More annual reports from HGL Limited:
2023 ReportPeers and competitors of HGL Limited:
Jardine Matheson Holdings LimitedANNUAL REPORT 2023
Contents
1
2
Chairman’s Report
Review of Operations
Our Purpose
Financial Highlights
Our Business
Mountcastle Group
Disruptive Packaging
Other Strategic Capital Assets
Funds Management
Directors’ Report
Remuneration Report (audited)
Auditors’ Independence Declaration
3
Financial Report
Consolidated Statement of Profit or 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
Corporate Directory
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15
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80
Important
Dates
Final Dividend
Record date: 8 December 2023
Payment date: 21 December 2023
Annual General Meeting
AGM date: 15 February 2024
Corporate
Governance
Statement
Our Corporate Governance
Statement is available on
the company website at
www.hancockandgore.com.au/
corporate-governance and is
lodged with ASX with this report.
ASX: HNG
Chairman’s
Report
Stand the test of time
2023 has been a pivotal year in the development of H&G
and the progression of intentions expressed in my initial
2021 Chairman’s report to build on H&G’s long heritage
of supporting great Australian businesses.
I am pleased to report the achievement of almost
all key objectives outlined in my previous report,
and specifically the continued development of
both Mountcastle and Disruptive Packaging and the
contribution and growth of the H&G management
team in both navigating challenges, identifying
opportunities and delivering results in what has been in
my experience one of the more challenging investment
markets of the last 30 years.
I chose the front cover of this year’s annual report to
highlight one of the core product offerings of Disruptive
Packaging and the essence of its simplicity, utility,
functionality and symbolism to H&G. Disruptive is
providing innovative modern solutions to century
old problems of transporting and protecting fresh
produce. Symbolically the fish on the front cover
which Disruptive’s packaging solutions are protecting
has historic relevance across many different cultures
as a symbol of prosperity, abundance, blessing and
perseverance which I believe is appropriate to the
journey of Disruptive and its management team.
Wendy and Brandon Penn are leading a team facilitating
important changes to reuse/recycling and waste
minimisation of core packaging materials proliferating
international supply chains in response to both
legislative and consumer demands.
Disruptive has a global market and I had the privilege
during the year in attending international tradeshows
and customer pitches with major industry participants
that enforced the innovation of the product offering
and global consumer demand. Disruptive has the
potential to be an enduring player in a global market of
scale – and we are delighted to be playing a role in its
execution.
As in prior reports I am drawn to the contributions
of significant Australian musical artists as a source of
inspiration and parallels for H&G. Spy vs Spy was a great
80’s Australian pub rock band that were passionate
in vocalising issues of importance and substance and
were a great live act! Their song “Test of Time” is well
worth a listen and resonates with the lyrical question
“will the work you do today ... stand the test of time?”.
I am proud to be a part of a business that has stood
the test of time for more than 100 years and constantly
use the question as a framework for considering new
investments that will meet that benchmark.
As H&G moved into new premises in June I was
delighted to find an original Hancock and Gore dining
suite being offered for sale online. I was even more
delighted to understand the pride of ownership which
the owner had for the furniture (included on page 81 is
a letter from the proud owner). It is inspiring to see the
impact of quality products that endure for more than
50 years … I am a firm believer that quality products
and services will endure and stand the test of time.
That is an objective which will continue to drive H&G
management team going forward.
The most important strategic decision during 2023
was to proceed towards an acquisition of 100% of
the Mountcastle Group in partnership with new
Executive Chair Steve Doyle and CEO Brad Aurisch
who have collectively invested a further $2.5m into the
business which will result in them having meaningful
shareholdings in H&G and direct alignment with all
shareholders. We are delighted that Steve will also join
the Board of H&G and will be an invaluable resource in
adding operational capability and networks to future
acquisitions. Steve has an impressive career spanning
30 years of retail experience with notable highlights
including Managing Director of Leisure Division of Super
Retail Group which involved the creation and launch
of Boating Camping Fishing and subsequently led
the development and expansion of ASX listed Lovisa
delivering significant shareholder value during his tenure.
