ANNUAL REPORT
2022
Hancock && Gore Limited (ACN: 009 657 961)
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 1
Chairman’s
Report
2
H&&G Annual Report 2022 3
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Chairman’s
Report
I am pleased to report on another year of substantial progress
in the repositioning of H&&G as a diversified investment company
and outline key objectives for the 2023 financial year.
The 2022 annual report cover features a quiet
achiever of the H&&G portfolio - the “workhorse”
Consew sewing machines which have produced
millions of Mountcastle products for close to 100
years. These machines have endured long past
their use by date and have enabled the artisanal
design team to passionately turn design ideas
into reality and evolve through constant fashion
cycles and changing styles. These machines and
their craftspeople masters embody some of the
key attributes we are striving for in our investment
selections. We seek investments that can endure
through economic cycles and evolution of demand,
guided by passionate management teams
committed to the highest level of execution who can
successfully navigate opportunities and challenges.
H&&G is fortunate to have Mountcastle / LW Reid as a
key investment pillar contributing to annual profitability
and we acknowledge the efforts of the management
team in delivering another strong performance in
2022. We believe there is a significant opportunity
to further develop Mountcastle during 2023 both
organically and through acquisitions. H&&G was
pleased to be able to increase its ownership interest
in Mountcastle to 49% during the year.
H&&G began 2022 with a strongly supported capital
raising to further strengthen the balance sheet and
allow for additional diversification of investments and
investment strategies.
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H&&G Annual Report 2022 The capital raising enabled us to partner with
Disruptive Packaging and their management team
in the international roll-out of manufacturing facilities
for their sustainable packaging products. Disruptive
Packaging products have a massive global market
opportunity to replace non-sustainable packaging
products which dominate existing supply chains.
Disruptive Packaging is making substantial progress
in building international sales momentum but has
been limited by constrained supply. The H&&G initial
investment allows for a doubling of production
capacity and we will look to further assist in financing
additional capacity during 2023. We believe Disruptive
Packaging has the potential to be a significant
long-term underpinning investment of H&&G.
2022 was not without challenges – particularly
in the second half of the financial year when
inflationary pressures and interest rate rises
eroded investor confidence and caused significant
downturn in financial markets and repricing of risk.
Additionally, investee businesses had to adapt to
fluctuating operating costs, exchange rate volatility
and continuing changed labour market conditions
including significant staff shortages which created
earnings pressure.
Whilst these pressures and uncertainty and
continued listed equity volatility will continue to
impact on short term performance from listed
equities, it is also an environment that is historically
the catalyst for significant investment opportunity.
We have seen an increased amount of enquiry and
activity in refinancing opportunities and bridging
finance and expect this will increase in 2023.
H&&G will actively pursue opportunities to allocate an
appropriate portion of the balance sheet to structured
investments with the intention to deliver superior risk
adjusted medium term returns.
Notwithstanding challenges encountered during
2022, there are a number of specific highlights of
the second half which warrant emphasis.
The divestment of long-term investment Pegasus
Healthcare in June released balance sheet capacity
for H&&G to make new investments and to also pay
fully franked interim, special and final dividends.
Pegasus was a very successful investment for H&&G
and we acknowledge the efforts of our investment
partner Scott Nowland in leading the business and in
execution of the sale to manufacturing partner Linet
and wish them well for the future.
A key objective of the repositioning of H&&G has been
the development of a funds management business
and increased specialist investment capabilities. It
is pleasing that 2022 has seen the launch of initial
investment syndicates for listed equity, private equity
and property transactions and the initial public
offering of H&&G High Conviction Limited. Amidst an
environment of erosion of investor confidence and
negative investment returns it was pleasing to see
the company successfully make its debut on the
ASX. It is a key intention to continue to increase our
funds management size and capability during 2023.
I believe the performance of H&&G in 2023
and likely 2024 will be driven by execution of a
relatively small number of initiatives with significant
balance sheet and profitability impact. Investment
potential of Mountcastle and Disruptive Packaging
alone could significantly re-shape H&&G, whilst
funds management execution should contribute
meaningfully. These two investments represent less
than 40% of the current net assets of H&&G, and with
significant balance sheet capacity we are targeting at
least one new key investment pillar in 2023.
I would like to thank the management team of H&&G
and specifically Phil, Nick, Joseph, Michael and Arthur
for their contributions and support during the year
and look forward to an even stronger 2023 as the
introductions, research and networking, and insights
from due diligence undertaken during 2022 continue
to bear fruit.
I would also like to acknowledge the support of my
fellow Board members Peter, Kevin, Cheryl and Joseph
whose contributions have been significant and valued.
Both Peter and Cheryl have announced their intentions
to retire as Directors leading up to and following the
AGM and I would like to acknowledge the efforts of both
of them over a long period of time, and specifically Peter
who served as a long time Chairman.
I believe we have successfully expanded and built on
the platform established in 2021 and look forward
to continuing to further expand and develop on it
in 2023, and hopefully like the Consew sewing
machine… we produce more than expected.
Sandy Beard
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Contents
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2
6
Chairman’s Report
Review Of Operations
Review of Operations
Core Capabilities of the Management Team
Business Activities Review
Mountcastle Group
Disruptive Packaging
Hyde Road Property
H&&G High Conviction Limited
The H&&G Opportunities Portfolio
Other Unlisted Assets
Strategic Listed Investments
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20
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26
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H&&G Annual Report 2022 3
Financial Review
Corporate Directory
Directors Report
Operating And Financial Review
Renumeration Report
Auditor’s Independence Declaration
Financial Report
Consolidated Statement of Profit and Loss
and Other Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement Of Changes In Equity
Consolidated Statement Of Cash Flows
Notes To The Consolidated Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
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100
105
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 2
Review Of
Operations
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H&&G Annual Report 2022 9
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Review of Operations
FY22 saw significant diversification of the balance
sheet and sources of profit contribution.
The 1st half was highlighted by a $15m capital raising, continued development of investee businesses
and progression of transactions. Against the 2nd half backdrop of inflation, rising interest rates and
significant stock market volatility, the Company realised its investment in Pegasus Health, completed
a new key investment in Disruptive Packaging, saw Mountcastle achieve another record year and
launched a number of key initiatives that will underpin future profitability.
Highlights of the year include net profit of $5.6m, increase in Net Tangible Assets to 28.1 cents
per share and payment of fully franked dividends of 1 cent per share relating to FY21, 0.5c special
dividend, 0.5c interim dividend and declaration of a 1 cent final FY22 dividend.
$5.6M
NET PROFIT AFTER TAX
28.1cps
NTA PER SHARE
2.0cps
DIVIDENDS
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H&&G Annual Report 2022 DIVIDENDS
KEY ACHIEVEMENTS AND INITIATIVES
• Sale of Pegasus Health for $10m cash
representing a profit of $5.5m on original 2018
acquisition price and $2.7m uplift on the carrying
value as reported in H&&G’s 30 September 2021
balance sheet
• Mountcastle recorded record revenues of $49.3m
and EBITDA of $10.4m (unaudited) with capital
management initiatives increasing H&&G’s stake
to 49.4%. H&&G share of Mountcastle dividends
during the year was $1.5m
• New investment ($5.8m balance sheet, $2.5m
syndicated) into Disruptive Packaging, an
innovative sustainable packaging business with
strong traction in The US and Australia
• Initial Public Offering of H&&G High Conviction
Limited externally managed by H&&G Investment
Management. Establishes platform for long term
investment management and performance fees
• Hyde Road Trust completed arrangements
for the acquisition of 1.2 ha property for $10m
(H&&G $3.9m equity interest). The property is a
high yielding asset with strong tenancies and
substantial long term development potential
• Mint Payments continues to perform well,
servicing H&&G’s senior debt which is due for
refinance at the end of CY2023
• Strategic shareholdings in ASX listed Anagenics
(ASX:AN1) and FOS Capital (ASX:FOS) with
board representation and targeting long term
value enhancement
H G achieved 91% external
FuM growth in FY23
• H&&G Opportunities Portfolio contributed
approximately 10% return in tough market
conditions vs Small Ords Accumulation Index loss
of 23% for the financial year
• Established approx. $10m portfolio of income
producing investments generating yield of greater
than 10% per annum
• T Shirt Ventures achieved strong revenue growth
from NDIS technology services and a material
growth capital raising completed at premium to
H&&G initial investment valuation
• Fully franked dividend payments of 2 cents per
share paid during the year, and final fully franked
dividend declared of 1 cent per share
• Focus areas for FY2023 include:
• Enhanced distribution and syndication
• Further diversification into high quality income
generating assets
• Mountcastle M&A and evaluation of liquidity
• AN1 and FOS M&A and value creation
• Growth of Disruptive Packaging
• Driving Returns of H&&G High Conviction
Limited
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Core Capabilities of the
Management Team
H G’s ability to deliver long term investment returns is
dependent on the skills of its management team, the quality
of the investments made and the strength and skill of the
management teams of the investee companies.
Dealflow and ability to partner with management
teams and entrepreneurs is also fundamental to
the future success of H&&G as quality management
teams are attracted to those that can truly
partner with them for the longer term in a trusted
relationship, and assist in creating value.
H&&G’s approach is encapsulated in the concept of
“Capital plus Skills” which is an elegant description of
the marriage between leadership talent and access
to capital that powers investment returns and which
we are striving to deliver.
There are abundant opportunities in the Australian
economy that will power significant long term
investment outperformance and result in building
significant Australian companies. In particular we
believe smaller companies, those with valuations less
than $100m, are the most prospective for H&&G. These
emerging companies provide the opportunity for us to
offer a differentiated blend of capital and skills and to
work as a preferred partner assisting investees to realise
their investment aspirations.
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The role of our investment team is to identify the
strongest investment candidates and advocate
H&&G’s credentials as their investment partner of
choice, for the longer term. We offer the chance
for them to benefit from a relationship that drives
business growth, rounds out gaps in their business
plan and management team and navigates any
inevitable bumps in their journey. H&&G seeks to
invest in businesses that have dominant founder /
management ownership as we believe there is
significant correlation in investment performance
and ownership.
The skill set of the H&&G management team
encompassess a broad range of capabilities.
The combined experience and diverse transaction
exposure over multiple investment cycles presents
a uniquely differentiated opportunity for potential
investees to benefit from.
In FY2022 H&&G has expanded its skill base with key
hires across the investment and support teams and
investment management vehicles.
H&&G Annual Report 2022 CORE CAPABILITIES AND EXPERIENCE INCLUDE:
• Long term investment return delivery
> 15% per annum
• Corporate advisory skills and networks
• Capital markets access
• Operational management experience
• Underwriting capabilities
• Broad deal flow networks and access
• Mentorship and insights
• Strategic advice and assistance
• Supply chain and distribution experience
• Management of businesses through economic cycles
• Divestment, merger and takeover transactions
• Infrastructure investment
• Venture and early stage investment capital
• Debt recovery, and distressed asset turnaround
• Alternative lending sources
• Navigation of complex shareholder issues
• Experience with growing companies and
growing pains
• Diverse industry experience
• Renewable Energy and Sustainable Investments
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Business Activities
Review
In a difficult year for financial markets, H G refined and diversified
its portfolio while establishing foundations for future value creation
among its key assets and funds management vehicles.
The key strategic objective of H&&G is to deliver long term returns to shareholders, in excess of
15% per annum on invested capital, including dividends and long-term capital growth. This
objective can be achieved through a combination of short, medium and long term investment
strategies which will both increase in size and overlap over time with reinvestment of profits.
Short term:
Listed investment trading profits, dividend income,
interest income, rental income, funds management
and performance fees and advisory fees
Medium term:
Strategic ASX investments, private equity portfolio
M&A, and property investments
Long term:
Realisation of long term value realisation strategies
including IPO or trade sales, realisation of significant
planning outcomes for property investments and other
significant corporate M&A activity
Further detail on each of H&&G’s key assets and strategies are provided on the following pages.
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H&&G Annual Report 2022 5
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Mountcastle
Group
KEY ACHIEVEMENTS
• Mountcastle recorded record revenues of $49.3m and EBITDA
of $10.4m (unaudited)
• Paid $3.0 million dividends for FY22 ($1.5m H&&G share received)
• Completed two accretive minority share buybacks (H&&G interest
increased to 49.4%)
• Completed the extraction of its 50% owned Hyde Road Property
to shareholders on 4 October 2022
• Progressed a strong pipeline of accretive M&A opportunities
The School Uniform industry in Australia
is estimated at A$1bn revenue p.a.
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H&&G Annual Report 2022 OVERVIEW
Mountcastle, established in 1835, is a leading Australian
supplier, wholesaler, and retailer of both customized private
and public-school uniforms within Australia.
The School Uniform industry in Australia is estimated
at A$1bn revenue p.a. and is highly fragmented.
With the acquisition of LW Reid Pty Ltd in December
2019, Mountcastle became one of the largest
industry players & continues to grow year on year.
FY22 was another record year of revenue and profits for
Mountcastle despite continued impacts of the pandemic
in key regions. During the year Mountcastle completed
two buybacks of minority shareholders at accretive
prices, with H&&G’s ownership interest increasing to
49.4% from 39.7% at 30 September 2021.
Revenue ($’millions)
EBITDA ($’millions)
Group’s ownership interest
Group’s carrying value ($’millions)
Mountcastle’s financial year end is 30 June.
STRATEGY & OUTLOOK
The H&&G management team continues to assist
Mountcastle in progressing strategic opportunities
in industry consolidation, increased operational
efficiencies, access to new markets, product innovation,
diversified manufacturing capability, e-commerce
platforms & access to cheaper equity & debt capital.
2022
49.3
10.4
49.4%
21.1
2021
47.5
9.5
39.7%
16.7
Mountcastle has a significant acquisition pipeline
and aims to complete transformational M&A
during FY23.
30 September Valuation
$21.1m
includes $1.1m look-through interest in Hyde Rd Property
Basis for Valuation
Capitalisation of future maintainable earnings
H&&G Investment Date
June 1997
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Disruptive
Packaging
KEY ACHIEVEMENTS
• Completed $8 million growth capital raising provided by an H&&G managed trust
• Continued international expansion and established JV partner in the US
• Rapidly increasing sales, pipeline of demand and expanding supply chain capability
OVERVIEW
Disruptive Packaging (DP) is an Australian based inventor,
manufacturer and marketer of a revolutionary sustainable
technology, Unicor®.
Unicor is made of 70% natural elements and is 100%
recyclable with numerous commercial applications in
global industries The Unicor box is a sustainable, cost-
effective, high-performance solution to replace wax
cardboard and polystyrene in the packaging industry.
Since 2016 DP has invested significant founder
capital and efforts into developing, protecting and
commercializing DP’s intellectual property. H&&G funded
DP’s first external growth capital raise in June 2022 to
complete its manufacturing set up in Mexico and exploit
rapidly growing demand from the North American
customer base.
With millions of units shipped, ~$5m FY22 revenue
(+80% on FY21) and a significant global pipeline of
customers, DP is poised for another step change in
growth.
H&&G’s provided DP’s growth capital through its
first syndicated investment, raising $8.4 million
in a H&&G-managed trust (including a net $5.8
million contribution by H&&G’s balance sheet, since
syndicated further) to invest preferred equity into DP.
The Group has board representation in an active
sponsor role and expects Disruptive Packaging to be
a key long-term investee pillar of the Group portfolio.
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H&&G Annual Report 2022 STRATEGY & OUTLOOK
DP has the opportunity to become a globally relevant
business, with evidenced value in their IP through
significant demand across regions.
Fresh produce and seafood wholesale industries in
particular are large global markets requiring packaging
solutions which address specific supply chain needs,
with harmful materials like polystyrene and wax
cardboard still prevalent. DP is making inroads with
customers and the focus for FY23 is expanding
manufacturing capacity to service this demand,
particularly in the US and Australia.
30 September
H&&G Share Valuation
$5.8m
Basis for Valuation
Net asset backing reflecting conversion value of investment instrument
H&&G Investment Date
June 2022
9
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Hyde Road
Property
OVERVIEW
Mountcastle’s warehouse and office property at Hyde Road,
Yeronga, Brisbane was acquired by an H G managed trust
on 4 October 2022.
H&&G now owns 73% of the Hyde Rd property
alongside other Mountcastle shareholders. The
property is a high yielding asset with strong
tenancies and substantial long term development
potential. There is long-term upside from a potential
redevelopment of the precinct. Yeronga is only 6 km
from the Brisbane CBD & very close to the University
of Queensland, St Lucia Campus. The site is presently
included in a Strategic Inner City Industrial Area under
the “Brisbane Industrial Strategy 2019”.
H&&G will continue to optimise, reposition and
maximise the value of the Hyde Rd property during
FY23 and beyond.
30 September
H&&G Share Valuation
$3.9m
Hyde Rd valuation is based on H&&G’s interest at settlement
(4 October) and is not reflected in H&&G’s 30 September 2022
balance sheet. The Mountcastle Group valuation at 30 September
2022 prior to the extraction of Hyde Rd Property includes
approximately $1.1m value attributable to the Hyde Rd Property.
Basis for Valuation
Cost base of investment
H&&G Investment Date
October 2022
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H&&G Annual Report 2022 1
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 H&&G High Conviction
Limited
KEY ACHIEVEMENTS
• Returned 7.2% after all fees for the 12 months ended 30 September 2022*
compared to the ASX Small Ordinaries Accumulation Index’s loss of 22.6%
• Hancock && Gore received $0.3m in management and performance fees from
HCF during FY22, up over 100% on FY21
• Grew funds under management by 39%, to end FY22 at $18m
• Post year-end, closed the IPO of H&&G High Conviction Limited (ASX: HCF),
raising a further $5m
*Includes H&&G High Conviction Fund unit trust until 23 June 2022 and
H&&G High Conviction Limited company from 23 June 2022.
