/2020
14/10/2020
15/2/2021
31/5/2021
Shares Issued
Issue Price
5,135,000
2,315,000
2,500,000
860,000
150,000
1,250,000
150,000
$2.99
$4.75
$4.92
$5.62
$5.47
$5.27
$4.06
As no loan funded shares were issued during or since the financial year, the Company has provided no new interest free
loans to the Directors or staff to acquire the shares under the legacy LFSP.
As a result of a number of performance conditions and shares price hurdles not being met, as well as the resignation of
certain employees, 6,611,875 legacy LFSP shares lapsed during the year. This resulted in the total amount of the loans
outstanding under the legacy LFSP at year-end being $3,902,150 (2022: $27,785,506).
Loan funds under the legacy LFSP are limited recourse in nature, meaning that the Company’s recourse is limited to
the shares. If at the date that the loan becomes repayable the Directors or employees shares are worth less than the
outstanding balance of the loan, the Company cannot recover the difference from the Director or employee. Interest will
not be payable on the outstanding balance of the loan.
All shares issued under the legacy LFSP are held in an employee share trust, on behalf of all participants. The name of
the Trust is EOS Loan Plan Pty Ltd as trustee for the Share Plan Trust. All shares under the legacy LFSP are also subject
to a holding lock until all conditions are satisfied and the loan is repaid.
46
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Electro Optic Systems Holdings Limited | Annual Report 2023
47
Director’s Report
Director’s Report
9. Share Options / Rights (continued)
Legacy Employee Share Option Plan
As a result of a number of performance conditions and share price hurdles not being met, as well as the resignation of
certain employees, 350,000 legacy Employee Share Options lapsed during the year. The options issued are subject to
both ‘vesting conditions’ and ‘forfeiture conditions’.
Once the vesting conditions have been satisfied, removed or lifted, the options vest and employees may deal with
them in accordance with the rules of the Plan subject to sale restrictions and other legal restrictions (such as under the
Company’s trading policy).
Reconciliation of Unlisted Options Balances issued under the Legacy Employee Share Option Plan:
Balance at beginning of the financial year
Lapsed during the year
Balance at end of the financial year
Exercisable at the end of the year
10. Subsequent Events
2023
Number
720,000
(350,000)
370,000
-
2022
Number
1,830,000
(1,110,000)
720,000
192,500
Subsequent to year-end, EFA approval was received and the amendment to the finance facility agreement became
effective and the $4.5m fee was paid to the lender.
Apart from the above, there have been no transactions or events of a material and unusual nature between the end
of the reporting period and the date of the report likely, in the opinion of the Directors of the Company, to significantly
affect the operations of the Group, the results of those operations, or state of affairs of the Group in future years.
11. Deed of Cross Guarantee
On 6 April 2018, the parent entity, Electro Optic Systems Holdings Limited, entered into a deed of cross guarantee with
two of its Australian wholly-owned subsidiaries, Electro Optic Systems Pty Limited and EOS Defence Systems Pty
Limited. On 28 November 2019, EM Solutions Pty Limited entered into an Assumption Deed and became a party to the
Deed of Cross Guarantee.
12. Likely Developments
The Group will continue to operate in the Space Systems and Defence Systems businesses. Please see the Review of
Operations for further details.
13. Environmental Regulations
In the opinion of the Directors, the Group is in compliance with all applicable environmental legislation and regulations.
14. Ethical Labour
The Group has established measures regarding fair labour practices and guidelines that create a respectful and safe
work environment for our employees globally.
The Group is committed to treating all of its employees with respect and strictly prohibits the use of slavery, forced
labour and human trafficking. To prevent the occurrence of forced, compulsory or child labour, the Group has
implemented local labour policies and practices to comply with the Modern Slavery Act.
Any person who applies for employment with the Group does so on a voluntary basis and all employees are legally
entitled to leave upon reasonable notice without penalty. In accordance with the Group’s recruiting guidelines, offers of
employment must be conditional upon successful completion of required background checks. Background checks are
required to protect the safety of employees and to ensure that employees meet the Group’s standards.
15. Diversity
The Group values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its goals.
Accordingly, the Group’s diversity policy (“Diversity Policy”) outlines its diversity objectives in relation to gender, age,
cultural background, ethnicity, employment of veterans and other factors to leverage the widest pool of available talent.
A copy of the Group’s Diversity Policy is available on the Company’s website.
Section 6 of the Diversity Policy states that the Group will establish appropriate and meaningful objectives for achieving
gender and other forms of diversity.
The Group’s current objectives are to:
improve the participation of women in the workforce;
reduce the number of workplace harassment;
•
•
•
improve retention of staff; and
• encourage retention of staff.
As at 31 December 2023, the Group’s gender diversity mix was as follows:
EOS Directors 2023
Board
EOS Staff 2023
Senior Management *
(CEO/CFO/COO/EVP)
Australia
New Zealand
Singapore
United States
Germany
Total Staff
United Arab Emirates
Number of
personnel
5
Number of
personnel
4
326
9
20
46
40
1
446
1
0
0
6
6
1
66
12
91
Female
Female %
Male
Male %
20%
4
80%
Female
Female %
Male
Male %
0%
20%
0%
30%
26%
15%
100%
20%
4
260
9
14
34
34
0
355
100%
80%
100%
70%
74%
85%
0%
80%
* ”Board” excludes the Managing Director who is included under “Senior Management” as CEO. “Senior Management” is defined as a manager who has a relatively high leadership
role in the day-to-day responsibilities of managing the Company.
The proportion of women to total workforce has reduced from 21% over recent years to 20% at the end of 2023.
48
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Director’s Report
Director’s Report
9. Share Options / Rights (continued)
Legacy Employee Share Option Plan
As a result of a number of performance conditions and share price hurdles not being met, as well as the resignation of
certain employees, 350,000 legacy Employee Share Options lapsed during the year. The options issued are subject to
both ‘vesting conditions’ and ‘forfeiture conditions’.
Once the vesting conditions have been satisfied, removed or lifted, the options vest and employees may deal with
them in accordance with the rules of the Plan subject to sale restrictions and other legal restrictions (such as under the
Company’s trading policy).
Reconciliation of Unlisted Options Balances issued under the Legacy Employee Share Option Plan:
2023
Number
720,000
(350,000)
370,000
-
2022
Number
1,830,000
(1,110,000)
720,000
192,500
Balance at beginning of the financial year
Lapsed during the year
Balance at end of the financial year
Exercisable at the end of the year
10. Subsequent Events
11. Deed of Cross Guarantee
Deed of Cross Guarantee.
12. Likely Developments
Operations for further details.
13. Environmental Regulations
Subsequent to year-end, EFA approval was received and the amendment to the finance facility agreement became
effective and the $4.5m fee was paid to the lender.
Apart from the above, there have been no transactions or events of a material and unusual nature between the end
of the reporting period and the date of the report likely, in the opinion of the Directors of the Company, to significantly
affect the operations of the Group, the results of those operations, or state of affairs of the Group in future years.
On 6 April 2018, the parent entity, Electro Optic Systems Holdings Limited, entered into a deed of cross guarantee with
two of its Australian wholly-owned subsidiaries, Electro Optic Systems Pty Limited and EOS Defence Systems Pty
Limited. On 28 November 2019, EM Solutions Pty Limited entered into an Assumption Deed and became a party to the
The Group will continue to operate in the Space Systems and Defence Systems businesses. Please see the Review of
In the opinion of the Directors, the Group is in compliance with all applicable environmental legislation and regulations.
14. Ethical Labour
The Group has established measures regarding fair labour practices and guidelines that create a respectful and safe
work environment for our employees globally.
The Group is committed to treating all of its employees with respect and strictly prohibits the use of slavery, forced
labour and human trafficking. To prevent the occurrence of forced, compulsory or child labour, the Group has
implemented local labour policies and practices to comply with the Modern Slavery Act.
Any person who applies for employment with the Group does so on a voluntary basis and all employees are legally
entitled to leave upon reasonable notice without penalty. In accordance with the Group’s recruiting guidelines, offers of
employment must be conditional upon successful completion of required background checks. Background checks are
required to protect the safety of employees and to ensure that employees meet the Group’s standards.
15. Diversity
The Group values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its goals.
Accordingly, the Group’s diversity policy (“Diversity Policy”) outlines its diversity objectives in relation to gender, age,
cultural background, ethnicity, employment of veterans and other factors to leverage the widest pool of available talent.
A copy of the Group’s Diversity Policy is available on the Company’s website.
Section 6 of the Diversity Policy states that the Group will establish appropriate and meaningful objectives for achieving
gender and other forms of diversity.
The Group’s current objectives are to:
•
•
•
improve the participation of women in the workforce;
reduce the number of workplace harassment;
improve retention of staff; and
• encourage retention of staff.
As at 31 December 2023, the Group’s gender diversity mix was as follows:
EOS Directors 2023
Board
EOS Staff 2023
Senior Management *
(CEO/CFO/COO/EVP)
Australia
New Zealand
Singapore
United States
United Arab Emirates
Germany
Total Staff
Number of
personnel
Female
Female %
Male
Male %
5
1
20%
4
80%
Number of
personnel
Female
Female %
Male
Male %
4
326
9
20
46
40
1
446
0
66
0
6
12
6
1
91
0%
20%
0%
30%
26%
15%
100%
20%
4
260
9
14
34
34
0
355
100%
80%
100%
70%
74%
85%
0%
80%
* ”Board” excludes the Managing Director who is included under “Senior Management” as CEO. “Senior Management” is defined as a manager who has a relatively high leadership
role in the day-to-day responsibilities of managing the Company.
The proportion of women to total workforce has reduced from 21% over recent years to 20% at the end of 2023.
48
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Director’s Report
16. Dividends
The Directors recommend that no dividend be paid and no amount has been paid or declared by way of dividend since
the end of the previous financial year and up to the date of this report.
17. Director Shareholdings
The following table sets out each Director’s relevant interest in shares, restricted ordinary shares under the legacy LFSP
of the Company or a related body corporate as at the date of this report.
Directors
Mr Garry Hounsell
Dr Andreas Schwer*
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson*
* Director for part of the financial year
Fully paid
ordinary shares
Fully paid ordinary shares
restricted – LTI plans
Directors
Attended
Attended
Attended
Attended
Eligible
to attend
Eligible
to attend
Eligible
to attend
Eligible
to attend
500,000
-
26,315
23,490
12,963
120,000
-
-
-
-
75,000
-
18. Indemnification and Insurance of Officers and Auditors
1) Appointed 11 December 2023 2) Appointed 24 May 2023 3) Resigned 27 March 2023 4) Resigned 31 January 2023 5) Resigned 20 March 2023.
During the financial year, the Company paid a premium in respect of a contract insuring the Directors and Officers of the
Company and any related body corporate against a liability incurred as such a Director or Officer to the extent permitted
by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the coverage provided
and the amount of the premium. The Company has agreed to indemnify the current Directors, Company Secretary and
Executive Officers against all liabilities to other persons that may arise from their position as Directors or Officers of the
Company and its controlled entities, except where to do so would be prohibited by law. The agreement stipulates that
the Company will meet the full amount of any such liabilities, including costs and expenses.
To the extent permitted by law and professional regulations, the Company has agreed to indemnify its auditors, Ernst &
Young Australia, as part of the terms of its audit engagement agreement against claims by third parties arising from the
audit. The indemnity does not apply to any Loss resulting from Ernst & Young Australia’s negligent, wrongful or wilful acts
or omissions. No payment has been made to indemnify Ernst & Young Australia during or since the financial year.
19. Directors’ Meetings
The following table sets out the number of Directors’ meetings (including meetings of committees of Directors)
held during the financial year and the number of meetings attended by each Director (while they were a Director or
committee member).
During the reporting period, the Nomination and Remuneration Committee was split into two separate committees, the
People and Culture Committee and the Nomination Committee. A further Board committee was created during the year
named the Data Security and Data Governance Committee to assist the Board to discharge its duties in relation to data
security, data governance, cybersecurity and related cultural and technological risks. The charters for each committee
can be found on the Company web site.
Director’s Report
During the financial year, the following meetings were held:
• 13 Board meetings;
• 7 Audit and Risk Committee meetings;
• 4 People and Culture Committee meetings;
• 3 Data Security and Data Governance Committee meetings; and
• No meetings of the Nomination Committee were held.
Board of Directors
Audit and Risk
Committee
People and Culture
Committee
Data Security and Data
Governance
Committee
Mr Garry Hounsell
Dr Andreas Schwer 1
Air Marshal Geoff Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson 2
Dr Ben Greene 3
Ms Deena Shiff 4
Mr Robert Kaye 5
13
1
13
13
13
6
3
1
3
13
1
13
13
13
5
3
1
3
-
-
3
7
7
4
-
-
-
-
-
3
7
7
3
-
-
-
-
-
4
4
4
-
-
-
-
-
-
4
4
4
-
-
-
-
-
-
-
3
3
3
-
-
-
-
-
-
3
3
3
-
-
-
19.1 Audit and Risk Committee
The members of the Committee during the year were Mr David Black (Chair), Air Marshal Geoffrey Brown AO, the Hon
Kate Lundy, Ms Deena Shiff and Mr Robert Nicholson. Ms Deena Shiff resigned from the Board, and therefore the
Committee, on 31 January 2023. Mr Robert Nicholson was appointed to the Board on 24 May 2023 and was appointed
to the Committee on this day. Air Marshall Geoffrey Brown AO resigned from the Committee on 23 May 2023.
The Audit and Risk Committee have reviewed the Group’s risk management profile during the year to satisfy themselves
that it continues to be sound and that the Group is operating with due regard to the risk appetite set by the Board. The
Chief Financial Officer prepares a risk profile for regular review by the Committee and the Board of Directors.
The current members of the Committee are Air Marshal Geoffrey Brown AO (Chair), Mr David Black and the Hon Kate
19.2 People and Culture Committee
Lundy.
19.3 Nomination Committee
All Board members are members of the Nomination Committee.
19.4 Data Security & Data Governance Committee
The current members of the Committee are the Hon Kate Lundy (Chair), Mr David Black and Mr Robert Nicholson.
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Director’s Report
16. Dividends
Directors
Mr Garry Hounsell
Dr Andreas Schwer*
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson*
Air Marshal Geoffrey Brown AO
* Director for part of the financial year
The Directors recommend that no dividend be paid and no amount has been paid or declared by way of dividend since
the end of the previous financial year and up to the date of this report.
17. Director Shareholdings
The following table sets out each Director’s relevant interest in shares, restricted ordinary shares under the legacy LFSP
of the Company or a related body corporate as at the date of this report.
Fully paid
ordinary shares
Fully paid ordinary shares
restricted – LTI plans
500,000
-
26,315
23,490
12,963
120,000
-
-
-
-
-
75,000
During the financial year, the Company paid a premium in respect of a contract insuring the Directors and Officers of the
Company and any related body corporate against a liability incurred as such a Director or Officer to the extent permitted
by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the coverage provided
and the amount of the premium. The Company has agreed to indemnify the current Directors, Company Secretary and
Executive Officers against all liabilities to other persons that may arise from their position as Directors or Officers of the
Company and its controlled entities, except where to do so would be prohibited by law. The agreement stipulates that
the Company will meet the full amount of any such liabilities, including costs and expenses.
To the extent permitted by law and professional regulations, the Company has agreed to indemnify its auditors, Ernst &
Young Australia, as part of the terms of its audit engagement agreement against claims by third parties arising from the
audit. The indemnity does not apply to any Loss resulting from Ernst & Young Australia’s negligent, wrongful or wilful acts
or omissions. No payment has been made to indemnify Ernst & Young Australia during or since the financial year.
19. Directors’ Meetings
committee member).
The following table sets out the number of Directors’ meetings (including meetings of committees of Directors)
held during the financial year and the number of meetings attended by each Director (while they were a Director or
During the reporting period, the Nomination and Remuneration Committee was split into two separate committees, the
People and Culture Committee and the Nomination Committee. A further Board committee was created during the year
named the Data Security and Data Governance Committee to assist the Board to discharge its duties in relation to data
security, data governance, cybersecurity and related cultural and technological risks. The charters for each committee
can be found on the Company web site.
Director’s Report
During the financial year, the following meetings were held:
• 13 Board meetings;
• 7 Audit and Risk Committee meetings;
• 4 People and Culture Committee meetings;
• 3 Data Security and Data Governance Committee meetings; and
• No meetings of the Nomination Committee were held.
Board of Directors
Audit and Risk
Committee
People and Culture
Committee
Data Security and Data
Governance
Committee
Eligible
to attend
Attended
Eligible
to attend
Attended
Eligible
to attend
Attended
Eligible
to attend
Attended
13
1
13
13
13
6
3
1
3
13
1
13
13
13
5
3
1
3
-
-
3
7
7
4
-
-
-
-
-
3
7
7
3
-
-
-
-
-
4
4
4
-
-
-
-
-
-
4
4
4
-
-
-
-
-
-
-
3
3
3
-
-
-
-
-
-
3
3
3
-
-
-
Directors
Mr Garry Hounsell
Dr Andreas Schwer 1
Air Marshal Geoff Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson 2
Dr Ben Greene 3
Ms Deena Shiff 4
Mr Robert Kaye 5
18. Indemnification and Insurance of Officers and Auditors
1) Appointed 11 December 2023 2) Appointed 24 May 2023 3) Resigned 27 March 2023 4) Resigned 31 January 2023 5) Resigned 20 March 2023.
19.1 Audit and Risk Committee
The members of the Committee during the year were Mr David Black (Chair), Air Marshal Geoffrey Brown AO, the Hon
Kate Lundy, Ms Deena Shiff and Mr Robert Nicholson. Ms Deena Shiff resigned from the Board, and therefore the
Committee, on 31 January 2023. Mr Robert Nicholson was appointed to the Board on 24 May 2023 and was appointed
to the Committee on this day. Air Marshall Geoffrey Brown AO resigned from the Committee on 23 May 2023.
The Audit and Risk Committee have reviewed the Group’s risk management profile during the year to satisfy themselves
that it continues to be sound and that the Group is operating with due regard to the risk appetite set by the Board. The
Chief Financial Officer prepares a risk profile for regular review by the Committee and the Board of Directors.
19.2 People and Culture Committee
The current members of the Committee are Air Marshal Geoffrey Brown AO (Chair), Mr David Black and the Hon Kate
Lundy.
19.3 Nomination Committee
All Board members are members of the Nomination Committee.
19.4 Data Security & Data Governance Committee
The current members of the Committee are the Hon Kate Lundy (Chair), Mr David Black and Mr Robert Nicholson.
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Director’s Report
Director’s Report
20. Remuneration Report (Audited)
Contents
20.1 Remuneration Report Overview
20.2 Overview of Non-executive Director Remuneration
20.3 Overview of Executive Remuneration
20.4 KMP Equity Holdings and Other Transactions
20.5 Company Performance and Shareholder Returns
20.1 Remuneration Report Overview
The Key Management Personnel (KMP) of the Group, who had the authority and responsibility for planning, directing
and controlling the activities of the Group during the year were:
Name
Non-executive Directors
Mr Garry Hounsell
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson
Ms Deena Shiff
Mr Robert Kaye
Executive Directors
Dr Andreas Schwer
Dr Ben Greene
Executives
Dr Andreas Schwer
Mr Clive Cuthell
Dr James Bennett
Mr Ian Cook
Mr Matthew Jones
Role
Term as KMP
Chair, Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Full financial year
Full financial year
Full financial year
Full financial year
Non-executive Director
Appointed 24/05/23
Non-executive Director
Resigned 31/01/23
Non-executive Director
Resigned 20/03/23
Managing Director
Appointed 11/12/23
Executive Director
Resigned from Board on 27/03/23
Chief Executive Officer
Chief Financial Officer
EVP Space Systems
Full financial year
Full financial year
Full financial year
EVP Defence Systems (Australia)
Appointed 02/11/23
Acting EVP Defence Systems
Ceased employment 02/11/23
This report outlines the remuneration arrangements in place for Directors and executives of the Group.
The Directors are responsible for remuneration policies and packages applicable to the Board members and executives
of the Group. The Group has a separate People and Culture Committee. The remuneration policy is to ensure the
remuneration package properly reflects the persons duties and responsibilities.
20.2 Overview of Non-executive Directors Remuneration
In accordance with best practice corporate governance, the structure of Non-executive Director and senior manager
remuneration is separate and distinct.
Non-executive Director remuneration reflects the Group’s desire to attract, motivate and retain experienced directors
and to ensure their active participation in advocating for the interests of shareholders, in areas such as corporate
governance, remuneration, compliance, risk and Group strategy. The size of the remuneration pool that can be paid to
Non-executive Directors is governed by resolutions passed at a General Meeting of shareholders.
Each Non-executive Director receives a fee for serving as a Director of the Company. The level of Director remuneration
has been fixed at the same level since 2020 and is as follows:
Role
Board Chair
Non-executive director
Committee Chair
Committee Member
Fee
2023
$
140,000
70,000
-
-
Fee
2022
$
140,000
70,000
-
-
All fees presented include statutory superannuation, where applicable. Directors may be reimbursed for expenses
reasonably incurred in attending to the Group’s affairs.
The level of fees received by the Non-executive Directors from within the shareholder approved maximum limit of
$1,000,000 per annum (excluding options), approved by shareholders on 29 May 2020 has not increased since 2020.
The manner in which this limit is apportioned amongst Directors, and the policy of granting options to Directors, is
determined by Directors within the limit set by shareholders. Following a review, the Board has decided to increase the
level of Director fees paid, to $175,000 for the Chair and $100,000 for each Non-executive Director, effective from 1
January 2024.
No options were granted to or exercised by any Director during 2023.
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Director’s Report
Director’s Report
20.2 Overview of Non-executive Directors Remuneration
In accordance with best practice corporate governance, the structure of Non-executive Director and senior manager
remuneration is separate and distinct.
Non-executive Director remuneration reflects the Group’s desire to attract, motivate and retain experienced directors
and to ensure their active participation in advocating for the interests of shareholders, in areas such as corporate
governance, remuneration, compliance, risk and Group strategy. The size of the remuneration pool that can be paid to
Non-executive Directors is governed by resolutions passed at a General Meeting of shareholders.
Each Non-executive Director receives a fee for serving as a Director of the Company. The level of Director remuneration
has been fixed at the same level since 2020 and is as follows:
The Key Management Personnel (KMP) of the Group, who had the authority and responsibility for planning, directing
Role
and controlling the activities of the Group during the year were:
Board Chair
Non-executive director
Committee Chair
Committee Member
Fee
2023
$
140,000
70,000
-
-
Fee
2022
$
140,000
70,000
-
-
All fees presented include statutory superannuation, where applicable. Directors may be reimbursed for expenses
reasonably incurred in attending to the Group’s affairs.
The level of fees received by the Non-executive Directors from within the shareholder approved maximum limit of
$1,000,000 per annum (excluding options), approved by shareholders on 29 May 2020 has not increased since 2020.
The manner in which this limit is apportioned amongst Directors, and the policy of granting options to Directors, is
determined by Directors within the limit set by shareholders. Following a review, the Board has decided to increase the
level of Director fees paid, to $175,000 for the Chair and $100,000 for each Non-executive Director, effective from 1
January 2024.
No options were granted to or exercised by any Director during 2023.
20. Remuneration Report (Audited)
Contents
20.1 Remuneration Report Overview
20.2 Overview of Non-executive Director Remuneration
20.3 Overview of Executive Remuneration
20.4 KMP Equity Holdings and Other Transactions
20.5 Company Performance and Shareholder Returns
20.1 Remuneration Report Overview
Name
Non-executive Directors
Mr Garry Hounsell
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson
Ms Deena Shiff
Mr Robert Kaye
Executive Directors
Dr Andreas Schwer
Dr Ben Greene
Executives
Dr Andreas Schwer
Mr Clive Cuthell
Dr James Bennett
Mr Ian Cook
Mr Matthew Jones
Role
Term as KMP
Chair, Non-executive Director
Non-executive Director
Non-executive Director
Non-executive Director
Full financial year
Full financial year
Full financial year
Full financial year
Non-executive Director
Appointed 24/05/23
Non-executive Director
Resigned 31/01/23
Non-executive Director
Resigned 20/03/23
Managing Director
Appointed 11/12/23
Executive Director
Resigned from Board on 27/03/23
Chief Executive Officer
Chief Financial Officer
EVP Space Systems
Full financial year
Full financial year
Full financial year
EVP Defence Systems (Australia)
Appointed 02/11/23
Acting EVP Defence Systems
Ceased employment 02/11/23
This report outlines the remuneration arrangements in place for Directors and executives of the Group.
The Directors are responsible for remuneration policies and packages applicable to the Board members and executives
of the Group. The Group has a separate People and Culture Committee. The remuneration policy is to ensure the
remuneration package properly reflects the persons duties and responsibilities.
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Director’s Report
Director’s Report
20.3 Overview of Executive Remuneration
The Group aims to reward executives with a level and mix of remuneration commensurate with their position,
responsibilities and performance, in a way that aligns with business strategy so as to:
•
reward executives for Group and individual performance against targets set by reference to suitable benchmarks;
• align executive’s interests with those of shareholders; and
• ensure that the total remuneration paid is competitive by market standards.
Structure
The remuneration paid to executives is set with reference to prevailing market levels and typically comprises a fixed
salary, short-term incentive and a long-term incentive, comprising share options and share rights. Incentives are
granted to executives in line with their respective levels of experience and responsibility. Details of the amounts paid,
and the number of options granted to executives are disclosed elsewhere in the Directors’ Report.
2,953,087 share options and 1,341,117 share rights were issued to executives during 2023.
No options or share rights were granted to or exercised by any executive during 2022.
Employment Contracts
contracts.
Executives and senior management are employed under standard employment contracts which contain no unusual
terms. Beyond accrued leave benefits, there are no other termination payments or golden parachutes for any Directors
or senior executives. The CEO and the other senior management have 90-day notice periods under their employment
20. Remuneration Report (continued)
Non-executive Director Remuneration
The following tables disclose the remuneration of the Non-executive Directors of the Company during the year:
2023
Short term
Salary & Fees
Non-monetary
Mr Garry Hounsell
Air Marshal
Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson*
Ms Deena Shiff*
Mr Robert Kaye*
Total
$
126,411
63,206
63,206
63,206
42,339
15,837
15,837
390,042
$
-
-
-
-
-
-
-
-
Post
employment
Super-
annuation
$
Equity
Sub-total
$
Loan Funded
Share Plan**
$
Total
$
13,589
140,000
-
140,000
6,794
6,794
6,794
-
1,663
1,663
70,000
(78,571)
(8,571)
70,000
70,000
42,339
17,500
17,500
(78,571)
(32,940)
-
-
-
(8,571)
37,060
42,339
17,500
17,500
37,297
427,339
(190,082)
237,257
* Non-executive Director for part of the financial year
** Expense reversal relating to LFSP lapsed shares
2022
Short term
Salary & Fees
Non-monetary
Mr Garry Hounsell
Lt Gen Peter Leahy AC
Air Marshal
Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Ms Deena Shiff
Mr Robert Kaye
Total
$
13,190
126,985
63,491
63,491
63,491
63,491
23,928
418,067
$
-
-
-
-
-
-
-
-
Post
employment
Super-
annuation
$
Equity
Sub-total
$
Loan Funded
Share Plan**
$
Total
$
1,385
14,575
-
14,575
13,015
140,000
1,321
141,321
6,509
70,000
1,470
71,470
6,509
6,509
6,509
2,512
70,000
70,000
70,000
26,440
1,470
3,847
-
-
71,470
73,847
70,000
26,440
42,948
461,015
8,108
469,123
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Director’s Report
Director’s Report
20.3 Overview of Executive Remuneration
The Group aims to reward executives with a level and mix of remuneration commensurate with their position,
responsibilities and performance, in a way that aligns with business strategy so as to:
•
reward executives for Group and individual performance against targets set by reference to suitable benchmarks;
• align executive’s interests with those of shareholders; and
• ensure that the total remuneration paid is competitive by market standards.
