GenusPlus Group Limited
Annual Report 2022

Plain-text annual report

Annual Report 2022 CONNECTING THE FUTURE Built on a bedrock of three generations of accumulated family expertise, today the GenusPlus Group is a leading ASX-listed provider of critical infrastructure services to a blue-chip client base. We provide an integrated service delivered through key complementary businesses to our clients in the resources, power, utilities, and telecommunications sectors across Australia. CONTENTS About GenusPlus Group Our Capabilities Highlights Chairman’s Review Managing Director’s Report Sustainability People Financial Report Corporate Directory 2 4 8 10 12 16 17 21 100 ANNUAL REPORT 2022 1 About Genus CONNECTING THE FUTURE GenusPlus Group (ASX:GNP) is an end to end service provider for essential power and communications infrastructure. We provide an integrated service delivered through key complementary businesses to our clients in the resources, power, utilities, and telecommunications sectors across Australia. Built on a bedrock of three generations of accumulated family expertise, today the GenusPlus Group is a leading ASX-listed provider of critical infrastructure services to a blue-chip client base. 2 GENUSPLUS GROUP LTD DESIGN & ENGINEERING CONSTRUCTION FEASIBILITY STUDY TESTING & COMMISSIONING DECOMMISSIONING SHUTDOWNS & MAINTENANCE CONNECTING THE FUTURE THROUGH INNOVATIVE POWER SOLUTIONS Our Services We cover the full project life-cycle, from design and engineering to commissioning and decommissioning of power infrastructure assets. Our expertise crosses multiple sectors and our teams are experienced operators in both brownfield and greenfield sites across Australia. ANNUAL REPORT 2022 3 POWER INFRASTRUCTURE CAPABILITIES From the generating source to connection, we tick every box. Our team optimises every stage of an asset’s lifecycle, ensuring certainty with the lowest risk and whole-of-life cost. We draw on experience to continually develop advanced solutions which position projects to transition as technology develops. Our clients include Australia’s largest electricity utilities, infrastructure developers, telecommunications networks and major mining companies. We have delivered projects throughout Australia and across metropolitan, regional & remote areas. 1 2 3 GENERATING SOURCE TERMINAL SUBSTATIONS TRANSMISSION INFRASTRUCTURE Power Station/ E&I Construction Solar Wind Battery Storage/ Hybrid Solutions Terminal Substations Overhead Transmission Infrastructure Underground Transmission Infrastructure 4 GENUSPLUS GROUP LTD 4 5 6 ZONE SUBSTATIONS DISTRIBUTION INFRASTRUCTURE PRIMARY CUSTOMER CONNECTION Zone Substations Overhead Distribution Infrastructure Underground Distribution Infrastructure Primary Customer Connection ANNUAL REPORT 2022 5 COMMUNICATIONS INFRASTRUCTURE CAPABILITIES End-to-end Communications capability. Our turnkey communications solutions span the full asset lifecycle from feasibility, engineering design, site acquisition, logistics, procurement, construction and integration through to operations and maintenance. We focus on improving asset performance and reducing the risk associated with disruption to operations. NETWORKS: FROM CONCEPT TO CONSTRUCTION CIVIL & INFRASTRUCTURE CONSTRUCTION • • • • Complete network designs • Direct ploughing & optic fibre installation Line route selection & optimisation • Directional drilling Experienced field delivery capability Field services from planning & design through to construction & maintenance • • • • Trenching Cable hauling & cable jointing Pit & pipe installation Asset installation 6 GENUSPLUS GROUP LTD MOBILE & WIRELESS INFRASTRUCTURE DIGITAL SOLUTIONS • • Field services covering site acquisition, engineering & and design (SAED), construction & install Extending mobile construction capability to grow into mobile blackspots, 5G and beyond • Dedicated Workforce Operations Centre and field management platform (WFM) • Data analytics toolsets • • Virtual assessment, technician mobility apps Proprietary app connecting to customers ANNUAL REPORT 2022 7 2022 HIGHLIGHTS 8 GENUSPLUS GROUP LTD $451 million Revenue of $451 million Up 42% on PCP of $318 million $35.1 million Normalised EBITDA of $35.1 million Up 8.3% on PCP of $32.4 million $27.9 million Cash balance of $27.9 million Net cash of $6.8 million $488 million Orderbook of $304 million in FY2023 and $184 million in FY2024 29% Normalised ROCE ROCE normalised for PFA acquisition/ Capital raise in February 2022 ANNUAL REPORT 2022 9 A Strong Year In Challenging Times Genus produced a strong financial result this year, despite economic, supply chain and Covid-19 headwinds. Our diversification and growth strategy is on track, and with a record order book and pipeline we have a solid base for future organic growth. Revenue for the year was in line with forecast, rising 42% to $451 million while normalised EBITDA increased by 8% to $35.1 million. This result reflects solid performances across all our business segments and was underpinned by a record order intake. Pleasingly we grew our market presence on the East Coast with operations in the region now representing a collective portfolio of over $100m, with a revenue contribution of 22% compared to 7% in 2021. This marks the achievement of a number of key strategic goals that we had established for 2022, with this East Coast growth expected to continue. The acquisitions of Connect Infrastructure (NSW) and select business assets of Tandem Corp have been successfully integrated into existing operations throughout the year, bolstering our power networks and communications offerings respectively. In February we announced the business acquisition of Pole Foundations Australia (PFA). PFA is a strategic transaction for Genus, expanding our capability into a highly specialised service for Tier 1 customers and allowing us to provide a full lifecycle service offering across pole inspection, reinforcement, and replacement. Genus also acquired a 50% stake in Blue Tongue Energy Pty Ltd (BT Energy) during the year. BT Energy specialises in the design and construction of hybrid power technology and micro-grid energy markets and provides growth opportunities in the stand-alone power market. CHAIRMAN'S REVIEW CONNECTING THE FUTURE THROUGH INNOVATIVE POWER AND COMMUNICATIONS INFRASTRUCTURE 10 GENUSPLUS GROUP LTD Think Safe. Work Safe. Home Safe. Continuing To Deliver For Shareholders We continue with our steadfast commitment to safety and our goal of zero harm to our people and the environment . As we strive to achieve this critical objective, we are actively promoting and encouraging all of our people to take individual responsibility for their safety, as well as the safety of those around them, as they carry out their daily activities. Our focus on safety and the conduct of safety-awareness initiatives throughout the year have continued to strengthen our safety culture and deliver improvements in our performance. This is demonstrated by our Total Recordable Injury Frequency Rate (“TRIFR”), which reduced in the year from 7.7 to 3.6 at 30 June – surpassing our internal target. The Group’s Lost Time Injury Frequency Rate (“LTIFR”) remains at zero, which is testament to the collective effort of our outstanding operational teams. A Robust Platform For Growth We ended the year in a strong financial position with a cash balance of $27.9 million and net cash of $6.8 million, with the Group’s net assets increasing by 61.9% compared to the previous year. The Group has in excess of $47 million available in our performance bond facilities which provides headroom for continued growth. The continued strength of our balance sheet positions us for organic growth and strategic acquisition opportunities focused on increasing our existing scale, improving our operating margins, further growing our east coast presence and potentially expanding into new markets or geographies. On the back of this year’s record financial performance, the Board has again declared a final dividend of 1.8 cents per share fully franked. Looking Ahead With a tender pipeline of $848 million; an order book standing at $488 million; budget and opportunity leads in excess of $2 billion; and a workforce approaching 1,000, our growing and diversified company is well placed to capitalise on opportunities in the years to come. We are confident that our consolidation and growth strategy positions us positively to play a major role in the expanding pipeline of infrastructure opportunities across Australia. My thanks once again to all of our talented people, whose commitment and dedication forms the foundation of our business and to our executive leadership who ensure we deliver on our vision. Finally, I would like to thank you, our shareholders, for continuing to be an integral part of the Genus story - and I trust you will continue to share in our future success. Simon High Chairman Our strategic diversification has delivered significant organic and acquisitional growth, as we maintain a focus on east coast expansion and recurring revenue streams. ANNUAL REPORT 2022 11 MANAGING DIRECTOR'S REPORT POWERING UP AUSTRALIA THROUGH STRONG, EFFECTIVE CLIENT RELATIONSHIPS Delivering On Our Strategy For Genus, FY22 has been a solid year. Our ability to meet the challenges of prevailing economic & supply chain issues and deliver another strong financial performance demonstrates that we are on track strategically; and well positioned to capitalise on emerging opportunities across Australia. Our evolution to a more diversified services model through the introduction of significant communications infrastructure capacity – supplementing our existing power and industrial services capabilities – has seen Genus deliver record revenue of $451 million and normalised EBITDA of $35.1 million. The Group’s focus on both acquisitive and organic growth along with diversification of recurring revenue streams underpin the benefits we can deliver to clients and our shareholders, predominantly through increased capacity, financial strength and security. This expansion in capability and access to a greater forward pipeline has driven a strong order book, which is again supplemented by the traditionally robust recurring revenue base that we generate across the business. Record Revenue, Through Strong Operational Performance This past year saw us progress to the final stages of the Pilbara Transmission & Iron Bridge Projects for Fortescue; while other major project activity included the Kangaroo Hill D&C Project for Rio Tinto, achievement of key milestones at the landmark 250 MW/h Kwinana Battery Energy Storage System (BESS) Project for Synergy and successful delivery of multiple Underground Power Program (UPP) projects for Western Power. Meanwhile, anticipated recurring works for major utilities across Australia will continue to provide ongoing revenue in the years ahead. Against this backdrop, the Group was able to deliver a year of significant growth despite the prevailing environment. Record Revenue of $451 million saw an increase of 42% on the prior comparative period, while normalised EBITDA was up 8.3% to $35.1 million. The Group’s net assets also increased by 61.9% compared to the previous year (FY21: 32%), due to the increase in retained earnings and the capital raising conducted to fund the strategic acquisition of Pole Foundations Australia (PFA). Genus’ growth strategy is on track and we are well placed to capitalise on emerging opportunities across the nation. Our growth aspirations are supported by record revenue, a strong tender pipeline and a robust balance sheet. 12 GENUSPLUS GROUP LTD EBIT and NPAT were impacted by amortisation of intangible assets acquired from the acquisitions of Tandem and PFA totalling circa $1.6 million before tax. A larger than usual year of capital expenditure used to bolster the fleet of drills employed in drilling the foundations for power poles contributed additional depreciation expense of circa $1.1 million before tax. Revenue EBITDA1 EBITDA Normalised2 EBIT1 EBIT Normalised2 NPAT NPAT Normalised2 FY2022 $ FY2021 $ 450,936,669 318,207,504 32,994,800 27,274,044 Change % 41.7% 35,109,457 32,405,782 8.3% 21,092,868 19,858,515 23,207,525 24,992,253 (7.1%) 13,556,474 13,348,769 15,036,735 17,300,033 (13.1%) 1 2 These are non-IFRS measures that are unaudited but derived from auditor reviewed FY22 Financial Statements. These measures are presented to provide further insight into GenusPlus Group’s performance. FY 2022 Normalised EBITDA / EBIT / NPAT excluding Acquisition costs $1.1 million, ECM Claim Costs $0.3 million and Restructuring costs of $0.8 million. FY 2021 Normalised EBITDA / EBIT / NPAT excluding Listing costs of $2.7 million, ECM Claim costs of $2.2 million, Director & employee share issue costs of $0.7 million and Mark to market revaluation increase of investment of ($0.5) million. Our People As always, our success is dependent on the effort, capability and commitment of our people. Their commitment and support enables us to continue to deliver smart, innovative solutions across our diverse sectors, which underpins our strong financial results and growth trajectory. Our successful apprenticeship program has expanded as we continue to invest in the growth, development, education and training for young graduates, apprentices and trainees. We currently support the career ambitions of 87 apprentices and trainees, which is building a strong foundation of future skilled tradespeople. Our balance sheet remains strong with very low levels of debt and strong investor and finance support. We are constantly reviewing opportunities for expansion and are well placed for further accretive acquisitional growth. Significant investment has been allocated to growing our east coast presence, positioning Genus to benefit from the step- change in power network expansions over the next 10-20 years. Whilst we continue to derive the majority of earnings from the core business in Western Australia, substantial progress has been made expanding the business into the much larger east coast markets. Connecting The Future. Together. With an order book of $488 million, comprising $191 million of contracted revenues secured for FY2023 & FY2024 and recurring revenues currently at $149 million p.a - combined with a tender pipeline of $848 million – Genus has a strong platform for continued growth. David Riches Managing Director ANNUAL REPORT 2022 13 14 GENUSPLUS GROUP LTD SUSTAINABILITY INNOVATIVE PEOPLE, DELIVERING RESULTS THROUGH EXPERTISE AND HARD WORK ANNUAL REPORT 2022 15 SUSTAINABILITY We will continue to implement health and safety initiatives which provide the foundation for a sustainable safety culture. SHEQ Community Genus continues to recognise the importance of building relationships and supporting the communities in which we operate, and we are committed to the development, health, safety and wellbeing of these communities and our people. During the year we continued to support a variety of local charities, education and sporting programs. Earlier this year, we were delighted to be able to help Starlight's Western Australia operations through an $80,000 donation which enabled their fantastic team to lease state-of- the-art office space in the heart of Subiaco, Western Australia. It will also assist them to brighten the hospital experience for 2,000 sick kids in their Starlight Express Room. This new home will give the team the base they need to keep on helping kids of all ages regardless of disability, injury or illness. CONNECTING THE FUTURE. TOGETHER. With nearly 1,000 people working across Australia, it is essential for Genus to have a robust approach to health, safety and environment. Our goal is to ensure that those influenced by our work (including employees, subcontractors, and the general public) go home safely, every day. This approach to health and safety is embodied in the Group’s “Think Safe. Work Safe. Home Safe.” message. We have established and implemented an integrated safety, health, environment, and quality (SHEQ) management system that provides the framework for how these areas are managed. In the years ahead we will continue to maintain our triple-ISO Management System certification (45001, 14001 & 9001) and to streamline our Group-wide SHEQ management system. We will also continue to implement health and safety initiatives that will provide the foundation for sustainable safety performance across Genus. We have established a set of safety non-negotiables, which identify the Group’s most critical risks and control measures. These safety non-negotiables were established to increase awareness and understanding of critical risks and control measures; provide a clear set of standards that are easily understood by all; and ultimately create an awareness to help prevent serious workplace injury and fatality. These safety non-negotiables are communicated at inductions, and regularly referred to during toolboxes, health, and safety communications and during incident investigations. Milestones achieved during FY22 include: LTIFR at 30 June 2022 0 3.6 TRIFR at 30 June 2022 (exceeding our internal target) 16 GENUSPLUS GROUP LTD Employing our own people and trades improves safety, quality and productivity and enables us to deliver smart, innovative solutions across our diverse sectors. People The foundation of our success is the effort, capability and commitment of our people. Our unique culture underpinned by core values of safety, integrity, collaboration and mateship is a crucial piece of the Group’s competitive advantage. Genus’ business is built on the efforts and capability of its employees and we firmly believe that support and development of our workforce remain a priority in delivering our critical services. Investing in the future generation of employees is integral to our continued success. Genus believes in realising and developing talent with a structured and supported Apprenticeship Program. We currently support the career ambitions of 87 apprentices and trainees across the business who will form the foundation of our future skilled tradespeople. The attraction of high calibre employees is an ongoing challenge and there continues to be a very competitive employment market for skilled professionals. Combined with a continued focus on people-related productivity improvements, Genus will continue to invest in the development and retention of key capability and talent to enable the Company to successfully achieve its vision and to maintain this vital competitive advantage. We remain committed to investing in our employees through generating opportunities to grow on personal and professional levels, through varied learning and development programmes for apprentices, trades, operational, professional and managerial employees. This creates a significant pipeline of talent throughout the Company. Our diversity policies promote respect and fair treatment for all employees, and we seek to create an all-inclusive workplace where our people are encouraged regardless of age, gender, ethnicity, disability, sexual orientation or religion. Our commitment to building a diverse workforce is evident in all aspects of employee engagement including recruitment, professional development, promotion and remuneration. Genus & Maali Group – Sparking Positive Change. Genus is a key shareholder in Maali Group - a multi-disciplined, Aboriginal-owned & managed construction and maintenance contractor servicing clients across the resources, energy, infrastructure and defence sectors. Through our combined strength and breadth of capability, our partnership aims to facilitate more apprenticeships, traineeships and career opportunities for Aboriginal and Torres Strait Islander people. Together, our vision is to set a new benchmark in Aboriginal career engagement and development. Learn more at maaligroup.com. ANNUAL REPORT 2022 17 CONNECTING THE FUTURE THROUGH END-TO-END COMMUNICATIONS INFRASTRUCTURE 18 GENUSPLUS GROUP LTD ANNUAL REPORT 2022 19 FINANCIAL REPORT 2022 CONNECTING THE FUTURE THROUGH INNOVATIVE POWER SOLUTIONS 20 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022CONTENTS Directors’ Report Auditor’s Independence Declaration Corporate Governance Statement Consolidated Statement of Profit or Loss and Other Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Independent Auditor’s Report 22 33 34 35 36 37 38 39 94 POWERING UP AUSTRALIA - FROM INSPIRATION TO OPERATION ANNUAL REPORT 2022 21 DIRECTORS’ REPORT The directors present their report together with the financial statements on the consolidated entity, consisting of GenusPlus Group Ltd and its controlled entities (the Group) for the year ended 30 June 2022. Directors’ details The names and details of the Company’s directors in office during the financial year and until the date of this report are set out below. Directors of GenusPlus Group Ltd were in office for the entire period unless otherwise stated. Mr David Riches David Riches is the Managing Director and CEO of GenusPlus Group Ltd. David is the founder of Powerlines Plus Pty Ltd and is a third-generation recognised industry expert. David has led the business growth with a successful year on year track record. During the past three years he has also served as a director of the following listed companies: Nil. Mr Simon High Simon High is the Non-Executive Chairman of the Group. Simon is a qualified Civil Engineer, Fellow of the Institute of Engineers Australia and Fellow of the Australian Institute of Company Directors. Simon has over 45 years’ experience globally in the Oil & Gas, Mining and Industrial Infrastructure industries. Simon held Senior Executive roles with Kvaerner Oil & Gas, United Construction, Clough Ltd, Southern Cross Electrical Engineers and Ausgroup Ltd. During the past three years he has also served as a director of the following listed companies: Nil. Mr José Martins José Martins is a Non-Executive Director and Member of the Audit and Risk Committee and Remuneration and Nominations Committees and brings over 25 years’ experience in the financial management of public and private companies. Jose is the former CFO of ASX listed Ausdrill Ltd and Macmahon Holdings Ltd. José is the current CFO of Alliance Mining Commodities. During the past three years he has also served as a director of the following listed companies: Nil. Mr Paul Gavazzi Paul Gavazzi is a Non-Executive Director and member of the Audit and Risk and Remuneration and Nominations Committees. Paul has over 35 years’ experience in commercial law, specialising in construction, projects and infrastructure. Paul is a senior partner of law firm Sparke Helmore Lawyers. Paul is an associate of the Chartered Institute of Arbitrators (UK), member of the Society of Construction Lawyers and member of the Australian Institute of Company Directors. During the past three years he has also served as a director of the following listed companies: Nil. Company Secretary Damian Wright is the Chief Financial Officer and Company Secretary of GenusPlus Group Ltd. Damian has held senior finance positions including CFO and Company Secretary for private and ASX listed entities. Damian holds a Degree in Commerce, and is a fellow of CPA Australia and a fellow of the Governance Institute of Australia. Interests in the shares and options of the Company and related bodies corporate As at the date of this report, the interests of the directors in the shares and options of GenusPlus Group Ltd were: Director David Riches Simon High José Martins Paul Gavazzi 22 GENUSPLUS GROUP LTD Number of ordinary shares Interest in options 92,583,947 304,167 100,000 204,167 - - - - DIRECTORS’ REPORT Principal activities The principal activities of the Group during the financial year were the installation, construction and maintenance of power and communication systems. There have been no significant changes in the nature of these activities during the year. Review of operations and financial results A review of the operations of the Group during the financial year and the results of those operations saw an increase in contract revenue from $318,207,504 to $450,936,669. The profit of the Group for the financial year after providing for income tax amounted to $13,556,475 (2021: $13,348,769). FY2022 was a strong year with Genus achieving guidance despite the challenges of Covid-19, extremely wet weather seen across NSW and Queensland particularly in the second half, and supply chain issues seen across the country. The turnaround in communications division has been slowed by the delays in the HyperOne project. The Group improved its capability to deliver to meet customer requirements on larger scale projects across the nation. The 1.56% increase in profit was delivered during a year in which the company completed a number of acquisitions and