HCF returned 7.2% after all fees for the 12 months
ended 30 September 2022, navigating a turbulent
market and significantly outperforming the ASX
Small Ordinaries Accumulation Index’s –22.6%.
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H&&G Annual Report 2022 OVERVIEW
H G High Conviction (HCF) had another successful year,
its second under the management of H G’s wholly owned
subsidiary H G Investment Management Ltd.
HCF returned 7.2% after all fees for the 12 months
ended 30 September 2022, navigating a turbulent
market and significantly outperforming the ASX
Small Ordinaries Accumulation Index’s –22.6%.
HCF generated $0.3m in management and
performance fees to H&&G during FY22 and funds
under management grew by 39%, up over 100%
on FY21.
During the year, HCF investment structure was
converted from a unit trust to a company, following
unanimous support from unitholders, and prepared
for an IPO. Post year end HCF raised $5m via
IPO, which was cornerstoned by Perennial Value
Management. H&&G also subscribed for shares in
HCF and presently owns 5.7% of the company.
HCF is an investment company that aims to
maintain a concentrated portfolio of 15-25
ASX-listed micro capitalisation (microcap)
companies. HCF invests in and actively engages
with companies that it considers have superior
fundamental prospects but are priced by the market
at a discount relative to perceived inherent value,
usually resulting from non-operating, external
events that have led to a flight of investors. HCF
seeks to minimise capital loss and focuses on long-
term capital growth and income from its portfolio
companies.
During FY22 microcap companies suffered a
large sell-off, leading to increased opportunities for
investing in this segment of the market. The HCF
management team intends to take advantage of this
by deploying recently raised capital into microcaps
over the coming months. In addition, HCF will
continue to engage closely with its concentrated
portfolio of investee companies to help realise value
for shareholders.
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 The H&&G
Opportunities Portfolio
KEY ACHIEVEMENTS
• Generated an absolute return in FY22 of 10% that materially outperformed
the Small Ordinaries Accumulation Index return of negative 23% over the
same period.
• Pivoted the strategy in the 2HFY22 to fewer positions, but more concentrated
strategic long-term holdings as value presented opportunities.
OVERVIEW
The H G Opportunities Portfolio provides the H G balance sheet
with exposure to select deeply analysed core strategic listed and
unlisted long-term investments.
H&&G Opportunities Portfolio’s mandate is intentionally
very flexible allowing it to invest across the micro &
large company spectrum, including global listed and
unlisted investments when compelling value arises.
It also provides a source of short-term investment
trading profits during times of market dislocation.
During the year, the strategy delivered investment
returns of 10% that materially outperformed both
the All Ordinaries Accumulation Index & the Small
Ordinaries Accumulation Indices that returned
negative 8.6% & negative 22.6% respectively.
The investment strategy is nimble and successfully
pivoted in 2HFY22 to increase weighting to core
long-term strategic holdings as value presented with
the market sell off in the last quarter. Several new
Microcap/SmallCap company investments were
added to the portfolio at attractive pricing levels that
provide a material margin of safety buffer against
global market volatility.
The H&&G group believes smaller capitalised ASX
listed companies are a source of significant potential
long-term investment performance and are often
effectively private companies with limited liquidity
and access to capital. In the current environment,
where Microcap companies access to equity capital
markets is effectively closed, there is abundant
opportunities & a natural overlap with the HCF
investment style. This presents a unique window
for the broader H&&G group to work collaboratively
with investee company’s management teams to
find solutions. In doing so, H&&G can obtain attractive
investment terms for its capital and corresponding
highly valued skills offering.
As we look forward to FY23, we anticipate creating
value through recapitalisation solutions, active
management of undervalued, counter-cyclical and
undervalued strategic holdings, and strategic investee
company mergers and acquisitions.
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H&&G Annual Report 2022 5
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Other Unlisted Assets
T SHIRT VENTURES
T Shirt Ventures (TSV) is an innovative health tech company that
helps people living with disability and long-term health needs.
TSV’s key brands are Provider Choice (NDIS plan
management platform launched in 2018) and
HeyHubble (online marketplace for NDIS participants
and providers currently in launch phase) with more
solutions for those in need under development.
TSV is a rapidly growing profit-for-purpose business
with significant intellectual property to create
solutions across multiple healthcare segments where
there is potential to make lives easier. H&&G has a
minority equity position in T Shirt Ventures.
FY22 saw strong revenue growth from NDIS
technology services and a material growth capital
raising recently completed at a premium to H&&G
initial investment valuation.
30 September
H&&G Share Valuation
$2.0m
Basis for Valuation
Monte Carlo valuation based on recent capital raising
H&&G Investment Date
March 2021
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H&&G Annual Report 2022 MINT PAYMENTS
Mint is an Australian fintech institution specialising
in a wide range of end-to-end payment solutions.
Mint processes over $3bn transactions per annum
which is expected to grow rapidly particularly in
its core segment of travel as Australia continues
reopening domestically and internationally.
Tourism and travel was over a $120bn sector in
Australia prior to COVID and has been rapidly
recovering during 2022. Mint has now completed
the integration of transformative acquisition IPG
Group and continues to grow revenue rapidly from a
profitable base. H&&G holds a senior debt instrument
in Mint.
30 September
H&&G Share Valuation
$3.65m
Basis for Valuation
Loan Principal face value
H&&G Investment Date
September 2021
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Strategic Listed
Investments
ANAGENICS LIMITED
Anagenics Limited (ASX:AN1) is a growing wellness,
health and beauty business with a portfolio of functional
skin, hair and wellness brands.
Originally an IP development portfolio with limited
commercialisation, AN1 was transformed in 2021
with the acquisition of BLC Cosmetics from H&&G
- a beauty distribution business supporting iconic
prestige brands such as Thalgo, Hydropeptide,
Comfort Zone, Priori and recently Inika Organic.
AN1 retains its strong developed IP in hair regrowth
technology with related license and royalty streams.
H&&G received an equity stake in AN1 through the
BLC transaction, remaining a supportive strategic
shareholder with board representation for the
continued transformation AN1 with a particular
focus on accretive M&A opportunities.
30 September
H&&G Share Valuation
$2.2m
includes $1m deferred consideration owed by AN1 to HNG
30 September
H&&G Interest
14.8%
H&&G Investment Date
November 2021
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H&&G Annual Report 2022 FOS CAPITAL
FOS Capital (ASX:FOS) was established April 2019 and
designs, manufactures and distributes quality lighting solutions
to the commercial construction industry.
Led by an experienced management team with a
proven industry track record, FOS has completed
4 acquisitions since inception to create an ANZ
operation. FOS is profitable, cashflow positive, debt
free and has built the foundations to launch the
business into its next expansion phase.
FOS’s medium term stated intentions are to grow
organically and by acquisition to create a +$50M
revenue group that can produce net profit margins in
excess of 10%.
H&&G has been a shareholder in FOS Capital since its
IPO in June 2021, is represented on the board and
continues to support the company in M&A, capital
and strategic initiatives.
30 September
H&&G Share Valuation
30 September
H&&G Interest
$0.7m
6.5%
H&&G Investment Date
November 2020
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 3
Financial
Review
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H&&G Annual Report 2022 1
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Corporate Directory
Directors
Alexander (Sandy) Beard B.Com, FCA, MAICD
Chair
Kevin Eley CA, F Fin, FAICD
Director
Peter Miller FCA, FAICD
Director
Cheryl Hayman B Com, FAICD
Director
Joseph Constable BA (Hons), MPhil
Director
Company Secretary
Michael Bower BSc (Hons) CA FCA
Registered office
Principal place of business
Suite 803, Level 8
25 Bligh Street
Sydney NSW 2000
Australia
Suite 803, Level 8
25 Bligh Street
Sydney NSW 2000
Australia
Share registry
Auditor
Computershare Investor Services Pty Ltd
Level 4, 60 Carrington Street
Sydney NSW 2000
1300 855 080
UHY Haines Norton Sydney
Level 11, 1 York Street
Sydney NSW 2077
Stock exchange listings
ASX: HNG (not HGL)
Corporate Governance Statement
https://www.hancockandgore.com.au/corporate-governance
Website address
www.hancockandgore.com.au
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H&&G Annual Report 2022 3
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Directors’ Report
The directors of Hancock && Gore Ltd (“the Company”) and its
controlled entities (“the Group”) submit their report for the year
ended 30 September 2022.
Directors
The names and details of Hancock && Gore Ltd (“the Company”)’s directors in office during the
financial year and until the date of this report are set out below. Directors were in office for the entire
period unless otherwise stated.
• Alexander (Sandy) Beard
• Kevin Eley
• Peter Miller
• Cheryl Hayman
•
Joseph Constable
Alexander (Sandy) Beard, B.Com, FCA, MAICD (Chair)
Executive Chair, appointed 29 October 2020. Alexander ‘Sandy’ Beard has been a Director of
numerous public and private companies over the past 25 years. He is the former Chief Executive
Officer of CVC Limited (ASX:CVC). He is a professional investor and has extensive experience with
investee businesses, both in providing advice, assisting in acquisitions and divestments, capital
raisings and in direct management roles, especially bringing management expertise to small
cap companies in driving shareholder returns. Sandy is a Director of Centrepoint Alliance Ltd
(ASX:CAF), Anagenics Limited (ASX:AN1) and FOS Capital Ltd (ASX:FOS). Sandy was a director
of Pure Foods Tasmania Limited (ASX:PFT), until May 2022.
Kevin Eley, CA, F Fin, FAICD (Director)
Non-executive Director, appointed 1985. Chair 5 June 2020 to 29 October 2020. Kevin Eley
is a Chartered Accountant with significant executive and director experience, including as Chief
Executive Officer of the Company from 1985 to 2010. Kevin has been the lead director on the
board for Audit and Risk matters since 2018. He is a director of EQT Holdings Ltd (ASX: EQT) and
Pengana Capital Group Ltd (ASX: PCG) and was a Director of Milton Ltd (ASX: MLT) until it was
taken over by Washington H. Soul Pattinson in October 2021.
Peter Miller, FCA, FAICD (Director)
Non-executive Director, appointed 2000. Peter Miller is a Chartered Accountant with over 45
years experience in public practice. Peter was Chair of the Company for many years and was also
a member of the Nomination and Remuneration Committee, and of the Audit and Risk Committee
until their functions were absorbed by the full board.
34
H&&G Annual Report 2022 Cheryl Hayman, B.Com, FAICD (Director)
Non-executive Director, appointed 2016. Cheryl Hayman brings international experience including
significant strategic and marketing expertise derived from a 20 year corporate career which
spanned local and global consumer retail organisations. Her skills include developing marketing
and business strategy across diverse industry segments, growth orientated innovation and
product development. Cheryl has expertise in traditional and digital communications and business
transformation. Cheryl is the lead director on the board for Nomination and Remuneration matters.
Cheryl is a director of Beston Global Food Company Ltd (ASX: BFC) and Ai-Media Technologies
Limited (ASX: AIM), a director of Chartered Accountants ANZ, as well as other unlisted and not-for-
profit companies.
She was a director of Clover Corporation Ltd (ASX: CLV) until November 2020, and of Shriro
Holdings Ltd (ASX: SHM) until March 2022.
Joseph Constable, BA(Hons), MPhil (Director)
Executive Director, appointed 30 June 2020. Joseph has seven years experience in equity
markets. He is a Portfolio manager and Responsible manager for H&&G Investment Management
Ltd (formerly Supervised Investments Australia Ltd). He has previous investment experience at
Hunter Hall International and UK-based Smith and Williamson. Joseph has a Bachelor of Arts with
Honours from the University of Melbourne and a Master of Philosophy from the University of Oxford.
Joseph brings to the board research and analytical skills in addition to knowledge of investing in
public markets. Joseph is a director of H&&G High Conviction Limited (ASX: HCF) and Po Valley
Energy Limited (ASX: PVE).
Interests of Directors 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 Hancock &&
Gore were:
Number of Options
Number of direct shares Number of indirect shares
Alexander (Sandy) Beard
6,000,000
9,390,724
15,333,235
Kevin Eley
Peter Miller
Cheryl Hayman
Joseph Constable
-
-
-
-
-
234,469
-
425,872
3,577,240
25,549,971
744,030
-
Entities related to Alexander Beard (200,000 units), Kevin Eley (100,000 units), Peter Miller (100,000 units),
Cheryl Hayman (50,000 units), hold ordinary units in the DP Trust a related body corporate of the Group.
5
3
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Key management personnel
The following names and details are of the other key management personnel of the Company.
Other key management personnel were in office for the entire period unless otherwise stated.
Investment Director
Nicholas Atkinson, MBA, B.Com, GradDipAppFin
Nicholas is Investment Director of the Group, appointed 21 June 2021. Nicholas has more than
25 years of investment experience spanning capital markets, corporate finance, and investment
management. He served as the Executive Director of Institutional Equities at Morgans Financial for
14 years, where he oversaw the growth of the division's profitability. Having gained global experience
in London and New York, Nicholas has expertise in the Energy, Healthcare and Small-Capitalization
sectors. He has a passion for assisting companies grow organically and through acquisitions.
Nicholas is a director of H&&G High Conviction Limited (ASX: HCF).
Investment Director
Phillip Christopher, BEc, BCom
Phillip has been an Investment Director of the Group since 17 May 2021. Phillip has over 12 years
of experience across private equity, capital markets and investment management. Prior to joining
the Group he was a Director in Private Equity at Alceon Group and a member of the Investment
Banking Division of Goldman Sachs. Phillip is a director of Anagenics Limited (ASX:AN1).
Company Secretary
Michael Bower BSc (Hons) CA FCA
Michael was appointed Company Secretary on 29 March 2022. Michael has over 25 years'
experience in finance and investment roles in Australia, the United Kingdom and New Zealand,
including 17 years at CVC Limited (ASX: CVC), initially as Chief Financial Officer and Company
Secretary and then as Investment Analyst and Manager. Michael is a Chartered Accountant and
member of both Chartered Accountants Australia and New Zealand and the Institute of Chartered
Accountants in England and Wales. Michael has a Bachelor of Science (Honours) in Chemistry from
the University of Durham.
Chief Financial Officer and Company Secretary
Iain Thompson,BEc (Accg), CA, Grad dip CSP, FGIA, GAICD
Resigned effective 29 March 2022 to take on equivalent roles at Mountcastle Group, a major
investee of the Group. Iain was appointed CFO / Company Secretary in 2015, Iain has 30 years’
experience in finance and company secretarial roles, including over a decade at ASX listed
Brickworks Ltd. He also has directorship experience in the Not For Profit sector, focusing on early
childhood intervention. Iain is a Chartered Accountant, a member of the Governance Institute of
Australia, and a member of the Australian Institute of Company Directors.
36
H&&G Annual Report 2022 Dividends
During the year, the Company paid the following fully franked dividends:
•
•
Final dividend of 1.0 cent per share for the year ended 30 September 2021 paid on
3 December 2021;
Interim dividend of 0.5 cents per share for the year ended 30 September 2022 paid on
30 September 2022; and
• Special dividend of 0.5 cents per share for the year ended 30 September 2022 paid on
30 September 2022.
Since the end of the financial year the directors have declared a fully franked final dividend for
the year ended 30 September 2022 of 1.0 cent per share to be paid on 12 December 2022.
The dividend reinvestment plan will not apply to this dividend.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan (DRP) was established by the directors to provide shareholders
with the opportunity of reinvesting their dividends in ordinary shares in the Company. No brokerage
is payable if shares are allotted under the DRP. Participation is open to shareholders with a
registered address in Australia or New Zealand and holding more than 1,000 shares. During the
year the Directors determined that the DRP would not be in operation and there were no shares
issued under the DRP.
Share buy-back
There were no shares bought back during the current financial year.
Principal activities
During the period the principal activities of the Group consisted of management of a diversified
investment strategy with the objective to deliver consistent dividends and long term capital growth.
The investment strategies include management of a portfolio of diversified assets, including ASX
listed equities – both passive and strategic, unlisted equities including mature private businesses
and earlier emerging companies, fixed income producing investments, funds management
activities, and direct and indirect investment in property assets.
The Group provides active support to those investees in which we hold a significant equity stake,
including directorship capabilities, facilitation of management services and secondment of personnel.
7
3
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Operating And
Financial Review
Overview
The Group continued to refine and expand its investment approach and capabilities during the
financial year ended 30 September 2022 with a further well-supported capital raising, recruitment
of additional new team members and active management of its portfolio of investments, which
included the divestment of long-term investee companies and focus on owner operated businesses.
Statutory Net Profit after Tax of $5.6 million was reported, which included:
• Realisations from the portfolio of private equity investments;
• Dividend income, recoupment of costs and other transactions with investees;
• Share trading profits;
• Management and performance fees from funds management activities;
• Net revaluation gains on private equity investments; and
•
Interest income from fixed interest and convertible note investments.
The Group has adopted an ‘investment entity’ accounting approach since the start of the financial
year ended 30 September 2021, where investee entities are recognised on the balance sheet at
fair value, with changes in the value during the reporting period recognised through profit and loss.
A key profit measure adopted by the board following this change is Adjusted net profit before tax.