Structure
The remuneration paid to executives is set with reference to prevailing market levels and typically comprises a fixed
salary, short-term incentive and a long-term incentive, comprising share options and share rights. Incentives are
granted to executives in line with their respective levels of experience and responsibility. Details of the amounts paid,
and the number of options granted to executives are disclosed elsewhere in the Directors’ Report.
2,953,087 share options and 1,341,117 share rights were issued to executives during 2023.
No options or share rights were granted to or exercised by any executive during 2022.
Employment Contracts
Executives and senior management are employed under standard employment contracts which contain no unusual
terms. Beyond accrued leave benefits, there are no other termination payments or golden parachutes for any Directors
or senior executives. The CEO and the other senior management have 90-day notice periods under their employment
contracts.
The following tables disclose the remuneration of the Non-executive Directors of the Company during the year:
20. Remuneration Report (continued)
Non-executive Director Remuneration
2023
Short term
Salary & Fees
Non-monetary
* Non-executive Director for part of the financial year
** Expense reversal relating to LFSP lapsed shares
390,042
37,297
427,339
(190,082)
237,257
Mr Garry Hounsell
Air Marshal
Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson*
Ms Deena Shiff*
Mr Robert Kaye*
Total
Mr Garry Hounsell
Lt Gen Peter Leahy AC
Air Marshal
Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Ms Deena Shiff
Mr Robert Kaye
Total
$
126,411
63,206
63,206
63,206
42,339
15,837
15,837
$
13,190
126,985
63,491
63,491
63,491
63,491
23,928
2022
Short term
Salary & Fees
Non-monetary
Post
employment
Super-
annuation
$
Equity
Loan Funded
Share Plan**
Sub-total
$
13,589
140,000
6,794
6,794
6,794
-
1,663
1,663
(78,571)
(32,940)
70,000
70,000
42,339
17,500
17,500
70,000
(78,571)
(8,571)
Post
employment
Super-
annuation
$
Equity
Loan Funded
Share Plan**
Sub-total
$
1,385
14,575
13,015
140,000
1,321
141,321
6,509
70,000
1,470
71,470
6,509
6,509
6,509
2,512
70,000
70,000
70,000
26,440
1,470
3,847
Total
$
140,000
(8,571)
37,060
42,339
17,500
17,500
Total
$
14,575
71,470
73,847
70,000
26,440
$
-
-
-
-
$
-
-
-
$
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
418,067
42,948
461,015
8,108
469,123
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Director’s Report
Director’s Report
20. Remuneration Report (continued)
Executive Remuneration
No executives are employed by the holding company. The following table discloses the remuneration of the executives
of the Group for the period during which they were considered key management personnel:
2023
Short term
Post
employment
Share-based
Salary &
Fees
Bonus
Other
benefits
Super-
annuation
Dr Andreas Schwer
711,471
518,000
34,509
$
$
$
$
-
Mr Clive Cuthell
657,207
275,280
42,787
13,699
Loan
Funded
Share Plan
$
OEIP
Options/
Rights
$
Other long
term
benefits
$
-
-
383,6003
-
226,507
4,183
Dr James Bennett
329,435
42,250
Mr Matthew Jones1
304,231
50,750
-
-
32,074
(31,450)
30,762
2,228
44,723
13,431
Total
Termination
benefits
$
-
-
-
$
1,647,580
1,219,663
462,829
-
-
-
145,821
501,426
323
-
80,300
Mr Ian Cook2
47,792
20,583
6,789
4,813
-
Total
2,050,136
906,863
84,085
81,348
(29,222)
654,830
17,937
145,821
3,911,798
1) Ceased employment 2 November 2023 2) Commenced employment 2 November 2023 3) Although subject to shareholder approval, the Group is required to commence recognition
of the fair value expense of the proposed grant.
2022*
Short term
Post
employment
Share-based
Total
Salary &
Fees
$
Dr Andreas Schwer
291,666
Bonus
Other
benefits
Super-
annuation
Loan Funded
Share Plan
$
-
$
41,030
$
-
Mr Clive Cuthell
171,541
100,000
26,265
27,500
Other
long-term
benefits
$
-
3,171
$
-
-
Dr James Bennett
181,137
Mr Matthew Jones
167,622
Dr Ben Greene
787,170
Mr Michael Lock
202,117
Mr Peter Short
260,458
Mr Grant Sanderson
229,625
Mr Glen Tindall
Mr Tahir Khan
338,000
122,542
-
-
-
-
-
-
-
-
-
-
15,835
(7,109)
28,706
16,881
(8,784)
8,197
26,163
27,500
14,700
29,216
-
-
-
-
-
18,831
4,301
-
-
225,249
38,374
(20,321)
19,953
193,537
492,001
21,269
(16,549)
11,788
22,131
11,623
-
-
-
-
-
-
-
246,133
360,131
134,165
Termination
benefits
$
-
-
-
-
$
332,696
328,477
218,569
183,916
884,749
Total
2,751,878
100,000
93,458
199,944
(33,762)
101,031
193,537
3,406,086
* All KMP during 2022 were key management personnel for only part of the financial year.
56
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57
Short-term performance incentives (STI)
Executives and senior management have a target STI opportunity based on the accountabilities of their specific role
and impact on the Group’s performance. Each year appropriate targets and key performance indicators (KPI’s) are
determined for each individual to reflect the core drivers of short-term performance and to provide a framework for
delivering sustainable value to the Group, its shareholders and customers.
Each participant is assigned five to six key performance indicators (KPIs) that encompass both Group and individual
business unit financial measures, as well as non-financial performance measures. A baseline target and a stretch
objective are set for each KPI. The specific KPIs assigned can vary between participants based on their roles, examined
on a case-by-case basis. The KPI measurements and their corresponding weightings are evenly distributed among the
total count of KPIs allocated to each participant.
The STI is determined after the end of the financial year following a review of performance over the year against the
STI performance measures by the CEO (and in the case of the CEO, by the Board). The STI is paid in cash following the
release of this Financial Report.
Group earnings, revenue, cash flow and business unit profits are measures against which the Group’s short-term
financial performance is assessed. Non-financial hurdles relate primarily to the delivery of team or business unit
objectives and projects.
Long-term Incentives (“LTI”) – Omnibus Employee Incentive Plan (“OEIP”)
During the year a new Group LTI plan, the OEIP, was established to replace the legacy Loan Funded Share Plan (“LFSP”).
It is anticipated that annual grants will be made to senior managers under the OEIP to align remuneration with the
creation of shareholder value over the long term.
The grant under the OEIP comprises:
a) Share options with share price vesting targets intended to drive performance that will generate significant
shareholder value; and
b) Share rights, with service-based vesting that are intended to retain the management team.
In both cases, the value of the reward is linked to the future share price, providing strong alignment with shareholders.
There is not expected to be any change in share capital as a result of the 2023 OEIP allocation as it is anticipated this
allocation will be funded by shares already issued and held in trust as lapsed shares from the legacy LFSP.
The structure of the OEIP is detailed below with full details of offers included in Note 23 to the financial statements.
Share Options (OEIP)
Vesting Principles
The options will vest if the vesting conditions have been met on a testing date in the manner set out in the tables below,
provided that the employee continues to provide services to the Group on the date of vesting.
Measures and hurdles
Testing Dates
Exercise Period
50% of options vest if the share price hurdle of $1.20 is met for a period of
20 trading days (not necessarily consecutive) prior to a testing date.
100% of options vest if the share price hurdle of $3.00 is met for a period of
20 trading days (not necessarily consecutive) prior to a testing date.
31 December 2024
31 December 2025
31 December 2026
Share options are
exercisable from
Vesting Date until
31 December 2028
Options will vest on a linear pro-rata basis for share price performance between $1.20 and $3.00.
Director’s Report
Director’s Report
20. Remuneration Report (continued)
Executive Remuneration
No executives are employed by the holding company. The following table discloses the remuneration of the executives
of the Group for the period during which they were considered key management personnel:
2023
Short term
Post
employment
Share-based
Salary &
Fees
Bonus
Other
Super-
Loan
OEIP
Other long
Termination
benefits
annuation
Funded
Options/
term
benefits
Share Plan
Rights
benefits
$
$
Dr Andreas Schwer
711,471
518,000
34,509
383,6003
Mr Clive Cuthell
657,207
275,280
42,787
13,699
226,507
4,183
Dr James Bennett
329,435
42,250
30,762
2,228
44,723
13,431
$
-
$
-
-
$
-
-
-
$
-
-
Mr Matthew Jones1
304,231
50,750
32,074
(31,450)
-
145,821
501,426
Mr Ian Cook2
47,792
20,583
6,789
4,813
323
80,300
Total
2,050,136
906,863
84,085
81,348
(29,222)
654,830
17,937
145,821
3,911,798
Total
$
1,647,580
1,219,663
462,829
1) Ceased employment 2 November 2023 2) Commenced employment 2 November 2023 3) Although subject to shareholder approval, the Group is required to commence recognition
of the fair value expense of the proposed grant.
Salary &
Fees
$
Bonus
Other
benefits
Super-
Loan Funded
Other
Termination
annuation
Share Plan
benefits
long-term
benefits
Post
employment
$
-
Dr Andreas Schwer
291,666
41,030
Mr Clive Cuthell
171,541
100,000
26,265
27,500
3,171
Dr James Bennett
181,137
15,835
(7,109)
28,706
Mr Matthew Jones
167,622
16,881
(8,784)
8,197
Dr Ben Greene
787,170
26,163
27,500
14,700
29,216
Mr Michael Lock
202,117
18,831
4,301
Mr Peter Short
260,458
38,374
(20,321)
19,953
193,537
492,001
Mr Grant Sanderson
229,625
21,269
(16,549)
11,788
Mr Glen Tindall
Mr Tahir Khan
338,000
122,542
22,131
11,623
Total
2,751,878
100,000
93,458
199,944
(33,762)
101,031
193,537
3,406,086
* All KMP during 2022 were key management personnel for only part of the financial year.
$
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
$
332,696
328,477
218,569
183,916
884,749
225,249
246,133
360,131
134,165
$
-
-
-
-
$
-
$
-
-
-
-
$
-
-
-
-
$
-
-
-
-
-
-
-
-
Short-term performance incentives (STI)
Executives and senior management have a target STI opportunity based on the accountabilities of their specific role
and impact on the Group’s performance. Each year appropriate targets and key performance indicators (KPI’s) are
determined for each individual to reflect the core drivers of short-term performance and to provide a framework for
delivering sustainable value to the Group, its shareholders and customers.
Each participant is assigned five to six key performance indicators (KPIs) that encompass both Group and individual
business unit financial measures, as well as non-financial performance measures. A baseline target and a stretch
objective are set for each KPI. The specific KPIs assigned can vary between participants based on their roles, examined
on a case-by-case basis. The KPI measurements and their corresponding weightings are evenly distributed among the
total count of KPIs allocated to each participant.
The STI is determined after the end of the financial year following a review of performance over the year against the
STI performance measures by the CEO (and in the case of the CEO, by the Board). The STI is paid in cash following the
release of this Financial Report.
Group earnings, revenue, cash flow and business unit profits are measures against which the Group’s short-term
financial performance is assessed. Non-financial hurdles relate primarily to the delivery of team or business unit
objectives and projects.
Long-term Incentives (“LTI”) – Omnibus Employee Incentive Plan (“OEIP”)
During the year a new Group LTI plan, the OEIP, was established to replace the legacy Loan Funded Share Plan (“LFSP”).
It is anticipated that annual grants will be made to senior managers under the OEIP to align remuneration with the
creation of shareholder value over the long term.
The grant under the OEIP comprises:
2022*
Short term
Share-based
Total
a) Share options with share price vesting targets intended to drive performance that will generate significant
shareholder value; and
b) Share rights, with service-based vesting that are intended to retain the management team.
In both cases, the value of the reward is linked to the future share price, providing strong alignment with shareholders.
There is not expected to be any change in share capital as a result of the 2023 OEIP allocation as it is anticipated this
allocation will be funded by shares already issued and held in trust as lapsed shares from the legacy LFSP.
The structure of the OEIP is detailed below with full details of offers included in Note 23 to the financial statements.
Share Options (OEIP)
Vesting Principles
The options will vest if the vesting conditions have been met on a testing date in the manner set out in the tables below,
provided that the employee continues to provide services to the Group on the date of vesting.
Measures and hurdles
Testing Dates
Exercise Period
50% of options vest if the share price hurdle of $1.20 is met for a period of
20 trading days (not necessarily consecutive) prior to a testing date.
100% of options vest if the share price hurdle of $3.00 is met for a period of
20 trading days (not necessarily consecutive) prior to a testing date.
31 December 2024
31 December 2025
31 December 2026
Share options are
exercisable from
Vesting Date until
31 December 2028
Options will vest on a linear pro-rata basis for share price performance between $1.20 and $3.00.
56
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Electro Optic Systems Holdings Limited | Annual Report 2023
57
Director’s Report
Director’s Report
20. Remuneration Report (continued)
Share Rights (OEIP)
Vesting Principles
The rights will vest in the below proportions based purely on a service condition if the employee remains employed by
the Group on the below hurdle dates.
Measure
Hurdle
One third of rights vest
Continued employment on 31 December 2024
One third of rights vest
Continued employment on 31 December 2025
One third of rights vest
Continued employment on 31 December 2026
Long-term Incentive
Legacy Plans
During the year the Board determined to replace the LFSP and the Legacy Employee Share Option Plan with the OEIP as
the long-term incentive for management.
Of the 7,401,875 shares allocated at the beginning of the year to the Legacy LFSP, 6,611,875 shares were forfeited
during the year, either as a result of not meeting performance conditions, expiry or cessation of employment.
790,000 Legacy LFSP shares remain at the end of the financial year.
Of the 720,000 remaining unlisted options at the beginning of the year issued under the legacy Employee Share Option
Plan, 350,000 options were forfeited during the year, either as a result of not meeting performance conditions, expiry or
cessation of employment. 370,000 legacy Employee Share Option Plan options remain at the end of the financial year.
It is not intended that any future grants will be made under the legacy LFSP or legacy Employee Share Option Plan.
The employee options have similar vesting and forfeiture conditions as those issued under the legacy LFSP.
Legacy LFSP
Details of the historical grants under the legacy LFSP are outlined below.
Vesting Principles
The shares will vest at the end of each ‘vesting period’ in the manner set out in the following tables, provided that the
following conditions are met:
a) Directors and employees continue to provide services to the Group on each of the vesting dates (or such other date
on which the Board makes a determination as to whether the vesting condition has been met); and
b) the performance hurdles set out below are satisfied, which relate to the Company’s earnings before income tax
(EBIT) and the Company’s share price. Notably, EBIT and share price hurdles must both be achieved in order for
shares to vest under each Tranche.
Elements of remuneration related to performance
There are service conditions and performance conditions both market and non-market conditions attached to the
restricted fully paid ordinary shares issued under the share plan.
The overall performance of the Company as measured by the share price will determine whether the shares vest and
whether the Director or executive receives any benefit from these shares. The time service condition was chosen by the
Board as an appropriate condition as it helps in the retention and motivation of staff.
The ordinary restricted shares were issued to Directors, senior executives and senior staff under the legacy LFSP. These
ordinary restricted shares are subject to performance and vesting conditions.
Further measures, hurdles and sale restrictions
Employees and Directors may be subject to individualised measures and hurdles associated with any shares issued
to them under to the legacy LFSP. To the extent shares vest, they will be subject to sale restrictions as outlined in the
tables below for each separate issue of Loan Funded Shares.
Phase 1: Issue of 5,135,000 shares on 20 June 2018 at $2.99 per share
Under the terms of the legacy LFSP, once vested, the Director or executive has the right to acquire a share at the
specified price during the exercise period until the expiry date. Due to the expiry of the exercise period, the remaining
vested but unexercised shares from the 20 June 2018 issue lapsed during the reporting period.
Phase 2: Issue of LFSP shares during the year ended 31 December 2020, including:
• On 19 May 2020, the issue of 2,315,000 ordinary restricted shares to employees at an issue price of $4.75.
• On 29 May 2020, the issue of 2,500,000 ordinary restricted shares to Directors at an issue price of $4.92.
• On 10 August 2020, the issue of 860,000 ordinary restricted shares to employees at an issue price of $5.62.
• On 14 October 2020, the issue of 150,000 ordinary restricted shares to employees at an issue price of $5.47.
TRANCHE A – Senior Employees – (applies to 50% of the total number of shares issued)
Phase 2
Measures and hurdles
Vesting period
A share price hurdle of $9.50 by 31 December 2024 (this hurdle must
be reached on at least 30 trading days, not necessarily consecutive,
by 31 December 2024)
The period of two calendar years
ending 31 December 2024
TRANCHE B – Senior Employees - (applies to 50% of the total number of shares issued)
Phase 2
Measures and hurdles
Vesting period
A share price hurdle of $11.50 by 31 December 2025 (this hurdle
must be reached on at least 30 trading days, not necessarily
consecutive, by 31 December 2025)
The period of four calendar years
ending 31 December 2026
If the above vesting conditions are not satisfied, or if the Board determines that they cannot be satisfied, the unvested
shares will be forfeited.
Under Phase 2 Directors have also imposed additional vesting conditions for some senior employees under the terms of
the legacy LFSP which specifically relate to the performance of their business sectors within the Group. These conditions
are outlined in Note 23 of the financial statements and are in addition to the above vesting conditions.
As at 31 December 2023, there remains 412,500 LFSP shares from the Phase 2 offers.
58
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59
Director’s Report
Director’s Report
20. Remuneration Report (continued)
Share Rights (OEIP)
Vesting Principles
The rights will vest in the below proportions based purely on a service condition if the employee remains employed by
the Group on the below hurdle dates.
Measure
Hurdle
One third of rights vest
Continued employment on 31 December 2024
One third of rights vest
Continued employment on 31 December 2025
One third of rights vest
Continued employment on 31 December 2026
Long-term Incentive
Legacy Plans
During the year the Board determined to replace the LFSP and the Legacy Employee Share Option Plan with the OEIP as
the long-term incentive for management.
Of the 7,401,875 shares allocated at the beginning of the year to the Legacy LFSP, 6,611,875 shares were forfeited
during the year, either as a result of not meeting performance conditions, expiry or cessation of employment.
790,000 Legacy LFSP shares remain at the end of the financial year.
Of the 720,000 remaining unlisted options at the beginning of the year issued under the legacy Employee Share Option
Plan, 350,000 options were forfeited during the year, either as a result of not meeting performance conditions, expiry or
cessation of employment. 370,000 legacy Employee Share Option Plan options remain at the end of the financial year.
It is not intended that any future grants will be made under the legacy LFSP or legacy Employee Share Option Plan.
The employee options have similar vesting and forfeiture conditions as those issued under the legacy LFSP.
Legacy LFSP
Vesting Principles
Details of the historical grants under the legacy LFSP are outlined below.
The shares will vest at the end of each ‘vesting period’ in the manner set out in the following tables, provided that the
following conditions are met:
a) Directors and employees continue to provide services to the Group on each of the vesting dates (or such other date
on which the Board makes a determination as to whether the vesting condition has been met); and
b) the performance hurdles set out below are satisfied, which relate to the Company’s earnings before income tax
(EBIT) and the Company’s share price. Notably, EBIT and share price hurdles must both be achieved in order for
shares to vest under each Tranche.
Elements of remuneration related to performance
There are service conditions and performance conditions both market and non-market conditions attached to the
restricted fully paid ordinary shares issued under the share plan.
The overall performance of the Company as measured by the share price will determine whether the shares vest and
whether the Director or executive receives any benefit from these shares. The time service condition was chosen by the
Board as an appropriate condition as it helps in the retention and motivation of staff.
The ordinary restricted shares were issued to Directors, senior executives and senior staff under the legacy LFSP. These
ordinary restricted shares are subject to performance and vesting conditions.
Further measures, hurdles and sale restrictions
Employees and Directors may be subject to individualised measures and hurdles associated with any shares issued
to them under to the legacy LFSP. To the extent shares vest, they will be subject to sale restrictions as outlined in the
tables below for each separate issue of Loan Funded Shares.
Phase 1: Issue of 5,135,000 shares on 20 June 2018 at $2.99 per share
Under the terms of the legacy LFSP, once vested, the Director or executive has the right to acquire a share at the
specified price during the exercise period until the expiry date. Due to the expiry of the exercise period, the remaining
vested but unexercised shares from the 20 June 2018 issue lapsed during the reporting period.
Phase 2: Issue of LFSP shares during the year ended 31 December 2020, including:
• On 19 May 2020, the issue of 2,315,000 ordinary restricted shares to employees at an issue price of $4.75.
• On 29 May 2020, the issue of 2,500,000 ordinary restricted shares to Directors at an issue price of $4.92.
• On 10 August 2020, the issue of 860,000 ordinary restricted shares to employees at an issue price of $5.62.
• On 14 October 2020, the issue of 150,000 ordinary restricted shares to employees at an issue price of $5.47.
Phase 2
TRANCHE A – Senior Employees – (applies to 50% of the total number of shares issued)
Measures and hurdles
Vesting period
A share price hurdle of $9.50 by 31 December 2024 (this hurdle must
be reached on at least 30 trading days, not necessarily consecutive,
by 31 December 2024)
The period of two calendar years
ending 31 December 2024
Phase 2
TRANCHE B – Senior Employees - (applies to 50% of the total number of shares issued)
Measures and hurdles
Vesting period
A share price hurdle of $11.50 by 31 December 2025 (this hurdle
must be reached on at least 30 trading days, not necessarily
consecutive, by 31 December 2025)
The period of four calendar years
ending 31 December 2026
If the above vesting conditions are not satisfied, or if the Board determines that they cannot be satisfied, the unvested
shares will be forfeited.
Under Phase 2 Directors have also imposed additional vesting conditions for some senior employees under the terms of
the legacy LFSP which specifically relate to the performance of their business sectors within the Group. These conditions
are outlined in Note 23 of the financial statements and are in addition to the above vesting conditions.
As at 31 December 2023, there remains 412,500 LFSP shares from the Phase 2 offers.
58
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
59
Director’s Report
Director’s Report
20. Remuneration Report (continued)
Phase 3: Issue of shares on 15 March 2021
On 15 March 2021, the issue of 1,250,000 ordinary shares to staff at a price of $5.27 being the 20-day volume weighted
average price up to and including the trading day immediately prior to the date of issue.
Phase 3
TRANCHE A – Senior Employees - (applies to 50% of the total number of shares issued)
Measures and hurdles
Vesting period
A share price hurdle of $9.50 by 30 June 2026 (this hurdle must be
reached on at least 30 trading days, not necessarily consecutive, by
30 June 2026)
The period of two calendar years
ending 30 June 2026
Phase 3
TRANCHE B – Senior Employees - (applies to 50% of the total number of shares issued)
Measures and hurdles
Vesting period
A share price hurdle of $11.50 by 30 June 2028 (this hurdle must be
reached on at least 30 trading days, not necessarily consecutive, by
30 June 2028)
The period of four calendar years ending 30 June 2028
1,797
(1,797)
If the above vesting conditions are not satisfied, or if the Board determines that they cannot be satisfied, the unvested
shares will be forfeited.
Directors have also imposed vesting conditions for some senior employees under the terms of the legacy LFSP which
specifically relate to the performance of their business sectors within the Group. These conditions are outlined in Note
23 of the financial statements are in addition to the above vesting conditions.
As at 31 December 2023, there remains 302,500 LFSP shares from the Phase 3 offers.
Phase 4: Issue of shares on 31 May 2021
On 31 May 2021 the issue of 150,000 ordinary shares to a Director as approved by shareholders at a price of $4.06 being
the 20-day volume weighted average price up to and including the trading day immediately prior to the date of issue.
The Tranche A shares (50% of the total issued) did not vest and lapsed on 30 June 2023.
The Tranche B shares (50% of the total issued) remain on issue and subject to the below:
Phase 4
TRANCHE B – Director - (applies to 50% of the total number of shares issued)
Measures and hurdles
Vesting period
A share price hurdle of $11.50 by 30 June 2025 (this hurdle must be
reached on at least 30 trading days, not necessarily consecutive, by
30 June 2025)
The period of four calendar years ending 30 June 2025
If the above vesting conditions are not satisfied, or if the Board determines that they cannot be satisfied, the unvested
shares will be forfeited.
2,687,500
(505,000)
(2,040,000)
142,500
As at 31 December 2023, there remains 75,000 LFSP shares from the Phase 4 offers.
1) Appointed 24 May 2023 2) Resigned 27 March 2023 3) Resigned 31 January 2023 4) Resigned 20 March 2023 5) Ceased employment 2 November 2023
6) Commenced employment 2 November 2023
60
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
61
20.4 KMP Equity Holdings and Other Transactions
The following table sets out each key management personnel’s equity holdings (represented by holdings of fully paid
ordinary unrestricted shares in Electro Optic Systems Holdings Limited).
Number of shares
1 Jan 2023
Purchased
during the year
Sold during
the year
Ceased to be
31 Dec 2023
KMP
Mr Garry Hounsell
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson1
Dr Ben Greene2
Ms Deena Shiff3
Mr Robert Kaye4
Dr Andreas Schwer
Mr Clive Cuthell
Dr James Bennett
Mr Matthew Jones5
Mr Ian Cook6
Total
500,000
15,856
18,860
12,963
4,012,139
112,555
-
-
-
-
-
-
10,459
4,630
120,000
-
-
-
-
-
-
-
-
-
-
(4,012,139)
(112,555)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,674,170
135,089
(4,126,491)
682,768
The following table sets out each key management personnel’s equity holdings (represented by holdings of restricted
fully paid ordinary shares in Electro Optic Systems Holdings Limited issued under the legacy LFSP).
Number of Legacy LFSP shares
1 Jan 2023
Purchased
during the
year
during the
Sold
year
Lapsed
during the
year
Ceased
31 Dec 2023
to be KMP
Mr Garry Hounsell
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson1
Dr Ben Greene2
Ms Deena Shiff3
Mr Robert Kaye4
Dr Andreas Schwer
Mr Clive Cuthell
Dr James Bennett
Mr Matthew Jones5
Mr Ian Cook6
Total
200,000
200,000
150,000
2,000,000
97,500
40,000
-
-
-
-
-
-
-
75,000
(2,000,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(200,000)
(200,000)
(75,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(30,000)
67,500
(40,000)
500,000
26,315
23,490
12,963
120,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Director’s Report
Director’s Report
20. Remuneration Report (continued)
Phase 3: Issue of shares on 15 March 2021
On 15 March 2021, the issue of 1,250,000 ordinary shares to staff at a price of $5.27 being the 20-day volume weighted
average price up to and including the trading day immediately prior to the date of issue.
TRANCHE A – Senior Employees - (applies to 50% of the total number of shares issued)
Phase 3
Measures and hurdles
Vesting period
A share price hurdle of $9.50 by 30 June 2026 (this hurdle must be
reached on at least 30 trading days, not necessarily consecutive, by
30 June 2026)
The period of two calendar years
ending 30 June 2026
TRANCHE B – Senior Employees - (applies to 50% of the total number of shares issued)
Phase 3
Measures and hurdles
Vesting period
A share price hurdle of $11.50 by 30 June 2028 (this hurdle must be
reached on at least 30 trading days, not necessarily consecutive, by
The period of four calendar years ending 30 June 2028
30 June 2028)
shares will be forfeited.
