Finbar Group Limited
Annual Report 2023

Plain-text annual report

D E V E L O P I N G B E T T E R L I F E S T Y L E S S I N C E 1 9 9 5 A N N U A L R E P O R T 1 Contents 3 Chairman’s Report 5 Managing Director’s Report 9 Key Financial Metrics 14 Project History 15 Finbar Milestones 2023 Finbar Group Limited Annual Report2 17 Our Finbar 19 Modern Amenities 21 ESG at Finbar 22 Completed Projects 26 Projects Under Construction 30 New to Market 32 Future Projects 37 Investment Properties 40 Financial Report Finbar and Perth - rising together. For 28 years, the Finbar story has grown with the people of Perth. With every new address, every new apartment, every new innovation, we’re rewriting the narrative on what it means to call this beautiful city home – and our best is yet to come. 2023 Finbar Group Limited Annual Report3 Chairman’s Report “ Finbar was holding $18.2 million in cash which combined with the cash commitments from joint venture partners for our joint venture projects, means we are adequately capitalised to fulfil all working capital commitments and contingency provisions for all the projects we currently have under construction. JOHN CHAN ” Dear Shareholder, It is my privilege to present Finbar Group’s Annual Report for the 2023 financial year. Finbar has reported a net profit after tax of $2.78 million for the 12 months to June 30 2023, compared with $10.98 million the previous year. Revenue of $34 million was well down on the previous year, as Finbar focused on the completion of the AT238 project in Perth’s CBD and the continuing construction activities at Civic Heart in South Perth, Aurora in Applecross and The Point in Rivervale. Finbar has successfully sold the limited remaining stock at the Dianella Apartments development, which was completed in the 2022 financial year, and settled $46.8 million in sales at the AT238 complex during the 2023 financial year. Sales at AT238 have been steady in the early stages of this financial year and Finbar has adjusted prices at the project to mitigate the impact of higher than forecast construction costs. Finbar also recorded a $3 million impairment on its Fairlanes commercial property brought about by pressure on commercial property capitalisation. However, Finbar’s Pelago development continues to hold value, receiving a $1.68 million increase in valuation. At June 30, Finbar was holding $18.2 million in cash which combined with the cash commitments from joint venture partners for our joint venture projects, means we are adequately capitalised to fulfil all working capital commitments and contingency provisions for all the projects we currently have under construction. We also do not hold any balance sheet debt relating to our development/pipeline land. Finbar has good working relationships with its joint venture partners and I wish to thank them for their support and for the trust they have given Finbar. The Board has made the decision to suspend dividend payments to shareholders to help protect the balance sheet strength that has enabled Finbar to continue to fund construction and development during this difficult cycle. The Board is investigating the best options for returning capital to our patient shareholders upon completion and settlement of the current major apartment projects. In almost 30 years as a listed development company, Finbar has experienced a range of different trading conditions, but I think none have ever been as challenging as the years following the COVID pandemic. Rapidly rising costs of construction materials, coupled with a tight labour market and disrupted supply chains has meant project costs have soared. 2023 Finbar Group Limited Annual Report4 Finbar is in a position where it will be able to deliver new stock to the market later this financial year and into the 2025 financial year. Civic Heart Despite record low vacancy rates in the rental market, growing immigration and a chronic lack of new supply of apartments, prices of new apartments have not risen commensurately. numerous construction firms have failed, Hanssen has consistently worked with Finbar to facilitate the delivery of quality accommodation to Western Australia. Finbar has taken the decision to continue to develop projects through the current cycle, despite the challenges faced with increasing construction costs, operating costs, and continued monetary policy tightening. For many years, Finbar has exclusively partnered with construction company Hanssen to build its apartment developments. At a time when This symbiotic relationship has served both companies well and has enabled Finbar to continue to develop major apartment towers at a time when many of its competitors have been unable, or unwilling, to commit to commencing construction of their own projects. I would like to thank Gerry Hanssen for his continued support and for his ongoing relationship with Finbar. As a result, Finbar is in a position where it will be able to deliver new stock to the market later this financial year and into the 2025 financial year. With interest rates stabilising and a shortage of new residential stock, and with increasing population, low unemployment and a strong local economy, I feel that residential prices in Perth and Western Australia must increase. Finally, I would like to inform shareholders that Non-Executive Director, Lee Verios, has advised me of his intention to retire later this year and as such will be retiring as Director of the Company at the close of the Company’s annual general meeting in October. I am personally grateful for Lee’s contribution to the Board since his appointment in 2011 and extend thanks on behalf of all shareholders for this, and wish him the very best in his retirement. In closing, I would like to take the opportunity to acknowledge our Executive team and Finbar staff for their hard work and efforts during the year. I would also like to give thanks to all of our shareholders for their ongoing support. John Chan Chairman 2023 Finbar Group Limited Annual Report5 Managing Director’s Report “ Finbar has sales of $226 million at Civic Heart and – based on current pricing – approximately $202 million remaining for the market. ” DARREN PATEMAN Finbar has reported a net profit after tax for the 2023 financial year of $2.78 million as residential development companies continue to face challenging trading conditions. The Company had limited completed residential lots available for sale during the year with the Dianella Apartments project being sold out and revenue for the sold apartments in the AT238 development occurring in the second half of the financial year. The 50/50 joint venture with Ventrade Australia was completed in April and provided a timely boost to Finbar’s completed stock available for sale, with the remainder of settlements expected in the current financial year. The profit was also impacted by a decrease in the holding value of its Fairlanes commercial investment by $3 million due to pressure on commercial property capitalisation rates caused by the higher cost of funds in the commercial sector. Finbar’s other investment property, the Pelago apartment complex in Karratha, continues to perform well. It is 98% per cent occupied and generated rental income in FY2023 of $6.0 million. Karratha is at the epicentre of WA’s mineral resources and energy sectors, and the Pelago apartments are considered to be the town’s highest quality accommodation, with little or no likelihood of being replicated in the near future given the current construction cost environment and the challenges of building in regional towns. Finbar has approximately $680 million in project value under construction, which we expect to complete and deliver to the market later this financial year and in the first half of FY2025. We remain well capitalised to meet our funding commitments for all projects currently under construction. The company continues to face challenging trading conditions, primarily due to construction cost impacts in the building sector which are finally stabilising but not expected to reduce significantly. Additionally, the current environment of a rapid upward movement in interest rates have dampened sales activity as anticipated, although there are indications that interest rates are at, or very near, their expected highs based on recent encouraging inflation numbers. I want to acknowledge and thank Finbar’s joint venture partners for their contributions, Commonwealth Bank for its support of the Civic Heart Project and Westpac for its support at The Point and Aurora projects. It is only with the support and confidence of our investment and funding partners that we have been in a position to commence and progress major projects at a time when many other developers in Perth and across Australia have delayed and cancelled their proposed developments. Our company will be conducting a capital management review on the completion of Civic Heart and Aurora with a view to returning profits to our valued and patient shareholders through the most appropriate means. It is also important to note that we continue to work closely with building firm Hanssen to ensure ongoing viability of construction at our future projects. 2023 Finbar Group Limited Annual Report6 Our company will be conducting a capital management review on the completion of Civic Heart and Aurora with a view to returning profits to our valued and patient shareholders through the most appropriate means. Aurora In the current economic and business environment of increased material costs, a tight labour market, and with some lingering supply chain constraints, the practice of fixed price construction agreements has all but disappeared and developers will need to work closely with a reduced pool of builders to share risk and ensure the ongoing viability of projects through these unusual construction environment times. Finbar has worked with Hanssen to mitigate the risks of rising construction costs where possible, but also to ensure that these major projects are able to proceed, and be completed in a timely manner and acceptable rates of return. Construction at our biggest and most complex development Civic Heart, in South Perth, remains on track for structural completion by Christmas with practical completion and settlements on track to occur in the second half of this financial year. Finbar has sales of $226 million at Civic Heart and – based on current pricing – approximately $202 million remaining for the market. Aurora in Applecross, is also due to be completed in the second half of FY2024. Sales of $55 million have been completed with a further $91 million in value remaining for sale. Although apartment prices have not risen significantly in Western Australia in recent years, we are confident that these two completed projects will be well received by the market, with the chronic shortage of accommodation in Perth, combined with population growth and interest rate stability expected to drive demand and, inevitably, sustainable increases in prices for new apartments. Additionally, we are encouraged by the current recognition and focus from all tiers of government on the issues of affordability and supply of housing and apartments. The WA Government in particular has looked to streamline development approval processes and has offered stamp duty relief to buyers who have pre-purchased apartments off the plan ahead of construction. We are looking forward to a more typical 12-18 months for Finbar as we focus on the most important completion of new apartment stock being delivered later in the second half and into the following financial year. I will close by thanking my management team and staff for their continued hard work and support. Darren Pateman Managing Director 2023 Finbar Group Limited Annual Report7 $679.3m of apartments under construction. 204 apartments sold during the year with a total value of $176m Finbar has this year delivered a net profit after tax of $2.78m Finbar has been a shining light in the Perth property scene for decades. Reliable. Steadfast. Dependable. We’re proud to have led the way, staying the course when we could have rushed, pushing boundaries when we could have played it safe. Through it all, our commitment has never wavered, and never will – high quality residences, built in Perth’s best locations. Over 6,000 new apartments says it all, an enviable track record that will continue to drive our financial strength and stability as we reward investors for their confidence in us.2023 Finbar Group Limited Annual Report8 100% delivery on 6,776 apartments over 76 landmark developments. Over 70% of buyers say the reputation of the developer is critical when choosing an apartment. Our reputation is everything to us. 84% of our customers rated buying ‘off the plan’ easy. Consistently achieving 8-star NatHERS rating 89% of customers would recommend Finbar to a friend. Word of mouth is our strongest asset. 28 years on the ASX 2023 Finbar Group Limited Annual Report9 Key Financial Metrics SOURCE OF EARNINGS TOTAL EARNINGS Development income 77% Rental Income 16% Other 7% $176m FY23 Sales DEVELOPMENT INCOME AT238 49% Dianella Apartments 42% Reva 5% Vue Tower 2% One Kennedy 2% $2.78m after tax profit $12.2m average sales of off-the-plan apartments per month RENTAL INCOME Pelago 67% Fairlaines 29% Other 4% $2.72m average sales of completed apartments per month 2023 Finbar Group Limited Annual ReportKey Financial Metrics (continued) 10 NET PROFIT AFTER TAX $MILLION $13.8 $11.4 $11.0 $8.9 $7.1 $8.1 $5.1 $2.8 2016 2017 2018 2019 2020 2021 2022 2023 FULLY FRANKED DIVIDEND CENTS Interim Dividend Final Dividend 0.07 0.06 0.06 0.06 0.04 0.04 0.03 2016 2017 2018 2019 2020 2021 2022 2023 0.00 PROJECT PIPELINE VALUE $2.2 $2.0 $1.8 $BILLION $1.3 $1.4 $1.2 $1.5 $1.4 2016 2017 2018 2019 2020 2021 2022 2023 Finbar maintains a robust Project Pipeline of $1.4 BILLION to ensure that the company can capitalise on changing market conditions and bring new product to the market as quickly and efficiently as possible to maximise shareholder returns. 2023 Finbar Group Limited Annual Report11 Key Financial Metrics (continued) EARNINGS PER SHARE $ PER SHARE $0.06 $0.04 $0.02 $0.04 $0.04 $0.03 $0.02 $0.01 2016 2017 2018 2019 2020 2021 2022 2023 PRESALES BOOK VALUE $MILLION $453.8 $349.0 $250.7 $257.5 $194.5 $175.2 $122.6 $45.6 2016 2017 2018 2019 2020 2021 2022 2023 Sales achieved at Civic Heart, Aurora, The Point and Garden Towers has increased FY2023 presales to $453.8 MILLION. TOTAL DEVELOPED UNITS UNITS 6402 6527 6655 6776 5984 5675 5293 4923 2016 2017 2018 2019 2020 2021 2022 2023 Total Developed Units reached 6,776 by the end of FY2023 with the addition of 121 units from the completion of AT238. Finbar continues to position itself as the largest residential apartment developer in Western Australia. 2023 Finbar Group Limited Annual ReportKey Financial Metrics (continued) TOTAL SALES AND VALUE 12 Number Of Sales Total Value Number Of Sales Average Sales Per Day AVERAGE SALES PER DAY AVERAGE SALES VALUE Number Of Sales Average Sales 115178100230245309591305211138321184338547403430266235406264200464$0 $4 $6 $17 $17 $37 $86 $95 $329 $133 $198 $134 $334 $304 $214 $282 01002003004005006007000501001502002503003504001996199719981999200020012002200320042005200620072008200920102011201220132014201520162017201820192020202143220222023MillionsUnits$284 245054$94 $45 $277 $143 $158 $167 $140 $148 $110 $176 $195 204117854501002302453095913052111383211843385474034302662354062642004640.00.10.50.60.71.60.60.51.51.11.20.71.10.71.300.20.40.60.811.21.41.61.8199619971998199920002001200220032004200520062007200820092010201120122013201420152016201720182019202020214321.2$-$100$200$300$400$500$600$700202220420230.90.10.10.315240.80.80.90.60.50.4ThousandsSales0.5115241785450100230245309591305211138321184338547403430266235406264200464 $- $100 $200 $300 $400 $500 $600 $700 $80019961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021432010020030040050060070020222042023ThousandsUnits$330 $299 $232 $255 $319 $333 $365 $372 $389 $462 $519 $629 $678 $617 $730 $577 $611 $686 $706 $626 $598 $526 $559 $549 $607 $658 $863 $557 2023 Finbar Group Limited Annual Report13 Key Financial Metrics (continued) s e l a S 120 100 80 60 40 20 0 25 28 FOREIGN BUYER SALES 112 43 46 44 52 47 74 62 39 34 20 25 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 Following a rapid decline in FY20, after introduction of the foreign buyer surcharge tax by the state government, some foreign buyers are returning to the market. FY23 - SALES ACROSS AGE GROUP 10% 20% 14% 10% 23% 23% 18-24 25-34 35-39 40-49 50-59 60+ FY23 - LOCATION OF BUYER FROM THE DEVELOPMENTS 19% 18% 5% 9% 7% 14% 16% 6% 6% 2.5km or less 2.6-5km 6-10km 11-20km 21-30km 31-40km Regional WA Interstate Overseas 2023 Finbar Group Limited Annual Report Project History 2023 121 AT238 Perth 2021 2020 2019 2018 2017 2016 2015 2014 2013 2012 128 125 DIANELLA APARTMENTS Dianella RIVERENA Rivervale 123 167 ONE KENNEDY Maylands SABINA Applecross 128 59 250 PALMYRA APARTMENTS EAST Palmyra REVA SOUTH PERTH South Perth VUE TOWER East Perth 244 138 AIRE WEST PERTH West Perth AURELIA South Perth 227 143 116 169 154 63 47 264 188 8 98 194 CONCERTO East Perth MOTIVE West Leederville LINQ Northbridge UNISON ON TENTH Maylands ARBOR NORTH Rivervale NORWOOD PERTH Perth TOCCATA East Perth SUBI STRAND Subiaco SPRING VIEW TOWERS Rivervale 52 MILL POINT RD South Perth ECCO APARTMENTS Perth AU APARTMENTS East Perth 188 131 115 43 PELAGO EAST Pegs Creek (Karratha) ST MARKS Highgate ADAGIO East Perth KNIGHTSGATE Currambine 111 114 128 31 LIME Victoria Park PELAGO WEST Pegs Creek (Karratha) FAIRLANES PERTH East Perth 18 ON PLAIN East Perth 2011 202 X2 APARTMENTS East Perth 2010 75 85 THE EDGE Victoria Park THE SAINT East Perth 2009 34 50 62 197 71 71 VERVE Perth HORIZON CENTRAL Maylands HORIZON SIXTH Maylands ROYALE Perth REFLECTIONS EAST East Perth REFLECTIONS WEST East Perth 14 28 YEARS 76 LANDMARK DEVELOPMENTS 6,776 UNITS COMPLETED 2009 21 16 114 CIRCLE EAST Northbridge CIRCLE WEST Northbridge CODE Perth 113 111 123 81 49 80 76 60 104 54 43 98 64 14 94 51 25 45 30 47 54 47 11 25 68 76 1 1 12 2008 2007 2005 2004 2003 2001 2000 1999 CERESA Rivervale INFINITY East Perth ALTAIR East Perth DOMUS Perth DEL MAR Mandurah SOHO East Perth AVENA Rivervale SOL APARTMENTS West Perth ONE28 East Perth ARUM Rivervale SAMPHIRE Rivervale WESTRALIAN East Perth COSMOPOLITAN East Perth RIVERSTONE South Perth MARKETRISE West Perth 175 HAY East Perth BLUE 2 South Perth KINGSTON West Perth ST THOMAS SQUARE Subiaco MONTEREY BAY Port Mandurah BLUEWATER South Perth CHELSEA GARDENS West Perth 85 MILL POINT ROAD South Perth THE 10TH TEE The Vines THE RISE East Perth WELLINGTON PLACE East Perth ALBANY HIGHWAY MEDICAL CENTRE Victoria Park CORFIELD STREET MEDICAL CENTRE Gosnells MATILDA BAY APARTMENTS Crawley 1998 78 PADDINGTON PLACE West Perth 1997 1996 5 15 167 MELVILLE PARADE South Perth SEVILLE ON THE POINT South Perth 3 5 THE LINKS South Perth 19 RENWICK STREET South Perth 2023 Finbar Group Limited Annual Report15 Finbar Milestones 28 years on the ASX Our reputation is everything to us. Since we listed Finbar on the ASX 28 years ago, we have built our name on the back of an uninterrupted run of successful developments, from our first project, Seville on the Point, to Westralian, Pelago, Fairlanes, Subi Strand, Concerto and our award-winning Sabina Applecross. With Garden Towers and our landmark Civic Heart project on the way, Finbar continues to prove why it is WA’s leading and most trusted residential apartment developer. 1990s 2010s 1995 1997 Lists on ASX as Property Development Company operating out of a 2 bedroom Como apartment Commenced 1st Development Seville on the Point, South Perth Completed 1st Development Seville on the Point, South Perth Maiden net profit $0.7m 1998 $1m net profit milestone 2010 2012 2013 Secured first Pilbara project, Pelago West, Karratha $20m net profit milestone 2020s 2020 25th Year on the ASX 3000 apartments milestone Pelago West awarded Judge’s and UDIA High Density Development Completed company’s first Pilbara project Relocated to Fairlanes building, East Perth (13 staff) Fairlanes awarded winner UDIA High Density Development 2013 $30m net profit milestone 2012 2021 Launched internal sales division – Finbar Sales Sabina awarded Property Council WA Best Residential Development and UDIA Judges Commendation in the High Density Development Category 2021 FINALIST 2022 Work continues to progress on the construction of four projects, a collective total of 753 units - AT238, Aurora, Civic Heart, and The Point. The total value of sales resulting from these combined projects exceeds $780 million 2023 Finbar Group Limited Annual Report16 2000s 2001 Relocated to first corporate office, Preston Street South Perth (4 staff) 2005 2006 2008 2009 Completed Westralian, first luxury project on Terrace Road, East Perth $100m market capitalization 1000 apartments milestone $10m net profit milestone Inclusion in All Ordinaries Index 2000 apartments milestone 2014 2015 2017 2019 St. Mark’s awarded winner UDIA High Density Development and Urban Renewal 2014 4000 apartments milestone Record launch at Aurelia, with $66m of sales in the 1st month Completed WA’s tallest residential apartment development to date, Concerto Launched Property management division – Finbar to Rent 6000 apartments milestone Completed Finbar’s largest development to date, Subi Strand Launched the Finbar Loyalty Club. An exclusive rewards program for all Finbar buyers, past & present Spring View Towers awarded winner UDIA High Density Development Concerto awarded winner UDIA High Density Development 2017 Completed over $3b worth of developments since 1995 5000 apartments milestone 2015 2023 Finbar Group Limited Annual Report 17 Our Finbar JOHN CHAN Executive Chairman 28 years DARREN PATEMAN Managing Director 28 years RONALD CHAN Executive Director 19 years We’ve come a long way since the dream started as 3 people working out of a makeshift office in Como. Now a 29-strong team led by experienced and long serving management, we’re in prime position to push the boundaries at the forefront of Western Australia’s lifestyle property market. OUR PEOPLE - A team of 19 staff in Finbar’s head office - A team of 7 staff in Finbar to Rent - A team of 3 staff in Finbar Sales - Led by an experienced and long serving management team, with strong leadership skills and an excellent track record OUR BUSINESS - Retains a strong brand and a highly regarded reputation in WA - Operates on a low cost base providing attractive profit margins and shareholder returns - Maintains exemplary relationships with suppliers and stakeholders - Manages a pipeline of projects to ensure economies of scale and future growth OUR COMMITMENT - Our commitment to our customers, shareholders, state and local government and the environment has seen Finbar remain WA’s largest and most trusted apartment developer 2023 Finbar Group Limited Annual Report 18 ELDON WAN Non-Executive Director LEE VERIOS Non-Executive Director TERENCE PEH Non-Executive Director Finbar continues to elevate the quality of inner city living in Perth, delivering prestigious, well-appointed lifestyle apartments that artfully fuse office and public spaces in progressive and innovative designs. OUR PROJECTS - Represent some of Perth’s most prestigious and well-appointed lifestyle apartments - Remain committed to creating progressive and innovative designs which represent value for money - Offer a successful fusion of residential, office and public space OUR INVESTMENT PROPERTIES - Include the Fairlanes and Pelago buildings leased to reputable and proven businesses and individuals - Provide consistent annual revenue from investments - Ensure these additional revenue streams contribute to and smooth annual earnings OUR FUTURE - Our vision is to remain WA’s leading medium to high density apartment developer - Continue to focus development efforts in and around inner city Perth - Sustain and enhance the quality of inner city living for current and future generations 2023 Finbar Group Limited Annual Report 19 Modern Amenities INSPIRED BY MODERN LIFESTYLES At Finbar, we’re forever evolving to treat residents to the most thoughtful amenities in sync with how they like to live. From working out to working from home, accomodating guests to treating pets like family, each development is customised to the needs of its residents to ensure we continue to offer the most relevant and responsive inner-city lifestyles. PLAYTIME IN THE CITY No longer the exclusive domain of couples and professionals, inner city apartments are growing in demand from young families seeking low-care minimalist living close to entertainment precincts. Civic Heart and Garden Towers raise the energy with exciting kids’ playrooms and outdoor playgrounds, while AT238’s gaming zone complete with an arcade machine and PS5 mean it’s on for young and old. IMMERSIVE EXPERIENCES Finbar developments understand resident needs to a tee. Garden Towers’ state-of-the-art virtual golf driving range offers an immersive experience where players can finetune their swing in the comfort of their own home, while putting greens at Civic Heart and Aurora offer the chance to work on your short game at anytime. WORKS FOR YOU Working from home has become the new normal in a post- pandemic world. As thought leaders in this space, Finbar is innovating ahead of the trend with dedicated ‘WFH’ spaces in Civic Heart, Aurora, AT238 and Garden Towers, from business centres, to meeting rooms and zoom pods that make staying connected seamless. 