This removes unrealised revaluation gains on unlisted investments in the period but adds back
similar gains from prior periods now crystallised, and is considered to provide a better indication of
distributable earnings:
Net profit before income tax
Less: revaluation gains on unlisted investments in the current year (*1)
Add: prior year unrealised gains crystallised in respect of Pegasus Healthcare
Adjusted net profit before tax
2022
$’000’s
5,703
(3,154)
3,325
5,874
2021
$’000’s
15,235
(10,634)
-
4,601
*1 BLC Cosmetics is treated as realised in the prior period, as the 30 September 2021 valuation reflected an agreed sale price.
Net assets at 30 September 2022 were $64.1 million. Net Tangible Assets were 28.1 cents per share. These
amounts do not reflect contingent tax assets in respect of $17.7 million of carry forward tax losses which are not
reflected on the balance sheet. These losses remain subject to satisfaction of the Continuity of Ownership Test or
Same Business Test prior to usage.
38
H&&G Annual Report 2022 Dividends and capital management
The Group paid fully franked dividends of 2.0 cents per share during the financial year ended 30
September 2022.
The full year 2022 performance of the Group has allowed Directors to declare a fully franked final
dividend of 1.0 cent per share to shareholders to be paid on 12 December 2022.
The Company was able to expand and diversify the balance sheet during the year following a
strongly supported private placement announced in November 2021 which raised $15.0 million at a
price of 33 cents per share.
These funds have been used to invest in new and existing investments. At balance date the Group
held $13.5 million in cash.
Portfolio
Significant changes to the portfolio of investments improved the diversification and liquidity of the
portfolio during and subsequent to the end of the financial year, as follows:
• The Group completed the sale of its 70% interest in Pegasus Healthcare Group for
approximately $10 million cash to LINET Australia in September 2022. The sale price
represents a 120% uplift from the Group’s initial investment of $4.5 million in March 2018, and
an approximate $2.6 million uplift, or $2.3 million after adjusting for put and call options, on the
carrying value as reported in the Group’s 30 September 2021 balance sheet;
• Mountcastle completed a number of capital management initiatives, including share buybacks,
during the year. The Group also invested a further $1.2 million. The combined effect increased the
Group’s ownership of Mountcastle to 49.4% (up from 39.7% at 30 September 2021). Mountcastle
also distributed dividends of approximately $1.5 million to The Group during the year;
• The Group completed its first syndicated investment, raising $8.4 million in a Group-managed
trust (including a net $5.9 million contribution by the Group) to invest growth capital (unlisted
preferred equity) into Disruptive Packaging, an innovative global closed-loop recyclable packaging
inventor, manufacturer and marketer. The Group has board representation in an active sponsor
role and expects Disruptive Packaging to be a key long-term investee pillar of the Group portfolio;
• The Group further developed its funds management business through the restructure of the H&&G
High Conviction Fund into H&&G High Conviction Limited (ASX code: HCF). H&&G High Conviction
Limited is managed by the Group’s wholly owned subsidiary H&&G Investment Management
Ltd (HGIM). H&&G High Conviction Limited launched its IPO in September 2022, which closed
following the year-end with approximately $22 million in equity, including receiving a $3m
investment by funds managed by Perennial Investment Management. The listing of HCF provides
the Group with a fee generating and scalable source of funds under management.
• The Group completed the sale of its 100% owned subsidiary BLC Cosmetics to ASX Listed
Anagenics (ASX: AN1) for $1.2 million cash and 32,786,885 million Anagenics shares in
November 2021. The Group holds a substantial holding in Anagenics and has taken an
active role as a supportive strategic shareholder with board representation. As part of the
BLC Cosmetics transaction, the Group is entitled to earn-out consideration from Anagenics
of approximately $1.05 million payable in cash and Anagenics shares (subject to Anagenics
shareholders’ approval);
• The Group’s ASX trading portfolio, excluding core holdings in Anagenics and FOS Capital
acquired through business disposals, of approximately $10 million had a strong first half of
the financial year delivering annualized returns exceeding 20% per annum. Strong market
declines through April through to June significantly eroded gains made in first half, but returns
significantly improved from July through to September, allowing the portfolio to finish the year
with an annualized return of approximately $1 million or 10% per annum; and
9
3
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 • The Group also established a new syndicated investment through the Hyde Rd Trust to acquire
a property in Brisbane occupied and previously 50% owned by Mountcastle. The transaction
involved Mountcastle shareholders rolling over their look-through 50% equity interest and the
Group contributing $2.8 million of new funding. Settlement occurred just after year-end, on
4 October 2022, and gives the Group a 73% equity interest in the property. The Hyde Rd
property is a high yielding asset with strong tenancies and substantial long term development
potential which we will actively look to reposition.
A pipeline of further opportunities remain under active consideration.
The Mountcastle Group, the Group’s largest investment, is a supplier of school and corporate wear.
Mountcastle performed strongly during the year reporting record revenue and earnings despite the
impact of COVID and associated closure of schools at times during the year. The team are excited
about the opportunities available to Mountcastle and continue to work closely with management
and other shareholders to develop opportunities to further enhance the value of this investment.
The following table, based on unaudited management reporting for Mountcastle, for the years ended
30 June, provides further information on the Mountcastle investment:
Revenue ($’millions)
EBITDA ($’millions)
Group’s ownership interest
Group’s carrying value ($’millions)
Outlook
2022
49.3
10.4
49.4%
21.1
2021
47.5
9.5
39.7%
16.7
The Board remains focused on increasing value for shareholders through a combination of:
• Driving growth and value of investee companies by assisting with M&A, capital management
and strategy;
• Progressive realisation of portfolio investments, and redeployment of capital into new growth
opportunities;
• Diversification of the investment base to other asset categories;
•
Increasing funds under management across existing managed vehicles and new vehicles;
• Continued building of the investment and support team; and
• Continued dividend payments based on realised earnings.
The Group believes the refinement of the portfolio over the past 12 months has positioned it well
to drive realisable value from existing investments, deploy surplus cash into new investments and
broaden revenue streams from off balance sheet funds under management.
40
H&&G Annual Report 2022 Risk management
The achievement of the Group’s business objectives may be affected by internal and external
variables potentially impacting the operational and financial performance of the business. The
Group has an Enterprise Risk Management and Reporting System, which identifies strategic and
operational risks and specifies mitigation actions and is reported to the board.
Key risks for the Group include:
Loss of value of investments risk
The Group has a diversified portfolio of investments which are exposed to a variety of external
inputs. It is possible that broad macro-economic changes outside the direct control of management
may lead to a significant reduction in value of the investee companies.
Loss of Key Management Personnel risk
The Group has a small team of key executives with responsibility for assessing and deciding the
allocation of capital between investments. A loss of one or more of these key persons may have a
negative impact on future investment performance.
Funding risk
The Group has identified a significant pipeline of potential investments but has a limited capital
base from which to make these investments. An inability to access future capital, whether caused
by a lack of investor appetite or lack of other third-party funding options (including bank financing)
could result in the Group being unable to pursue valuable opportunities.
COVID-19 risk
The Group’s operations are subject to disruption from Government responses to COVID-19. Further,
some of the Group’s investee companies are reliant on supply chains from overseas markets that
have been impacted by COVID-19.
Cyber / IT risk
The Group and investee companies are highly reliant on information systems for their management,
including for supplier and sales processes. While many of these systems are provided by reputable
third parties and hosted in safe ‘cloud’ environments, they could still be subject to failure or attack by
various actors seeking to cause disruption.
Environmental, sustainability and climate risks
The Group is exposed to both financial and reputational risks from investing in entities that
potentially cause negative environmental and sustainability impacts and/ or are exposed to climate
risks. This includes impacts on the value of investments from investment community policies and
regulatory responses.
Regulatory risk
The Group holds an Australian Financial Services Licence (“AFSL”) which allows it to conduct
investment activities on behalf of third-party investors and requires the Group to comply with
strict obligations. A loss of the AFSL, or changes in the regulatory environment more generally,
could significantly inhibit the ability of the Group to conduct its activities and earn management,
performance and other fees.
The above list does not cover all the risks that could apply to the Group.
1
4
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Environmental regulation
Although our operations have limited environmental impact, the consequences of business
decisions on the environment are seriously considered. Although we have little exposure to
environmental risks, we strive to be environmentally responsible and embrace technologies and
processes that limit environmental impact.
Significant changes in the state of affairs
During the period the Group undertook a further capital raising to provide additional capital to
pursue a number of new investments.
There have been no other significant changes in the state of affairs of the Group during the year
other than those referred to in the Operating and Financial Review.
Events since the end of the financial year
On 4 October 2022, the Hyde Road Trust, in which the Group holds a 73% interest, acquired a
property at 20 Cansdale Street & 103 Hyde Road, Yeronga, Queensland, for $10 million from the
Hyde Road Partnership. The equity components of the acquisition were funded by an in-specie
capital return and dividend from Mountcastle Pty Ltd of $3.2 million, of which the Group’s share
was $1.6 million, and an additional contribution from the Group of $2.8 million.
On 25 October 2022, H&&G High Conviction Limited (ASX: HCF), a company managed by the
Group, listed on the Australian Stock Exchange. In conjunction with the listing, H&&G High Conviction
Limited raised $5.2 million of which the Group subscribed $854,252 for 869,114 shares.
On 24 November 2022, the Company declared a fully franked final dividend in respect of the
financial year ended 30 September 2022 of 1.0 cent per share.
There have been no other significant events occurring after the balance date which may affect
either the Group’s operations or results of those operations or the Group’s state of affairs.
Likely developments and expected results of operations
Likely developments in the operations of the Group are detailed in the Operating and Financial
Review and Events subsequent to balance date.
Meetings of directors
The number of meetings of directors held during the year and the number of meetings attended by
each director were as follows:
Director:
Alexander Beard
Kevin Eley
Peter Miller
Cheryl Hayman
Joseph Constable
Number of Directors’ meetings held
9
Number of meetings attended:
9
9
8
9
9
Proceedings on behalf of the company
There were no proceedings brought by or on behalf of the Company at any time during or since the
end of the financial year.
42
H&&G Annual Report 2022 Remuneration Report
(audited)
The remuneration report outlines the director and executive remuneration arrangements of the
Company for the 2022 financial year, in accordance with the requirements of the Corporations
Act 2001 and its Regulations. It has been audited in accordance with section 300(A) of the
Corporations Act 2001.
Details of Key Management Personnel
Key Management Personnel (KMP) are those individuals with authority and responsibility for planning,
directing and controlling the major activities of the Group, directly or indirectly, including any director
of the parent. The list below outlines the KMP of the Group during the financial year ended 30
September 2022. Unless otherwise indicated, the individuals were KMP for the entire financial year.
Directors
Alexander (Sandy) Beard
Executive Chair
Non-Executive Director
Non-Executive Director
Non-Executive Director
Executive Director
Investment Director
Investment Director
Company Secretary (appointed 29 March 2022)
Chief Financial Officer and Company Secretary
(resigned 29 March 2022)
Kevin Eley
Peter Miller
Cheryl Hayman
Joseph Constable
Executives
Nicholas Atkinson
Phillip Christopher
Michael Bower
Iain Thompson
Remuneration governance
Remuneration committee
In July 2020, the Board resolved to absorb the function of the Nomination and Remuneration
Committee (the Committee) into the remit of the full Board of directors. This decision was taken in
recognition that with the size of the company, and a small Board of directors, it was less effective to
have this extra layer of governance for the Group. As part of this governance restructure, the board
is retaining the Committee's Charter as guidance to the Board on remuneration and nomination
matters. Cheryl Hayman, who had Chaired the Committee remains the designated key director in
relation to remuneration related matters.
The main remuneration functions of the Board include:
• Executive remuneration and incentive policies;
• Remuneration packages for senior management, including incentive schemes;
• Recruitment, retention and termination policies for senior management;
• Remuneration framework for directors and KMP;
• Statutory reporting on remuneration; and
• Oversight of Company culture and performance accordingly.
3
4
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022
Use of remuneration consultants
Where the Committee or the Board will benefit from external advice, it is authorised to engage
directly with a remuneration consultant, who reports directly to the Committee. In selecting
a suitable consultant, the Committee considers potential conflicts of interest and requires
independence from the Group’s KMP and other executives as part of their terms of engagement.
Where sought, remuneration recommendations are provided to the Committee as one input into
decision making only. The Committee considers any recommendations in conjunction with other
factors in making its remuneration determinations.
Remuneration packages are reviewed annually with due regard to performance and other relevant
factors. In order to retain and attract executives of sufficient calibre to facilitate the effective and
efficient management of the Company’s operations the Committee, when necessary, seeks the
advice of external advisers in connection with the structure of remuneration packages.
Executive remuneration arrangements
Remuneration Policy
The Company and its KMP are all based in Australia, with each of the current portfolio of investee
companies operating predominantly in Australia and New Zealand.
Through an effective remuneration framework, the Group aims to:
• Provide fair and equitable rewards;
• Stimulate a high performance culture;
• Encourage the teamwork required to achieve business and financial objectives;
• Attract, retain and motivate high calibre employees; and
• Ensure that remuneration is competitive in relation to peer companies in Australia.
Principles of remuneration
The responsibilities of the Board include developing remuneration frameworks for senior
management which incorporate the following considerations:
• The structure of the total remuneration package (TRP) including base salary, other benefits,
short term incentives (STI) (bonus) and share-based long term incentives (LTI);
• The mechanism to be used to review and benchmark the competitiveness of the TRP;
• The Key Performance Indicators (KPIs) to be set;
• Changes in the amounts of different components of the TRP following annual performance
reviews;
• Decisions on whether the Long Term Incentive Plan will be offered for any year, the structure
of equity to be awarded to KMP under this plan when offered, and setting of associated
performance indicators for future assessment;
• Determination of the amount of equity and the associated vesting at the end of each agreed
assessment period of the Long Term Incentive Plan, based on financial performance indicators
previously established; and
• The remuneration and any other benefits of the Non-Executive Directors.
The Group’s executive remuneration strategy seeks to match the goals of the KMP to those of the
shareholders in driving value creation. This is achieved through combining appropriate market levels
of guaranteed remuneration with incentive payments. These incentive payments are only paid on
attainment of previously agreed annual performance targets which are developed against the business’
strategic and financial goals, unless the Board considers a discretionary bonus is appropriate.
44
H&&G Annual Report 2022 Components of remuneration
Guaranteed fixed base remuneration
Base remuneration, which is not at risk, is structured as a total employment package and includes
salary, superannuation and other benefits, with the allocation between salary and other sacrificing
benefits at the executive’s discretion. Base remuneration is annually reviewed but not necessarily
increased each year. The base remuneration is set at the appropriate level of market rate for the role
and the individual and in consideration of the size of the Company.
Long term employee benefits are the amount of long service leave entitlements accrued during the
year.
At risk remuneration
Certain executives are eligible for STI payments and have access to an LTI in the form of a Loan
Funded Share Plan (ELFSP) and performance rights.
Short term incentives
Key Management Personnel have the opportunity to earn an STI based on their performance
during any given year. In most instances, performance will be assessed against Key Performance
Indicators set prior to the commencement of a financial year and will include factors tied to Group
earnings, individually driven strategic outcomes and, in some circumstances, board discretion based
on specific achieved outcomes. The maximum STI opportunity for any KMP is 100% of base salary.
Long term incentives
The LTI is designed to enable a strategic focus on the longer term sustainability and growth of the
Group and aligns executive incentives with shareholder objectives through the use of the Company’s
shares via the ELFSP and performance rights.
ELFSP
Under the ELFSP, selected KMP are issued a quantity of shares at an issue price, determined at the
sole discretion of the board. Factors determining the issue price include the current market value of
the Company’s shares and any recent or potential capital raising.
The value of the shares issued under the ELFSP is offset by an unsecured, interest free loan from the
Company. The loans are limited recourse, meaning that if the market value of the Shares is less than
the loan value at the end of the term of the loan, the Participant will not need to repay the remaining
loan balance out of their own funds.
The loans are repayable in full on the earlier of 5 years from the date the loan is made, the shares
being acquired by a third party under a takeover bid or similar, the Participant ceasing employment
with the Group or becoming insolvent or subject to bankruptcy proceedings, or on the date the
Participant and the Company otherwise agree.
5
4
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Performance rights
In addition to the ELFSP, the Company has granted performance rights to Nick Atkinson (9,000,000
rights) and Phillip Christopher (4,500,000 rights) as an additional component of their LTI.
The rights granted to each KMP are split into 3 equal tranches which vest on the 3rd, 4th and 5th
anniversary of the KMP’s commencement date.
Upon vesting, each eligible right will convert to one fully paid ordinary share.
Vesting of each tranche of rights is subject to Total Shareholder Returns (TSR) on the Company’s
shares, calculated on a compounding basis from a starting point of 20 cents per share (being the
issue price of shares under the capital raising in April 2021).
Vesting is calculated in line with the following table:
TSR
Up to 10%
Vesting amount
At the Board's discretion
Between 10% and 15%
Pro rata between nil and 50% of Rights
15%
50% of Rights
Between 15% and 25%
Pro rata between 50% and 100% of Rights
25% and above
100% of Rights
Employment contracts
Terms of employment of executives are generally formalised in employment letters to each of the KMP.
There are currently no fixed term contracts in place, however personnel must adhere to a minimum
notice period as stipulated in their contracts of employment:
•
Joseph Constable has a three month notice period
• The Investment Directors have a three month notice period.
• The previous CFO and Company Secretary had a three month notice period.
Following the appointment of Sandy Beard as Chair in October 2020, the Chair's fee was reduced
to $50,000 per annum. In September 2022, it was announced that the role and remuneration of
the Executive Chair were being reset and formalised as follows:
•
•
the fee would increase to $300,000 plus minimum statutory superannuation; and
the notice period would be six months.