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Similarly I would like to acknowledge the support of
significant other partners in our investment “eco –
system” who play a pivotal role in providing deal flow
opportunities and transaction support. H&G is fortunate
to have a very strong and supportive shareholder
base who are both a source of investment ideas,
opportunities, and wisdom. Equally, longstanding
and growing relationships with multiple Australian
stockbrokers and specific transaction support groups
including Allier Capital, Derwent Executive and Thomson
Geer enable us to source and execute on better quality
investments and we will continue to build on these
relationships and develop others in future years. We are
focused on continuing to build the capabilities of H&G
to enable us to partner with quality managers to build
great businesses, and turn around others when needed,
and in this regard human capital is the rarest and most
important. H&G needs to be seen as a group that adds
value to its partners and we are committed to delivering
on that objective.
Finally, I would like to acknowledge the support of
fellow Board members Kevin, Joseph and Angus who
play a significant and active role in the development
of H&G and whilst small in number the Board is very
effective, always available and provide invaluable
networks, market knowledge and capability. We look
forward to the addition of Steven Doyle to the Board for
2024 and will seek to further develop the Board when
an opportunity to add significant further capability
emerges.
2024 is shaping to be another year of challenges where
capital is likely scarce, and opportunities are plentiful.
As was foreshadowed last year, 2024 is also likely
to be a year where a small number of well executed
transactions will make the most difference to H&G.
With Mountcastle as a larger core cash generating
engine in H&G’s portfolio, we are well positioned to
approach 2024 with optimism as to opportunities that
will emerge and our capacity to execute on them.
We thank all shareholders for their support in 2023 and
look forward to delivering outcomes that stand the test
of time!
Alexander (Sandy) Beard
Chairman
Mountcastle is a high-quality business that has
been a core investment in the H&G portfolio since
its original acquisition in 1997. During that time it has
grown steadily and delivered significant profitability
and dividends to H&G. James Baldwin and his family
built the business to the point where it was able to
undertake material expansion with the acquisition of
LW Reid in 2020 which facilitated a significant level of
growth and new capability. We are grateful that in 2023
James saw the opportunity to create a succession
pathway for the business and the introduction of Steve
Doyle as Executive Chair to lead further expansion of
the business, facilitating the sale of his shareholding
in Mountcastle in a transaction that includes him
becoming a substantial shareholder in H&G.
2023 also saw the continued realisation of historical
H&G investments and specifically the finalisation of the
management buyout of SPOS lead by Julian Pidcock.
The management buyout was a mutually successful
transaction for H&G and Julian and his team and we
are thankful for the professionalism of Julian in leading
the buyout and being open to the risk reward dynamic
of the transaction. We wish Julian and his team all the
best for the future and thank him and his team for their
longstanding contributions to H&G.
2023 performance has been delivered in a very tough
operating environment and investment market which
was essentially closed. The management team have
delivered significant contributions across all strategies,
and I would like to acknowledge Phil, Nick, Joseph,
Michael, Arthur, Nish, Rika and Max for their significant
contributions during the year. The team have also
reviewed and conducted due diligence on a significant
number of opportunities during the year which
have both lead to new investments but importantly
increased the knowledge base and networks of the
team which will be invaluable in future years. I have
no doubt that management experience gained in 2023
and the first half of 2024 will lead to significantly better
future investments. Without the capabilities provided by
the management team we would not have been able to
achieve the expansion of Mountcastle.
Investment performance is delivered by management
teams continually working on their businesses and
relationships to build better businesses, networks and
capabilities. 2023 created many challenges, as will 2024,
but it also created many new opportunities including
technological innovations which if properly harnessed
will likely transform industries into the future. H&G is
fortunate to be in “partnership” with a group of business
managers across all core investments, some of whom
I have acknowledged above, but I would also like to
acknowledge Scott and Matt for their commitment to
Anagenics, Con and Mike for their leadership with FOS,
and Tim and Mike for their leadership of Causeway and
support in the Dynamic Credit Fund joint venture.