2023 Finbar Group Limited Annual Report20 STAY A LITTLE LONGER Our residents said they wanted the flexibility of having family and friends visit, without having to send them away to stay at a hotel – and we listened. Following the overwhelming success at Sabina Applecross, Civic Heart and Aurora have incorporated Finbar’s guest apartment concept, allowing residents to book a suite to accommodate their loved ones while visiting. BEST FRIENDS WELCOME Dog ownership in Australia is increasing — and so is inner-city apartment living. Finbar brings the two worlds together thoughtfully and naturally, with pet wash facilities and pet play areas at Civic Heart, Garden Towers and AT238 inviting residents to embrace all the physical and emotional benefits that come from sharing an active city life with your four-legged friend. 2023 Finbar Group Limited Annual Report21 ESG at Finbar As WA’s largest and most trusted apartment developer, Finbar is committed to operating in a manner that shows the highest levels of environmental, social and governance standards. From its very early days, Finbar’s success has been guided by an ethos to have positive environmental and social impacts and to be ethical and transparent in its approach to meeting and exceeding all regulations that govern how it operates. The company’s ethos is to develop better lifestyles for people and this guides the approach to ESG. Finbar strives to be a leader in WA, to be a trusted and respected joint venture partner, employer and neighbour to its stakeholders across the community. E n v i r o n m e n t S o c i a l G o v e r n a n c e – Using innovative, contemporary, and light-weight construction techniques to reduce carbon emissions – Optimising design and material selection to reduce energy usage after handover – Aiming to achieve high energy efficiency and thermal comfort ratings for each project – Reducing waste through compaction and building management of diverse waste streams – Reducing land clearing through offering affordable and diverse infill housing options – Promoting adoption of EV through providing backbone infrastructure to catalyse the future installation of chargers – Providing affordable & diverse housing options across the Perth metro area – Corporate Governance Statement – Materiality assessment and identification of key ESG issues – Long serving and experienced management and leadership team – Ethical conduct and responsible business practices – Risk management and long term strategic direction – Nurturing employee growth & enhancing skills through training and professional development. – Data security and privacy – Providing a wide range of amenities in each project with a focus on health and wellness – Supporting local community organisations – Importance of employee diversity & wellbeing – Ensuring all our contractors and suppliers comply with the modern slavery initiatives and requirements. – Providing positive policy outcomes through membership and committee input into the Property Council of Australia (WA) & the Urban Development Institute of Australia (WA) – Broadening the rate base of local governments, supporting the delivery of services they provide to the local community 2023 Finbar Group Limited Annual Report22 COMPLETED PROJECTS AT238 P E R T H DIANELLA APARTMENTS D I A N E L L A REVA S O U T H P E R T H 2023 Finbar Group Limited Annual Report23 AT238 238 Adelaide Terrace, Perth AT238 comprises 119 residential apartments and two ground floor commercial lots in a 32 storey tower and represents Finbar’s tenth development along Adelaide Terrace. Embracing spacious semi-enclosed balconies, AT238 is positioned as an unique apartment product with a striking glazed façade and rooftop amenities that take full advantage of the expansive views. Project Company 240 Adelaide Terrace Pty Ltd Entity Type Equity Accounted Investee Finbar’s Ultimate Interest 50% Construction Commenced Mar 21 Construction Completed Apr 23 Total Lots 121 Approximate Total Project Sales Value $100.9m Value of Sales to Date $57.1m Lots Sold Lots Unsold 77 (64%) 44 (36%) 2023 Finbar Group Limited Annual Report24 DIANELLA APARTMENTS 36 Chester Avenue & 61 Waverley Street, Dianella Dianella Apartments is conveniently located to the amenity of Dianella Plaza and nearby high frequency public transport. Combined with resort facilities, the 128 residential apartments within a low-rise built form offers housing diversity within a local market devoid of housing choice. Project Company 36 Chester Avenue Pty Ltd Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 100% Construction Commenced Aug 20 Construction Completed Sep 21 Total Lots 128 Approximate Total Project Sales Value $62.5m Value of Sales to Date $62.5m Lots Sold 128 (100%) Lots Unsold 0 (0%) 2023 Finbar Group Limited Annual Report25 REVA 5 Harper Terrace, South Perth Adjacent to Finbar’s highly successful Aurelia project in South Perth, Reva is situated fronting Harper Terrace and comprises of 41 luxury one, two, and three bedroom apartments with rooftop amenities, as well as 18 commercial lots that were developed within the Harper Terrace structure. Project Company 5-7 Harper Terrace Pty Ltd Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 100% Construction Commenced Nov 17 Construction Completed Feb 19 Total Lots 59 Approximate Total Project Sales Value $46.7m Value of Sales to Date $43.8m Lots Sold Lots Unsold 55 (93%) 4 (7%) 2023 Finbar Group Limited Annual Report26 PROJECTS UNDER CONSTRUCTION CIVIC HEART S O U T H P E R T H AURORA A P P L E C R O S S THE POINT R I V E R V A L E 2023 Finbar Group Limited Annual Report27 CIVIC HEART 99 Mill Point Road & 3 Mends Street, South Perth This iconic site bounded by Mends Street, Labouchere Road and Mill Point Road offers luxurious apartments, world-class resort facilities, and a thriving ground floor commercial precinct anchored by the heritage South Perth Police Station and Post Office. Located in close proximity to the Swan River, Perth Zoo, and the Mends Street retail high street, Civic Heart is a transformational development that has achieved strong sales in a highly competitive localised market. Project Company 1 Mends Street Pty Ltd Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 52.5% Construction Commenced FY21 Estimated Completion 2H FY24 Total Lots 335 Approximate Total Project Sales Value $427.8m Value of Sales to Date $226.3m Lots Sold Lots Unsold 221 (66%) 114 (34%) CONSTRUCTION PROGRESS Comp le tion ETA 2H FY 24 JULY 2023 MARCH 2023 DECEMBER 2022 MAY 2022 JULY 2022 Constr uction Com me nced Janua ry 202 1 2023 Finbar Group Limited Annual Report28 CONSTRUCTION PROGRESS Comp le tion ETA 2H FY 24 JULY 2023 MAY 2023 OCTOBER 2022 JUNE 2022 Constr uct ion Comm ence d Decem ber 2 021 AURORA APPLECROSS 3 Kintail Road, Applecross The second stage of three in the Canning bridge precinct, Aurora combines luxurious apartment finishes & world-class facilities within an affluent Applecross address. Featuring a central shared lane and public amenity piazza. Project Company Finbar Applecross Pty Ltd Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 50% Construction Commenced FY22 Estimated Completion 2H FY24 Total Lots 121 Approximate Total Project Sales Value $146m Value of Sales to Date $55m Lots Sold Lots Unsold 60 (50%) 61 (50%) 2023 Finbar Group Limited Annual Report29 S P R I N G S R E S I D E N C E S CONSTRUCTION PROGRESS Comp le tion ETA 1H FY 25 JULY 2023 MARCH 2023 DECEMBER 2022 SEPTEMBER 2022 Constr uct ion Comm ence d M arch 202 2 THE POINT 31 Rowe Avenue, Rivervale The Point comprises 167 one, two, and three bedroom apartments and 9 commercial lots on the ground floor and will be situated at the main entrance to the Springs precinct, opposite the Aloft Hotel. Project Company 31 Rowe Avenue Pty Ltd Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 65% Construction Commenced FY22 Estimated Completion 1H FY25 Total Lots 176 Approximate Total Project Sales Value $105.5m Value of Sales to Date $74.8m Lots Sold Lots Unsold 136 (77%) 40 (23%) 2023 Finbar Group Limited Annual Report30 NEW TO MARKET GARDEN TOWERS E A S T P E R T H 2023 Finbar Group Limited Annual Report31 GARDEN TOWERS 110 Plain Street & 8 DeVlamingh Ave, East Perth Positioned opposite Queens Gardens in East Perth, Garden Towers will be comprised of 331 one, two, and three bedroom apartments plus 13 commercial units. Project Company Garden Towers East Perth Pty Ltd Entity Type Equity Accounted Investee Finbar’s Ultimate Interest 50% Construction Commencement Estimated Completion Total Lots FY24 TBC 344 Approximate Total Project Sales Value $256.5m Value of Sales to Date $96m Lots Sold Lots Unsold 138 (40%) 206 (60%) 2023 Finbar Group Limited Annual Report 32 FUTURE PROJECTS BEL-AIR B E L M O N T ROMEO A P P L E C R O S S LOT 1000 R I V E R V A L E PALMYRA APARTMENTS WEST P A L M Y R A 2 HOMELEA COURT R I V E R V A L E LOT 888 R I V E R V A L E FORMER ABC STUDIOS E A S T P E R T H 2023 Finbar Group Limited Annual Report33 BEL-AIR 239 Great Eastern Highway, Belmont The 239 Great Eastern Highway project has an approved DA for 196 one, and two bedroom apartments and 154sqm of ground floor commercial. Project Company 239 Great Eastern Highway Pty Ltd Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 100% Construction Commencement TBC Total Lots Approximate Total Project Sales Value 196 $92m 2023 Finbar Group Limited Annual Report 34 ROMEO 912 Canning Highway, Applecross PALMYRA APARTMENTS WEST 45 McGregor Road, Palmyra Located only metres from the Swan River and approximately 600 metres to the Canning Bridge Train Station, this 2,620sqm site fronting Canning Highway has DA approval as the third of three stages for 151 residential apartments and three ground floor commercial tenancies within a podium and 26 storey tower built form. Project Company Finbar Applecross Pty Ltd Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 50% Construction Commencement TBC Total Lots 155 Approximate Total Project Sales Value $121m The Palmyra second stage has received an amended DA to incorporate market feedback from stage one. Comprising 130 residential apartments, the introduction of lifts and re-alignment of apartment typologies within a low-rise structure, this development is designed to respond to first home buyer and downsizer drivers within the strong owner- occupier purchaser demographic, and is anticipated to have an end value of $52 million. A R Y M L A P Project Company 43 McGregor Road Pty Ltd Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 50% Construction Commencement TBC Total Lots Approximate Total Project Sales Value 130 $52m 2023 Finbar Group Limited Annual Report35 LOT 1000 32 Riversdale Road, Rivervale 2 HOMELEA COURT Cnr Rowe Avenue & Homelea Court, Rivervale Lot 1000 comprises 4,069 square metres of absolute waterfront land with expansive views of the Swan River, Stadium Precinct, and Perth CBD. DA has been approved for a 19 storey tower with 143 units. Project Company 32 Riversdale Road Pty Ltd Entity Type Fully Owned Subsidiary 2 Homelea Court comprises 3,770 square meters of land located on the corner of Rowe Avenue and Homelea Court, opposite Finbar’s Spring View Towers, is proposed to be developed into a project consisting of approximately 135 apartments within an 18 level building. The proposed apartment project has an estimated end value of approximately $83 million. Finbar’s Ultimate Interest 50% Project Company 2 Homelea Court Springs Pty Ltd Construction Commencement TBC Total Lots Approximate Total Project Sales Value 143 $88m Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 100% Construction Commencement TBC Total Lots Approximate Total Project Sales Value 135 $83m 2023 Finbar Group Limited Annual Report 36 LOT 888 2 Hawksburn Road, Rivervale FORMER ABC STUDIOS 187 Adelaide Terrace, East Perth The current approved DA comprises a six level office building with 6,250sqm NLA and 236 carbays. The former ABC Radio Studios heritage building with a GFA of 3,711sqm over three levels. Project Company Rowe Avenue Pty Ltd Project Company Finbar Sub 104 Pty Ltd Entity Type Equity Accounted Investee Entity Type Fully Owned Subsidiary Finbar’s Ultimate Interest 50% Finbar’s Ultimate Interest 100% Construction Commencement TBC Construction Commencement TBC Total Lots Approximate Total Project Sales Value TBC TBC Total Lots Approximate Total Project Sales Value TBC TBC 2023 Finbar Group Limited Annual Report37 INVESTMENT PROPERTIES FAIRLANES E A S T P E R T H PELAGO K A R R A T H A AURELIA S O U T H P E R T H 2023 Finbar Group Limited Annual ReportPELAGO Sharpe Avenue, Karratha Total Lots Residential Lots Commercial Lots 117 99 18 FY24 Forecast Rent $7.46m Lots Leased 110 (94%) Residential Lots Leased 97 (98%) Commercial Lots Leased 13 (72%) 38 FAIRLANES 181 Adelaide Terrace, East Perth Total SQM Office SQM Retail SQM 7,584 7,114 470 FY24 Forecast Rent $1.02m SQM Leased 4260 (56%) AURELIA 1 Harper Terrace, South Perth Total SQM 638 Estimated sales value $4.5m Estimated income value $271,000 p.a. 2023 Finbar Group Limited Annual Report39 2023 Finbar Group Limited Annual Report2023 Fi nbar Group Limited Annual Re port 40 Finbar Group Limited Financial Report CONTENTS PAGE Directors’ Report (including Corporate Governance Statement) Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Changes in Equity Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Auditor’s Report Lead Auditor’s Independence Declaration ASX Additional Information 41 56 57 58 59 60 92 93 98 99 DIRECTORS’ REPORT For the Year Ended 30 June 2023 The Directors present their report together with the consolidated financial report of the Group, comprising Finbar Group Limited (‘the Company’), its subsidiaries and the Group’s interest in equity accounted investees for the financial year ended 30 June 2023 and the independent auditor’s report thereon. CONTENTS OF DIRECTORS’ REPORT PAGE 42 43 43 43 44 44 44 44 46 47 48 48 48 49 49 50 50 51 51 53 53 53 54 54 54 55 1 Directors 2 Company Secretary 3 Directors’ Meetings 4 Corporate Governance Statement 4.1 Board of Directors 4.2 Remuneration Committee 4.3 Remuneration Report - Audited 4.3.1 Principles of Remuneration - Audited 4.3.2 Directors’ and Executive Officers’ Remuneration - Audited 4.3.3 Analysis of Bonuses included in Remuneration Report - Audited 4.3.4 Directors’ and Executives Interests - Audited 4.3.5 Equity Instruments - Audited 4.4 Audit Committee 4.5 Risk Management 4.6 Ethical Standards 4.7 Communication with Shareholders 4.8 Diversity 5 Principal Activities 6 Operating and Financial Review 7 Dividends 8 Events Subsequent to Reporting Date 9 Likely Developments 10 Directors’ Interests 11 Indemnification and Insurance of Officers 12 Non-audit Services 13 Lead Auditor’s Independence Declaration 41 2023 Finbar Group Limited Annual Report 1. Directors The Directors of the Company at any time during or since the end of the financial year are: Executive Director and Chairman John CHAN - BSc, MBA, MAICD Director since 27 April 1995 Chairman since 15 July 2010 John Chan is Executive Director and Chairman of Finbar, and a Director of its subsidiaries and equity accounted investees. John was appointed director in 1995 and was instrumental in re-listing Finbar on the ASX as a property development company. Prior to joining Finbar, John headed several property and manufacturing companies both in Australia and overseas. John holds a Bachelor of Science from Monash University in Melbourne and a Master of Business Administration from the University of Queensland. John is a Member of the Australian Institute of Company Directors, is a Trustee for the Western Australian Chinese Chamber of Commerce, and is a former Senate Member of Murdoch University. Managing Director Darren John PATEMAN - EMBA, GradDipACG, ACSA, AGIA, MAICD Director since 6 November 2008 Managing Director since 15 July 2010 Darren Pateman is the Managing Director of Finbar, and a Director of its subsidiaries and equity accounted investees. Darren commenced with Finbar prior to its relisting on the ASX as a property development company in 1995 and in this time has played a primary role in developing Finbar’s systems, strategy and culture. Darren has held several positions in his 28 years with the company which has given Darren an intimate knowledge of the key aspects of Finbar’s business. Darren was formerly Company Secretary from 1996 to 2010, Chief Executive Officer from 2008 to 2010, and was appointed Managing Director on 15 July 2010. Darren is a Chartered Secretary and holds an Executive Master of Business Administration from the University of Western Australia and a Graduate Diploma in Applied Corporate Governance (GradDipACG). Darren is an Associate of the Institute of Chartered Secretaries and Administrators and a Member of the Australian Institute of Company Directors. Executive Director and Chief Operations Officer Ronald CHAN Director since 24 February 2017 Ronald Chan is the Chief Operations Officer of Finbar, and a Director of Finbar’s subsidiaries and equity accounted investees. Ronald joined the Board as an Executive Director on 24 February 2017. Ronald brings 19 years of experience in Finbar’s Company operations where he has worked in several roles in the organisation including marketing, contract administration, and in 2013 was appointed Chief Operations Officer. In this role Ronald has gained an intimate understanding of the Company’s relationships and systems and managed the Company’s transition to digital and online marketing strategies. Non-executive Director Kee Kong LOH - B Acc, CPA Director since 28 April 1993 to 31 January 2023 Kee Kong Loh joined the Board in April 1993 and has substantial experience in the governance of companies in property development, marine transportation, and electronics manufacturing sectors. He has a degree in accountancy from the University of Singapore and is a member of the Institute of Certified Public Accountants of Singapore. Loh retired as a director of Finbar on 31 January 2023. Non-executive Director Terence Siong Woon PEH - B.Comm, M.Comm Director since 24 April 2018 Terence Peh joined the Board on 24 April 2018. Terence is Chief Executive Officer and Executive Director of Chuan Hup Holdings Limited, an investment company listed on the Singapore Stock Exchange, and Finbar’s largest corporate shareholder. Terence has over 24 years of experience in property development investment and project management in Asia Pacific, and management experience in finance in the marine and electronics manufacturing services industries. Terence obtained his Bachelor of Commerce in Marketing from Curtin University and a Master of Commerce in Finance from the University of New South Wales. Non-executive Director Eldon WAN - B Acc, FCA Singapore Director since 31 January 2023 Eldon Wan joined the Board on 31 January 2023. Eldon is the Chief Operating Officer of Chuan Hup Holdings Limited, an investment company listed on the Singapore Stock Exchange, and Finbar’s largest corporate shareholder. Eldon has over 25 years of experience in the finance and accounting sectors. He has accumulated industry experience in mergers and acquisitions, financial and management reporting, budgeting, taxation, treasury as well as corporate governance and risk management matters. 42 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report 1. Directors (continued) Non-executive (Independent) Director Lee VERIOS - LLB, MAICD Director since 6 December 2011 Lee Verios joined the Board in December 2011. He is a well credentialed commercial lawyer having practised in Western Australia for over 40 years. Until his retirement from practising law in 2012, Lee was partner in the international law firm of Norton Rose and the leader of their Commercial Property division in Perth. Throughout his legal career, Lee has held senior management roles in each of the firms of which he has been a member. In addition to his legal practice, Lee is an experienced company director, having held positions in a variety of public and private enterprises. Lee is a member of the Australian Institute of Company Directors, the Law Society of WA and was previously Chairman of the Australian Indonesian Business Council (WA Branch). Lee Verios has notified his intention to retire as a Director of the Company to take effect at the conclusion of the Company’s 2023 Annual General Meeting. 2. Company Secretary The Company Secretary of the Company at any time during or since the end of the financial year is: Edward Guy BANK - B Bus, ASCPA Company Secretary since 2 December 2016 Edward Bank is the Company Secretary of Finbar, and of Finbar’s Subsidiaries and equity accounted investees. Ed is a Certified Practicing Accountant with 29 years experience in private practice including 8 years as the Company’s external accountant. Ed joined the Company in 2005 in the capacity of Chief Financial Officer. Ed continues to hold the position of Chief Financial Officer. 3. Directors’ Meetings The number of Directors’ meetings attended by each of the Directors of the Company, whilst being a Director, during the financial year are: Director John CHAN Darren John PATEMAN Ronald CHAN Kee Kong LOH* Lee VERIOS Terence Siong Woon PEH Eldon WAN* Board Meetings Held Board Meetings Attended Resolutions Without Meetings Audit Committee Meetings Held Audit Committee Meetings Attended Remuneration Committee Meetings Held Remuneration Committee Meetings Attended 4 4 4 2 4 4 2 4 4 4 2 4 4 2 5 5 5 3 5 5 1 N/A N/A N/A 1 2 2 N/A N/A N/A 1 2 2 2 N/A N/A 1 2 2 N/A N/A N/A 2 N/A N/A 1 2 2 N/A * Kee Kong Loh retired on 31 January 2023. Eldon Wan was appointed on 31 January 2023. 4. Corporate Governance Statement The Board (‘Board’) of Finbar Group Limited (‘Finbar’ or ‘the Company’), its subsidiaries and equity accounted investees (collectively the Group) is committed to maintaining a high standard of corporate governance in the conduct of the organisation’s business in order to create and deliver value to shareholders. In this regard, Finbar has established a corporate governance framework, including corporate governance policies and charters to assist in this commitment. A copy of these policies and charters are available from the governance page of Finbar’s website, www.finbar.com.au and are referenced throughout this document where relevant. The framework is reviewed and revised in response to changes to law, developments in corporate governance best practice and changes to the Finbar business environment. As a listed entity, Finbar is required to comply with Australian laws including the Corporations Act 2001 (Cth) and the Australian Securities Exchange Listing Rules, and to report against the ASX Corporate Governance Council’s Principles and Recommendations. 43 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report 4. Corporate Governance Statement (continued) 4.1 Board of Directors Role of the Board The Board Charter sets out the Board’s role, powers and duties, and establishes the functions reserved for the Board and those which are delegated to the management. The Board’s primary role is the protection and enhancement of long-term shareholder value. To fulfil this role, the Board is responsible for the overall corporate governance of the Group. The Board has delegated responsibility for the operation and administration of the Group to the Executive Chairman, the Managing Director and Senior Executives. Composition of Board The Board recognises the importance of ensuring that Directors are free from interests and relationships that could, or could reasonably be perceived to materially interfere with the Director’s ability to exercise independent judgement and act in the Group’s best interests. Accordingly, the Board has adopted guidelines, set out in the Board Charter, which are used to determine the independence of the Directors. Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Group. Where the Board believes that a significant conflict exists for a Director on a Board matter, the Director concerned will be restricted from receiving materials, discussing or voting on the matter. Details of each of the non-executive Directors (Independent) are set out in the Directors Report (page 43). 4.2 Remuneration Committee The Remuneration Committee Charter sets out the Remuneration Committee’s role, powers and duties, and establishes the functions delegated to the Committee by the Board. The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Executive Officers and Directors themselves of the Company and of other Group Executives. It is also responsible for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits policies and professional indemnity and liability insurance policies. The Remuneration Committee reviews and makes recommendations to the Board on remuneration packages and policies applicable to the Executive Officers and Directors themselves of the Company and of other Group Executives. It is also responsible for share option schemes, incentive performance packages, superannuation entitlements, retirement and termination entitlements, fringe benefits policies and professional indemnity and liability insurance policies. The following directors serve on the Remuneration Committee: • Terence Siong Woon PEH (Chairman) - Non-executive Director • John CHAN - Executive Director • Kee Kong LOH - Non-executive Director (Retired on 31 January 2023) • Lee VERIOS - Non-executive Independent Director The Remuneration Committee Charter sets out the process for the periodical evaluation of the performance of the Executive Chairman and Managing Director. These evaluations have been conducted during the period. The Remuneration Committee Charter sets out the process for the periodical evaluation of the performance of the Senior Executives. The Remuneration Committee in consultation with the Executive Chairman and Managing Director are responsible for the periodical evaluation of the performance of the Senior Executives. These evaluations have been conducted during the period. Finbar has a written agreement, either in the form of an employment contract or letter of employment, with each Executive Director and Senior Executive which sets out the terms of their appointment. A copy of the Remuneration Committee Charter is available on Finbar’s website www.finbar.com.au. 4.3 Remuneration Report - Audited 4.3.1 Principles of Remuneration Remuneration of Directors and Executives is referred to as remuneration as defined in AASB 124 Related Party Disclosures and Section 300A of the Corporations Act 2001. Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Group, including Directors of the Company and other Executives. Key management personnel comprise the Directors of the Company and Executives for the Company and the Group including the Section 300A Executives. Remuneration levels for key management personnel and the secretary of the Company, and key management personnel and secretaries of the Group, are competitively set to attract and retain appropriately qualified and experienced Directors and Executives. The Remuneration Committee periodically obtains independent advice on the appropriateness of remuneration packages of both the Company and the Group given trends in comparative companies both locally and internationally and the objectives of the Company’s remuneration strategy. 44 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report4. Corporate Governance Statement (continued) 4.3 Remuneration Report - Audited (continued) 4.3.1 Principles of Remuneration (continued) The remuneration structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives and achieve the broader outcome of creation of value for shareholders. The remuneration structures take into account: • the capability and experience of the key management personnel; • the key management personnel’s ability to control the Group’s performance; • the key management personnel’s contribution to revenue and future earnings potential; • the key management personnel’s length of service; • project outcomes; and • the Group’s performance including: - - - the Group’s earnings; the growth in share price and delivering constant returns on shareholder wealth; and the amount of incentives within each key management person’s remuneration. Remuneration packages include a mix of fixed and variable remuneration, short-term performance-based incentives and can include long-term performance-based incentives. Fixed Remuneration Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any fringe benefit tax charges related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds. Remuneration levels are reviewed annually through a process that considers individual, segment and overall performance of the Group. In addition, where appropriate, external consultants provide analysis and advice to ensure the Directors’ and Senior Executives’ remuneration is competitive in the market place. A Senior Executive’s remuneration is also reviewed on promotion. Performance Linked Remuneration Performance linked remuneration includes short-term incentives (STI) and can include long-term incentives (LTI), which are designed to reward key management personnel for meeting or exceeding their financial and personal objectives. The short-term incentive is an ‘at risk’ bonus provided in the form of cash, whilst the long-term incentive is provided as shares or options over ordinary shares of the Company under the rules of the Employee Incentive Plan 2013 and the Director Share Plan 2014. As at 30 June 2023, there were no options on issue. Short-term Incentive The Remuneration Committee has elected to set the primary financial performance objective of ‘profit before tax’ as the key measure for the calculation of the short term incentives of key management personnel. The non-financial objectives vary with position and responsibility and include measures such as those outlined above. The STI for the current period was wholly based on a percentage of ‘profit before tax’. Contractual amounts are accrued in the current year and discretionary amounts are accounted for in the year of payment. The contractual amount is set at 3.3% of ‘profit before tax’ for the 2023 financial year. At the end of the financial year the Remuneration Committee assess the actual performance of the Group, the relevant segment and the individual key management personnel’s contribution to the Group. The performance evaluation in respect of the year ended 30 June 2023 has taken place in accordance with this process. Long-term Incentive Incentive shares or options issued under the Employee Incentive Plan 2013 or the Director Share Plan 2014 are made in accordance with thresholds set in the plans approved by shareholders at the relevant Annual General Meeting, subject to the Board’s discretion. Short-term and Long-term Incentive Structure The Remuneration Committee considers that the above performance-linked remuneration structure is generating the desired outcome. The evidence of this is in respect to the long term historical profit and dividend growth of the Company, coupled with the long term retention of key management personnel resulting in the retention of Company intellectual property. 45 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report4. Corporate Governance Statement (continued) 4.3 Remuneration Report - Audited (continued) 4.3.1 Principles of Remuneration (continued) Consequences of Performance on Shareholders Wealth In considering the Group’s performance and benefits for shareholder wealth, the Remuneration Committee has regard to the following indices in respect of the current financial year and the previous four financial years: Total comprehensive income Profit before tax Dividends paid Change in share price Return on capital employed Return on total equity 2023 2022 2021 2020 2019 $2,782,000 $3,948,000 $10,975,000 $8,863,000 $7,068,000 $11,372,000 $15,048,000 $12,043,000 $10,488,000 $15,947,000 $5,442,000 $10,884,000 $8,163,000 $13,606,000 $16,302,000 -$0.02 1.84% 1.16% -$0.17 5.06% 4.52% $0.15 3.82% 3.65% -$0.14 4.47% 2.92% -$0.10 5.58% 4.58% Profit before tax is considered as one of the financial targets in setting the STI. Dividends, changes in share price, and return of capital are included in the total shareholder return (TSR) calculation which is one of the performance criteria assessed for the LTI. The other performance criteria assessed for the LTI is growth in earnings per share, which takes into account the Group’s net profit. The overall level of key management personnel’s remuneration takes into account the performance of the Group over a number of years. Directors The base Directors fees for Non-executive Directors, last voted upon by the shareholders at the November 2013 AGM, is not to exceed $360,000 per annum. Non-executive Directors base fees (excluding Committee Fees) are presently $207,039 per annum. 4.3.2 Directors’ and Executive Officers’ Remuneration Details of the nature and amount of each major element of remuneration of each Director of the Company and of the named Group Executives who received the highest remuneration are: Short-Term Post - Employment Directors Fees and Committee Fees $ Salary $ STI Cash Bonus (A) $ Non Monetary Benefits $ Total $ Superannuation $ Other Long Term $ Total $ - 550,124 44,795 - 594,919 27,500 (3,535) 618,884 - 726,846 44,795 7,852 779,493 25,292 12,441 817,226 - 404,330 22,398 - 426,728 25,292 6,707 458,727 41,574 82,270 74,452 29,696 - - - - - - - - - - - - 41,574 82,270 74,452 29,696 - - 7,818 - - - - - 41,574 82,270 82,270 29,696 For the year ended 30 June 2023 Executive Directors Mr John Chan, Executive Chairman Mr Darren John Pateman, Managing Director Mr Ronald Chan, Chief Operating Officer Non-executive Directors Mr Kee Kong Loh* Mr Terence Siong Woon Peh Mr Lee Verios Mr Eldon Wan* Executives Mr Edward Guy Bank, CFO - 315,141 22,398 - 337,539 25,292 5,199 368,030 227,992 1,996,441 134,386 7,852 2,366,671 111,194 20,812 2,498,677 * Kee Kong Loh retired on 31 January 2023. Eldon Wan was appointed on 31 January 2023. 46 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report 4. Corporate Governance Statement (continued) 4.3 Remuneration Report - Audited (continued) 4.3.2 Directors’ and Executive Officers’ Remuneration (continued) Short-Term Post - Employment Directors Fees and Committee Fees $ Salary $ STI Cash Bonus (A) $ Non Monetary Benefits $ Total $ Superannuation $ Other Long Term $ Total $ - 587,356 190,706 - 778,062 27,981 13,176 819,219 - 738,362 190,706 23,620 952,688 24,021 25,117 1,001,826 - 411,593 95,353 - 506,946 24,021 16,125 547,092 78,603 74,937 74,790 - - - - - - - - - 78,603 74,937 74,790 - - 7,479 - - - 78,603 74,937 82,269 For the year ended 30 June 2022 Executive Directors Mr John Chan, Executive Chairman Mr Darren John Pateman, Managing Director Mr Ronald Chan, Chief Operating Officer Non-executive Directors Mr Kee Kong Loh Mr Terence Siong Woon Peh Mr Lee Verios Executives Mr Edward Guy Bank, CFO - 320,901 95,353 - 416,254 24,021 12,148 452,423 228,330 2,058,212 572,118 23,620 2,882,280 107,523 66,566 3,056,369 Notes in relation to the Table of Directors’ and Executive Officers’ Remuneration - Audited (A) Short-term Incentive Cash Bonus: The short-term incentive bonus is for performance during the respective financial years using the criteria set out on Page 45. Details of the Group’s policy in relation to the remuneration that is performance related is discussed on Page 45. On 25th August 2016, Finbar Group Limited issued 250,000 fully paid ordinary shares to Darren Pateman as Director Incentive Shares under the rules of the Director Share Plan 2014. Payment was by way of an interest free loan of $207,500 which was repaid in August 2021. The related non-monetary benefit is disclosed in table 4.3.2 on page 47. On 13th September 2017, Finbar Group Limited issued 250,000 fully paid ordinary shares to Darren Pateman as Director Incentive Shares under the rules of the Director Share Plan 2014. Payment was by way of an interest free loan of $202,500 which was repaid in September 2022. The related non-monetary benefit is disclosed in table 4.3.2 on page 46. 4.3.3 Analysis of Bonuses included in Remuneration Details of the vesting profile of the short term incentive bonuses awarded as remuneration to each Director of the Company and each of the named Group Executives are detailed below. Executive Directors Mr John Chan Mr Darren John Pateman Mr Ronald Chan Executives Mr Edward Guy Bank 47 Short Term Incentive Bonus Included in Remuneration $ % vested in year 44,795 44,795 22,398 22,398 134,386 100% 100% 100% 100% 100% DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report 4. Corporate Governance Statement (continued) 4.3 Remuneration Report - Audited (continued) 4.3.3 Analysis of Bonuses included in Remuneration (continued) Amounts included in remuneration for the financial year represent the amount of entitlements in the financial year based on achievement of personal goals and satisfaction of performance criteria, as per Short Term Incentives (page 45). No discretionary bonus was paid to the Executives in the 2023 financial year (2022: NIL). Any discretionary amounts of executive bonuses relating to 2023 financial year are yet to be determined, and therefore may impact future financial years. 4.3.4 Directors’ and Executives Interests Movement in Shares The movement during the reporting period in the number of ordinary shares in Finbar Group Limited held, directly, indirectly or beneficially, by each key management person, including their related parties, is as follows: Held at 1 July 2022 Purchases Sales/Retired Held at 30 June 2023 Directors Mr John Chan* Mr Darren John Pateman Mr Ronald Chan** Mr Kee Kong Loh (Retired on 31 January 2023) Mr Terence Siong Woon Peh*** Mr Lee Verios Mr Eldon Wan (Appointed on 31 January 2023) Executives Mr Edward Guy Bank 28,568,265 3,632,493 18,894,133 2,000,904 60,431,843 72,393 - 300,000 1,988,187 30,000 2,593,421 - - - - (2,000,904) 8,119,023 - - - Directors Mr John Chan* Mr Darren John Pateman Mr Ronald Chan** Mr Kee Kong Loh Mr Terence Siong Woon Peh*** Mr Lee Verios Executives Mr Edward Guy Bank Held at 1 July 2021 Purchases Sales 27,318,265 3,632,493 17,091,098 2,000,904 55,837,175 72,393 300,000 1,250,000 - 1,803,035 - 4,594,668 - - 30,556,452 3,662,493 21,487,554 - 68,550,866 72,393 - 300,000 Held at 30 June 2022 28,568,265 3,632,493 18,894,133 2,000,904 60,431,843 72,393 300,000 - - - - - - - - - - - * John Chan has interests in Forward International Pty Ltd, Apex Investments Pty Ltd and Blair Park Pty Ltd which hold shares in Finbar Group Limited. ** Ronald Chan has interests in Forward International Pty Ltd and Blair Park Pty Ltd which hold shares in Finbar Group Limited. *** Terence Peh is a Director and shareholder of Chuan Hup Holdings Limited which holds shares in Finbar Group Limited. No options or rights for shares were granted to key management personnel as remuneration during the reporting period. 4.3.5 Equity Instruments All options refer to options over ordinary shares of Finbar Group Limited issued under the Employee Incentive Plan 2013 or the Director Share Plan 2014. As at 30 June 2023, there were no options or rights on issue. 4.4 Audit Committee The Audit Committee Charter sets out the Audit Committee’s role, powers and duties, and establishes the functions delegated to the Audit Committee by the Board. The Audit Committee advises on the establishment and maintenance of a framework of internal control and appropriate ethical standards for the management of the Group. A copy of the Audit Committee Charter is available on Finbar’s website www.finbar.com.au. 48 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report 4. Corporate Governance Statement (continued) 4.4 Audit Committee (continued) The following directors serve on the Audit Committee: • Lee VERIOS (Chairman) - Non-executive Independent Director • Kee Kong LOH - Non-executive Director (Retired on 31 January 2023) • Terence Siong Woon PEH - Non-executive Director 4.5 Risk Management Oversight of the Risk Management Procedures The Board has elected not to establish a separate Risk Committee to oversee risk management and instead the overall responsibility of risk management resides with the Board in its entirety. In this regard, risk management considerations form part of the Board’s discussions at scheduled meetings. The Board oversees the establishment, implementation, and annual review of the Group’s risk management procedures. Management has established and implemented informal risk management procedures for assessing, monitoring and managing all risks including operational, financial reporting and compliance risks for the Group. The Managing Director and Chief Financial Officer provide assurance, in writing to the Board, that the financial risk management and associated compliance and controls have been assessed and found to be operating effectively. Risk Management and Compliance Control Comprehensive practices have been established to ensure: • capital expenditure with respect to land acquisitions or development agreements obtain prior Board approval; • financial exposures are controlled. Further details of the Group’s policies relating to interest rates management and credit risk are included in Notes 5 and 24 in the notes to the consolidated financial statements; • management systems are monitored and reviewed to achieve high standards of performance and compliance with regulations; • business transactions are properly authorised and executed; • the quality and integrity of personnel (see below); • financial reporting accuracy and compliance with the financial reporting regulatory framework (see below); and • environmental regulation compliance (see below). Quality and Integrity of Personnel Training and development and appropriate remuneration and incentives with regular performance reviews create an environment of cooperation and constructive dialogue with employees and senior management. Financial Reporting The Managing Director and the Chief Financial Officer have provided assurance, in writing, to the Board that the Group’s financial reports are founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board. There is a comprehensive accounting system. Monthly actual results are reported against budgets approved by the Directors and revised forecasts for the year are prepared regularly. Procedures are in place to ensure price sensitive information is reported to the Australian Securities Exchange (ASX) in accordance with Continuous Disclosure Requirements. A review is undertaken at each half year end of all related party transactions. Environmental Regulation The Group’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation. Compliance with the requirements of environmental regulations and with specific requirements of site environmental licences was substantially achieved across all operations with no instances of non-compliance in relation to licence requirements noted. The Board is not aware of any significant breaches of environmental regulations during the period covered by this report. 4.6 Ethical Standards All Directors, Managers and Employees are expected to act with the utmost integrity and objectivity, striving at all times to enhance the reputation and performance of the Group. Conflict of Interest Directors must keep the Board advised, on an ongoing basis, of any interest that could potentially conflict with those of the Group. Where the Board believes that a significant conflict exists for a Director on a Board matter, the Director concerned does not receive the relevant Board papers and is not present at the meeting whilst the item is considered. Details of Director related entity transactions with the Company and the Group are set out in Note 28 in the Notes to the Consolidated Financial Statements. 49 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report4. Corporate Governance Statement (continued) 4.6 Ethical Standards (continued) Code of Conduct All Directors, Managers and Employees are expected to maintain high ethical standards including the following: • aligning the behaviour of the Board and Management with the code of conduct by maintaining appropriate core Group values and objectives; • fulfilling responsibilities to shareholders by delivering shareholder value; • usefulness of financial information by maintaining appropriate accounting policies, practices and disclosure; • fulfilling responsibilities to clients, customers and consumers by maintaining high standards of product quality, service standards, commitments to fair value, and safety of goods produced; • employment practices such as occupational health and safety, employment opportunity, training and education support, community activities, sponsorships and donations; • responsibilities to the individual, such as privacy, use of privileged or confidential information, and conflict resolution; • managing actual or potential conflicts of interest; • corporate opportunities such as preventing Directors and key executives from taking advantage of property, information or position for personal gain; • confidentiality of corporate information; • fair dealing; • protection and proper use of the Group’s assets; • compliance with laws; and • reporting unlawful or of unethical behaviour including protection of those who report violations in good faith. Trading in General Company Securities by Directors and Employees The key elements of the Trading in Company Securities by Directors and Employees policy are: • identification of those restricted from trading - Directors and Senior Executives may acquire shares in the Company, but are prohibited from dealing in Company shares or exercising options: - within two trading days after either the release of the Company’s half-year and annual results to the Australian Securities Exchange (‘ASX’), the Annual General Meeting or any major announcement; - whilst in possession of price sensitive information not yet released to the market; • raising the awareness of legal prohibitions including transactions with colleagues and external advisers; • raising awareness that the Company prohibits those restricted from trading in Company shares as described above from entering into transactions such as margin loans that could trigger a trade during a prohibited period; and • requiring details to be provided of the trading activities of the Directors of the Company. 