The Company Secretary has no formal contract and is employed on a casual basis with a notional
two week notice period.
Aside from statutory requirements, the payment of any negotiated termination benefit is at the
discretion of the Board.
46
H&&G Annual Report 2022 Executive and Board remuneration splits:
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n
u
a
t
i
o
n
(
b
)
L
o
n
g
-
t
e
r
m
i
n
c
e
n
t
i
v
e
s
(
c
)
l
e
a
v
e
(
c
)
L
o
n
g
s
e
r
v
c
e
i
i
T
e
r
m
n
a
t
i
o
n
p
a
y
m
e
n
t
s
(
c
)
T
o
t
a
l
r
e
m
u
n
e
r
a
t
i
o
n
P
e
r
c
e
n
t
a
g
e
v
a
r
i
a
b
e
l
$
$
$
$
$
$
$
$
%
30 September 2022
Directors
Alexander Beard
Kevin Eley
Peter Miller
Cheryl Hayman
67,579
43,836
43,836
43,836
-
-
-
-
Joseph Constable
152,295
43,000
Total directors
351,382
43,000
Executives
Nicholas Atkinson
286,926
-
Phillip Christopher
279,045
100,000
Michael Bower (1)
Iain Thompson (2)
108,000
94,295
-
-
Total Executives
768,266
100,000
Total KMP remuneration
1,119,648
143,000
30 September 2021
Directors
Alexander Beard (3)
Kevin Eley
Peter Miller
Cheryl Hayman
Joseph Constable (4)
Total directors
Executives
42,203
46,271
43,836
43,836
96,916
273,062
Gregory Timar (5)
77,279
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
73,986
48,274
48,274
48,274
-
-
-
-
219,918
19.6
438,726
-
6,407
4,438
4,438
4,438
19,487
39,208
-
-
-
-
-
-
23,999 226,332
23,999
126,264
-
-
9,820
4,272
57,818 356,868
-
-
-
-
5,136
5,136
5,991
6,354
-
(594)
11,751
97,026 356,868
16,887
4,066
4,451
4,219
4,219
9,395
26,350
-
-
-
-
-
-
-
-
-
-
12,823
12,823
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
543,248
535,662
108,000
107,793
1,294,703
1,733,429
46,269
50,722
48,055
48,055
119,134
312,235
41.7
42.2
-
4.0
-
-
-
-
-
-
7.5
11.3
43.4
27.1
16,271
25,821
(4,074) 230,000
345,297
Iain Thompson
273,956
30,000
1,416
22,163
8,262
4,299
Nicholas Atkinson (6)
Phillip Christopher (7)
70,594
96,625
-
-
-
-
6,617
121,816
8,790
87,927
1,177
1,606
-
-
-
340,096
200,204
194,948
Total Executives
518,454
30,000
1,416
53,841 243,826
3,008 230,000 1,080,545
Total KMP remuneration
791,516
30,000
1,416
80,191 243,826
15,831 230,000 1,392,780
(a)
(b)
(c)
(1)
(2)
(3)
(4)
(5)
(6)
(7)
Short-term benefits
Post-employment benefits
Long-term benefits
Appointed as Company Secretary on 29 March 2022.
Resigned as Chief Financial Officer and Company Secretary on 29 March 2022 to take-up a full-time position at Mountcastle Pty Ltd. Previously
Iain had been combining roles at the Group and Mountcastle. Remuneration shown is gross and has not been reduced for $62,500 (2021:
$68,750) recharged by the Group to Mountcastle for services.
Appointed 29 October 2020.
Joseph Constable ceased drawing Directors fees upon the acquisition of Supervised Investments Australia Ltd on 24 March 2021, of which he
was an employee. Joseph's remuneration is now entirely related to his employment relationship with the Group and he has received no Director
Fees since April 2021.
Resigned 22 December 2020.
Appointed 21 June 2021.
Appointed 17 May 2021.
7
4
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022
Remuneration under COVID-19
During FY20 non-executive Directors took a 20% reduction in fees in response to the uncertainty
arising from COVID-19. Apart from minor superannuation changes, in line with movements in
statutory rates, directors fees have remained at this reduced level throughout the entire 2021 and
2022 financial years.
During FY22, companies within the Group received no JobKeeper payments (FY21: $189,000).
Relationship between remuneration policy and company performance
Short term incentives are largely determined with reference to net profit before tax of the Group,
excluding unrealised revaluation gains. This criteria is important as it is one of the key factors used to
determine dividend payments, with this profit measure approximating cash profits of the Group which
would be available for distribution. This measurement basis is also reflective of Group performance
under the Investment Entity basis of accounting adopted during the current financial year.
No portion of any incentive schemes are currently solely linked to the Company’s share price.
There are currently no non-financial Key Performance Indicators (KPIs) which give rise to incentive
payments.
With the change in basis of accounting in FY21 to investment entity basis, accounting profit
comparisons with earlier years are difficult. Key measures for determining performance of the
current year results are included in the review of operations and is not repeated in full here.
Financial Year
2018
2019
2020
2021
2022
Statutory NPAT ($000)
Share price at year end ($)
Dividends declared in relation to the year (cents)
Statutory Earnings per Share (cents)
812
0.44
3.00
1.1
1,461
0.32
0.75
1.9
0.16
-
(19.3)
Total Shareholder Returns
(6%)
(22%)
(50%)
0.29
1.00
11.6
81%
0.30
2.00
2.7
11%
(12,699)
15,599
5,600
Non-executive director remuneration arrangements
Non-executive directors are not employed under employment contracts. Non-executive directors
are appointed under a letter of appointment and are subject to election and rotation requirements
as set out in the ASX Listing Rules and the Company’s Constitution.
The remuneration of non-executive directors is determined by the full Board after consideration of
Group performance and market rates for directors’ remuneration. Non-executive director fees are
fixed each year, and are not subject to performance-based incentives.
The maximum aggregate level of fees which may be paid to non-executive directors is required
to be approved by shareholders in a general meeting. This figure is currently $500,000 and was
approved by shareholders at the Annual General Meeting on 5 February 2008.
Total non-executive directors’ remuneration including superannuation paid at the statutory prescribed
rate for the year ended 30 September 2022 was $144,822 which is within the approved amount.
Individual non-executive director’s fees have not increased since October 2007, and during 2020
in response to COVID-19 fees were temporarily reduced to $48,000 per annum. Subject to minor
changes for statutory superannuation changes, fees remain at this level at the date of this report.
48
H&&G Annual Report 2022 Key management personnel shareholdings
The key management personnel and their relevant interest in the fully paid ordinary shares of the
Company as at year end are as follows:
30 September 2022
Directors
Opening
balance
Purchases
Disposals
Changes in
Closing
Of which
KMPs
balance
Indirect interest
Alexander Beard
19,265,724
5,458,235
Kevin Eley
Peter Miller
Cheryl Hayman
Joseph Constable
Executives
Nicholas Atkinson
Phillip Christopher
Michael Bower
Iain Thompson
2,971,180
606,060
25,784,440
441,000
274,357
-
303,030
151,515
4,194,070
1,055,930
2,000,000
484,811
-
689,117
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
24,723,959
15,333,235
3,577,240
3,577,240
25,784,440
25,784,440
744,030
425,872
744,030
-
5,250,000
4,250,000
2,484,811
1,000,000
100,000
(689,117)
100,000
-
-
-
The key management personnel and their relevant interest in the unquoted options of the Company
as at year end are as follows:
30 September 2022
Directors
Opening
balance
Alexander Beard
6,000,000
Kevin Eley
Peter Miller
Cheryl Hayman
Joseph Constable
Executives
Nicholas Atkinson
Phillip Christopher
Michael Bower
Iain Thompson
-
-
-
-
500,000
-
-
-
Purchases
Disposals
Changes in
Closing
Of which
KMPs
balance
Indirect interest
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,000,000
6,000,000
-
-
-
-
-
-
-
-
500,000
500,000
-
-
-
-
-
-
The key management personnel and their relevant interest in the unquoted performance rights of the
Company as at year end are as follows:
30 September 2022
Opening
Purchases
Disposals
Changes in
Closing
Of which
balance
KMPs
balance
Indirect interest
Directors
Alexander Beard
Kevin Eley
Peter Miller
Cheryl Hayman
Joseph Constable
Executives
Nicholas Atkinson
Phillip Christopher
Michael Bower
Iain Thompson
-
-
-
-
-
9,000,000
4,500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9,000,000
4,500,000
-
-
End of Audited Remuneration Report
-
-
-
-
-
-
-
-
-
9
4
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Indemnification and insurance of directors and officers
The Company's Rules provide for an indemnity of directors, executive officers and secretaries where
liability is incurred in connection with the performance of their duties in those roles other than as
a result of their negligence, default, breach of duty or breach of trust in relation to the Company.
The Rules further provide for an indemnity in respect of legal costs incurred by those persons in
defending proceedings in which judgement is given in their favour, they are acquitted or the Court
grants them relief.
During the year, the Company purchased Directors’ and Officers’ Liability Insurance to provide cover
in the event a claim is made against the directors and officers in office during the financial year and
at the date of this report, as far as is allowable by the Corporations Act 2001. The policy also covers
the Company for reimbursement of directors’ and officers’ expenses associated with such claims if
the defence to the claim is successful. The total amount of insurance premium paid and the nature
of the liability are not disclosed due to a confidentiality clause within the agreement. As at the date
of this report, no amounts have been claimed or paid in respect of this indemnity and insurance,
other than the premium referred to above.
Auditors
Indemnification of auditors
To the extent permitted by law, the Company has agreed to indemnify its auditors, UHY Haines
Norton, as part of the terms of its audit engagement agreement against claims by third parties
arising from the audit (for an unspecified amount). No payment has been made to indemnify UHY
Haines Norton during or since the financial year.
Auditor independence and non-audit services
The directors have received a declaration signed in accordance with a resolution of the directors made
pursuant to s.298(2) of the Corporations Act 2001, a copy of which can be found on page 53.
Non-audit services
The Group may decide to employ the auditor on assignments additional to their statutory audit
duties where the auditor's expertise and experience with the Company and/or the Group are
important.
A total of $56,971 has been charged by UHY Haines Norton for the provision of non-audit services
during the year in respect of taxation services and the IPO of H&&G High Conviction Limited.
50
H&&G Annual Report 2022 Options
As part of the acquisition of Pegasus Healthcare on 1 April 2018, a Put and Call option was granted
to the minority shareholder. With the sale of Pegasus Healthcare during the year the options
terminated.
On 15 April 2021, the Company signed an agreement granting the management of SPOS Group
an option to purchase SPOS from the Company. The payment of an option fee of $250,000
granted management an option to acquire the business at any time over the next 5 years for $2.09
million less the amount of distributions made by SPOS to the Group. In addition, the shareholder
loan balances owed to the Group remain payable. The value of SPOS in note 3 of the financial
statements as at 30 September 2022 reflects the value of the current purchase price.
At the AGM on 24 February 2021 shareholders approved the issuance of 8,000,000 options to
various parties who had participated in the Private Placement announced on 21 October 2020.
Each option grants the holder the right to subscribe for 1 fully paid ordinary share in exchange for
15.0 cents cash, at any point prior to 24 February 2024. The options hold no voting or dividend
rights. At balance date, 1.0 million of the options had been exercised.
Rounding
The amounts contained in the financial report have been rounded to the nearest $1,000 (where
rounding is applicable) where noted ($000) under the option available to the Company under ASIC
Corporations (Rounding in Financial / Directors' Reports) Instrument 2016/191. The Company is an
entity to which the class order applies.
Signed in accordance with a resolution of the directors made pursuant to s.298(2) of the
Corporations Act 2001.
Alexander (Sandy) Beard
Director
24 November 2022
1
5
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Auditor’s
Independence
Declaration
52
H&&G Annual Report 2022 Level 11 | 1 York Street | Sydney | NSW | 2000
GPO Box 4137 | Sydney | NSW | 2001
t: +61 2 9256 6600 | f: +61 2 9256 6611
sydney@uhyhnsyd.com.au
www.uhyhnsydney.com.au
Auditor’s Independence Declaration
Under Section 307C of the Corporations Act 2001
To the Directors of Hancock & Gore Limited
As lead auditor for the audit of the financial report of Hancock & Gore Limited for the year ended 30
September 2022, I declare that to the best of my knowledge and belief, there have been:
(i)(cid:3)
No contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
(ii)(cid:3)
No contraventions of any applicable code of professional conduct in relation to the audit.
Mark Nicholaeff
Partner
Sydney
Dated: 24 November 2022
UHY Haines Norton
Chartered Accountants
An association of independent (cid:386) rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting (cid:386) rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
Passion beyond numbers
3
5
H&G Annual Report 2022H&G ANNUAL REPORT 2022
Financial Report
54
H&&G Annual Report 2022 Consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 30 September
Note
2022
$'000
2021
$'000
Dividend income
Finance income
Funds management and other fee revenue
Rental income
Revenue from continuing operations
Fair value gains on financial instruments at fair value through profit or loss
Other income
Administration and other expenses
Depreciation and amortisation expense
Employee benefit expenses
Finance costs
Occupancy expenses
Professional fees
Profit from continuing operations before income tax
Income tax (expense)/ benefit
Profit from continuing operations after income tax
10
2
10
10
10
10
11
2,611
579
821
418
1,522
-
475
479
4,429
2,476
5,864
-
(707)
(232)
(1,792)
(26)
(180)
(1,653)
5,703
(103)
5,600
14,261
1,473
(485)
(230)
(1,593)
(61)
(193)
(413)
15,235
364
15,599
Other comprehensive income, net of tax
Total comprehensive income from continuing operations
-
-
5,600
15,599
Profit from continuing operations after income tax is attributable to:
Owners of Hancock && Gore Ltd
Non-controlling interests
Total comprehensive income from continuing operations is attributable to:
Owners of Hancock && Gore Ltd
Non-controlling interests
5,600
15,599
-
-
5,600
15,599
5,600
15,599
-
-
5,600
15,599
Earnings per share attributable to the ordinary equity holders of the
Cents
Cents
Company:
Basic earnings per share
Diluted earnings per share
5
5
2.7
2.6
11.6
11.1
5
5
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Consolidated Balance Sheet as at 30 September
Note
2022
$'000
2021
$'000
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Related party receivables
Prepayments
Financial assets at fair value through profit and loss
Financial assets at amortised cost
Total current assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Financial assets at fair value through profit and loss
Financial assets at amortised cost
Other financial assets
Deferred tax assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Related party payables
Lease liabilities
Provisions
Other financial liabilities
Total current liabilities
Non-current liabilities
Lease liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Accumulated losses
Other components of equity
Equity interests of owners of Hancock & Gore Ltd
Non-controlling interests
Total equity
56
9
12
12
3
3
13
17
14
3
3
3
11
15
15
17
16
3
17
16
11
6
18
26
13,508
1,367
1,295
113
11,098
503
27,884
39
206
712
32,689
3,650
-
-
37,296
7,367
425
902
145
8,379
202
17,420
81
396
712
26,932
-
3,581
234
31,936
65,180
49,356
667
60
262
60
-
1,049
23
34
-
57
390
-
245
127
204
966
281
42
285
608
1,106
1,574
64,074
47,782
72,623
19,451
(24,651)
(3,349)
64,074
-
64,074
58,274
17,508
(24,651)
(3,349)
47,782
-
47,782
H&&G Annual Report 2022 Consolidated Statement of Changes in Equity for the years ended 30 September
I
s
s
u
e
d
C
a
p
i
t
a
l
P
r
o
f
i
t
R
e
s
e
r
v
e
O
p
t
i
o
n
R
e
s
e
r
v
e
R
e
s
e
r
v
e
i
F
o
r
e
g
n
C
u
r
r
e
n
c
y
S
c
h
e
m
e
R
e
s
e
r
v
e
l
E
m
p
o
y
e
e
S
h
a
r
e
O
t
h
e
r
R
e
s
e
r
v
e
s
L
o
s
s
e
s
A
c
c
u
m
u
a
t
e
d
l
C
o
m
p
a
n
y
O
w
n
e
r
s
o
f
t
h
e
o
f
E
q
u
i
t
y
O
t
h
e
r
C
o
m
p
o
n
e
n
t
s
A
t
t
r
i
b
u
t
a
b
e
t
o
l
I
n
t
e
r
e
s
t
s
N
o
n
-
C
o
n
t
r
o
l
l
i
n
g
T
o
t
a
l
E
q
u
i
t
y
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Balance at 30
September 2020
42,477
Profit for the period
Total comprehensive
income for the period
-
-
Transactions with
owners in their
capacity as owners:
Issue of Share Capital
Costs associated with
issues of shares
17,546
(1,749)
Share based payments
in respect of issue of
shares
-
15,797
-
-
-
-
-
-
Transfer to profit
reserves
Deconsolidation
adjustments on
change of accounting
basis
-
15,599
-
-
-
-
-
-
1,296
-
1,296
-
-
Balance at 30
September 2021
58,274 15,599
1,296
Profit for the period
Total comprehensive
income for the period
-
-
Transactions with
owners in their
capacity as owners:
Issue of Share Capital
15,150
Costs associated with
issues of shares
Share based payments
in respect of issue of
shares
Dividends paid
(801)
-
-
-
-
-
-
-
(4,018)
Transfer to profit
reserves
Balance at 30
September 2022
14,349 (4,018)
-
5,600
72,623
17,181
1,296
-
-
-
-
-
-
-
-
(159)
41
(1,017) (23,369)
(3,349)
14,624
1,884 16,508
-
-
-
-
-
-
-
-
-
-
-
307
307
-
-
-
-
-
-
15,599
15,599
-
-
-
-
-
1,282 (16,881)
159
-
-
-
-
-
-
-
-
-
-
-
15,599
15,599
17,546
(453)
307
17,400
-
-
-
-
-
-
-
-
15,599
15,599
17,546
(453)
307
17,400
-
159 (1,884)
(1,725)
-
-
-
-
-
-
-
-
-
-
348
265 (24,651)
(3,349) 47,782
- 47,782
-
-
-
-
361
-
-
-
-
5,600
- 5,600
-
-
-
-
-
-
-
-
-
-
- (5,600)
-
-
-
-
-
-
-
-
5,600
5,600
15,140
(801)
361
(4,018)
10,681
-
-
-
-
-
-
-
-
-
5,600
5,600
15,140
(801)
361
(4,018)
10,681
-
709
265 (24,651)
(3,349) 64,074
- 64,074
7
5
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022
Consolidated Statement of Cash Flows for the years ended 30 September
Note
2022
$'000
2021
$'000
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest paid
Net cash outflow from operating activities
Cash flows from investing activities
Proceeds from disposals of investments
Purchase of investments
Loans provided
Loans repaid
Payments for property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of shares and before issue costs
Share issues costs
Dividends paid
Repayment of borrowings
Payment of lease liabilities
Loans with related parties
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash derecognised on deconsolidation of subsidiaries
Cash and cash equivalents at end of the period
1,295
(3,797)
2,611
572
(17)
664
33,709
(37,695)
(5,294)
5,000
-
(4,280)
15,150
(801)
(4,018)
-
(241)
(333)
9,757
6,141
7,569
-
909
(3,338)
1,522
-
(35)
(942)
10,867
(17,544)
-
-
(14)
(6,691)
16,826
(453)
-
(1,553)
-
338
15,158
7,525
3,858
(3,814)
13,710
7,569
9
6
6
9
9
58
H&&G Annual Report 2022 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Corporate information
The consolidated financial statements of Hancock && Gore Ltd (the Company) and its subsidiaries (the Group) for
the year ended 30 September 2022 were authorised for issue in accordance with a resolution of the directors on
24 November 2022.
Hancock && Gore Ltd is a for profit, limited liability, public company, incorporated in Australia, whose shares are
publicly traded on the Australian Securities Exchange (ASX Code HNG).