If the above vesting conditions are not satisfied, or if the Board determines that they cannot be satisfied, the unvested
Directors have also imposed vesting conditions for some senior employees under the terms of the legacy LFSP which
specifically relate to the performance of their business sectors within the Group. These conditions are outlined in Note
23 of the financial statements are in addition to the above vesting conditions.
As at 31 December 2023, there remains 302,500 LFSP shares from the Phase 3 offers.
Phase 4: Issue of shares on 31 May 2021
On 31 May 2021 the issue of 150,000 ordinary shares to a Director as approved by shareholders at a price of $4.06 being
the 20-day volume weighted average price up to and including the trading day immediately prior to the date of issue.
The Tranche A shares (50% of the total issued) did not vest and lapsed on 30 June 2023.
The Tranche B shares (50% of the total issued) remain on issue and subject to the below:
TRANCHE B – Director - (applies to 50% of the total number of shares issued)
Phase 4
Measures and hurdles
Vesting period
A share price hurdle of $11.50 by 30 June 2025 (this hurdle must be
reached on at least 30 trading days, not necessarily consecutive, by
The period of four calendar years ending 30 June 2025
30 June 2025)
If the above vesting conditions are not satisfied, or if the Board determines that they cannot be satisfied, the unvested
shares will be forfeited.
20.4 KMP Equity Holdings and Other Transactions
The following table sets out each key management personnel’s equity holdings (represented by holdings of fully paid
ordinary unrestricted shares in Electro Optic Systems Holdings Limited).
Number of shares
1 Jan 2023
Purchased
during the year
Sold during
the year
Ceased to be
KMP
31 Dec 2023
Mr Garry Hounsell
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson1
Dr Ben Greene2
Ms Deena Shiff3
Mr Robert Kaye4
Dr Andreas Schwer
Mr Clive Cuthell
Dr James Bennett
Mr Matthew Jones5
Mr Ian Cook6
Total
500,000
15,856
18,860
12,963
-
10,459
4,630
-
-
120,000
4,012,139
-
112,555
-
-
-
1,797
-
-
-
-
-
-
-
-
-
4,674,170
135,089
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,012,139)
-
(112,555)
-
-
-
(1,797)
-
500,000
26,315
23,490
12,963
120,000
-
-
-
-
-
-
-
-
(4,126,491)
682,768
The following table sets out each key management personnel’s equity holdings (represented by holdings of restricted
fully paid ordinary shares in Electro Optic Systems Holdings Limited issued under the legacy LFSP).
Number of Legacy LFSP shares
1 Jan 2023
Purchased
during the
year
Sold
during the
year
Lapsed
during the
year
Ceased
to be KMP
31 Dec 2023
Mr Garry Hounsell
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson1
Dr Ben Greene2
Ms Deena Shiff3
Mr Robert Kaye4
Dr Andreas Schwer
Mr Clive Cuthell
Dr James Bennett
Mr Matthew Jones5
Mr Ian Cook6
Total
-
200,000
200,000
150,000
-
2,000,000
-
-
-
-
97,500
40,000
-
2,687,500
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(200,000)
(200,000)
(75,000)
-
-
-
-
-
-
(30,000)
-
-
-
-
-
(2,000,000)
-
-
-
-
-
-
-
(40,000)
-
-
-
-
75,000
-
-
-
-
-
-
67,500
-
-
(505,000)
(2,040,000)
142,500
As at 31 December 2023, there remains 75,000 LFSP shares from the Phase 4 offers.
1) Appointed 24 May 2023 2) Resigned 27 March 2023 3) Resigned 31 January 2023 4) Resigned 20 March 2023 5) Ceased employment 2 November 2023
6) Commenced employment 2 November 2023
60
Electro Optic Systems Holdings Limited | Annual Report 2023
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61
Director’s Report
Director’s Report
20. Remuneration Report (continued)
20.5 Company Performance and Shareholder Returns
The following table sets out key management personnel’s equity holdings represented by holdings of unvested share
options and share rights under the new OEIP released in 2023.
Subject to the rules of the OEIP, no options or rights will vest if the conditions are not satisfied, subject to the discretion
of the Board (and ASX Listing Rules, as applicable) hence the minimum value of the option and rights yet to vest is nil.
The maximum value of the options and rights yet to vest has been determined as the amount of the grant date fair
value of the options and rights that is yet to be expensed.
Number of OEIP Share Rights
1 January
2023
Share rights
issued
during the
year
Other
movement
during the
year
31
December
2023
Grant date
Fair value
of Grant
per Right
$
Financial
years in
which
options may
vest
Maximum
total value
of grant yet
to expense
Mr Clive Cuthell
Dr James Bennett
Total
-
-
744,000
81,250
825,250
-
-
-
744,000
21/4/23
$0.575
81,250
14/7/23
$1.090
825,250
2024
2025
2026
2024
2025
2026
327,023
71,555
398,578
1 January
2023
-
-
-
Share
options
issued
during the
year
1,240,000
135,417
1,375,417
Number of OEIP Share Options
Other
movement
during the
year
31
December
2023
Grant date
Fair value
of Grant
per option
Financial
years in
which
options may
vest
Maximum
total value
of grant yet
to expense
-
-
-
1,240,000
21/4/23
$0.275
135,417
14/7/23
$0.717
1,375,417
2024
2025
2026
2024
2025
2026
215,270
69,379
284,649
Mr Clive Cuthell
Dr James Bennett
Total
Shareholder approval will be sought at the 2024 Annual General Meeting for a grant of 1,260,000 share rights and
2,100,000 share options to the Managing Director and CEO, Dr Andreas Schwer. Although subject to shareholder
approval, the Group is required to commence recognition of the fair value expense of the proposed grant. As such, if
approved by shareholders, the maximum total future value yet to expense is expected to be $553,830 for share rights
and $364,570 for share options, based on the fair value determined at the time recognition commenced.
The table below sets out summary information about the Company’s earnings and movements in shareholder wealth
for the last five financial years.
31 December
31 December
31 December
31 December
31 December
2023
$’000
219,253
(40,193)
(34,107)
2023
$
0.49
1.04
-
2022
$’000
137,912
(124,839)
(115,561)
2022
$
2.34
0.49
-
2021
$’000
212,331
(4,612)
(13,843)
2021
$
5.91
2.34
-
2020
$’000
180,182
(29,901)
(25,208)
2020
$
7.42
5.91
-
2019
$’000
165,385
21,397
17,643
2019
$
2.45
7.42
-
31 December
31 December
31 December
31 December
31 December
Revenue
Net (loss)/profit before tax
Net (loss)/profit after tax
Share price at start of year
Share price at end of year
Dividends paid
People and Culture Committee
and the Hon Kate Lundy.
The current members of the People and Culture Committee are Air Marshal Geoffrey Brown AO (Chair), Mr David Black
The People and Culture Committee provide advice, recommendations and assistance to the Board with respect to
people and culture matters. The Committee advises the Board on remuneration policies and practices for the Board, the
CEO, the Chief Financial Officer (CFO), senior executives and other persons whose activities, individually or collectively,
affect the financial soundness of the Company. The Committee may seek independent advice from external advisors
on related matters.
The policies and practices are designed to:
and externally competitive;
employee; and
c) comply with relevant legal requirements.
a) enable the Company to attract, retain and motivate Directors, executives and employees who will create value for
shareholders within the Company’s values and risk appetite, by providing remuneration packages that are equitable
b) be fair and appropriate having regard to the performance of the Company and the relevant Director, executive or
62
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63
Director’s Report
Director’s Report
20. Remuneration Report (continued)
20.5 Company Performance and Shareholder Returns
The following table sets out key management personnel’s equity holdings represented by holdings of unvested share
options and share rights under the new OEIP released in 2023.
Subject to the rules of the OEIP, no options or rights will vest if the conditions are not satisfied, subject to the discretion
of the Board (and ASX Listing Rules, as applicable) hence the minimum value of the option and rights yet to vest is nil.
The maximum value of the options and rights yet to vest has been determined as the amount of the grant date fair
value of the options and rights that is yet to be expensed.
Number of OEIP Share Rights
1 January
Share rights
Other
31
Grant date
2023
issued
movement
December
during the
during the
2023
year
year
Fair value
of Grant
per Right
Financial
years in
which
$
options may
Maximum
total value
of grant yet
to expense
Mr Clive Cuthell
744,000
744,000
21/4/23
$0.575
327,023
Dr James Bennett
81,250
81,250
14/7/23
$1.090
Total
825,250
825,250
Number of OEIP Share Options
1 January
2023
Share
options
issued
during the
year
Other
movement
during the
year
31
Grant date
December
2023
Fair value
of Grant
per option
Financial
years in
which
options may
Maximum
total value
of grant yet
to expense
Mr Clive Cuthell
1,240,000
1,240,000
21/4/23
$0.275
215,270
vest
2024
2025
2026
2024
2025
2026
vest
2024
2025
2026
2024
2025
2026
71,555
398,578
69,379
284,649
Total
1,375,417
1,375,417
Shareholder approval will be sought at the 2024 Annual General Meeting for a grant of 1,260,000 share rights and
2,100,000 share options to the Managing Director and CEO, Dr Andreas Schwer. Although subject to shareholder
approval, the Group is required to commence recognition of the fair value expense of the proposed grant. As such, if
approved by shareholders, the maximum total future value yet to expense is expected to be $553,830 for share rights
and $364,570 for share options, based on the fair value determined at the time recognition commenced.
-
-
-
-
-
-
-
-
-
-
-
The table below sets out summary information about the Company’s earnings and movements in shareholder wealth
for the last five financial years.
31 December
2023
$’000
31 December
2022
$’000
31 December
2021
$’000
31 December
2020
$’000
31 December
2019
$’000
Revenue
Net (loss)/profit before tax
Net (loss)/profit after tax
219,253
(40,193)
(34,107)
137,912
(124,839)
(115,561)
212,331
(4,612)
(13,843)
180,182
(29,901)
(25,208)
165,385
21,397
17,643
31 December
2023
$
31 December
2022
$
31 December
2021
$
31 December
2020
$
31 December
2019
$
Share price at start of year
Share price at end of year
Dividends paid
0.49
1.04
-
2.34
0.49
-
5.91
2.34
-
7.42
5.91
-
2.45
7.42
-
People and Culture Committee
The current members of the People and Culture Committee are Air Marshal Geoffrey Brown AO (Chair), Mr David Black
and the Hon Kate Lundy.
The People and Culture Committee provide advice, recommendations and assistance to the Board with respect to
people and culture matters. The Committee advises the Board on remuneration policies and practices for the Board, the
CEO, the Chief Financial Officer (CFO), senior executives and other persons whose activities, individually or collectively,
affect the financial soundness of the Company. The Committee may seek independent advice from external advisors
on related matters.
Dr James Bennett
135,417
135,417
14/7/23
$0.717
The policies and practices are designed to:
a) enable the Company to attract, retain and motivate Directors, executives and employees who will create value for
shareholders within the Company’s values and risk appetite, by providing remuneration packages that are equitable
and externally competitive;
b) be fair and appropriate having regard to the performance of the Company and the relevant Director, executive or
employee; and
c) comply with relevant legal requirements.
62
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63
Director’s Report
Auditor’s Independence Declaration
21. Non-audit services
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person
or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors have formed this view based on the fact that the nature and scope of each type of
non-audit service provided means that the audit independence was not compromised.
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are
contained in Note 33 to the financial statements.
22. Auditor’s Independence Declaration
The auditor’s independence declaration is included on page 65 of this Annual Report.
Signed in accordance with a resolution of Directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
Garry Hounsell
Director and Chair of the Board of Directors
Dated at Canberra this 28th day of February 2024
64
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
65
Director’s Report
Auditor’s Independence Declaration
21. Non-audit services
The Directors are satisfied that the provision of non-audit services, during the year, by the auditor (or by another person
or firm on the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the
Corporations Act 2001. The Directors have formed this view based on the fact that the nature and scope of each type of
non-audit service provided means that the audit independence was not compromised.
Details of amounts paid or payable to the auditor for non-audit services provided during the year by the auditor are
contained in Note 33 to the financial statements.
22. Auditor’s Independence Declaration
The auditor’s independence declaration is included on page 65 of this Annual Report.
Signed in accordance with a resolution of Directors made pursuant to s.298(2) of the Corporations Act 2001.
On behalf of the Directors
Garry Hounsell
Director and Chair of the Board of Directors
Dated at Canberra this 28th day of February 2024
64
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited | Annual Report 2023
65
Consolidated Statement of Profit or Loss and Other Comprehensive Income
For The Year Ended 31 December 2023
Continuing operations
Revenue
Other income
Foreign exchange gain
Raw materials and consumables used
Changes in inventory work in progress
Employee benefits expense
Occupancy costs
Administration expenses
Other expenses
Finance cost
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of intangible assets
Impairment of assets
(Loss) before tax from continuing operations
Income tax benefit
(Loss) for the year from continuing operations
Discontinued Operations
(Loss) after tax for the year from discontinued operations
(Loss) for the year
Attributable to:
Owners of the Company
Non‑controlling interests
Other comprehensive income
Items that may be reclassified in future to profit or loss
Exchange differences on translation of foreign operations
Note
3(a)
3(a)
3(b)
3(b)
3(b)
3(b)
3(b)
3(b)
13
5
6
24
2023
$ ‘000
219,253
2,516
892
(128,049)
4,375
(57,273)
(2,050)
(29,962)
(1,930)
(35,582)
(6,356)
(4,430)
(1,597)
‑
2022
$ ‘000
137,912
1,860
12,666
(87,455)
(3,942)
(63,005)
(1,891)
(23,262)
(3,142)
(14,252)
(4,324)
(5,138)
(1,597)
(7,315)
(40,193)
(62,885)
6,086
9,278
(34,107)
(53,607)
‑
(61,954)
(34,107)
(115,561)
(33,275)
(832)
(34,107)
(114,540)
(1,021)
(115,561)
(501)
2,100
Total comprehensive (loss) for the year
(34,608)
(113,461)
Attributable to:
Owners of the Company
Non‑controlling interests
Basic and diluted (loss)/earnings per share
From continuing operations
From discontinued operations
Total
Notes to the financial statements are included on pages 71 to 137.
66
(33,776)
(832)
(34,608)
(112,440)
(1,021)
(113,461)
Note
4
4
2023
Cents per share
2022
Cents per share
(20.9 cents)
‑
(20.9 cents)
(35.8 cents)
(42.2 cents)
(78.0 cents)
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Consolidated Balance Sheet
As at 31 December 2023
CURRENT ASSETS
Cash and short‑term deposits
Trade and other receivables
Tax receivable
Security deposits
Contract asset
Inventories
Prepayments
TOTAL CURRENT ASSETS
NON‑CURRENT ASSETS
Contract asset
Deferred tax asset
Security deposits
Right of use assets
Goodwill
Intangible assets
Property, plant and equipment
TOTAL NON‑CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Contract liabilities
Secured borrowings
Unsecured borrowings
Lease liabilities
Tax payable
Provisions
TOTAL CURRENT LIABILITIES
NON‑CURRENT LIABILITIES
Secured Borrowings
Lease liabilities
Provisions
TOTAL NON‑CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
Equity attributable to owners of the Company
Non‑controlling interests
TOTAL EQUITY
Notes to the financial statements are included on pages 71 to 137.
Note
25
7
32
8
9
10
8
5
32
11
12
14
15
16
17
18
18
19
20
18
19
20
21
22
24
2023
$ ‘000
70,997
8,466
‑
21,086
29,090
73,397
16,384
219,420
38,946
8,950
45,970
19,783
12,373
18,283
29,508
2022
$ ‘000
21,681
7,419
12,245
‑
127,899
74,841
17,591
261,676
36,520
3,326
35,588
18,252
12,373
12,446
37,217
173,813
155,722
393,233
417,398
40,804
20,587
19,875
‑
4,876
3,584
25,769
115,495
44,947
19,043
14,674
78,664
43,179
22,168
21,391
1,904
3,939
‑
12,212
104,793
49,443
20,507
9,563
79,513
194,159
184,306
199,074
233,092
432,248
12,633
(241,774)
203,107
(4,033)
199,074
432,248
12,545
(208,499)
236,294
(3,202)
233,092
67
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Consolidated Statement of Changes in Equity
For the year ended 31 December 2023
2023
Accumulated
losses
$’000
Issued
capital
$’000
Foreign
currency
translation
reserve
(FCTR)
$’000
Employee
equity settled
benefits
reserve
$’000
Attributable
to owners of
the parent
$’000
Non‑
controlling
interests
$’000
Total
Equity
$’000
At 1 January 2023
(208,499)
432,248
277
12,268
236,294
(3,202)
233,092
Loss for the year
(33,275)
Exchange differences
arising on translation of
foreign operations
Total comprehensive
profit for the year
Recognition of
share‑based payments
expense
‑
(33,275)
‑
‑
‑
‑
‑
At 31 December 2023
(241,774)
432,248
‑
(501)
(501)
‑
(224)
‑
‑
‑
(33,275)
(832)
(34,107)
(501)
‑
(501)
(33,776)
(832)
(34,608)
589
12,857
589
‑
589
203,107
(4,033)
199,074
2022
Accumulated
losses
$’000
Issued
capital
$’000
Foreign
currency
translation
reserve
(FCTR)
$’000
Employee
equity settled
benefits
reserve
$’000
Attributable
to owners of
the parent
$’000
Non‑
controlling
interests
$’000
Total
Equity
$’000
At 1 January 2022
(93,959)
413,728
(1,823)
13,390
331,336
(2,181)
329,155
Loss for the year before
reclassification from FCTR
(110,365)
Reclassification of FCTR
Loss on disposal of
foreign operations
(Loss)/Profit for the year
Exchange differences
arising on translation of
foreign operations
Total comprehensive
(loss)/profit for the year
Issue of 12,500,000
equity shares at $1.20
per share on 4 July 2022
(Net of issuance cost of
$583,000)
Issue of 168,737 equity
shares at $1.20 per share
on 27 July 2022 under the
share purchase plan
Issue of 7,653,040
equity shares at $0.5096
per share on 13 Oct
2022 under financing
arrangements
Recognition of
share‑based payments
expense (reversal)
(4,175)
(114,540)
‑
(114,540)
‑
‑
‑
‑
‑
‑
‑
‑
‑
14,417
203
3,900
‑
‑
‑
(110,365)
(1,021)
(111,386)
4,175
4,175
(2,075)
2,100
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
(1,122)
12,268
‑
‑
‑
(110,365)
(1,021)
(111,386)
(2,075)
‑
(2,075)
(112,440)
(1,021)
(113,461)
14,417
203
3,900
(1,122)
‑
‑
‑
‑
14,417
203
3,900
(1,122)
236,294
(3,202)
233,092
At 31 December 2022
(208,499)
432,248
277
Notes to the financial statements are included on pages 71 to 137.
68
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Consolidated Statement of Cash Flows
For the year ended 31 December 2023
Note
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Income tax received/(paid)
Interest and bill discounts received
Interest and other costs of finance paid
Net cash inflows/(outflows) from operating activities
25(b)
Cash flows from investing activities
Payment for property, plant and equipment
Security deposits for performance bonds
Repayment of loan by associated entity
Payment to acquire a business
Net cash (outflows) from investing activities
Cash flows from financing activities
Proceeds from issue of new shares
Repayment of lease liabilities
Proceeds from borrowings
Repayment of borrowings
Transaction costs related to borrowings
Net cash (outflows)/inflows from financing activities
2023
$ ‘000
325,472
(215,914)
16,747
1,010
(14,191)
113,124
(2,933)
(31,793)
‑
‑
2022
$ ‘000
145,889
(188,637)
(1,014)
230
(8,040)
(51,572)
(19,253)
(11,212)
2,576
(421)
(34,726)
(28,310)
‑
(4,648)
‑
(24,404)
‑
(29,052)
14,620
(5,045)
75,687
(35,807)
(4,104)
45,351
Net increase/(decrease) in cash and cash equivalents
49,346
(34,531)
Cash and cash equivalents at the beginning of the financial year
21,681
59,261
Effects of exchange rate fluctuations on the balances of cash held in foreign currencies
(30)
(3,049)
Cash and cash equivalents at the end of the financial year
25(a)
70,997
21,681
Notes to the financial statements are included on pages 71 to 137.
69
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Financial Statements and Notes
Notes to the Consolidated Financial Statements
1.
2.
3.
4.
5.
6.
7.
8.
9.
Summary of accounting policies
Judgements, estimates and assumptions
(Loss)/profit before tax ‑ continuing operations
Earnings per share
Income tax
Discontinued operations ‑ prior year
Trade and other receivables
Contract asset
Inventories
10. Prepayments
11. Right of use assets
12. Goodwill
13.
14.
Impairment of assets
Intangible assets
15. Property, plant and equipment
16. Current trade and other payables
17. Contract liabilities
18. Borrowings
19.
Lease liabilities
20. Provisions
21.
Issued capital
22. Reserves
23. Share‑based payments
24. Accumulated losses
25. Notes to the cash flow statement
26. Related party disclosures
27. Controlled entities
28.
29.
Joint operations
Financial risk management objectives and policies
30. Segment Information ‑ continuing operations
31. Parent entity disclosure
32. Contingent liabilities and commitments
33. Remuneration of auditors
34. Subsequent events
35. Additional company information
71
82
85
87
88
92
93
93
94
94
94
95
96
97
98
103
103
103
105
106
108
109
110
119
120
121
122
125
125
131
134
135
136
137
137
70
Electro Optic Systems Holdings Limited | Annual Report 2023
Notes to the Consolidated Financial Statements
For the year ended 31 December 2023
1. Summary of Accounting Policies
a. Corporate Information
The consolidated financial statements of Electro Optic
Systems Holdings Limited and its subsidiaries (collectively,
the Group) for the year ended 31 December 2023
were authorised for issue by the Directors on
28th February 2024.
For the purposes of preparing the consolidated
financial statements, the Company is a for‑profit entity.
Electro Optic Systems Holdings Limited (the Company,
or parent) is a limited company incorporated and
domiciled in Australia and whose shares are publicly
traded. The registered office is in Symonston, Canberra
in Australia.
b. Basis of Preparation
The consolidated financial statements are general
purpose financial statements which have been prepared in
accordance with the Corporations Act 2001 and Australian
Accounting Standards issued by the Australian Accounting
Standards Board (AASB) and International Financial
Reporting Standards as issued by the International
Accounting Standards Board (IASB) (collectively referred to
as IFRS) and complies with other requirements of the law.
The financial report has been prepared on the basis of
historical cost unless otherwise stated. Cost is based on
the fair values of the consideration given in exchange for
assets. All amounts are presented in Australian dollars,
unless otherwise stated. The presentation and functional
currency of the Group is Australian dollars. Certain
comparative amounts have been restated to apply with the
method of computation in the current year.
The Company is a company of the kind referred to in ASIC
Corporations (Rounding in Financials/Directors’ Reports)
Instrument 2016/191, dated 24 March 2016, and in
accordance with that Corporations Instrument amounts
the financial report are rounded to the nearest thousand
dollars, unless otherwise indicated.
c. Going Concern
The financial report has been prepared on the going
concern basis which assumes continuity of normal
business activities and the realisation of assets and the
settlement of liabilities in the ordinary course of business
and at amounts stated in the financial report.
For the year ended 31 December 2023, the Group
incurred a Loss Before Tax from Continuing Operations
of $40.2m (December 2022: loss of $62.9m) and had
a net cash inflow from operating activities of $113.1m
(December 2022: net outflows of $51.6m), and a net
increase in cash and cash equivalents held of $49.3m
from December 2022 resulting in a cash balance of
$71.0m at 31 December 2023 (December 2022: $21.7m).
The Group as at 31 December 2023 has net current assets
of $103.9m (December 2022: $156.9m), which includes
debt repayments of $20.5m due in April 2024.
In September and October 2022, the Group entered
into binding agreements with a financier for borrowing
facilities, of which all facilities are fully drawn at
31 December 2023. A $26.9m repayment was made
on 5 September 2023 to repay in full the first working
capital facility.
Under the borrowing facilities, further repayment of the
total balances is required as follows:
• $20.5m due on 11 April 2024; and
• $52.1m due on 11 October 2025.
Based upon the information available at the date of signing
this report, including current estimates of cash inflows and
contract wins, the Group expects to have sufficient cash at
bank to make the required debt repayment of $20.5m on
11 April 2024 and forecasts it will generate sufficient net
cash flows to fund the required repayment of borrowings
of $52.1m on 11 October 2025.
The Directors, in their consideration of the appropriateness
of the going concern basis for the preparation of this
annual financial report, have caused to be prepared a
cash flow forecast through to 28 February 2025. This
cash flow forecast supports the ability of the Group to
continue as a going concern. The underlying assumptions
of the forecast include acknowledgement of the intrinsic
operational risks of the business, the existing cash
position of the Group, the need to convert the contract
asset into cash, the ongoing loan repayment requirements
and the potential need to obtain further funding.
EOS continues in advanced discussions relating to Offset
Credit Obligations in the Middle East, as disclosed in Note
32. EOS expects to generate offset credits via economic
activity and EOS does not expect to settle the offset
obligation in cash, either through the Credit Purchase
Program or the bank guarantee.
71
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 1. Summary of Accounting Policies (continued)
The Group is required to comply with borrowing covenants
each quarter, which if not met, would give the lender the
right to seek immediate repayment. During the year ended
31 December 2023, and in the period up to the date of
this announcement, the Group worked with the lender to
ensure it did not breach any of its covenants. Further, a
facility amendment was executed with the Group’s primary
lender as outlined in Note 18 which agreed to relax certain
restrictions included in the borrowing facility agreements
subsequent to year end.
The Group continues to closely monitor its cash flow
outlook and compliance with its borrowing covenants.
The ability of the Group to maintain liquidity, fund the
working capital required to grow the business, repay
debts, and meet its borrowing covenants is dependent
on the Group continuing to invoice customers and collect
cash in a timely manner. Should it appear that borrowing
covenants may not be complied with, or the Group may
not be in a position to meet its debt repayments, or the
Group may not have adequate liquidity for its operations,
the Directors will assess available options to restructure
debt commitments or access additional equity or debt
funding as required.
In the opinion of the Directors, the ability of the Group to
continue as a going concern and pay its debts as and
when they become due and payable is dependent on:
•
the receipt of significant cash collections from
customers as a result of:
a) the continued realisation of the contract asset; and
b) key military and government customers making
timely payments for the goods supplied in
accordance with contractual terms;
•
the continued ability of the Group to deliver against
its contracts on time, to the required specifications
and within budgeted costs, and to secure additional
contracts, including by converting key opportunities
within the Defence and Space sector pipelines;
•
•
•
•
the Group reaching a satisfactory agreement in relation
to plans to acquit the Offset Obligations arising under
an overseas contract;
to the extent required to meet the repayment
obligations under borrowing arrangements, the
successful completion of further debt or equity raisings;
the forbearance of creditors in respect of amounts
which may be beyond normal payment terms as
required; and
the continued adherence to borrowing covenants by the
Group, and the forbearance of lenders regarding any
covenant breaches should any arise.
The Directors note that whilst the Group has been
successful in securing debt finance and raising capital in
the past, there is no assurance that it will be successful in
any potential future recapitalisation and/or refinancing of
the Group should this be required.