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ASX: HNG Review of
Operations 2
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Hancock & Gore Limited ACN: 009 657 961
Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Our
Purpose
Delivery of superior long-term investment returns
through partnership of capital with skills.
What we stand for
Integrity
We act as a reliable,
trusted, long term partner
Alignment
Strong alignment
between shareholders,
management and
partners
Flexibility
Seek to accommodate
partners through flexible
capital and diverse
networks
Longevity
We are committed
to building lasting
relationships and
enduring success
Our Strategy
Hancock & Gore is a diversified investment company that exists to deliver superior long term investment returns to
shareholders through a portfolio of operating investments supported by strong business managers, a return focused
Balance Sheet and investment banking and funds management capabilities.
We differentiate ourselves through:
! Proprietary networks of deal flow and execution
! Investment track record across the full investment cycle
! Alignment of values and performance with investee partners
! Long-term investment objectives/counter cyclical view
! Ability to inject operational expertise to investees
Our Team
We are a specialist team with a demonstrated track record of actively adding value through strategic guidance,
capital markets expertise, and leveraging our extensive network. The team comprises diverse institutional and
entrepreneurial professionals with over 100 years of experience aligned to deliver superior investment returns for
shareholders. Management have strong experience across private and public, debt and equity markets.
4
ASX: HNG
Financial
Highlights
Total Shareholder Return (TSR)
26.7 %
vs 12% in prior year
Net Profit After Tax
NTA per Share
$8.2m
up 46% on prior year
30.7 cps
up 8% on prior year
Ordinary Dividends
Declared
1.5 cps
consistent with prior year
FUM Growth
$9.5m
up 31% on prior year
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Our
Business
Hancock & Gore aims to deliver long-term investment returns via annual
dividends and share price growth. The objective is delivered through profits
earned by operating businesses and performance of strategic capital, and
funds management strategies aimed to deliver total shareholder returns
over 15% per annum.
The H&G management team has delivered over 50% total shareholder returns per annum since coming together
in November 2020. Over the past 3 years, the team has worked to: optimise key investments in the portfolio,
recapitalise the balance sheet, establish dealflow networks, and establish a Funds Management division, with a clear
focus of maximising return on investment.
Investment pillars
Operating Businesses
Strategic Capital
Funds management
Investment strategies aimed
at delivering enhanced
risk adjusted returns and
identifying new operating
businesses.
Current key assets:
! Disruptive Packaging
! Rino Recycling
! T-Shirt Ventures
! Strategic ASX Listed
Investments (Anagenics
& FOS Capital)
! Fixed Income Portfolio
Management of external
funds, both listed and
unlisted to enhance group
returns and provide H&G
networks with access to its
investment universe.
Strategies:
! High Conviction Fund
! Hyde Road Trust
! Dynamic Credit Fund
! Vail Lane Trust
Controlling or significant
interest in quality Australian
companies in aligned
partnership with operating
management.
Shareholder returns derived
from franked dividends,
investment growth from
organic earnings and
growth supported by
H&G investment banking
strengths including M&A
support.
Current asset:
! Mountcastle
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ASX: HNG Key Achievements
! Strong operational performance of Mountcastle
Focus areas
! Completion of meaningful additional operating
investment.
! Execution of advanced Mountcastle M&A
opportunities, in combination with organic growth
opportunities.
! Continued international expansion of Disruptive
Packaging including launch of proprietary pallet
making technology.
! Further simplification of H&G portfolio with
realisations for non-core assets and reinvestment
into high-conviction operating businesses.
! Value enhancement of ASX strategic listed
investments.
! Continued development of funds management
products, team and scale.
! Continue to manage surplus cash through liquid
and income generating low risk investments.
Group and completion of two accretive acquisitions
including expansion into NZ.
! Binding agreement to move to 100% ownership of
Mountcastle (reached post year-end). Includes scrip
acquisition of key management team members
who are now aligned with H&G shareholders.
! Significant commercial expertise added to
Mountcastle with Appointment of Executive
Chairman Steven Doyle, who is also joining the H&G
Board.