The Group is principally engaged in investing in diversified asset categories, either as principal or as investment
manager. The Company seeks to actively engage and support its investees.
The Group's principal place of business is Suite 803, Level 8, 25 Bligh St, Sydney, NSW, 2000, Australia.
Further information on the nature of the operations and principal activities of the Group is provided in the
Directors' report.
9
5
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 2. Material profit or loss items
Significant profit and loss items
The Group has identified items which may be considered significant for providing a better understanding of the
financial performance of the Group, due to their nature and/or amount.
a) Fair value gains on financial instruments at fair value through profit or loss
Fair value gains on financial instruments at fair value through profit or loss, as shown in the statement of profit or
loss, includes both realised and unrealised gains on both listed and unlisted assets and liabilities. Given its size
and nature, further information is provided below:
Realised gains/ (losses) on disposals of unlisted investments
Pegasus Healthcare
Mint Payments convertible notes (1)
JSB Lighting (2)
Realised gains/ (losses) on disposals of listed investments
Unrealised gain/ (losses) on revaluation of unlisted investments (3)
Mountcastle Group (4)
Pegasus Healthcare
BLC Cosmetics
SPOS Group (5)
T-Shirt Ventures/ Provider Choice
Other unlisted financial instruments
Unrealised gains/ (losses) on listed investments
Total fair value gains on financial instruments at fair value through profit or loss
2022
$'000
2,310
650
-
2,960
(216)
3,196
-
-
(1,124)
1,000
82
3,154
(34)
5,864
2021
$'000
-
-
(1,155)
(1,155)
1,150
8,535
2,847
2,560
407
-
-
14,349
(83)
14,261
1.
2.
3.
4.
5.
A $650,000 gain was recognised on the restructuring of a $3.0 million convertible note investment with Mint Payments into a $3.65 million
loan receivable.
$1,118,000 from JSB Lighting debt forgiveness was included within other income in the year ended 30 September 2021, substantially offsetting
the fair value loss.
Unrealised gains/ (losses) on revaluation of unlisted investments in the year ended 30 September 2021 reflected amounts arising during the year
but also amounts arising on the initial change to investment entity accounting.
In addition, included within dividends received was $1,483,000 (2021: $897,000) from Mountcastle Group.
The Group has granted a purchase option over the equity in SPOS Group under which the option price decreases with dividends paid to the
Group. Included with dividends receivable is $1,050,000 (2021: $250,000) of dividend income from SPOS Group, substantially offsetting the
fair value loss above.
b) Other significant profit or loss items
During the year the Group incurred costs of $658,000 in relation to the restructure of the H&&G High Conviction
Fund and the initial public offering of H&&G High Conviction Limited.
60
H&&G Annual Report 2022 3. Financial assets and financial liabilities
(a) Categories of financial instruments
Details of financial assets and liabilities contained in the consolidated financial statements are as follows:
Financial assets
Cash and cash equivalents
Trade and other receivables
Related party receivables
Financial assets at fair value through profit and loss
Financial assets at amortised cost
Other financial assets
Financial liabilities
Trade and other payables
Related party payables
Lease liabilities
Other financial liabilities
b) Financial assets at fair value through profit or loss
Current assets
Listed equities
Other listed equity securities
Unlisted equities
Non-current assets
Unlisted equities
Unlisted convertible notes
Note
9
12
12
3b
3c
3d
15
15
17
3e
Note
3f
3f
3f
3f
2022
$'000
13,508
1,367
1,295
43,787
4,153
-
64,110
667
60
295
-
1,022
2022
$'000
10,722
-
376
11,098
31,114
1,575
32,689
2021
$'000
7,367
425
902
35,311
202
3,581
47,788
390
-
526
204
1,120
2021
$'000
4,225
31
4,123
8,379
26,932
-
26,932
Amounts recognised in profit or loss
Changes in fair value of financial assets at fair value through profit or loss are recorded in the Statement of Profit
or Loss in their own category. Refer Note 2.
43,787
35,311
1
6
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Fair value
The fair value of the listed securities is based on their closing prices in an active market.
Unlisted securities, units and convertible notes are not traded in inactive markets. Directors use a variety of
methods to determine fair value based on the characteristics and circumstances surrounding each investment.
External expert valuation advice may also be sought.
Methods applied and adopted in these financial statements include reference to:
•
•
•
observable transaction valuations where equity in the investee has recently traded or is expected to be traded;
known transaction values where the Company has entered, or expects to enter, into a contract of sale;
reported net asset value pricing; and
• Capitalisation of Future Maintainable Earnings (CFME).
Risk exposure and fair value measurements
Information about the Group's exposure to risk is provided in note 3(h).
For further information about the methods and assumptions used in determining fair value refer to note 3(f).
c) Financial assets at amortised cost
Current assets
Term deposit
Loan receivables
Non-current assets
Loan receivables
d) Other financial assets at fair value
Non-current assets
Call option asset
Convertible note securities
Note
Note
2022
$'000
202
301
503
3,650
4,153
2022
$'000
-
-
-
2021
$'000
202
-
202
-
202
2021
$'000
581
3,000
3,581
As part of the acquisition of the Group’s investment in Pegasus Healthcare, a call option was granted over the
remaining interest not held by the Group. During the year the Group sold its investment in Pegasus Healthcare
and the option terminated.
Convertible note securities were acquired just prior to the year-end and were valued at their cost price.
62
H&&G Annual Report 2022 e) Other financial liabilities at fair value
Non-current liabilities
Put option liability
Note
2022
$'000
2021
$'000
-
204
As part of the acquisition of Pegasus Healthcare, a Put option was granted over the remaining interest not held by
the Parent entity. During the year the Group sold its investment in Pegasus Healthcare and the option terminated.
f) Fair value measurements of financial instruments
Fair value hierarchy
To provide an indication about the reliability of the inputs used in determining fair value, the Group classifies its
financial instruments into the three levels prescribed under the accounting standards.
AASB 13 requires disclosure of fair value measurements by level of the following fair value measurement
hierarchy (consistent with the hierarchy applied to financial assets and financial liabilities):
•
•
quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly or indirectly (level 2); and
•
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives,
and equity securities) is based on quoted market prices at the end of the reporting period. The
quoted market price used for financial assets held by the Group is the last sale price. These
instruments are included in level 1.
Level 2: The fair value of financial instruments that are not traded in an active market (for example, over-the-
counter derivatives) is determined using valuation techniques which maximise the use of observable
market data and rely as little as possible on entity-specific estimates. If all significant inputs required
to fair value an instrument are observable, the instrument is included in level 2.
Level 3:
If any of the significant inputs are not based on observable market data, the instrument is included in
level 3.The Group’s policy is to recognise transfers into and transfers out of fair value hierarchy levels
as at the end of the reporting period. There were no transfers between the levels of the fair value
hierarchy during the financial year.
3
6
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Assets and liabilities at fair value by hierarchy as at 30 September 2022
Financial assets at fair value at 30 September 2022:
Listed equities
Unlisted equities
Convertible note securities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
10,722
-
-
10,722
-
376
1,575
1,951
-
31,114
-
31,114
10,722
31,490
1,575
43,787
There were no financial liabilities at fair value at 30 September 2022.
Fair value measurements using significant unobservable inputs (level 3)
Specific valuation techniques
Specific valuation techniques used to value used to determine fair values of level 3 assets include:
•
•
•
•
shares in unlisted entities with a history of generating profits have been revalued based on a capitalisation of
future maintainable earnings methodology, having regard to observable comparable transactions or quoted
prices for similar enterprises;
net asset values based on the conversion valuation mechanisms of convertible securities;
discounted cash flows for expected distribution and loan repayment streams;
valuations of all financial assets and liabilities are finally cross-checked in light of any subsequent specific
valuation information arising, including:
•
•
•
latest pricing inherent in capital raising activity by an investee;
latest pricing inherent in actual or proposed transactions in the financial instruments of an investee; and
changes in circumstances affecting the investee.
Valuation processes
Key level 3 inputs used by the Group in measuring the fair value of financial instruments have been derived and
evaluated as follows:
•
Future maintainable earnings: these are assessed based on historical earnings performance and board
approved budgets and forecasts, after adjusting for non-recurring or significant one-off items, and typically
are only up to 12 months in advance
• Capitalisation rates: these are determined using a comparator group of publicly available transactions, adjusted
for relevant factors such as control premiums or minority discounts, liquidity discounts and market size.
64
H&&G Annual Report 2022
Valuation inputs and relationships to fair value
The following table summarises the quantitative information about the material significant unobservable inputs
used in level 3 fair value measurements for the unlisted shares as at 30 September 2022:
Investment
Valuation
Basis of
$’000’s
Valuation
Material
Unobservable
Inputs
Inputs
Used
Relationship of unobservable
inputs to fair value
Mountcastle
21,120 Capitalisation of future
Future maintainable
$9.0m
+/- 10% change would result
Group
(49% interest)
maintainable earnings,
earnings
in a change in fair value of +/-
adjusted for net debt and
surplus assets.
$2.3m
Disruptive
Packaging Trust
(70% interest)
T-Shirt
Ventures
(<5%)
Capitalisation multiple 5.2x
A change in the multiple of +/-
0.5x would result in a change
in fair value of +/- $2.2m
5,773 Net asset backing reflecting
conversion value of investment
Conversion valuation
of underlying operating
$45m
A 10% decrease would have
$nil effect on fair value due
instrument.
business
to a ratchet mechanism on
conversion in the instrument.
A 10% increase would
increase valuation by $0.6m
2,000 Monte Carlo simulation
Volatility
100%
A change of the Volatility %
of equity valuation using
conversion price mechanism in
capital raising.
to 120% or 80% would result
in a change in fair value of +/-
$0.5m
Time to conversion
3 years
Changing the time by +/- 1
year would result in a change
in fair value of +/- $0.3m
QRT Finance
1,659 Net asset backing reflecting
Future profit
$Nil
A $2.0 million profit
Trust (<5%)
carrying value of investment
participation.
instrument and income and
profit participation entitlements
participation entitlement
would increase the valuation
by $0.1m
SPOS Group
(100% interest)
562 Discounted cash flow value of
Discount rate
5%
Increasing the rate by +/- 5%
expected receipts under option
deed. (1)
would result in a change in fair
value of +/- $0.1m
Total
31,114
1.
Included within related party receivables is an additional amount of $783,000 that must be repaid for the option to be exercised.
5
6
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022
g) Maturities of Financial liabilities
The following table details the Group’s remaining contractual maturity for its financial liabilities. The tables have
been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which
the Group can be required to pay and includes both principal and interest cash flows.
Trade and
Related party
Finance lease
Put option
Total
other payables
$'000
payables
$’000
liabilities
$'000
liability
$'000
$'000
2022
Less than 1 year
1 - 2 year
2 - 3 years
Total
2021
Less than 1 year
1 - 2 year
2 - 3 years
Total
667
-
-
667
391
-
-
391
60
-
-
60
-
-
-
-
274
23
-
297
245
259
22
526
-
-
-
-
204
-
-
204
1,001
23
-
1,024
840
259
22
1,121
Trade and other payables, related party payables and the put option liability are not interest bearing. The weighted
average interest rate inherent in the finance lease liabilities is 4.0% (2021: 4.0%).
h) Capital management
The Group seeks to manage its capital to ensure that it has sufficient funding to pursue its preferred investment
opportunities, without holding excessive low yielding cash balances, and thereby deliver increased value to
shareholders.
The capital structure is reviewed regularly and is balanced through the payment of dividends and on-market
share buy-backs as well as the level of debt.
The capital structure consists of net debt, which includes any borrowings less cash and cash equivalents, and
total equity, which includes issued capital (Note 6), reserves (Note 18) and accumulated losses/retained earnings.
Financial risk management
The activities of the Group expose it to a variety of financial risks, primarily related to liquidity risk, market risk and
credit risk.
The Group’s risk management program works to minimise material potential negative impacts on the financial
performance of the Group.
66
H&&G Annual Report 2022
Liquidity risk
Liquidity risk represents the risk that an entity will encounter difficulty in meeting obligations associated with
financial liabilities.
The Group's major cash payments are the purchase of investments and operating expenses (which are managed
by executives) and dividends paid to shareholders (which are determined by the Board).
Major cash receipts are dependent upon the level of sales of securities and any dividends and interest receivable,
or other capital management initiatives that may be implemented by the Board from time to time such as capital
raisings.
Senior management monitors the Group's cash flow requirements by reference to known sales and purchases of
securities, dividends, and interest to be paid or received.
The Group seeks to ensure it always holds sufficient cash to enable it to meet all payments. Furthermore, the Group
maintains a portfolio of ASX listed equities including liquid stocks which can generally be sold on market when and
if required.
Market risk
Market risk is the risk that changes in market prices, such as interest rates and other price risks, will affect the fair
value or future cash flows of the Company's financial instruments.
By its nature, as a company that invests in tradable securities, the Company will always be subject to market risk,
as the market price of these securities can fluctuate.
Other price risk is the risk that the value of an instrument will fluctuate as a result of changes in market prices,
whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments
traded in the market.
As a significant proportion of the Company's investments are carried at fair value with fair value changes
recognised in profit or loss, all changes in market conditions can directly affect net investment income.
The Group seeks to manage and reduce price risk by diversification of the investment portfolio across numerous
stocks and multiple industry sectors. However, there are no formalised parameters which specify a maximum
amount of the portfolio that can be invested in a single company or sector.
The Group has minimal exposure to direct movements in interest rates.
Credit risk
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing
to discharge a contracted obligation.
The maximum exposure to credit risk on financial assets, excluding investments of the Company which have
been recognised on the Balance Sheet, is the carrying amount net of any expected credit losses.
Credit risk is not considered to be a major risk to the Company as the cash held by the Company is invested
with major Australian banks. In addition, credit risk on trading in listed securities is minimised due to these trades
primarily occurring ‘on market’ on the Australian Securities Exchange.
7
6
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 i) Accounting policies
Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the
Group becomes a party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through profit or loss are recognised immediately
in profit or loss.
Financial assets with cash flows that are not solely payments of principal and interest are classified and
measured at fair value through profit or loss, irrespective of the business model.
Debt instruments, with cash flows that are solely payments of principal and interest, are classified at amortised
cost unless they are designated at fair value through profit or loss on initial recognition where doing so eliminates,
or significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the consolidated statement of financial position
at fair value with net changes in fair value recognised in the consolidated statement of comprehensive income
within the profit and loss.
Financial assets
All regular way purchases or sales of financial assets are recognised and derecognised on a trade date basis.
Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within
the time frame established by regulation or convention in the marketplace. All recognised financial assets are
measured subsequently in their entirety at either amortised cost or fair value, depending on the classification of
the financial assets.
Derivative assets and liabilities
Where the acquisition of an investment includes a put or call option for the Group to acquire the shares of a
minority shareholder, an asset or liability is recognised equal to the fair value of the option calculated under the
Binomial method. Movements in the value of the option are taken directly to profit or loss.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on investments in debt instruments that are
measured at amortised cost, lease receivables, trade receivables and contract assets, as well as on financial
guarantee contracts. The amount of expected credit losses is updated at each reporting date to reflect changes in
credit risk since initial recognition of the respective financial instrument.
The Group recognises lifetime expected credit losses for trade receivables, contract assets and lease receivables.