continued its significant investment in the east coast in setting the company up to capitalize on the significant opportunities as they present over the medium to long term. The Group’s net assets increased by 61.9% compared to the previous year (FY21: 32%), which is due to the increase in retained earnings and the capital raising undertaken during the reporting period to fund the business acquisition of Pole Foundations Australia. The acquisitions which have occurred during the year are in line with the Group’s strategy to increase its geographical position to take advantage of significant infrastructure investment in new markets. Refer to Note 35. A comparison of the Group’s performance from continuing operations is set out below: Revenue EBITDA1 EBITDA Normalised2 EBIT1 EBIT Normalised2 NPAT NPAT Normalised2 FY2022 $ FY2021 $ 450,936,669 318,207,504 32,994,800 27,274,044 Change % 41.7% 35,109,457 32,405,782 8.3% 21,092,868 19,858,515 23,207,525 24,992,253 (7.1%) 13,556,474 13,348,769 15,036,735 17,300,033 (13.1%) 1 2 These are non-IFRS measures that are unaudited but derived from auditor reviewed FY22 Financial Statements. These measures are presented to provide further insight into GenusPlus Group’s performance. FY 2022 Normalised EBITDA / EBIT / NPAT excluding Acquisition costs $1.1 million, ECM Claim Costs $0.3 million and Restructuring costs of $0.8 million. FY 2021 Normalised EBITDA / EBIT / NPAT excluding Listing costs of $2.7 million, ECM Claim costs of $2.2 million, Director & employee share issue costs of $0.7 million and Mark to market revaluation increase of investment of ($0.5) million. Pipeline The Group continues to achieve significant growth in its business underpinned by existing contracted work, recurring revenue from regular clients, and anticipated revenue from its existing tender pipeline of works. In addition to revenue from recurring works including long term customer/panel revenue and revenue from long term supply & maintenance contracts of $149 million, GenusPlus has a project orderbook of $155 million revenue for FY2023 and a further $36 million revenue for FY2024 based on expected revenue from contracts awarded. GenusPlus has approximately $191 million of contracted revenues secured for FY2023 & FY2024 which, when combined with its history of recurring revenues currently at $149 million per annum and its current $848 million tender pipeline, provides a strong platform for continued growth. In addition to the tendered pipeline there are further significant budgets and opportunities in progress in excess of $2 billion. Work on initial budgets for clients, which are not yet at formal tender stage, is common in our industry. Genus is seeing the pipeline for the transition of the east coast transmission network grow substantially. In addition to the major investment in the transmission network around Australia Genus is well positioned to construct connections to the new transmission network from new energy power sources. ANNUAL REPORT 2022 23 DIRECTORS’ REPORT Review of operations and financial results (continued) Outlook FY2023 is anticipated to be a year of consolidation and integrating recent acquisitions following a number of significant years of growth. Genus expect to return to strong growth in the medium term with a large pipeline of renewables and transmission projects to drive medium to long term growth in the business. The Group expects to see continued growth from its east coast operations and increase in services revenue with the acquisition of Tandem and PFA during FY2022. The increase focus of the network issues around Australia should see significant opportunities present during the coming 10-20 years as the Australian power network goes through a substantial transition from traditional energy source of coal to generation from new and renewable energy. We have seen some impact from supply chain issues and we expect them to continue into FY2023. Genus continues the rebranding and restructuring some of its divisions to make better use of the “Genus” name, branding and logo. This will unify the offering to clients and enable better cross selling of the Group’s services. Growth Strategy Significant investment has been put into growing the east coast presence of Genus to be positioned for the substantial investment required to the power network over the next 10-20 years. Whilst the Group continues to derive the majority of earnings from the core business in Western Australia, substantial progress has been made expanding the business into the much larger east coast markets. During the year the company acquired selected assets of Tandem Corp expanding the Genus services in the east coast and the communications industry and our relationship with Telstra. The foundations of the business are in place to enable the Genus to take advantage of the large ongoing spend in the communications industry. In February Genus announced the business acquisition of Pole Foundations Australia (PFA). PFA is a highly strategic transaction for Genus. This transaction expands Genus’ capability into a highly specialised service for Tier 1 customers, allowing Genus to provide a full lifecycle service offering across pole inspection, reinforcement, and replacement. Genus acquired a 50% stake in Blue Tongue Energy Pty Ltd (BT Energy) during the year. BT Energy specialises in the design and construction of hybrid power technology and micro-grid energy markets and provides growth opportunities in the stand-alone power market. The Group is focused on replicating its Western Australian business model into the larger east coast market which is dependent on the Group’s ability to continue to grow the new operations or execute and integrate further strategic bolt-on acquisitions. Significant changes in the state of affairs During the year, the following changes occurred within the Group: • • • On 6 August 2021, GenusPlus Group Ltd through its wholly owned subsidiary Diamond Underground Services Pty Ltd finalised the purchase of selected key contracts, intellectual property, IT systems, plant and equipment and employee contracts of Tandem Corp Pty Ltd (Administrators Appointed). This acquisition greatly extends the capability of the Group’s communications division, and significantly expands the Group’s ongoing relationship with Telstra. For further details refer to the ASX announcement. On 2 February 2022, GenusPlus Group Ltd acquired 50% of BT Energy. BT Energy is involved in the design and construction of hybrid power technology and micro-grid energy markets, furthering Genus’ offering in this strategic space. The acquisition is subject to further contingent earn out payment due in FY23. The contingent consideration amounts are disclosed under Note 25. Genus has the option to acquire the remaining 50% of the business in FY25 and FY26 with valuation based on BT Energy’s earnings at the time. On 29 April 2022, GenusPlus Group Ltd acquired 100% of Pole Foundations Australia (PFA) for an upfront consideration of $22.523m (comprised of $16.5m cash and $6.023m in Genus ordinary shares escrowed for 24 months). Under the terms of the agreement, Genus acquired the net assets of PFA comprising property, plant and equipment, inventory and employee liabilities. The acquisition is subject to further contingent earn-out payments in cash subject to PFA’s performance in FY22 to FY24. The performance metric for FY22 was satisfied, with payment due as disclosed under note 25. Capital structure Issued shares The acquisition of Pole Foundations Australia (PFA) was funded by the issue of 16,528,926 Genus ordinary shares with a quoted price of $1.21 per share. Transaction costs of $1,101,377 and share issuance costs of $58,929 were incurred. 4,633,530 shares were issued to the previous owners of Pole Foundations at an effective deeming price of $1.30 per share. 24 GENUSPLUS GROUP LTD DIRECTORS’ REPORT Dividends The Board has resolved to declare a dividend in respect of the year ended 30 June 2022 of 1.8 cents per share fully franked for a total of $3,181,544. (30 June 2021: $2,800,619). The ex-Dividend Date for this dividend will be 27 October 2022, the Record Date is 28 October 2022 and the Payment Date will be 30 November 2022. Events arising since the end of the reporting period On 26 August 2022, the Directors declared a final fully franked dividend of 1.8 cents per share with a record date of 28 October 2022 and a payment date of 30 November 2022. The total dividend payable is an aggregate of $3,181,544. Other than the matter mentioned above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. Likely developments The Group will continue to seek opportunities to provide its services in installation, construction and maintenance of power and communication systems across Australia. The Group’s strategy includes: • • • • • • • • • Continuing to replicate its successful business model to penetrate the large east coast markets, including growing its recent strategic acquisitions in QLD and NSW; Rebuilding of the ECM business into a scale but sustainable business, utilising the ability to be more selective on projects given the strength of the Genus platform; Taking advantage of the expected growth in electrical network infrastructure spending by public and private utility companies in Australia; Taking advantage of the expected growth in resources sector activity and related electrical network infrastructure construction; Continuing to grow the Diamond business in the large telecommunications sector, which Diamond currently only has a small market share; Continuing to maintain and develop new customer relationships; Continuing to maintain Genus’ culture and significant investment into staff training; Continuing to maintain its diversification between the Government utilities and the private sectors; and Continuing to maintain and grow its panel contract positions to provide a stable base line of year on year revenue. Directors’ meetings The number of meetings of Directors (including meetings of Committees of Directors) held during the year and the number of meetings attended by each Director is as follows: Board Meetings Audit and Risk Committee Remuneration and Nominations Committee A 20 20 20 20 B 20 20 19 17 A - 3 3 3 B - 3 3 3 A 1 - 1 1 B 1 - 1 1 Board Member David Riches Simon High Paul Gavazzi José Martins Where: Column A: is the number of meetings the Director was entitled to attend Column B: is the number of meetings the Director attended Options No options over issued shares or interests in the Group were granted during or since the end of the financial year and there were no options outstanding at the date of this report. ANNUAL REPORT 2022 25 DIRECTORS’ REPORT Remuneration Report (audited) The Directors of GenusPlus Group Ltd (the Group) present the Remuneration Report for Non-Executive Directors, Executive Directors and other Key Management Personnel, prepared in accordance with the Corporations Act 2001 and the Corporations Regulations 2001. The Remuneration Report is set out under the following main headings: a b c d e f a Principles used to determine the nature and amount of remuneration Details of remuneration Share-based remuneration; and Bonuses included in remuneration Shares held by key management Other transactions with key management personnel and their related parties Principles used to determine the nature and amount of remuneration The principles of the Group’s executive strategy and supporting incentive programs and frameworks are: • • • to align rewards to business outcomes that deliver value to shareholders to drive a high performance culture by setting challenging objectives and rewarding high performing individuals; and to ensure remuneration is competitive in the relevant employment market place to support the attraction, motivation and retention of executive talent GenusPlus Group Ltd has structured a remuneration framework that is market competitive and complementary to the reward strategy of the Group. The Board has established a Nomination and Remuneration Committee which operates in accordance with its charter as approved by the Board and is responsible for determining and reviewing compensation arrangements for the Directors and the Executive Team. The Committee has engaged independent remuneration consultants to provide any necessary information to assist in the discharge of its responsibilities (refer to the disclosures below). The remuneration structure that has been adopted by the Group consists of the following components: • • fixed remuneration being annual salary; and short term incentives, being employee share schemes and bonuses. The Nomination and Remuneration Committee assess the appropriateness of the nature and amount of remuneration on a periodic basis by reference to recent employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and Executive Team. The payment of bonuses, share options and other incentive payments are reviewed by the Nomination and Remuneration Committee annually as part of the review of executive remuneration and a recommendation is put to the Board for approval. All bonuses, options and incentives must be linked to pre-determined performance criteria. Short Term Incentive (STI) GenusPlus Group Ltd performance measures involve the use of annual performance objectives, metrics, performance appraisals and continuing emphasis on living the Company values. The performance measures are set annually after consultation with the Directors and executives and are specifically tailored to the areas where each executive has a level of control. The measures target areas the Board believes hold the greatest potential for expansion and profit and cover financial and non-financial measures. 26 GENUSPLUS GROUP LTD DIRECTORS’ REPORT Remuneration Report (audited) (continued) a Principles used to determine the nature and amount of remuneration (continued) The Key Performance Indicators (KPIs) for the Executive Team are summarised as follows: Performance areas • • financial: operating profit and earnings per share; and non-financial: strategic goals set by each individual business unit based on job descriptions The STI Program incorporates only cash components for the Executive Team and other employees. The Board may, at its discretion, award bonuses for exceptional performance in relation to each person’s pre-agreed KPIs. Voting and comments made at the Company’s last Annual General Meeting GenusPlus Group Ltd held its Annual General meeting held on 26 November 2021. There were no adverse comments from the vote on the Remuneration Report for the financial year ending 30 June 2021. Consequences of performance on shareholder wealth In considering the Group’s performance and benefits for shareholder wealth, the Board have regard to the following indices in respect of the current financial year and the previous two financial years: Item EPS (cents) Dividends (cents per share) Net profit ($’000) Share price ($) 2022 8.4 1.8 13,556 1.27 2021 8.6 1.8 13,349 0.94 2020 7.5 0.88 10,689 n/a ANNUAL REPORT 2022 27 DIRECTORS’ REPORT - - - - - - - - % 4 3 2 . $ 4 9 4 9 4 3 , 9 3 0 7 7 4 , 0 5 7 2 1 1 , $ - - - , 4 4 2 5 0 6 - , 6 6 8 0 0 3 0 0 0 0 0 2 , 0 0 5 , 1 7 - 0 0 5 , 1 7 - 0 4 9 0 6 1 , 0 0 0 0 0 1 , 0 4 9 0 6 1 , 0 0 0 0 0 1 , % 1 . 0 1 , 5 8 7 9 9 0 , 1 0 0 0 0 0 4 , $ - - - - - - - - - - $ ) 0 8 3 9 ( , 9 8 7 8 , - - - - - - ) 0 8 3 9 ( , 9 8 7 8 , $ 8 6 5 3 2 , 9 4 7 , 1 2 0 5 2 0 1 , 1 5 7 8 , 0 0 5 6 , 7 8 2 5 , 0 0 5 6 , 7 8 2 5 , 8 1 8 6 4 , 4 7 0 , 1 4 $ - - - - - - - - - - $ - $ 6 0 3 5 3 3 , 0 0 6 , 1 1 1 , 1 0 9 4 3 3 - - - - - - - 0 0 5 2 0 1 , 5 1 1 , 2 9 0 0 0 5 6 , 3 5 6 5 5 , 0 0 0 5 6 , 3 5 6 5 5 , 6 0 8 7 6 5 , 0 0 6 , 1 1 1 , 2 2 3 8 3 5 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 s r o t c e r i D e v i t u c e x e - n o N r o t c e r i D g n g a n a M i d n a O E C s n i t r a M é s o J t n e d n e p e d n I i z z a v a G l u a P t n e d n e p e d n I n a m r i a h C l a t o T 2 2 0 2 l a t o T 1 2 0 2 i h g H n o m S i 1 i s e h c R d v a D i s r o t c e r i D e v i t u c e x E f o % d e s a b e c n a m r o f r e P : l l w o e b e b a t e h t n i n w o h s e r a d t L p u o r G s u P s u n e G f o ) P M K ( l l e n n o s r e P t n e m e g a n a M y e K h c a e f o n o i t a r e n u m e r e h t l f o t n e m e e h c a e f o t n u o m a d n a e r u t a n e h t f o s l i a t e D ) d e u n i t n o c ( ) d e t i d u a ( t r o p e R n o i t a r e n u m e R n o i t a r e n u m e r f o s l i a t e D b d e s a b - e r a h S n o i t a n m r e T i i e c v r e s g n o L y r a t e n o m - n o N h s a C l y r a a s h s a C s t fi e n e b m r e t - g n o L l t n e m y o p m e - t s o P m r e t - t r o h S s t fi e n e b s t fi e n e b e e y o p m e l l e n n o s r e P t n e m e g a n a M y e K r e h t o d n a r o t c e r i D n o i t a r e n u m e r l a t o T s t n e m y a p s t fi e n e b e v a e l n o i t a u n n a r e p u S s t fi e n e b s u n o b s e e f d n a r a e Y e e y o p m E l 28 GENUSPLUS GROUP LTD . 1 2 0 2 Y F r o f s u n o b e b g l i i l i e s h f o % 0 5 o g e r o f o t d e t c e e s e h c R d v a D l i i 1 DIRECTORS’ REPORT f o % d e s a b e c n a m r o f r e P d e s a b - e r a h S n o i t a n m r e T i i e c v r e s g n o L y r a t e n o m - n o N h s a C l y r a a s h s a C s t fi e n e b m r e t - g n o L l t n e m y o p m e - t s o P m r e t - t r o h S s t fi e n e b s t fi e n e b e e y o p m e l l e n n o s r e P t n e m e g a n a M y e K r e h t o d n a r o t c e r i D n o i t a r e n u m e r l a t o T s t n e m y a p s t fi e n e b e v a e l n o i t a u n n a r e p u S s t fi e n e b s u n o b s e e f d n a r a e Y e e y o p m E l ) d e u n i t n o c ( ) d e t i d u a ( t r o p e R n o i t a r e n u m e R ) d e u n i t n o c ( n o i t a r e n u m e r f o s l i a t e D b % 9 7 1 . % 5 6 2 . % 4 8 1 . % 6 5 2 . % 3 6 1 . % 0 6 2 . % 8 4 1 . % 1 . 5 2 % 7 6 1 . % 7 5 2 . $ , 1 6 8 4 3 3 4 3 1 , 5 3 3 , 7 5 9 6 2 3 , 1 2 9 2 3 3 , 1 6 3 8 6 3 , 7 1 5 8 9 3 , 0 3 0 6 0 4 1 6 1 , 6 5 4 , 9 0 2 6 3 4 , 1 , 3 3 7 2 2 5 , 1 $ - - - - - - - - - - $ - - - - - - - - - - - $ 1 0 3 4 , 6 3 2 8 , 8 0 4 8 , 5 9 7 4 , - - - 2 3 3 7 1 , 8 0 4 8 , $ 6 9 3 3 2 , 0 5 2 , 1 2 6 4 0 3 2 , 6 8 9 3 2 , 8 6 5 3 2 , 6 4 7 , 1 2 0 3 0 6 2 , 4 9 6 , 1 2 0 4 0 6 9 , 6 7 6 8 8 , $ - - - - - - - - - - $ $ l e n n o s r e P t n e m e g a n a M y e K r e h t O 0 0 0 0 6 , 4 6 1 , 7 4 2 0 3 8 8 8 , 4 5 0 5 2 2 , 0 0 0 0 6 , , 5 7 6 5 3 2 0 5 0 5 8 , 7 7 4 5 1 2 , 0 0 0 0 6 , 8 9 9 9 7 2 , 3 2 6 3 0 1 , 8 4 1 , 3 7 2 0 0 0 0 6 , 0 0 0 0 2 3 , 7 6 4 4 1 1 , 0 0 0 0 2 3 , 0 0 0 0 4 2 , , 7 3 8 2 8 0 , 1 0 7 9 , 1 9 3 , 9 7 6 3 3 0 , 1 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 2 2 0 2 1 2 0 2 t h g i r W n a m a D i i s e c v r e S e t a r o p r o C M G E n e e r G l e a h c M i y r a t e r c e S y n a p m o C d n a O F C s s e n s u B i l a n o i t a N M G E , l d y o L e g r o e G t n e m p o e v e D l l i a c r e m m o C M G E d a r u M n a s a H l a t o T 2 2 0 2 l a t o T 1 2 0 2 ANNUAL REPORT 2022 29 DIRECTORS’ REPORT Remuneration Report (audited) (continued) b Details of remuneration (continued) The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: Employee Executive Directors David Riches Other Key Management Personnel Damian Wright Michael Green George Lloyd Hasan Murad Fixed remuneration At risk: Short Term Incentives (STI) At risk: options 43% 61% 61% 61% 61% 57% 39% 39% 39% 39% 0% 0% 0% 0% 0% Remuneration and other terms of employment for the Executive Directors and other Key Management Personnel are formalised in a Service Agreement. The major provisions of the agreements relating to remuneration are set out below: Employee David Riches Damian Wright Michael Green George Lloyd Hasan Murad Base salary (incl super) 358,874 270,560 258,871 303,566 346,030 Term of agreement Notice period Unspecified Six months Unspecified Three months Unspecified Three months Unspecified Six months Unspecified Three months c Share-based remuneration No member of the Key Management Personnel has an entitlement to be paid in shares. d Bonuses included in remuneration Details of the short-term incentive cash bonuses awarded as remuneration to each key management personnel, the percentage of the available bonus that was paid in the financial year, and the percentage that was forfeited because the person did not meet the service and performance criteria is set out below. No part of the bonus is payable in future years. Employee Executive Directors David Riches1 Other Key Management Personnel Damian Wright Michael Green George Lloyd Hasan Murad Included in remuneration ($) Percentage vested during the year Percentage forfeited during the year - 60,000 60,000 60,000 60,000 - 37% 39% 33% 29% - 63% 61% 67% 71% 1 David Riches has elected not to receive a performance-based incentive in relation to the year ended 30 June 2022. 30 GENUSPLUS GROUP LTD DIRECTORS’ REPORT Remuneration Report (audited) (continued) e Shares held by key management personnel The number of ordinary shares in the Company during the 2022 reporting period held by each of the Group’s key management personnel, including their related parties, is set out below: Employee Year ended 30 June 2022 David Riches S. High J. Martins P. Gavazzi Damian Wright Michael Green George Lloyd Hasan Murad Simon Higgins Balance at start of year Granted as remuneration Other changes Held at the end of reporting period 91,722,947 304,167 100,000 204,167 72,917 130,208 1,626,042 72,917 520,833 - - - - - - - - - 861,000 92,583,947 - - - - - - - (520,833) 304,167 100,000 204,167 72,917 130,208 1,626,042 72,917 - None of the shares included in the table above are held nominally by key management personnel. Loans to key management personnel The Group allows its employees to take up limited short-term loans to fund merchandise and other purchases through the Group’s business contacts. This facility is also available to the Group’s key management personnel. No member of the key management personnel received a loan during the reporting period. The Group does not have an allowance account for receivables relating to outstanding loans and has not recognised any expense for impaired receivables during reporting period. There were no individuals with loans above $100,000 during the financial year. Other transactions with key management personnel and their related parties (i) Details and terms and conditions of other transactions with KMP and their related parties: Purchases Legal services During 2022, the Group used the legal services of one Company Director (Mr Paul Gavazzi) and the law firm over which he exercises significant influence. The amounts billed related to this legal service amounted to $9,339 (2021: $1,144,517), based on normal market rates. Nil was unpaid as of the reporting date. Property leases During 2022, the Group rented various properties from David Riches and his related parties as part of normal business operations. The amount for which each property was leased was negotiated on commercial terms in accordance with lease agreements verified by the board. During 2022 $1,080,144 was recognised in the operating result for the year in relation to these properties. $30,948 was un-paid as of the reporting date. Engineering services During 2022, the Group utilised the engineering services of Partum Engineering Pty Ltd, of which David Riches is also a Director, for design and other work related to FMG sub-station and powerlines. $7,396,206 was recognised as an expense in relation to these services. $775,051 was un-paid as of the reporting date. Transportation and logistical services During 2022, Pastoral Plus, of which David Riches is a Director, provided transportation and logistical services to the Group in circumstances where independent commercial transport services were unavailable to meet the business’ requirements. $646,489 was recognised as an expense for these services, of which $87,002 was unpaid as of the reporting date. Injury management During 2022, Edge People Management Pty Ltd, in which David Riches holds an interest, provided injury management services to the Group. $41,889 was recognised as an expense in relation to these services. $8,760 was un-paid as of the reporting date. End of audited Remuneration Report. ANNUAL REPORT 2022 31 DIRECTORS’ REPORT Environmental regulations The Group’s operations are subject to the environmental regulations that apply to our clients. There have been no significant breaches during the period covered by this report. Indemnities given to, and insurance premiums paid for, auditors and officers Insurance of officers During the year, GenusPlus Group Ltd paid a premium to insure officers of the Group. The officers of the Group covered by the insurance policy include all Directors. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else to cause detriment to the Group. Details of the amount of the premium paid in respect of insurance policies are not disclosed as such disclosure is prohibited under the terms of the contract. The Group has not otherwise, during or since the end of the financial year, except to the extent permitted by law, indemnified or agreed to indemnify any current or former officer of the Group against a liability incurred as such by an officer. Indemnity of auditors The Group has agreed to indemnify its auditors, Grant Thornton Audit Pty Ltd, to the extent permitted by law, against any claim by a third party arising from the Group’s breach of its agreement. The indemnity requires the Group to meet the full amount of any such liabilities including a reasonable amount of legal costs. Non-audit services During the year, Grant Thornton, the Company’s auditors, performed certain other services in addition to their statutory audit duties. The Board has considered the non-audit services provided during the year by the auditor and, in accordance with written advice provided by resolution of the Audit and Risk Committee, is satisfied that the provision of those non-audit services during the year is compatible with, and did not compromise, the auditor 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 Company and have been reviewed by the Audit and Risk Committee to ensure they do not impact upon the impartiality and objectivity of the auditor the non-audit services 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 Company, acting as an advocate for the Company or jointly sharing risks and rewards Details of the amounts paid to the auditors of the Company, Grant Thornton, and its related practices for audit and non-audit services provided during the year are set out in Note 32 to the financial statements. Proceedings on behalf of Group No person has applied for leave of Court to bring proceedings on behalf of the Group or intervene in any proceedings to which the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The Group was not a party to any such proceedings during the year. Auditor’s Independence Declaration A copy of the Auditor’s Independence Declaration as required under section 307C of the Corporations Act 2001 is set out on page 33 and forms part of this Directors’ Report. Signed in accordance with a resolution of the Board of Directors. David Riches Director, 31 August 2022 32 GENUSPLUS GROUP LTD AUDITOR’S INDEPENDENCE DECLARATION Grant Thornton Audit Pty Ltd Level 43 Central Park 152-158 St Georges Terrace Grant Thornton Audit Pty Ltd Perth WA 6000 Level 43 Central Park PO Box 7757 152-158 St Georges Terrace Cloisters Square Perth WA 6000 Perth WA 6850 PO Box 7757 T +61 8 9480 2000 Cloisters Square Perth WA 6850 T +61 8 9480 2000 Auditor’s Independence Declaration Auditor’s Independence Declaration To the Directors of GenusPlus Group Ltd In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit To the Directors of GenusPlus Group Ltd of GenusPlus Group Ltd for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, there have been: In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of GenusPlus Group Ltd for the year ended 30 June 2022, I declare that, to the best of my knowledge and belief, a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to there have been: the audit; and a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to b no contraventions of any applicable code of professional conduct in relation to the audit. the audit; and b no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants GRANT THORNTON AUDIT PTY LTD Chartered Accountants L A Stella Partner – Audit & Assurance L A Stella Perth, 31 August 2022 Partner – Audit & Assurance Perth, 31 August 2022 www.grantthornton.com.au ACN-130 913 594 www.grantthornton.com.au Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ACN-130 913 594 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one Legislation. another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. #8033301v1 #8033301v1 ANNUAL REPORT 2022 33 CORPORATE GOVERNANCE STATEMENT The Corporate Governance Statement is available on GenusPlus Group’s website at www.genus.com.au/who-we-are/corporate- governance. Corporate Governance Principles And Recommendations The ASX Corporate Governance Council sets out best practice corporate governance recommendations, including practices and suggested disclosures. Listing Rule 4.10.3 requires disclosure for companies on the extent to which they comply with these recommendations, and if not, to give reasons for not following them. Unless otherwise indicated, the best practice recommendations of the ASX Corporate Governance Council, including corporate governance practices and suggested disclosures, have been adopted by Genus for the year ended 30 June 2022. Genus expects to lodge its annual Corporate Governance Statement and Appendix 4G with its full Annual Report to shareholders at the end of September 2022. Corporate Governance Genus is committed to a governance culture that aims to protect shareholder rights, effectively manage risk, enhance disclosure and transparency (both within the company and to external stakeholders) and facilitate the effective functioning of the board. We believe that by operating with a strong focus on corporate governance, we will enhance Genus’ sustainable long-term performance and value creation for all stakeholders. The Board of Directors is responsible for Genus’ corporate governance framework, which ensures that the Company’s obligations and responsibilities to its various stakeholders are fulfilled. The Company’s 2022 Corporate Governance Statement, to be released to shareholders towards the end of September 2022, will report on Genus’ governance practices. Genus has in place charters, policies, and procedures (published on our website) which are reviewed and revised as appropriate to reflect changes in law and developments in corporate governance. The Board’s Risk & Audit Committee is responsible for monitoring the effectiveness of the Group’s risk management framework. 34 GENUSPLUS GROUP LTD CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2022 Revenue Other income Employee expenses Raw materials and consumables expenses Contractors and labour hire expenses Motor vehicle expenses Depreciation expense Other expenses Initial Public Offering expenses Operating profit Share of results of joint ventures Share of results of associates Finance income Other gains and losses Finance costs Profit before income tax Income tax expense Profit for the year Other comprehensive income for the year Items that may be reclassified subsequently to profit or loss: Exchange differences on monetary items denominated in foreign currency (net of tax) Total comprehensive income for the year Profit for the year attributable to Owners of the company Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) This statement should be read in conjunction with the notes to the financial statements. Notes 6 7 2022 $ 2021 $ 450,936,669 318,207,504 1,962,423 3,006,546 26 (137,197,766) (87,150,489) (139,298,892) (96,660,619) (114,602,305) (87,414,689) (16,037,478) (10,743,266) (11,901,931) (7,413,528) (12,771,590) (9,697,868) - (2,736,076) 21,089,130 19,397,515 63,346 401,393 - - 8,550 3,216 (461,000) 461,000 (1,077,105) (707,343) 20,024,314 19,154,388 20 10 8 9 11 11 12 (6,467,839) (5,805,619) 13,556,475 13,348,769 160,117 8,275 13,716,592 13,357,044 13,716,592 13,357,044 13 13 8.36 8.36 8.63 8.63 ANNUAL REPORT 2022 35 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2022 Current assets Cash and cash equivalents Trade and other receivables Contract assets Inventories Current tax asset Other assets Total current assets Non-current assets Other financial assets Interests in joint ventures Investment in associates Property, plant and equipment Right-of-use assets Intangible assets Total non-current assets Total assets Current liabilities Trade and other payables Contract liabilities Other financial liabilities Lease liabilities Employee benefits Provisions Total current liabilities Non-current liabilities Other financial liabilities Lease liabilities Deferred tax liabilities Employee benefits Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Retained earnings Total equity This statement should be read in conjunction with the notes to the financial statements. 36 GENUSPLUS GROUP LTD Notes 2022 $ 2021 $ 14 15 16 18 12 19 17 8 9 20 21 22 23 24 25 21 26 27 25 21 12 26 28 29 27,882,473 34,181,508 68,872,911 57,698,845 45,734,278 20,351,162 3,728,803 2,044,909 4,569,537 1,482,484 1,582,879 3,449,926 152,370,881 119,208,834 993,833 1,483,000 3,086,299 401,442 - 49 17,675,106 15,767,432 23,283,092 13,550,857 34,173,243 5,545,578 79,613,015 36,346,916 231,983,896 155,555,750 72,608,068 64,012,279 12,752,963 5,225,354 6,869,953 1,920,000 7,765,884 4,285,659 6,487,235 6,456,002 1,221,721 50,000 107,705,824 81,949,294 3,924,000 4,920,000 14,232,018 10,148,438 8,758,718 1,195,098 2,550,543 1,022,430 30,854,999 15,896,246 138,560,823 97,845,540 93,423,073 57,710,210 53,789,037 28,925,754 (343,442) (503,559) 39,977,478 29,288,015 93,423,073 57,710,210 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2022 Share capital $ Retained earnings $ Notes Corporate Restructure Reserve $ Foreign currency translation reserve Total $ 27,732,909 15,939,246 (511,834) - - - 13,348,769 - 13,348,769 Balance at 1 July 2020 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: share issues to Directors share issues as employee compensation share issues pursuant to a business combination 28,37 28,37 400,000 300,000 28,35 500,000 cost of share issues 28 (7,155) 1,192,845 Sub-total 1,192,845 13,348,769 Balance at 30 June 2021 28,925,754 29,288,015 (511,834) 8,275 57,710,210 Balance at 1 July 2021 Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners: 28,925,754 29,288,015 (511,834) 8,275 57,710,210 - - - 13,556,475 - 13,556,475 - - 43,160,321 13,348,769 8,275 8,275 8,275 13,357,044 - - - - - 400,000 300,000 500,000 (7,155) 1,192,845 8,275 14,549,889 - - - - - - - - - - - - - - - - - - - - 13,556,475 160,117 160,117 160,117 13,716,592 - - - - - - 20,000,000 6,023,589 (1,160,306) (2,800,619) 22,062,664 (66,393) 160,117 35,712,863 proceeds from capital raising 28 20,000,000 share issues pursuant to a business combination cost of share issues dividend paid Changes in ownership interests: disposal of Burton Training & Consultancy Pty Ltd 28,35 6,023,589 (1,160,306) 28 30 - (2,800,619) 24,863,283 (2,800,619) - (66,393) - - - - - - - - Sub-total 24,863,283 10,689,463 Balance at 30 June 2022 53,789,037 39,977,478 (511,834) 168,392 93,423,073 This statement should be read in conjunction with the notes to the financial statements. ANNUAL REPORT 2022 37 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2022 Operating activities Receipts from customers Payments to suppliers and employees Government grant income received (JobKeeper) Income tax paid Notes 2022 $ 2021 $ 465,134,004 318,433,388 (451,425,418) (306,762,419) - 2,093,000 (2,243,853) (6,776,048) Net cash provided by operating activities 31 11,464,733 6,987,921 Investing activities Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Net loans paid by / (loans to) associated and joint venture entities Proceeds from disposal of investments Acquisition of investment in associate Acquisition of subsidiaries (net of cash) Net cash used in investing activities Financing activities Proceeds from borrowings Repayments of borrowings Payment of lease liabilities principal Proceeds from issue of share capital Transaction costs for issued share capital Dividends paid Interest received Finance costs Net cash provided by / (used in) financing activities Net change in cash and cash equivalents held Cash and cash equivalents at beginning of financial year Effect of exchange rate fluctuations on cash held 1,386,650 1,190,843 (4,870,466) (11,294,484) 28,168 170,000 (1,000,000) (100,000) - - 35 (19,963,360) (2,220,677) (24,249,008) (12,424,318) - 5,000,000 (1,670,000) (1,170,119) (6,975,397) (3,314,831) 28 28 20,000,000 (1,160,306) (2,800,619) 8,550 (1,077,105) 6,325,123 - - - 3,216 (707,343) (189,077) (6,459,152) (5,625,474) 34,181,508 39,798,707 160,117 8,275 Cash and cash equivalents at end of financial year 14 27,882,473 34,181,508 This statement should be read in conjunction with the notes to the financial statements. 38 GENUSPLUS GROUP LTD 1. Nature of operations GenusPlus Group Ltd and its subsidiaries’ (the Group) principal activities include the construction and maintenance of transmission and distribution power lines and substations servicing the Western Australian, Queensland and New South Wales power networks as well as providing specialist engineering, testing and commissioning services to the electrical and communications industries. 2. Basis of preparation The consolidated general purpose financial statements of the Group have been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards (“AASBs”) and other authoritative pronouncements of the Australian Accounting Standards Board (AASB). Compliance with Australian Accounting Standards results in full compliance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). GenusPlus Group Ltd is a for-profit entity for the purpose of preparing the financial statements. GenusPlus Group Ltd is the Group’s Ultimate Parent Company. GenusPlus Group Ltd is an ASX listed Public Company (ASX Code: GNP) incorporated and domiciled in Australia. The address of its registered office and its principal place of business is Level 1, 63 – 69 Abernethy Road, Belmont, Australia. The consolidated financial statements for the year ended 30 June 2022 were approved and authorised for issue by the Board of Directors on 31 August 2022. Historical cost convention The financial statements have been prepared under the historical cost convention, except for, where applicable, the revaluation of financial assets and liabilities at fair value through profit or loss, financial assets at fair value through other comprehensive income, investment properties, certain classes of property, plant and equipment and derivative financial instruments. Critical accounting estimates The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 4. 3. Changes in accounting policies 3.1 New standards adopted as at 1 July 2021 Certain new accounting standards and interpretations have been published that are mandatory for 30 June 2022 reporting periods and have not been adopted by the Group. The Group's assessment of the impact of these new standards do not have a material impact on the entity in the current reporting periods. 3.2 Standards, amendments and interpretations to existing Standards that are not yet effective and have not been adopted early by the Group The following new accounting standards and interpretations have been published that are not mandatory for 30 June 2022 reporting periods, have not been early adopted by the Group, and are as follows: i) Amendments to AASB 101: Classification of Liabilities as Current or Non-current The amendment specify the requirements for classifying liabilities as current or non-current. The amendments clarify: • • • • What is meant by a right to defer settlement That a right to defer must exist at the end of the reporting period That classification is unaffected by the likelihood that an entity will exercise its deferral right That only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its classification The amendments are effective for annual reporting periods beginning on or after 1 January 2023 and must be applied retrospectively. The Group's assessment of the impact of the new standard is not expected to have a material impact on the entity in future reporting periods. ANNUAL REPORT 2022 39 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20223. Changes in accounting policies (continued) 3.2 Standards, amendments and interpretations to existing Standards that are not yet effective and have not been adopted early by the Group (continued) ii) Amendments to AASB 3 Business Combinations - Reference to the Conceptual Framework The amendments are intended to replace a reference to the Framework for the Preparation and Presentation of Financial Statements, issued in 1989, with a reference to the Conceptual Framework for Financial Reporting issued in March 2018 without significantly changing its requirements. The Board also added an exception to the recognition principle of AASB 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that would be within the scope of AASB 137 or AASB Interpretation 21 Levies, if incurred separately. At the same time, the Board decided to clarify existing guidance in AASB 3 for contingent assets that would not be affected by replacing the reference to the Framework for the Preparation and Presentation of Financial Statements. The amendments are effective for annual reporting periods beginning on or after 1 January 2022 and apply prospectively. iii) Onerous Contracts - Costs of Fulfilling a Contract - Amendments to AASB 137 The amendments to AASB 137 specify which costs an entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a “directly related cost approach”. The costs that relate directly to a contract to provide goods or services include both incremental costs and an allocation of costs directly related to contract activities. General and administrative costs do not relate directly to a contract and are excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments are effective for annual reporting periods beginning on or after 1 January 2022. The Group will apply these amendments to contracts for which it has not yet fulfilled all its obligations at the beginning of the annual reporting period in which it first applies the amendments. iv) AASB 9 Financial Instruments – Fees in the ’10 per cent’ test for derecognition of financial liabilities The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. These fees include only those paid or received between the borrower and the lender, including fees paid or received by either the borrower or lender on the other’s behalf. An entity applies the amendment to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. The Group will apply the amendments to financial liabilities that are modified or exchanged on or after the beginning of the annual reporting period in which the entity first applies the amendment. The amendments are not expected to have a material impact on the Group. 40 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies Parent entity information In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 41. Basis of consolidation The Group financial statements consolidate those of the Parent Company and all of its subsidiaries as of 30 June 2022. The parent controls a subsidiary if it is exposed, or has rights, to variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the subsidiary. All subsidiaries have a reporting date of 30 June. All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group. Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable. Non-controlling interests, presented as part of equity, represent the portion of a subsidiary’s profit or loss and net assets that is not held by the Group. The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests. Business combination The acquisition method of accounting is used to account for business combinations regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. ANNUAL REPORT 2022 41 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Foreign currency translation Functional and presentation currency The consolidated financial statements are presented in Australian Dollars ($AUD), which is also the functional currency of the Parent Company. Foreign currency transactions and balances Foreign currency transactions are translated into the functional currency of the respective Group Entity, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items at year end exchange rates are recognised in profit or loss. Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the date of the transaction), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. Segment reporting Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. During the year to 30 June 2022, the Groups operating segments were reviewed and reduced in line with the above disclosure. All comparative information has been restated. Revenue from contracts with customers The Group recognises revenue when a customer obtains control of the goods or services, in accordance with AASB 15 Revenue from contracts with customers. Revenue is measured at the fair value of the consideration received or receivable. Determining the timing of the transfer of control: either at a point in time or over time requires judgement. Revenue is recognised over time if one of the following is met: • • • The customer simultaneously receives and consumes the benefits as the Group performs; The customer controls the asset as the Group creates or enhances it; or The Group’s performance does not create an asset for which the Group has an alternative use and there is a right to payment for the performance to date. To determine whether to recognise revenue, the Group follows the 5-step revenue recognition model introduced by AASB 15 Revenue from contracts with customers: 1. 2. Identifying the contract(s) with a customer Identifying the performance obligations in the contract 3. Determining the transaction price 4. Allocating the transaction price to the performance obligations in the contract 5. Recognising revenue when/as performance obligation(s) are satisfied. The Group often enters into transactions involving a range of the Group’s products and services. In all cases, the total transaction price for a contract is allocated amongst the various performance obligations based on their relative stand-alone selling prices. The transaction price for a contract excludes any amounts collected on behalf of third parties. The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position (see Note 24). Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. 