Should the Group be unable to achieve successful
outcomes in relation to the above matters (in particular,
the ability to convert the contract asset into cash, the
ability to secure the continued support of the financiers to
the Group, the Group reaching a satisfactory agreement in
relation to plans to acquit the Offset Obligations, and the
ability to secure debt finance or raise capital should that be
required), then material uncertainty exists that may cast
significant doubt on the ability of the Group to continue as
a going concern and therefore, it may be required to realise
its assets and extinguish its liabilities other than in the
normal course of business and at amounts different from
those stated in the financial report.
No adjustments have been made to the financial report
relating to the recoverability and classification of recorded
asset amounts or to the amounts and classification of
liabilities that might be necessary should the Group not
continue as a going concern.
72
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes d. Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the
Company. Control is achieved when the Company:
• has power over the investee;
•
is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Company 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 listed above.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company
loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year
are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company
gains control until the date when the Company ceases to control the subsidiary.
All intra‑Group assets and liabilities, equity, income, expenses, and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.
Non‑controlling interests in subsidiaries are identified separately from the Group’s equity therein. The interests of
non‑controlling shareholders with present ownership interests entitling them to a proportionate share of net assets upon
liquidation may initially be measured at fair value or at the non‑controlling interests’ proportionate share of the fair value
of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition‑by‑acquisition basis.
Other non‑controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of
non‑controlling interests is the amount of those interests at initial recognition plus the non‑controlling interests’ share of
subsequent changes in equity. Total comprehensive income is attributed to non‑controlling interests even if this results in
non‑controlling interests having a deficit balance.
e. Adoption of New and Revised Standards
New and amended standards that are effective for the current year
The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting
Standards Board (the AASB) that are relevant to its operations and effective for the current year. These standards did not
materially affect the Group’s accounting policies or any of the amounts recognised in the financial statements.
New and revised AASB Standards in issue but not yet effective
At the date of authorisation of the financial statements, the Group has not applied the following new and revised Australian
Accounting Standards, Interpretations and amendments that have been issued but are not yet effective. These are not
expected to have a material impact on the Group’s accounting policies or any of the amounts recognised in the
financial statements.
Standard/amendment
Effective for annual
reporting periods
beginning on or after
Expected to be initially
applied in the financial
year ending
• AASB 2020‑1 Amendments to Australian Accounting Standards ‑ Classification of Liabilities
as Current or Non‑current
1 January 2024
31 December 2024
• AASB 2022‑5 Amendments to Australian Accounting Standards ‑ Lease Liability in a Sale and
Leaseback
1 January 2024
31 December 2024
• AASB 2023‑1 Amendments to Australian Accounting Standards ‑ Amendments to AASB 107
and AASB 7 ‑ Disclosure of Supplier Finance Arrangements
1 January 2024
31 December 2024
• AASB 2023‑5 Amendments to Australian Accounting Standards ‑ Lack of Exchangeability
1 January 2025
31 December 2025
• AASB 2014‑10 Amendments to Australian Accounting Standards ‑ Sale or Contribution of
Assets between an Investor and its Associate or Joint Venture
1 January 2025
31 December 2025
73
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 1. Summary of Accounting Policies (continued)
(ii) Timing of revenue recognition
f. Revenue from Contracts with Customers
The Group recognises revenue from the following
major sources:
• engineering design, manufacture and supply of remote
weapon systems and related installation, integration
and support services;
• design, manufacture, delivery and operation of sensors
for space domain awareness and space control; and
• design, development and provision of satellite
communications products, systems and services.
Customer contracts across all segments, including both
products and services, are highly customised and are
configured specifically for each client’s operational and
commercial requirements.
(i) Transaction price
Revenue is measured based on the consideration to
which the Group expects to be entitled in a contract with a
customer. This transaction price is updated for changes in
scope or price (or both) that are approved by all parties to
the contract, either in writing or by oral agreement.
Revenue recognition is constrained for negative variable
consideration in relation to delays in formal customer
acceptance or potential late delivery penalties/liquidated
damages. Once the constraint is removed, a cumulative
catch‑up adjustment is made to recognise the
related revenue.
There is no significant financing component in the
Group’s contracts with customers as the period between
provision of goods and services and the receipt of cash
from customers is less than a year. Payment terms which
extend beyond a year are for reasons other than the
provision of a significant financing component.
The timing of revenue recognition (i.e. over time or
at a point in time) is determined by the nature and
specifications of the contracts that the Group enters
into with its customers.
A. Revenue recognition over time
Goods manufactured and services delivered under the
Group’s major contracts do not have an alternative use
for the Group and the Group has an enforceable right to
payment for performance completed to date, therefore,
the Group recognises revenue for its major contracts
over time.
• The transaction price is allocated to performance
obligations based on standalone selling prices.
The output method, based on the delivery of goods
or services to customers or the achievement of
contract milestones, best depicts progress under these
contracts as it represents the best measurement of
value to the customer of goods or services to date
relative to the remaining goods or services promised
under the contract.
• For other contracts the input method offers the best
depiction of progress under the contract. For such
contracts, the Group recognises revenue by reference
to costs incurred to date relative to total expected
contract costs.
B. Revenue recognition at a point time
For contracts where revenue at a point in time offers
the best depiction of the Group’s satisfaction of its
performance obligations, the Group recognises revenue
when control transfers to the customer. Control is
assessed as transferred to the customer when the Group
has a present right to payment for the asset, typically upon
delivery of goods and services to customers.
Under bill and hold arrangements, revenue is recognised
once formal acceptance is received from customers.
Interest revenue is recognised using the effective interest
rate method.
74
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes g. Discontinued Operations
B. Measurement
A disposal Group qualifies as a discontinued operation
if it is a component of an entity that either has been
disposed of, or it is classified as held for sale and:
•
•
•
represents a separate major line of business or
geographical area of operations,
is part of a single co‑ordinated plan to dispose of a
separate major line of business or geographical area of
operations, or
is a subsidiary acquired exclusively with a view
to resale.
Discontinued operations are excluded from the results
of continuing operations and are presented as a single
amount as profit or loss after tax from discontinued
operations in the statement of profit or loss.
An operation was discontinued in the prior year. Refer to
Note 6 for further information.
All other notes to the financial statements include amounts
for continuing operations, unless indicated otherwise.
h. Financial Instruments
(i) Financial assets
A. Classification
The Group classifies its financial assets in the following
measurement categories:
•
those to be measured subsequently at fair value (through
profit or loss or other comprehensive income); and
•
those to be measured at amortised cost.
The classification depends on the Group’s business model
for managing financial assets and the contractual cash flow
characteristics of the financial assets. For assets measured
at fair value, gains and losses will either be recorded
through profit or loss or other comprehensive income. For
investments in debt instruments, this will depend on the
business model in which the investment is held.
For investments in equity instruments not held for trading,
this will depend on whether the Group has made an
irrevocable election at the time of initial recognition to
account for the equity investment at fair value through
other comprehensive income. The Group reclassifies debt
investments when and only when its business model for
managing those assets changes.
At initial recognition, the Group measures a financial asset
at its fair value plus, in the case of a financial asset not
at fair value through profit or loss, transaction costs that
are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at fair
value through profit or loss are expensed in profit or loss.
Measurement of trade and other receivables remains at
amortised cost consistent with the prior year.
C. Debt instruments
Subsequent measurement of debt instruments depends
on the Group’s business model for managing the asset
and the cash flow characteristics of the asset. The Group
measures its debt instruments using the amortised
cost basis. Using this method, assets that are held for
collection of contractual cash flows where those cash
flows represent solely payments of principal and interest
are measured at amortised cost. A gain or loss on a debt
investment that is subsequently measured at amortised
cost and is not part of a hedging relationship is recognised
in profit or loss when the asset is derecognised or
impaired. Interest income from these financial assets is
included in finance income using the effective interest rate
method.
D. Impairment
The Group assesses on a forward‑looking basis
the expected credit losses associated with its debt
instruments carried at amortised cost. The impairment
methodology applied depends on whether there has been
a significant increase in credit risk. For trade receivables,
contract assets, loans to associates and lease receivables,
the Group applies the simplified approach permitted by
AASB 9, which requires expected lifetime losses to be
recognised from initial recognition of the receivables.
(ii) Financial Liabilities
A. Interest bearing liabilities
All loans and borrowings are initially recognised at fair
value less transaction costs. After initial recognition,
interest bearing liabilities are stated at amortised cost
with any difference between cost and redemption value
being recognised in the statement of profit or loss over the
period of the borrowings on an effective interest basis.
B. Trade and other payables
Liabilities are recognised for amounts to be paid for goods
or services received. Trade payables are settled on terms
aligned with the normal commercial terms in the Group’s
countries of operation.
75
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 1. Summary of Accounting Policies (continued)
(ii) Foreign operations
i. Cash and Short‑term Deposits
Cash and short‑term deposits comprise cash on hand,
cash in banks and investments in money market
instruments, net of outstanding bank overdrafts. Cash
equivalents are short‑term (generally with original maturity
of three months or less), highly liquid investments that are
readily convertible to a known amount of cash and which
are subject to an insignificant risk of changes in value.
j. Employee Benefits
Provision is made for benefits accruing to employees
in respect of wages and salaries, annual leave, and long
service leave when it is probable that settlement will be
required, and they are capable of being measured reliably.
Provisions made in respect of short‑term employee
benefits are measured at their nominal values using
the remuneration rate expected to apply at the time
of settlement.
Provisions made in respect of long‑term employee
benefits are measured as the present value of the
estimated future cash outflows to be made by the Group
in respect of services provided by employees up to the
reporting date.
Contributions to defined benefit contribution
superannuation plans are expensed when incurred.
k. Foreign Currency
(i) Foreign currency transactions
Transactions in foreign currencies are recorded at the
exchange rate prevailing on the date of transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated at the functional currency closing
rates of exchange at the reporting date.
Exchange differences arising on settlement or translation
of monetary items are recognised in profit or loss.
Non‑monetary items that are measured in terms of
historical cost in a foreign currency are recorded using
the exchange rates at the date of the transaction.
Non‑monetary items measured at fair value in a foreign
currency are translated using the exchange rates at the
date when the fair value was measured. The gain or loss
arising on translation of non‑monetary items measured
at fair value is treated in line with the recognition of
the gain or loss on the change in fair value of the item
(i.e. translation differences on items whose fair value gain
or loss is recognised in Other Comprehensive Income or
profit or loss are also recognised in Other Comprehensive
Income or profit or loss, respectively).
For the purpose of presenting consolidated financial
statements, the assets and liabilities of the Group’s
foreign operations (having non‑AUD functional currency)
are translated into Australian dollars at the exchange rate
prevailing at the reporting date, income and expenses
items are translated at the average rate of exchange for
the respective months. Exchange differences arising on
such translation are recognised as currency translation
reserve under equity.
Exchange differences arising from the translation of
a foreign operation previously recognised in currency
translation reserve in equity are not reclassified from
equity to the consolidated profit or loss until the disposal
of the operation.
l. Goods and Services Tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
• where the amount of GST incurred is not recoverable
from the taxation authority, it is recognised as part of
the cost of acquisition of an asset or as part of an item
of expense; or
•
for receivables and payables which are recognised
inclusive of GST.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables
or payables. Cash flows are included in the statement of
cash flows on a gross basis. The GST component of cash
flows arising from investing and financing activities which
is recoverable from, or payable to, the taxation authority is
classified as operating cash flows.
m. Government Grants
Government grants are recognised in profit or loss on
a systematic basis over the periods in which the costs
for which the grants are intended to compensate are
recognised. Where a grant’s primary condition is that
the Group should purchase, construct or otherwise
acquire non‑current assets (including property, plant and
equipment), the grant is recognised as deferred income
in the consolidated balance sheet, which is subsequently
transferred to profit or loss on a systematic basis over the
useful lives of the related assets.
Government grants that are receivable as compensation
for expenses or losses already incurred, or for the purpose
of giving immediate financial support to the Group with
no future related costs, are recognised as income in the
period in which the grants becomes receivable.
76
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes n. Impairment of Assets
At each reporting date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets have
suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order
to determine the extent of the impairment loss (if any).
Where the asset does not generate cash flows that are
independent from other assets, the Group estimates the
recoverable amount of the cash‑generating unit to which
the asset belongs.
Goodwill and intangible assets with indefinite useful
lives are tested for impairment annually and whenever
there is an indication that the asset may be impaired. An
impairment of goodwill is not subsequently reversed.
The recoverable amount is the higher of fair value less
cost of disposal and value in use. In assessing value in
use, the estimated future cash flows are discounted to
their present value using a discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset for which the estimates
of future cash flows have not been adjusted.
If the recoverable amount of an asset or CGU is estimated
to be less than its carrying amount, the carrying amount
of the asset or CGU is reduced to its recoverable
amount. An impairment loss is recognised in profit or
loss immediately.
Other than goodwill, where an impairment loss
subsequently reverses the carrying amount of the asset or
CGU is increased to the revised estimate of its recoverable
amount, but only to the extent that the increased carrying
amount does not exceed the carrying amount that would
have been determined had no impairment loss been
recognised for the asset or CGU in prior years. A reversal
of an impairment loss is recognised in profit or
loss immediately.
o. Income Tax
(i) Current tax
Current tax is calculated by reference to the amount of
income taxes payable or recoverable in respect of the
taxable profit or tax loss for the year, using tax rates and
tax laws that have been enacted or substantively enacted
by the reporting date. Current tax for current and prior
years is recognised as a liability (or asset) to the extent
that it is unpaid (or refundable).
(ii) Deferred tax
Deferred tax is recognised on temporary differences
arising from differences between the carrying amount of
assets and liabilities in the financial statements and their
corresponding tax base.
In principle, deferred tax liabilities are recognised for all
taxable temporary differences. Deferred tax assets are
recognised to the extent that it is probable that sufficient
taxable amounts will be available against which deductible
temporary differences or unused tax losses and tax
offsets can be utilised.
However, deferred tax assets and liabilities are not
recognised if the temporary differences giving rise to
them arise from the initial recognition of assets and
liabilities (other than as a result of business combination)
which affects neither taxable income nor accounting
profit. Furthermore, a deferred tax liability is not recognised
in relation to taxable temporary differences arising
from goodwill.
Deferred tax assets arising from deductible temporary
differences associated with these investments and
interests are only recognised to the extent that it is
probable that there will be sufficient taxable profits against
which to utilise the benefits of the temporary differences
and they are expected to reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period(s) when the
assets and liabilities giving rise to them are realised or
settled, based on tax rates (and tax laws) that have been
enacted or substantively enacted by the reporting date.
The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from
the manner in which the Group expects, at the reporting
date, to recover or settle the carrying amount of its assets
and liabilities.
Deferred tax assets and liabilities are offset when they
relate to income taxes levied by the same taxation
authority and the Company/Group intends to settle its
current tax assets and liabilities on a net basis.
77
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 1. Summary of Accounting Policies (continued)
p. Intangible Assets
(iii) Current and deferred tax for the year
(i) Research and development costs
Current and deferred tax is recognised as an expense
or income in the Statement of profit or loss and other
comprehensive income, except when it relates to items
credited or debited directly to equity, in which case the
deferred tax is also recognised directly in equity, or
where it arises from the initial accounting for a business
combination, in which case it is taken into account in the
determination of goodwill or bargain purchase gain.
(iv) Tax consolidation
The Company and all its wholly‑owned Australian entities
are part of a tax‑consolidated Group under Australian
taxation law. Electro Optic Systems Holdings Limited
is the head entity in the tax‑consolidated Group. Tax
expense/income, deferred tax liabilities and deferred
tax assets arising from temporary differences of the
members of the tax‑consolidated Group are recognised in
the separate financial statements of the members of the
tax‑consolidated Group using the ‘separate taxpayer within
the Group’ approach.
Current tax liabilities and assets and deferred tax
assets arising from unused tax losses and tax credits
of the members of the tax‑consolidated Group are
recognised by the Company (as the head entity in the
tax‑consolidated Group).
There are formal tax funding and tax sharing
arrangements between the companies comprising the
Australian tax‑Group as at 31 December 2023.
Expenditure on research activities is recognised as an
expense in the year in which it is incurred. Where no
internally generated intangible assets can be recognised,
development expenditure is recognised as an expense in
the year as incurred.
(ii) Intangible assets acquired in a business combination
Intangible assets acquired in a business combination are
identified and recognised separately from goodwill where
they satisfy the definition of an intangible asset, and their
fair value can be measured reliably.
Subsequent to initial recognition, intangible assets
acquired in a business combination are reported at
cost less accumulated amortisation and accumulated
impairment losses, on the same basis as intangible assets
acquired separately.
The following estimated useful lives are used in the
calculation of amortisation on a straight‑line basis:
Core technology (not patented)
Patented technology
Software
Customer contracts and relationships
Licences
q. Inventories
10 years
15 years
5 years
15 years
4 years
Inventories are measured at the lower of cost and net
realisable value.
Costs are assigned on the following basis:
Raw materials:
weighted average cost basis for raw material
inventory
Work‑in‑progress:
standard cost
Net realisable value represents the estimated selling price
in the ordinary course of business, less estimated costs of
completion, estimated costs necessary to make the sale,
and provision for obsolescence.
78
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes r. Leases
The Group assesses at contract inception whether a
contract is or contains a lease. That is, if the contract
conveys the right to control the use of an identified asset
for the period of time in exchange for consideration.
The Group recognises a right‑of‑use asset and a
corresponding lease liability with respect to all lease
agreements in which it is the lessee, except for short‑term
leases (defined as leases with a lease term of 12 months
or less) and leases of low value assets. For these leases,
the Group recognises the lease payments as an operating
expense on a straight‑line basis over the term of the lease
unless another systematic basis is more representative
of the time pattern in which economic benefits from the
leased asset are consumed.
(i) Right of use asset
The Group recognises right‑of‑use assets at the
commencement date of the lease (i.e. the date the
underlying asset is available for use). Right of use
assets are measured at cost, less any accumulated
depreciation and impairment losses, and adjusted for any
remeasurement of lease liabilities. The cost of right‑of‑use
assets includes the amount the lease liability recognised,
initial direct costs incurred, and lease payments made
at or before the commencement date less any lease
incentives received.
Right‑of‑use assets are depreciated on a straight‑line basis
over the shorter of the lease term and the estimated useful
lives of the assets. Right‑of‑use assets are also subject to
impairment in line with AASB 136 Impairment of Assets
(refer note 1(n)).
Where the Group has an obligation for costs to dismantle
and remove a leased asset, restore the site on which it is
located or restore the underlying asset to the condition
required by the terms and conditions of the lease, a
provision is recognised and measured under AASB 137.
The costs are included in the related right‑of‑use asset,
unless those costs are incurred to produce inventories.
If a lease transfers ownership of the underlying asset
or the cost of the right‑of‑use asset reflects that the
Group expects to exercise a purchase option, the related
right‑of‑use asset is depreciated over the useful life of the
underlying asset.
(ii) Lease liabilities
At the commencement date of the lease, the Group
recognised lease liabilities measured at the present value
of the lease payments to be made over the lease term.
In calculating the present value of the lease payment,
The Group uses the discount rate implicit in the lease,
or if this rate cannot be readily determined, the Group’s
incremental borrowing rate.
Lease payments included in the measurement of the lease
liability comprise:
• fixed lease payments (including in‑substance fixed
payments), less any lease incentives;
• variable lease payments that depend on an index
or rate,
•
•
the amount expected to be paid under residual value
guarantees;
the exercise price of purchase options, if the lessee is
reasonably certain to exercise the options; and
• payments of penalties for terminating the lease.
The lease liability is subsequently measured by increasing
the carrying amount to reflect interest on the lease liability
(using the effective interest method) and by reducing the
carrying amount to reflect the lease payments made.
The Group remeasures the carrying amount of the lease
liability if there is a modification, a change in the lease
term, a change in the lease payments (eg, changes to
future payments resulting from a change in an index or
rate used to determine lease payments) or a change in the
assessment of an option to purchase the underlying asset.
79
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 1. Summary of Accounting Policies (continued)
s. Property, Plant and Equipment
the obligation. Where a provision is measured using the
cash flows estimated to settle the present obligation, its
carrying amount is the present value of those cash flows.
Plant and equipment and leasehold improvements
are stated at cost less accumulated depreciation and
impairment. Cost includes expenditure that is directly
attributable to the acquisition of an item. 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.
Depreciation is provided on property, plant and equipment.
Depreciation is calculated so as to write‑off the net cost
or other revalued amount of each asset over its expected
useful life to its estimated residual value. Leasehold
improvements are depreciated over the period of the lease
or estimated useful life, whichever is the shorter, using the
straight‑line method. The estimated useful lives, residual
values and depreciation method are reviewed at the end
of each annual accounting period. In particular, the Group
considers the impact of health, safety and environmental
legislation in its assessment of expected useful lives
and estimated residual values. Furthermore, the Group
considers climate‑related matters, including physical and
transition risks in determining if climate‑related legislation
and regulations might impact either residual values or
useful lives.
The following estimated useful lives are used in the
calculation of depreciation:
Plant and equipment
Leasehold improvements
Office equipment
Furniture, fixture and fittings
Motor vehicles
Computer equipment
Test equipment
t. Provisions
3 to 15 years
3 to 5 years
5 to 15 years
5 to 15 years
5 to 15 years
3 to 4 years
3 to 4 years
Provisions are recognised when the Group has a present
obligation, the future sacrifice of economic benefits
is probable, and the amount of the provision can be
measured reliably.
When some or all of the economic benefits required to
settle a provision are expected to be recovered from a
third party, the receivable is recognised as an asset if it is
probable that recovery will be received, and the amount of
the receivable can be measured reliably.
The amount recognised as a provision is the best estimate
of the consideration required to settle the present obligation,
taking into account the risks and uncertainties surrounding
(i) Warranties
Provisions for warranty costs are recognised as agreed in
individual sales contracts, at the Directors best estimate
of the expenditure required to settle the Group’s liability.
Sales‑related warranties cannot be purchased separately,
and they serve as an assurance that the products sold
comply with agreed‑upon specifications.
(ii) Contract losses
Present obligations arising under onerous contracts are
recognised and measured as a provision. An onerous
contract is considered to exist where the Group has a
contract under which the unavoidable costs of meeting
the obligations under the contract exceed the economic
benefits expected to be received under it.
(iii) Make good provisions and decommissioning costs
A make good provision, including decommissioning costs,
is recognised when there is a present obligation which it
is probable that an outflow of economic benefits will be
required to settle and the amount of the provision can
be measured reliably. The estimated future obligations
include the costs of dismantling and removing leasehold
improvement, decommissioning plant and equipment, or
otherwise restoring facilities and premises as required in
accordance with the underlying agreements.
(iv) RWS Units
A provision to manufacture and resupply RWS units, is
recognised when there is a present obligation under an
existing contract to settle the Group’s obligation under the
contract and the amount of the provision can be measured
reliably. The estimated future obligations include the
costs of the manufacture and resupply as required in
accordance with the underlying agreements.
(v) Finance costs
A provision for finance costs is recognised when there is
a present obligation which it is probable that an outflow
of economic benefits will be required to settle and the
amount of the provision can be measured reliably.
The estimated future obligation relates to the fee dispute
with the lender that was resolved through a conditional
facility amendment executed on 22 December 2023.
(vi) Legal costs
A provision for legal costs is recognised when there is
a present obligation which it is probable that an outflow
of economic benefits will be required to settle and the
amount of the provision can be measured reliably.
80
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes u. Share‑based Payments to Employees
w. Climate‑Related Matters
Equity‑settled share‑based payments are measured
at fair value at the date of the grant. Fair value is
measured by use of either the Monte Carlo model or
the Binomial model. The models have been adjusted,
based on management best estimates, for the effects of
non‑transferability, exercise restrictions and behavioural
considerations. The fair value determined at the grant date
of the equity‑settled share‑based payments is expensed
on a straight‑line basis over the vesting period, based on
the Group’s estimate of shares that will eventually vest.
Ordinary shares issued under the Legacy LFSP are
accounted for as an in‑substance option and initially
measured using a Monte Carlo simulation model.
Directors reassess the non‑market inputs and adjust
throughout the life for likely eventuality.
v. Goodwill
Goodwill is initially recognised and measured as the
excess of the sum of the consideration transferred, the
amount of any non‑controlling interests in the acquirer,
and the fair value of the acquirer’s previously held equity
interest (if any) over the net of the acquisition‑date amount
of the identifiable assets acquired and liabilities assumed.
Goodwill is not amortised but is reviewed for impairment
at least annually. For the purpose of impairment testing,
goodwill is allocated to each of the Group or Group’s cash
generating units expected to benefit from the synergies of
the combination. Cash generating units to which goodwill
has been allocated are tested for impairment annually, or
more frequently when there is an indication that the unit
may be impaired.
The Group considers climate‑related matters in estimates
and assumptions, where appropriate. This assessment
includes a wide range of possible impacts on the Group
due to both physical and transition risks. Even though the
Group believes its business model and products will still
be viable after the transition to a low‑carbon economy,
climate‑related matters increase the uncertainty in
estimates and assumptions underpinning several items
in the financial statements. Even though climate‑related
risks might not currently have a significant impact on
measurement, the Group is closely monitoring relevant
changes and developments, such as new climate‑related
legislation. The items and considerations that are most
directly impacted by climate‑related matters are:
• Useful life of property, plant and equipment.
i. When reviewing the residual values and expected
useful lives of assets, the Group considers
climate‑related matters, such as climate‑related
legislation and regulations that may restrict the use
of assets or require significant capital expenditures.
See Note 1(s) for further information.
•
Impairment of non‑financial assets.
ii. The value‑in‑use may be impacted in several
different ways by transition risk in particular, such
as climate‑related legislation and regulations and
changes in demand for the Group’s products. Even
though the Group has concluded that no single
climate‑related assumption is a key assumption
for the 2023 test of goodwill, the Group considered
expectations for increased costs of emissions,
increased demand for goods sold by the Group and
cost increases due to stricter recycling requirements
in the cash‑flow forecasts in assessing value‑in‑use
amounts. See Note 13 for further information.
• Decommissioning liability.
iii. The impact of climate‑related legislation and
regulations is considered in estimating the timing
and future costs of decommissioning one of the
Group’s manufacturing facilities.
81
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes c. Capitalisation and Recoverable Amount of
Capitalised Development Costs
A critical judgement exists in the decision to capitalise
work in progress (see Note 15). The Group capitalises
costs for product development projects. Initial
capitalisation of costs is based on judgement that
technological and economic feasibility is confirmed,
usually when a product development project has reached
a defined milestone. In determining the amounts to be
capitalised, the Directors make assumptions regarding
the expected future cash generation of the project.
At 31 December 2023, the carrying amount of capitalised
development costs was $14.5m. The asset is driven by
capital works undertaken by Defence Systems and Space
Systems. During the year, $7.4m of capitalised work in
progress was reclassified as an intangible asset as the
Group confirmed its intention to utilise these assets as
a prototype to facilitate the ongoing development and
testing of its CUAS technologies.
A critical judgement also exists in relation to the
recoverability of capital work in progress.
The Group continues to invest through EOS Defence
Systems Australia (EOSDS) in the ongoing engineering
development of counter drone defence, predominantly in
the areas of directed energy (DE) and counter uninhabited
aerial strike (CUAS) technologies. The Directors have
assessed the recoverable amount of the EOSDS capital
works in progress asset on 31 December 2023 and
concluded that no impairments should be recognised. This
judgement is based on the engagements, negotiations
and demonstrations completed during the year and the
feedback received from industry partners and potential
customers. Contract negotiations for its DE product are
underway with at least one potential customer.