The expected credit losses on these financial assets are estimated using a provision matrix based on the Group’s
historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions
and an assessment of both the current as well as the forecast direction of conditions at the reporting date,
including time value of money where appropriate.
68
H&&G Annual Report 2022 Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset
expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset
to another entity.
If the Group neither transfers nor retains substantially all the risks and rewards of ownership and continues
to control the transferred asset, the Group recognises its retained interest in the asset and an associated
liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a
collateralised borrowing for the proceeds received.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying
amount and the sum of the consideration received and receivable is recognised in profit or loss.
Fair value measurement
The Group measures financial instruments such as derivatives at fair value at each balance sheet date.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place either:
•
•
In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability. The principal
or the most advantageous market must be accessible to the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant's ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data
is available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised
within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair
value measurement as a whole:
Level 1:
Quoted (unadjusted) market prices in active markets for identical assets or liabilities
Level 2:
Valuation techniques for which the lowest level input that is significant to the fair value measurement
is directly or indirectly observable
Level 3:
Valuation techniques for which the lowest level input that is significant to the fair value measurement
is unobservable
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis,
the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing
categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the
end of each reporting period.
9
6
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 4. Dividends
(a) Dividends paid during the year:
Fully franked final dividend of 1.0 cent per share for the year ended 30 September
2021 paid on 3 December 2021
Fully franked interim dividend of 0.5 cents per share for the year ended 30 September
2022 paid on 30 September 2022
Fully franked special dividend of 0.5 cents per share for the year ended 30 September
2022 paid on 30 September 2022
Total dividends
Amounts retained on employee loan funded share plans
Dividends paid
(b) Dividends proposed but not recognised as a liability as at 30 September:
2022
$'000
2021
$'000
1,789
1,127
1,127
4,043
(25)
4,018
-
-
-
-
-
-
2022
$'000
2021
$'000
Fully franked final dividend of 1.0 cent per share for the year ended 30 September
2022 payable on 12 December 2022
2,254
-
Fully franked final dividend of 1.0 cent per share for the year ended 30 September
2021 paid on 3 December 2021
-
1,789
(c) Franking account
The amount of franking credits available for the subsequent financial year are:
Franking account balance as at the end of the financial year at 25% (2021 - 26%)
Franking debits that will arise from the payment of dividends subsequent to the end of
financial year
2022
$'000
8,271
(751)
7,519
2021
$'000
9,234
(596)
8,638
70
H&&G Annual Report 2022 (d) Dividend reinvestment plan
The Company has a dividend reinvestment plan. Brief details of the Plan are:
•
•
•
•
•
•
•
shareholders with a minimum holding requirement of 1,000 ordinary shares and a registered address in
Australia or New Zealand are eligible to participate;
the DRP will apply to dividends at the discretion of the board;
participation is optional;
full or partial participation is available;
payment is made through the allotment of shares, rather than cash, at a discount determined by the
Directors, at the date of declaration, of up to 7.5%, on the average market price of the Company’s ordinary
shares, calculated for the five days beginning on the day the shares are first quoted for sale on an ex-dividend
basis in respect of the relevant dividend;
no brokerage, commission, stamp duty, or administration costs are payable by shareholders; and
participants may withdraw from the plan at any time by notice in writing to the Registry.
The Directors determined that the dividend reinvestment plan would not be in operation for all of the dividends
paid during the year.
(e) Accounting policies
The Company recognises a liability to pay cash or make non-cash distributions to equity holders of the parent
when the distribution is authorised and the distribution is no longer at the discretion of the Company. A
corresponding amount is recognised directly in equity.
5. Earnings per share
Basic earnings per share
From continuing operations attributable to the ordinary equity holders of the company
Total basic earnings per share attributable to the ordinary equity holders of the Company
Diluted earnings per share
From continuing operations attributable to the ordinary equity holders of the company
Total diluted earnings per share attributable to the ordinary equity holders of the Company
2022
Cents
2021
Cents
2.7
2.7
2.6
2.6
11.6
11.6
11.1
11.1
1
7
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 (a) Reconciliations of earnings used in calculating earnings per share
Earnings used in calculating Basic earnings per share
Profit from continuing operations after income tax
Deduct profit attributable to non-controlling interests
2022
$'000
2021
$'000
5,600
15,599
-
-
Profit from continuing operations after income tax attributable to equity holders of the parent
5,600
15,599
Earnings used in calculating Diluted earnings per share
Used in calculating basic earnings per share
Add back: costs not incurred for share-based payments
Earnings used in calculating diluted earnings per share
(b) Weighted average number of shares used as the denominator
5,600
361
5,961
15,599
117
15,716
2022
Number
2021
Number
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
210,246,017
134,600,230
Adjustments for calculation of diluted earnings per share:
• Options issued not exercised
•
Performance rights and employee loan funded share plan
3,523,079
2,979,889
14,343,821
4,167,123
Weighted average number of ordinary and potential ordinary shares used as the
denominator in calculating diluted earnings per share
228,112,917
141,747,242
Further information on the potentially dilutive equity instruments can be found in note 6.
72
H&&G Annual Report 2022 6. Issued capital
(a) Movements in ordinary shares
Number of shares
Total
$’000
Balance as at 30 September 2020
75,622,581
42,477
Issued under Capital raising announced 21 October 2020
Issued for the acquisition of H&&G Investment Management Ltd in March 2021
Issued under Capital raising announced 22 March 2021
Shares issued to employees
Costs associated with shares issued
Options issued as fund raising expenses
37,085,208
3,000,000
59,200,000
4,000,000
-
-
4,586
720
11,840
400
(453)
(1,296)
Balance as at 30 September 2021
178,907,789
58,274
Issued under Capital raising announced 26 November 2021
45,454,536
15,000
Costs associated with shares issued
Options exercised
-
1,000,000
(801)
150
Balance as at 30 September 2022
225,362,325
72,623
(b) Movements in ordinary shares during the year
On 26 November 2021, the Company announced a capital raising at 33 cents per share comprising: an initial
private placement and a conditional placement, subject to shareholder approval. The company raised $7.41
million before costs from the issue of 22,451,514 shares through the initial private placement, and $7.59m before
costs from the issue of 23,003,022 shares through the conditional placement.
On 16 September 2022, the Company issued 1,000,000 new shares upon the exercise of 1,000,000 options at
15 cents per share.
(c) Ordinary shares
Ordinary shares entitle the holder to participate in dividends, and to share in the proceeds of winding up the
Company in proportion to the number of and amounts paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one
vote, and on a poll each share is entitled to one vote.
(d) Employee Loan Funded Share Plan (ELFSP)
The Company has established an Employee Loan Funded Share Plan (ELFSP). Under the plan, selected
executives are invited to join the ELFSP whereby they are issued with ordinary shares in the Company, offset by
an unsecured, interest free loan from the Company.
The loans are limited recourse, meaning that if the market value of the Shares is less than the loan value at the end
of the term of the loan, the Participant will not need to repay the remaining loan balance out of their own funds.
3
7
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 The loans are repayable in full on the earlier of: 5 years from the date the loan is made; the shares being acquired
by a third party under a takeover bid or similar; the Participant ceasing employment with the Group or becoming
insolvent or subject to bankruptcy proceedings; or on the date the Participant and the Company otherwise agree.
A summary of the movement in the number of shares held and the value of loans outstanding under the ELFSP
during the year ended 30 September 2022 is as follows:
Balance as at 30 September 2021
Loan repayments from dividends retained
Balance as at 30 September 2022
Number of shares
2,328,125
-
2,328,125
Total
$’000
473
(25)
448
As the loans are limited recourse, no amounts are recognised within receivables or shares capital at issue of the
ELFSP shares and they are not included within the calculation of Basic Earnings per Share. The ELFSP shares
are included in the calculation of Diluted Earnings Per Share.
(e) Options
On 24 February 2021, the Company issued 8,000,000 options to various parties who had participated in the
private placement announced on 21 October 2020.
Each option grants the holder the right to subscribe for 1 fully paid ordinary share in exchange for 15.0 cents cash,
at any point prior to 24 February 2024. The options hold no voting or dividend rights.
On 16 September 2022, the Company issued 1,000,000 new shares upon the exercise of 1,000,000 options.
At balance date, 7,000,000 of the options remain unexercised.
The options are included in the calculation of Diluted Earnings Per Share.
(f) Performance Rights
The Company has granted 13,500,000 performance rights in total to two employees.
The rights hold no voting or dividend rights. The rights granted to each employee are split into 3 equal tranches
which vest on the 3rd, 4th and 5th anniversary of the employee’s commencement date (being May/June of each
of 2024, 2025 and 2026 respectively). Upon vesting, each eligible right will convert to one fully paid ordinary
share.
Vesting of each tranche of rights is subject to Total Shareholder Returns (TSR) on the Company’s shares,
calculated on a compounding basis from a starting point of 20 cents per share. Vesting is calculated in line with
the following table:
TSR
Up to 10%
Vesting Amount
At the Board’s discretion
Between 10% and 15%
Pro rata between nil and 50% (for example at 12% TSR - 20% of Rights would vest)
15%
50% of Rights
Between 15% and 25%
Pro rata between 50% and 100% (for example at 20% TSR - 75% of Rights would vest)
25% and above
100% of Rights
No performance rights were exercised or lapsed during the year ended 30 September 2022.
The performance rights are included in the calculation of Diluted Earnings Per Share.
74
H&&G Annual Report 2022 (g) Share-based payments:
Total expenses arising from share-based payment transactions, recognised during the year as part of employee
benefit expense, were as follows:
Employer loan funded share plan
Performance rights
Share discount
7. Business combinations
2022
$
65,112
296,028
-
2021
$
56,763
117,062
70,000
361,149
243,825
(a) Changes in controlled entities within the investment entity
The Group reports as an investment entity, as defined in the accounting standards. Accordingly, only those
controlled entities whose main purpose and activities relate to the investment activities of the Group are
consolidated, and other controlled entities are instead shown as investments held at fair value.
During the prior period, on 23 March 2021, the Company acquired all of the equity in H&&G Investment
Management Ltd (formerly: Supervised Investments Australia Ltd).
Details of controlled entities that are not consolidated as part of the investment entity are included in Note 25.
(b) Accounting policy
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any
non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the
non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net
assets. Acquisition related costs are expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate
classification and designation in accordance with the contractual terms, economic circumstances and pertinent
conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by
the acquiree. If the business combination is achieved in stages, the previously held equity interest is remeasured
at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.
8. Events occurring after the reporting period
On 4 October 2022, the Hyde Road Trust, in which the Group holds a 73% interest, acquired a property at
20 Cansdale Street & 103 Hyde Road, Yeronga, Queensland, for $10 million from the Hyde Road Partnership.
Mountcastle Pty Ltd, a company in which the Group holds a 49% interest, was a 50% partner in The Hyde Road
Partnership and the property is its main Queensland operating site.
The equity components of the acquisition were funded by an in-specie capital return and dividend from
Mountcastle Pty Ltd of $3.2 million, of which the Group’s share was $1.6 million, and an additional contribution
from the Group of $2.8 million. The Group funded the payment of a deposit of $0.5 million by the Hyde Road
Trust before year-end which is included in related party receivables and paid the balance of the additional
contribution on 4 October 2022.
5
7
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022
On 25 October 2022, H&&G High Conviction Limited (ASX: HCF), a company managed by the Group, listed on
the Australian Stock Exchange. In conjunction with the listing, H&&G High Conviction Limited raised $5.2 million of
which the Group subscribed $854,252 for 869,114 shares.
On 24 November 2022, the Company declared a fully franked final dividend in respect of the financial year
ended 30 September 2022 of 1.0 cents per share.
There have been no other significant events occurring after the balance date which may affect either the Group’s
operations or results of those operations or the Group’s state of affairs.
9. Cash flow information
(a) Cash and cash equivalents
For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise the following:
Cash at banks and on hand
Term deposit
2022
$’000
13,508
202
2021
$’000
7,367
202
Cash and cash equivalents
13,710
7,569
(b) Reconciliation of profit after income tax to net cash inflow from operating activities:
Profit from continuing operations after income tax
2022
$’000
5,600
2021
$’000
15,599
Adjustments to reconcile profit before tax to net cash flows:
Net (gains) on assets and liabilities at fair value through profit or loss
(5,864)
(14,261)
Debt forgiven
Non-cash employee benefits expense - share-based payments
Depreciation and amortisation
Net loss on sale of property, plant and equipment
Changes in assets and liabilities:
(Increase)/decrease in trade receivables
(Increase)/decrease in prepayment
(Increase)/decrease in deferred tax assets
Increase/(decrease) in trade creditors
Increase/(decrease) in other provisions
Increase/(decrease) in lease liabilities
Net cash (outflow) from operating activities
76
-
361
232
-
152
32
(51)
277
(75)
-
664
(1,118)
242
230
1
(481)
(1)
(364)
(673)
74
(190)
(942)
H&&G Annual Report 2022 (c) Non-cash investing and financing activities:
Material non-cash investing and financing activities during the year included:
• Receipt of 32,786,885 shares in Cellmid Ltd (since renamed Anagenics Limited, ASX: AN1), at a valuation,
at 6.1 cents per share, of $2.0 million, and recognition of $0.9 million in deferred consideration for the sale of
shares in BLC Cosmetics Ltd; and
•
restructure of $3.0 million convertible note investment into a $3.65 million loan receivable with Mint
Payments.
(d) Accounting policies
For purposes of the cash flow statement, cash includes deposits at call which are readily convertible to cash
on hand and which are used in the cash management function on a day-to-day basis, net of outstanding bank
overdrafts.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows
arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is
classified as part of operating cash flows.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and
short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part
of the Group’s cash management.
7
7
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 10. Other income and expense items
(a) Other income
Debt forgiven
Option fee income
Other income
(b) Expenses information
Depreciation and amortisation expensed to profit and loss
Plant and equipment
Right of use asset
Employee benefit expenses
Salary and wages
Defined contribution superannuation expense
Directors’ fees
Share based payments
Other
2022
$’000
-
-
-
-
2021
$’000
1,118
250
105
1,473
2022
$’000
2021
$’000
42
190
232
1,104
90
219
361
18
1,792
40
190
230
755
74
217
244
303
1,593
Lease expenses
Lease expenses
116
193
78
H&&G Annual Report 2022 (c) Finance income and costs
Finance income
Finance institutions
Financial assets at amortised cost
Other
Finance costs
Finance institutions - interest expenses and line fees
Interest on lease liabilities
Finance costs expensed
Net finance income/ (costs)
(d) Accounting policies
2022
$’000
2021
$’000
26
499
54
579
9
17
26
553
-
-
-
-
35
26
61
(61)
Revenue is measured at the fair value of the consideration received or receivable, taking into account any
discounts, allowances and GST.
Dividend income
Dividend income is recognised on receipt.
Finance income
Interest income is recognised on a time proportionate basis that takes into account the effective yield on the
financial asset.
Funds management income
Funds management income includes establishment, management, performance and other fees.
Establishment fees are recognised when an investment vehicle has been formally established and the right to the
income is achieved.
Management fees are recognised on a monthly basis as they accrue.
Performance fees are recognised based on the amounts that would be payable at a reporting date if it was the
end of each performance fee calculation period.
Rental income
Rental income is recognised on a daily basis on a straight-line basis.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST, except when the GST incurred on a sale or
purchase of assets or services is not payable to or recoverable from the taxation authority, in which case the GST is
recognised as part of the revenue or the expense item or as part of the cost of acquisition of the asset, as applicable.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the statement of financial position.
Borrowing costs
Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of
funds. Borrowing costs are expensed in the period in which they occur.
9
7
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 11. Income tax
(a) Income tax expense
Current tax
Current tax on profits for the year
Adjustments for current tax of prior periods
Total current tax expense
Deferred income tax
Decrease/(increase) in deferred tax assets
(Decrease)/increase in deferred tax liabilities
Total deferred tax expense/(benefit)
Total income tax expense /(benefit)
Income tax expense is attributable to:
Profit from continuing operations
(b) Numerical reconciliation of income tax expense to prima facie tax payable
2022
$’000
2021
$’000
-
154
154
234
(285)
(51)
103
(286)
-
(286)
(3,262)
3,184
(78)
(364)
103
(364)
2022
$’000
2021
$’000
Profit from continuing operations before income tax expense
5,703
15,234
Tax at the Australian tax rate of 25% (2021 - 26%)
Adjustments for prior periods
Impact of future tax rate reduction
Non allowable expenses
Other assessable income
Non assessable items
Fully franked dividends received
Non-assessable revaluation gains
Revenue losses recognised during year
Capital losses recognised during year
Deferred tax items recognised during year
1,426
154
-
94
91
(39)
(386)
-
(320)
(293)
(624)
3,961
-
4
328
-
(26)
(331)
(3,714)
(738)
(3,840)
3,992
Income tax expense /(benefit)
103
(364)
80
H&&G Annual Report 2022
(c) Deferred tax
Deferred tax comprises:
Deferred tax assets
Deferred tax liabilities
Net deferred taxes
(d) Movements in net deferred tax
Movements in net deferred taxes during the year were:
2022
$’000
-
-
-
2021
$’000
234
(285)
(51)
i
P
r
o
v
s
o
n
s
i
I
n
v
e
s
t
m
e
n
t
s
l
P
a
n
t
a
n
d
i
e
q
u
p
m
e
n
t
a
s
s
e
t
s
i
R
g
h
t
o
f
u
s
e
L
e
a
s
e
l
i
a
b
i
l
i
t
i
e
s
f
o
r
w
a
r
d
c
a
r
r
i
e
d
T
a
x
l
o
s
s
e
s
O
t
h
e
r
T
o
t
a
l
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 30 September 2020
164
Deconsolidation
(164)
-
-
(683)
683
-
-
Other (charges)/credits to profit or loss
42
(4,027)
Balance at 30 September 2021
42
(4,027)
(Charges)/credits to profit or loss
(42)
(424)
Balance at 30 September 2022
-
(4,451)
-
-
-
-
(e) Tax losses
195
454
(259)
(129)
(195)
(454)
(99)
131
3,840
259
62
129
(51)
(99)
131
3,840
62
(51)
47
(60)
592
(62)
(52)
71
4,432
-
51
-
The Group has a further $17.7 million of tax losses which have not been brought to account at 30 September
2022. These losses are subject to utilisation rules in future periods such as the Continuity of Ownership Test or
Same Business Test.