42 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Revenue from contracts with customers (continued) Construction Contracts Revenue from construction contracts is recognised when the benefits transfer to the customer as the work is performed and as such revenue is recognised over the duration of the project according to the percentage of costs completed, or input method. Under this method revenue is calculated based on the proportion of the contract costs incurred for work performed to date relative to the estimated total contract costs. Revenue recognised under this method is predominantly derived from projects containing one performance obligation. Services revenue Revenue from the provision of services is recognised as the service is provided. Typically, under the performance obligations of a service contract, the customer consumes and receives the benefit of the service as it is provided. As such, service revenue is recognised over time as the services are provided, with each service deemed a separate performance obligation. The transaction price is allocated to each obligation based on contract prices. Work order revenue generated in the Communications division is recognised at a point in time as the customer is only deemed to have received the benefit once the work has been completed. The transaction price is calculated based on a schedule of rates which define the price of the ticket of work. Transaction price and contract modifications The transaction price is the amount of consideration to which the company expects to be entitled to under the customer contract and which is used to value total revenue and is allocated to each performance obligation. The determination of this amount includes “fixed remuneration”, (for example lump sum, schedule of rates or pricing for services) and “variable consideration”. The main variable consideration elements are claims (contract modifications) and consideration for optional works and provisional sums each of which needs to be assessed. Contract modifications are changes to the contract approved by the parties to the contract. The Group applies the guidance given in AASB 15 in relation to variable consideration. The estimate of variable consideration can only be recognised to the extent that it is highly probable that there will not be a significant reversal of revenue in the future. The measurement of additional consideration arising from claims is subject to a high level of uncertainty, both in terms of the amount that customers will pay and the collection times, which usually depend on the outcome of negotiations between the parties or decisions taken by judicial/arbitration bodies. The Group considers all relevant aspects in circumstances such as the contract terms, business in negotiating practices of the sector, the Group’s historical experiences with similar contracts and consideration of those factors that affect the variable consideration that are out of control of the Group or other supporting evidence when making the above decision. Loss making contracts A provision is made for the difference between expected cost of fulfilling a contract and expected on and portion of the transaction price whether forecast costs are greater than forecast revenue. The provision is recognised in full in a period in which the loss-making contract is identified under AASB 137 Provisions, Contingent Liabilities and Contingent Assets. Under AASB 137, the assessment of whether a provision needs to be recognised takes place at the contract level and there are no segmentation criteria to apply. As a result, there are some instances where loss provisions recognised in the past have not been recognised under AASB 15 because the contract as a whole is profitable. In addition, when two or more contracts entered into at or near the same time are required to be combined for accounting purposes, AASB 15 requires the Group to perform the assessment of whether the contract is onerous at the level of the combined contracts. The Group also notes that the amount of loss accrued in respect of a loss contract under AASB 111 takes into account an appropriate allocation of construction overheads. This contrasts with AASB 137 where loss accruals may be lower as they are based on the identification of ‘unavoidable costs’. Interest and dividend income Interest income and expenses are reported on an accrual basis using the effective interest method. Dividend income, other than those from investments in associates, are recognised at the time the right to receive payment is established. Operating Expenses Operating expenses are recognised in profit or loss upon utilisation of the service or at the date of their origin. ANNUAL REPORT 2022 43 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Borrowing costs Other borrowing costs are expensed in the period in which they are incurred and reported in ‘finance costs’ (see Note 11). Goodwill Goodwill represents the future economic benefits arising from a business combination that are not individually identified and separately recognised. See Business Combinations (above) for information on how goodwill is initially determined. Goodwill is carried at cost less accumulated impairment losses. Refer to impairment testing note 22 for a description of impairment testing procedures. Property, plant and equipment Land and buildings held for use in the production or supply of goods or services, or for administrative purposes, are stated in the statement of financial position at cost, less any recognised impairment loss. Properties held for production, supply or administrative purposes, or for purposes not yet determined, are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Freehold land is not depreciated. Fixtures and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised so as to write off the cost or valuation of assets (other than freehold land and properties under construction) less their residual values over their useful lives, using the straight-line method. The estimated useful lives, residual values and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. The depreciation rates used for each class of depreciable assets are: Class of fixed asset Buildings: Leasehold improvements: Plant and equipment: Furniture, fixtures and fittings: Tools and low value assets Software and technology Motor vehicles Depreciation rate 10% 10% - 33% 10% - 33% 10% - 33% 18.8% - 33% 33% 20% - 25% Depreciation rates and methods shall be reviewed at least annually and, where changed, shall be accounted for as a change in accounting estimate. Where depreciation rates or methods are changed, the net written down value of the asset is depreciated from the date of the change in accordance with the new depreciation rate or method. Depreciation recognised in prior financial years shall not be changed, that is, the change in depreciation rate or method shall be accounted for on a ‘prospective’ basis. Assets held under leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease term and their useful lives. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 44 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Leased assets The Group as lessee For any new contracts entered into, the Group considers whether a contract is or contains a lease. A lease is defined as a ‘contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether: • • • the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use. Measurement and recognition of leases as a lessee In respect of leased assets, at lease commencement date the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). All other leased assets are recorded under property, plant and equipment according to the category of asset. The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such indicators exist. At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised. The right-of-use assets are presented as a separate line in the consolidated statement of financial position. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments. When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero. The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight-line basis over the lease term. The lease liability is presented as a separate line in the consolidated statement of financial position. ANNUAL REPORT 2022 45 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Impairment testing of goodwill, other intangible assets and property, plant and equipment For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash- generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors goodwill. Cash-generating units to which goodwill has been allocated (determined by the Group’s management as equivalent to its operating segments) are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount, which is the higher of fair value less costs to sell and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable interest rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group’s latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect management’s assessment of respective risk profiles, such as market and asset-specific risks factors. Impairment losses for cash-generating units reduce first the carrying amount of any goodwill allocated to that cash-generating unit. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment charge is reversed if the cash-generating unit’s recoverable amount exceeds its carrying amount. Financial instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognized when it is extinguished, discharged, cancelled or expires. Classification and initial measurement Financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Financial assets are classified into the following categories: • • • amortised cost fair value through profit or loss (FVTPL) fair value through other comprehensive income (FVOCI) In the periods presented, the Group does not have any financial assets categorized as FVOCI. The classification is determined by both: • • the entity’s business model for managing the financial asset the contractual cash flow characteristics of the financial asset. All income and expenses relating to financial assets that are recognized in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. 46 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Financial instruments (continued) Subsequent measurement of financial assets Financial assets at amortised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL): • • they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial instruments. Financial assets at fair value through profit or loss (FVTPL) Financial assets that are held within a different business model other than ‘hold to collect’ or ‘hold to collect and sell’ are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. The category also contains an equity investment. The Group accounts for the investment at FVTPL and did not make the irrevocable election to account for the investment in Volt Power Pty Ltd at fair value through other comprehensive income (FVOCI). The fair value was determined in line with the requirements of AASB 9, which does not allow for measurement at cost. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists. Impairment of financial assets AASB 9’s impairment requirements use more forward-looking information to recognise expected credit losses – the ‘expected credit loss (ECL) model’. Instruments within scope included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under AASB 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss. Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward-looking approach, a distinction is made between: • • • financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage 1’) and financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’). ‘Stage 3’ would cover financial assets that have objective evidence of impairment at the reporting date. ‘12-month expected credit losses’ are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. ANNUAL REPORT 2022 47 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Investments in associates and joint ventures An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control. The results and assets and liabilities of associates or joint ventures are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for in accordance with AASB 5. Under the equity method, an investment in an associate or a joint venture is recognised initially in the consolidated statement of financial position at cost and adjusted thereafter to recognise the Group’s share of the profit or loss and other comprehensive income of the associate or joint venture. When the Group’s share of losses of an associate or a joint venture exceeds the Group’s interest in that associate or joint venture (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate or joint venture), the Group discontinues recognising its share of further losses. Additional losses are recognised only to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate or joint venture. An investment in an associate or a joint venture is accounted for using the equity method from the date on which the investee becomes an associate or a joint venture. On acquisition of the investment in an associate or a joint venture, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. The requirements of AASB 136 are applied to determine whether it is necessary to recognise any impairment loss with respect to the Group’s investment in an associate or a joint venture. When necessary, the entire carrying amount of the investment (including goodwill) is tested for impairment in accordance with AASB 136 as a single asset by comparing its recoverable amount (higher of value in use and fair value less costs of disposal) with its carrying amount. Any impairment loss recognised is not allocated to any asset, including goodwill that forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised in accordance with AASB 136 to the extent that the recoverable amount of the investment subsequently increases. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or a joint venture. When the Group retains an interest in the former associate or a joint venture and the retained interest is a financial asset, the Group measures the retained interest at fair value at that date and the fair value is regarded as its fair value on initial recognition in accordance with AASB 9. The difference between the carrying amount of the associate or a joint venture at the date the equity method was discontinued, and the fair value of any retained interest and any proceeds from disposing of a part interest in the associate or a joint venture is included in the determination of the gain or loss on disposal of the associate or joint venture. In addition, the Group accounts for all amounts previously recognised in other comprehensive income in relation to that associate on the same basis as would be required if that associate had directly disposed of the related assets or liabilities. Therefore, if a gain or loss previously recognised in other comprehensive income by that associate or joint venture would be reclassified to profit or loss on the disposal of the related assets or liabilities, the Group reclassifies the gain or loss from equity to profit or loss (as a reclassification adjustment) when the associate or joint venture is disposed of. When the Group reduces its ownership interest in an associate or a joint venture but the Group continues to use the equity method, the Group reclassifies to profit or loss the proportion of the gain or loss that had previously been recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be reclassified to profit or loss on the disposal of the related assets or liabilities. When a Group entity transacts with an associate or a joint venture of the Group, profits and losses resulting from the transactions with the associate or joint venture are recognised in the Group’s consolidated financial statements only to the extent of interests in the associate or joint venture that are not related to the Group. The Group applies AASB 9, including the impairment requirements, to long-term interests in an associate or joint venture to which the equity method is not applied and which form part of the net investment in the investee. Furthermore, in applying AASB 9 to long-term interests, the Group does not take into account adjustments to their carrying amount required by AASB 128 (i.e. adjustments to the carrying amount of long-term interests arising from the allocation of losses of the investee or assessment of impairment in accordance with AASB 128). 48 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Investments in associates and joint ventures (continued) Trade and other receivables and contract assets and liabilities Contract assets A contract asset is initially recognised for revenue earned from construction and maintenance services when the receipt of consideration is conditional on client acceptance of the successful completion or installation of the underlying contractual obligation. Upon such notification, the amount recognised as contract assets is reclassified as trade receivables. Trade receivables A receivable is recognised if an amount of consideration that is unconditional is due from the customer (i.e. only the passage of time is required before payment of the consideration is due). Contract liabilities A contract liability is recognised if a payment is received or a payment is due (whichever is earlier) from a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue when the Group performs under the contract (i.e. transfers control of the related goods or services to the customer.) Impairment of contract assets and liabilities and trade receivables The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assess impairment of trade receivables on a collective basis as they possess shared credit risk characteristics they have been grouped based on the days past due. Refer to Note 38 for a detailed analysis of how the impairment requirements of AASB 9 are applied. Classification and measurement of financial liabilities The Group’s financial liabilities include borrowings, trade and other payables and derivative financial instruments. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments). All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within finance costs or finance income. Inventories Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a first-in-first-out basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale. ANNUAL REPORT 2022 49 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Taxation Tax consolidation The Company and its wholly-owned Australian resident entities are members of a tax-consolidated group under Australian tax law. The Company is the head entity within the tax-consolidated group. In addition to its own current and deferred tax amounts, the Company also recognises the current tax liabilities and assets and deferred tax assets arising from unused tax losses and relevant tax credits of the members of the tax-consolidated group. Amounts payable or receivable under the tax-funding arrangement between the Company and the entities in the tax consolidated group are determined using a ‘separate taxpayer within group’ approach to determine the tax contribution amounts payable or receivable by each member of the tax-consolidated group. This approach results in the tax effect of transactions being recognised in the legal entity where that transaction occurred, and does not tax effect transactions that have no tax consequences to the group. The same basis is used for tax allocation within the tax-consolidated group. Current tax The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of profit or loss and other comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Company’s current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period. Adjustments are made for transactions and events occurring within the tax-consolidated group that do not give rise to a tax consequence for the Company or that have a different tax consequence at the level of the entity. Deferred tax Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Adjustments are made for transactions and events occurring within the tax- consolidated group that do not give rise to a tax consequence for the Company or that have a different tax consequence at the level of the entity. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. Current and deferred tax for the year Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case the current and deferred tax are also recognised in other comprehensive income or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination. Management has applied a risk weighted measurement to the tax treatments used in the Group and has determined that there is no change required under IFRIC 23 Uncertainty over Income Tax Treatments. 50 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value. Equity, reserves and dividend payments Share capital represents the fair value of shares that have been issued. Any transaction costs associated with the issuing of shares are deducted from share capital, net of any related income tax benefits. Other components of equity include the following: • • Corporate restructure reserve: comprises amounts recognised upon the introduction of a new ultimate parent entity. Foreign currency translation reserve: comprises amounts recognised upon translation of certain amounts denominated in foreign currencies ($USD) into the presentation currency ($AUD) Retained earnings include all current and prior period retained profits. Dividend distributions payable to equity shareholders are included in other liabilities when the dividends have been declared by the Board prior to the reporting date. All transactions with owners of the parent are recorded separately within equity. Employee benefits Short-term and long-term employee benefits Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date. Share-based payment transactions The Group provides remuneration to certain employees, including Directors, of the Group in the form of share-based payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled transactions’). The cost of these equity-settled transactions is measured by reference to the fair value at the date at which they are vested. The fair value is measured using a variation of the binomial option pricing model that takes into account the terms and conditions on which the instruments were granted and the current likelihood of achieving the specified target. Further, the cost of equity- settled transactions is recognised, on the date on which they become fully entitled to the award (‘vesting date’). Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material). When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. Onerous contracts Present obligations arising under onerous contracts are recognised and measured as provisions. An onerous contract is considered to exist where the Group has a contract under which the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it. ANNUAL REPORT 2022 51 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except: • • Where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense, or For receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables. Cash flows are included in the statement of cash flows on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified within operating cash flows. Government grants Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Government assistance which does not have conditions attached specifically relating to the operating activities of the Group is recognised in accordance with the accounting policies above. Earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of GenusPlus Group Ltd, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. Dividends Dividends are recognised when declared during the financial year and no longer at the discretion of the company. Contract liabilities Contract liabilities represent the consolidated entity's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the customer. 52 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20224. Statement of accounting policies (continued) Significant management judgement in applying accounting policies and estimation uncertainty When preparing the Group’s consolidated financial statements, management makes a number of judgements, estimates and assumptions about the recognition and measurement of assets, liabilities, revenue and expenses. Critical judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Construction contract revenue Recognised amounts of construction contract revenues and related receivables reflect management’s best estimate of each contract’s outcome and stage of completion. For more complex contracts in particular, costs to complete and contract profitability are subject to significant estimation uncertainty. Impairment of non-financial assets and goodwill In assessing impairment, management estimates the recoverable amount of each asset or cash generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate. Calculation of loss allowance When measuring ECL the Group uses reasonable and supportable forward looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Loss given default is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and those that the lender would expect to receive, taking into account cash flows from collateral and integral credit enhancements. Probability of default constitutes a key input in measuring ECL. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future conditions. The Group maintains insurance against Domestic Trade Credit defaults and therefore considers the risk of loss to be minimal. Useful lives of property, plant and equipment Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Fair value measurements and valuation processes Some of the Group's assets and liabilities are measured at fair value for financial reporting purposes. In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. Business combinations Management uses valuation techniques in determining the fair values of the various elements of a business combination. Particularly, the fair value of contingent consideration is dependent on the outcome of many variables that affect future profitability. Leases – estimating the incremental borrowing rate The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right of use asset in a similar economic environment. The IBR therefore reflects what the Group ‘would have to pay’, which requires estimation when no observable rates are available. The Group estimates the IBR using observable inputs (such as market interest rates) when available and is required to make certain entity-specific estimates. Recognition of Deferred tax assets The extent to which deferred tax assets can be recognised is based on an assessment of the probability that future taxable income will be available against which the deductible temporary differences and tax loss carry-forwards can be utilised. In addition, significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions. ANNUAL REPORT 2022 53 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2022e c n a m r o f r e p t n e m g e S . m e h t o t s e c r u o s e r f o n o i t a c o l l a e h t n o g n d c e d s a i i l l e w s a s t n e m g e s g n i t a r e p o e s e h t f o e c n a m r o f r e p e h t s r o t i n o m o h w , e v i t u c e x e f e h c s t i i s i ) M D O C ( r e k a M n o s c e D i i t a t u o d e i r r a c e r a s r e f s n a r t t n e m g e s - r e t n i l l A . s e c r u o s e r r e h t o d n a s e h c a o r p p a g n i t e k r a m , i l s e g o o n h c e t i t n e r e ff d s e r i u q e r h c a e s a y e t a r a p e s d e g a n a m s l i s t n e m g e s g n i t a r e p o e s e h t f o h c a E . s t l u s e r g n i t a r e p o t n e m g e s d e t s u d a g n s u d e r o t i n o m s j i i . i s e c v r e s d n a s d o o g l a c i t n e d i l f o s e a s e n o a - d n a t s n l i l s r e m o t s u c d e t a e r n u o t d e g r a h c s e c i r p n o d e s a b s e c i r p h t g n e l ’ s m r a . s u c o f l a n o i t a r e p o d n a y g e t a r t s ’ i s s e n s u b e h t h t i w e n i l n i r a e y r o i r p e h t m o r f d e n g i l a - e r e r e w s t n e m g e s g n i t a r e p o , 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t g n i r u D 2 2 0 2 e n u J 0 3 o t r a e Y : s w o l l o f s a d e s i r a m m u s e r a s e i t i l i b a i l d n a s t e s s a t n e m g e s d n a s t n e m g e s g n i t a r e p o s p u o r G e h t ’ f o h c a e y b d e t a r e n e g t fi o r p d n a s e u n e v e r e h T i g n i t a r e p O f e h C s p u o r G e h T ’ . i s e c v r e s l a i r t s u d n i d n a , i s n o i t a c n u m m o c e e t l , i s e c v r e s r e w o p : s t n e m g e s g n i t a r e p o s t i s a s e n i l ’ i s s e n s u b e e r h t s p u o r G e h t s e fi i t n e d i y l t n e r r u c t n e m e g a n a M g n i t r o p e R t n e m g e S . 