4.7 Communication with Shareholders The Board is committed to ensuring that the Company complies with its continuous disclosure obligations and to facilitate this, has approved a Continuous Disclosure Policy that applies to all Group personnel, including the Directors and Senior Executives. The Board seeks to promote investor confidence by seeking to ensure that trading in the Company’s shares take place in an informed market. Finbar provides information about itself, its activities and operations, and its governance via its website www.finbar.com.au. A copy of the Group’s Market Disclosure Policy is available on Finbar’s website www.finbar.com.au. 4.8 Diversity The Board has considered the recommendation to formulate strict measurable targets for the purposes of the assessment of gender diversity within the organisation. Given the small size and relatively stable nature of its workforce it has formed the view that at this time it would not be appropriate or practical to establish a written policy regarding gender diversity. The Board will review this position at least annually. However, generally, when selecting new employees or advancing existing employees, no consideration is given to gender, age or ethnicity, but instead selections are based upon individuals achievements, skill and expertise. Gender representation Board Key Management Personnel Senior Management Group 2023 2022 Female - - 50% 56% Male 100% 100% 50% 44% Female - - 50% 56% Male 100% 100% 50% 44% 50 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report 5. Principal Activities The principal activities of the Group during the course of the financial year continued to be property development and investment. The Group’s focus is the development of medium to high-density residential buildings and commercial developments in Western Australia by way of direct ownership, ownership through fully owned Subsidiaries or by equity accounted investees (through companies registered specifically to conduct the development). The Group holds rental property in East Perth, South Perth and Karratha. There were no significant changes in the nature of the activities of the Group during the financial year. 6. Operating and Financial Review 2023 2022 2021 2020 2019 Total comprehensive income attributable to Owners of the Group $2,782,000 $10,975,000 $8,863,000 $7,068,000 $11,372,000 Basic and Diluted EPS Dividends paid Dividends paid per share Market price per share Change in share price Return on capital employed attributable to Owners of the Group Return on total equity attributable to Owners of the Group $0.01 $0.04 $0.03 $0.02 $0.04 $5,442,000 $10,884,000 $8,163,000 $13,606,000 $16,302,000 $0.02 $0.66 -$0.02 1.84% 1.16% $0.04 $0.68 -$0.17 5.06% 4.52% $0.03 $0.85 $0.15 3.82% 3.65% $0.05 $0.70 -$0.14 4.47% 2.92% $0.06 $0.84 -$0.10 5.58% 4.58% Dividends paid in 2023 were fully franked and it is expected that dividends in future years will continue to be fully franked. Key transactions that contributed to the consolidated net profit of the Company for the 2023 financial year were the completion of AT238 Apartments, sales and settlements of completed stock held at 30 June 2022 and the ongoing rental of the Company’s commercial and residential properties. See below for further information on the Company’s project completions and overview. Review of Operations Finbar Group Limited’s (‘Finbar’ or ‘the Company’) core business lies in the development of medium to high density residential apartments and commercial property within the state of Western Australia. Finbar carries out its development projects through wholly owned subsidiaries, development agreements with landowners or incorporated special purpose entities, and equity accounted investees. Development arrangements and equity partners are sought to allow the Company to leverage into larger development projects to take advantage of the benefits of economies of scale, to help spread project risk, and to leverage the Company’s intellectual property. The Company operates predominantly within the central suburbs of the Perth metropolitan area. The ability to source new viable development opportunities and develop product that meets the needs of an evolving residential market is central to Finbar’s ongoing success. The Board and Management has a long-proven track record of such success. The administration of the Group along with the operating, investment and acquisitions decisions are made by Finbar’s Board and Management. The Company employs 28 staff in its corporate offices in East Perth, Western Australia and 1 member of staff in the regional Karratha office. The Company’s Management has remained diligent in ensuring a strong balance sheet is maintained to protect and improve the Company’s market position through market cycles. The Company completed AT238 Apartments in East Perth during the financial year. Focusing on its main principal activity, construction continues to progress at Civic Heart in South Perth, Aurora in Applecross and The Point in Rivervale into the next financial year. The building and completion of the projects will further strengthen the Company’s financial and operating position, generating revenue, and building cash flows to fund future opportunities and the payment of dividends to shareholders. There were no significant changes in the composition of overall assets and liabilities, with movements in assets from non-current to current and movements in liabilities from non-current to current as projects reach completion. The Company continued to focus on the generation of property sales and rental revenue through property development and investment. Material Business Risks With multiple projects in the pipeline, current property shortages and supply constraints, the outlook of the Group is optimistic. Nonetheless, the Group is exposed to various risk factors which could be business specific or generally macroeconomic. The Group’s operational structure and unique business relationship arrangements mitigates the inherent risk of the business. Supply chain and cost control risk – Building and architectural costs are the key development costs of a project. Finbar outsources its design and construction activities to long-standing external parties. The stable affiliation and adequate project contingencies help cushion project margins from significant price fluctuations, milestone delays, and contract default risk by key providers. This outsourcing model ensures that the Company is and remains scalable, efficient and agile in a market where acquisition and project timing is critical in maintaining a competitive advantage. 51 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report 6. Operating and Financial Review (continued) Material Business Risks (continued) Funding and interest rates risk – As property development requires a large initial capital outlay before property settlement, restricted access to funds will limit and affect the Company’s ability to pursue new opportunities and to deliver projects in a timely manner. The Company addresses this as follows: • Depending on the development arrangement, we have access to capital from equity accounted investees partners and landowners; • Construction does not commence until sufficient pre-sales are achieved to prove up project viability and provide comfort to project financiers; • Where financing criteria is met, development funding from major Australian banks over the specific project is utilised; and • Land acquisitions and associated holding costs are funded without the use of debt funding. Valuation of property – The value of land, building, and investment properties may be affected by a wide range of factors which are beyond of the Company’s control. The effect may be adverse on the overall business result due to impact on net realisable value of inventory, selling price, compliance on lending covenants and ultimately the liquidity of the Group. The Board and Management continuously monitor market fluctuations and conditions and implement appropriate strategies to benefit from and insulate the Company against changing market conditions. Additionally, changes in government legislation, regulation, rebates, and incentives may impact the Company’s operations. Management mitigates regulatory risks through constant monitoring, providing appropriate staff training, maintaining relationships with regulatory bodies, and actively engaging with industry groups conducting property related advocacy work in the Company’s sector. The Board and Management do not currently have the view that there is a requirement to reposition the Company’s overall business model. Completed Projects Dianella Apartments - 36 Chester Avenue, Dianella: 37 units have settled during the period and 1 unit settled post the reporting period. The 128 unit development is now fully sold. Reva - 5 Harper Terrace, South Perth: 3 commercial units have settled in the reporting period. 4 commercial units remain for sale in the 59 unit development. Vue Tower - 63 Adelaide Terrace, East Perth: 1 unit has settled in the reporting period. The 250 unit development is now fully sold and settled. One Kennedy - 241 Railway Parade, Maylands: 2 units have settled in the reporting period. The 123 unit development is now fully sold and settled. AT238 - 240 Adelaide Terrace, Perth: Construction of the AT238 project completed in the second half of the financial year. 67 units have settled in the reporting period and 4 units settled post the reporting period. 45 units remain for sale in the 121 unit development. Currently Under Construction Civic Heart - 1 Mends Street, South Perth: Construction works continue to progress, with completion expected during the financial year ending 30 June 2024. To date 198 residential sales and 23 commercial sales have been achieved in the development of 309 residential and 26 commercial units. Aurora Applecross - 3 Kintail Road, Applecross (Stage 2): Construction works continue to progress, with completion expected during the financial year ending 30 June 2024. To date 60 residential sales have been achieved in the development of 118 residential and 3 commercial units. The Point - 31 Rowe Avenue, Rivervale: Construction works continue to progress, with completion expected during the financial year ending 30 June 2025. To date 134 residential sales and 2 commercial sales have been achieved in the development of 167 residential and 9 commercial units. Future Projects Garden Towers East Perth - 101 Hay Street, East Perth - Marketing of the Garden Towers project continues to progress, with construction expected to commence in the financial year ending 30 June 2024. To date 130 residential sales and 5 commercial sales have been achieved in the development of 331 residential and 13 commercial units. 912 Canning Highway, Applecross (Stage 3): Development Approval has been received for 151 residential and 3 commercial units. Palmyra West Apartments - 43 McGregor Road, Palmyra (Stage 2): Development Approval has been received for 130 residential units. 239 Great Eastern Highway, Belmont: Development Approval has been received for a development of 194 residential and 2 commercial units. Lot 1000 - 32 Riversdale Road, Rivervale: Development Approval has been received for 143 residential units. Springs Commercial - 2 Hawksburn Road, Rivervale: The company has not secured a lease to date which would underpin the viability of the development of a commercial building on this land. The company will continue to seek a leasing pre-commitment. 2 Homelea Court, Rivervale: Development options are currently being explored. 187 Adelaide Terrace, East Perth: Development options are currently being explored. 52 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report6. Operating and Financial Review (continued) Investment Property Fairlanes - 181 Adelaide Terrace, East Perth: The Fairlanes property has been valued during the reporting period. The valuation resulted in a $3,000,000 reduction to the value of the property. The company continues to benefit from the investment income generated from the leased property. The property is currently 47% leased. The company continues to actively market the remaining tenancies for rental. Pelago Commercial - 23 & 26 Sharpe Avenue, Karratha: The Pelago commercial property has been revalued during the reporting period. The valuation resulted in a $45,000 increase in value of the property. The company continues to benefit from the investment income generated from the leased property. The property is currently 61% leased. The company continues to actively market the remaining tenancies for rental. Pelago Residential - 23 & 26 Sharpe Avenue, Karratha: The Pelago residential property has been revalued during the reporting period. The valuation resulted in a $1,638,000 increase to the value of the property. The company continues to benefit from the investment income generated from the leased property. The property is currently 95% leased. The company continues to actively market tenancies for rental as they become available. Vue Tower Commercial - 63 Adelaide Terrace, East Perth: Lot 2 at Vue Tower was acquired in December 2022 under Finbar Commercial Pty Ltd. The purchase price was $753,000. The company is marketing the tenancy for rental. Lot 4 at Vue Tower continues to be leased to a non- profit organisation at $1 per annum until 13 June 2029. Aurelia Commercial - 96 Mill Point Road, South Perth: Lots 132-138 at Aurelia were revalued during the period. The valuation resulted in $570,000 increase to the value of the property. Lots 136 and 138 are currently being leased. The company is actively marketing the remaining tenancies for rental. Significant Changes in State of Affairs Other than set out in this report, in the opinion of the Directors there were no significant changes in the state of affairs of the Group that occurred during the financial year under review. 7. Dividends Dividends paid or declared by the Company to members since the end of the previous financial year were: Dividends Paid During the Year 2023 Final 2022 ordinary Total Dividends Paid Cents per Share Total Amount $’000 Franked / Unfranked Date of Payment 2.00 5,442 5,442 Franked 9 September 2022 Franked dividends declared or paid during the year were franked at the rate of 30%. No dividend has been proposed after balance date. Dealt with in the financial report as - Dividends Dividend Reinvestment Plan Note 19 $’000 5,442 In accordance with Rule 13 of the Company’s Dividend Reinvestment Plan (DRP), the Directors have elected to suspend the DRP in the 2023 financial year until further notice. 8. Events Subsequent to Reporting Date There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 9. Likely Developments The Group will continue to pursue its policy of increasing the profitability and market share of its major business sectors during the next financial year. The Group will continue planned development projects on existing land and will continue to assess new development opportunities through acquisition of land for future development. Further information about likely developments in the operations of the Group and the expected results of these operations in future years have not been included in this report as the disclosure of such information would, in the opinion of the Directors, be likely to result in unreasonable prejudice to the Group. 53 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report 10. Directors’ Interests The relevant interest of each Director in the shares and options over such instruments by the companies within the Group, as notified by the Directors to the Australian Stock Exchange Limited in accordance with S205G(1) of the Corporations Act 2001, as at the date of this report is as follows: Director Mr John Chan Mr Darren John Pateman Mr Ronald Chan Mr Terence Siong Woon Peh Mr Lee Verios Mr Eldon Wan Ordinary Shares 30,556,452 3,662,493 21,487,554 68,550,866 72,393 - 11. Indemnification and Insurance of Officers Indemnification The Company has agreed to indemnify the current Directors of the Company, its subsidiaries and equity accounted investees, against all liabilities to another person (other than the Company or related body corporate) that may arise from their position as Directors of the Company, its subsidiaries and equity accounted investees, except where the liability arises out of the conduct involving a lack of good faith. Insurance Premiums During the financial year the Company has paid insurance premiums of $86,000 (2022: $71,000) in respect of Directors and Officers liability and legal expenses insurance contracts for Directors and Officers, including Executive Officers of the Company. The insurance premiums relate to: • Costs and expenses incurred by the relevant Officers in defending proceedings, whether civil or criminal and whatever their outcome; and • Other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain a personal advantage. 12. Non-audit Services During the year KPMG, the Group’s auditor, has performed certain other services in addition to their statutory duties. The Board has considered the non-audit services provided during the year by the auditor and is satisfied that the provision of those non- audit services during the year by the auditor is compatible with, and did not compromise, the auditors independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services were subject to the corporate governance procedures adopted by the Group and have been reviewed to ensure they do not impact the integrity and objectivity of the auditor; and • the non-audit services provided do not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards. Details of the amounts paid to the auditor of the Group, KPMG, and its related practices for audit and non-audit services provided during the year are set out below: Audit Services: Auditors of the Company Audit and review of financial statements - KPMG Services Other Than Statutory Audit: Taxation advice and tax compliance services - KPMG Consolidated 2023 $ 2022 $ 181,778 181,778 21,527 21,527 146,970 146,970 20,700 20,700 54 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual Report 13. Lead Auditor’s Independence Declaration The Lead Auditor’s Independence Declaration is set out on Page 98 and forms part of the Directors’ Report for the financial year ended 30 June 2023. Signed in accordance with a resolution of the Board of Directors: Darren Pateman Managing Director Dated at Perth this Twenty-second day of August 2023. 55 DIRECTORS’ REPORT (Continued)For the Year Ended 30 June 20232023 Finbar Group Limited Annual ReportCONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the Year Ended 30 June 2023 Note Consolidated 2023 $’000 2022 $’000 Revenue Cost of sales Gross Profit Other income Administrative expenses Advertising expenses Revaluation (decrease)/increase of investment property Revaluation increase of property, plant and equipment Rental expenses Gain on disposal of investment properties Results from Operating Activities Finance income Finance costs Net Finance (Costs)/Income Share of profit/(loss) of equity accounted investees (net of income tax) Profit before Income Tax Income tax expense Profit for the year Other comprehensive income Items which will not be reclassified to profit or loss: Revaluation (decrease)/increase of property, plant and equipment Tax on items that will not be reclassified to profit or loss Other comprehensive (loss)/income for the year, net of income tax Total comprehensive income for the year Earnings per Share: Basic earnings per share (cents per share) Diluted earnings per share (cents per share) 7 8 10 10 14 11 11 20 20 33,965 91,109 (19,022) (70,049) 14,943 21,060 226 (7,283) (152) (243) 151 (3,671) 491 4,462 945 (2,239) (1,294) 780 3,948 (813) 3,135 (504) 151 (353) 2,782 1.15 1.15 328 (8,280) (544) 6,864 283 (4,960) 374 15,125 595 (513) 82 (159) 15,048 (4,142) 10,906 98 (29) 69 10,975 4.01 4.01 The Consolidated Statement of Profit or Loss and Other Comprehensive Income is to be read in conjunction with the Notes to the Financial Statements set out on Pages 60 to 91. 56 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the Year Ended 30 June 2023 Balance as at 1 July 2021 Total comprehensive income for the year Profit Other comprehensive income Transactions with owners, recognised directly in equity Dividends to shareholders Balance as at 30 June 2022 Balance as at 1 July 2022 Total comprehensive income for the year Profit Other comprehensive loss Transactions with owners, recognised directly in equity Dividends to shareholders Balance as at 30 June 2023 Amounts are stated net of tax Note Share Capital $’000 Retained Earnings $’000 Asset Revaluation Reserve $’000 Total Equity $’000 194,484 47,697 460 242,641 - - - 194,484 10,906 - (10,884) 47,719 - 69 - 529 10,906 69 (10,884) 242,732 194,484 47,719 529 242,732 - - - 194,484 3,135 - (5,442) 45,412 - (353) - 176 3,135 (353) (5,442) 240,072 19 19 The Consolidated Statement of Changes in Equity is to be read in conjunction with the Notes to the Financial Statements set out on Pages 60 to 91. 57 CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 30 June 2023 Current Assets Cash and cash equivalents Trade and other receivables Inventories Investment property Prepayments Investments in equity accounted investees Other assets Total Current Assets Non-current Assets Trade and other receivables Inventories Investment property Prepayments Investments in equity accounted investees Property, plant and equipment Deferred tax assets Other assets Total Non-current Assets Total Assets Current Liabilities Trade and other payables Loans and borrowings Current tax payable Employee benefits Total Current Liabilities Non-current Liabilities Trade and other payables Loans and borrowings Deferred tax liabilities Employee benefits Total Non-current Liabilities Total Liabilities Net Assets EQUITY Share capital Retained earnings Reserves Total Equity Note 18a 17 16 12 14 17 16 12 14 13 15 23 21 15 22 23 21 15 22 19 19 Consolidated 2023 $’000 2022 $’000 18,176 20,486 145,883 2,050 716 2 51 33,202 20,037 19,338 - - 590 49 187,364 73,216 19,917 114,878 98,902 115 1,767 9,486 8,053 83 30,799 123,048 102,189 738 990 9,932 5,366 123 253,201 440,565 273,185 346,401 15,086 162,337 1,882 807 180,112 257 14,803 5,310 11 20,381 200,493 240,072 194,484 45,412 176 10,876 23,340 1,936 792 36,944 166 61,857 4,696 6 66,725 103,669 242,732 194,484 47,719 529 240,072 242,732 The Consolidated Statement of Financial Position is to be read in conjunction with the Notes to the Financial Statements set out on Pages 60 to 91. 58 CONSOLIDATED STATEMENT OF CASH FLOWS For the Year Ended 30 June 2023 Cash Flows from Operating Activities Cash receipts from customers Cash paid to suppliers and employees Cash used in Operating Activities before tax and interest paid Interest paid Income tax paid Note Consolidated 2023 $’000 2022 $’000 76,994 278,333 (186,127) (109,133) (1,738) (2,788) 3,238 483 590 (206) - (716) - (2,136) (5,555) 16,488 12,186 (283,611) (5,278) (1,833) (2,598) (9,709) 1,785 470 635 (98) 14 (331) (3) (2,943) (23,130) 9,887 (13,714) 100,739 38,659 (8,850) (5,442) 86,447 (23,749) (10,884) 4,026 (15,026) (19,397) 33,202 18,176 52,599 33,202 Net Cash used in Operating Activities 18b (113,659) Cash Flows from Investing Activities Proceeds from sale of investment properties Interest received Dividends received from equity accounted investees Acquisition of property, plant and equipment Proceeds from sale of property, plant and equipment Acquisition of investment property Acquisition of other investments Repayment of loans to related party Loans to equity accounted investees Proceeds from loans to equity accounted investees Net Cash provided by/(used in) Investing Activities Cash Flows from Financing Activities Proceeds from borrowings Repayment of borrowings Dividends paid Net Cash provided by Financing Activities Net decrease in cash and cash equivalents Cash and cash equivalents at 1 July Cash and Cash Equivalents at 30 June 13 13 21 21 19 18a The Consolidated Statement of Cash Flows is to be read in conjunction with the Notes to the Financial Statements set out on Pages 60 to 91. 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS For the Year Ended 30 June 2023 Index to Notes to the Financial Statements Note Page Note Page 1. Reporting Entity 2. Basis of Preparation 3. Significant Accounting Policies 4. Determination of Fair Values 5. Financial Risk Management 6. Operating Segments 7. Revenue 8. Other Income 9. Personnel Expenses 10. Finance Income and Finance Costs 11. Income Tax Expense 12. Investment Property 13. Property, Plant and Equipment 14. Investments in Equity Accounted Investees 15. Tax Assets and Liabilities 16. Inventories 62 62 63 68 69 70 73 73 73 73 74 74 76 78 80 80 17. Trade and Other Receivables 18. Cash and Cash Equivalents 19. Capital and Reserves 20. Earnings per Share 21. Loans and Borrowings 22. Employee Benefits 23. Trade and Other Payables 24. Financial Instruments 25. Operating Leases 26. Capital and Other Commitments 27. Contingencies 28. Related Parties 29. Group Entities 30. Subsequent Events 31. Auditor’s Remuneration 32. Parent Entity Disclosures 80 81 81 83 83 84 85 85 87 88 88 88 90 90 91 91 60 Page 63 63 64 65 65 65 66 66 66 67 67 67 68 68 68 Index to Significant Accounting Policies (Note 3) Note (a) Basis of Consolidation (b) Financial Instruments (c) Property, Plant and Equipment (d) Investment Property (e) Inventories (f) Impairment (g) Employee Benefits (h) Provisions (i) Revenue (j) Finance Income and Finance Costs (k) Income Tax (l) Goods and Services Tax (m) Earnings per Share (n) Segment Reporting (o) New Standards and Interpretations 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023 1. Reporting Entity Finbar Group Limited (‘the Company’) is a public company domiciled in Australia. The address of the Company’s registered office is Level 6, 181 Adelaide Terrace, East Perth WA 6004. The consolidated financial statements of the Group as at and for the year ended 30 June 2023 comprise the Company, its Subsidiaries (together referred to as ‘the Group’ and individually as ‘Group entities’) and the Group’s interest in equity accounted investees. The Group is a for-profit entity and is primarily involved in residential property development and property investment (see Note 6). 