2. Judgements, Estimates and Assumptions
The key assumptions concerning the future and other key
sources of estimation uncertainty at the reporting date, that
have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within
the next financial year, are described below. The Group
based its assumptions and estimates on parameters
available when the consolidated financial statements
were prepared. Existing circumstances and assumptions
about future developments, however, may change due
to market changes or circumstances arising that are
beyond the control of the Group. Estimates and underlying
assumptions are reviewed on an ongoing basis and
changes are reflected in the assumptions when they occur.
a. Recoverability of Goodwill and Impairment
of Assets
The Directors made a critical judgement in relation to the
recoverable amount of goodwill in Note 12 and the allocation
of goodwill to the three Cash Generating Units (“CGUs”).
The Group assesses each CGU, where possible, at year
end, to determine whether there are any indications of
impairment or reversal of impairment. Where an indicator
of impairment or reversal exists, a formal estimate of the
recoverable amount is made. Goodwill and indefinite life
intangible assets are assessed at least on an annual basis.
Recoverable amount is the higher of the fair value less
cost of disposal and value in use calculated in accordance
with the Group accounting policy. These assessments
require the use of estimates and assumptions such as
the pipeline of sales opportunities, discount rates applied
to estimated free cash flows, and long‑term growth
rates applied in estimating the future value of our CGUs.
The recoverable amount is sensitive to these assumptions
used for the discounted cashflow model.
The key assumptions used to determine the recoverable
amount for the different CGU’s are disclosed and further
explained in Note 13.
b. Impairment of Continuing Operations
As part of the preparation of its 31 December 2023
Annual Report, management noted that the carrying
amount of the Group’s net assets continued to be more
than its market capitalisation as at 31 December 2023.
This is a specific indicator of impairment under AASB
136 Impairment of Assets. As a result, management
performed an assessment of the recoverable amount
of each of its three CGUs, Defence, EM Solutions (EMS)
and Space as at 31 December 2023. No impairments, or
reversals of impairments, were recognised as a result of
the Group’s 31 December 2023 assessment.
82
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes d. Contract Asset
f. Consolidation of EOS Defence Systems USA
Effective from 17 October 2022, EOS Defence Systems
USA (EOSDS USA), a United States based subsidiary, is
managed through a Special Security Agreement (SSA) as
required by the US National Industrial Security Program
(“NISPOM”). The SSA enables EOSDS USA to enter into
contracts with the US Department of Defence that contain
certain classified information.
The SSA is an instrument designed to mitigate the risk
of foreign ownership, control or influence over a US
entity that has security clearance under the NISPOM.
The SSA denies the foreign owner unauthorized access
to classified and export‑controlled information while
preserving the foreign owner’s voice in the business
management of the company. Under the SSA, the
Group has the right to appoint a representative (Inside
Director) along with three Outside Directors. The Outside
Directors must be US citizens approved by the US Defense
Counterintelligence and Security Agency (DCSA).
The Group maintains its involvement with EOSDS USA’s
activities through normal business activity and liaison
with the Chair of the SSA and through the Inside Director.
The operational and governance activities and results are
reviewed by the Group’s management. These activities
are all performed within the confines of the SSA such that
EOSDS USA operates its business within the requirements
necessary to protect the US national security interest.
An assessment has been performed in accordance with
AASB 10 Consolidated Financial Statements of whether,
for accounting purposes, the Group controls EOSDS
USA. The Group is exposed to variable returns from its
investment in EOSDS USA and there is assessed to be
sufficient power within the confines of the Proxy agreement
for the Group to use its influence to affect those returns. As
such, under AASB 10, it is deemed that the Group controls
EOSDS USA and therefore the results of EOSDS USA are
consolidated into the Group’s consolidated accounts.
A critical judgement exists in relation to the recoverability
of the contract assets described in Note 8. Of the total
contract assets of $68.0m, an amount of $52.3m relates
to a contract with a customer in a foreign jurisdiction.
Significant collection of the contract asset was realised
during the year with a reduction in the balance of $96.4m
during FY23. The Directors have reviewed the collectability
of the total contract asset as at 31 December 2023 of
$68.0m, including both current and non‑current amounts.
The Directors have concluded that no provisions should
be recognised on the basis of cash received to date
and the creditworthiness of the counterparty, amongst
other factors. Furthermore, the Directors are of the view
that the estimates used in preparing this financial report
are reasonable.
Timing differences between revenue recognition and
invoicing are expected to arise due to differences between
the Group’s revenue recognition policies (see Note 1(f))
and the terms of the underlying contracts. The Directors
have concluded that any estimated credit losses against
the contract asset are immaterial. This judgement is based
on the nature of the counterparties involved (primarily
sovereign entities), the payments received during the year,
and continuing communications with clients regarding
administration of the underlying contracts.
e. Revenue
The Group estimates variable considerations to be
included in the transaction price and also judgements
in terms of the nature and timing of revenue recognised
under contracts. A summary of the accounting policies
adopted by the Group in regard to revenue recognition is
set out in Note 1(f).
Under a major production contract with a foreign
customer, late deliveries against the contracted schedule,
due in part to customer requested changes and other
factors, resulted in the application of late delivery penalties
in 2023. These penalties, and potential penalties where
revenue has been recognised but the cash not yet
received, have been recognised as constrained revenue.
Negotiations are well advanced to amend future contract
delivery dates to ensure no further late delivery penalties
will be incurred. The Board is confident this will be
achieved given the status of these contract amendments,
the Group’s positive operating performance under the
contract, good relationships with the client and track
record of payments received to date.
83
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 2. Judgements, Estimates and Assumptions
(continued)
g. Tax
Deferred tax assets are recognised for unused tax losses
to the extent it is probable that the taxable profit will
be available against which the losses can be utilised.
Significant judgement is required to determine the amount
of the deferred tax assets that can be recognised, based
on the likely timing and the level of future taxable profits,
together with future tax planning strategies.
The Directors made a critical judgement in relation to
recognising some of the deferred tax balances described in
Note 5(b). The Directors currently consider it probable that
sufficient taxable amounts will be available against which
deductible temporary differences can be utilised in the
Australian tax Group.
The Directors also made a critical judgement in relation
to not recognising deferred tax balances on tax losses.
No deferred tax assets have been recognised in the
foreign subsidiaries.
h. Warranty Provision
The Directors made a critical judgement in relation to the
valuation of the provision for warranty costs described
in Note 20(g). The valuation is determined based on the
Directors’ best estimate of the expenditure required to settle
the Group’s liability under its warranty obligations.
Estimates and outcomes that have been applied in the
assessing warranty provisions may change in the future and
the Group will recognise any revisions deemed necessary
as a result.
i. Legal Cost Provision
The Directors made a critical judgement in relation to
the provision for legal costs described in Note 20(f).
The judgement is based on the Directors’ best estimate
of the expenditure required to settle the Group’s liability to
resolve the legal matter. Estimates and outcomes that have
been applied in the assessing this provision may change
in the future and the Group will recognise any revisions
deemed necessary as a result.
j. RWS Units Provision
The Directors made a critical judgement in relation to the
provision for the cost to resupply RWS units for an existing
customer as described in Note 20(d). The judgement is
based on the Directors’ best estimate of the cost required to
settle the Group’s obligation under this contract. Estimates
and outcomes that have been applied in the assessing
this provision may change in the future and the Group will
recognise any revisions deemed necessary as a result.
k. Share‑based Payments
Estimating fair value for share‑based payment transactions
requires determination of the most appropriate valuation
model, which depends on the terms and conditions of the
grant. This estimate also requires determination of the
most appropriate inputs to the valuation model including
the expected life of the share option or appreciation right,
volatility and dividend yield and making assumptions about
them. Details of the assumptions and models used for
estimating fair value for share‑based payment transactions
are disclosed in Note 23.
84
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 3. (Loss)/Profit Before Tax ‑ Continuing Operations
a. Revenue
Revenue from operations
Revenue from operations consisted of the following items:
Revenue from the sale of goods
Revenue from providing services
Total revenue
(i) Disaggregation of revenue
2023
$ ‘000
201,402
17,851
219,253
2022
$ ‘000
111,292
26,620
137,912
The Group derives its revenue from the transfer of goods and services both (i) over time and (ii) at a point in time, as
shown below.
Revenue recognition over time
Defence segment
Sale of goods
Providing services
Space segment
Sale of goods
Providing services
Total revenue recognised over time
All other revenue is recognised at a point in time:
Revenue recognition at a point in time
Defence segment
Sale of goods
Providing services
Space segment
Sale of goods
Providing services
Total revenue recognised at a point in time
Total revenue recognised
(ii) Other income
Interest:
Bank deposits
Other
Grant income
Bargain purchase
Gain on lease modification
Other
Total other income
2023
$ ‘000
81,765
6,620
40,754
2,804
131,943
2023
$ ‘000
65,092
1,885
13,792
6,541
87,310
2022
$ ‘000
83,512
8,887
22,132
3,301
117,832
2022
$ ‘000
2,100
11,452
3,548
2,980
20,080
219,253
137,912
2023
$ ‘000
850
160
87
‑
1,129
290
2,516
2022
$ ‘000
41
189
480
870
‑
280
1,860
85
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 3. (Loss)/Profit Before Tax ‑ Continuing Operations (continued)
b. Expenses
The loss for the year from continuing operations includes the following expenses:
Employee benefits expense:
Share based payments (equity settled) expense/(reversal)
Contributions to defined contribution superannuation plans
Other employee benefits
Total employee benefits expense
Finance costs
Interest expense on lease liabilities
Interest on secured borrowings
Other finance costs
Finance costs
Amortisation of intangibles
Depreciation of property, plant and equipment
Depreciation on right of use assets
Impairment loss
Foreign exchange (gain)/loss
2023
$ ‘000
589
4,507
52,177
57,273
1,396
15,857
18,329
35,582
1,597
6,356
4,430
‑
(892)
2022
$ ‘000
(1,122)
5,200
58,927
63,005
1,317
5,905
7,030
14,252
1,597
4,324
5,138
7,315
(12,666)
86
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 4. Earnings per Share
Basic
Continuing operations
Discontinued operations
Total
Diluted
Continuing operations
Discontinued operations
Total
2023
cents per share
2022
cents per share
(20.9 cents)
‑
(35.8 cents)
(42.2 cents)
(20.9 cents)
(78.0 cents)
(20.9 cents)
‑
(35.8 cents)
(42.2 cents)
(20.9 cents)
(78.0 cents)
Calculation of basic and diluted total Earnings per Share
The earnings and weighted average number of ordinary shares used in the calculation of basic and diluted earnings per
share are as follows:
Earnings
Earnings ‑ net loss attributable to equity holders of parent
Adjustments to exclude loss for the year from discontinued operations
Earnings from continuing operations for the purpose of basic and diluted earnings per share
excluding discontinued operations
Number of shares
Weighted average number of ordinary shares used in the calculation of basic earnings per share
Note
(a)
6
Note
(b),
(c),
(d),
(e)
2023
$’000
(33,275)
‑
2022
$’000
(114,540)
61,954
(33,275)
(52,586)
2023
No. of shares
2022
No. of shares
159,226,631
146,853,905
(a) (Loss)/ profit attributable to the owners of the parent entity used in the calculation of basic earnings per share is the
same as net (loss)/profit in the statement of profit or loss and other comprehensive income.
(b) The 270,000 unlisted Legacy Employee Share Plan options outstanding are not considered dilutive as all the conditions
of exercise have not been met at the reporting date and given the Group made a loss in the year.
(c) Shares issued under the Legacy LFSP are not included in the weighted average number of ordinary shares as they
are treated as in‑substance options for accounting purposes. The options are not considered dilutive given the Group
made a loss in the year.
(d) Share options issued under the OEIP are not considered dilutive as the conditions of vesting or exercise have not been
met at the reporting date and given the Group made a loss in the year.
(e) Share rights issued under the OEIP are not considered dilutive as the conditions of vesting or exercise have not been
met at the reporting date and given the Group made a loss in the year.
87
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 5. Income Tax
Income tax
Current year tax (benefit)
2023
$ ‘000
(6,086)
2022
$ ‘000
(9,278)
a. The Prima Facie Income Tax Expense on Pre‑Tax Accounting (Loss)/Profit from Operations Reconciles to
the Income Tax Expense in the Financial Statements as follows:
(Loss) before income tax from continuing operations
(Loss) before income tax from discontinued operations
(Loss) before income tax
Income tax (benefit) calculated at 30%
Effect of different tax rates of subsidiaries operating in other jurisdictions
Non‑deductible capital expenditure
Other assessable income
Bargain purchase on acquisition
Impairment of goodwill
Impact of discontinued operations
Share based payments
Amortisation of intangible assets in other jurisdictions
Other non‑deductible/non‑assessable items
Recognition of tax losses carry back receivable
Temporary differences not recognised
Adjustment in respect of prior years
Unused Australian tax losses and tax offsets now brought to account
Unused tax losses and tax offsets not recognised as deferred tax assets
Income tax (benefit) attributable to operating (loss)
Income tax attributable to a discontinued operation
2023
$ ‘000
(40,193)
‑
2022
$ ‘000
(62,885)
(61,954)
(40,193)
(124,839)
(12,058)
1,662
1,088
1,051
‑
‑
‑
177
‑
188
(37,452)
(2,070)
254
‑
(261)
751
9,239
(336)
120
1,698
(7,892)
(28,057)
‑
‑
(1,470)
‑
3,276
(6,086)
‑
(11,200)
(155)
(49)
‑
30,183
(9,278)
‑
The tax rate used in the above reconciliation is the corporate tax rate of 30% payable by Australian corporate entities on
taxable profits under Australian tax law, 25% in Germany, 17% in Singapore, 9% in United Arab Emirates and 28% in New
Zealand. Tax rates in the USA apply at a Federal, State and local level and can vary depending upon location. The tax rates
applicable to the Group’s USA operations haves been assumed to approximate a combined rate of 21%. There has been no
change in the corporate tax rate when compared with the previous reporting year.
88
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes b. Deferred Tax Balances
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against
currents tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to
settle current tax assets and liabilities on a net basis.
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the
current and prior year.
Charge/
(credit) to profit
and loss
$ ‘000
Recognised
in other
comprehensive
income
$ ‘000
Deferred tax assets
Accruals
Business capital expenditure deductible over five years
Provision for annual leave
Provision for long service leave
Provision for estimated credit losses
Provision for decommissioning costs
Provision for obsolete stock
Provision for make good costs
Provision for other employee costs
Provision for warranty
Other provisions
Contract asset
Income tax losses
Foreign exchange gain arising from
tax fair value adjustment
Other
Deferred tax liabilities
Prepaid insurance
Right of use assets
Property plant and equipment
Other
Acquired intangible assets
2022
$ ‘000
175
955
2,146
1,294
(40)
75
138
411
‑
2,204
‑
825
‑
(2,760)
‑
5,423
38
(958)
1,895
(46)
(3,026)
(2,097)
(22)
(565)
(156)
81
40
‑
929
178
1,050
406
3,678
(48)
‑
1,204
16
6,791
(38)
2,176
(3,755)
46
404
(1,167)
Total
3,326
5,624
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
2023
$ ‘000
153
390
1,990
1,375
‑
75
1,067
589
1,050
2,610
3,678
777
‑
(1,556)
16
12,214
‑
1,218
(1,860)
‑
(2,622)
(3,264)
8,950
89
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Charge/
(credit) to profit
and loss
$ ‘000
Recognised
in other
comprehensive
income
$ ‘000
5. Income Tax (continued)
Deferred tax assets
Accruals
Business capital expenditure deductible over five years
Provision for annual leave
Provision for long service leave
Provision for estimated credit losses
Provision for decommissioning costs
Provision for obsolete stock
Provision for make good costs
Provision for warranty
Contract asset
Income tax losses
Foreign exchange gain arising from
tax fair value adjustment
Deferred tax liabilities
Prepaid insurance
Right of use assets
Property plant and equipment
Other
Acquired intangible assets
2021
$ ‘000
243
1,703
2,374
1,446
‑
75
162
331
1,927
366
‑
355
8,982
(25)
270
(1,079)
(183)
(3,459)
(4,476)
(68)
(748)
(228)
(152)
(40)
‑
(24)
80
277
459
‑
(3,115)
(3,559)
63
(1,228)
2,974
137
433
2,379
2022
$ ‘000
175
955
2,146
1,294
(40)
75
138
411
2,204
825
‑
(2,760)
5,423
38
(958)
1,895
(46)
(3,026)
(2,097)
3,326
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
Total
4,506
(1,180)
At the reporting date the Group has unused tax losses emanating from its non‑Australian entities. No deferred tax asset
has been recognised in respect of these balances as it is not considered probable that there will be future taxable profits
available in these jurisdictions.
90
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes c. Unrecognised Deferred Tax Balances
The following cumulative deferred tax assets have not been brought to account as assets
Tax losses ‑ revenue
Temporary differences
Total
d. Franking Account Balance
Adjusted franking account balance
e. Tax Consolidation
(i) Relevance of tax consolidation to the Group
2023
$ ‘000
63,361
‑
63,361
2023
$ ‘000
4,042
2022
$ ‘000
37,889
926
38,815
2022
$ ‘000
17,443
The Company and some of its wholly‑owned Australian resident taxable entities have formed a tax‑consolidated Group
with effect from 1 January 2003 and are therefore taxed as a single entity from that date. The head entity within the
tax‑consolidated Group is Electro Optic Systems Holdings Limited. The members of the tax‑consolidated entity Group are
identified in Note 27.
(ii) Nature of tax funding arrangements and tax sharing agreements
As at 31 December 2023, there were formal tax funding and tax sharing arrangements within the Australian
tax‑consolidated Group.
91
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 6. Discontinued Operations ‑ Prior Year
On 15 November 2022, the Group assigned its US subsidiary SpaceLink Corporation (SpaceLink) to an assignee under
an Assignment for the Benefit of Creditors (ABC) process in the United States. Under this process, the Assignee became
responsible entity therefore the Group effectively lost control over SpaceLink as a result of this Assignment and there was
an effective disposal.
The activities relating to SpaceLink have been classified as a discontinued operation in the prior year. The prior year
consolidated statement of profit and loss and other comprehensive income has been presented to show the discontinued
operation separately from Continuing Operations.
The results of SpaceLink Corporation are presented below:
Other income
Raw materials and consumables used
Employee benefit expenses
Occupancy costs
Administration expenses
Other expenses
Amortisation of Intangible assets
Depreciation of property plant and equipment
Depreciation of right of use assets
Finance cost
Impairment loss
Onerous contract provision
Loss before tax from discontinued operations
Tax expense
Loss for the year from discontinued operations
Gain on assignment and effective disposal of SpaceLink
Tax expense on gain on assignment and effective disposal of SpaceLink
Gain after tax
Net loss for the year attributable to discontinued operations (attributable to owners of the Company)
The net cash flows incurred by SpaceLink were:
Cash flow ‑ discontinued operations
Operating cash flows
Investing cash flows
Total
Financing cash flows (provided by the continuing operations)
92
2022
$ ‘000
39
‑
(12,525)
(240)
(17,068)
(568)
(401)
(159)
(438)
(197)
(47,181)
(2,932)
(81,670)
‑
(81,670)
19,716
‑
19,716
(61,954)
2022
$ ‘000
(15,321)
(11,373)
(26,694)
26,478
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 7. Trade and Other Receivables
Trade receivables from third‑party customers
GST receivable
Employee receivables
Other debtors
Total
2023
$ ‘000
7,431
605
219
211
8,466
2022
$ ‘000
6,373
933
113
‑
7,419
Trade receivables are non‑interest bearing and are generally on terms of 30 days.
The Group measures the loss allowance for trade receivables at an amount equal to the lifetime expected credit loss (ECL).
The ECL on trade receivables are estimated by reference to past known default experience of the debtors and an analysis of
the debtors’ current financial position, adjusted for factors that are specific to the debtors. Based on this analysis, any ECLs
on trade receivable balances at the end of the year are immaterial.
There has been no change in the estimation techniques or significant assumptions made during the current reporting year.
There were no receivables written off during the year and no receivables balances, as at the end of the year, are subject to
enforcement activities.
8. Contract Asset
Unbilled revenue ‑ current
Unbilled revenue ‑ non‑current
Total
2023
$ ‘000
29,090
38,946
68,036
2022
$ ‘000
127,899
36,520
164,419
The contract asset reflects amounts recognised in revenue on a milestone or a delivery basis in the Defence and Space
segments, but not yet billed to the customer. Timing differences between the satisfaction of performance obligations and
invoicing and subsequent receipt of cash are expected to arise due to differences between the Group’s revenue recognition
policies (see Note 1(f)) and the terms of the underlying contracts. This occurs where contracts typically invoice on a
milestone basis that may not necessarily reflect progress under the contract.
The Group assesses for any constrained revenue and the recoverability of the contract asset. The Directors have reduced
the contract balance for its estimate of constrained revenue and believes the contract asset balance remains recoverable.
This judgement is based on the nature of the counterparties involved, contract amendment discussions that are
underway with customers, payments received during the year and continuing communications with the clients regarding
administration of the underlying contracts.
The movement in the contract asset during the financial year is set out below.
Opening balance
Invoicing during the financial year
Net revenue recognised during the year
Impact of foreign exchange and other movements
Closing balance
2023
$ ‘000
164,419
(185,687)
88,089
1,215
68,036
2022
$ ‘000
128,297
(59,611)
88,816
6,917
164,419
93
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 9. Inventories
Raw materials ‑ at cost
Work in progress ‑ at cost
Total
10. Prepayments
Prepayments1 ‑ current
2023
$ ‘000
29,351
44,046
73,397
2023
$ ‘000
16,384
1Prepayments include prepayments made to suppliers for the delivery of component parts in relation to current orders.
11. Right of Use Assets
(a) Office premises ‑ at cost
Less accumulated depreciation and impairment
(b) Office equipment ‑ at cost
Less accumulated depreciation and impairment
Cost
Office premises
Balance at the beginning of the year
Adjustment due to lease modification
Additions
Disposals
Impairments
Net foreign exchange differences
Balance at the end of the year
Office equipment
Balance at the beginning of the year
Additions
Disposals/Write‑offs
Net foreign currency exchange differences
Balance at the end of the year
94
2023
$ ‘000
34,979
(15,484)
19,495
1,266
(978)
288
19,783
2023
$ ‘000
29,117
4,857
319
‑
‑
686
34,979
1,402
‑
(136)
‑
1,266
2022
$ ‘000
26,420
48,421
74,841
2022
$ ‘000
17,591
2022
$ ‘000
29,117
(11,414)
17,703
1,402
(853)
549
18,252
2022
$ ‘000
37,151
1,931
1,658
(185)
(12,492)
1,054
29,117
1,612
‑
(136)
(74)
1,402
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes
Accumulated Depreciation/Amortisation/ Impairment
Office premises
Balance at the beginning of the year
Adjustment due to lease modification
Depreciation*
Disposals
Impairments
Net foreign exchange differences
Balance at the end of the year
Office equipment
Balance at the beginning of the year
Depreciation*
Disposals
Net foreign exchange differences
Balance at the end of the year
* 2023 refers to continuing operations only. 2022 Is inclusive of continuing and discontinued operations.
12. Goodwill
Opening balance
Less impairment
Closing balance
2023
$ ‘000
11,414
‑
4,169
‑
‑
(99)
15,484
853
261
(136)
‑
978
2023
$ ‘000
12,373
‑
12,373
2022
$ ‘000
9,384
(105)
5,291
(185)
(3,625)
654
11,414
777
285
(136)
(73)
853
2022
$ ‘000
14,878
2,505
12,373
Management has identified the following as the Group’s cash generating units (“CGUs”):
CGU
EM Solutions
Space Technologies
Defence Systems
Operations
EMS specialises in innovative optical, microwave and on‑the‑move radio and satellite products that help deliver
high speed, resilient and assured telecommunications anywhere in the world.
The Group’s laser‑based surveillance systems with space tracking capability; manufactures and sells telescopes
and dome enclosures for space projects.
Develops, manufactures and markets advanced fire control, surveillance, and weapon systems to approved
military customers
The carrying amount of goodwill has been allocated to CGUs as follows:
Defence Systems
Space Technologies
EM Solutions
2023
$ ‘000
‑
2,505
9,868
12,373
2022
$ ‘000
‑
2,505
9,868
12,373
95
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 13. Impairment of Assets
a. Impairment Indicators and Testing
At each year end, the Group assesses whether indicators of impairment or impairment reversal exist at an individual asset
level, where possible, and a CGU level.
(i) Market capitalisation deficiency
The carrying amount of the Group’s net assets continues to be more than its market capitalisation as at 31 December 2023.
This is a specific indicator of impairment under AASB 136 Impairment of Assets. As a result, an assessment of the
recoverable amount of each of the three CGUs was performed, Defence Systems, EM Solutions and Space Technologies
as of 31 December 2023. This assessment showed the recoverable amount for all CGUs being higher than their carrying
values and as such the Group did not identify any further impairments required as at 31 December 2023.
(ii) Defence
During 2022, an impairment expense was recognised for the Defence CGU of $1.3m for a right of use asset for a Defence
site lease and $2.5m of impairment of goodwill allocated to the Defence CGU. The Group has assessed this and determined
that no indicators of impairment reversal exist at 31 December 2023.
(iii) Corporate
During 2022, an impairment expense of $3.5m was recognised in relation to the right of use asset for the corporate
head office lease. The Group has assessed this and determined that no indicators of impairment reversal exist at
31 December 2023.
(iv) Key assumptions and sensitivities used for impairment assessment performed during the year ended
31 December 2023
The recoverable amount of the CGUs of the Group have been assessed by reference to the higher of value in use and fair
value less cost of disposal arrived by discounting a cash flow forecast with the weighted average cost of capital of each CGU.
Assumption
Future sales levels
Discount rate
Long‑term growth rate
Basis of Assumption
Derived from the Group’s multi‑year revenue outlook.
Takes into account the risk‑free rate, equity market risk and the specific risk premium for each CGU.
Represents the rate relevant to market conditions and business plans. The long‑term growth rate included in the
terminal value in calculating the value in use for each CGU was 2.5%.
The Board monitors climate‑related risks when measuring the recoverable amount. While the Group believes its operations
are not significantly exposed to physical risk, the value‑in‑use may be impacted by climate related legislation and
regulations and their impact on demand for the Group’s products. The Group has concluded that no single climate‑related
assumption is a key assumption for the 2023 test of goodwill.
Management reviewed the discount rates used based on the prevailing market conditions as of 31 December 2023, the risk
profile related to assumed future cash flows and other relevant considerations. The discount rates used in calculating the
value in use for each CGU are given below:
Defence Systems
Space Technologies
EM Solutions
(v) Sensitivity analysis
14.02%
20.09%
15.30%
The Group conducted a sensitivity analysis to test changes in the key assumptions used to determine the recoverable
amount for each of the CGUs. Sensitivity testing for CGUs included reducing future sales levels by 10%, reducing the
long‑term growth rate to 0.5% and increasing the discount rate by an additional 3%.
It was noted these sensitivities would not cause the recoverable amount of the EM Solutions CGU to fall below its
carrying value.
It was observed that a reasonable change in future sales levels and discount rates could cause impairment in the Space
Technologies and Defence Systems CGUs.