5 54 GENUSPLUS GROUP LTD - , ) 8 8 7 5 4 3 0 3 ( , , 8 8 7 5 4 3 0 3 , , 8 7 3 4 1 6 5 1 , - , 9 6 6 6 3 9 0 5 4 , ) 8 4 9 , 1 7 6 0 3 ( , , 7 1 6 8 0 6 , 1 8 4 , 2 4 0 9 2 4 6 7 , , 7 5 6 6 1 8 5 5 , $ l a t o T , 9 6 6 6 3 9 0 5 4 , $ / r e h t O s n o i t a n m i i l E $ l a t o T s t n e m g e S ) 0 6 1 , 6 2 3 ( , 9 2 8 2 6 2 , 1 5 4 , 4 6 6 4 1 8 0 6 , , 7 5 6 6 1 8 5 5 , $ l a i r t s u d n I i s e c v r e S $ i s e c v r e S i n o i t a c n u m m o C $ r e w o P i s e c v r e S 0 1 4 , 1 3 7 4 1 , 8 0 5 , 1 3 6 4 3 3 , , 8 1 9 2 6 3 9 4 3 , s e u n e v e r t n e m g e S t n e m g e s - r e t n I s e u n e v e R , ) 6 3 4 8 5 7 , 1 8 ( s e s n e p x e t n e m y o p m E l , ) 6 7 3 5 1 0 9 2 1 ( , , ) 0 6 5 2 5 0 5 4 1 ( , - - , ) 6 7 3 5 1 0 9 2 1 ( , , ) 9 8 5 2 8 3 9 2 ( , , ) 1 5 3 4 7 8 7 1 ( , , ) 0 6 5 2 5 0 5 4 1 ( , , ) 1 7 6 4 7 1 , 0 3 ( ) 4 4 1 , 5 4 5 4 ( , , ) 5 4 7 2 3 3 0 1 1 ( , l d e s u s a i r e t a m d n a s e b a m u s n o C l , ) 5 3 5 8 6 0 5 1 1 ( , , 8 8 7 5 4 3 0 3 , , ) 3 2 3 4 1 4 5 4 1 ( , , ) 0 5 3 8 9 0 5 1 ( , ) 4 5 8 , 1 9 8 3 3 ( , ) 9 1 1 , 4 2 4 6 9 ( , s e s n e p x e e r i h r u o b a l d n a s r o t c a r t n o C ) 5 1 2 , 1 8 3 , 1 1 ( , ) 5 5 5 7 2 6 9 ( , , ) 8 4 0 8 1 1 , 9 1 ( , 0 8 3 3 7 6 , 1 2 2 7 1 , 5 3 0 6 2 2 , , 3 8 3 0 9 5 , 1 6 1 - - - ) 0 6 1 , 6 2 3 ( , ) 1 9 4 6 2 0 3 1 ( , , ) 3 4 3 3 8 7 4 ( , ) 5 1 2 , 1 8 3 , 1 1 ( , ) 5 5 5 7 2 6 9 ( , , ) 8 4 0 8 1 1 , 9 1 ( , 0 4 5 9 9 9 , 1 2 3 6 6 , 1 6 0 9 3 2 , , 6 2 7 3 7 3 6 6 1 , , ) 5 1 8 3 4 4 ( , ) 1 9 2 9 2 6 ( ) 4 6 5 7 7 5 ( , ) 6 9 2 5 7 7 , , ) 6 3 8 9 5 3 0 1 ( , , ) 8 6 9 2 2 2 8 ( , , ) 0 2 3 0 0 2 2 ( , , ) 4 3 7 2 6 2 2 ( , , ) 4 9 9 4 5 6 4 1 ( , , ) 4 9 9 9 9 4 , 1 ( , ) 6 8 2 0 1 1 , 4 ( , 0 2 8 9 0 6 7 2 , s e s n e p x e n o i t a s i t r o m a d n a n o i t a c e r p e D i x a T e m o c n I e r o f e b t fi o r P t n e m g e S s e s n e p x e r e h t O l s e s n e p x e e c h e v r o t o M i , 7 3 8 2 1 0 8 2 , , 3 9 3 6 0 4 9 2 , 4 3 1 , 7 9 8 4 2 , 2 9 6 , 1 5 1 , 6 8 1 3 5 1 , 1 6 4 0 2 , 0 8 1 , 6 0 5 6 1 1 , s t e s s A s e i t i l i b a L i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 $ l a t o T , 4 0 5 7 0 2 8 1 3 , - , 4 0 5 7 0 2 8 1 3 , ) 0 0 1 , 5 7 0 8 7 ( , , ) 2 5 2 2 1 8 0 0 1 ( , ) 7 1 1 , 5 6 3 7 8 ( , , ) 2 1 7 3 3 0 8 ( , , ) 0 2 3 6 4 0 6 ( , ) 1 8 6 , 1 0 1 , 5 1 ( , 2 2 3 3 7 7 2 2 , , 1 9 5 2 1 8 0 4 1 , , 6 3 8 6 1 1 , 5 8 $ 9 2 4 , 1 0 2 / r e h t O s n o i t a n m i i l E , ) 7 7 5 6 2 8 4 1 ( , - - ) 8 4 1 , 5 2 6 4 1 ( , , 7 7 5 6 2 8 4 1 , - - - 9 2 4 , 1 0 2 , ) 4 7 7 7 4 9 , 1 1 ( , ) 6 2 6 4 0 6 3 ( , 2 6 4 , 1 2 7 8 8 , , 9 0 2 8 7 8 8 1 , , 4 9 6 6 2 1 , 5 , 9 5 5 6 1 7 4 6 , , 8 7 6 4 2 0 3 1 , , 1 9 4 9 2 2 , 1 2 1 , 5 7 0 6 0 0 8 1 3 , , 8 2 6 7 9 5 6 2 , , 7 7 5 6 2 8 4 1 , , 9 4 8 9 7 6 5 , , 2 5 6 2 3 8 2 3 3 , , 7 7 4 7 7 2 2 3 , ) 0 0 1 , 5 7 0 8 7 ( , , ) 5 6 9 8 8 0 6 1 ( , , ) 2 5 2 2 1 8 0 0 1 ( , , ) 3 5 9 7 0 3 9 ( , ) 4 9 6 , 1 9 1 , 2 0 1 ( , ) 5 8 0 8 2 2 5 ( , , ) 2 1 7 3 3 0 8 ( , , ) 0 2 3 6 4 0 6 ( , ) 1 8 6 , 1 0 1 , 5 1 ( 3 9 8 , 1 7 5 2 2 , , 5 6 3 0 6 7 2 5 1 , ) 8 2 4 5 1 4 ( , ) 3 4 5 7 5 6 ( , , ) 9 4 3 7 8 6 2 ( , , ) 6 4 8 7 0 1 , 2 ( 6 9 1 , 6 0 5 8 1 , , 9 0 0 5 8 7 6 , , 9 0 0 5 8 7 6 , ) 4 7 3 8 1 7 ( , ) 6 8 1 , 0 4 5 2 ( , , ) 6 3 0 3 0 8 , 1 ( ) 3 2 0 4 1 4 ( , ) 9 8 4 7 8 4 ( , ) 9 8 2 0 1 1 ( , 2 1 6 , 1 1 7 $ l a t o T s t n e m g e S $ l a i r t s u d n I i s e c v r e S 1 2 0 2 e n u J 0 3 o t r a e Y $ i s e c v r e S i n o i t a c n u m m o C $ r e w o P i s e c v r e S , 8 2 7 6 4 1 , 9 6 6 1 , 0 7 7 3 9 2 , , ) 9 4 9 5 4 4 9 5 ( , , 8 3 4 3 2 6 4 8 2 , , ) 5 2 9 5 8 7 0 9 ( , ) d e u n i t n o c ( g n i t r o p e R t n e m g e S . 5 s e u n e v e r t n e m g e S t n e m g e s - r e t n I s e u n e v e R s e s n e p x e t n e m y o p m E l l d e s u s a i r e t a m d n a s e b a m u s n o C l , ) 3 7 5 0 6 1 , 5 9 ( s e s n e p x e e r i h r u o b a l d n a s r o t c a r t n o C , ) 1 6 2 4 0 2 7 ( , l s e s n e p x e e c h e v r o t o M i ) 8 8 2 , 1 0 9 4 ( , s e s n e p x e n o i t a s i t r o m a d n a n o i t a c e r p e D i , ) 3 4 0 4 0 3 2 1 ( , s e s n e p x e r e h t O 7 2 1 , 8 6 9 3 2 , x a T e m o c n I e r o f e b t fi o r P t n e m g e S s t e s s A s e i t i l i b a L i ANNUAL REPORT 2022 55 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2022 5. Segment Reporting (continued) The totals presented for the Group’s operating segments reconcile to the key financial figures as presented in its consolidated financial statements as follows: Revenues Total reportable segment revenues Other segment revenues Elimination of intersegment revenues Group Revenues Profit or loss Note 2022 $ 2021 $ 450,936,669 318,207,504 16,573,612 15,049,992 (13,589,277) (11,582,446) 453,921,004 321,675,050 Total reportable segment operating profit 21,673,380 22,773,322 Other segment profit Employment expenses Consumables and materials used Contractors and labour hire expenses Motor vehicle expenses Depreciation and amortisation expenses Other expenses Elimination of intersegment profits Group operating profit Share of profit of associates Share of profit of joint ventures Finance costs Other gains / (losses) Finance income Group profit before tax Assets Total reportable segment assets Other segment assets Group assets Liabilities Total reportable segment liabilities Other segment liabilities Group liabilities 56 GENUSPLUS GROUP LTD (8,182,390) (9,075,389) (345,306) (31,261) (319,744) (49,572) (4,746,865) (2,709,554) (2,276,209) (1,367,208) (7,991,238) (5,918,109) 22,989,019 16,063,769 21,089,130 19,397,515 63,346 401,393 - - (1,077,105) (707,343) (461,000) 461,000 8,550 3,216 20,024,314 19,154,388 226,035,172 140,812,591 5,948,724 14,743,159 231,983,896 155,555,750 161,590,383 85,116,836 (23,029,560) 12,728,704 138,560,823 97,845,540 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20226. Revenue The Group’s revenue disaggregated by type is as follows: Construction Services Note 2022 $ 2021 $ 331,450,121 257,514,742 119,486,548 60,692,762 450,936,669 318,207,504 The Group’s revenue disaggregated by pattern of revenue recognition is as follows: Construction Note 2022 $ 2021 $ 2022 $ Services 2021 $ Products and services Transferred over time 331,450,121 257,414,742 74,416,276 60,692,762 Transferred at a point in time - - 45,070,272 - 331,450,121 257,414,742 119,486,548 60,692,762 Contract balances Trade receivables Contract assets Note 15 16 2022 $ 2021 $ 67,729,376 57,678,803 45,734,278 20,351,162 113,463,654 78,029,965 Trade receivables are non-interest bearing and are generally on 30 to 90 day terms. In 2022 ($91,983) (2021: $147,530) was recognised as provision for expected credit losses on trade receivables. The increase in trade receivables and contract assets for 2022 is representative of the increase in business volume and revenue for the Group during the period, as well as the timing of recognition of significant claims related to work undertaken. Contract assets and revenue includes contract modifications recognised in accordance with the Group’s accounting policy for which amounts are not yet finalised with customers. The following amounts are included in revenue from contracts for the year ended 30 June 2022. Revenue recognised as a contract liability in prior period 12,454,989 16,922,957 The amounts recognised as revenue from contract liabilities represents work undertaken on significant transmission projects for which advance claims were made for materials or services or which payments were made on a milestone basis. Note 2022 $ 2021 $ Unsatisfied performance obligations Transaction price expected to be recognised in future years for unsatisfied performance obligations at 30 June 2022. Construction revenue Services revenue Note 2022 $ 2021 $ 188,800,000 219,100,000 2,000,000 12,500,000 190,800,000 231,600,000 ANNUAL REPORT 2022 57 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 20227. Other income Net gain on disposal of property, plant and equipment Insurance claims and recoveries Government grant income Apprenticeship training subsidies Scrap metal sales Other income Note 2022 $ 279,015 161,363 2021 $ 186,258 105,670 (A) - 2,093,000 851,412 211,742 458,891 445,699 61,366 114,553 1,962,423 3,006,546 (A) As part of economic stimulus measures introduced by the Australian Government related to the COVID19 pandemic, during 2021 Group companies received or were eligible to receive $2,093,000 in ‘JobKeeper’ wage subsidies. No amount was received during 2022. 8. Joint ventures Acquisition of 50% of share capital of Blue Tongue Energy On 2 February 2022, GenusPlus Group Ltd acquired 50% of Blue Tongue Energy Pty Ltd (BT Energy) for upfront consideration of $1m cash. Blue Tongue is involved in the design and construction of hybrid power technology and micro-grid energy markets. Blue Tongue is a private entity that is not listed on any public exchange. The acquisition includes a contingent earn out payment due in FY23 as disclosed under Note 27. Genus has the option to acquire the remaining 50% of the business in FY25 and FY26 with valuation based on BT Energy’s earning at the time. BT Energy contributed $63,000 profit before tax to the consolidated group for the period following the acquisition. The Group’s interest in Blue Tongue is accounted for using the equity method in the consolidated financial statements. The following table illustrates the summarised financial information of the Group’s investment in Blue Tongue. Current assets Non current assets Current liabilities Non-current liabilities Equity Group’s share in equity – 50% (2021: Nil) Goodwill Group’s carrying amount of the investment Note 30 Jun 2022 $ 30 Jun 2021 $ 929,882 2,091,329 (1,706,362) (1,138,872) 175,977 87,989 2,998,310 3,086,299 - - - - - - - No dividends were received from Blue Tongue Energy Pty Ltd during the year ended 30 June 2022. Summarised Financial Information Opening carrying value of investment in Associate Initial investment in associate (a) Investment in associate recognised during the reporting period (b) Share of profit using the equity method Note 30 Jun 2022 $ 30 Jun 2021 $ - 1,000,000 2,022,953 63,346 3,086,299 - - - - - (a) The initial investment in Blue Tongue Energy Pty Ltd was paid in cash on 2 February 2022. (b) The additional investment in Blue Tongue Energy Pty Ltd during the period represents contingent consideration payable to the previous owners in recognition of the achievement of earn-out targets as notified in the ASX release dated 20 December 2021. 58 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 20229. Associates The Group has a 39% interest in Maali Group JV Pty Ltd (Maali), a joint venture involved in the supply of labour hire services to a broad range of customers in the Mining, Energy and Construction sectors. The Group’s interest in Maali is accounted for using the equity method in the consolidated financial statements. Summarised financial information of the joint venture, based on its IFRS financial statements, and a reconciliation with the carrying amount of the investment in the consolidated financial statements are set out below: Summarised statement of financial position of Maali Note 30 Jun 2022 $ 30 Jun 2021 $ Current assets Non current assets Current liabilities Equity Group’s share in equity – 39% (2021: Nil) Goodwill Group’s carrying amount of the investment Summarised statement of profit or loss of Maali Revenue from contracts with customers Cost of sales Administrative expenses, including depreciation Finance costs including interest expense Profit before tax Income tax expense at 25% Profit for the year (continuing operations) Total comprehensive income for the year (continuing operations) Group’s share of profit for the year at 39% Movement in carry value Summarised Financial Information Opening carrying value of joint venture Share of profit using the equity method 8,594,370 823,237 (8,388,268) 1,029,339 401,442 - 401,442 - - - - 49 Note 30 Jun 2022 $ 30 Jun 2021 $ 24,786,151 (22,215,897) (1,166,455) (31,515) 1,372,284 (343,071) 1,029,213 1,029,213 401,393 - - - - - - 49 - Note 30 Jun 2022 $ 30 Jun 2021 $ 49 401,393 401,442 49 - 49 Associates are accounted for using the equity method in these consolidated financial statements as set out in the Group’s accounting policies. No dividends were received from Maali Group Pty Ltd during the year ended 30 June 2022. ANNUAL REPORT 2022 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2022Note 2022 $ 2021 $ 5,022,260 3,236,339 2,291,264 1,800,257 879,336 2,778,473 4,361,527 949,004 731,762 419,236 12,771,590 9,697,868 Note Note 2022 $ 8,550 8,550 2022 $ 142,053 703,456 845,509 231,596 - 231,596 1,077,105 2021 $ 3,216 3,216 2021 $ 46,093 433,865 479,958 218,335 9,050 227,385 707,343 10. Other expenses Other expenses recognised during the period Insurance Consultancy, legal and other professional fees Computer, and other ICT expenses Occupancy costs Other expenses Total other expenses 11. Finance costs and finance income Finance income for the reporting periods consist of the following: Interest income from cash and cash equivalents Finance costs for the reporting periods consist of the following: Interest expenses for borrowings at amortised cost: Bank loans Lease liabilities Total interest expense Other finance costs Bank fees and charges Borrowing costs Total other finance costs Total finance costs 60 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202212. Income tax expense The major components of tax expense and the reconciliation of the expected tax expense based on the domestic effective tax rate of GenusPlus Group Ltd at 30% (2021: 30%) and the reported tax expense in profit or loss are as follows: Reconciliation between tax expense and pre-tax accounting profit Note Profit before tax Domestic tax rate for GenusPlus Group Ltd Expected tax expense Adjustment for tax-exempt income: Other tax-exempt income Adjustment for non-deductible expenses: Other non-deductible expenses 2022 $ 2021 $ 20,024,314 19,154,388 30% 30% 6,007,294 5,746,316 - - 202,251 - (30,000) - - 357,647 Adjustments in the current year in relation to the current tax of prior years 258,294 (268,344) Actual tax expense Tax expense comprises: Income tax payable Deferred tax (income) / expense: Origination and reversal of temporary differences (Over) provision in respect of prior years Income tax expense reported in the income statement The applicable effective tax rates are: 6,467,839 5,805,619 72,003 5,597,645 6,395,836 476,318 - (268,344) 6,467,839 5,805,619 32.3% 30.3% ANNUAL REPORT 2022 61 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202212. Income tax expense (continued) (a) Recognised deferred tax assets and liabilities Deferred income tax balances relate to the following: 1 July 2020 $ Recognised in profit and loss $ Business Combination 1 July 2021 $ Recognised in profit and loss $ 30 June 2022 $ Deferred tax liabilities Trade and other receivables (14,682) 14,682 - Contract assets (1,981,392) (4,123,957) (6,105,349) Financial assets Property, plant and equipment Prepayments - (339,625) (339,625) (424,442) 410,563 (13,879) - - - Right-of-use assets (1,210,088) (78,164) (1,288,252) - - - - - - (108,811) (108,811) (7,712,398) (13,817,747) (1,122) (340,747) (768,048) (781,927) (454,926) (454,926) (5,696,676) (6,984,928) Customer relationships - - - (2,557,504) - (2,557,504) (3,630,604) (4,116,501) (7,747,105) (2,557,504) (14,741,981) (25,046,590) Deferred tax assets Trade and other receivables - 34,015 34,015 Other current assets 1,395 (1,395) Accrued expenses Contract liabilities Lease liabilities Statutory liabilities - - 1,221,776 285,613 - - - 1,567,606 1,567,606 368,105 1,589,881 158,615 444,228 Employee benefits 1,226,406 1,016,611 2,243,017 Blackhole expenditure Capital losses – Australia Transferred tax losses 63,201 61,178 - 531,089 594,290 - - 61,178 - Borrowing costs 12,405 5,387 17,792 2,871,974 3,680,033 6,552,007 - - - - - - - - - - - - (22,640) 11,375 108,812 108,812 150,000 150,000 2,512,084 4,079,690 5,009,490 6,599,371 252,201 696,429 468,316 2,711,333 (174,285) 420,005 (61,178) - 110,235 110,235 (6,890) 10,902 8,346,145 14,898,152 (758,629) (436,468) (1,195,098) (2,557,504) (6,395,836) (10,148,438) All deferred tax assets (including tax losses and other tax credits) have been recognised in the statement of financial position. (b) Current Income tax Income tax receivable / (payable) Note 2022 $ 2021 $ 4,569,537 1,482,484 62 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202213. Earnings per share Both the basic and diluted earnings per share have been calculated using the profit attributable to shareholders of the parent company (GenusPlus Group Ltd) as the numerator, i.e. no adjustments to profits were necessary during the year ended 30 June 2022 and 30 June 2021. Profit for the period Note 2022 $ 2021 $ 13,556,474 13,348,769 The weighted average number of shares for the purpose of calculation of diluted earnings per share can be reconciled to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: Weighted average number of shares used in basic earnings per share 162,218,759 154,742,031 Shares deemed to be issued for no consideration - - Weighted average number of shares used in diluted earnings per share 162,218,759 154,742,031 Note 2022 No. 2021 No. Earnings per share (basic) Earnings per share (diluted) 14. Cash and cash equivalents Cash at bank and in hand Australian Dollar ($AUD) – unrestricted Australian Dollar ($AUD) – held as guarantee1 American Dollar ($USD) Short-term bank deposits Total cash and cash equivalents 8.36 8.36 8.63 8.63 Note 2022 $ 2021 $ 25,804,868 29,345,153 738,882 1,338,723 - 611,326 4,137,779 87,250 27,882,473 34,181,508 1 In accordance with certain contractual agreements, agreed amounts of cash at bank are held in guarantee to meet ongoing performance obligations. ANNUAL REPORT 2022 63 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202215. Trade and other receivables Current Trade receivables, gross Allowance for expected credit losses Trade receivables Other receivables Total trade and other receivables Note 2022 $ 2021 $ 67,821,359 57,826,333 (91,983) (147,530) 67,729,376 57,678,803 1,143,535 20,042 68,872,911 57,698,845 Trade receivables are non-interest bearing and are generally on 30 to 90 day terms. The Group has a policy of only dealing with credit worthy customers and therefore will only recognise an allowance for expected credit losses when some uncertainty as to collection exists. When the Group is reasonably certain that no recovery of the amount owing is possible, the amount is considered irrecoverable and written off against the financial asset directly. Once an item is considered uncollectable, all other amounts relating to the same customer are then also assessed for recoverability. The Group will continue to strongly pursue all debts provided for. Due to their short-term nature, the net carrying value of trade receivables is considered a reasonable approximation of fair value. Allowance for expected credit losses The consolidated entity has recognised a loss of Nil (FY21: $20,927) in profit or loss in respect of the expected credit losses for the year ended 30 June 2022. Expected credit loss rate Carrying amount Allowance for expected credit losses Note 2022 % 2021 % 2022 $ 2021 $ 2022 $ 2021 $ Consolidated Not overdue 0 to 3 months overdue 3 to 6 months overdue Nil Nil Nil Nil Nil Nil 57,849,322 51,039,101 5,903,255 3,510,145 2,426,855 777,774 - - - - - - Over 6 months overdue 5.6% 5.9% 1,641,927 2,499,313 (91,983) (147,530) 67,821,359 57,826,333 (91,983) (147,530) The majority of customers of the Group consist of tier 1 miners and industrial services business and government trading entities. Accordingly, the calculation of expected credit losses is maintained at a relatively low level due to the infrequent nature of default by any of these customers. The movement in the allowance for expected credit losses in respect of Trade receivables during the year was as follows: Movement in provision for expected credit losses Balance at start of year Impairment losses recognised Amounts recognised in acquisition of Connect Engineering Pty Ltd Debts written off during the year Balance at 30 June Note 2022 $ 2021 $ (147,530) - - 55,547 (91,983) (77,449) (20,927) (49,154) - (147,530) 64 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202216. Contract assets Current Contract assets Total contract assets Note 2022 $ 2021 $ 45,734,278 20,351,162 45,734,278 20,351,162 Contract assets represents the unbilled amounts expected to be collected from customers for contract work performed to date. The contract assets are transferred to trade receivables when the rights have become unconditional. This usually occurs when the Group issues an invoice in accordance with contractual terms to the customer. The increase from 2021 is representative of the overall increase in business activity experienced by the Group during the reporting period. Remaining performance obligations As of 30 June 2022, the aggregate amount of the transaction price allocated to the remaining performance obligations is $190.8 million (2021: $231.6 million). The Group will recognise this revenue when the performance obligations are satisfied. Approximately 81% of remaining performance obligations are expected to occur within the next 12 months. The remaining performance obligations balances for both 30 June 2022 and 30 June 2021 presented above relate to the revenue expected to be recognised from ongoing construction type contracts which were not wholly performed at each of those dates. 17. Financial assets and liabilities Categories of financial assets and liabilities Note 4 provides a description of each category of financial assets and financial liabilities and the related accounting policies. The carrying amounts of financial assets and financial liabilities in each category are as follows: 30 June 2022 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets (a) Listed equity securities (a) Total financial assets Amortised cost $ Note FVTPL $ Total $ 14 15 27,882,473 68,872,911 71,833 - 96,827,217 - - - 922,000 922,000 27,882,473 68,872,911 71,833 922,000 97,749,217 (a) Other financial assets includes loans to associates and listed equity securities valued at $993,833. 30 June 2022 Financial liabilities Bank borrowings Leases Contingent consideration Trade and other payables Non-current - bank borrowings Non-current - leases Non-current contingent consideration Total financial liabilities Other liabilities amortised cost $ Other liabilities FVTPL $ Note 1,920,000 7,765,884 - - - 4,949,953 72,608,068 3,250,000 14,232,018 - - - 25 21 25 23 25 21 25 Total $ 1,920,000 7,765,884 4,949,953 72,608,068 3,250,000 14,232,018 - 674,000 674,000 99,775,972 5,623,953 105,399,923 ANNUAL REPORT 2022 65 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202217. Financial assets and liabilities (continued) 30 June 2021 Financial assets Cash and cash equivalents Trade and other receivables Other financial assets Listed equity securities Total financial assets Amortised cost $ Note FVTPL $ Total $ 14 15 (b) (b) 34,181,508 57,698,845 100,000 - - - 34,181,508 57,698,845 100,000 - 1,383,000 1,383,000 91,980,353 1,383,000 93,363,353 (b) Other financial assets includes loans to joint ventures and listed equity securities valued at $1,483,000. 