(f) Significant estimates
Tax benefit includes $4.4 million from the recognition of gross Deferred Tax Assets (DTA) on the balance sheet.
It is a key assumption that the Group will be able to manage the timing of the reversal of deferred tax liabilities to
offset with the deferred tax assets, or continue to generate ongoing taxable income to be able to utilise this DTA,
and that, in particular, any tax losses recognised on the balance sheet will remain available for use across future
periods, including by ongoing satisfaction of Income Tax rules such as the Continuity of Ownership Test or Same
Business Test.
1
8
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022
(g) Accounting Policies
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be
recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are
those that are enacted or substantively enacted, at the reporting date in the countries where the Group operates
and generates taxable income.
Current income tax relating to items recognised directly in equity is recognised in equity and not in the statement
of profit or loss.
Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from
the initial recognition of assets and liabilities (other than as a result of a business combination) which affects
neither taxable income nor accounting profit. Furthermore, a deferred tax liability is not recognised in relation to
taxable temporary differences arising from goodwill.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax
credits and any unused tax losses, to the extent that it is probable that taxable profit will be available for utilisation.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is
no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be
utilised. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent
that it has become probable that future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the reporting date.
Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation
authority.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition
at that date, are recognised subsequently if new information about facts and circumstances change. The
adjustment is either treated as a reduction to goodwill (as long as it does not exceed goodwill) if it was incurred
during the measurement period or recognised in profit or loss.
Tax consolidation legislation
The Company and its wholly-owned Australian controlled entities have implemented tax consolidation, and
entered into tax funding and tax sharing agreements.
The head entity, Hancock && Gore Ltd and the controlled entities in the tax consolidated group continue to
account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in
the tax consolidated group continues to be a stand alone taxpayer in its own right, adjusted for intercompany
transactions.
In addition to the current and deferred tax amounts, the Company also recognises the current tax liabilities (or
assets) and the deferred tax assets from unused tax losses and unused tax credits assumed from controlled
entities in the tax consolidated group.
Assets or liabilities, recorded at the tax equivalent amount, arising under tax funding agreements with the tax
consolidated entities are recognised as amounts receivable from or payable to other entities in the group.
82
H&&G Annual Report 2022 12. Trade and other receivables
Current:
Trade receivables
Provision for expected credit losses
Trade receivables
Deferred consideration receivable
Other
Other receivables
Trade and other receivables
Loans to related parties
Total receivables
2022
$’000
2021
$’000
272
(29)
243
1,050
74
1,124
1,367
1,295
2,662
248
-
248
-
177
177
425
902
1,327
Further information relating to loans to related parties and key management personnel is set out in note 20.
(a) Classification as trade receivables
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of
business. They are generally due for settlement within 30 days and are therefore all classified as current.
Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain
significant financing components, when they are recognised at fair value. The Group holds the trade receivables
with the objective of collecting the contractual cash flows and therefore measures them subsequently at
amortised cost using the effective interest method.
(b) Allowance for expected credit losses
The Group measures the loss allowance for trade receivables at an amount equal to the lifetime expected credit
loss. The expected credit losses on trade receivables are estimated using a provision matrix by reference to past
default experience and an analysis of the debtor's current financial position, adjusted for factors that are specific
to the debtors and general economic conditions of the industry in which the debtors operate.
There has been no change in the estimation techniques or significant assumptions made during the current
reporting period.
The Group has historically had immaterial levels of credit losses which have resulted in non-recovery of amounts
outstanding from trade receivables. Recognition of an expected credit loss in the provision for doubtful debts is based
predominantly on the estimated recoverability of specific long overdue debtor balances. A provision is raised against
debtors to reflect historical loss experience on debtors with similar characteristics. The trade receivable is retained on
the balance sheet net of the expected credit loss provision pending the outcome of any recovery activities.
The Group writes off a trade receivable when there is information indicating that the debtor is in severe financial
difficulty and there is no realistic prospect of recovery e.g when the debtor has been placed under liquidation or
has entered into bankruptcy proceedings, or when the trade receivables are over two years past due, whichever
occurs earlier. None of the trade receivables that have been written off remain subject to enforcement activities.
The Group has not experienced a material change in credit losses arising from COVID-19 impacts on our customers.
(c) Deferred consideration receivable
As part of the sale of BLC Cosmetics to Anagenics Limited (ASX: AN1), the Group is entitled to deferred consideration
based on the results of BLC Cosmetics in the year to 30 September 2022. The first $700,000 is payable in cash
with Anagenics having the right to pay the excess in Anagenics shares, subject to necessary approvals.
3
8
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 13. Property, plant and equipment
Plant and equipment
Gross value
Accumulated depreciation
Net carrying value
(a) Movements during the year
Net book amount at 30 September 2020
Derecognition on deconsolidation
Additions
Disposals
Depreciation charge
Net book amount at 30 September 2021
Depreciation charge
Net book amount at 30 September 2022
(b) Accounting policies
2022
$’000
2021
$’000
183
(144)
39
Plant and equipment
Rental equipment
$’000
$’000
1,105
(997)
14
(1)
(40)
81
(42)
39
3,432
(3,432)
-
-
-
-
-
-
183
(102)
81
Total
$’000
4,537
(4,429)
14
(1)
(40)
81
(42)
39
Plant and equipment and rental equipment are stated at cost less accumulated depreciation and impairment
losses. Cost includes expenditure that is directly attributable to the acquisition of the item.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at
each financial year end and adjusted prospectively, if appropriate.
Revaluation, depreciation methods and useful lives
Items of plant and equipment are depreciated over their estimated useful lives using the straight line or reducing
balance methods. The estimated useful lives and depreciation methods are reviewed at the end of each reporting
period.
The cost of improvements to or on leasehold properties is depreciated over the lesser of the period of the lease or
the estimated useful life of the improvement.
The following estimated useful lives are used in the calculation of depreciation:
• Plant and equipment
3 to 10 years
• Rental equipment
1 to 7 years
84
H&&G Annual Report 2022
14. Intangible assets
Intangible assets
Goodwill
Impairment
Net carrying value of Goodwill
(a) Movements during the year
Net book amount at 30 September 2020
Derecognition on deconsolidation
Additions
Net book amount at 30 September 2021
Net book amount at 30 September 2022
(b) Allocation of goodwill
2022
$’000
2021
$’000
712
-
712
Goodwill
Other intangibles
$’000
$’000
2,499
(2,499)
712
712
712
1,170
(1,170)
-
-
-
712
-
712
Total
$’000
3,669
(3,669)
712
712
712
Goodwill at 30 September 2022 relates solely to the acquisition of Supervised Investments Australia Ltd (now
H&&G Investment Management Ltd (H&&GIM)) on 24 March 2021.
(c) Impairment testing
Determining whether goodwill is impaired requires an estimation of the value in use (VIU) of the cash generating
units (CGU) to which goodwill has been allocated. The VIU calculation requires estimation of the future cash
flows expected to arise from the cash generating unit, and application of a suitable discount rate to calculate
present value.
The Company has undertaken an impairment assessment to compare the recoverable amount of each CGU to
its carrying value, using a VIU approach.
The key assumption for the impairment assessment is the growth of Funds under Management (FUM) over the
forecast period through investment performance and new investor subscriptions in existing and new investment
entities. Following its acquisition by the Group, H&&GIM has launched two new unlisted investment trusts and
restructured the H&&G High Conviction Fund to H&&G High Conviction Limited (ASX: HCF), which listed post year
end.
These initiatives combined with strong investment returns in the funds, have seen both management and
performance fees generated exceed initial estimates. A pre-tax discount rate of 15.0% has been used for the
calculation.
The impairment calculation is most sensitive to the assumption of investment performance. If investment
performance was only 70% of forecast the carrying value of goodwill would approximate fair value per the VIU
calculation.
5
8
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 (d) Accounting policies
Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets
acquired in a business combination is their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment
whenever there is an indication that the intangible asset may be impaired. The amortisation period and the
amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each
reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic
benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and
are treated as changes in accounting estimates and adjusted on a prospective basis. The amortisation expense
on intangible assets with finite lives is recognised in the statement of profit or loss as the expense category that is
consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either
individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to
determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to
finite is made on a prospective basis.
Goodwill
Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and
the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable
assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate
consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired
and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at
the acquisition date. If the re-assessment still results in an excess of the fair value of net assets acquired over the
aggregate consideration transferred, then the gain is recognised in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each
of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether
other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is
disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the
operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured
based on the relative values of the disposed operation and the portion of the cash-generating unit retained.
Impairment of non-financial assets
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any
indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s
recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU)
fair value less costs of disposal and its value in use. Recoverable amount is determined for an individual asset,
unless the asset does not generate cash inflows that are largely independent of those from other assets or groups
of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered
impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the
asset. In determining fair value less costs to sell, recent market transactions are taken into account.
86
H&&G Annual Report 2022 Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement
of profit or loss in expense categories consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is
any indication that previously recognised impairment losses may no longer exist or may have decreased. If
such indication exists, the Group estimates the asset’s or CGUs recoverable amount. A previously recognised
impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s
recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have
been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years.
Goodwill is tested for impairment annually as at 30 September and when circumstances indicate that the
carrying value may be impaired.
Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs)
to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an
impairment loss is recognised in the statement of profit or loss. Impairment losses relating to goodwill cannot be
reversed in future periods.
15. Trade and other payables
Current:
Trade payables and other payables
Loans from related parties
Total payables
2022
$’000
2021
$’000
667
60
727
391
-
391
Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade
and other payables are considered to be the same as their fair values, due to their short-term nature.
Further information relating to loans to related parties and key management personnel is set out in note 20.
7
8
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 16. Provisions
Current
Employee benefits
Restoration provision
Non-current
Employee benefits
(a) Restoration provision
Balance at start of the financial year
Derecognition on deconsolidation
Balance at end of the financial year
(b) Accounting policies
2022
$’000
2021
$’000
60
-
60
34
34
2022
$’000
-
-
-
127
-
127
42
42
2021
$’000
53
(53)
-
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the obligation.
A provision is recognised at the present value of the estimated expenditure required to remove any leasehold
improvements.
Employee benefits
Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave and long
service leave when it is probable that settlement will be required and are capable of being measured reliably.
Employee benefits expected to be settled wholly within 12 months are measured at their nominal values using the
remuneration rate expected to apply at time of settlement. Employee benefit provisions, which are not expected
to be settled wholly within 12 months, are measured at the present value of the estimated future cash outflows to
be made by the Group in respect of services provided by employees up to the reporting date.
Contributions to defined contribution superannuation plans are expensed when incurred.
Restoration provision
Provisions for the costs to restore leased plant assets to their original condition, as required by the terms and
conditions of the lease, are recognised when the obligation is incurred, either at the commencement date or as
a consequence of having used the underlying asset during a particular period of the lease, at the directors’ best
estimate of the expenditure that would be required to restore the assets. Estimates are regularly reviewed and
adjusted as appropriate for new circumstances.
88
H&&G Annual Report 2022
17. Leases
(a) Right of use assets
Property leases
Accumulated depreciation
2022
$’000
776
(570)
206
2021
$’000
776
(380)
396
(b) Movements in right of use assets during the year
Property leases
Vehicle leases
Equipment leases
$’000
$’000
$’000
Total
$’000
3,919
(2,084)
(1,281)
(158)
396
(190)
206
Net book amount at 30 September
2020
Derecognition on deconsolidation
Derecognition on change of
assumption
Depreciation charge
Net book amount at 30 September
2021
Depreciation charge
Net book amount at 30 September
2022
(c) Lease liabilities
Current
Non-current
(d) Amounts recognised in statement of profit or loss
Interest expense on lease liabilities (included in finance costs)
Expense relating to short-term leases and low value assets (included in
administration and other expenses
338
(338)
120
(120)
-
-
-
-
-
-
-
-
-
-
2022
$’000
262
23
258
2022
$’000
17
40
4,377
(2,542)
(1,281)
(158)
396
(190)
206
2021
$’000
245
281
526
2021
$’000
26
3
9
8
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 (e) Accounting policies
Right-of-use-assets
The Group recognises right-of-use assets at the commencement of the lease (i.e. the date the underlying asset is
available for use). The initial measurement of right-of-use assets includes the amount of liabilities recognised and
lease payments made at or before the commencement date, less any incentives received. Right-of-use assets
are subsequently measured at cost, less any accumulated depreciation and impairment losses, and adjusted for
any re-measurement of lease liabilities.
Unless the Group is reasonably certain to obtain the ownership of the leased asset at the end of the lease term,
the right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the
lease term. Right-of-use assets are subject to impairment assessments under AASB 136 Impairments of Assets.
Lease liabilities
At the commencement of a lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or rate, and
amounts expected to be paid under residual value guarantees. The lease payments also include renewal periods
where the Group is reasonably certain to exercise the renewal option.
The variable lease payments that do not depend on an index or a rate are expensed in the period in which they
are incurred. Variable lease payments include rent concessions in the form of rent forgiveness or a waiver as a
direct consequence of the COVID-19 pandemic.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement
date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease
payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a change in the
lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the
underlying asset.
The Group has made use of the practical expedient available on transition to AASB16 not to reassess whether
a contract is or contains a lease. Accordingly, the definition of a lease in accordance with AASB117 and
interpretation 4 will continue to be applied to those leases entered or changed before 1 October 2019.
Short-term lease and leases of low-value assets
The Group applies a recognition exemption to leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option. It also applies a recognition exemption to leases that
are considered of low value.
Lease payments on short-term and low-value leases are recognised as expense on a straight-line basis over the
lease term.
Judgements in determining the lease term of contracts with renewal options
The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered
by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to
terminate the lease, if it is reasonably certain not to be exercised.
After initial recognition, the Group reassesses the lease term if there is a significant event or change in
circumstances that are within its control and affects its ability to exercise (or not to exercise) the option to renew.
90
H&&G Annual Report 2022
(f) Extension and termination options
Extension and termination options are included in the property leases across the Group. These are used to
maximise operational flexibility in terms of managing the assets used in the Group’s operations. The extension
and termination options held are exercisable only by the Group and not by the respective lessor.
In determining the lease term, management considers all facts and circumstances that create an economic
incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after
termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not
terminated).
The extension option in the remaining office and warehouse lease has not been included in the lease liability as
the Group no longer occupies the premises.
18. Reserves
Profit reserve
Option reserve
Share based payments reserve
Other reserves
2022
$’000
17,181
1,296
709
265
2021
$’000
15,599
1,296
348
265
19,451
17,508
The Profit reserve represents amounts appropriated from annual profits and kept segregated to allow for ongoing
dividend payments.
The Option reserve represents the fair value of options granted over Company shares as payment for capital
raising services.
The Share Based Payments reserve represents the expense recognised in relation to share related dealings with
employees, including Performance Rights and the Employee Loan Funded Share Plan.
Other reserves include the excess of the purchase consideration over the share of net assets acquired on the
increase in equity interests, classified as common controlled transactions under AASB 3 Business Combinations,
and the Group’s share of movements in the reserves of equity accounted associates.
1
9
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 19. Parent entity financial information
Balance sheet
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Reserves
•
•
•
•
Profit reserve
Option reserve
Share based payment reserve
Other reserves
2022
$’000
27,757
36,518
2021
$’000
16,789
31,457
64,275
48,246
438
300
738
335
315
650
63,537
47,596
72,623
58,274
34,976
33,745
1,296
709
265
1,296
348
265
Retained profits and accumulated losses
(46,332)
(46,332)
Total equity
Profit or loss
Profit or loss for the financial year
Total comprehensive income for the financial year
63,537
47,596
5,248
5,248
18,147
18,147
92
H&&G Annual Report 2022 20. Related party transactions
(a) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Termination benefits
Share-based payments
2022
$
2021
$
1,262,648
822,932
97,026
16,887
-
356,868
80,191
15,831
230,000
243,826
1,733,429
1,392,780
Detailed remuneration disclosures are provided in the remuneration report on pages 10 to 15.
(b) Other transactions with key management personnel
Entities related to Alexander Beard (200,000 units), Kevin Eley (100,000 units), Peter Miller (200,000 units),
Cheryl Hayman (50,000 units), Phillip Christopher (100,000 units) and Nicholas Atkinson (70,000 units),
subscribed for ordinary units at $1 per unit in the DP Trust.
Entities related to Phillip Christopher (1,000 units) and Nicholas Atkinson (250 units) subscribed for B Class units
in the DP Trust at $1 per unit.
An entity related to Phillip Christopher subscribed for 10 shares in Mulga Capital Pty Ltd for $10.
There were no other transactions with key management personnel during the period.