2. Basis of Preparation (a) Statement of Compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. These consolidated financial statements of the Group comply with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were approved by the Board of Directors on 22nd August 2023. (b) Basis of Measurement The consolidated financial statements have been prepared on the historical cost basis except for the following: • financial instruments recognised through profit or loss are measured at fair value; • investment property is measured at fair value; and • property under property, plant and equipment is measured at fair value. The methods used to measure fair values are discussed further in Note 4. (c) Functional and Presentation Currency These consolidated financial statements are presented in Australian dollars which is the functional currency for the Group. In accordance with ASIC Corporations (Rounding in Financial/ Directors’ Reports) Instrument 2016/191, amounts in the consolidated financial statements and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. (d) Use of Estimates and Judgements The preparation of consolidated financial statements in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. (i) Assumptions and estimation uncertainties Information about assumptions made in measuring fair values and estimation uncertainties that have a significant risk of resulting in a material adjustment within the year ending 30 June 2023 are included in the following notes: • Note 12 - Valuation of investment property; and • Note 13 - Valuation of property, plant & equipment. (ii) Measurement of fair values A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities. The Group has an established control framework with respect to the measurement of fair values. The Managing Director and Chief Financial Officer have the overall responsibility for overseeing all significant fair value measurements, including Level 3 fair values. Valuations are reported to the Audit Committee at each reporting date. When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs) If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change occurred. 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20232. Basis of Preparation (continued) (e) Changes in Accounting Policies The Group’s accounting policies are consistent with those disclosed in the financial statements for the year ended 30 June 2022. 3. Significant Accounting Policies The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities. (a) Basis of Consolidation (i) Subsidiaries Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to or has rights to variable returns from its investment with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. (ii) Equity Accounted Investees Equity accounted investees are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic and operating decisions. Investments in equity accounted investees are accounted for using the equity method and are initially recognised at cost. The consolidated financial statements include the Group’s share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that the joint control commences until the date the joint control ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the equity accounted investee. Investments in equity accounted investees are carried at the lower of the equity accounted amount and the recoverable amount. (iii) Joint Operations A joint operation is carried on by each venturer using its own assets in pursuit of the joint operations. The consolidated financial statements include the assets that the Group controls and the liabilities that it incurs in the course of pursuing the joint operation, and the expenses that the Group incurs and its share of the income that it earns from the joint operation. (iv) Transactions Eliminated on Consolidation Intra-group balances and transactions, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the equity accounted investees. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. Gains and losses are recognised as the contributed assets are consumed or sold by the equity accounted investee or, if not consumed or sold by the equity accounted investee, when the Group’s interest in such entities is disposed. (b) Financial Instruments (i) Non-derivative Financial Instruments Non-derivative financial assets Trade and other receivables and debt securities issued are initially recognised when they are originated. All other financial assets (including assets designated at fair value through profit or loss – FVTPL) are initially recognised when the Group becomes a party to the contractual provisions of the instrument. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: • it is held within a business model whose objective is to hold assets to collect contractual cash flows; and • its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability. Accounting for finance income and expense is discussed in Note 3(j). 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20233. Significant Accounting Policies (continued) (b) Financial Instruments (continued) (i) Non-derivative Financial Instruments (continued) Non-derivative financial liabilities Trade and other payables, commercial bills and subordinated liabilities are initially recognised when they are originated at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest rate method. All other financial liabilities (including liabilities designated at fair value through profit or loss) are initially recognised when the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. (ii) Share Capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. Repurchase of share capital When share capital recognised in equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Dividends Dividends are recognised as a liability in the period in which they are declared. (c) Property, Plant and Equipment (i) Recognition and Measurement Items of plant and equipment are measured at cost or deemed cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets include the cost of materials, direct labour, any other costs directly attributable to bringing the asset to a working order for its intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Items classified as property are measured at fair value. Refer Note 3(c)(iv). Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant & equipment and are recognised net within “Other income” in profit or loss. Losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of the property, plant & equipment item and are recognised net within “Administrative expenses” in profit or loss. When revalued assets are sold, the amounts included in the revaluation reserve are transferred to retained earnings. In respect to borrowing costs relating to qualifying assets, the Group capitalises costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of the asset. (ii) Reclassification to Investment Property Property that is being constructed for future use as investment property is accounted for as inventory until construction or development is complete, at which time it is remeasured to fair value and reclassified as investment property. Any gain or loss arising on remeasurement is recognised in profit or loss. When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Any loss is recognised in the revaluation reserve to the extent that an amount is included in revaluation reserve for that property, with any remaining loss recognised immediately in profit or loss. Any gain arising on revaluation is recognised in profit or loss to the extent the gain reverses a previous impairment loss on the property, with any remaining gain recognised in a revaluation reserve in equity. (iii) Subsequent Costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be reliably measured. The carrying amount of the replaced part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred. 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20233. Significant Accounting Policies (continued) (c) Property, Plant and Equipment (continued) (iv) Revaluation Model for Property After recognition as an asset, the Group has elected to carry an item of property whose fair value can be reliably measured shall be carried at a revalued amount, being its fair value at the date of the revaluation less any subsequent accumulated depreciation and accumulated impairment losses. Revaluations are made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. If an item of property is revalued, the entire class of property to which that asset belongs shall be revalued. Any gain or loss arising on remeasurement is recognised in other comprehensive income and asset revaluation reserve. Refer Note 4. (v) Depreciation and Amortisation Depreciation and amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. Assets are depreciated or amortised from the date of acquisition. Land is not depreciated. The estimated useful lives in the current and comparative periods are as follows: • Property • Office furniture and equipment, fixtures and fittings • Plant and equipment 40 years 5 - 25 years 1 - 10 years Depreciation and amortisation rates and methods are reviewed at each reporting date. When changes are made, adjustments are reflected prospectively in the current and future periods only. (d) Investment Property Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, used in the production or supply of goods and services or for administrative purposes. Investment property is measured at fair value (see Note 4) with any change therein recognised in profit or loss. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The self-constructed investment property transferred from inventory are recognised at fair value. When the use of a property changes such that it is reclassified as property, plant or equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting. (e) Inventories Inventories and work in progress, including land held for resale, are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Cost includes the cost of acquisition, development costs, holding costs and directly attributable interest on borrowed funds where the development is a qualifying asset. When a development is completed and ceases to be a qualifying asset, borrowing costs and other costs are expensed as incurred. Inventory is classified as current when it satisfies any of the following criteria: • it is expected to be realised in, or is intended for sale or consumption in, the entity’s normal operating cycle; • it is held primarily for the purpose of being traded; or • it is expected to be realised within twelve months of the reporting date. (f) Impairment (i) Financial Assets Under the expected credit losses (ECL) model in accordance with AASB 9 Financial Instruments, the Group calculates the allowance for credit losses by considering on a discounted basis the cash shortfalls it would incur in various default scenarios for prescribed future periods and multiplying the shortfalls by the probability of each scenario occurring. The allowance is the sum of these probability-weighted outcomes. At each reporting period, the Group assess whether the credit risk on a financial instrument has increased significantly since initial recognition, by analysing reasonable and supportable information that is available without undue cost or effort about past events, current conditions and forecasts of future economic conditions. Except for purchased and originated credit-impaired financial assets, trade receivables, AASB 15 contract assets and lease receivables, at each reporting date: • the Group measures the loss allowance for a financial instrument at an amount equal to the ‘lifetime expected credit losses’ if the credit risk on that financial instrument has increased significantly since initial recognition; and • if the credit risk on a financial instrument has not increased significantly since initial recognition, the Group measure the loss allowance for that financial instrument at an amount equal to ‘12 month expected credit loss’. The allowance and any changes in the expected credit loss are recognised as impairment gain and losses in profit or loss. 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20233. Significant Accounting Policies (continued) (f) Impairment (continued) (ii) Non-financial Assets The carrying amounts of the Group’s non-financial assets other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash flow from continuing use that are largely independent of the cash flows of other assets or groups of assets (the “cash generating unit”). An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (g) Employee Benefits (i) Superannuation Contributions Obligations for contributions to superannuation funds are recognised as an expense in profit or loss. (ii) Long-term Employee Benefits The Group’s obligation in respect of long-term service benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods plus related on costs. (iii) Termination Benefits Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be reliably estimated. (iv) Short-term Employee Benefits Short term employee benefits are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be recognised reliably. (h) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be reliably estimated, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. (i) Revenue Under AASB 15 Revenue from Contracts with Customers, revenue is measured based on the consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The Group recognises revenue when it transfers control over a product or service to a customer. (i) Property Sales Revenue from property sales include: • sale of residential and commercial property; • development costs fees which represent the fees charged to recoup project development costs from the landowners; and • profit share fees which represent percentage profit sharing revenue based on net project profit. Revenue is recognised when control of the assets is transferred and the amount of revenue is measured based on the contracted amount. The timing of transfer of control vary depending on the individual terms of the contract of sale. For projects with an external landowner, when the Group is engaged as a property developer of the land, the Group is deemed to be acting as the principal in the transaction and as such, property sales revenue and cost of sale are grossed up by the land cost base. The cost of sales allocated to individual units is based on the estimated overall selling price for the project and is updated at each reporting date. 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20233. Significant Accounting Policies (continued) (i) Revenue (continued) (ii) Supervision Fees Supervision fees represents the management fees charged to the equity accounted investees. Revenue is recognised in profit or loss in proportion to the stage of project completion which is by reference to an assessment of the costs incurred and the costs to be incurred. Revenue is measured based on the contracted amount and constrained to the amount that is highly probable. (iii) Management Fee Management fees represents the management fee charged to the shareholders of equity accounted investees. Revenue is recognised in profit or loss at property settlement and is measured based on the contracted amount and constrained to the amount that is highly probable. Management fees include the fees earned by providing property management services, exclusively to Finbar built properties. Revenue is recognised in profit or loss at the end of each month. (iv) Rental Income Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease in accordance with AASB 16 Leases. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. (j) Finance Income and Finance Costs Finance income comprises interest income on funds invested, interest on loans to equity accounted investees, dividend income and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date. Finance costs comprise interest expense on borrowings, changes in fair value of financial assets at fair value through profit or loss and impairment losses recognised on financial assets. Borrowing costs that are not directly attributable to the acquisition or production of a qualifying asset are recognised in profit or loss using the effective interest method. (k) Income Tax Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income. Current tax is the expected tax payable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss, and differences relating to investments in subsidiaries and equity accounted investees to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income tax expenses that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend is recognised. The Group does not distribute non-cash assets as dividends to its shareholders. (l) Goods and Services Tax Revenue, 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 Australian Taxation Office (ATO). In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows. 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20233. Significant Accounting Policies (continued) (m) Earnings per Share The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees. (n) Segment Reporting Determination and Presentation of Operating Segments An operating segment is a component of the Group that engages in business which directly relates to or supports its core business. An operating segment’s operating results are regularly reviewed by the Chief Operating Decision Maker (CODM) to make decisions about resources to be allocated to the segment and assess its performance and for which discrete information is available. Reportable segments that are significant to the CODM include residential apartment development, commercial development, property rental and business units which generate revenue by providing supporting services to the core business (Corporate). Segment results that are reported to the CODM include items directly attributable to a segment and those than that can be allocated on a reasonable basis. Unallocated items comprise of cash, balances relating to equity accounted investees and tax obligations. Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment. (o) New Standards and Interpretations A number of new standards are effective for annual periods beginning after 1 July 2023 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements. The potential impact of the new standards, amendments to standards and interpretations has been considered and they are not expected to have a significant impact on the financial statement. 4. Determination of Fair Values A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability. (a) Investment Property and Property carried at fair value An external, independent valuation company, having appropriately recognised professional qualifications and recent experience in the location and category of the property being valued, values the Group’s investment property portfolio and property no less than once every three years. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly. In the absence of current prices in an active market, the valuations are prepared by considering the aggregate of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation. Valuations reflect, where appropriate: the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities between the Group and the lessee, and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices and where appropriate counter-notices, have been served validly and within the appropriate time. Properties that have not been independently valued as at the balance sheet date are carried at fair value by way of directors valuation. (b) Trade and Other Receivables The fair value of trade and receivables, excluding construction work in progress, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes. (c) Financial Guarantees For financial guarantee contracts liabilities, the fair value at initial recognition is determined using a probability weighted discounted cash flow approach. This method takes into account the probability of default by the guaranteed party over the term of the contract, the loss given default (being the proportion of the exposure that is not expected to be recovered in the event of default) and exposure at default (being the maximum loss at the time of default). 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20235. Financial Risk Management Overview The Group has exposure to the following risks from their use of financial instruments: • credit risk • liquidity risk • market risk This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. Risk Management Framework The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. The Board is responsible for developing and monitoring risk management policies. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. Credit Risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities. Trade and Other Receivables The nature of the Group’s business means that most sales contracts occur on a pre-sales basis, before significant expenditure has been incurred on the development. All pre-sale contracts require a deposit at the point of entering into the contract, these funds being held in trust independently of the Group. Generally, pre-sale contracts are executed on an unconditional basis. Possession of a development property does not generally pass until such time as the financial settlement of the property has been completed, and title to a development property does not pass until the financial settlement of the property has been completed. Where possession of the development property is granted prior to settlement, title to the property remains with the Group until financial settlement of the property has been completed. The demographics of the Group’s customer base has little or no influence on credit risk. Approximately 10.12% (2022: 11.82%) of the Group’s revenue is attributable to multiple sales transactions with single customers. The Board of Directors has established a credit policy which undertakes an analysis of each sale. Purchase limits are established on customers, with these purchase limits being reviewed on each property development. The Group’s trade and other receivables relate mainly to expenses directly recoverable from landowners at project completion and loans to equity accounted investees and associates. The loans to equity accounted investees bear interest at BBSY plus an agreed margin and are repaid from proceeds on property settlement. The Group has not established an allowance for impairment, as no losses are expected to be incurred in respect of trade and other receivables. The trade and other receivables are mainly from related parties or being eligible for set-off against amounts owed to the borrower. Liquidity Risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group uses project by project costing to cost its products and services, which assists it in monitoring cash flow requirements and optimising its cash return on investments. Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. Market Risk Market risk is the risk that changes in market prices, such as interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, whilst optimising the return. Interest Rate Risk The Group continuously reviews its exposure to changes in interest rates and where it is considered prudent will enter into borrowings on a fixed rate basis. 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20235. Financial Risk Management (continued) Capital Management The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defines as total comprehensive income attributable to the group divided by total shareholders’ equity, excluding non-controlling interests. The Board of Directors also monitors the level of dividends to shareholders. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. The Group’s target is to achieve a return on assets of between 6.00% and 8.00%; for the year ended 30 June 2023 the return was 1.09% (2022: 4.52%). In comparison the weighted average interest expense on interest-bearing borrowings (excluding liabilities with imputed interest) was 3.66% (2022: 0.47%). The Group’s debt-to-capital ratio at the end of the financial year was as follows: Interest-bearing debt Market Capitalisation as at 30 June Total Capital Debt-to-capital ratio at 30 June Note 21 2023 $’000 2022 $’000 107,661 179,601 287,262 40,041 185,044 225,085 37% 18% From time to time, the Company purchases its own shares on the market. The timing of these purchases depends on market prices and availability of unallocated company cash resources where not required for core business activity. Shares purchased are cancelled from issued capital on purchase. The intention of the Board of Directors in undertaking such purchases is to enhance the capital return to the shareholders of the Company. Buy decisions are made on a specific transaction basis by the Board of Directors. In accordance with Rule 13 of the Company’s Dividend Reinvestment Plan (DRP), the Directors have elected to suspend the DRP in the 2023 financial year until further notice. 6. Operating Segments The Group operates predominantly in the property development sector and has identified 4 reportable segments, as described below, which are the Group’s three strategic business units, as well as Corporate and overheads. The strategic business units offer different products, and are managed separately because they require different technology, marketing strategies and have different types of customers. For each of the strategic business units, the Chief Operating Decision Maker (CODM) reviews internal management reports on a regular basis. The following describes the operations in each of the Group’s reportable segments: • Residential apartment development in Western Australia; • Commercial office/retail development in Western Australia; • Rental of property in Western Australia; and • Corporate and overheads represents Finbar Group Limited (parent entity) and business units which generates project management fees, property management fees and sales commission. This also includes net assets attributable to the corporate offices and other administrative expenses. 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20236. Operating Segments (continued) Information about Reportable Segments For the Year ended 30 June 2023 External Revenues - Company and Subsidiaries External Revenues - Equity Accounted Investees External Revenues - Total Residential Apartment Development $’000 Commercial Office/Retail Development $’000 Rental of Property $’000 Corporate and Overheads $’000 19,214 20,573 39,787 3,137 790 3,927 9,454 - 9,454 2,386 - 2,386 Total $’000 34,191 21,363 55,554 Reportable Segment Profit before Income Tax - Company and Subsidiaries Reportable Segment Profit before Income Tax - Equity Accounted Investees 2,137 (236) 4,020 (2,753) 3,168 1,047 34 - 32 1,113 Reportable Segment Profit before Income Tax - Total 3,184 (202) 4,020 (2,721) 4,281 Reportable Segment Assets - Company and Subsidiaries Reportable Segment Assets - Equity Accounted Investees Reportable Segment Liabilities - Company and Subsidiaries Reportable Segment Liabilities - Equity Accounted Investees* Capital Expenditure For the Year ended 30 June 2022 External Revenues - Company and Subsidiaries External Revenues - Equity Accounted Investees External Revenues - Total 249,321 31,968 132,802 28,749 - 76,661 6,550 83,211 22,467 101,634 28,225 401,647 2,653 9,295 629 - - - 34,621 40,433 10,772 193,302 - - 2 29,380 206 206 4,842 8,464 1,470 91,437 - - - 6,550 4,842 8,464 1,470 97,987 Reportable Segment Profit before Income Tax - Company and Subsidiaries Reportable Segment Profit before Income Tax - Equity Accounted Investees 8,467 (609) 10,259 (2,911) 15,206 (161) (35) - (31) (227) Reportable Segment Profit before Income Tax - Total 8,306 (644) 10,259 (2,942) 14,979 Reportable Segment Assets - Company and Subsidiaries 136,221 16,706 103,883 27,594 284,404 Reportable Segment Assets - Equity Accounted Investees Reportable Segment Liabilities - Company and Subsidiaries Reportable Segment Liabilities - Equity Accounted Investees* Capital Expenditure 33,767 52,029 25,872 - 2,989 3,315 852 - - 36,411 - - - 5,281 2 98 36,756 97,036 26,726 98 * Excludes liabilities payable to Finbar Group Limited. The Group’s share of revenues from equity accounted investees are reported in this table as they are managed by Finbar and reported to the CODM. Revenues from equity accounted investees are not reported in the statement of profit or loss and other comprehensive income. 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20236. Operating Segments (continued) Reconciliation of Reportable Segment Revenues, Profit or Loss, Assets and Liabilities Revenues including Other Income Total revenue for development reportable segments Total revenue for rental segments Total revenue for other reportable segments Consolidated Revenue including Other Income Total revenue for development reportable segments - Equity Accounted Investees Total Reportable Segments Revenue including Other Income Profit or Loss Total profit or loss for reportable segments Income tax applicable to share of profit of equity accounted investees Consolidated Profit before Income Tax Assets Total assets for reportable segments Cash and cash equivalents Investments in equity accounted investees Unallocated assets** Consolidated Total Assets Liabilities Total liabilities for reportable segments Unallocated liabilities Consolidated Total Liabilities ** Includes receivables due to Finbar Group Limited from equity accounted investees. Geographical information The Group operates predominantly in the one geographical segment of Western Australia. 2023 $’000 2022 $’000 22,351 81,503 9,454 2,386 34,191 21,363 55,554 8,464 1,470 91,437 6,550 97,987 4,281 (333) 3,948 14,979 69 15,048 401,647 284,404 18,176 33,202 1,769 1,580 18,973 27,215 440,565 346,401 193,302 97,036 7,191 6,633 200,493 103,669 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 20232023 $’000 2022 $’000 22,351 81,503 9,454 2,160 - 8,464 818 324 33,965 91,109 158 35 33 226 X X 253 61 14 328 4,589 5,232 378 (30) 51 228 8 369 66 106 228 7 5,224 6,008 X X X X 3 690 230 22 945 1,350 889 2,239 (1,294) 142 318 32 103 595 503 10 513 82 7. Revenue Property development sales Rental income Management fees Supervision fees Total Revenue 8. Other Income Sales commission income Administration fees Other Total Other Income 9. Personnel Expenses Wages and salaries Superannuation contributions (Decrease)/Increase in liability for annual leave Increase in liability for long service leave Directors and committee fees Non-executive directors - superannuation contributions Total Personnel Expenses Personnel expenses are included in administrative expenses on the Consolidated Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 June 2023. 10. Finance Income and Finance Costs Recognised in Profit or Loss Interest income on loans to equity accounted investees Interest income on loans Interest income on bank deposits Interest income on property settlements Total Finance Income Interest expense Bank charges Total Finance Costs Net Finance (Costs)/Income 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023 11. Income Tax Expense Recognised in Income Statement Current Tax Expense Current year Income tax recognised directly to equity Adjustments for prior periods Reversal of previously recognised deferred tax Non-recoverable amounts Deferred Tax Expense Movement Origination and reversal of temporary differences Income Tax Expense recognised in profit or loss Income tax recognised in other comprehensive income Total Income Tax Expense recognised in total comprehensive income for the year Numerical Reconciliation between Tax Expense and Pre-tax Net Profit Profit before Income Tax Income tax using the domestic rate of 30% (2022: 30%) Movement in income tax expense due to: Non-deductible expenses Non-recoverable amounts Reversal of previously recognised tax assets Tax effect of share of equity accounted investees (profit)/loss Total Income Tax Expense before prior year adjustments Over provided in prior years Total Income Tax Expense Income tax recognised in other comprehensive income Total Income Tax Expense recognised in total comprehensive income for the year Income Tax Recognised Directly in Equity Decrease in income tax expense due to: Tax incentives not recognised in income statement Total Income Tax Recognised Directly in Equity 12. Investment Property 12a. Reconciliation of Carrying Amount Balance at 1 July Sale of investment property Acquisition of investment property Transferred to property, plant and equipment Change in fair value Balance at 30 June 2023 $’000 2022 $’000 3,024 3,471 - (3) (162) 27 58 - (424) 2 2,886 3,107 (2,073) 813 (151) 662 1,035 4,142 29 4,171 3,948 15,048 1,185 4,515 - 27 (162) (234) 816 (3) 813 (151) 662 1 2 (424) 48 4,142 - 4,142 29 4,171 - - (58) (58) X X 102,189 97,925 (1,710) (2,176) 716 - (243) 331 (755) 6,864 100,952 102,189 Investment property comprises commercial properties at five developments and residential properties at two developments which are leased to third parties (see Note 25). The decrease in the revaluation was primarily as a result of a reduction of the weighted average lease term across all properties and an increase in capitalisation rates broadly across the Western Australia market from prior year. Investment property worth $2,050,000 has been classified as current assets. 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023 12. Investment Property (continued) 12b. Measurement of fair values (i) Fair Value Hierarchy The fair value of investment property was determined by external, independent property valuers, having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued or by director’s valuation. In accordance with the Company’s policy, independent valuations were undertaken in December 2022 on existing properties, Pelago in Karratha and Fairlanes in East Perth and in June 2023 for Aurelia in South Perth. For the June reporting period, the Directors confirm that there is no change to the valuations undertaken in December 2022, other than the movements at Note 12a. The fair value assessment of the Company as at the reporting date includes the best estimates using information available at the time of preparation of the financial statements and appropriate forward looking assumptions. The fair value measurement for investment property of $100,952,000 has been categorised as a Level 3 fair value based on the inputs to the valuation technique used (see Note 2(d)). (ii) Level 3 Fair Value Note 12a shows a reconciliation from the opening balances to the closing balances for Level 3 fair values. (iii) Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of investment property, as well as the significant unobservable inputs used. Valuation Technique Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement Discounted cash flows: The valuation model considers the present value of net cash flows able to be generated from the property taking into account expected rental growth rate, void periods, occupancy rate, lease incentive costs, such as rent-free periods and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), tenant credit quality and lease terms. Capitalisation of income valuation: The capitalisation of income valuation method capitalises the current rent received, at a rate analysed from the most recent transactions of comparable property investments. The capitalisation rate used varies across properties. Valuations reflect, where appropriate, lease term remaining, the relationship of current rent to the market rent, location and prevailing investment market conditions. Expected market rental growth 1.50% - 4.00%; The estimated fair value would increase (decrease) if: Weighted average 3.15%; Void periods (average 8.1 months after the end of each lease); Occupancy rate 68%; Risk-adjusted discounted rates (weighted average 7.75%). Expected market rental growth were higher (lower); Void periods were shorter (longer); Occupancy rate were higher (lower); Rent-free periods were shorter (longer); or Risk-adjusted discount rate were lower (higher). Adopted capitalisation rate 7.50% - 9.00%; Gross rent per annum $450 - $696 per sqm; Occupancy rate 47% - 95%; and The estimated fair value would increase (decrease) if: Adopted capitalisation rate were higher (lower); Rent free period 30 months Gross rent per annum were higher (lower); Occupancy rate were higher (lower); or Lease term remaining were longer (shorter). 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023 13. Property, Plant and Equipment Cost or Valuation Balance at 1 July 2021 Additions Transferred from investment property Change in fair value Reclassification Disposals Balance at 30 June 2022 Balance at 1 July 2022 Additions Change in fair value Disposals Balance at 30 June 2023 Depreciation Balance at 1 July 2021 Reclassification Disposals Revaluation Depreciation and amortisation charge for the year Balance at 30 June 2022 Balance at 1 July 2022 Disposals Revaluation Depreciation and amortisation charge for the year Balance at 30 June 2023 Carrying Amounts At 1 July 2021 At 30 June 2022 At 1 July 2022 At 30 June 2023 Office Furniture and Equipment $’000 Property $’000 Plant and Equipment $’000 Fixtures and Fittings $’000 Total $’000 7,288 - 755 180 - - 8,223 8,223 - (544) - 7,679 - - - (201) 201 - - - (191) 191 - 7,288 8,223 8,223 7,679 973 98 - - - (314) 757 757 18 - (2) 773 766 - (292) - 97 571 571 (2) - 35 604 207 186 186 169 7,683 91 16,035 - - - (4,047) (147) 3,489 3,489 187 - - 3,676 5,972 (4,047) (132) - 182 1,975 1,975 - - 71 2,046 1,711 1,514 1,514 1,630 - - - - - 91 91 1 - - 92 79 - - - 3 82 82 - - 2 84 12 9 9 8 98 755 180 (4,047) (461) 12,560 12,560 206 (544) (2) 12,220 6,817 (4,047) (424) (201) 483 2,628 2,628 (2) (191) 299 2,734 9,218 9,932 9,932 9,486 For each revalued class, the carrying amount that would have been recognised had the assets been carried at historical cost basis are as follows: Revalued assets at cost Cost Less accumulated depreciation Net book value at 30 June 2023 Property $’000 7,626 (1,966) 5,660 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023 13. Property, Plant and Equipment (continued) Measurement of fair values (i) Fair Value Hierarchy The fair value of property was determined by external, independent property valuers, having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued or by director’s valuation. In accordance with the Company’s policy, independent valuations were undertaken in December 2022 on existing properties, Pelago in Karratha and Fairlanes in East Perth. At June reporting period the Directors confirm that there is no change to the valuations undertaken in December 2022, other than the movements at Note 13(ii). The fair value assessment of the Company as at the reporting date includes the best estimate using information available at the time of preparation of the financial statements and appropriate forward looking assumptions. The fair value measurement for property of $7,679,000 has been categorised as a Level 3 fair value based on the inputs to the valuation technique used (see Note 2(d)). (ii) Level 3 Fair Value The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values. Balance at 1 July Acquisitions and reclassifications from investment property and inventory Revaluation increase included in ‘profit or loss’ Revaluation (decrease)/increase included in ‘other comprehensive income’ Depreciation Balance at 30 June 2023 $’000 2022 $’000 8,223 - 151 (504) (191) 7,679 7,288 755 283 98 (201) 8,223 (iii) Valuation technique and significant unobservable inputs The following table shows the valuation technique used in measuring the fair value of property, plant and equipment, as well as the significant unobservable inputs used. Valuation Technique Significant unobservable inputs Inter-relationship between key unobservable inputs and fair value measurement Expected market rental growth 1.50% - 4.00%; The estimated fair value would increase (decrease) if: Weighted average 3.15%; Void periods (average 8.1 months after the end of each lease); Expected market rental growth were higher (lower); Void periods were shorter (longer); Occupancy rate 68%; Occupancy rate were higher (lower); Risk-adjusted discounted rates (weighted average 7.75%). Rent-free periods were shorter (longer); or Risk-adjusted discount rate were lower (higher). Adopted capitalisation rate 7.50% - 9.00%; The estimated fair value would increase (decrease) if: Gross rent per annum $450 - $696 per sqm; Occupancy rate 47% - 95%; and Rent free period 30 months Adopted capitalisation rate were higher (lower); Gross rent per annum were higher (lower); Occupancy rate were higher (lower); or Lease term remaining were longer (shorter). Discounted cash flows: The valuation model considers the present value of net cash flows able to be generated from the property taking into account expected rental growth rate, void periods, occupancy rate, lease incentive costs, such as rent-free periods and other costs not paid by tenants. The expected net cash flows are discounted using risk-adjusted discount rates. Among other factors, the discount rate estimation considers the quality of a building and its location (prime vs secondary), tenant credit quality and lease terms. Capitalisation of income valuation: The capitalisation of income valuation method capitalises the current rent received, at a rate analysed from the most recent transactions of comparable property investments. The capitalisation rate used varies across properties. Valuations reflect, where appropriate, lease term remaining, the relationship of current rent to the market rent, location and prevailing investment market conditions. 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023 14. Investments in Equity Accounted Investees The Group accounts for investments in equity accounted investees using the equity method. The Group has the following investments in equity accounted investees (all stated at 100% of the values): Equity Accounted Investees Assets 2023 Ownership Current Assets $’000 Non-current Assets $’000 Total Assets $’000 Garden Towers East Perth Pty Ltd 240 Adelaide Terrace Pty Ltd 647 Murray Street Pty Ltd Axis Linkit Pty Ltd Finbar Sub 5050 Pty Ltd Lot 1001 - 1003 Rowe Avenue Pty Ltd Rowe Avenue Pty Ltd Total at 100% ownership 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 986 45,394 1 - - 5 2 46,388 24,141 51 25,127 45,445 - 1 2 - 1 1 2 5 4,360 28,555 4,362 74,943 Equity Accounted Investees Liabilities 2023 Ownership Garden Towers East Perth Pty Ltd 240 Adelaide Terrace Pty Ltd Axis Linkit Pty Ltd Finbar Sub 5050 Pty Ltd Lot 1001 - 1003 Rowe Avenue Pty Ltd Rowe Avenue Pty Ltd Total at 100% ownership 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% Current Liabilities $’000 Non-current Liabilities $’000 Total Liabilities $’000 62 43,591 - - 1 - 43,654 26,495 428 26,557 44,019 2 7 - 2 7 1 819 27,751 819 71,405 Equity Accounted Investees Assets 2022 Ownership Current Assets $’000 Non-current Assets $’000 Total Assets $’000 Garden Towers East Perth Pty Ltd 240 Adelaide Terrace Pty Ltd 647 Murray Street Pty Ltd Axis Linkit Pty Ltd Finbar Sub 5050 Pty Ltd Lot 1001 - 1003 Rowe Avenue Pty Ltd Rowe Avenue Pty Ltd Total at 100% ownership 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 1,209 34,431 63 - - 1,619 1 37,323 20,131 18,166 - 1 2 - 4,245 42,545 21,340 52,597 63 1 2 1,619 4,246 79,868 Equity Accounted Investees Liabilities 2022 Ownership Current Liabilities $’000 Non-current Liabilities $’000 Total Liabilities $’000 Garden Towers East Perth Pty Ltd 240 Adelaide Terrace Pty Ltd 647 Murray Street Pty Ltd Axis Linkit Pty Ltd Finbar Sub 5050 Pty Ltd Lot 1001 - 1003 Rowe Avenue Pty Ltd Rowe Avenue Pty Ltd Total at 100% ownership 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 767 35,484 4 - - 499 5 36,759 21,509 17,745 22,276 53,229 - 2 6 - 688 39,950 4 2 6 499 693 76,709 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202314. Investments in Equity Accounted Investees (continued) Profit/(Loss) Before Income Tax Recognised from Equity Accounted Investees 2023 Ownership Garden Towers East Perth Pty Ltd 240 Adelaide Terrace Pty Ltd Finbar Sub 5050 Pty Ltd Lot 1001 - 1003 Rowe Avenue Pty Ltd Rowe Avenue Pty Ltd Total at 100% ownership 50.00% 50.00% 50.00% 50.00% 50.00% Revenues $’000 Expenses $’000 43 42,790 - 13 - 750 39,846 1 6 14 42,846 40,617 Profit/(Loss) Before Income Tax Recognised from Equity Accounted Investees 2022 Ownership Revenues $’000 Expenses $’000 Garden Towers East Perth Pty Ltd 240 Adelaide Terrace Pty Ltd 647 Murray Street Pty Ltd Finbar Sub 5050 Pty Ltd Lot 1001-1003 Rowe Avenue Pty Ltd Rowe Avenue Pty Ltd Total at 100% ownership 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 5 2 - - 13,094 - 13,101 1,337 302 (15) 1 11,920 9 13,554 Profit/ (Loss) before income tax $’000 (707) 2,944 (1) 7 (14) 2,229 Profit/ (Loss) before income tax $’000 (1,332) (300) 15 (1) 1,174 (9) (453) Reconciliation of net assets and profit or loss Net assets on investments in equity accounted investees Total assets Total liabilities Net assets at 100% ownership Net assets at 50% ownership Profit or Loss on equity accounted investees Total profit/(loss) before tax Income tax using the domestic rate of 30% (2022: 30%) Total profit/(loss) after tax at 100% ownership Total profit/(loss) after tax at 50% ownership 2023 $’000 2022 $’000 74,943 79,868 (71,405) (76,709) 3,538 1,769 2,229 (669) 1,560 780 3,159 1,580 (453) 136 (317) (159) 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023 15. Tax Assets and Liabilities The current tax liability for the Group of $1,882,000 (2022: $1,936,000) represents the amount of income taxes payable in respect of current and prior periods. Recognised Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are attributable to the following: Inventories Interest bearing loans and borrowings Revaluation of investment property Revaluation of property, plant and equipment* Other items Tax value of carry-forward losses recognised Tax assets/(liabilities) Set off of tax Net Tax Assets Liabilities 2023 $’000 2022 $’000 2023 $’000 2022 $’000 - 602 - - 3,416 7,730 11,748 (3,695) 8,053 (1,112) 38 21 - 3,181 4,966 7,094 (1,728) 5,366 (7,068) - (1,725) (129) (83) - (9,005) 3,695 (5,310) (7,334) - (1,882) (257) 3,049 - (6,424) 1,728 (4,696) * The tax effect on the revaluation of property, plant and equipment recognised in other comprehensive income in the current period was $151,000 (2022: ($29,000)). 16. Inventories Current Work in progress Completed stock Total Current Inventories Non-current Work in progress Completed stock Total Non-current Inventories 2023 $’000 2022 $’000 143,199 2,684 145,883 - 19,338 19,338 114,878 122,277 - 771 114,878 123,048 17. Trade and Other Receivables X X Current Trade receivables Other receivables Amounts receivable from equity accounted investees Total Current Trade and Other Receivables Non-current Trade receivables Other receivables Amounts receivable from equity accounted investees Total Non-current Trade and Other Receivables Amounts receivable from equity accounted investees bear interest at BBSY plus an agreed margin. The Group’s exposure to credit risk and impairment losses to trade and other receivables are disclosed at Note 24. 12,565 419 7,502 20,486 1,145 15,357 3,415 19,917 6,716 622 12,699 20,037 8,556 13,094 9,149 30,799 80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023 18. Cash and Cash Equivalents 18a. Cash and Cash Equivalents Bank balances Cash and cash equivalents 2023 $’000 2022 $’000 18,176 18,176 33,202 33,202 The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities is disclosed at Note 24. 18b. Reconciliation of Cash Flows from Operating Activities Cash Flows from Operating Activities Profit for the year Adjustments for: Depreciation and amortisation Loss on disposal of assets Revaluation of investment property Revaluation of property, plant & equipment Gain on sale of investment property Net financing cost/(income) Share of net (profit)/loss of equity accounted investees Income tax expense Operating Profit before Changes in Working Capital and Provisions Change in trade and other receivables Change in inventories Change in prepayments Change in provision for employee benefits Change in trade and other payables Cash used in Operating Activities Interest paid Income taxes paid Net Cash used in Operating Activities Note 2023 $’000 2022 $’000 13 12a 11 16 22 3,135 10,906 299 - 243 (151) (491) 405 (780) 813 3,473 2,049 483 23 (6,864) (283) (374) (92) 159 4,142 8,100 560 (118,375) (2,545) (93) 20 (304) 171 3,793 (11,260) (109,133) (1,738) (2,788) (113,659) (5,278) (1,833) (2,598) (9,709) The increases and decreases in trade and other receivables as well as trade and other payables reflect only those changes that relate to operating activities. The remaining increases and decreases relate to investing activities. 