30 June 2021 Financial liabilities Bank borrowings Leases Trade and other payables Non-current - bank borrowings Non-current - leases Total financial liabilities Other liabilities amortised cost $ Other liabilities FVTPL $ Note 25 21 23 25 21 1,920,000 4,285,659 64,012,279 4,920,000 8,758,718 83,896,656 - - - - - - Total $ 1,920,000 4,285,659 64,012,279 4,920,000 8,758,718 83,896,656 A description of the Group’s financial instrument risks, including risk management objectives and policies is given in Note 38. The methods used to measure financial assets and liabilities reported at fair value are described in Note 39. Financial assets at fair value through profit or loss (FVTPL) Financial assets at FVTPL include the equity investment in Volt Power Ltd (VPR). The Group accounts for the investment at FVTPL and did not make the irrevocable election to account for it at FVOCI. Listed investment in Volt Power Ltd (VPR) Borrowings Borrowings include the following financial liabilities: At amortised cost Bank borrowings Total borrowings Note 2022 $ 922,000 922,000 2021 $ 1,383,000 1,383,000 2022 $ 1,920,000 1,920,000 Current 2021 $ 2022 $ Non-current 2021 $ 1,920,000 3,250,000 4,920,000 1,920,000 3,250,000 4,920,000 Bank borrowings are secured by a floating charge over the assets of the Group (see Note 25). Current interest rates are variable and average 1.58% (2021: 0.07%). The carrying amount of the other bank borrowings is considered to be a reasonable approximation of the fair value. 66 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202217. Financial assets and liabilities (continued) Other financial instruments The carrying amount of the following financial assets and liabilities is considered a reasonable approximation of fair value: • • • • trade and other receivables cash and cash equivalents trade and other payables. contingent consideration payable. 18. Inventories Current At cost: Raw materials and stores Total inventories Note 2022 $ 2021 $ 3,728,803 2,044,909 3,728,803 2,044,909 In 2022, a total of $139,298,892 of materials was included in profit and loss as an expense (2021: $96,660,619). This includes an amount of NIL resulting from write down of inventories (2021: $19,219). 19. Other assets Current Prepayments Security deposits Total other assets Note 2022 $ 2020 $ 1,516,419 3,371,850 66,460 78,076 1,582,879 3,449,926 ANNUAL REPORT 2022 67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2022$ l a t o T $ s t e s s a l e u a v w o l d n a g n i l o o T , e r u t i n r u F $ $ l y g o o n h c e t s g n i t t fi d n a e r a w t f o S d n a s e r u t x fi $ d n a t n a P l t n e m p u q e i r o t o M l d o h e s a e L d n a d n a L i t n e m p u q e d n a t n a l p , y t r e p o r P . 0 2 l s e c h e v i s t n e m e v o r p m i s g n d i l i u b $ $ $ 2 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F , 2 1 8 2 8 5 9 3 , , 2 5 3 4 1 7 5 , - , 8 7 2 4 8 2 2 , 0 4 1 , 0 0 6 8 7 4 3 4 , - 8 2 5 , 1 6 ) 5 2 6 4 1 ( , - ) 7 8 3 , 1 9 8 2 ( , ) 0 0 1 , 2 ( - - , 2 6 6 3 4 8 , 0 0 0 0 0 8 2 5 0 3 3 , 3 0 9 9 6 , 0 0 0 0 4 , 4 5 4 3 1 , ) 5 0 3 , 1 ( ) 5 2 6 4 1 ( , 8 2 9 3 7 5 , , 6 4 7 5 0 1 , 1 , 1 0 5 6 6 4 , 8 1 5 3 9 2 0 2 , , 2 8 4 4 9 0 4 , , 0 1 6 2 5 4 7 6 7 4 9 , , 8 7 9 7 5 4 5 1 , , 9 5 2 3 1 0 , 1 , 8 7 2 4 4 4 , 1 - 7 3 1 , 2 7 1 ) 1 7 1 , 0 8 2 ( - - - - - ) 3 7 1 , 7 5 9 ( ) 7 8 1 , 1 3 4 , 1 ( ) 2 2 6 9 9 4 ( , - - - - , 0 7 6 5 4 6 0 5 4 5 1 1 , i i s n o i t a n b m o c s s e n s u b h g u o r h t n o i t i s u q c A i l i i a s o p s d s s e n s u b f o t r a p s a s a s o p s D l i i n o i t a c fi s s a c - e R l l s a s o p s D i i t n u o m a g n y r r a c s s o r G 1 2 0 2 y u J 1 l t a e c n a a B l s n o i t i d d A , 0 3 4 5 7 6 4 4 , 6 4 0 3 0 7 , , 0 6 4 2 8 7 2 , , 2 4 2 7 4 0 5 2 , , 0 3 2 9 9 1 , 4 1 , 4 0 4 8 0 6 0 2 1 , 1 6 7 2 2 0 2 e n u J 0 3 t a e c n a a B l 68 GENUSPLUS GROUP LTD , ) 0 8 3 5 1 8 3 2 ( , , ) 5 6 7 3 4 3 ( , ) 8 2 9 4 0 4 ( ) 9 2 7 5 1 2 ( , , ) 8 5 4 0 4 7 3 1 ( , , ) 4 0 2 2 2 8 8 ( , ) 3 6 4 8 9 1 ( , ) 3 3 8 9 8 ( , 1 2 0 2 y u J 1 l t a e c n a a B l t n e m r i a p m i d n a n o i t a c e r p e D i , 6 4 7 8 9 7 , 1 8 7 8 - 1 7 2 1 1 1 , 6 5 7 - ) 0 1 3 0 2 ( , ) 1 3 1 , 9 4 ( ) 5 7 4 3 2 ( , ) 8 9 3 7 2 3 ( , , 3 7 6 5 9 8 , 4 1 3 0 2 4 - 3 1 8 5 4 1 , - - i n o i t a c fi s s a c - e R l l s a s o p s D i , ) 0 9 6 3 8 9 4 ( , ) 0 5 0 5 6 1 ( , , ) 3 7 8 0 9 5 ( ) 6 9 9 9 1 1 ( , ) 6 5 5 , 1 8 4 2 ( , , ) 7 3 0 3 3 4 , 1 ( ) 7 5 5 9 2 1 ( , ) 1 2 6 3 6 ( , i n o i t a c e r p e D , ) 4 2 3 0 0 0 7 2 ( , , ) 7 4 2 8 2 5 ( , ) 2 3 9 4 4 0 , 1 ( , ) 9 2 9 8 5 3 ( , ) 1 0 3 3 9 7 5 1 ( , 6 0 1 , 5 7 6 7 1 , 9 9 7 4 7 1 , , 8 2 5 7 3 7 , 1 9 9 9 4 1 2 , , 1 4 9 3 5 2 9 , , ) 4 5 2 9 3 9 8 ( , , 6 7 9 9 5 2 5 , ) 7 0 2 2 8 1 ( , ) 4 5 4 3 5 1 ( , 2 2 0 2 e n u J 0 3 t a e c n a a B l 7 9 1 , 6 2 4 6 6 6 7 0 6 , 2 2 0 2 e n u J 0 3 t n u o m a g n y r r a C i NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022 $ l a t o T , 9 2 4 9 7 4 6 3 , $ s t e s s a l e u a v w o l d n a g n i l o o T , 4 5 3 8 5 3 , ) 0 5 5 0 0 0 , 1 ( - 4 9 1 , 2 1 3 4 , 5 4 1 , 0 1 2 - , 6 2 2 2 1 6 2 , - 7 5 0 7 8 , , e r u t i n r u F $ $ l y g o o n h c e t s g n i t t fi d n a e r a w t f o S d n a s e r u t x fi $ d n a t n a P l t n e m p u q e i r o t o M l d o h e s a e L d n a d n a L ) d e u n i t n o c ( t n e m p u q e d n a t n a l p i , y t r e p o r P . 0 2 l s e c h e v i s t n e m e v o r p m i s g n d i l i u b $ $ $ 1 2 0 2 e n u J 0 3 d e d n e r a e y e h t r o F - - , 1 3 2 3 7 5 , 9 9 4 4 3 4 0 5 5 2 5 1 , - - 5 6 3 4 7 3 , 5 4 7 3 7 , 6 2 5 7 2 , , ) 4 1 3 8 5 4 , 1 ( 7 5 1 , 9 3 3 , 1 ) 0 0 8 8 4 6 ( , ) 0 5 7 , 1 5 3 ( - - , 7 8 5 5 3 6 2 , 0 5 1 , 1 9 4 , 1 , 6 3 7 0 8 7 0 0 0 6 3 9 , , 2 5 2 2 6 9 8 1 , , 5 8 3 7 0 7 4 1 , 2 3 7 6 5 , 0 0 0 5 , 2 2 0 , 1 1 0 , 1 - - 0 2 8 2 9 4 , 0 5 7 0 2 1 , - 0 0 1 , 2 3 i i s n o i t a n b m o c s s e n s u b h g u o r h t n o i t i s u q c A i 1 s t e s s a e s u - f o - t h g i r s a n o i t a c fi s s a c - e R l i l s a s o p s D i i n o i t a c fi s s a c - e R l i t n u o m a g n y r r a c s s o r G 0 2 0 2 y u J 1 l t a e c n a a B l s n o i t i d d A , ) 7 8 4 0 2 8 2 ( , ) 6 1 4 5 5 ( , ) 4 3 5 4 5 ( , ) 5 3 1 , 9 ( , ) 7 5 3 8 8 6 ( , ) 0 5 5 3 5 9 , 1 ( ) 5 9 4 9 5 ( , , 2 1 8 2 8 5 9 3 , , ) 1 6 4 8 9 6 0 2 ( , 0 4 1 , 0 0 6 , 6 4 7 5 0 1 , 1 , 1 0 5 6 6 4 ) 9 3 5 9 3 2 ( , ) 0 4 8 3 7 2 ( , ) 9 6 5 5 3 1 ( , , 8 1 5 3 9 2 0 2 , , 8 7 9 7 5 4 5 1 , , ) 6 5 2 6 4 4 2 1 ( , , ) 1 9 3 4 7 4 7 ( , , 9 5 2 3 1 0 , 1 , 0 7 6 5 4 6 1 2 0 2 e n u J 0 3 t a e c n a a B l ) 2 3 7 2 1 1 ( , ) 4 3 1 , 6 1 ( t n e m r i a p m i d n a n o i t a c e r p e D i 0 2 0 2 y u J 1 l t a e c n a a B l - ) 5 3 2 , 1 2 ( - , 1 9 9 2 6 7 , 1 6 1 4 5 5 , 2 7 4 9 4 , - 3 7 7 3 , , 4 5 7 5 6 5 1 5 6 5 2 1 , ) 6 0 2 , 1 0 1 ( - , ) 0 1 9 9 7 8 4 ( , ) 7 0 4 8 3 1 ( , ) 0 6 5 0 8 1 ( , ) 3 3 9 3 8 ( , , ) 7 0 6 5 8 9 , 1 ( ) 8 4 1 , 0 9 2 2 ( , ) 6 6 7 0 3 1 ( , , ) 0 8 3 5 1 8 3 2 ( , , 2 3 4 7 6 7 5 1 , , ) 5 6 7 3 4 3 ( , ) 8 2 9 4 0 4 ( ) 9 2 7 5 1 2 ( , , 5 7 3 6 5 2 , 8 1 8 0 0 7 , 2 7 7 0 5 2 , ) 8 5 4 0 4 7 3 1 ( , , ) 4 0 2 2 2 8 8 ( , ) 3 6 4 8 9 1 ( , , 1 4 5 3 4 0 , 1 5 3 0 5 4 , - l s a s o p s D i ) 0 1 2 3 ( , ) 9 8 4 0 7 ( , ) 3 3 8 9 8 ( , 1 2 0 2 e n u J 0 3 t a e c n a a B l i n o i t a c e r p e D i n o i t a c fi s s a c - e R l , 0 6 0 3 5 5 6 , , 4 7 7 5 3 6 6 , 6 9 7 4 1 8 , , 7 3 8 5 5 5 1 2 0 2 e n u J 0 3 t n u o m a g n y r r a C i ) 1 2 e t o N i ( n o i t i s u q c a o t t n e u q e s b u s s t e s s a e s u - f o - t h g i r o t d e fi s s a c - e r e r e w l i i l t n e m p u q e d n a t n a p d n a s e c h e v r o t o m l i f o s m e t i i n a t r e C 1 ANNUAL REPORT 2022 69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2022 20. Property, plant and equipment (continued) All depreciation and impairment charges are included within depreciation, amortisation and impairment of non-financial assets. Total depreciation and amortisation recognised during the reporting period: Depreciation Buildings Leasehold improvements Motor vehicles Plant and equipment Furniture, fixtures and fittings Software and technology Tooling and low value assets Note 2022 $ 2021 $ 63,621 129,557 1,433,037 2,481,556 119,996 590,873 165,050 70,489 130,766 2,290,148 1,985,607 83,933 180,560 138,407 Total depreciation expense for the year 4,983,690 4,879,910 Depreciation – right of use assets 21 5,340,060 2,533,618 Amortisation – intellectual property and customer contracts Total depreciation and amortisation 1,578,181 - 11,901,931 7,413,528 The net assets of the Group have been pledged as security for the Group’s other bank borrowings (see Note 25). 21. Leases Lease liabilities are presented in the statement of financial position as follows: Current Non-current Total leases Group as a lessee Note 2022 $ 2021 $ 7,765,884 4,285,659 14,232,018 8,758,718 21,997,902 13,044,377 The Group has lease contracts for land and buildings and for various items of plant and equipment and motor vehicles used in its operations. Leases of plant and equipment and motor vehicles generally have lease terms between 3 and 5 years after which ownership of the underlying asset passes to the Group. Leases over land and buildings have lease terms of between 1 and 10 years. The Groups obligations under its leases are secured by the lessor title to the leased assets. Generally, the Group is restricted from assigning and subleasing the leased assets. The Group also has certain leases of office equipment with low value. The Group applies the ‘short-term lease’ and ‘lease of low- value assets’ recognition exemptions for these leases. 70 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202221. Leases (continued) Group as a lessee (continued) Set out below are the carrying amounts of right-of-use assets and the movement during the period: Right-of-use assets – Land and Buildings As at 1 July Additions Adjustments related to changes in lease conditions1 Acquired under a business combination2 Depreciation expense De-recognised during the period3 As at 30 June Right-of-use assets – Plant and Equipment As at 1 July Additions Acquired under a business combination2 Disposal Re-classification from property, plant & equipment5 Depreciation expense As at 30 June Right-of-use asset – Motor Vehicles As at 1 July Additions Disposals Acquired under a business combination4 Re-classification from property, plant & equipment5 Depreciation expense As at 30 June Note 2022 $ 2021 $ 35 35 35 4,666,285 3,929,446 91,773 - 4,457,451 283,954 256,001 969,355 (2,227,853) (1,207,731) (270,942) (92,745) 6,188,709 4,666,285 4,236,234 5,139,079 - (47,199) - (1,703,882) 970,233 3,283,569 170,000 - 648,800 (836,368) 7,624,232 4,236,234 4,648,338 6,234,706 (4,568) - - (1,408,325) 1,480,367 2,571,740 - 734,000 351,750 (489,519) 9,470,151 4,648,338 Total Right-Of-Use Assets 23,283,092 13,550,857 1 2 3 4 5 Increase resulting from a change in the monthly lease payable to the owner. Acquired as part of the acquisition of Connect Engineering Pty Ltd. Leases surrendered during the period. Includes motor vehicles acquired as part of the acquisition of Connect Engineering Pty Ltd. Includes plant and equipment and motor vehicles purchased from Great Southern Electrical Pty Ltd that were financed via a lease arrangement after transfer to the Group. The following are the amounts recognised in profit or loss: Depreciation of right-of-use assets Interest expense on right-of-use asset lease liabilities Expense relating to short-term leases Note 2022 $ 5,340,060 703,456 11,496,147 17,539,663 2021 $ 2,533,618 433,865 5,320,931 8,288,414 The group had total cash outflows for leases of $6,975,397 in 2022 (2021: $3,314,831). The Group also had non-cash additions to right-of-use assets and lease liabilities of $15,516,763 in 2022 (2020: $7,139,813). ANNUAL REPORT 2022 71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202221. Lease (continued) Group as a lessee (continued) Maturity analysis: Less than 1 year Between 1 year and 2 years Between 2 years and 5 years Over 5 years Less: interest Note 2022 $ 2021 $ 8,484,431 7,033,025 7,908,245 - 4,829,670 3,943,431 4,949,197 282,362 23,425,701 14,004,660 (1,427,799) (960,283) 21,997,902 13,044,377 The Group does not face a significant liquidity risk with regards to its lease liabilities. Lease liabilities are monitored within the Group treasury function. 22. Intangible assets The movements in the net carrying amount of intangible assets is as follows: Goodwill Balance 1 July Acquired through business combinations Balance 30 June Accumulated impairment losses Accumulated amortisation Carrying amount at 30 June Customer contracts Balance 1 July Acquired through business combinations Balance 30 June Accumulated amortisation Carrying amount at 30 June Other intellectual property Balance 1 July Note 2022 $ 2021 $ 5,505,688 35 14,035,100 1,613,914 3,891,774 19,540,788 5,505,688 - - - - 19,540,788 5,505,688 39,890 35 9,004,000 - 39,890 39,890 - 39,890 - - - - - 9,043,890 (518,879) 8,525,011 - 7,166,746 7,166,746 (1,059,302) 6,107,444 34,173,243 5,545,578 Acquired through business combinations 35 Balance 30 June Accumulated amortisation Carrying amount at 30 June Total intangible assets No adjustments to Goodwill were recognised during the reporting period. Customer contracts and other intellectual property are amortised over their estimated useful lives, which is on average 11 years (customer contracts) and 9 years (intellectual property). 72 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202222. Intangible assets (continued) Impairment testing For the purpose of annual impairment testing, goodwill is allocated to the following cash-generating units, which are the units expected to benefit from the synergies of the business combinations in which the goodwill arises. Powerlines Plus (Qld) Pty Ltd Proton Power Pty Ltd KEC Power Pty Ltd Connect Engineering Pty Ltd Genus PFA Pty Ltd Goodwill allocation at 30 June Note 2022 $ 1,179,147 305,395 129,372 2021 $ 1,179,147 305,395 129,372 3,891,774 3,891,774 35 14,035,100 - 19,540,788 5,505,688 The recoverable amounts of the cash-generating units were determined based on value-in-use calculations, covering a three- year forecast, followed by an extrapolation of expected cash flows for the units’ remaining useful lives using the growth rates determined by management. The present value of the expected cash flows of each segment is determined by applying a suitable discount rate. Powerlines Plus (Qld) Pty Ltd Proton Power Pty Ltd KEC Power Pty Ltd Connect Engineering Pty Ltd Genus PFA Pty Ltd Growth rates Growth rates Discount rates 2022 2021 2022 2021 5% 5% 5% 5% 5% 5% 5% 5% 5% - 13% 13% 13% 13% 13% 7% 7% 7% 7% - The growth rates reflect the long-term average growth rates for the business of the segments and the markets they operate in. Sensitivity As disclosed in note 4, the directors have made judgements and estimates in respect of impairment testing of goodwill. Should these judgements and estimates not occur the resulting goodwill carrying amount may decrease. The sensitivities are as follows: Gross Margin − Decreased demand and increase costs can lead to a decline in the gross margin and earnings before interest, taxes and depreciation (EBITDA). A decrease in the gross EBITDA margin by 1.0% would result in impairment in the Connect cash generating unit. Growth rate estimates − Rates are based on published industry research. The effect of whether delays, new entrants to the market could yield a reasonably possible alternative to the estimated long-term growth rate of 5% for the Connect CGU. A reduction by 1% in the long-term growth rate would result in an impairment. Discount rates The discount rates reflect appropriate adjustments relating to market risk and specific risk factors of each unit. Cash flow assumptions Powerlines Plus (Qld) Pty Ltd, Proton Power Pty Ltd, KEC Power Pty Ltd, Connect Engineering Pty Ltd & Genus PFA Pty Ltd Management’s key assumptions include stable profit margins, based on past experience in this market. The Group’s management believes that this is the best available input for forecasting this mature market. Cash flow projections reflect stable profit margins achieved immediately before the budget period. No expected efficiency improvements have been taken into account and prices and wages reflect publicly available forecasts of inflation for the industry. ANNUAL REPORT 2022 73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202223. Trade and other payables Unsecured liabilities: Trade payables Goods and services tax payable Unpaid wages Sundry payables and accrued expenses Total trade and other payables Note 2022 $ 2021 $ 33,646,539 37,462,511 2,810,173 4,413,962 1,545,427 3,041,992 31,737,394 21,962,349 72,608,068 64,012,279 All amounts are short-term. The carrying values of trade payables and other payables are considered to be a reasonable approximation of fair value. 24. Contract liabilities Short-term advances for materials Short-term advances for construction services Note 2022 $ 2021 $ 885,057 4,357,461 11,867,906 867,893 12,752,963 5,225,354 Advances received for construction contract work represent customer payments received in advance of performance (contract liabilities) that are expected to be recognised as revenue in the next financial year. The amounts recognised in respect of construction contracts will generally be utilised within the next reporting period. The balance relating to advances for materials decreased during the period as the related aspects of the contracts were performed. Advances in relation to construction services increased during the period due to the increase in the Group’s customer base, and the recognition of milestone payments. 25. Other financial liabilities Secured borrowings – at amortised cost Bank loan – secured Current Non-current Contingent consideration Current Non-current 74 GENUSPLUS GROUP LTD Note 2022 $ 2021 $ 1,920,000 1,920,000 3,250,000 4,920,000 5,170,000 6,840,000 Note 2022 $ 2021 $ 4,949,953 674,000 5,623,953 - - - NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202225. Other financial liabilities (continued) The bank debt facility comprises term loans with quarterly principal repayments with maturity dates between two and five years. The group has an overdraft/trade finance facility with a limit of $10,000,000 with $10,000,000 available at 30 June 2022. The group has an equipment finance facility with Commonwealth Bank of Australia Pty Ltd (CBA) with a limit of $7,000,000 (FY21 - $4,000,000) with $3,198,984 available at 30 June 2022 (FY21 - $2,840,000). The group has an equipment finance facility with Mercedes Benz finance with a limit of $2,000,000 (FY21 - $2,000,000) with $1,981,358 available at 30 June 2022 (FY21 - $1,882,500). The group has an equipment finance facility with Toyota Asset Finance with a limit of $12,000,000 (FY21 - $6,000,000) with $5,809,252 available at 30 June 2022 (FY21 - $594,000). The group has an equipment finance facility with Australia and New Zealand Banking Group Limited (ANZ) with a limit of $4,000,000 (FY21 - $4,000,000) with $708,365 available at 30 June 2022 (FY21 - $2,481,000). The group has an equipment finance facility with Westpac Banking Corporation (WBC) with a limit of $2,000,000 (FY21 – N/A) with $1,507,969 available at 30 June 2022 (FY21 - $N/A) The bank debt is secured by a General Security Agreement of the group. The Group was not in breach of any loan agreements permitting the lender to demand accelerated repayments at year end, nor did any breach occur during the year. The Group was not in default of any loans payable recognised at year end during the year. Contingent consideration As part of the agreement to purchase 50% of Blue Tongue Energy Pty Ltd (Blue Tongue) a contingent consideration has been agreed. There will be additional cash payments to the owners of Blue Tongue if the entity generates more than $500,000 profit before interest and tax in the financial reporting period ended 30 June 2022. This target was met with $2,022,953 recognised as contingent consideration to be settled within 12 months. As part of the purchase agreement with the previous owners of Pole Foundations Australia (Pole Foundations), a contingent consideration has been agreed. There will be additional cash payments to the former owners of Pole Foundations: i. ii. iii. if the entity generates more than $6.175 million profit before interest, tax, depreciation and amortisation (EBITDA) in the financial reporting period ended 30 June 2022. This target was met with $2,927,000 recognised as contingent consideration that is expected to be settled within 12 months. if the entity generates EBITDA between of $6.675 million and $9.8 million in the financial reporting period ended 30 June 2023. This target is only expected to be partially met with $674,000 recognised as contingent consideration. If EBITDA of $9.8 million is achieved, $7 million will be payable, with a pro-rata payment for the EBITDA between $6.675 million and $9.8 million. if the entity generates EBITDA between of $9.8 million and $12.25 million in the financial reporting period ended 30 June 2023. This target is only not expected to be met. No contingent consideration has been recognised. If EBITDA of $12.25 million is achieved, $9 million will be payable, with a pro-rata payment for the EBITDA between $9.8 million and $12.25 million. ANNUAL REPORT 2022 75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202226. Employee benefits Employee benefits expense Expenses recognised for employee benefits are analysed below: Salaries and wages Superannuation Amounts provided for employee entitlements Short term incentives Share based payments expense Other allowances and expenses Employee benefits expense Note 2022 $ 2021 $ 114,594,683 69,718,843 9,053,499 5,381,807 6,181,826 4,843,608 617,884 1,300,000 37 - 700,000 6,749,874 5,206,231 137,197,766 87,150,489 During 2021 certain employees and Non-Executive Directors were issued shares in lieu of cash for meeting agreed targets. Inaugurating employees with Genus Renewables received a sign-on bonus and Non-Executive Directors received shares in accordance with their contracts for successful listing of the Group on the ASX. No amounts were issued or expected to be issued as shares for 2022. Employee benefits The liabilities recognised for employee benefits consist of the following amounts: Current Annual leave Long service leave Other short term employee benefits Non-current Long service leave Note 2022 $ 2021 $ 5,578,530 357,056 551,649 4,756,411 399,591 1,300,000 6,487,235 6,456,002 2,550,543 1,022,430 Total employee benefits 9,037,778 7,478,432 The current portion of these liabilities represents the groups obligations to which the employee has a current legal entitlement. These liabilities arise mainly from accrued annual leave entitlement at reporting date and for employees who have satisfied the service eligibility for long service leave – usually 10 years. 27. Provisions Current Amounts recognised in respected of expected losses or write-downs Total provisions Note 2022 $ 1,221,721 1,221,721 2021 $ 50,000 50,000 76 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202228. Share capital The share capital of the Group consists only of fully paid ordinary shares; the shares do not have a par value. Ordinary shares participate in dividends and the proceeds on winding up of the Group in proportion to the number of shares held. Fully paid ordinary shares Beginning of the year Shares issued to Directors1 2022 Shares 2021 Shares 2022 $ 2021 $ 155,589,964 154,350,877 28,925,754 27,732,909 - 400,000 - 400,000 Shares issued as part of a capital raising2 16,528,926 - 20,000,000 Shares issued as part of a business combination3,4 4,633,530 Shares issued as employee benefits5 Share issue costs - - 529,010 310,077 6,023,589 - - 500,000 300,000 - (1,160,306) (7,155) Total contributed equity at 30 June 176,752,420 155,589,964 53,789,037 28,925,754 1 2 3 4 5 400,000 shares were issued to Directors in accordance with their contracts upon the successful listing of GenusPlus Group Ltd on the ASX. GenusPlus Group Ltd (ASX: GNP) officially listed on the ASX on 14 December 2020. 16,528,926 shares were issued as part of a capital raising to fund the acquisition of Pole Foundations Australia as announced to the market 17 February 2022. The share placement was completed on 28 February 2022. 4,633,530 shares were issued as part consideration for the acquisition of Pole Foundations Australia on 29 April 2022. 