96
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 14. Intangible Assets
Product
development
$’000
Core
technology
(not
patented)
$ ‘000
Patented
technology
$ ‘000
Software
$ ‘000
Customer
contracts and
relation‑ships
$ ‘000
Licences
$ ‘000
Total
$ ‘000
Cost
At 1 January 2022
Exchange differences
Disposal
At 31 December 2022
‑
‑
‑
‑
10,772
3,556
486
2,776
‑
‑
‑
‑
‑
‑
‑
‑
10,772
3,556
486
2,776
Transfer from PP&E
7,434
Exchange differences
Disposal
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
At 31 December 2023
7,434
10,772
3,556
486
2,776
Amortisation
At 1 January 2022
Exchange differences
Charge for the year
Impairment and write off
Disposal
At 31 December 2022
Exchange differences
Charge for the year
Impairment and write‑off
Disposal
At 31 December 2023
Carrying amount
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
2,394
‑
1,077
‑
‑
3,471
‑
1,078
‑
‑
527
‑
237
‑
‑
764
‑
237
‑
‑
216
‑
97
‑
‑
313
‑
97
‑
‑
411
‑
185
‑
‑
596
‑
185
‑
‑
4,549
1,001
410
781
At 31 December 2023
7,434
6,223
2,555
76
1,995
At 31 December 2022
‑
7,301
2,792
173
2,180
5,076
427
(5,503)
‑
‑
‑
‑
‑
2,009
308
401
2,785
(5,503)
‑
‑
‑
‑
‑
‑
‑
‑
22,666
427
(5,503)
17,590
7,434
‑
‑
25,024
5,557
308
1,997
2,785
(5,503)
5,144
‑
1,597
‑
‑
6,741
18,283
12,446
During the year, $7.4m of capitalised work in progress was reclassified as an intangible asset as the Group confirmed its
intention to utilise these assets as a prototype to facilitate the ongoing development and testing of its CUAS technologies.
97
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 15. Property, Plant and Equipment
(a) Plant and equipment ‑ at cost
Less accumulated depreciation and impairment
(b) Office equipment ‑ at cost
Less accumulated depreciation and impairment
(c) Furniture, fixtures and fittings ‑ at cost
Less accumulated depreciation and impairment
(d) Leasehold improvements ‑ at cost
Less accumulated depreciation and impairment
(e) Motor vehicle ‑at cost
Less accumulated depreciation and impairment
(f) Computer software ‑ at cost
Less accumulated depreciation
(g) Test equipment ‑ at cost
Less accumulated depreciation
(h) Satellite ‑ at cost
Less impairment
(i) Capital works in progress
Less impairment
2023
$ ‘000
20,726
(11,755)
8,971
5,692
(4,387)
1,305
1,456
(628)
828
2,859
(2,349)
510
702
(495)
207
1,659
(1,552)
107
5,690
(2,565)
3,125
7,000
(7,000)
‑
14,455
‑
14,455
2022
$ ‘000
19,003
(8,141)
10,862
5,326
(3,721)
1,605
1,391
(531)
860
2,459
(2,100)
359
678
(394)
284
1,628
(1,364)
264
4,815
(2,440)
2,375
7,000
(7,000)
‑
20,608
‑
20,608
Total net book value of property, plant and equipment
29,508
37,217
98
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Cost
Plant and equipment
Balance at beginning of year
Additions
Transfers
Other movement
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Office equipment
Balance at beginning of year
Additions
Transfers
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Furniture, fixtures and fittings
Balance at beginning of year
Additions
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Leasehold improvements
Balance at beginning of year
Additions
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Motor vehicles
Balance at beginning of year
Additions
Other movements
Net foreign currency exchange differences
Balance at end of year
2023
$ ‘000
19,003
2,355
62
(514)
(156)
(24)
20,726
5,326
473
‑
(124)
17
5,692
1,391
84
(18)
(1)
1,456
2,459
408
‑
(8)
2,859
678
‑
33
(9)
702
2022
$ ‘000
17,373
3,190
1,204
(31)
(3,025)
292
19,003
4,730
971
97
(616)
144
5,326
1,318
79
(26)
20
1,391
2,440
279
(336)
76
2,459
610
47
‑
21
678
99
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 15. Property, Plant and Equipment (continued)
Cost (continued)
Computer software
Balance at beginning of the year
Additions
Disposals and write offs
Transfer
Other movements
Net foreign currency exchange differences
Balance at end of year
Test equipment ‑ at cost
Balance at beginning of the year
Additions
Disposals and write‑offs
Balance at end of year
Satellite
Balance at beginning of year
Balance at end of year
Capital works in progress
Balance at beginning of the year
Additions
Transfer*
Other movements
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
2023
$ ‘000
1,628
88
(7)
‑
(49)
(1)
1,659
4,815
1,278
(403)
5,690
7,000
7,000
20,608
1,343
(7,496)
‑
‑
‑
14,455
2022
$ ‘000
1,589
366
(213)
(4)
(76)
(34)
1,628
2,736
2,079
‑
4,815
7,000
7,000
44,297
14,642
(1,297)
(226)
(37,691)
883
20,608
* During the year, $7.4m of capitalised work in progress was reclassified as an intangible asset. Refer to Note 14 for further details.
100
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Accumulated depreciation/impairment
Plant and equipment
Balance at beginning of year
Depreciation *
Disposals and write offs
Other movements
Net foreign currency exchange differences
Balance at end of year
Office equipment
Balance at beginning of year
Depreciation *
Disposals and write offs
Other movements
Net foreign currency exchange differences
Balance at end of year
Furniture, fixtures and fittings
Balance at beginning of year
Depreciation *
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Leasehold improvements
Balance at beginning of year
Depreciation *
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
Motor vehicle
Balance at beginning of year
Depreciation *
Disposals and write offs
Net foreign currency exchange differences
Balance at end of year
* 2023 refers to continuing operations only. 2022 Is inclusive of continuing and discontinued operations.
2023
$ ‘000
(8,141)
(4,305)
156
527
8
(11,755)
(3,721)
(777)
107
‑
4
2022
$ ‘000
(8,996)
(1,877)
3,025
‑
(293)
(8,141)
(2,812)
(1,008)
164
(31)
(34)
(4,387)
(3,721)
(531)
(115)
17
1
(628)
(2,100)
(259)
‑
10
(433)
(117)
25
(6)
(531)
(1,681)
(461)
81
(39)
(2,349)
(2,100)
(394)
(128)
‑
27
(495)
(284)
(96)
‑
(14)
(394)
101
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 15. Property, Plant and Equipment (continued)
Accumulated depreciation/impairment (continued)
Computer software
Balance at beginning of the year
Depreciation *
Disposals and write offs
Other movements
Net foreign currency exchange differences
Balance at end of year
Test equipment
Balance at beginning of the year
Depreciation *
Disposals
Net foreign currency exchange differences
Balance at end of year
Satellite
Balance at beginning of year
Balance at end of year
Capital work in progress
Balance at beginning of the year
Impairment
Disposals
Balance at end of year
2023
$ ‘000
(1,364)
(245)
7
49
1
2022
$ ‘000
(963)
(540)
110
‑
29
(1,552)
(1,364)
(2,440)
(527)
402
‑
(2,056)
(384)
‑
‑
(2,565)
(2,440)
(7,000)
(7,000)
‑
‑
‑
‑
(7,000)
(7,000)
(1,790)
(31,931)
33,721
‑
* 2023 refers to continuing operations only. 2022 Is inclusive of continuing and discontinued operations.
Aggregate depreciation, impairment and amortisation allocated during the year is recognised as an expense and disclosed
in Note 3 to the financial statements.
During the year, the Group reassessed the carrying values and useful lives of its assets. The Group determined a change
in accounting estimate in the useful life of an individual asset, which resulted in an additional $1.7m depreciation being
recognised during the year.
102
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 16. Current Trade and Other Payables
Trade payables
Accruals
Total
2023
$ ‘000
30,093
10,711
40,804
2022
$ ‘000
25,105
18,074
43,179
The average creditor days on purchases of goods is 30 days and no interest is payable on goods purchased within agreed
credit terms. The Group has financial risk management policies in place to ensure that all payables are paid within the
credit timeframe.
17. Contract Liabilities
Contract liabilities
2023
$ ‘000
20,587
2022
$ ‘000
22,168
Contract liability represents amounts received from customers in advance of the satisfaction of relevant performance
obligations under the applicable contracts. The Group expects to deliver the goods and services in question within the
next 12 months, in accordance with the terms of the underlying contracts. An amount of $15.0m included in the contract
liabilities at 31 December 2022 has been recognised in revenue in 2023 (2022: $6.9m of 2021 balance recognised in 2022).
18. Borrowings
Secured borrowings
Washington H. Soul Pattinson and Company Ltd (“WHSP”)
Total secured borrowings
Unsecured borrowings
Total borrowings, net
Current portion
Non ‑ current portion
Total borrowings, net
a. Secured Borrowings ‑ WHSP
Note
(a)
(b)
(b)
2023
$ ‘000
64,822
64,822
‑
64,822
19,875
44,947
64,822
2022
$ ‘000
70,834
70,834
1,904
72,738
23,295
49,443
72,738
As at 31 December 2023, the Group had two secured borrowings with WHSP (‘WHSP facilities’):
(i) Additional Working Capital Principal Facility of $15.0m. The agreement was entered on 12 October 2022 with maturity
date of 11 April 2024. The facility carries interest of 15% per annum and line fees of 4%. As at 31 December 2023,
$4.9m of interest and fees have been capitalised (net of amortisation) into the loan balance. This loan is secured by a
general security deed which ranks in priority above both the Term Loan Facility and the Export Finance Australia facility.
(ii) Term Loan Principal Facility of $35.0m. The agreement was entered into on 12 October 2022 with maturity date
of 11 October 2025. The facility carries interest of 22% per annum and line fees of 4%. As at 31 December 2023,
$9.9m of interest and fees have been capitalised (net of amortisation) into the loan balance. This loan is secured by a
general security deed which ranks pari passu with the Export Finance Australia facility.
103
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes
18. Borrowings (continued)
A further Working Capital Principal Facility of $20.0m was repaid in full during 2023 by its maturity date of
6 September 2023.
All of the loans above have upfront fees comprising of work fees of 7.5% and establishment fees of 5%. The relevant
amounts were capitalised into the facility limit at the commencement of the facility.
The WHSP facilities specify a “Minimum Earn” amount under which, in the event of early repayment, the Group is
required to pay the full interest and line fee that would otherwise be payable to maturity for the term of the facility.
At 31 December 2023, the total repayment including the Minimum Earn on the remaining two facilities is $96.9m.
As at 31 December 2023 the current portion of the WHSP Facility loans outstanding was $19.9m (2022: $21.4m)
and non‑current portion was $44.9m (2022: $49.4m).
The WHSP facilities included the following financial covenants up to and including 31 December 2023:
(i) The cash inflows ratio was required to be more than 0.9:1. This ratio was defined as the Group’s actual cash inflows
(over a 3‑month period), relative to the Group’s cash inflow forecast (over that 3‑month period). This ratio was required
to be tested each month until 31 December 2023.
(ii) The cash outflows ratio was required to be less than 1.1:1. This ratio was defined as the Group’s actual cash outflows
(over a 3‑month period), relative to the Group’s cash outflow forecast (over that 3‑month period). This ratio is required
to be tested each month until 31 December 2023.
(iii) The asset coverage ratio is required to be more than 1.6:1 and was required to be tested each month until
31 December 2023 then is required to be tested each quarter until the facilities are repaid.
In addition to item (iii) above, from 1 January 2024, the following financial covenant is applicable:
(i)
Interest coverage ratio was required to be more than 2:1. This ratio is defined as Group’s net cash flow from operations
(adjusted for interest payments) relative to the interest expense. This covenant applies on and from 31 December 2023
and is required to be tested quarterly until the facilities are repaid.
b. Total Borrowings
The total reported borrowings amount shown above include the total outstanding borrowings owing to lenders, including
capitalised fees and interest, less the unamortised transaction costs of establishing borrowings:
Total borrowings owing to lenders
Unamortised cost of establishing borrowings
Total borrowings, net
The weighted average interest rates paid during the year were as follows:
Weighted average interest rate
2023
$ ‘000
72,576
(7,754)
64,822
2023
%
19
2022
$ ‘000
85,467
(12,729)
72,738
2022
%
20
The total principal drawn at 31 December 2023 under these facilities is $50m (2022: $70.0m). The arrangements require the
Group to repay up to $96.9m (2022: $127.0m), including interest and other fees.
The Group resolved a commercial dispute with its primary lender, Washington H. Soul Pattinson on 22 December 2023
which included an agreement under which EOS will pay WHSP a $4.5m fee in full and final settlement of the previous
disputed fee claim, and WHSP has agreed to relax certain restrictions included in the borrowing facility agreements.
The adjustment to the July borrowing covenant test was subject to payment of a fee, which has been incorporated into
a facility amendment executed between the parties on 22 December 2023. Subsequent to year‑end, EFA approval was
received and the facility amendment became effective and the $4.5m fee was paid to the lender.
104
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 19. Lease Liabilities
As at 1 January
Additions
Lease modification
Interest accrued / paid
Lease payments
Termination
Net foreign currency exchange differences
As at 31 December
Current
Non‑current
Total
Maturity analysis
Year 1
Year 2
Year 3
Year 4
Year 5
Onwards
Less: interest
2023
$ ‘000
24,446
‑
4,219
1,415
(5,933)
‑
(228)
23,919
4,876
19,043
23,919
2023
$ ‘000
6,018
5,533
4,838
3,910
2,512
4,941
27,752
(3,833)
23,919
2022
$ ‘000
30,024
1,453
1,878
1,318
(5,746)
(4,711)
230
24,446
3,939
20,507
24,446
2022
$ ‘000
5,480
4,419
4,794
4,151
3,942
6,071
28,857
(4,411)
24,446
The Group has several lease contracts that include extension and termination options. These options are negotiated
by management to provide flexibility in managing the lease portfolio and to align with the Group’s business needs.
Management exercises judgement in determining whether the extension and termination options are reasonably certain
to be exercised. The Group does not face a significant liquidity risk with regard to its lease liabilities. All lease obligations
in Australia are denominated in Australian dollars and leases in overseas entities are based in the currency of the
country concerned.
The Group had cash outflows for leases of $4.6m. A lease agreement was amended in relation to a property lease, resulting
a net gain of $1.1m which reflects the reduction in lease payments.
105
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes
20. Provisions
Current
Employee benefits
Decommissioning costs
RWS units
Finance costs
Legal costs
Warranty
Total
Non‑current
Employee benefits
Provision for make good
Warranty
Total
a. Employee Benefits
MOVEMENT
Balance at 1 January
Net movement in provision during year
Balance as at 31 December
2023
$ ‘000
11,440
250
7,761
4,500
1,462
356
25,769
4,183
2,147
8,344
14,674
2023
$ ‘000
11,089
351
11,440
2022
$ ‘000
11,089
250
‑
‑
‑
873
12,212
1,517
1,570
6,476
9,563
2022
$ ‘000
12,339
(1,250)
11,089
The provision for employee benefits relates to the liability for annual leave, long service leave and expected short‑term
incentive obligations to employees.
b. Decommissioning Costs
MOVEMENT
Balance at 1 January
Balance as at 31 December
2023
$ ‘000
250
250
2022
$ ‘000
250
250
The provision for decommissioning costs relates to an obligation to dismantle and refurbish a telescope at a future date.
c. Make Good of Premises
MOVEMENT
Balance as at 1 January
Increase during the year from new lease
Balance as at 31 December
The provision for make good relates to obligation to make good on leased assets.
2023
$ ‘000
1,570
577
2,147
2022
$ ‘000
1,053
517
1,570
106
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes d. RWS Units
MOVEMENT
Balance as at 1 January
Net increase during the year
Balance as at 31 December
The provision for RWS units relates to the cost to resupply RWS units for an existing customer.
e. Finance Costs
MOVEMENT
Balance as at 1 January
Net increase during the year
Balance as at 31 December
2023
$ ‘000
‑
7,761
7,761
2023
$ ‘000
‑
4,500
4,500
2022
$ ‘000
‑
‑
‑
2022
$ ‘000
‑
‑
‑
The provision for finance costs relates to the agreed fee negotiated between the Group and its lender through a conditional
facility amendment executed on 22 December 2023. Refer Note 18 for further details.
f. Legal Costs
MOVEMENT
Balance as at 1 January
Net increase during the year
Balance as at 31 December
The provision for legal costs relates to estimated costs to resolve a legal dispute.
g. Warranty Provisions
MOVEMENT
Balance as at 1 January
Reductions resulting from expiry
Additional provisions recognised
Expenses incurred
Balance as at 31 December
2023
$ ‘000
‑
1,462
1,462
2023
$ ‘000
7,349
(72)
2,229
(806)
8,700
2022
$ ‘000
‑
‑
‑
2022
$ ‘000
6,425
(608)
1,709
(177)
7,349
The provision for warranty is determined based on Directors’ best estimate of the expenditure required to settle the
Group’s liability under its warranty undertakings for military products, satellite communication terminals and telescopes.
The Directors made a critical judgement in relation to the valuation of the provision for warranty costs. The valuation
is determined based on the Directors’ best estimate of the expenditure required to settle the Group’s liability under its
warranty obligations.
Estimates and outcomes that have been applied in the assessing warranty provisions may change in the future and the
Group will recognise any revisions deemed necessary as a result.
107
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 21. Issued Capital
Balance at the beginning of the financial year ‑ ordinary shares
Issue of 12,500,000 equity shares at $1.20 per share on 4 July 2022 (net of issuance cost of $583,000)
Issue of 168,737 equity shares at $1.20 per share on 27 July 2022 under the share purchase plan
Issue of 7,653,040 equity shares at $0.5096 per share on 13 Oct 2022 under financing arrangements for nil
consideration
Balance at end of the financial year
Fully paid ordinary shares
Balance at beginning of financial year
Issue of new shares at $1.20 on 4 July 2022
Issue of new shares at $1.20 under the Share Purchase Plan on 27 July 2022
Issue of new shares at $0.51 on 13 October 2022
Balance at end of financial year
2023
$ ‘000
432,248
‑
‑
‑
432,248
2023
Number
2022
$ ‘000
413,728
14,417
203
3,900
432,248
2022
Number
171,236,006
150,914,229
‑
‑
‑
12,500,000
168,737
7,653,040
171,236,006
171,236,006
Fully paid ordinary shares carry one vote per share and carry the right to dividends. The shares issued under the Legacy
LFSP are restricted shares subject to vesting and performance criteria under the Plan detailed in Note 24 to the financial
statements and are treated as in substance options for accounting purposes.
Shares issued under the Legacy LFSP are not included in issued capital as they are treated as in‑substance options for
accounting purposes.
108
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 22. Reserves
Foreign currency translation
Employee equity‑settled benefits reserve
Foreign currency translation
Balance at beginning of financial year
Reclassification of FCTR Loss on disposal of foreign operations
Translation of foreign operations
Balance at end of financial year
2023
$ ‘000
(224)
12,857
12,633
2023
$ ‘000
277
‑
(501)
(224)
2022
$ ‘000
277
12,268
12,545
2022
$ ‘000
(1,823)
4,175
(2,075)
277
Exchange differences relating to the translation from US dollars, being the functional currency of the Group’s foreign
controlled entities in the USA, Euros, being the functional currency of the Group’s foreign controlled entity in Germany,
Singaporean dollars, being the functional currency of the Group’s foreign controlled entity in Singapore and Dirham being
the functional currency in the United Arab Emirates, into Australian dollars are brought to account by entries made directly
to the foreign currency translation reserve. Exchange differences previously accumulated in the foreign currency translation
reserve (in respect to translating the net assets of foreign operations) are reclassified to profit or loss on disposal of the
foreign operation.
Employee equity‑settled benefits
Balance at beginning of financial year
Share based payment (reversal)/expense
Balance at end of financial year
2023
$ ‘000
12,268
589
12,857
2022
$ ‘000
13,390
(1,122)
12,268
The employee equity‑settled benefits reserve arises on the grant of share options to directors and executives under the
Legacy Employee Share Option Plan, Legacy LFSP and Omnibus Employee Incentive Plan. Further information about
share‑based payments to employees is made in Note 23 to the financial statements.
109
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 23. Share‑based Payments
During the year, the Board determined to replace the Legacy LFSP and Legacy Employee Share Option Plan with the
Omnibus Employee Incentive Plan (OEIP). No further issues under the legacy plans are anticipated.
a. Legacy Employee Share Option Plan
The Group had an ownership‑based compensation scheme for employees (including Directors) of the Group. In accordance
with the provisions of the scheme, as approved by shareholders at a previous Annual General Meeting on 28 June 2002,
employees may be granted options to purchase ordinary shares at exercise prices determined by the Directors based on
market prices at the time the issue of options were made.
Each unlisted share option converts to one ordinary share in Electro Optic Systems Holdings Limited. No amounts are paid
or payable by the recipient on receipt of the options. The options carry neither rights to dividends nor voting rights. Options
may be exercised at any time from the date of vesting to the date of expiry.
The number of options granted is determined by the Directors and takes into account both Company and individual
achievements against both qualitative and quantitative criteria. Shares are held in an employee share trust until all vesting
conditions are satisfied in accordance with their terms of issue.
Reconciliation of unlisted options issued under the legacy Employee Share Option Plan:
2023
2022
Weighted average
exercise price
$
4.26
3.67
4.81
‑
Number
720,000
(350,000)
370,000
‑
Weighted average
exercise price
$
4.73
5.04
4.26
2.99
Number
1,830,000
(1,110,000)
720,000
192,500
Balance at beginning of the financial year (i)
Lapsed during the year (iv)
Balance at end of the financial year (v)
Exercisable at the end of the year
(i) Balance at the beginning of the year
Grant date
Expiry date
Exercise price
Number
220,000
435,000
20/06/2018
31/03/2023
19/05/2020
18/05/2025
65,000
15/03/2021
16/03/2026
720,000
220,000
220,000
635,000
475,000
280,000
1,830,000
20/06/2018
31/03/2023
16/11/2020
16/11/2025
19/05/2020
18/05/2025
15/03/2021
16/03/2026
22/07/2021
22/07/2026
Fair value at
grant date
$
61,369
279,705
101,920
442,994
61,369
197,134
408,305
744,800
202,160
1,613,768
$2.99
$4.75
$5.27
$2.99
$5.82
$4.75
$5.27
$4.31
2023
2022
110
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes (ii) Granted during the year
There were no options granted during the year (2022: nil).
(iii) Exercised during the year
There were no options exercised during the year (2022: nil).
(iv) Lapsed during the year
Number
Grant date
Expiry date
Exercise price
2023
(220,000)
20/06/2018
31/03/2023
2022
(110,000)
19/05/2020
18/05/2025
(20,000)
15/03/2021
16/03/2026
(350,000)
(200,000)
(220,000)
19/05/2020
18/05/2025
16/11/2020
16/11/2025
(410,000)
15/03/2021
16/03/2026
(280,000)
22/07/2021
22/07/2026
(1,110,000)
$2.99
$4.75
$5.27
$4.75
$5.82
$5.27
$4.31
(v) Balance at the end of the financial year
2023
Staff options
Staff options
2022
Staff options
Staff options
Staff options
Number
Grant date
Expiry date
Exercise price
325,000
45,000
370,000
220,000
435,000
65,000
720,000
19/05/2020
18/05/2025
15/03/2021
16/03/2026
20/06/2018
31/03/2023
19/05/2020
18/05/2025
15/03/2021
16/03/2026
$4.75
$5.27
$2.99
$4.75
$5.27
Fair value at
grant date
$
(61,369)
(70,730)
(31,360)
(163,459)
(128,600)
(197,134)
(642,880)
(202,160)
(1,170,774)
Fair value at
grant date
$
208,975
70,560
279,535
61,369
279,705
101,920
442,994
These employee options have similar vesting and forfeiture conditions as those issued under the Legacy LFSP
summarised in Note 23(b). The options issued were priced using the Monte Carlo Simulation method model. Where
relevant, the expected life used in the model has been adjusted based on management’s best estimate for the effects of
non‑transferability, exercise restrictions and behavioural conditions. Expected volatility is based on the historical share
price volatility.
111
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 23. Share‑based Payments (continued)
The inputs used in the model for these option grants are summarised in the table below:
Issue date
Number of staff options
Dividend yield
Expected volatility (linearly interpolated)
Risk free interest rate
Expected life of options
Grant date share price
Exercise price
Fair value of options on grant date:
Tranche A (50% of options issued)
Tranche B (50% of options issued)
20/06/2018
19/05/2020
16/11/2020
15/03/2021
22/07/2021
220,000
635,000
220,000
475,000
280,000
‑
30.00%
2.32%
‑
40.00%
0.40%
‑
40.00%
0.31%
‑
45.00%
0.71%
‑
45.00%
0.58%
1,745 days
1,789 days
1,825 days
1,827 days
1,826 days
$2.91
$2.99
$0.2885
$0.2694
$4.98
$4.75
$0.557
$0.729
$6.07
$5.82
$0.773
$1.019
$5.37
$5.27
$1.370
$1.766
$4.16
$4.31
$0.494
$0.950
Staff options carry no rights to dividends and no voting rights.
The difference between the total market value of the options issued during the financial year, at the date of issue, and the
total amount received from the employees (nil) is recognised in the financial statements over the vesting period.
b. Legacy Loan‑Funded Share Plan
This note sets out the details on the Legacy Loan Funded Share Plan (LFSP) and the grants made under the Legacy LFSP in
2018, 2020 and 2021. During 2023 no new loan funded shares were granted. A new Omnibus Employee Incentive Plan was
established in 2023. Refer note 23(c).
The Board established an employee incentive scheme known as the Electro Optic Systems Holdings Limited LFSP, pursuant
to which fully paid restricted ordinary shares in the Company (“Shares) are acquired by participants (“Participants”) of
the Group using a loan made to them by the Company. Shareholders approved the establishment of the LFSP and the
participation of Directors in the LFSP at the Annual General Meeting held on 24 April 2018.
The loans are limited recourse, interest and fee free and are repayable in full on the earlier of the termination date of the loan
(five years) or the date on which the shares are sold in accordance with the terms of the LFSP.
Under the applicable Accounting Standards, the Legacy LFSP shares are accounted for as options, which give rise to share
based payments.
The shares are subject to both ‘vesting conditions’ and ‘forfeiture conditions’:
• The vesting conditions are split into two different tranches which are outlined in the tables below. Participants are
required to satisfy the vesting conditions in order for their shares to vest.
• While Participants hold their shares, they will be subject to forfeiture conditions and Participants will forfeit their shares if
either they fail to satisfy the vesting conditions or they cease to be employed or continue to provide services to the Group
in certain circumstances.
Once the vesting conditions have been satisfied, removed or lifted, the shares vest and Participants may deal with them
in accordance with the rules of the Legacy LFSP subject to sale restrictions and other legal restrictions (such as under the
Company’s trading policy).
112
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes The shares will vest at the end of each ‘vesting period’ in the manner set out in the tables below, provided that the following
conditions are met:
(a) Participants continue to provide services to the Group on each of the vesting dates (or such other date on which the
Board makes a determination as to whether the vesting conditions have been met);
(b) the performance hurdles set out below are satisfied, which relate to the Group’s earnings before income tax (EBIT) and
the Company’s share price. Notably, EBIT and share price hurdles must both be achieved in order for shares to vest
under each tranche; and
(c) further vesting conditions may apply to individualised arrangements.
If the vesting conditions are not satisfied, or if the Board determines that they cannot be satisfied, Directors and selected
employees will forfeit their unvested shares (unless the Board exercises its discretion to permit those shares to vest in
accordance with the terms of the Legacy LFSP).