19. Capital and Reserves Share Capital On issue at 1 July On Issue at 30 June - Fully Paid Company Ordinary Shares 2023 2022 272,123,142 272,123,142 272,123,142 272,123,142 The Company does not have authorised capital or par value in respect of its issued shares. The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets. 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202319. Capital and Reserves (continued) Dividends Dividends recognised in the current year by the Group are: Dividends Paid During the Year 2023 Final 2022 ordinary Total Dividends Paid Dividends Paid During the Year 2022 Final 2021 ordinary Interim 2022 ordinary Total Amount Cents per Share Total Amount $’000 Franked / Unfranked Date of Payment 2.00 5,442 Franked 9 September 2022 5,442 2.00 2.00 5,442 Franked 10 September 2021 5,442 Franked 18 March 2022 10,884 Franked dividends declared or paid during the year were franked at the rate of 30%. No dividend has been proposed after balance date. Dividend Reinvestment Plan The Company has a dividend reinvestment plan under which holders of ordinary shares may elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than by being paid in cash. In accordance with Rule 13 of the Company’s Dividend Reinvestment Plan (DRP), the Directors have elected to suspend the DRP in the 2023 financial year until further notice. Dividend Franking Account Company 2023 $’000 2022 $’000 30% franking credits available to shareholders of Finbar Group Limited for subsequent financial years 12,251 11,652 The above available amounts are based on the balance of the dividend franking account at year-end adjusted for: (a) franking credits that will arise from the payment of current tax liabilities; (b) franking debits that will arise from the payment of dividends recognised as a liability at the year-end; (c) franking credits that will arise from the receipt of dividends recognised as receivables at the year-end; and (d) franking credits that the entity may be prevented from distributing in subsequent years. The ability to utilise the franking credits is dependent upon there being sufficient available profits to declare dividends. The impact on the dividend franking account of dividends proposed after balance sheet date but not recognised as a liability is to reduce it by Nil (2022: $2,332,000). No dividend was proposed after balance sheet date. Nature and purpose of reserve Asset revaluation reserve The revaluation reserve relates to the revaluation of property, plant and equipment carried at fair value. 82 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202320. Earnings per Share Basic and Diluted Earnings per Share The calculation of basic and diluted earnings per share at 30 June 2023 was based on the profit attributable to ordinary shareholders of $3,135,000 (2022: $10,906,000) and a weighted average number of ordinary shares on issue during the year ended 30 June 2023 of 272,123,142 (2022: 272,123,142), calculated as follows: Profit Attributable to Ordinary Shareholders Weighted Average Number of Ordinary Shares Issued ordinary shares at 1 July Weighted Average Number of Ordinary Shares at 30 June 2023 $’000 2022 $’000 3,135 10,906 Ordinary Shares 2023 2022 272,123,142 272,123,142 272,123,142 272,123,142 Basic and Diluted Earnings per Share (cents per share) 1.15 4.01 21. Loans and Borrowings This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings. For more information about the Group’s exposure to interest rate risk see Note 24. 2023 $’000 2022 $’000 97,731 23,340 932 63,674 - - 162,337 23,340 1,450 13,353 14,803 16,701 45,156 61,857 Nominal Interest Rate BBSY+2.00% BBSY+2.40% BBSY+1.60% BBSY+1.50% BBSY+1.50% 2023 2022 Financial Year of Maturity Carrying Amount $’000 Carrying Amount $’000 2024 2024 2024 2024 2024 2024 2024 21,840 21,840 53,638 413 932 53,674 10,000 1,500 21,840 - - - - - 162,337 23,340 Current Commercial bills (Secured) Investor loans (Secured) Investor loans (Unsecured) Total Current Loans and Borrowings Non-current Commercial bills (Secured) Investor loans (Unsecured) Total Non-current Loans and Borrowings Terms and debt repayment schedule Terms and conditions of outstanding loans are as follows: Current Commercial bills (Secured) Commercial bills (Secured) Commercial bills (Secured) Commercial bills (Secured) Investor loans (Secured)* Investor loans to subsidiaries (Unsecured)** Investor loans to subsidiaries (Unsecured)** Total Current Loans and Borrowings 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202321. Loans and Borrowings (continued) Non-current Commercial bills (Secured) Commercial bills (Secured) Investor loans (Unsecured)* Investor loans (Unsecured)* Investor loans to subsidiaries (Unsecured)** Investor loans to subsidiaries (Unsecured)** Investor loans to subsidiaries (Unsecured)** Total Non-current Loans and Borrowings Nominal Interest Rate BBSY+2.00% BBSY+1.60% BBSY+1.50% BBSY+3.00% 2023 2022 Financial Year of Maturity Carrying Amount $’000 Carrying Amount $’000 2024 2025 2025 2025 2024 2024 2025 - 16,701 1,450 5,446 2,102 - - 5,805 14,803 - - - 33,434 10,000 1,722 61,857 * These are loans from related parties. Please refer to Note 28 for details on related parties. ** These are loans from landowners which are non interest bearing. Financing Arrangements Commercial bills The commercial bills are secured by registered first mortgages over the land and buildings (including those under construction) and a registered mortgage debenture over the assets and undertakings of the subsidiaries. The loans relate to a specific project or property and are denominated in Australian dollars. There are no cross securities against other projects or property within the Group to assist in mitigating risk in the event of default on a commercial bill. The bank guarantees within the Group are disclosed under Note 27. When a project is undertaken, initial funding is provided by the Group, equity accounted investees partners, and development landowners where applicable. Project developments are marketed and pre-sales are secured with customer deposits which are held in trust and not reflected on the Company’s balance sheet. Typically, external funding is accessible when minimum compliant pre-sales are achieved, secured over a specific project, and only to fund progress development costs. As a project nears its completion date, it is expected that the available facility will near or be at its fully drawn limit. When a project is completed and settlement proceeds are received, the proceeds are firstly applied to facility repayments and then payments to the project investors in accordance with the negotiated development agreements. The returned capital is reinvested into the Group’s future projects and activities as well as payment of dividends to shareholders. Investor Loans Investor Loans are generally repayable upon the completion of the project, unless otherwise agreed. 22. Employee Benefits Current Liability for annual leave Liability for long-service leave Total Current Employee Benefits Non-current Liability for long-service leave Total Non-current Employee Benefits 2023 $’000 2022 $’000 123 684 807 11 11 153 639 792 6 6 84 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202323. Trade and Other Payables Current Trade and other payables Other payables and accrued expenses Total Current Trade and Other Payables Non-current Other payables and accrued expenses Total Non-current Trade and Other Payables 2023 $’000 2022 $’000 13,192 1,894 15,086 10,185 691 10,876 257 257 166 166 At 30 June 2023, consolidated trade and other payables include retentions of $467,000 (2022: $204,000) relating to construction contracts in progress. The Group’s exposure to liquidity risk related to trade and other payables is disclosed at Note 24. 24. Financial Instruments Credit Risk Exposure to Credit Risk The carrying amount of the Group’s financial assets represent the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was: Trade and other receivables - Current Trade and other receivables - Non-current Cash and cash equivalents Note 17 17 18a The Group’s maximum exposure to credit risk for trade and other receivables at the reporting date by receivable category was: Amounts receivable from equity accounted investees GST refunds due and other trade debtors Other receivables Working capital advances and bonds Carrying Amount 2023 $’000 2022 $’000 20,486 19,917 18,176 58,579 10,917 11,208 15,776 2,502 40,403 20,037 30,799 33,202 84,038 21,847 11,508 13,716 3,765 50,836 Impairment Losses None of the Group’s trade or other receivables are past due. Based on historic default rates and security held, the Group believes that no impairment allowance is necessary in respect of trade or other receivables. Liquidity Risk The following are the contractual maturities of non-derivative financial liabilities, including estimated interest payments and excluding the impact of netting agreements: Non-derivative Financial Liabilities Commercial bills* Investor Loans* Trade and other payables 85 Note 21 21 23 30 June 2023 Carrying Amount $’000 Contractual Cash Flows $’000 1 Year or Less $’000 1-3 Years $’000 99,181 104,798 103,326 77,959 78,474 15,343 15,343 64,609 15,086 1,472 13,865 257 192,483 198,615 183,021 15,594 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202324. Financial Instruments (continued) Non-derivative Financial Liabilities Commercial bills* Investor Loans* Trade and other payables Note 21 21 23 30 June 2022 Carrying Amount $’000 Contractual Cash Flows $’000 1 Year or Less $’000 1-3 Years $’000 40,041 41,880 24,704 45,156 45,156 11,042 11,042 96,239 98,078 - 10,876 35,580 17,176 45,156 166 62,498 * Refer to Note 21 Loans and borrowings for details on loan maturity. Interest Rate Risk Profile At the reporting date the interest rate profile of the Group’s interest-bearing financial assets and liabilities was: Variable Rate Instruments Financial Assets Financial Liabilities Carrying Amount 2023 $’000 2022 $’000 21,819 57,202 (107,661) (40,041) (85,842) 17,161 Cash Flow Sensitivity Analysis for Variable Rate Instruments A change of 100 basis points in interest rates would have (decreased)/increased the Group’s equity and profit or loss by the amounts shown below. This analysis assumes that all variables remain constant. The analysis is on the same basis for 2022. 30 June 2023 Variable rate instruments 30 June 2022 Variable rate instruments Profit or Loss Equity 100bp Increase $’000 100bp Decrease $’000 100bp Increase $’000 100bp Decrease $’000 (616) 616 (616) 616 100bp Increase $’000 100bp Decrease $’000 100bp Increase $’000 100bp Decrease $’000 (460) - (460) - 86 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202324. Financial Instruments (continued) Fair Values Fair Values Versus Carrying Amounts The fair values of financial assets and liabilities, as detailed below, approximates to the carrying amounts shown on the balance sheet: Trade and other receivables Cash and cash equivalents Secured commercial bills Investor loans Trade and other payables Fair Values 2023 $’000 2022 $’000 40,403 18,176 50,836 33,202 (99,181) (77,959) (15,343) (40,041) (45,156) (11,042) Note 17 18a 21 21 23 The methods and assumptions used to estimate the fair value of financial instruments are as follows: Trade and other receivables The carrying amount approximates fair value given the short term nature of the balances and the market based commercial terms. Cash and cash equivalents The carrying amount is fair value due to the liquid nature of these assets. Secured commercial bills The carrying amount approximates fair value given the short term nature of the balances. Investor loans The carrying amount approximates fair value given the short term nature of the balances and the market based commercial terms. Trade and other payables The carrying amount approximates fair value given the short term nature of the balances and the market based commercial terms. 25. Operating Leases Leases as Lessor The Group leases out its investment properties held under operating leases. Rental income received from investment property Other rental property income received Future minimum lease receipts At 30 June, the future minimum lease receipts under non-cancellable leases expected to be received as follows: Less than one year Between one and five years More than 5 years Note 2023 $’000 2022 $’000 9,118 336 9,454 8,235 229 8,464 7 5,955 3,551 494 10,000 5,325 3,835 107 9,267 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202326. Capital and Other Commitments Commitments and Contingent Liabilities Property Development Contracted but not provided for and payable: Within one year Later than one year Total Property Development Commitments Property Development - Equity Accounted Investees Contracted but not provided for and payable: Within one year Total Property Development Commitments - Equity Accounted Investees Group’s Share of Property Development - Equity Accounted Investees Contracted but not provided for and payable: Within one year Total Share of Property Development Commitments - Equity Accounted Investees Group’s Property Development Commitments including Equity Accounted Investees Contracted but not provided for and payable: Within one year Later than one year Group’s Total Property Development Commitments including Equity Accounted Investees 27. Contingencies The Directors are of the opinion that provisions are not required for the guarantees below, as it is not probable that a future sacrifice of economic benefits will be required or the amount is not capable of reliable measurement. Guarantees Finbar Group Limited guaranteed commercial bill over investment property in Karratha (Pelago) Finbar Group Limited guaranteed commercial bill over investment property in East Perth (Fairlanes) Total Guarantees 28. Related Parties The key management personnel compensation included in ‘personnel expenses’ is as follows: Short term employee benefits Other long term benefits Post employment benefits Employee benefits 2023 $’000 2022 $’000 130,497 225,462 7,384 2,133 137,881 227,595 - - - - 13,891 13,891 6,946 6,946 130,497 232,408 7,384 2,133 137,881 234,541 X X 21,840 2,184 24,024 18,201 2,184 20,385 X X 2,367 2,882 21 111 67 108 2,499 3,057 88 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202328. Related Parties (continued) Individual Directors and Executives Compensation Disclosures Information regarding individual directors and executives compensation are provided in the Remuneration Report section of the Directors’ report on pages 44 to 48. On 25th August 2016, Finbar Group Limited issued 250,000 fully paid ordinary shares to Darren Pateman as Director Incentive Shares under the rules of the Director Share Plan 2014. Payment was by way of an interest free loan of $207,500 which was repaid in August 2021. The related non-monetary benefit is disclosed in table 4.3.2 on page 47. On 13th September 2017, Finbar Group Limited issued 250,000 fully paid ordinary shares to Darren Pateman as Director Incentive Shares under the rules of the Director Share Plan 2014. Payment was by way of an interest free loan of $202,500 which was repaid in September 2022. The related non-monetary benefit is disclosed in table 4.3.2 on page 46. Equity Accounted Investees Loans are made by the Group to equity accounted investees for property development undertakings. Loans outstanding from the Group to equity accounted investees are interest bearing and are repayable at the completion of the equity accounted investees development project. As at 30 June, the balance of these loans were as follows: Garden Towers East Perth Pty Ltd 240 Adelaide Terrace Pty Ltd Axis Linkit Pty Ltd Finbar Sub 5050 Pty Ltd Rowe Avenue Pty Ltd 2023 $’000 2022 $’000 3,224 7,502 1 3 1,990 19,720 1 3 187 134 10,917 21,848 Ventrade Australia Pty Ltd is a related party of Chuan Hup Holdings Limited who owns 25.19% of Finbar Group Limited. Ventrade Australia Pty Ltd owns 50% of the following equity accounted investees disclosed in Note 14: • 240 Adelaide Terrace Pty Ltd (AT238): Construction completed with 67 units settled during the financial year; and • Garden Towers East Perth Pty Ltd (Garden Towers East Perth): Marketing continues to progress, with construction expected to commence in the financial year ending 30 June 2024. Other Related Party Transactions As at 30 June, related party loans (see Note 21) were as follows: Ventrade Australia Pty Ltd (Secured) Ventrade Australia Pty Ltd (Unsecured) Forward International Pty Ltd (Unsecured) Nominal Interest Rate Financial Year of Maturity 2023 $’000 2022 $’000 BBSY+1.50% BBSY+1.50% BBSY+3.00% 2024 2025 2025 932 5,446 2,102 8,480 - - - - 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 202329. Group Entities Parent Company Finbar Group Limited Subsidiaries 1 Mends Street Pty Ltd 2 Homelea Court Springs Pty Ltd 31 Rowe Avenue Pty Ltd 32 Riversdale Road Pty Ltd 36 Chester Avenue Pty Ltd 43 McGregor Road Pty Ltd 5-7 Harper Terrace Pty Ltd 63 Adelaide Terrace Pty Ltd 88 Terrace Road Pty Ltd 96 Mill Point Road Pty Ltd (Liquidated) 175 Adelaide Terrace Pty Ltd 239 Great Eastern Highway Pty Ltd 241 Railway Parade Pty Ltd Finbar Applecross Pty Ltd Finbar Commercial Pty Ltd Finbar Finance Pty Ltd Finbar Fund Pty Ltd Finbar Karratha Pty Ltd Finbar Port Hedland Pty Ltd Finbar Project Management Pty Ltd Finbar To Rent Pty Ltd Finbar Sales Pty Ltd Finbar Sub 104 Pty Ltd Finbar Executive Rentals Pty Ltd Lot 1 to 10 Whatley Crescent Pty Ltd 30. Subsequent Events Country of Incorporation Shareholding/ Unit Holding $ Ownership Interest 2023 2022 Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia 1 1 1 1 2 1 1 1 1 - 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 26 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the Directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 90 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023 31. Auditors’ Remuneration Audit Services: Auditors of the Group Audit and review of financial statements - KPMG Audit and review of trust accounts - Other Auditors Services other than Statutory Audit: Taxation advice and tax compliance services - KPMG 32. Parent Entity Disclosures As at and throughout the financial year ending 30 June 2023, the parent company of the Group was Finbar Group Limited. Result of the Parent Entity Profit for the year (after tax) Total Comprehensive Income for the year Financial Position of the Parent Entity Current Assets Total Assets Current Liabilities Total Liabilities Total Equity of the Parent Entity comprising of: Share capital Retained earnings Total Equity Parent Entity Contingencies 2023 $ 2022 $ 181,778 146,970 4,037 4,382 185,815 151,352 21,527 21,527 20,700 20,700 2023 $’000 2022 $’000 6,450 6,450 9,158 9,158 15,815 32,194 220,605 214,029 1,282 6,790 1,186 1,222 194,484 194,484 19,331 18,323 213,815 212,807 The Directors are of the opinion that provisions are not required, as it is not probable that a future sacrifice of economic benefits will be required or the amount is capable of reliable measurement. 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)For the Year Ended 30 June 2023DIRECTORS’ DECLARATION 1. In the opinion of the Directors of Finbar Group Limited (‘the Company’): a) The consolidated financial statements and notes that are contained in Pages 60 to 91 and the Remuneration report in section 4.3 in the Directors’ report, set out on Pages 44 to 48, are in accordance with the Corporations Act 2001, including: i) giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its performance for the year ended on that date; and ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and b) There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2. The Directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the Managing Director and the Chief Financial Officer for the financial year ended 30 June 2023. 3. The Directors draw attention to Note 2(a) to the consolidated financial statements, which contains a statement of compliance with International Financial Reporting Standards. Signed in accordance with a resolution of the Board of Directors: Darren Pateman Managing Director Dated at Perth this Twenty-second day of August 2023. 92 2023 Finbar Group Limited Annual Report Independent Auditor’s Report Independent Auditor’s Report To the shareholders of Finbar Group Limited To the shareholders of Finbar Group Limited Report on the audit of the Financial Report Report on the audit of the Financial Report Opinion Opinion We have audited the Financial Report of Finbar Group Limited (the Company). We have audited the Financial Report of Finbar Group Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with In our opinion, the accompanying Financial the Corporations Act 2001, including: Report of the Company is in accordance with the Corporations Act 2001, including:  Giving a true and fair view of the Group’s  Giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial performance for the year ended financial position as at 30 June 2023 and of on that date; and its financial performance for the year ended on that date; and  Complying with Australian Accounting Standards and the Corporations  Complying with Australian Accounting Regulations 2001. Standards and the Corporations Regulations 2001. The Financial Report comprises:  The Financial Report comprises:   Consolidated statement of financial position as at 30 June 2023;  Consolidated statement of financial position as at 30 June 2023;  Consolidated statement of profit or loss and other comprehensive income, Consolidated  Consolidated statement of profit or loss and statement of changes in equity, and other comprehensive income, Consolidated Consolidated statement of cash flows for the statement of changes in equity, and year then ended; Consolidated statement of cash flows for the year then ended; accounting policies; and  Notes including a summary of significant  Notes including a summary of significant accounting policies; and  The Directors’ Declaration.  The Directors’ Declaration. The Group consists of the Company and the entities it controlled at the year-end or from time The Group consists of the Company and the to time during the financial year. entities it controlled at the year-end or from time to time during the financial year. Basis for opinion Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics We are independent of the Group in accordance with the Corporations Act 2001 and the ethical for Professional Accountants (including Independence Standards) (the Code) that are relevant to our requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in for Professional Accountants (including Independence Standards) (the Code) that are relevant to our accordance with these requirements. audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. Key Audit Matters Key Audit Matters The Key Audit Matters we identified are: The Key Audit Matters we identified are:  Valuation of Investment Properties; and  Valuation of Investment Properties;  Carrying Value of Inventory. and  Carrying Value of Inventory. Key Audit Matters are those matters that, in our professional judgement, were of most significance in Key Audit Matters are those matters that, in our our audit of the Financial Report of the current period. professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming These matters were addressed in the context of our our opinion thereon, and we do not provide a separate audit of the Financial Report as a whole, and in forming opinion on these matters. our opinion thereon, and we do not provide a separate opinion on these matters. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and a scheme approved under Professional Standards Legislation. logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 93 Carrying value of Inventories ($260.8million) Carrying value of Inventories ($260.8million) Refer to Notes 3(e) and 16 to the Financial Report Refer to Notes 3(e) and 16 to the Financial Report The key audit matter The key audit matter How the matter was addressed in our audit How the matter was addressed in our audit Valuation of inventories, being both completed Valuation of inventories, being both completed units and work in progress, is a key audit matter units and work in progress, is a key audit matter due to the: due to the:  Significance of the balance to the financial  Significance of the balance to the financial statements (59% of total assets); statements (59% of total assets);   Judgement and our effort applied to Judgement and our effort applied to assessing forecast selling prices and costs of assessing forecast selling prices and costs of completion for work in progress. These completion for work in progress. These factors involve forecasting, which can add factors involve forecasting, which can add audit complexity to the assessment of net audit complexity to the assessment of net realisable value. It is the Group’s policy, in realisable value. It is the Group’s policy, in accordance with accounting standards, that accordance with accounting standards, that inventory must be carried at the lower of inventory must be carried at the lower of cost and net realisable value. cost and net realisable value. Selling prices can fluctuate based on current Selling prices can fluctuate based on current property market conditions. property market conditions. Work in progress comprises developments Work in progress comprises developments currently under construction and future currently under construction and future projects, which are long term in nature projects, which are long term in nature where forecast costs could be negatively where forecast costs could be negatively impacted by issues encountered during impacted by issues encountered during planning or construction. planning or construction.   Our procedures included: Our procedures included:  Assessing the Group’s policies for the  Assessing the Group’s policies for the valuation of inventories against the valuation of inventories against the requirements of the accounting standards requirements of the accounting standards and our understanding of the business and our understanding of the business  Challenging the Group’s assumptions of  Challenging the Group’s assumptions of forecast costs of completion by selecting a forecast costs of completion by selecting a sample of developments under construction sample of developments under construction and future projects to understand project and future projects to understand project design complexity, sub-contractor reliance, design complexity, sub-contractor reliance, project funding and other project risks such project funding and other project risks such as supplier cost increases which could as supplier cost increases which could negatively impact costs of completion. This negatively impact costs of completion. This was done through enquiry of senior was done through enquiry of senior management, and assessment of the management, and assessment of the Group’s underlying documentation such as Group’s underlying documentation such as budgets, funding agreements, supplier budgets, funding agreements, supplier contracts and internal reports. contracts and internal reports. Testing a sample of sales of inventories Testing a sample of sales of inventories during the year and subsequent to year end during the year and subsequent to year end to executed settlement statements to to executed settlement statements to assess sales margins and volumes achieved assess sales margins and volumes achieved during and post the financial year. This during and post the financial year. This informed our evaluation of the carrying value informed our evaluation of the carrying value of inventories at balance date against the of inventories at balance date against the Group’s policy for recording inventories at Group’s policy for recording inventories at the lower of cost and net realisable value. the lower of cost and net realisable value.  Comparing forecast selling prices to total  Comparing forecast selling prices to total costs incurred to date and forecast costs of costs incurred to date and forecast costs of completion for significant projects. We did completion for significant projects. We did this to assess the carrying value of this to assess the carrying value of inventories against the Group’s policy for inventories against the Group’s policy for recording at the lower of cost and forecast recording at the lower of cost and forecast net realisable value. net realisable value.  Assessing the disclosures in the financial  Assessing the disclosures in the financial report, using our understanding obtained report, using our understanding obtained from our testing, against accounting from our testing, against accounting standards requirements. standards requirements. 94 Valuation of Investment Property ($101 million) Carrying value of Inventories ($260.8million) Refer to Note 12 to the Financial Report Refer to Notes 3(e) and 16 to the Financial Report The key audit matter The key audit matter How the matter was addressed in our audit How the matter was addressed in our audit Valuation of Investment Property is a key Valuation of inventories, being both completed units and work in progress, is a key audit matter audit matter due to the: due to the: • Significance of the balance to the financial  Significance of the balance to the financial statements (23% of total assets); statements (59% of total assets); • Judgement required by the Group in • Judgement applied by the Group in the Judgement and our effort applied to  selection of the valuation methodology to assessing forecast selling prices and costs of be used from those methodologies completion for work in progress. These available under accounting standards. The factors involve forecasting, which can add adoption of alternative methodologies may audit complexity to the assessment of net result in a different valuation outcome; realisable value. It is the Group’s policy, in accordance with accounting standards, that inventory must be carried at the lower of assessing the capitalisation rates applied to cost and net realisable value. the projected income of individual properties in the income valuation Selling prices can fluctuate based on current methodology. A small percentage property market conditions. movement in the capitalisation rate would Work in progress comprises developments result in a significant financial impact to the currently under construction and future investment property balance and the projects, which are long term in nature income statement; and where forecast costs could be negatively impacted by issues encountered during • Judgement required by the Group in planning or construction. assessing any changes that may have occurred since the timing of the valuations performed by the Group’s external valuer. It is the Group’s policy when the external valuation was not performed at year end for the directors to assess and confirm the valuation to be adopted in the financial report.  • Assessing the property valuation Our procedures included: Working with our real estate valuation specialists, our procedures included:  Assessing the Group’s policies for the valuation of inventories against the • Assessing the Group’s policies for the requirements of the accounting standards valuation of Investment Property against the and our understanding of the business requirements of the accounting standards  Challenging the Group’s assumptions of and our understanding of the business; forecast costs of completion by selecting a • Obtaining an understanding of the Group’s sample of developments under construction process regarding the valuation of and future projects to understand project investment property; design complexity, sub-contractor reliance, project funding and other project risks such • Assessing the scope, objectivity, and as supplier cost increases which could competence of the Group’s external valuer; negatively impact costs of completion. This was done through enquiry of senior methodology adopted by the Group, key management, and assessment of the assumptions and market commentary in the Group’s underlying documentation such as valuations for specific properties against budgets, funding agreements, supplier accepted industry practices, using the nature contracts and internal reports. of the properties, and requirements of the Testing a sample of sales of inventories accounting standards; during the year and subsequent to year end • Comparing the Group’s external valuations in to executed settlement statements to December 2022 to other valuations obtained assess sales margins and volumes achieved on the same or similar properties and to the during and post the financial year. This director’s own assessment of valuation at informed our evaluation of the carrying value June 2023 and where appropriate, to recent of inventories at balance date against the Group’s policy for recording inventories at sales evidence and other published reporting the lower of cost and net realisable value. relevant to the Investment Property;  Comparing forecast selling prices to total • Challenging the capitalisation rates applied costs incurred to date and forecast costs of by the Group, based on our knowledge of completion for significant projects. We did the property portfolio and other published this to assess the carrying value of reports of industry commentators; inventories against the Group’s policy for • Comparing the valuations prepared using the recording at the lower of cost and forecast capitalisation of income valuation method to net realisable value. the alternative valuation method applied by  Assessing the disclosures in the financial the Group’s external valuers in challenging report, using our understanding obtained the captialisation rate input; from our testing, against accounting • Testing, on a sample basis, the following key standards requirements. inputs to the valuations to existing lease contracts, leasing schedules and published CPI statistics by the Australian Bureau of Statistics; – Gross rent; – Occupancy rate; – – CPI. Lease term remaining; and Assessing the disclosures in the financial report, using our understanding obtained from our testing, against accounting standards requirements. 95 Carrying value of Inventories ($260.8million) Other Information Other Information is financial and non-financial information in Finbar Group Limited’s annual reporting Refer to Notes 3(e) and 16 to the Financial Report which is provided in addition to the Financial Report and the Auditor's Report. The Directors are responsible for the Other Information. The key audit matter How the matter was addressed in our audit Our procedures included: statements (59% of total assets); The Other Information we obtained prior to the date of this Auditor’s Report was the Directors’ Valuation of inventories, being both completed report. The Chairman’s Report, Managing Director’s Report, Key Financial Metrics, Finbar Milestones, units and work in progress, is a key audit matter Our Finbar, Environmental Social Governance, Finbar Amenities, Finbar Awards, Completed Projects,  Assessing the Group’s policies for the due to the: Projects Under Construction, Future Projects and Investment Properties are expected to be made valuation of inventories against the available to us after the date of the Auditor's Report. requirements of the accounting standards  Significance of the balance to the financial and our understanding of the business  Challenging the Group’s assumptions of Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not and will not express an audit opinion or any form of assurance conclusion thereon, with the exception  of the Remuneration Report and our related assurance opinion. Judgement and our effort applied to assessing forecast selling prices and costs of completion for work in progress. These factors involve forecasting, which can add audit complexity to the assessment of net realisable value. It is the Group’s policy, in accordance with accounting standards, that inventory must be carried at the lower of cost and net realisable value. forecast costs of completion by selecting a sample of developments under construction In connection with our audit of the Financial Report, our responsibility is to read the Other and future projects to understand project Information. In doing so, we consider whether the Other Information is materially inconsistent with design complexity, sub-contractor reliance, the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially project funding and other project risks such misstated. as supplier cost increases which could negatively impact costs of completion. This We are required to report if we conclude that there is a material misstatement of this Other was done through enquiry of senior Information, and based on the work we have performed on the Other Information that we obtained management, and assessment of the prior to the date of this Auditor’s Report we have nothing to report. Group’s underlying documentation such as budgets, funding agreements, supplier contracts and internal reports. Selling prices can fluctuate based on current property market conditions. Responsibilities of the Directors for the Financial Report Work in progress comprises developments currently under construction and future projects, which are long term in nature where forecast costs could be negatively  Preparing the Financial Report that gives a true and fair view in accordance with Australian impacted by issues encountered during planning or construction.  Testing a sample of sales of inventories during the year and subsequent to year end to executed settlement statements to assess sales margins and volumes achieved during and post the financial year. This Implementing necessary internal control to enable the preparation of a Financial Report that informed our evaluation of the carrying value gives a true and fair view and is free from material misstatement, whether due to fraud or of inventories at balance date against the error. Group’s policy for recording inventories at the lower of cost and net realisable value. Accounting Standards and the Corporations Act 2001. The Directors are responsible for:  Assessing the Group and Company’s ability to continue as a going concern and whether the use  Comparing forecast selling prices to total of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, costs incurred to date and forecast costs of matters related to going concern and using the going concern basis of accounting unless they completion for significant projects. We did either intend to liquidate the Group and Company or to cease operations, or have no realistic this to assess the carrying value of alternative but to do so. inventories against the Group’s policy for recording at the lower of cost and forecast net realisable value. Auditor’s responsibilities for the audit of the Financial Report  Our objective is:  To obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and  Assessing the disclosures in the financial report, using our understanding obtained from our testing, against accounting standards requirements.  To issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf. This description forms part of our Auditor’s Report. 96 Report on the Remuneration Report Carrying value of Inventories ($260.8million) Opinion Refer to Notes 3(e) and 16 to the Financial Report Directors’ responsibilities The key audit matter In our opinion, the Remuneration Report of Finbar Group Limited for the year ended 30 June 2023, complies with Section 300A of the Corporations Act 2001. Valuation of inventories, being both completed units and work in progress, is a key audit matter due to the:  Significance of the balance to the financial statements (59% of total assets);  Judgement and our effort applied to assessing forecast selling prices and costs of completion for work in progress. These factors involve forecasting, which can add audit complexity to the assessment of net realisable value. It is the Group’s policy, in accordance with accounting standards, that inventory must be carried at the lower of cost and net realisable value. Selling prices can fluctuate based on current property market conditions. The Directors of the Company are responsible for the How the matter was addressed in our audit preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our procedures included: Our responsibilities  Assessing the Group’s policies for the valuation of inventories against the requirements of the accounting standards We have audited the Remuneration Report included in and our understanding of the business paragraph 4.3 of the Directors’ report for the year ended 30 June 2023.  Challenging the Group’s assumptions of forecast costs of completion by selecting a Our responsibility is to express an opinion on the sample of developments under construction Remuneration Report, based on our audit conducted in and future projects to understand project accordance with Australian Auditing Standards. design complexity, sub-contractor reliance, project funding and other project risks such as supplier cost increases which could negatively impact costs of completion. This was done through enquiry of senior management, and assessment of the Group’s underlying documentation such as budgets, funding agreements, supplier contracts and internal reports. Glenn Brooks KPMG Work in progress comprises developments currently under construction and future projects, which are long term in nature where forecast costs could be negatively impacted by issues encountered during planning or construction. Partner  Perth 22 August 2023 Testing a sample of sales of inventories during the year and subsequent to year end to executed settlement statements to assess sales margins and volumes achieved during and post the financial year. This informed our evaluation of the carrying value of inventories at balance date against the Group’s policy for recording inventories at the lower of cost and net realisable value.  Comparing forecast selling prices to total costs incurred to date and forecast costs of completion for significant projects. We did this to assess the carrying value of inventories against the Group’s policy for recording at the lower of cost and forecast net realisable value.  Assessing the disclosures in the financial report, using our understanding obtained from our testing, against accounting standards requirements. 97 Carrying value of Inventories ($260.8million) Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 Refer to Notes 3(e) and 16 to the Financial Report The key audit matter How the matter was addressed in our audit Valuation of inventories, being both completed units and work in progress, is a key audit matter To the Directors of Finbar Group Limited due to the: Our procedures included:  Assessing the Group’s policies for the valuation of inventories against the requirements of the accounting standards and our understanding of the business i. ii. statements (59% of total assets);  Significance of the balance to the financial I declare that, to the best of my knowledge and belief, in relation to the audit of Finbar Group Limited for the financial year ended 30 June 2023 there have been:   Challenging the Group’s assumptions of No contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and Judgement and our effort applied to assessing forecast selling prices and costs of completion for work in progress. These factors involve forecasting, which can add audit complexity to the assessment of net realisable value. It is the Group’s policy, in accordance with accounting standards, that inventory must be carried at the lower of cost and net realisable value. forecast costs of completion by selecting a sample of developments under construction and future projects to understand project No contraventions of any applicable code of professional conduct in relation to the audit. design complexity, sub-contractor reliance, project funding and other project risks such as supplier cost increases which could negatively impact costs of completion. This was done through enquiry of senior management, and assessment of the Group’s underlying documentation such as budgets, funding agreements, supplier contracts and internal reports. Selling prices can fluctuate based on current property market conditions. Glenn Brooks KPMG Work in progress comprises developments currently under construction and future projects, which are long term in nature where forecast costs could be negatively impacted by issues encountered during planning or construction. Partner  Perth 22 August 2023 Testing a sample of sales of inventories during the year and subsequent to year end to executed settlement statements to assess sales margins and volumes achieved during and post the financial year. This informed our evaluation of the carrying value of inventories at balance date against the Group’s policy for recording inventories at the lower of cost and net realisable value.  Comparing forecast selling prices to total costs incurred to date and forecast costs of completion for significant projects. We did this to assess the carrying value of inventories against the Group’s policy for recording at the lower of cost and forecast net realisable value.  Assessing the disclosures in the financial report, using our understanding obtained from our testing, against accounting standards requirements. KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 98 Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. SHAREHOLDINGS (as at 30 June 2023) Substantial Shareholders The number of shares held by substantial shareholders and their associates are set out below: Shareholder name Chuan Hup Holdings Limited Forward International Pty Ltd Thorney Holdings Proprietary Limited Rubi Holdings Pty Ltd (John Rubino S/F A/C) Ordinary shares Refer to Note 19 in the notes to the financial statements. Distribution of Equity Security Holders Range 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001-over Number % 68,550,866 30,799,036 28,743,116 20,440,000 25.19 11.32 10.56 7.51 Number of Holders Ordinary Shares 402 442 307 726 106,619 1,294,803 2,397,032 22,718,335 159 245,606,353 2,036 272,123,142 The number of shareholders holding less than a marketable parcel of ordinary shares is 341. Stock Exchange The Company is listed on the Australian Securities Exchange. The home exchange is Perth. ASX Code: FRI Other Information Finbar Group Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares. 99 ASX ADDITIONAL INFORMATION Twenty largest shareholders of ordinary shares as disclosed in the share register: Chuan Hup Holdings Limited UBS Nominees Pty Ltd Rubi Holdings Pty Ltd (John Rubino S/F A/C) J P Morgan Nominees Australia Pty Limited Forward International Pty Ltd Blair Park Pty Ltd BNP Paribas Noms Pty Ltd (DRP) Mr James Chan 3RD Wave Investors Pty Ltd Forward International Pty Ltd Hanssen Pty Ltd Mrs Siew Eng Mah Citicorp Nominees Pty Limited Chan Family Super (WA) Pty Ltd (Chan Family S/F A/C) Giovanni Nominees Pty Ltd (Giovanni Family Fund A/C) Mr Ah-Hwa Lim Ms Yi Xian Chan Apex Investments Pty Ltd Denshir Pty Ltd Pateman Equity Pty Ltd TOP 20 Number of Ordinary Shares Held 63,871,363 27,920,536 15,000,000 9,661,227 8,261,109 7,228,813 6,787,921 6,378,032 6,000,000 5,298,135 5,000,000 4,820,000 4,771,638 4,427,072 4,000,000 3,155,770 2,892,126 2,890,212 2,739,322 2,543,844 % 23.47 10.26 5.51 3.55 3.04 2.66 2.49 2.34 2.20 1.95 1.84 1.77 1.75 1.63 1.47 1.16 1.06 1.06 1.01 0.93 193,647,120 71.15 100 ASX ADDITIONAL INFORMATION (Continued)ASX ADDITIONAL INFORMATION (Continued) OFFICES AND OFFICERS Directors Mr John Chan (Executive Chairman) Mr Darren John Pateman (Managing Director) Mr Ronald Chan (Chief Operations Officer) Mr Lee Verios Mr Terence Siong Woon Peh Mr Eldon Wan Company Secretary Mr Edward Guy Bank (Chief Financial Officer) Principal Registered Office Finbar Group Limited Level 6 181 Adelaide Terrace EAST PERTH WA 6004 PO Box 3380 EAST PERTH WA 6892 Telephone: +61 8 6211 3300 Facsimile: +61 8 9221 8833 Email: info@finbar.com.au Website: www.finbar.com.au ABN 97 009 113 473 ACN 009 113 473 Share Registry Computershare Investor Services Pty Ltd Level 17 221 St Georges Terrace PERTH WA 6000 Telephone: +61 8 9323 2000 Auditors KPMG 235 St Georges Terrace PERTH WA 6000 101 ASX ADDITIONAL INFORMATION finbar.com.au 

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