529,010 shares were issued as consideration for the acquisition of Connect Engineering Pty Ltd on 4 June 2021 310,077 shares were issued as consideration for certain employees entering new employment contracts on 31 March 2021 upon the commencement of Genus Renewables Pty Ltd. Each share has the same right to receive dividend and the repayment of capital and represents one vote at the Shareholders’ Meeting of GenusPlus Group Ltd. 29. Reserves Balance at 1 July 2020 Movements in asset values measured in foreign currencies that will subsequently be re-classified to profit or loss Notes Foreign Currency Translation reserve - 8,275 Corporate Restructure reserve $ Total $ (511,834) (511,834) - 8,275 Balance at 30 June 2021 8,275 (511,834) (503,559) Balance at 1 July 2021 Movements in asset values measured in foreign currencies that will subsequently be re-classified to profit or loss 8,275 160,117 (511,834) (503,559) - 160,117 Balance at 30 June 2022 168,392 (511,834) (343,442) Corporate restructure reserve The corporate reconstruction reserve recorded the transaction on the introduction of a new ultimate parent entity. Foreign currency translation reserve The foreign currency translation reserve records the un-recognised gains / (losses) incurred on translation of monetary items held in US Dollars ($USD). The balance will be subsequently reported in profit and loss when the underlying value of the monetary item (cash at bank) is utilised. ANNUAL REPORT 2022 77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202230. Dividends on equity instruments Recognised amounts Fully paid ordinary shares Final dividend Year ended 30 June 2022 Year ended 30 June 2021 Cents per share Total $ Cents per share Total $ 1.8 3,181,544 1.8 2,800,619 On 28 October 2021, a dividend of 1.8c per share was paid to the holders of fully paid ordinary shares in respect of the financial year ended 30 June 2021. On 26 August 2022, the directors declared a fully franked dividend of 1.8 cents per share to the holders of fully paid ordinary shares in respect of the financial year ended 30 June 2022. At the time of reporting, the dividend of $3,181,544 was unpaid. The record date is 28 October 2022 and the payment date is 30 November 2022. Distributions made and proposed Franking credit balance The amount of franking credits available for the subsequent financial year are: Franking account balances as at the end of the financial year at 30% (2021: 30%) 16,836,429 20,268,588 2022 $ 2021 $ 31. Reconciliation of cash flows Reconciliation of cash flows from operating activities Cash flows from operating activities Profit after income tax Non-cash flows in profit: gain on disposal of plant and equipment gain on disposal of subsidiary depreciation and amortisation increase in value of investments reported at FVTPL share of profits of associates and joint ventures net finance costs share based payments – net of other costs Changes in assets and liabilities: (increase) in trade and other receivables decrease / (increase) in other assets (increase) / decrease in inventories increase in trade and other payables Net cash provided by operating activities 78 GENUSPLUS GROUP LTD 2022 $ 2021 $ 13,556,475 13,348,769 (279,015) (70,000) (186,258) - 11,901,931 7,413,528 461,000 (464,739) 1,068,555 - (461,000) - 704,127 692,798 (34,801,667) (30,928,713) 1,867,047 (1,393,440) (1,537,509) 497,003 19,762,655 17,301,107 11,464,733 6,987,921 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202232. Auditor remuneration During the financial year the following fees were paid or payable for services provided by Grant Thornton, the auditor of the company, its network firms and unrelated firms: Auditing services – Grant Thornton Audit or review of the financial statements Other services – Grant Thornton Investigating Accountant Report Taxation governance review Review of tax return Other non-assurance services Total auditor’s remuneration 33. Related party transactions Note 2022 $ 2021 $ 235,000 162,000 - - 7,400 25,500 267,900 175,000 22,000 - 46,675 405,675 The Group’s related parties include its key management personnel, related parties of its key management personnel, and others as described below. Unless otherwise stated, none of the transactions incorporate special terms and conditions and no guarantees were given or received. Outstanding balances are usually settled in cash. Transactions with related parties As part of normal business operations, the Group undertakes construction work through associated entities, as well as leasing rental properties. A summary of these transactions is included below. Services provided by related parties Pastoral Plus (Director D Riches) Testing Plus WA (Director D Riches) Partum Engineering (Director D Riches) Sparke Helmore Lawyers (Director P. Gavazzi) Matt Riches and Dave Riches (Director D Riches) Dave Riches (Director D Riches) Edge People Management (Director D Riches) Services provided to related parties Partum Engineering (Director D Riches) Testing Plus WA (Director D Riches) Pastoral Plus (Director D Riches) Blue Tongue Energy Pty Ltd (Associate) All services were contracted at arms’ length basis. 2022 $ 2021 $ 646,489 1,229 839,903 96,545 7,396,206 6,673,059 9,339 559,244 520,900 41,889 1,144,517 572,055 524,613 15,662 2022 $ 2021 $ - - 22,757 498,558 102,394 1,980 30,533 - ANNUAL REPORT 2022 79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202233. Related party transactions (continued) Transactions with related parties (continued) Amounts due to related parties at reporting date Pastoral Plus (Director D Riches) Testing Plus WA (Director D Riches) Partum Engineering (Director D Riches) Innotech Services1 (Director D. Riches) Sparke Helmore Lawyers (Director P. Gavazzi) Matt Riches Pty Ltd & Dave Riches Pty Ltd (Director D Riches) Dave Riches Pty Ltd (Director D Riches) Edge People Management (Director D Riches) Amounts due from related parties at reporting date AUSCON Construction Group (Director D. Riches) Pastoral Plus (Director D. Riches) Blue Tongue Energy Pty Ltd 2022 $ 2021 $ 87,002 - 775,051 - - 21,116 9,832 8,760 52,345 (1,019) 561,880 1,105,923 87,472 - - - 2022 $ 2021 $ - 11,192 18,445 498,558 - - All amounts outstanding at reporting date were included in accounts payable or accounts receivable, and settled in accordance with commercial terms. Transactions with key management personnel Key management of the Group are the Non-Executive members of the Group’s Board of Directors, the Group’s Chief Executive Officer and the other members of the Executive team reporting to the Managing Director. Key management personnel remuneration includes the following expenses: Salaries including bonuses Long service leave Superannuation Termination benefits Share-based payment Total remuneration 2022 $ 2021 $ 1,890,643 2,075,571 7,952 142,858 - - 2,041,453 17,197 129,750 - 400,000 2,622,518 During 2022, the Group used the legal services of one Company Director (Mr Paul Gavazzi) a firm over which he exercises significant influence. The amounts billed related to this legal service amounted to $9,339 (2021: $1,144,517), based on normal market rates. 80 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202234. Contingent assets and contingent liabilities The Group has no contingent assets. There were no material warranty or legal claims brought against the Group during the year. Unless recognised as a provision, management considers these claims to be unjustified and the probability that they will require settlement at the Group’s expense to be remote. Further information on these contingencies is omitted so as not to prejudice the Group’s position in the related disputes. 2022 $ 2021 $ 26,601,326 33,129,277 26,264,012 11,372,443 52,865,338 44,501,720 Estimates of the potential financial effect of contingent liabilities that may become payable: Secured guarantee to company's bankers supported by a floating charge over the Group assets Surety bonds secured by the Group assets The CBA guarantee facility has a limit of $60,000,000 (FY21 - $35,000,000). The Surety bond facilities have a limit of $40,000,000 (FY21 - $30,000,000). 35. Acquisitions and disposals Acquisition of key Tandem Corp assets and contracts On 6 August 2021, GenusPlus Group Ltd completed the purchase of selected key contracts, intellectual property, IT systems, plant and equipment and employee contracts of Tandem Corp Pty Ltd out of administration for total consideration of $3.463m in cash. The assets acquired under the purchase were fair valued at $728,000 with the remaining purchase price allocated to intangibles that will be amortised over a three year period. For the period since the date of acquisition, the contracts acquired contributed revenue of $53m and loss before tax of $4.6m to the consolidated group. This transaction was accounted for as a business combination. Acquisition of net assets of Pole Foundations Australia On 29 April 2022, GenusPlus Group Ltd acquired 100% of the Pole Foundations Australia (PFA) business from BJ Fraser Pty Ltd ACN 139 760 071 as trustee for the BJ Fraser Family Trust and CC Rankine Pty Ltd ACN 098 970 300 as trustee for the CC Rankine Family Trust for an upfront consideration of $22.523m comprised of $16.5m cash and $6.023m in Genus shares (4,633,530 shares with a value at date of transfer of $1.21 were issued, escrowed for 24 months). Under the terms of the agreement, Genus acquired the net assets of PFA comprising property, plant and equipment, inventory and employee liabilities. The acquisition is subject to further contingent earn-out payments in cash subject to PFA’s performance in FY22 to FY24. The performance metric for FY22 was satisfied, with payment due as disclosed under note 27. Pole Foundations contributed revenue of $2,658,00 and profit before tax of $805,000 to the consolidated group for the period following the acquisition. Following the acquisition, a fair value allocation of the purchase price related to the separately identifiable intangible assets was undertaken by an external expert. Subject to the experts valuation, goodwill of $4,660,000 was recognised from the acquisition. None of the goodwill is expected to be deductible of income tax purposes. In relation to the acquisition of Pole Foundations Australia, the Group has performed a provisional assessment of the fair value of the assets and liabilities as at the date of acquisition as well as the contingent consideration payable for meeting specific earnings guidance over the succeeding two-year period. For the purposes of the balance sheet, the assets and liabilities have been recorded at their provisional fair values. Under Australian Accounting Standards, the Group has up to 12 months from the date of acquisition to complete its initial acquisition accounting. The Group has already commenced this exercise to consider the fair values of intangible assets acquired. As at the date of this report, this assessment is not complete. This transaction was accounted for as a business combination. ANNUAL REPORT 2022 81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2022 35. Acquisitions and disposals (continued) Businesses disposed The Group disposed of its interest in Burton Training and Consultancy Pty Ltd during the year ended 30 June 2022. Tandem Corp $ Pole Foundations Australia $ 3,463,360 16,500,000 - - - 6,023,589 (246,330) 3,601,000 3,463,360 25,878,259 40,000 1,444,278 800,000 1,146,459 1,685,758 278,286 - 2,934,387 - - - (1,553,037) (1,868,493) - - - 146,385 4,232,359 9,004,000 14,035,100 (2,701,200) (282,663) - 3,463,360 25,878,259 3,463,360 16,500,000 - - 3,463,360 16,500,000 Consideration transferred / transferrable Cash Shares Adjustment amount Contingent consideration arrangement Total Assets acquired and liabilities assumed at the date of acquisition Plant and equipment Software and technology Deferred tax assets Work in progress Prepayments Inventory Intellectual property Customer relationships Goodwill Deferred tax liability Employee entitlements Liabilities to subcontractors mobilisation costs Total Net cash outflow on acquisition of businesses Consideration paid in cash Less: cash and cash equivalent balances acquired Total 82 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202236. Interests in subsidiaries Composition of the Group Set out below details of the subsidiaries held directly by the Group: Parent Entity: GenusPlus Group Ltd (a) Subsidiaries: Powerlines Plus Pty Ltd (b) Diamond Underground Services Pty Ltd (b) Proton Power Pty Ltd (b) Complete Cabling and Construction Pty Ltd (b) Proton Technical Services Pty Ltd (b) GPL (WA) Pty Ltd (b) Powerlines Plus (Qld) Pty Ltd (Burton Power Pty Ltd) (c) Genus Services Pty Ltd KEC Power Pty Ltd (d) Powerlines Plus (NSW) Pty Ltd (e) ECM Consultancy Pty Ltd (f) Genus Renewables Pty Ltd (g) Connect Engineering Pty Ltd (h) Connect Infrastructure Pty Ltd (h) Connect Infrastructure Construction Pty Ltd (h) Connect Infrastructure Design Pty Ltd (h) Connect Design South Coast (NSW) Pty Ltd (h) Burton Training & Consultancy Pty Ltd (i) Genus PFA Pty Ltd (j) (a) GenusPlus Group Ltd was incorporated on 6 July 2017. Country of Incorporation Percentage Ownership 2022 2021 Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust Aust 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% - (b) Powerlines Plus Pty Ltd was acquired on 17 May 2018. Powerlines Plus Pty Ltd was the 100% shareholder of Diamond Underground Services Pty Ltd, Proton Power Pty Ltd, Complete Cabling and Construction Pty Ltd, Proton Technical Services Pty Ltd, Proton E&I Pty Ltd and GPL (WA) Pty Ltd. (c) Burton Power Pty Ltd was acquired 1 January 2019. (d) KEC Power Pty Ltd was incorporated on 4 February 2019. (e) Powerlines Plus (NSW) Pty Ltd was incorporated on 26 November 2019. (f) ECM Consultancy was incorporated on 12 December 2019. (g) Genus Renewables Pty Ltd was incorporated on 3 July 2020. (h) Connect Engineering Pty Ltd and its subsidiaries were acquired on 1 June 2021. (i) Burton Training & Consultancy acquisition was completed 15 January 2021 and disposed with effect from 1 July 2021. (j) Pole Foundations Australia (now Genus PFA Pty Ltd) was acquired on 29 April 2022. ANNUAL REPORT 2022 83 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2021 37. Share based payments Expense recognised in profit or loss. Share based payments expenses for the year comprises: Directors fees Other employment expense Total 2022 $ - - - 2021 $ 400,000 300,000 700,000 No shares were issued to any member or employee during 2022 by way of payment for service. During 2021 Non-Executive Directors, in accordance with their contracts, were issued shares in GenusPlus Group Ltd upon its successful listing on the Australian Stock Exchange (ASX: GNP). Upon the initial business registration of Genus Renewables, certain inaugurating employees received a sign-on bonus in shares. 38. Financial risk management Risk management objectives and policies The Group is exposed to various risks in relation to financial instruments. The Group’s financial assets and liabilities by category are summarised in Note 17. The main types of risks are market risk, credit risk and liquidity risk. The Group’s risk management is coordinated at its headquarters, in close cooperation with the Board of Directors, and focuses on actively securing the Group’s short to medium-term cash flows by minimising the exposure to financial markets. Long-term financial investments are managed to generate lasting returns. The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed are described below. Market risk analysis The Group is exposed to market risk through its use of financial instruments and specifically to currency risk, interest rate risk and certain other price risks, which result from both its operating and investing activities. Foreign currency sensitivity Most of the Group’s transactions are carried out in Australian Dollars (AUD). Exposures to currency exchange rates arise from the Group’s sales and purchases denominated in US-Dollars (USD). The Group holds a bank account in USD for this purpose. To mitigate the Group’s exposure to foreign currency risk, non-AUD cash flows are monitored in accordance with the Group’s risk management policies. Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no hedging activity is undertaken. Foreign currency denominated financial assets and liabilities which expose the Group to currency risk are disclosed below. The amounts shown are those reported to key management translated into AUD at the closing rate: 2022 Short term exposure USD $ 922,967 - 922,967 2022 Long term exposure USD $ - - - 2021 Short term exposure USD $ 3,103,646 - 3,103,646 2021 Long term exposure USD $ - - - Financial assets Financial liabilities Total exposure 84 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2021 38. Financial risk management (continued) Foreign currency sensitivity (continued) The following table illustrates the sensitivity of profit and equity in respect of the Group’s financial assets and financial liabilities and the AUD/USD exchange rate ‘all other things being equal’. It assumes a +/- 10% change of the AUD/USD exchange rate for the year ended 30 June 2022 (2021: 10%). The percentage has been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Group’s foreign currency financial instruments held at each reporting date. In any respect, the Group would elect not to realise the underlying value of the financial asset were it to result in a loss to the Group. Financial assets subject to currency sensitivity were received on 30 June 2020, and valued at the exchange rate applicable on that date. If the Australian Dollar (AUD) had strengthened against the US-Dollar (USD) by 10% (2021: 10%) then this would have had the following impact: 30 June 2022 30 June 2021 Profit for the year AUD $ - - If the AUD had weakened against the USD by 10% (2020: 10%) then this would have had the following impact: 30 June 2022 30 June 2021 Profit for the year AUD $ - - Equity AUD $ (121,702) (376,192) Equity AUD $ 121,702 376,192 Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of the Group’s exposure to currency risk. Interest rate sensitivity The Group’s policy is to minimise interest rate cash flow risk exposures on long-term financing. Longer-term borrowings are therefore usually at fixed rates. At 30 June 2022, the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other borrowings are at fixed interest rates. The exposure to interest rates for the Group’s money market funds is considered low due to the current low interest rate setting, and long-term outlook provided by the Reserve Bank of Australia (RBA). The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of +/- 2.00% (2021: +/- 1%). These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant. 30 June 2022 30 June 2021 Profit for the year $ +2% / +1% 103,400 68,400 $ -2% / -1% (103,400) (68,400) $ +2% / +1% (103,400) (68,400) Equity $ -2% / -1% 103,400 68,400 ANNUAL REPORT 2022 85 38. Financial risk management (continued) Other price risk sensitivity The Group is exposed to other price risk in respect of the investment in Volt Power Limited (ASX: VPR). For the listed investment in Volt Power Limited, an average volatility of 33% has been observed during 2022 (2021: 33%). Volatility at the lower end of this scale is considered a suitable basis for estimating how profit or loss and equity would have been affected by changes in market risk that were reasonably possible at the reporting date due to the relatively low volumes traded. If the quoted stock price for VPR increased or decreased by that amount, profit or loss and equity would have changed by $304,260 (2021: $461,000). The investment in VPR is considered a long-term, strategic investment. In accordance with the Group’s policies, no specific hedging activities are undertaken in relation to this investment. The investment is continuously monitored and voting rights arising from the equity instrument are utilised in the Group’s favour. Credit risk analysis Credit risk is the risk that a counterparty fails to discharge an obligation to the Group. The Group is exposed to credit risk from financial assets including cash and cash equivalents held at banks, trade and other receivables and contract assets. The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below: Classes of financial assets Carrying amounts: cash and cash equivalents trade and other receivables Credit risk management 2022 $ 2021 $ 27,882,473 34,181,508 68,872,911 57,698,845 96,755,384 91,880,353 The credit risk is managed on a group basis based on the Group’s credit risk management policies and procedures. Cash and cash equivalents The Group’s cash and cash equivalents are held with major reputable financial institutions. Trade receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry and country in which the customers operate, has less of an influence on credit risk. Geographically, the concentration of credit risk is within Australia and, by industry, the concentration is within the commercial infrastructure and resources industries. The Group continuously monitors defaults of customers and other counterparties, identified either by individual or group and incorporates this information into its credit risk controls. The Group’s policy is to deal only with creditworthy counterparties. The ongoing credit risk is managed through regular review of ageing analysis, together with credit limits per customer. The Group does not require collateral in respect of trade receivables and contract assets. To mitigate the impact of any single credit default, the Group maintains a policy of Trade Credit Insurance that provides protection in the event of default. The Group’s management considers that all the above financial assets that are not impaired or past due for each of the reporting dates under review are of good credit quality. 86 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202238. Financial risk management (continued) Credit risk analysis (continued) Impairment losses The ageing of the Group’s trade and other receivables at the reporting date was: Other receivables – not past due Note 16 Trade receivables: Current Less than 90 days Greater than 91 days Gross 2022 $ 1,143,535 57,849,322 5,903,255 4,068,782 14 67,821,359 68,964,894 Allowance for Impairment 2022 $ - - - Gross 2021 $ 3,449,926 51,039,101 3,510,145 Allowance for Impairment 2021 $ - - - (91,983) 3,513,277,087 (91,983) (91,983) 57,826,333 61,276,259 (147,530) (147,530) (147,530) The provision of $91,983 relates to expected credit losses. Impairment provision related to specific debts that are more than one year overdue relating to a small number of customers. The Group continues to strongly pursue all debts provided for. The majority of un-impaired debtors exceeding one year relate to retention claims that are not due. The debtor aging is relative to the date of the original invoice claim against which the retention is held. The Group has established an allowance for impairment that represents their expected credit losses in respect of trade receivables and contract assets. The Group recognises a provision for impairment related to expected credit losses (“ECLs”) for trade receivables, and other debt financial assets not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group uses a provision matrix to calculate the ECLs. The provision matrix is established based on the Group’s historically observed default rates. The Group calibrates the matrix to adjust historical credit loss experience with forward looking factors specific to debtors and the economic environment where appropriate. At every reporting date, historical default rates are updated and changes in the forward-looking estimates are analysed. To date, the Group has not observed or expects to see material decline in its customers’ abilities to pay as a result of the Coronavirus pandemic due in part to the nature of those customers, which mainly includes large private sector corporations and government organisations, meaning the risk of default of receivables is low. Accordingly, no additional expected credit loss allowance pertaining to the Coronavirus pandemic have been included. The assessment of the correlation between historical observed default rates, forecast of economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecasts in economic conditions. The Group’s historical credit loss experience and forecast of economic conditions may also not be representative of customer’s actual default in the future. The Group considers a financial asset’s potential for default when contractual payments are more than 120 days past due, factoring in other qualitative indicators where appropriate. Exception shall apply to financial assets that relate to entities under common controls or covered by letter of credit or credit insurance. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. ANNUAL REPORT 2022 87 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202238. Financial risk management (continued) Liquidity risk analysis Liquidity risk is the risk that the Group might be unable to meet its obligations. The Group manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as forecast cash inflows and outflows due in day-to-day business. The data used for analysing these cash flows is consistent with that used in the contractual maturity analysis below. Liquidity needs are monitored in various time bands, on a week-to-week basis, as well as on the basis of a rolling 30-day projection. Long-term liquidity needs for a 180 to 360 day lookout period are identified monthly. Net cash requirements are compared to available borrowing facilities in order to determine headroom or any shortfalls. This analysis shows that available borrowing facilities are expected to be sufficient over the lookout period. The Group’s objective is to maintain cash and marketable securities to meet its liquidity requirements for 30-day periods at a minimum. This objective was met for the reporting periods. Funding for long-term liquidity needs is additionally secured by an adequate amount of committed credit facilities and the ability to sell long-term financial assets. The Group considers expected cash flows from financial assets in assessing and managing liquidity risk, in particular its cash resources and trade receivables. The Group’s existing cash resources and trade receivables (see Note 8) significantly exceed the current cash outflow requirements. Cash flows from trade and other receivables are all contractually due within three months. As at 30 June 2022, the Group’s non-derivative financial liabilities have contractual maturities as summarised below: 30 June 2022 Secured borrowings Leases Trade and other payables Contingent consideration payable Total Current Non-current Within 6 months $ 6-12 months $ 1-5 years $ 5+ years $ 960,000 960,000 3,250,000 3,925,439 3,840,445 14,232,018 72,608,068 4,949,953 - - - 674,000 82,443,460 4,800,445 18,156,018 - - - - - This compares to the maturity of the Group’s non-derivative financial liabilities in the previous reporting periods as follows: 30 June 2021 Secured borrowings Leases Trade and other payables Total Current Non-current Within 6 months $ 6-12 months $ 1-5 years $ 5+ years $ 960,000 2,434,166 63,695,989 960,000 2,371,379 316,289 4,920,000 7,813,792 - - 425,041 - 67,090,155 3,647,668 12,733,792 425,041 The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying values of the liabilities at the reporting date. 88 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202239. Fair value measurement Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to the measurement, as follows: • • • Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability The following table shows the levels within the hierarchy of financial assets and liabilities measured at fair value on a recurring basis at 30 June 2022 and 30 June 2021: 30 June 2022 Financial assets Listed securities Other financial assets Total assets Financial liabilities Contingent consideration Total liabilities Net fair value 30 June 2021 Financial assets Listed securities Other financial assets Total assets Financial liabilities Total liabilities Net fair value Level 1 $ Level 2 $ Level 3 $ Total $ 922,000 - 922,000 - - - 71,833 71,833 - - - 922,000 71,833 71,833 - - (5,623,953) (5,623,953) (5,623,953) (5,623,953) 922,000 71,883 (5,623,953) (4,630,120) Level 1 $ Level 2 $ Level 3 $ Total $ 1,383,000 - 1,383,000 - 100,049 100,049 - - 1,383,000 100,049 - - - - - 1,383,000 100,049 1,483,049 - 1,483,049 There were no transfers between Level 1 and Level 2 in 2022 or 2021. ANNUAL REPORT 2022 89 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 202239. Fair value measurement (continued) Measurement of fair value of financial instruments The Group’s finance team performs valuations of financial items for financial reporting purposes, including Level 3 fair values, in consultation with third party valuation specialists for complex valuations. Valuation techniques are selected based on the characteristics of each instrument, with the overall objective of maximising the use of market-based information. The finance team reports to the Audit Committee. Valuation processes and fair value changes are discussed among the Audit Committee and the valuation team at least every year, in line with the Group’s reporting dates. The valuation techniques used for instruments categorised in Levels 2 are described below. There were no instruments categorised as Level 3. Level 3 fair value measurements Contingent consideration (Level 3) The fair value of contingent consideration related to the acquisition of Blue Tongue Energy Pty Ltd and Pole Foundations Australia (see Note 35) has been determined through analysis of past profitability against targets agreed in the purchase agreement and estimated future cash-flows. Due to the short time frame associated with assessing achievement of the targets related to the contingent consideration, the impact of discounting of future cash flows was not material in the assessment and the values stated are consistent with fair value. The following table provides information about the sensitivity of the fair value measurement to changes in the most significant inputs: Fair value measurement of non-financial assets The following table shows the levels within the hierarchy of non-financial assets measured at fair value at 30 June 2022 and 30 June 2021: 30 June 2022 Property, plant and equipment: Industrial land and buildings acquired under business combination 30 June 2021 Property, plant and equipment: Industrial land and buildings acquired under business combination Level 1 $ Level 2 $ Level 3 $ Total $ - 181,000 - 181,000 Level 1 $ Level 2 $ Level 3 $ Total $ - 181,000 - 181,000 Fair value of the Group’s land assets acquired under business combination through the purchase of KEC Contracting is estimated based on an evaluation of current market price trends and with regards to the initial valuation of the land at the date of acquisition. The fair value is reviewed by the Board of Directors and Audit Committee at each reporting date. 90 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 202240. Capital management policies and procedures The Group’s capital management objectives are: • • to ensure the Group’s ability to continue as a going concern to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. The Group monitors capital on the basis of the carrying amount of equity plus its bank loans and other financial liabilities, less cash and cash equivalents as presented on the face of the statement of financial position. The Group’s goal in capital management is to ensure compliance with the Group’s covenants relating to its commercial financing arrangements. These covenants measure the Group’s Debt Service Cover, Gross Leverage and Liquidity Ratios, as well as requiring maintenance of a minimum Tangible Net Worth. The Group has met all its covenant obligations, since the commercial loan was taken out. Management assesses the Group’s capital requirements in order to maintain an efficient overall financing structure while avoiding excessive leverage. The amounts managed as capital by the Group for the reporting periods under review are summarised as follows: Total equity Financial liabilities Cash and cash equivalents Capital Total equity Borrowings Overall financing Capital-to-overall financing ratio 2022 $ 2021 $ 93,423,073 57,710,210 21,110,359 15,463,682 (27,882,473) (34,181,508) 86,650,959 38,992,384 93,423,073 57,710,210 21,110,359 15,463,682 114,533,432 73,173,892 0.76 0.53 The ratio increase during 2022 is primarily a result of the capital raising undertaken to part-fund the acquisition of Pole Foundations Australia. 41. Parent entity information Information relating to GenusPlus Group Ltd (the Parent Entity): Statement of financial position Current assets Total assets Current liabilities Total liabilities Net assets Issued capital Retained earnings Total equity Statement of profit or loss and other comprehensive income (Loss) for the year Total comprehensive income The Parent Entity had no capital commitments at year end (2021:$Nil). 2022 $ 2021 $ 2,902,789 10,365,487 40,761,752 42,407,131 (1,455,015) 2,608,463 (11,006,876) 18,141,008 51,768,629 24,266,123 53,789,037 28,925,754 (2,020,409) (4,659,631) 51,768,629 24,266,123 (2,560,158) (2,389,103) (2,560,158) (2,389,103) ANNUAL REPORT 2022 91 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 30 JUNE 2022 42. Events after the reporting date On 26 August 2022, the Directors declared a final fully franked dividend of 1.8 cents per share with a record date of 28 October 2022 and a payment date of 30 November 2022. The total dividend payable is an aggregate of $3,181,544. Other than those mentioned above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years. 43. Group details The registered office and principal place of business of the Group is: GenusPlus Group Ltd Level 1, 63 – 69 Abernethy Road Belmont WA 6104 92 GENUSPLUS GROUP LTD NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2022DIRECTORS’ DECLARATION In accordance with a resolution of the directors of GenusPlus Group Limited, I state that: In the opinion of the directors: (a) he financial statements and notes of GenusPlus Group Limited for the financial year ended 30 June 2022 are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the year ended on that date; and (ii) complying with Accounting Standards and the Corporations Regulations 2001; (b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 2; and (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration has been made after receiving the declarations required to be made to the directors by the chief executive officer and chief financial officer in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2022. On behalf of the board David Riches Director Dated the 31st day of August 2022 ANNUAL REPORT 2022 93 INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2022 Grant Thornton Audit Pty Ltd Level 43 Central Park Grant Thornton Audit Pty Ltd 152-158 St Georges Terrace Level 43 Central Park Perth WA 6000 152-158 St Georges Terrace PO Box 7757 Perth WA 6000 Cloisters Square PO Box 7757 Perth WA 6850 Cloisters Square Perth WA 6850 T +61 8 9480 2000 Grant Thornton Audit Pty Ltd T +61 8 9480 2000 Level 43 Central Park 152-158 St Georges Terrace Perth WA 6000 PO Box 7757 Cloisters Square Perth WA 6850 T +61 8 9480 2000 Independent Auditor’s Report Independent Auditor’s Report To the Members of GenusPlus Group Ltd To the Members of GenusPlus Group Ltd Report on the audit of the financial report Report on the audit of the financial report Independent Auditor’s Report Opinion Opinion We have audited the financial report of GenusPlus Group Ltd (the Company) and its subsidiaries (the To the Members of GenusPlus Group Ltd Group), which comprises the consolidated statement of financial position as at 30 June 2022, the We have audited the financial report of GenusPlus Group Ltd (the Company) and its subsidiaries (the consolidated statement of profit or loss and other comprehensive income, consolidated statement of Group), which comprises the consolidated statement of financial position as at 30 June 2022, the changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated statement of profit or loss and other comprehensive income, consolidated statement of consolidated financial statements, including a summary of significant accounting policies, and the Directors’ changes in equity and consolidated statement of cash flows for the year then ended, and notes to the Opinion declaration. consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. We have audited the financial report of GenusPlus Group Ltd (the Company) and its subsidiaries (the In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act Group), which comprises the consolidated statement of financial position as at 30 June 2022, the 2001, including: In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act consolidated statement of profit or loss and other comprehensive income, consolidated statement of 2001, including: a giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance changes in equity and consolidated statement of cash flows for the year then ended, and notes to the a giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance consolidated financial statements, including a summary of significant accounting policies, and the Directors’ declaration. for the year ended on that date; and for the year ended on that date; and Report on the audit of the financial report b complying with Australian Accounting Standards and the Corporations Regulations 2001. b complying with Australian Accounting Standards and the Corporations Regulations 2001. In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act 2001, including: for the year ended on that date; and a giving a true and fair view of the Group’s financial position as at 30 June 2022 and of its performance b complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those of our report. We are independent of the Group in accordance with the auditor independence requirements standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical of our report. We are independent of the Group in accordance with the auditor independence requirements Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Basis for opinion Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence our other ethical responsibilities in accordance with the Code. Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those our other ethical responsibilities in accordance with the Code. standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our of our report. We are independent of the Group in accordance with the auditor independence requirements opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical opinion. Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Key audit matters Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our the financial report of the current period. These matters were addressed in the context of our audit of the financial Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of opinion. report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these the financial report of the current period. These matters were addressed in the context of our audit of the financial matters. report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of www.grantthornton.com.au the financial report of the current period. These matters were addressed in the context of our audit of the financial ACN-130 913 594 www.grantthornton.com.au report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. matters. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member www.grantthornton.com.au another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one ACN-130 913 594 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 Legislation. 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. Legislation. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 GENUSPLUS GROUP LTD 94 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2022 Key audit matter How our audit addressed the key audit matter Revenue recognition of long-term contracts – refer to summary of significant accounting policy Note 4 As disclosed in note 6, the Group recognised revenue from construction contracts and service revenue of $331.4 million and $119.4 million respectively, with revenue recorded over time totalling $405.8 million. Revenue for these contracts recognised revenue with reference to the input method to determine the amount of revenue to be recognised in the period. In accordance with AASB 15 Revenue from Contracts with Customer, revenues from goods and services are recognised based on the completion of performance obligations under each contract. Determining the appropriate timing of revenue recognition for construction contracts requires estimating the inputs (costs) remaining in the contract and the expected margins earned on the contracts, which requires management judgement. • • • • • This area is a key audit matter due to the high level of estimation and management judgement required to determine the revenue recognised from each contract. • Our procedures included, amongst others: • Understanding and documenting the design of internal controls over project costings and estimating costs to complete construction projects; Testing the operating effectiveness of project costs designed for determining the revenue recognised over time utilising the percentage of completion method; Testing a sample of costs to ensure appropriate allocation to projects; Testing a sample of project billings to underlying obligations to consider and evaluate the key inputs required to determine revenue recognition; Reviewing management assumptions in determining the stage of completion, total contract price, costs incurred and estimated costs to complete to supporting documentation; Recalculating the stage of completion based on costs to date proportionate to forecasted costs or milestones, including testing a sample of progress billings and contract costs to ensure the allocation to revenue, contract assets and liabilities was appropriate and consistent with the requirements of AASB 15; Assessing estimated costs to complete through discussion with project managers and challenging the key assumptions connected to the stage of completion method, including potential disputes and claims relating to variations to the original contract terms and agreeing to underlying support; and Business combination – Poles Foundations Australia Notes 35 As disclosed in Note 35, the Group acquired Poles Foundations Australia (“PFA”). The acquisitions were treated as Business Combinations defined by AASB 3 and accounted for on a provisional basis. In performing the purchase price allocations for the acquisitions, the Group identified and estimated the fair value of all assets acquired, liabilities assumed, contingent consideration based on performance hurdles and other intangible assets associated with the acquisition. The purchase price allocation has resulted in goodwill of $14.0 million, intellectual property of $4.2 million and customer relationships of $9.0 million being recognised. This area is a key audit matter due to the management estimates and judgments applied in identifying separately identifiable intangible assets and determining the fair value of any separately identifiable intangible assets and earn-out liabilities. • Assessing the adequacy of the Group’s presentation and disclosures in the financial statements. Our procedures included, amongst others: • Obtaining and reviewing the terms and conditions contained in the Sales and Purchase agreements; • • • • • • • Obtaining the acquisition trial balance and performing opening balance audit procedures to evaluate the completeness and accuracy of assets acquired and liabilities assumed; Ensuring the total cost of the combinations included all elements of consideration paid and payable with reference to signed purchase agreements; Tracing cash consideration paid to bank statements; Evaluating management’s purchase price allocation documentation and challenging their assessment of separately identifiable intangible assets; Engaging with auditor’s expert to assess the discount rates applied and forecasted future cash flows to determine valuations for other intangible assets; Re-calculating the goodwill balance recognised by deducting the fair value of identifiable net assets acquired, the value of other intangible assets against the total consideration paid; and Ensuring the appropriateness of related financial statement disclosures. ANNUAL REPORT 2022 95 INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2022 Goodwill – Note 22 As disclosed in Note 22, the Group recognised goodwill totalling $19.5 million at 30 June 2022 across five cash-generating units (CGUs). Goodwill is required to be assessed for impairment annually by management as prescribed in AASB 136 Impairment of Assets. Our procedures included, amongst others: • Understanding and documenting management’s process and controls related to the assessment of impairment, including management’s identification of CGUs and the calculation of the recoverable amount for each CGU; Management performs annual impairment testing per AASB 136 to ensure the CGUs’ recoverable amount is greater than its carrying value, utilising either the greater of fair value less costs to sell or its value in use. The Group uses the discounted cash flow model for the value-in-use approach to determine the recoverable amount. In doing so, management considers the following key inputs; forecasted budgeted financial performance; • estimated growth rates; • working capital adjustments; • • • estimated capital expenditure; discount rate; and terminal value. This area is a key audit matter due to the significant balance carried by the Group that management has assessed using estimates and judgement • Evaluating the value-in-use models against the requirements of AASB 136, including consultation with our auditor’s valuation expert; • Challenging the appropriateness of management’s revenue and cost forecasts by comparing the forecasted cash flows to actual growth rates achieved historically; • Reviewing management’s value-in-use calculations by: o Testing the mathematical accuracy of the calculations; o Evaluating the forecast cash inflows and outflows to be derived by the CGUs assets for reasonableness; o Comparing estimates and judgements for growth rates to available market and industry data; o Assessing the discount rates applied to forecast future cash flows for reasonableness with assistance from internal valuation specialists; o Performing sensitivity analysis on the significant inputs and assumptions made by management in preparing its calculation; and • Assessing the adequacy of financial report disclosures. Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Group’s annual report for the year ended 30 June 2022, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors’ for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. 96 GENUSPLUS GROUP LTD INDEPENDENT AUDITOR’S REPORT FOR THE YEAR ENDED 30 JUNE 2022 Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1_2020.pdf.This description forms part of our auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 26 to 31 of the Directors’ report for the year ended 30 June 2022. In our opinion, the Remuneration Report of GenusPlus Group Ltd, for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. GRANT THORNTON AUDIT PTY LTD Chartered Accountants L A Stella Partner – Audit & Assurance Perth, 31 August 2022 ANNUAL REPORT 2022 97 ASX ADDITIONAL INFORMATION AS AT 30 AUGUST 2022 Distribution of equity security holders Category 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Total Twenty largest shareholders MR DAVID WILLIAM RICHES DAVID WILLIAM RICHES MATTHEW STEVEN RICHES & DAVID WILLIAM RICHES HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED NATIONAL NOMINEES LIMITED MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED CARJAY INVESTMENTS PTY LTD ARROCHAR PTY LTD CEDARFIELD HOLDINGS PTY LTD NEIL RAE & MELAINE RAE & SIMEON RAE & DOMINIQUE RAE MR KEMPER SHAW CC RANKINE PTY LTD BJ FRASER PTY LTD WILLIAM TAYLOR NOMINEES PTY LTD PATRICK LLOYD PTY LTD PATRICK LLOYD GEORGE LLOYD PTY LTD GEORGE LLOYD MR KENNETH JOSEPH HALL PRECISION OPPORTUNITIES FUND LTD MR WILLIAM JAMES BEAMENT BOTSIS HOLDINGS PTY LTD Substantial shareholders Ordinary Shares 108,652 735,863 1,274,674 9,301,777 165,331,454 176,752,420 Number of ordinary shares held Percentage of capital held 39,461,473 39,461,474 12,800,000 11,547,021 10,271,593 5,012,068 4,734,689 3,850,000 3,041,865 2,392,344 2,376,947 2,316,765 2,316,765 2,148,684 1,600,000 1,600,000 1,550,000 1,266,357 1,196,172 1,140,000 150,084,217 22.33% 22.33% 7.24% 6.53% 5.81% 2.84% 2.68% 2.18% 1.72% 1.35% 1.34% 1.31% 1.31% 1.22% 0.91% 0.91% 0.88% 0.72% 0.68% 0.64% 84.91% Number The number of shares held by substantial shareholders and their associates are set out below: David William Riches & Matthew Steven Riches & David William Riches Dave Riches & Matt Riches Unit 92,583,947 98 GENUSPLUS GROUP LTD www.genus.com.au ANNUAL REPORT 2022 99 CORPORATE DIRECTORY Directors Simon High Chairman Independent Non-Executive Director David Riches CEO and Managing Director José Martins Independent Non-Executive Director Paul Gavazzi Independent Non-Executive Director Company Secretary Damian Wright Auditors Grant Thornton Audit Pty Ltd Central Park Level 43, 152-158 St Georges Terrace Perth WA 6000 Share Registry Link Market Services Ltd Level 12, QV1 Building 250 St Georges Terrace Perth WA 6000 T: +61 8 9211 6670 Registered Office GenusPlus Group Ltd Level 1, 63-69 Abernethy Road Belmont WA 6104 ASX Code: GNP 100 GENUSPLUS GROUP LTD INNOVATIVE PEOPLE, DELIVERING RESULTS THROUGH EXPERTISE AND HARD WORK Connecting the Future. Together. genus.com.au I n s i g h t C o m m u n i c a t i o n & D e s i g n 

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