All the ordinary restricted fully paid shares issued have been valued using the Monte Carlo Simulation method model as
the shares have a share price hurdle in the vesting conditions. Where relevant, the expected life used in the model has been
adjusted based on management’s best estimate for the effects of non‑transferability, vesting restrictions and behavioural
conditions. Expected volatility is based on the historical share price volatility.
Reconciliation of shares issued under the Legacy LFSP:
Balance at beginning of the financial year
Lapsed during the year
Balance at end of the financial year
The following tables summarise the loan funded shares issued to date:
(i) 2018 Legacy LFSP issues
2023
Number
2022
Number
7,401,875
10,292,500
(6,611,875)
(2,890,625)
790,000
7,401,875
Under the terms of the Legacy LFSP, once vested, the Participant has the right to acquire a share at the specified
price during the exercise period until the expiry date. Due to the expiry of the exercise period, the remaining vested but
unexercised shares from the 20 June 2018 issue lapsed during the reporting period.
2018 Loan funded shares:
Issue date
20 June 2018
(Shareholders approved the participation of Directors in the Legacy LFSP at the Annual General Meeting (AGM) held
on 24 April 2018)
Shares issued
5,135,000
(4,000,000 shares issued to Directors and KMP)
Fair value at issue date
$1,432,407
Dividend yield
Expected volatility (linearly
interpolated)
‑
30.00%
Risk free interest rate
2.32%
Expected life of options
1,745 days
Issue price
Grant date share price
$2.99
$2.91
Under the terms of the Legacy LFSP, once vested, the Participant has the right to acquire a share at the specified
price during the exercise period until the expiry date. Due to the expiry of the exercise period, the remaining vested but
unexercised shares from the 20 June 2018 issue lapsed during the reporting period.
113
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 23. Share‑based Payments (continued)
(ii) 2020 Legacy LFSP issues
2020 Loan funded shares:
Issue date
Shares issued
Fair value at issue date
Dividend yield
Expected volatility (linearly interpolated)
Risk free interest rate
Expected life of options
Issue price
Grant date share price
19 May 2020
29 May 2020
10 August 2020
14 October 2020
2,315,000
$1,488,545
‑
40.00%
0.31%
2,500,000
$2,463,750
‑
40.00%
0.34%
860,000
$651,880
‑
40.00%
0.34%
150,000
$125,925
‑
40.00%
0.23%
1,789 days
1,752 days
1,679 days
1,643 days
$4.75
$4.98
$4.92
$5.68
$5.62
$5.68
$5.47
$6.01
Vesting conditions:
Tranche A: (applies to 50% of the initial total number of shares issued above)
Measures and hurdles:
A share price hurdle of $9.50 by 31 December 2021 (this hurdle must be reached on at least 30 trading days, not necessarily
consecutive, by 31 December 2021*).
Vesting period:
The period of 2 calendar years ending 31 December 2021*
Any vested shares are now eligible to be sold
Other conditions:
i. Participants have various Group and divisional EBITDA targets to be met as performance hurdles; and
ii. Participants in the various sectors have to meet the additional hurdles established by the Directors in relation to each sector.
Vesting conditions:
Tranche B: (applies to 50% of the initial total number of shares issued above)
Initial measures and hurdles:
A share price hurdle of $11.50 by 31 December 2022 (this hurdle must be reached on at least 30 trading days, not
necessarily consecutive, by 31 December 2022 **).
Vesting period:
The period of four calendar years ending 31 December 2023**
Vested shares can be sold after:
30‑Jun‑24: (25% of vested shares)
30‑Sep‑24:(50% of vested shares)
31‑Dec‑24: (75% of vested shares)
31‑Mar‑25: (100% of vested shares)
Other conditions:
i. Participants have various Group and divisional EBITDA targets to be met as performance hurdles; and
ii. Participants in the various sectors have to meet the additional hurdles established by the Directors in relation to each sector.
* This price hurdle date of 31 December 2021 was extended by three years by the Directors on 16 November 2021 for executives
and employees only to now be 31 December 2024. As the price hurdle was not met, 1,250,000 shares issued to Directors lapsed on
31 December 2021.
** This price hurdle date of 31 December 2022 was extended by three years by the Directors on 16 November 2021 for executives
and employees only to now be 31 December 2025. As the price hurdle was not met, 1,250,000 shares issued to Directors lapsed on
31 December 2022.
114
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes (iii) 2021 Legacy LFSP issues
2021 Loan funded shares:
Issue date
Shares issued
Fair value at issue date
Dividend yield
Expected volatility
Risk free interest rate
Expected life of options
Issue price
Grant date share price
15 March 2021
31 May 2021
1,250,000
$2,602,880
‑
45%
0.71%
150,000
$114,750
‑
45%
0.71%
1,827 days
1,491 days
$5.27
$5.37
$4.06
$4.10
Vesting conditions:
Tranche A: (applies to 50% of the total number of shares to be issued above)
Measures and hurdles:
A share price hurdle of $9.50 by 30 June 2023 (this hurdle must be reached on at least 30 trading days, not necessarily
consecutive, by 30 June 2023*).
Vesting period: The period ending 30 June 2023*
Vested shares can be sold after:
30‑Jun‑23: (25% of vested shares)
30‑Sep‑23: (50% of vested shares)
31‑Dec‑23: (75% of vested shares)
31‑Mar‑24: (100% of vested shares)
Other conditions:
i. Participants have various Group and divisional EBITDA targets to be met as performance hurdles; and
ii. Participants in the various sectors have to meet the additional hurdles established by the Directors in relation to each sector.
Tranche B: (applies to 50% of the total number of shares to be issued above)
Measures and hurdles:
A share price hurdle of $11.50 by 30 June 2025 (this hurdle must be reached on at least 30 trading days, not necessarily
consecutive, by 30 June 2025**).
Vesting period: The period ending 30 June 2025**
Vested shares can be sold after:
30‑Jun‑25: (25% of vested shares)
30‑Sep‑25:(50% of vested shares)
31‑Dec‑25: (75% of vested shares)
31‑Mar‑26: (100% of vested shares)
Other conditions:
i. Participants have various Group and divisional EBITDA targets to be met as performance hurdles; and
ii. Participants in the various sectors have to meet the additional hurdles established by the Directors in relation to each sector.
* This price hurdle date of 30 June 2023 was extended by three years by the Directors on 16 November 2021 for executives and employees to
now be 30 June 2026. As the price hurdle was not met, 75,000 shares issued to Directors lapsed on 30 June 2023.
** This price hurdle date of 30 June 2025 was extended by three years by the Directors on 16 November 2021 for executives and
employees to now be 30 June 2028.
115
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 23. Share‑based Payments (continued)
(iv) Other features of the Legacy LFSP structure
Shares are held in an employee share trust, on behalf of participants, until all vesting conditions are satisfied in accordance
with their terms of issue and the loan relating to the shares is repaid in full.
If the Company pays dividends or make capital distributions, the after‑tax value of any dividends paid or distributions
made to a Participant will be applied to repay the loan. The balance (i.e., the estimated value of the tax payable by the
Participant on the dividend or distribution) is paid to the Participant to allow them to fund their tax liability on the dividend
or distribution.
At the end of the year for the vesting conditions and subject to continuous employment or engagement of services with the
Company, the Participants are able to dispose of their shares on repayment of any outstanding loan balance. However, the
Board may impose sale restrictions on the shares for a period of time after vesting.
There may be circumstances where Legacy LFSP participants cease working for the Group prior to the vesting of their LFSP
shares and where Participants cease working for the entity after the vesting of their Legacy LFSP shares but prior to there
being a right of sale of some or all of those vested shares. In either instance, on cessation of employment, the Board has
discretion to determine whether the Participant is a Bad Leaver, a Good Leaver or a Leaver and the following provisions apply:
Bad Leaver. All unvested loan funded shares held by the Participant will be forfeited and any vested loan funded shares
will be disposed of or bought‑back, in each case in accordance with the buy‑back rules of the scheme, if either:
•
•
•
they remain subject to any conditions or disposal restrictions;
they remain held in trust (for any reason); or
the loan applicable to those Shares has not been repaid in full.
Good Leaver. Subject to the Board’s discretion to determine otherwise (including the discretion to permit some or all
unvested loan funded shares to vest based on its assessment of the circumstances in which the Participant has ceased
employment), unvested loan funded shares will vest pro rata to the proportion of the vesting period that has elapsed as
at the date on which employment ceases and having regard to the extent to which any performance conditions have
been achieved (as determined by the Board). The balance of loan funded shares that do not vest will be disposed of or
bought‑back, in each case in accordance with the buy‑back rules of the scheme.
Leaver. Unvested loan funded shares will normally be disposed of or bought‑back, in each case in accordance with the
buy‑back rules of the scheme, subject to the Board’s discretion to permit some or all of those unvested loan funded
shares to vest based on its assessment of the circumstances in which the participant has ceased employment.
A Good Leaver or Leaver may retain vested loan funded shares and may deal with any vested loan funded shares subject to
repaying the outstanding loan balance by the earlier of its expiry date or the date which is three months from the cessation
date or twelve months in the case of a participant who ceases employment due to death.
116
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes c. OMNIBUS EMPLOYEE INCENTIVE PLAN (“OEIP”)
The Board has established a new long‑term incentive plan Omnibus Employee Incentive Plan for senior management during
2023 to align remuneration with the creation of shareholder value over the long‑term.
There is not expected to be any change in share capital as a result of the 2023 allocation as it is anticipated this allocation
will be funded by shares already issued and held in trust as lapsed shares from the existing LFSP.
(i) Share options OEIP
Each share option converts to one ordinary share in Electro Optic Systems Holdings Limited. The options carry neither
rights to dividends nor voting rights. The options may be exercised by paying the exercise price at any time from the date of
vesting to the date of expiry.
The number of options granted is determined by the Directors and takes into account both the seniority of the individual role
and its ability to drive Group and divisional performance.
The options will vest if the vesting conditions have been met on a testing date in the following manner, provided that the
employee continues to provide services to the Group on the date of vesting:
• 50% of options vest if the share price hurdle of $1.20 is met for a period of 20 trading days (not necessarily consecutive)
prior to a testing date.
• The remaining 50% of options vest if the share price hurdle of $3.00 is met for a period of 20 trading days (not
necessarily consecutive) prior to a testing date.
• Testing dates are 31 December 2024, 31 December 2025 and 31 December 2026.
• The options are exercisable from vesting date until 31 December 2028. Options will vest on a straight‑line basis for share
price performance between $1.20 and $3.00.
Movements in unlisted options issued under the OEIP:
2023
2022
Balance at beginning of the financial year
Granted during the year
Exercised during the year
Lapsed during the year
Number
‑
2,953,087
‑
‑
Balance at end of the financial year
2,953,087
Exercisable at the end of the year
‑
Weighted average
exercise price
$
Weighted average
exercise price
$
Number
‑
0.50
‑
‑
0.50
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
The options issued were priced using the Monte Carlo Simulation method model. Where relevant, the expected life used
in the model has been adjusted based on management’s best estimate for the effects of non‑transferability, exercise
restrictions and behavioural conditions. Expected volatility is based on the historical share price volatility.
Shareholder approval will be sought at the 2024 Annual General Meeting for a grant of 2,100,000 share options to the
Managing Director and CEO, Dr Andreas Schwer. Although subject to shareholder approval, the Group is required to
commence recognition of the fair value expense of the proposed grant.
117
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 23. Share‑based Payments (continued)
The inputs used in the model for these option grants are summarised in the table below:
Date
Number of staff options
Dividend yield
Annual volatility
Risk free interest rate
Expected life of options
Grant date share price
Exercise price
Fair value of options on grant date
21/04/23
3,340,000
‑
65.00%
3.22%
14/07/23
1,713,087
‑
70.00%
3.96%
5.69 years
5.46 years
$0.58
$0.50
$0.275
$1.09
$0.50
$0.717
Staff options carry no rights to dividends and no voting rights. The expiry date of the options is 31 December 2028.
(ii) Share rights OEIP
Each share right converts to one ordinary share in Electro Optic Systems Holdings Limited. No amounts are paid or payable
by the recipient on receipt of the share rights. Rights will be converted into ordinary shares upon the satisfaction of the
vesting conditions.
The number of rights granted is determined by the Directors and takes into account both the seniority of the individual role
and its ability to drive Group and divisional performance.
The rights will vest in the below proportions based purely on a service condition if the Employee remains employed by the
Group on the below hurdle dates:
• One‑third of rights vest if employed by the Group on 31 December 2024;
• One‑third of rights vest if employed by the Group on 31 December 2025; and
• One‑third of rights vest if employed by the Group on 31 December 2026.
Movements in share rights issued under the OEIP:
2023
2022
Balance at beginning of the financial year
Granted during the year
Exercised during the year
Lapsed during the year
Number
‑
1,341,117
‑
‑
Balance at end of the financial year
1,341,117
Exercisable at the end of the year
‑
Weighted average
exercise price
$
Weighted average
exercise price
$
Number
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
‑
The rights issued were priced using the Binomial model. Where relevant, the expected life used in the model has
been adjusted based on management’s best estimate for the effects of non‑transferability, exercise restrictions and
behavioural conditions.
118
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Shareholder approval will be sought at the 2024 Annual General Meeting for a grant of 1,260,000 share rights to the
Managing Director and CEO, Dr Andreas Schwer. Although subject to shareholder approval, the Group is required to
commence recognition of the fair value expense of the proposed grant.
The inputs used in the model for these rights grants are summarised in the table below:
Grant date
Tranche 1
Tranche 2
Tranche 3
Tranche 1
Tranche 2
Tranche 3
Number of staff rights
668,000
668,000
668,000
199,039
199,039
199,039
21/04/23
14/7/23
Dividend yield
Annual volatility
Risk free interest rate
Expected life of rights
Grant date share price
Exercise price
Fair value of rights on grant date
24. Accumulated Losses
‑
80%
‑
70%
‑
75%
‑
90%
‑
80%
‑
80%
3.31%
3.08%
3.08%
3.70%
3.50%
3.68%
1.69 years
2.69 years
3.69 years
1.46 years
2.46 years
3.46 years
$0.58
‑
$0.58
$0.58
‑
$0.58
$0.58
‑
$0.58
$1.09
‑
$1.09
$1.09
‑
$1.09
$1.09
‑
$1.09
Balance at beginning of financial year
Net (loss) attributable to members of the parent entity
Balance at end of financial year
2023
$ ‘000
(208,499)
(33,275)
(241,774)
2022
$ ‘000
(93,959)
(114,540)
(208,499)
119
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 25. Notes to the Cash Flow Statement
a. Reconciliation of Cash and Cash Equivalents
For the purposes of the statement of cash flows, cash includes cash on hand and at call deposits with banks or financial
institutions, investments in money market instruments maturing within less than three months and net of bank overdrafts.
Cash at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the
balance sheet as follows:
Cash and cash short‑term deposits ‑ current
2023
$ ‘000
70,997
b. Reconciliation of (Loss) Before Income Tax to Net Cash Flows from Operating Activities
(Loss) before income tax from continuing operations
(Loss) before income tax from discontinued operations
(Loss) before income tax
Reconciling items which include operating activities from both continuing and discontinued operations:
Cash paid on bargain purchase included in investing activities
Accrued interest, finance costs and other financing expenses
Amortisation of intangibles
Equity settled share‑based payments
Depreciation of property, plant and equipment
Impairment of assets
Depreciation of right of use assets
Loss on sale of property, plant and equipment
Tax received/(paid)
Foreign exchange movements
(Increase)/decrease in assets
Receivables and contract assets
Inventories
Prepayments
Increase/(decrease) in liabilities
Provisions
Trade and other payables
Deferred income
2022
$ ‘000
21,681
2022
$ ‘000
(62,885)
(61,954)
2023
$ ‘000
(40,193)
‑
(40,193)
(124,839)
‑
16,488
1,597
589
6,356
‑
4,430
‑
16,747
(5,590)
95,336
1,444
1,208
18,668
(2,375)
(1,581)
421
6,414
1,997
(1,122)
4,483
54,496
5,576
11
(1,014)
2,379
(20,584)
(262)
205
348
5,417
14,502
Net cash inflows / (outflows) from operating activities
113,124
(51,572)
120
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 26. Related Party Disclosures
a. Equity Interests in Related Parties
Details of the percentage of ordinary shares held in subsidiaries are disclosed in Note 27.
b. Key Management Personnel Compensation
The aggregate compensation of the key management personnel of the Group is set out below:
Short‑term benefits
Post‑employment benefits
Share based payments
Termination benefits
Long‑term benefits
Total
2023
$ ‘000
2,523
119
436
146
18
2022
$ ‘000
3,363
243
(26)
194
101
3,242
3,875
c. Transactions with Other Related Parties
Other related parties include associates, joint venture partners, and subsidiaries.
The Group did not enter into any transactions with other related parties outside of the ordinary course of business.
d. Other Transactions with Key Management Personnel or Director‑Related Entities
During the year, the Company paid $140,000 (2022: $14,575) to Latour Pty Limited, a company associated with Mr Garry
Hounsell in respect of directors’ fees and superannuation for Mr Garry Hounsell.
During the year, the Company paid $70,000 (2022: $70,000) to GCB Stratos Consulting Pty Limited, a company associated
with Air Marshall Geoffrey Brown AO in respect of directors’ fees and superannuation for Air Marshall Geoffrey Brown AO.
During the year, the Company paid $70,000 (2022: $70,000) to Technology Innovation Partners Pty Ltd, a company
associated with the Hon Kate Lundy in respect of directors’ fees and superannuation for the Hon Kate Lundy.
e. Parent Entity
The parent entity in the Group is Electro Optic Systems Holdings Limited.
121
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 27. Controlled Entities
Name of entity
Parent Entity
Electro Optic Systems Holdings Limited (i), (ii)
Controlled Entities
Electro Optic Systems Pty Limited (ii), (iii)
EOS Defence Systems Pty Limited (ii), (iii)
FCS Technology Holdings Pty Limited (ii)
EOS Space Systems Pty Limited (ii)
EOS UAE Holdings Pty Limited (ii)
EOS Communications Systems Pty Ltd (ii)
EM Solutions Pty Ltd (ii), (iii)
EOS Loan Plan Pty Ltd (iv)
Australian Missile Alliance Pty Ltd
EOS Optical Technologies Ltd
EOS USA, Inc. (Inc in Nevada)
EOS Space Technologies, Inc. (Inc in Arizona)
EOS Defense Systems, Inc (Inc in Arizona)
EOS Defense Systems USA Inc (Inc in Alabama) (v)
EOS Advanced Technologies LLC (vi)
EOS Optronics GmbH
EOS Defense Systems Pte Limited (vii)
Country of
incorporation
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
USA
USA
USA
USA
UAE
Germany
Singapore
December
2023
%
December
2022
%
100
100
100
100
100
100
100
‑
100
100
100
100
100
100
49
100
100
100
100
100
100
100
100
100
‑
100
100
100
100
100
100
49
100
100
(i) Electro Optic Systems Holdings Limited is the head entity within the tax‑consolidated Group.
(ii) These companies form part of the Australian consolidated tax entity.
(iii) These wholly‑owned subsidiaries have entered into a deed of cross guarantee with Electro Optic Systems Holdings
Limited pursuant to ASIC Corporations (Wholly‑owned Companies) Instrument 2016/875 and are relieved from the
requirement to prepare and lodge an audited financial report.
On 6 April 2018, the parent entity, Electro Optic Systems Holdings Limited entered into a deed of cross guarantee
with two of its Australian wholly‑owned subsidiaries Electro Optic Systems Pty Limited and EOS Defence Systems
Pty Limited. On 28 November 2019, the parent entity Electro Optic Systems Holdings Limited entered into a Deed of
Assumption which joined EM Solutions Pty Limited as part of the Deed of Cross Guarantee from the effective date of
acquisition which was 11 October 2019.
(iv) EOS Loan Plan Pty Ltd is the trustee of the Legacy LFSP. EOS Loan Plan Pty Ltd was incorporated on 5 December 2019.
Electro Optic Systems Holdings Limited has the ability to direct the relevant activities of the entity.
(v) Refer to note 2(f) on judgments made in relation to the consolidation of EOS Defense Systems USA Inc.
(vi) Whilst the Group owns less than 50% of the shares, pursuant to the shareholder and related agreements, it
has existing rights that give it the ability to direct the relevant activities of the company and is entitled to 80% of
company distributions.
(vii) EOS Defense Systems Pte Limited is audited by Assurance Affiliates, Chartered Accountants in Singapore and EOS
Advanced Technologies LLC is audited by M A International Consulting LLC in UAE and are the only entities with a
separately appointed statutory auditor.
122
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes
a. Consolidated Profit or Loss, Consolidated Balance Sheet and Movements in Consolidated Retained
Earnings of Entities Party to the Deed of Cross Guarantee
The consolidated profit or loss of the entities which are parties to the Deed of Cross Guarantee are:
Revenue and other income
Foreign exchange gains
Changes in inventories of work in progress and finished goods
Raw materials and consumables used
Employee benefits expense
Administration expenses
Amortisation of intangibles
Interest expense on lease liabilities
Finance costs
Depreciation of property, plant and equipment
Depreciation of right of use assets
Impairment of assets
Loss on disposal of subsidiary
Loss on sale of fixed assets
Occupancy costs
Other expenses
Provision for loss on loans to subsidiaries
(Loss) before income tax
Income tax benefit
(Loss) for the year
2023
$ ‘000
206,920
958
(238)
(122,083)
(37,159)
(26,454)
(1,597)
(1,064)
(34,093)
(4,671)
(2,436)
‑
‑
‑
(1,334)
(1,069)
(63,521)
(87,841)
6,997
(80,844)
2022
$ ‘000
130,504
7,383
(3,738)
(81,836)
(40,647)
(22,696)
(1,597)
(1,170)
(12,935)
(2,591)
(3,256)
(7,315)
(84,730)
(11)
(1,421)
(2,297)
‑
(128,353)
9,405
(118,948)
123
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 27. Controlled Entities (continued)
b. Consolidated Profit or Loss, Consolidated Balance Sheet and Movements in Consolidated Retained
Earnings of Entities Party to the Deed of Cross Guarantee
The consolidated balance sheet of the entities which are parties to the Deed of Cross Guarantee:
CURRENT ASSETS
Cash and short‑term deposits
Trade and other receivables
Current tax asset
Contract assets
Inventories
Other
TOTAL CURRENT ASSETS
NON‑CURRENT ASSETS
Contract asset
Loans to subsidiaries
Deferred tax assets
Security deposit
Right of use asset
Goodwill
Intangible assets
Property, plant and equipment
TOTAL NON‑CURRENT ASSETS
TOTAL ASSETS
CURRENT LIABILITIES
Trade and other payables
Current tax payable
Secured borrowings
Unsecured borrowings
Lease liabilities
Contract liabilities
Provisions
TOTAL CURRENT LIABILITIES
NON‑CURRENT LIABILITIES
Secured borrowings
Lease liabilities
Provisions
TOTAL NON‑CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued capital
Reserves
Accumulated losses
TOTAL EQUITY
124
2023
$ ‘000
63,942
3,282
‑
29,014
68,862
35,501
200,601
38,879
609
8,950
45,828
13,571
12,373
18,283
22,680
161,173
361,774
37,845
2,970
19,875
‑
3,186
16,259
23,791
103,926
44,947
14,715
13,801
73,463
2022
$ ‘000
18,221
6,182
12,245
127,823
69,180
15,121
248,772
36,520
41,734
3,326
35,444
15,900
12,373
12,446
30,959
188,702
437,474
38,862
‑
21,391
1,904
2,894
19,765
10,162
94,978
49,443
19,331
9,082
77,856
177,389
172,834
184,385
264,640
432,247
12,858
(260,720)
184,385
432,247
12,269
(179,876)
264,640
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes The consolidated accumulated losses of the entities which are party to the Deed of Cross Guarantee are:
Balance at the start of the year
Net (loss) for the year
Balance at end of the year
28. Joint Operations
2023
$ ‘000
(179,876)
(80,844)
(260,720)
2022
$ ‘000
(60,928)
(118,948)
(179,876)
The Group is party to a joint operation. The Group has a share in the operation based on capital contributions that entitles it
to a proportionate share of revenue earned from the operation.
29. Financial Risk Management Objectives and Policies
The Group’s principal financial instruments comprise receivables, payables, contract assets, borrowings, finance leases,
cash and short‑term deposits. These instruments expose the Group to a variety of risks that it must manage including,
market risk (such as currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest
rate risk.
The Group does not use derivative financial instruments to hedge these risk exposures.
The Directors consider that the carrying amount of financial assets and liabilities recognised in these financial statements
approximate their fair values. The amounts disclosed in this note exclude contract asset balances as these are not
financial assets.
Risk exposures and responses
a. Interest Rate Risk
The Group’s exposure to market interest rates relates primarily to the Group’s cash holdings.
At balance date the Group had the following mix of financial assets exposed to interest rate risk that are not designated in
cash flow hedges:
Financial assets
Cash and short‑term deposits
Security deposits
Total
2023
$ ‘000
70,997
67,056
138,053
2022
$ ‘000
21,681
35,588
57,269
At balance date the Group had financial liabilities with a fixed rate of interest. These liabilities therefore do not introduce an
exposure to movement in interest rates.
Financial liabilities
Borrowings
Total
2023
$ ‘000
64,822
64,822
2022
$ ‘000
72,738
72,738
The Group constantly analyses its interest rate exposure. Within this analysis consideration is given to potential renewals of
existing positions, alternative financing and the mix of fixed and variable interest rates.
125
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 29. Financial Risk Management Objectives and Policies (continued)
At 31 December 2023, if interest rates had moved as illustrated in the table below, with all other variables held constant,
post‑tax profit/(loss) and equity would have been affected as follows:
Judgements of reasonably possible movements
Consolidated
+1% (100 basis points)
‑0.1% (10 basis points)
Post‑tax (loss)
higher/(lower)
2023
$ ‘000
966
(97)
2022
$ ‘000
391
(39)
Equity
higher/(lower)
2023
$ ‘000
966
(97)
2022
$ ‘000
391
(39)
The movements in profits are due to lower interest rates on cash balances.
b. Foreign Currency Risk
The Group’s financial results can be significantly affected by movements in the US$/A$ exchange rates. There are also
exposures to Singapore dollars, Emirati Dirham, Euro and the New Zealand dollars from operations in those countries.
Exchange rates are managed within approved policy parameters using natural hedges and no derivatives are used.
The Group also has transactional currency exposures. Such exposures arise from sales or purchases by an operating entity
in currencies other than the functional currency.
The policy of the Group is to convert surplus foreign currencies to Australian dollars. The Group also holds cash deposits in
US dollars to secure US dollar bank guarantees and performance bonds to overseas customers.
At 31 December 2023, the Group the following exposure to US$ foreign currency:
2023
A$ ‘000
40,630
38,545
5,815
84,990
4,862
37,056
41,918
2022
A$ ‘000
11,056
34,136
3,048
48,240
1,006
29,137
30,143
43,072
18,097
Financial assets
Cash and short‑term deposits
Security deposits
Trade and other receivables
Total
Financial liabilities
Lease liabilities
Trade and other payables
Total
Net exposure
126
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes All US$ denominated financial instruments were translated to A$ at 31 December 2023 at the exchange rate of 0.684
(2022: 0.6775).