(c) Transactions with other related parties
The Group reports an investment entity. Accordingly, only those controlled entities whose main purpose and
activities relate to the investment activities of the Group are consolidated. Transactions with related parties not
forming part of the consolidated Group, during the year, are as follows:
The Group received dividends from Mountcastle Pty Ltd of $1,483,291 and Hamlon Pty Ltd of $1,050,000.
These parties may have dividend payment restrictions imposed on them from time to time, by the related party's
financiers, which could limit the ability of the Group to receive future distribution income.
The Group holds the head lease of premises used by related parties for warehousing and office space. Rent
and occupancy costs of $302,000 were charged to Hamlon for the full financial year and $10,250 to BLC
Cosmetics Pty Ltd for the period whilst it was a related party of the Group.
The Group and Hamlon share IT support and telecommunications services. $63,972 was recharged by the
Group to Hamlon for costs paid by the Group.
Prior to resigning as Chief Financial Officer and Company Secretary of the Group to take-up a full-time position
at Mountcastle group, Iain Thompson had been combining these roles at the Group and Mountcastle group.
During the year, $62,500 was charged by the Group to Mountcastle for these services and Mountcastle
recharged the Group $49,604 for leave entitlements assumed by Mountcastle on the transition.
DP Trust a unit trust set up by the Group during the year, and which is owned 70% by the Group, paid the Group
$160,000 and $35,178 in establishment and management fees respectively during the year.
The Group loaned $500,000 to the Hyde Road Trust, a newly established trust which is owned 73% by the
Group to pay a deposit on a property that settled after the year-end.
3
9
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 (d) Loans to/from related parties
Loan balances at the beginning of the year
Movement in year-end outstanding accounts receivables and payables
Loans advanced to related parties
Loan balances at the end of the year
Shown on the balance sheet as:
Loans to related parties
Loans from related parties
21. Commitments and contingencies
(a) Commitments
Note
12
15
2022
$
902,217
(167,267)
500,000
1,234,950
1,294,707
(59,757)
1,234,950
There are no significant lease commitments at balance date except those associated with the Right of Use
Assets as outlined in note 17.
There are no significant capital expenditure commitments at balance date.
At balance date the Group had investment commitments of $2,695,000 including $2,285,000 to the Hyde
Road Trust, as outlined in note 8.
(b) Contingent liabilities
There are no significant contingent liabilities at balance date.
22. Summary of significant accounting policies
(a) Basis of preparation
The financial report is a general purpose financial report, which has been prepared in accordance with
the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a
historical cost basis, except for certain financial instruments.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars
($000) unless otherwise stated.
The consolidated financial statements provide comparative financial information in respect of the previous period.
The financial statements have been prepared on the going concern basis, which contemplates continuity
of normal business activities and the realisation of assets and discharge of liabilities in the normal course of
business.
Compliance with Australian Accounting Standards
The consolidated financial statements of the Hancock && Gore Ltd Group have been prepared in accordance
with Australian Accounting Standards Board (AASB) and interpretations issued by the AASB Interpretations
Committee (AASB IC) applicable to companies reporting under AASB. The financial statements comply with
94
H&&G Annual Report 2022 AASB as issued by the Australian Accounting Standards Board (AASB).
(b) Basis of consolidation
During the prior year, the Group adopted the "Investment Entity" basis of accounting as outlined in paragraph
27 of AASB10: Consolidated Financial Statements, whereby the fair value of each investee business unit is
recognised as a single investment value in the balance sheet. Subsequent movements in the assessed fair value
of the businesses are recognised within “Fair value gains on financial instruments at fair value through profit or
loss” in the statement of profit or loss.
Group revenue arising from these businesses now reflects distributions made to the Group in its capacity as a
shareholder of that business, rather than the underlying trading income and profits previously shown.
An entity that is not considered a standalone investee company, where the activities of the entity are substantially
those of investing, will be consolidated into the Group in accordance with AASB10: Consolidated Financial
Statements.
The consolidated financial statements comprise the financial statements of the Group and those controlled
subsidiaries deemed to be carrying on investment activities as at 30 September 2022.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with an
entity and has the ability to affect those returns through its power over the entity. Specifically, the Group controls
an entity if and only if the Group has:
• Power over the entity (i.e. existing rights that give it the current ability to direct the relevant activities of the
entity);
• Exposure, or rights, to variable returns from its involvement with the entity; and
• The ability to use its power over the entity to affect its returns.
Generally, there is a presumption that a majority of voting rights results in control. To support this presumption,
and when the Group has less than a majority of the voting or similar rights of an entity, the Group considers all
relevant facts and circumstances in assessing whether it has power over an entity, including:
• The contractual arrangement(s) with the other vote holders of the entity;
• Rights arising from other contractual arrangements; and
• The Group’s voting rights and potential voting rights.
The Group re-assesses whether or not it controls an entity if facts and circumstances indicate that there are
changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group
obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities,
income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated
financial statements from the date the Group gains control until the date the Group ceases to control the
subsidiary.
Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of
the parent of the Group and to the non-controlling interests, unless this results in the non-controlling interests
having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting
policies into line with the Group’s accounting policies. All intra-group assets and liabilities, equity, income,
expenses and cash flows relating to transactions between members of the Group are eliminated in full on
consolidation.
A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity
transaction. If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill),
liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in
profit or loss. Any investment retained is recognised at fair value.
5
9
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 (c) New accounting standards and interpretations
Certain Australian Accounting Standards and Interpretations have recently been issued or amended but are
not yet effective and have not been adopted by the Group for the annual reporting period ended 30 September
2022. The directors have not early adopted any of these new or amended standards or interpretations.
The directors have not finalised their assessment of these accounting standards on the Group and its financial
reports, however on initial consideration they do not consider it likely there will be a material impact on the
financial statements in future periods.
23. Remuneration of auditors
The auditor of the Group is UHY Haines Norton Sydney who were appointed at the AGM of the Company on 24
February 2021.
(a) Amounts paid or due and payable to UHY Haines Norton Sydney and related network firms
2022
$
2021
$
Audit or review of the financial report of the entity and any other entity in the
consolidated group
101,053
80,000
Other non-audit services in relation to the entity and any other entity in the
consolidated group
56,971
-
158,024
80,000
Other non-audit services related to taxation services ($14,086) and an independent accountant’s report for the
prospectus of H&&G High Conviction Limited ($42,885).
It is the Group's policy to engage the Group's auditors on assignments additional to their statutory audit duties
where the auditor's expertise and experience with the Group are considered important.
(b) Other auditors and their related network firms
H&&G Investment Management Ltd paid $5,206 to Rothsay Audit & Assurance Pty Ltd for the audit of its 30
September 2021 financial report and has provided $8,000 to the same company for the audit of the 30
September 2022 financial report.
24. Segment information
Since the Group adopted the investment entity basis of accounting for an investment entity during the previous
financial year, all income and expenses for the Group are considered derived from and incurred for the generation
of investment income. As a result, and with effect from 1 October 2020, the Group operates as a single segment,
Investing, and there are no separate reportable operating segments for the current or prior periods.
96
H&&G Annual Report 2022 25. Interest in other entities
(a) Categories of controlled entities
As described in Note 7, the Group has adopted the "Investment Entity" basis of accounting, and only those
entities where the activities of the entity are substantially those of investing, are consolidated in the Group
financial statements.
Certain immaterial entities have not been disclosed in the lists of controlled entities below.
(b) Controlled entities consolidated into these financial statements as an investment entity
Name of entity
Country of Incorporation
Ownership interest
Ownership interest held
Hancock && Gore Ltd
HGL Logistics Pty Ltd
HGL Investments Pty Ltd
H&&G Investment Management Ltd
Mulga Capital Pty Ltd
held by the Group
2022%
by the Group
2021%
Australia
Australia
Australia
Australia
Australia
100
100
100
100
80
100
100
100
100
-
(c) Controlled entities accounted for as an investee and not consolidated into these financial
statements
Name of entity
Country of Incorporation
Ownership interest
Ownership interest
held by the Group
held by the Group
2022%
2021%
Hamlon Pty Limited (trading as SPOS)
Australia
The Point-of-Sale Centre (New Zealand) Limited
New Zealand
Hyde Road Trust
DP Trust (*)
Pegasus Health Group
Certitude Healthcare Trust
BLC Cosmetics Pty Limited
Australia
Australia
Australia
Australia
Australia
BLC Cosmetics (NZ) Limited
New Zealand
100
100
73
70
-
-
-
-
100
100
-
-
70
70
100
100
(*) DP Trust has ordinary and B class units. The Group holds 70% of the ordinary units. The B class units
convert into ordinary units on the occurrence of prescribed conversion events at 10% of the outperformance of
the Trust compared to a 10% hurdle return. The Group holds 75% of the B class units with others held by Key
Management Personnel of the Group.
7
9
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 (d) Changes in controlled entities
In respect of controlled entities forming part of the investment entity:
•
•
on 26 June 2022, the Group incorporated a new entity, Mulga Capital Pty Ltd; and
during the prior period, on 23 March 2021, the Company acquired all of the equity in H&&G Investment
Management Ltd.
In respect of controlled entities that were not consolidated but accounted for as investments:
•
•
during the period the Group disposed of its interests in Pegasus Healthcare Group and Certitude Healthcare
Trust, on 16 September 2022, and BLC Cosmetics Pty Limited and BLC Cosmetics (NZ) Limited, on 2
November 2021; and
during the prior period, the Company disposed of its interests in Baker & McAuliffe Holdings Pty Limited
(trading as JSB Lighting) and JSB Lighting (New Zealand) Limited.
26. Non-controlling interests
Balance at beginning of the financial year
Derecognised on deconsolidation
Profit attributable to non-controlling interests
Balance at beginning of the financial year
(a) Accounting policies
2022
$’000
-
-
-
-
2021
$’000
1,884
(1,884)
-
-
Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests
of non-controlling shareholders that are present ownership interests entitling their holders to a proportionate
share of net assets upon liquidation, may initially be measured at fair value or at the non-controlling interests’
proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made
on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value.
Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at
initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Profit or loss and
each component of other comprehensive income are attributed to the owners of the Company and to the non-
controlling interests. Total comprehensive income of the subsidiaries is attributed to the owners of the Company
and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity
transactions.
The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes
in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling
interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and
attributed to the owners of the Company
98
H&&G Annual Report 2022 Directors’ Declaration
Directors’ declaration
In the directors’ opinion:
a)
the consolidated financial statements and notes set out on pages 18 to 53 are in accordance with the
Corporations Act 2001, including:
i)
ii)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
giving a true and fair view of the consolidated entity’s financial position as at 30 September 2022
and of its performance for the financial year ended on that date, and
b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable, and
c) at the date of this declaration, there are reasonable grounds to believe that the members of the extended
closed Group will be able to meet any obligations or liabilities to which they are, or may become, subject by
virtue of the deed of cross guarantee.
Note 22(a) confirms that the consolidated financial statements also comply with International Financial
Reporting Standards as issued by the International Accounting Standards Board.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the directors.
Alexander (Sandy) Beard
Director
24 November 2022
9
9
H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Independent
Auditor’s Report
100
H&&G Annual Report 2022 INDEPENDENT AUDITOR’S REPORT
To the Members of Hancock & Gore Limited
Report on the Audit of the Financial Report
Opinion
Level 11 | 1 York Street | Sydney | NSW | 2000
GPO Box 4137 | Sydney | NSW | 2001
t: +61 2 9256 6600 | f: +61 2 9256 6611
sydney@uhyhnsyd.com.au
www.uhyhnsydney.com.au
We have audited the financial report of Hancock & Gore Limited and the entities it controlled (together
the Group) for the year-ended 30 September 2022, which comprises the consolidated statement of
financial position as at 30 September 2022, the consolidated statement of profit or loss and other
comprehensive income, consolidated statement of changes in equity and consolidated statement of
cash flows for the year then ended, notes to the financial statements, including a summary of
significant accounting policies, and the directors’ declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations
Act 2001, including:
i.(cid:3) giving a true and fair view of the Group’s financial position as at 30 September 2022 and of
its financial performance for the year ended on that date; and
ii.(cid:3) complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the
Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional
Accountants (the Code) that are relevant to our audit of the financial report in Australia. We have also
fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in
our audit of the financial report of the current year. These matters were addressed in the context of
our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide
a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in
our report.
An association of independent (cid:386) rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting (cid:386) rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
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H&G Annual Report 2022H&G ANNUAL REPORT 2022
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the Group’s annual report for the year ended 30 September 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 accordingly we do not
express any form of assurance conclusion thereon, with the exception of the Remuneration Report and
our related assurance opinion.
In connection with our audit of the financial report, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
report or our knowledge obtained in the audit or otherwise appears to be materially misstated.
If, based on the work we have performed, 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 Group are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and
for such internal control as the directors determine is necessary to enable the preparation of the
financial report that gives a true and fair view and is free from material misstatement, whether due to
fraud or error.
In preparing the financial report, the directors are responsible for assessing the ability of the Group to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an
audit conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgement and maintain professional scepticism throughout the audit. We also:
(cid:121)(cid:3)
Identify and assess the risks of material misstatement of the financial report, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
An association of independent (cid:386) rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting (cid:386) rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
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H&G Annual Report 2022
(cid:121)(cid:3) Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Group’s internal control.
(cid:121)(cid:3) Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by the directors.
(cid:121)(cid:3) Conclude on the appropriateness of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material uncertainty exists
related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to the related disclosures in the financial
report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the Group to cease to continue as a going concern.
(cid:121)(cid:3) Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and
events in a manner that achieves fair presentation.
(cid:121)(cid:3) Obtain sufficient appropriate audit evidence regarding the financial information of the
entities or business activities within the Group to express an opinion on the financial report.
We communicate with the directors regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
An association of independent (cid:386) rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting (cid:386) rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
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H&G Annual Report 2022H&G ANNUAL REPORT 2022
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 10 to 15 of the directors’ report for the
year ended 30 September 2022.
In our opinion, the Remuneration Report of Hancock & Gore Limited for the year ended 30 September
2022, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Group 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.
Mark Nicholaeff
Partner
Sydney
24 November 2022
UHY Haines Norton
Chartered Accountants
An association of independent (cid:386) rms in Australia and New Zealand and a member
of UHY International, a network of independent accounting and consulting (cid:386) rms.
UHY Haines Norton—ABN 85 140 758 156 NSWBN 98 133 826
Liability limited by a scheme approved under Professional Standards Legislation.
Passion beyond numbers
H&G Annual Report 2022
Shareholder
Information
The shareholder information set out below was applicable as at 11 January 2023.
Distribution of equity securities
The number of equity security holders by size of holding and the total percentage of securities in that class held by
the holders in each category:
(a) Ordinary shares
Holding
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
(b) Options
Holding
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
(c) Performance Rights
Holding
1 - 1000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Number of holders
Securities held
317
321
152
336
176
127,366
844,423
1,194,157
12,528,913
210,667,466
1,302
225,362,325
Number of holders
Securities held
-
-
-
2
3
5
-
-
-
200,000
6,800,000
7,000,000
Number of holders
Securities held
%
0.06
0.37
0.53
5.56
93.48
100.00
%
-
-
-
2.86
97.14
100.00
%
-
-
-
-
-
-
-
-
-
-
-
-
2
2
13,500,000
13,500,000
100.00
100.00
5
0
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Ordinary shares
No.
Name
1
2
3
4
5
6
6
6
9
10
11
12
13
14
15
16
17
18
19
Sery Pty Limited
National Nominees Limited
Dr Ida Constable
Alexander Damien Harry Beard
Alexander Beard + Maire Beard
Aus Confec Pty Ltd
Green Family Pty Ltd
TSL Super Pty Ltd
IJV Investments Pty Ltd
Mr Alexander Damien Harry Beard + Mrs Pascale Marie Beard
Cannington Corporation Pty Ltd
BNP Paribas Nominees Pty Ltd Hub24 Custodial Serv Ltd
HSBC Custody Nominees (Australia) Limited
BNP Paribas Nominees Pty Ltd
KJE Superannuation Pty Ltd
Citicorp Nominees Pty Limited
Merrill Lynch (Australia) Nominees Pty Limited
Donus Australia Foundation Limited
LPO Investments Pty Limited
20
Mrs Jennifer Ann Hershon
Substantial holders
Securities held
%
22,065,555
14,888,097
10,750,000
9,390,724
8,300,000
8,230,000
8,230,000
8,230,000
8,172,240
7,033,235
4,780,240
3,958,483
3,758,349
3,719,062
3,577,240
3,412,755
3,182,932
2,900,000
2,879,070
2,682,052
9.79
6.61
4.77
4.17
3.68
3.65
3.65
3.65
3.63
3.12
2.12
1.76
1.67
1.65
1.59
1.51
1.41
1.29
1.28
1.19
140,140,034
62.18
The names of the substantial shareholders as disclosed in substantial shareholder notices received by the Company:
Name
Sery Group
Constable Group
Date of last notice
Votes held
Voting %
14 February 2022
29,374,067
09 December 2021
22,932,634
13.09%
11.40%
10.95%
6.45%
AD & MP Beard ATF AD & MP Beard Superannuation Fund
14 February 2022
24,567,239
Perennial Value Management Limited
28 June 2022
14,465,979
Unmarketable parcels
The number of shareholders holding less than a marketable parcel (1,667 shares) is 399.
106
H&&G Annual Report 2022
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H&&G Annual Report 2022H&&G ANNUAL REPORT 2022 Hancock && Gore
Suite 803
Level 8, 25 Bligh Street
Sydney NSW 2000
T: +612 8667 4660
E: info@hng.com.au
H&&G Annual Report 2022