At 31 December 2023 and 2022, had the Australian Dollar moved as illustrated in the table below, with all other variables
held constant, post‑tax profit/(loss) and equity would have been affected as follows:
Post‑tax profit
higher/(lower)
Equity
higher/(lower)
Judgements of reasonably possible movements
Consolidated
AUD/USD +10%
AUD/USD ‑5%
2023
$ ‘000
(2,765)
1,601
2022
$ ‘000
(10,787)
6,245
At 31 December 2023, the Group had the following exposure to Singapore $ foreign currency:
Financial assets
Cash and short‑term deposits
Trade and other receivables
Total
Financial liabilities
Trade and other payables
Lease liabilities
Total
Net exposure
2023
$ ‘000
(2,765)
1,601
2023
$ ‘000
5,547
518
6,065
900
982
1,882
4,183
2022
$ ‘000
(10,787)
6,245
2022
$ ‘000
1,612
1,044
2,656
432
1,042
1,474
1,182
All Singapore $ denominated financial instruments were translated to A$ at 31 December 2023 at the exchange rate of
0.9014 (2022: 0.9102).
At 31 December 2023 and 2022, had the Australian Dollar moved as illustrated in the table below, with all other variables
held constant, post‑tax profit/(loss) and equity would have been affected as follows:
Judgements of reasonably possible movements
Consolidated
AUD/SING +10%
AUD/SING ‑5%
Post‑tax profit
higher/(lower)
Equity
higher/(lower)
2023
$ ‘000
(266)
154
2022
$ ‘000
(75)
44
2023
$ ‘000
(266)
154
2022
$ ‘000
(75)
44
127
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 29. Financial Risk Management Objectives and Policies (continued)
At 31 December 2023, the Group had the following exposure to Euro € foreign currency:
Financial assets
Cash and short‑term deposits
Trade and other receivables
Total
Financial liabilities
Trade and other payables
Total
Net exposure
2023
$ ‘000
5,398
8
5,406
606
606
4,800
2022
$ ‘000
‑
‑
‑
‑
‑
‑
All Euro € denominated financial instruments were translated to A$ at 31 December 2023 at the exchange rate of 0.6181.
At 31 December 2023, had the Australian Dollar moved as illustrated in the table below, with all other variables held
constant, post‑tax profit/(loss) and equity would have been affected as follows:
Judgements of reasonably possible movements
Consolidated
AUD/EUR +10%
AUD/EUR ‑5%
Post‑tax profit
higher/(lower)
Equity
higher/(lower)
2023
$ ‘000
(305)
177
2022
$ ‘000
‑
‑
2023
$ ‘000
(305)
177
2022
$ ‘000
‑
‑
The Group believes the balance date risk exposures are representative of risk exposure inherent in financial instruments.
As noted, foreign currency transactions entered into during the financial year are managed within approved policy
parameters using natural hedges. The Directors do not consider that the net exposure to foreign currency transactions is
material after considering the effect of natural hedges.
c. Credit Risk Management
Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in a financial loss to the
Group. The Group has adopted a policy of only dealing with creditworthy counterparties. The Group is exposed to credit
risk from its operating activities (primarily trade receivables and contract asset) and from its financing activities, including
deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
The credit risk on liquid funds is limited because the counterparties are banks with high credit‑ratings from international
credit agencies. Refer Note 7 and Note 8 for further information on credit assessment for receivables and contract assets.
128
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes d. Liquidity Risk Management
The Group’s approach to managing liquidity risk is to ensure, as far as possible, that it will always have sufficient liquidity to
meet its liabilities when due.
Ultimate responsibility for liquidity risk management rests with the Board of Directors, which has built an appropriate
risk management framework for the management of the Group’s short, medium and long term funding and liquidity
requirements. The Group manages liquidity by seeking to maintain adequate cash reserves, continuously monitoring
forecast and actual cash flows and managing the maturity profiles of financial assets.
Liquidity and interest tables
The following table detail the Group’s remaining contractual maturity for its non‑derivative financial liabilities. The table has
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group
can be required to pay. The table includes both interest and principal cash flows.
Consolidated
2023
Borrowings
Trade payables & accruals
Lease liabilities
2022
Borrowings
Trade payables & accruals
Lease liabilities
Weighted average
effective interest
rate
%
Less than 1 month
$ ‘000
1‑3 months
$ ‘000
3 months to 1 year
$ ‘000
1‑5 years
$ ‘000
19%
‑
5%
20%
‑
5%
‑
15,909
402
‑
8,121
397
‑
13,508
809
‑
11,028
704
20,505
11,387
3,620
28,846
24,030
2,811
52,072
‑
19,088
72,576
‑
20,534
The following table detail the Group’s remaining contractual maturity for its non‑derivative financial assets. The table has
been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be
earned on these assets except where the Group anticipates that the cash flow will occur in a different period.
Weighted average
effective interest
rate
%
Less than 1 month
$ ‘000
1‑3 months
$ ‘000
3 months to 1 year
$ ‘000
1‑5 years
$ ‘000
Consolidated
2023
Non‑interest bearing
Cash and cash equivalent
Receivables
Security deposits
Fixed interest rate instruments
Total
2022
Non‑interest bearing
Cash and cash equivalent
Receivables
Security deposits
‑
‑
0.01%
0.05%
‑
‑
‑
Fixed interest rate instruments
0.04%
Total
70,068
2,634
‑
929
73,631
15,369
4,711
‑
6,312
26,392
‑
4,378
‑
‑
4,378
‑
1,385
119
‑
1,504
‑
419
21,214
‑
21,633
‑
277
125
‑
402
‑
‑
45,842
‑
45,842
‑
‑
35,344
‑
35,344
129
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 29. Financial Risk Management Objectives and Policies (continued)
e. Price Risk
The Group’s exposure to commodity price risk is minimal. The Group does not make investments in equity securities.
f. Categories of Financial Assets and Liabilities
2023
$ ‘000
2022
$ ‘000
70,997
8,466
67,056
146,519
100,549
45,970
64,822
23,919
88,741
24,751
63,990
21,681
7,419
35,588
64,688
29,100
35,588
72,738
24,446
97,184
27,234
69,950
61,391
65,347
61,391
‑
65,347
‑
Financial Assets
Amortised cost
Cash and short‑term deposits
Trade and other receivables
Security deposits
Total financial assets at amortised cost
Current
Non‑current
Financial Liabilities
Interest bearing loans and borrowings
Borrowings
Lease liabilities
Total interest‑bearing loans and borrowings
Current
Non‑current
Trade and other payables
Current
Non‑current
g. Commodity Price Risk
The Group’s exposure to commodity price risk is minimal.
130
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 30. Segment Information ‑ Continuing Operations
AASB 8 requires operating segments to be identified on the basis of internal reports about components of the Group
that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segment and to
assess performance.
a. Segment Determination
The Group identifies its operating segments based on internal reports reviewed and used by the Group’s chief operating
decision maker (the Chief Executive Officer) to determine business performance and resource allocation. Operating
segments are aggregated after considering the nature of the products and services, nature of production processes, type of
customer and distribution methods. As a result, EM Solutions and Space Systems segments were merged to form an
enlarged Space Systems segment.
As a result, the Group’s reportable segments are Defence Systems and Space Systems.
(i) Defence Systems
Defence Systems develops, manufactures and markets advanced fire control, surveillance, and weapon systems to
approved military customers. These products either replace or reduce the role of a human operator for a wide range of
existing and future weapon systems in the US, Australasia, Middle East and other markets.
(ii) Space Systems
Space Systems has a range of ground products available to support the Australian and international space markets.
They include:
• significant investments into passive optical and laser sensing equipment at both its Mt Stromlo and Learmonth sites;
• manufacturing and supply of various telescopes and dome enclosures for customers around the world. Space Systems
astrometric products provide reliable and high‑quality optical systems under demanding environmental conditions; and
• specialisation in innovative optical, microwave and on‑the‑move radio and satellite products that help to deliver high
speed, resilient and assured telecommunications anywhere in the world. Developments in the Group’s laser technology
has opened aligned markets in space optical communications and various high power laser applications.
b. Geographic Activity
The Group continues to operate in Australia, USA, Singapore, UAE, New Zealand and Germany in the development,
manufacture and sale of telescopes and dome enclosures, laser satellite tracking systems, the manufacture of electro‑optic
fire control systems and the design and manufacturing of microwave satellite dishes and receivers.
131
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 30. Segment Information ‑ Continuing Operations (continued)
c. Segment Information
Segment revenues ‑ continuing operations
Space Systems
Defence Systems
Total of all segments
Segment results ‑ continuing operations
Space Systems
Defence Systems
Total of all segments
Unallocated holding company costs
(Loss) before income tax expense
Income tax benefit
(Loss) for the year
2023
$ ‘000
63,891
155,362
219,253
2023
$ ‘000
7,334
(12,536)
(5,202)
(34,991)
(40,193)
6,086
(34,107)
2022
$ ‘000
31,961
105,951
137,912
2022
$ ‘000
(7,039)
(40,399)
(47,438)
(15,447)
(62,885)
9,278
(53,607)
The revenue reported above represents revenue from external customers. The Group had two customers that each
provided in excess of 10% of consolidated revenue. The customers are within the Defence Systems segment. One
customer represented revenue of $67.6m and the other represented $49.6m during the year.
Segment profit represents the profit earned by each segment without the allocation of central administration costs and
directors’ salaries, investment revenue and finance costs and income tax benefit. This is the measure reported to the chief
operating decision maker for the purposes of resource allocation and assessment of segment performance.
The following is an analysis of the Group’s assets and liabilities by reportable operating segment:
Segment assets and liabilities ‑ continuing operations
Assets
Liabilities
31 December 2023
$ ‘000
31 December 2022
$ ‘000
31 December 2023
$ ‘000
31 December 2022
$ ‘000
Space Systems
Defence Systems
Total all segments
Unallocated cash and security deposit
Consolidated
50,229
204,951
255,180
138,053
393,233
39,858
320,271
360,129
57,269
417,398
29,009
165,150
194,159
12,664
171,642
184,306
‑
‑
194,159
184,306
Assets used jointly by reportable segments are allocated on the basis of the revenue earned by the individual
reportable segments.
132
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Other segment information ‑ continuing operations
Depreciation, impairment and amortisation
of segment assets
Acquisition of segment assets
31 December 2023
$ ‘000
31 December 2022
$ ‘000
31 December 2023
$ ‘000
31 December 2022
$ ‘000
3,936
7,157
11,093
1,290
12,383
51,895
8,998
60,893
5,659
66,552
3,890
2,043
5,933
333
6,266
5,896
3,858
9,754
1,043
10,797
Revenue from
external customers
$ ‘000
Segment assets*
$ ‘000
Acquisition of
segment assets
$ ‘000
69,810
68,598
710
8,466
71,669
219,253
335,464
1,342
‑
56,424
3
393,233
6,209
5
‑
52
‑
6,266
Revenue from
external customers
$ ‘000
Segment assets*
$ ‘000
Acquisition of
segment assets
$ ‘000
39,027
84,767
4,342
9,776
406,065
10,725
1,809
9,520
4
24
48
‑
137,912
417,398
10,797
Space Systems
Defence Systems
Total all segments
Unallocated management
Consolidated
Information on geographical segments
31 December 2023
Geographical segments
Australia/Asia
Middle East ‑ United Arab Emirates
Middle East ‑ other
North America
Europe
Total
31 December 2022
Geographical segments
Australia/Asia
Middle East ‑ United Arab Emirates
North America
Europe
Total
*Segment assets reflects the requirements of AASB 8.33 (b) and reflect only non‑current assets other than financial instruments and
deferred tax assets.
The revenue information above is based on the locations of the customers.
133
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 31. Parent Entity Disclosure
Financial position
Assets
Current assets
Non‑current assets
Total assets
Liabilities
Current liabilities
Non‑current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Accumulated (losses)
Total equity
Financial performance
(Loss) for the year
Other comprehensive income
Total comprehensive income
2023
$ ‘000
2022
$ ‘000
1,015
88,123
89,138
36,281
44,947
81,228
13,531
204,757
218,288
30,068
49,443
79,511
7,910
138,777
432,248
12,858
(437,196)
7,910
432,248
12,268
(305,739)
138,777
(131,456)
(115,570)
‑
‑
(131,456)
(115,570)
Guarantees entered into by the parent entity in relation to the debts of its subsidiaries
Guarantee provided under the Deed of Cross Guarantee
177,389
172,834
Electro Optic Systems Holdings Limited entered into a deed of cross guarantee on 6 April 2018 with two of its wholly‑owned
subsidiaries. Electro Optic Systems Pty Limited and EOS Defence Systems Pty Limited. On 28 November 2019, EM
Solutions Pty Limited entered into an Assumption Deed and became a party to the Deed of Cross Guarantee.
134
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 32. Contingent Liabilities and Commitments
(a) The Group maintains cash deposits with banks and financial institutions as security for various performance and rental
bonds. The detail of such cash deposits is as per below:
Offset bond for a defence contract
Performance bond for a defence contracts ‑ overseas customers
Rental bonds
Performance bonds for defence contracts ‑ Australian customers
Performance bonds for space contracts
Deposit for credit card guarantee
Total
Note
(c)
(d)
(e)
(f)
2023
$ ‘000
15,356
23,172
1,097
21,086
6,228
117
67,056
2022
$ ‘000
10,741
23,395
1,331
‑
‑
121
35,588
(b) Entities within the Group are involved in contractual disputes in the normal course of contracting operations. The Directors
believe that the entities within the Group can settle any contractual disputes with customers and should any customers
commence legal proceedings against the Company, the Directors believe that any actions can be successfully defended.
As at the date of this report no material legal proceedings have been commenced against any entity within the Group.
(c) The Group executed an offset agreement in relation to an overseas defence contract for an amount of US$16,957,080
(A$24,791,053) secured by an offset bond for the full amount. The offset bond is guaranteed by Export Finance
Australia (EFA) under a Bond Facility Agreement and is secured by a cash security deposit of US$10,503,513
(A$15,356,013) and a fixed and floating charge over the assets of the Group.
Under the Offset Program guidelines, participants typically have several years in which to earn offset credits. As an
alternative to generating offset credits through the Offset Program, in certain circumstances offset credits can be
generated through participation in the Credit Purchase Program, which involves settling obligations by making cash
payments. As part of the Offset Program, EOS is required to develop, agree and submit an approved business plan to
the offset credit authority. On 30 August 2023, the government agency advised a deadline of 30 September 2023 for
EOS to submit a revised business plan, which EOS delivered within the specified timeframe. The business plan remains
under review by the offset credit authority and the Group continued to have advanced discussions with the offset credit
authority towards finalising this approval. Subsequent to year end, a Memorandum of Understanding was executed
between the Group and the proposed JV partner that is being considered by the offset credit authority.
As at the date of this report, EOS considers that it is in compliance with its obligations and expects to reach agreement
on an approved business plan, and to ultimately generate offset credits by executing that business plan. EOS does not
expect to settle the offset obligation in cash, either through the Credit Purchase Program or the bank guarantee
(d) At 31 December 2023, the Group was not in breach of the EFA covenants applying at that date.
(e) The Group maintains a performance bond for US$33,249,177 (A$48,609,908) in relation to an overseas defence sector
contract. The performance bond is guaranteed by Export Finance Australia under a Bond Facility Agreement and is
secured by a cash security deposit of US$15,849,843 (A$23,172,285) and a fixed and floating charge over the assets of
the Group.
(f) The Group entered into agreements to provide performance bonds of $22,172,000 to a domestic customer in Australia
in the defence segment. The guarantees were issued by funding providers and are secured by cash deposits totaling
$21,086,000 as at 31 December 2023.
(g) $6,000,000 of new performance bonds were issued to support an EM Solutions contract to deliver and install
communication systems to the Royal Australian Navy. This guarantee is secured by a cash security deposit of $6,000,000.
(h) Electro Optic Systems Holdings Limited entered into a deed of cross guarantee on 6 April 2018 with two of its
wholly‑owned subsidiaries, Electro Optic Systems Pty Limited and EOS Defence Systems Pty Limited, pursuant to ASIC
Corporations (Wholly‑owned Companies) Instrument 2016/785 and was relieved from the requirement to prepare and
lodge an audited financial report. On 28 November 2019, EM Solutions Pty Ltd entered into an Assumption Deed and
became a party to the Deed of Cross Guarantee.
135
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes
33. Remuneration of Auditors
a. DELOITTE TOUCHE TOHMATSU AND RELATED NETWORK FIRMS*
2023
$ ‘000
2022
$ ‘000
Audit or review of the financial reports:
In relation to the current year
In relation to the 2022 audit paid in 2023
In relation to the 2021 audit paid in 2022
• Group
Other assurance services
Other services
• Tax consulting services
b. ERNST & YOUNG AND RELATED NETWORK FIRMS**
Audit or review of the financial reports:
In relation to the current year
• Group
Other assurance services
Other services
c. OTHER AUDITOR AND THEIR RELATED NETWORK FIRMS
Audit or review of the financial reports
Other services
• Taxation services
* Deloitte Touche Tohmatsu was the auditor of the Group for the year ended 2022.
** In May 2023, Ernst & Young was appointed the auditor of the Group.
‑
164
‑
164
19
178
361
530
530
‑
92
622
14
8
22
888
‑
200
1,088
218
71
1,377
‑
‑
‑
‑
‑
17
9
26
136
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 34. Subsequent Events
Subsequent to year‑end, EFA approval was received and the amendment to the finance facility agreement became effective.
The $4.5m fee was paid to the lender.
Apart from the above, the Directors are not aware of any significant subsequent events since the end of the financial year
and up to the date of this report.
35. Additional Company Information
Electro Optic Systems Holdings Limited is a listed public company in Australia, incorporated in Australia. The Company and
its subsidiaries operate in Australia, North America, Middle East, Singapore, New Zealand and Germany.
Principal Place of Business
18 Wormald Street
Symonston
ACT 2609
Australia
Tel: 02 6222 7900
Fax: 02 6299 7687
German Operations
Ulrichsberger Str. 17
D‑94469 Deggendorf
Germany
Tel: +49 991 2892 1964
Fax: +49 991 3719 1884
United Arab Emirates Operations
Tawazun Industrial Park (TIP)
Zone 2, Facility 15,
Al Ajban Area,
Abu Dhabi, UAE
Tel: +971 2 492 7112
Fax: +971 2 492 7110
Registered Office
18 Wormald Street
Symonston
ACT 2609
Australia
Tel: 02 6222 7900
Fax: 02 6299 7687
USA Operations Alabama
2865
Wall Triana Hwy SW
Huntsville
AL 35824 USA
Singapore Operations
456 Alexandra Road
Fragrance Empire Building
#21002 Singapore
Tel: +65 6304 3130
New Zealand Operations
69 Gracefield Road,
Gracefield
Lower Hutt, 5010
New Zealand
137
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes Directors’ Declaration
Directors’ Declaration
In accordance with a resolution of the Directors of Electro Optic Systems Holdings Limited (the Company), I state that:
1.
In the Directors’ opinion:
(a) the financial statements and notes of the Company and its subsidiaries (collectively the Group) are in accordance with
the Corporations Act 2001, including:
i. complying with Australian Accounting Standards, the Corporations Regulations 2001 and other mandatory reporting
requirements; and
ii. giving a true and fair view of the Group’s financial position at 31 December 2023 and of its performance for the
financial year ended on; and
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in
note 1; and
(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; and
(d) as at the date of this declaration, there are reasonable grounds to believe that the Company and the subsidiaries to
which ASIC Corporations (Wholly‑owned Companies) Instrument 2016/785 applies, as detailed in Note 27 to the financial
statements, will be able to meet any liabilities to which they are, or may become, subject to by virtue of the Deed of
Cross Guarantee between the Company and those subsidiaries.
2. This declaration has been made after receiving the declarations required to be made by the Chief Executive Officer and
the Chief Financial Officer in accordance with section 295A of the Corporations Act 2001 for the financial year ended
31 December 2023.
Signed in accordance with a resolution of the Directors:
Garry Hounsell
Director and Chair of the Board of Directors
Dated at Canberra this 28th day of February 2024
138
Electro Optic Systems Holdings Limited | Annual Report 2023 139
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 140
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 141
Electro Optic Systems Holdings Limited | Annual Report 2023 142
Electro Optic Systems Holdings Limited | Annual Report 2023Financial Statements and Notes 143
Electro Optic Systems Holdings Limited | Annual Report 2023 ASX Additional Information
ASX Additional Information
Additional information required under ASX Listing Rule 4.10 and not shown elsewhere in this Annual Report is as follows.
This information is current as at 8 March 2024.
Distribution of shareholders
Size of holding
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Distribution of Option holders
The distribution of unquoted options on issue are:
Size of Holding
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of
shareholders
150
1,333
1,257
4,789
8,075
Ordinary shares
% of issued capital
110,312,625
64.43
35,880,761
20.95
9,606,319
5.61
11,989,818
7.00
3,446,483
2.01
15,604
171,236,006
100.00
Number of option
holders
8
26
‑
‑
‑
Unlisted
options
2,271,042
1,052,045
‑
‑
‑
34
3,323,087
% of total options
68
32
‑
‑
‑
100
The options on issue are unquoted and have been issued under an employee incentive scheme.
Distribution of Share Rights
The distribution of unquoted share rights on issue are:
Size of Holding
100,001 and over
10,001 to 100,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Number of share
right holders
Unlisted
share rights
% of Total
share rights
2
18
‑
‑
‑
844,500
496,617
‑
‑
‑
20
1,341,117
63
37
‑
‑
‑
100
The share rights on issue are unquoted and have been issued under an employee incentive scheme.
144
Electro Optic Systems Holdings Limited | Annual Report 2023
ASX Additional Information
Less than marketable parcels of Ordinary Shares
There are 3,421 shareholders with unmarketable parcels, holding 512,020 shares.
Twenty largest shareholders
At 8 March 2024, the 20 largest ordinary shareholders held 47.06% of the total issued fully paid quoted Ordinary Shares of
171,236,006.
Number held
% of issued capital
1
2
3
4
5
6
7
8
9
10
11
12
13
14
WASHINGTON H SOUL PATTINSON & COMPANY
EOS LOAN PLAN PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ‑ A/C 2
CITICORP NOMINEES PTY LIMITED
BNP PARIBAS NOMINEES PTY LTD
CAPITAL PROPERTY CORPORATION PTY LTD
ACE PROPERTY HOLDINGS PTY LTD
TECHNOLOGY TRANSFORMATIONS PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
N & J PROPERTIES PTY LTD
BRAZIL FARMING PTY LTD
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CAPITOL ENTERPRISES LIMITED
A AND D WIRE LIMITED
15 WARBONT NOMINEES PTY LTD
16
17
18
19
20
CAPITAL PROPERTY CORPORATION PTY LTD
TECHNOLOGY INVESTMENTS PTY LTD
BUNDARRA TRADING COMPANY PTY LTD
BOND STREET CUSTODIANS LIMITED
BNP PARIBAS NOMS PTY LTD
17,037,983
12,009,375
10,280,749
9,743,716
4,465,701
3,099,738
3,000,000
2,758,662
2,530,151
2,315,816
2,100,393
1,570,247
1,550,000
1,457,276
1,352,889
1,250,000
1,193,477
1,005,173
1,000,000
863,537
9.95
7.01
6.00
5.69
2.61
1.81
1.75
1.61
1.48
1.35
1.23
0.92
0.91
0.85
0.79
0.73
0.70
0.59
0.58
0.50
Remaining quoted equity securities
Total number of ordinary shares on issue
Unquoted equity securities
The Company had the following unquoted securities on issue as at 8 March 2024:
Options over ordinary shares
Rights over ordinary shares
80,584,883
90,651,123
171,236,006
47.06
52.94
100.00
Number on issue
Number of holders
3,323,087
1,341,117
34
20
145
Electro Optic Systems Holdings Limited | Annual Report 2023
ASX Additional Information
Substantial shareholders
The names of the Substantial Shareholders as disclosed in notices submitted to the ASX as at 8 March 2024 are:
Shareholder
Washington H. Soul Pattinson and Company Limited
EOS Loan Plan Pty Ltd
Citicorp Nominees Pty Limited
Archon Capital Management LLC
Restricted securities
Ordinary Shares
Percentage of total
Ordinary shares
17,037,983
12,009,375
8,690,548
8,629,115
9.95%
7.01%
5.08%
5.04%
The Company had no restricted securities on issue as at 8 March 2024.
Voting rights
In accordance with the Constitution each member present at a meeting whether in person, or by proxy, or by power of
attorney, or a duly authorised representative in the case of a corporate member, shall have one vote on a show of hands,
and one vote for each fully paid ordinary share, on a poll. Holders of performance rights have no voting rights.
On‑market buy‑backs
There is no current on‑market buy‑back in relation to the Company’s securities.
146
Electro Optic Systems Holdings Limited | Annual Report 2023
Corporate Directory
Share Registry
Computershare Investor Services Pty Limited
Level 3
60 Carrington Street
Sydney NSW 2000
Australia
GPO Box 7045
Sydney NSW 1115
Telephone: 1300 855 080 or
+61 3 9611 5711 outside Australia
Facsimile: 1300 137 341
Auditors
Ernst & Young
121 Marcus Clarke Street
Canberra ACT 2600
Australia
Corporate Directory
Directors
Mr Garry Hounsell (Chairman)
Dr Andreas Schwer (Managing Director and CEO)
Air Marshal Geoffrey Brown AO
The Hon Kate Lundy
Mr David Black
Mr Robert Nicholson
Chief Executive Officer
Dr Andreas Schwer
Company Secretary
Ms Leanne Ralph
Ms Melanie Andrews (appointed 26 March 2024)
Registered Office and Principal
Place of Business
18 Wormald Street
Symonston ACT 2609
Australia
Telephone: +61 2 6222 7900
Email:
enquiry@eos‑aus.com
Website: www.eos‑aus.com
147
Electro Optic Systems Holdings Limited | Annual Report 2023
Electro Optic Systems Holdings Limited
ANNUAL REPORT
2023
COPYRIGHT
ATTRIBUTION
HEAD OFFICE
Electro Optic Systems Holdings Limited
ACN 092 708 364
18 Wormald Street, Symonston
Canberra ACT 2609
T: +61 2 6222 7900
E: enquiry@eos-aus.com
www.eos-aus.com
EOS’ preference is that if you attribute
this publication and any material
sourced from it, the following wording
is used: Source: Electro Optic Systems
Holdings Limited Annual Report 2023.
MORE INFORMATION
For enquiries regarding copyright,
including requests to use material in
a way that is beyond the scope of the
terms of use that apply to it, please
contact us through our website or email
us at enquiry@eos-aus.com
Electro Optic Systems Holdings Limited
(EOS) encourages the dissemination
and exchange of information provided
in this publication. Except as otherwise
specified, all material presented in
this publication is provided under the
Creative Commons Attribution 4.0
International Licence.
This excludes:
• the EOS logo
• content supplied by third parties.
The Creative Commons Attribution 4.0
International Licence is a standard form
licence agreement that allows you to
copy, distribute, transmit and adapt this
publication provided that you attribute
the work. The details of the version
4.0 of the licence are available on the
Creative Commons website, as is the full
legal code for that licence.
148
Electro Optic Systems Holdings Limited | Annual Report 2023
IT’S WHAT WE DO NEXT THAT MATTERS MOST ELECTRO OPTIC SYSTEMS HOLDINGS LIMITED
ANNUAL REPORT
2023
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I
T
E
D
A
N
N
U
A
L
R
E
P
O
R
T
2
0
2
3
Electro Optic Systems Holdings Limited
Annual Report 2023
IT’S WHAT WE DO NEXT THAT MATTERS MOST