! Continued strong sales growth, development of
sales pipeline and business expansion of Disruptive
Packaging. Completion of two acquisitions and $6m
growth capital raised at a valuation reflecting a 55%
premium to H&G cost (completed post year-end).
! $8m invested into secured income investments,
generating strong ongoing cash yields.
! Accretive acquisitions completed by strategic ASX
listed investments Anagenics (AN1) and FOS Capital
(FOS).
! High Conviction Fund FUM growth of 58% and
outperformance against benchmarks.
! Sale of Hyde Road Property as partial consideration
for Mountcastle acquisition at a significant premium
to cost.
! Realisation of investment in Mint Payments
(completed post year-end) delivering ~20%+ IRR to
H&G.
! Further realisation of historical balance sheet assets
including completion of MBO of SPOS group to
simplify the portfolio towards highest ROI strategic
investments.
! Continued enhancement of management team.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Mountcastle
Group
Mountcastle, established in 1835, is a leading Australian supplier,
wholesaler, and retailer of customised school uniforms within
Australia and New Zealand with a global reach and capability.
Highlights
! Delivered standalone sales and underlying EBITDA result of $52.9m and $10.3m (unaudited).
! Dividends to H&G of $2.5m.
! Binding agreement reached to increase ownership in Mountcastle to 100% (post year-end).
! Completed two accretive acquisitions, Moorebank Uniform & Embroidery (based in West Sydney) and
Argyle Schoolwear (based in Auckland New Zealand). Pro-forma FY23 combined group EBITDA of ~$13m
and revenue of ~$65m.
! Enhancement of Mountcastle’s board with addition of Steven Doyle as Executive Chairman.
Approximately
Over
30 %
Long term return
on net assets
Over
33 k
Online orders
in FY2023
4 k
Customers with
tenure greater than
10 years
Over
2.6 m
Items sold in
FY2023
1 in 3
Schools serviced
nationally
Over
40 k
Garments
manufactured
monthly
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ASX: HNG Revenue $m
EBITDA $m(1)
Group’s ownership interest(2)
Group’s carrying value
(1)
2022 included positive impact of $0.3m from Hyde Road property
(2) Binding agreement to move to 100% ownership reached post year-end
Overview
! Mountcastle’s platform and market offering
continue to improve with investments in
e-commerce and other operational initiatives to
release further synergies from acquisitions, and
leverage manufacturing capabilities.
2023
2022
52.9
10.3
49.4%
25.0
49.3
10.4
49.4%
21.1
M&A
! Mountcastle has cemented itself as one of the
largest industry players with two acquisitions
completed during the year (MUE and Argyle).
! Moorebank Uniform & Embroidery (MUE) is based
in Western Sydney. It operates school uniform retail
services for 69 schools with five retail locations and
represents Mountcastle’s entry into retail.
! Argyle Schoolwear (Argyle) is a leading supplier of
school uniforms based in Auckland New Zealand.
The company was founded in 1948 and supplies
over 300 contracted schools and 1,700 garment
styles across the product range.
! The CEOs of MUE and Argyle continue in their
capacities as valuable additions to the Mountcastle
leadership team, and have been invaluable in
identifying synergies, providing market intelligence
and presenting introductions to acquisition targets
from their networks.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Operations
Mouncastle
LW Reid
MUE
Argyle
Strategy and Outlook
! The school uniform industry in Australia is
estimated at A$1bn+ revenue p.a. and is highly
fragmented. Mountcastle is optimally positioned to
increase the scale of the business through accretive
acquisitions, leveraging its best-in-class design,
supply chain and IT infrastructure.
! With a high calibre team, strong acquisition
pipeline and defensive customer base, we expect
Mountcastle’s growth to continue in FY24.
Valuation
30 Sep Valuation
Basis for Valuation
H&G Investment Date
10
2023
$25.0m
Capitalisation of future maintainable earnings
June 1997
ASX: HNG2008Jun1204:45:24OMC-MartinWeineltkm Disruptive
Packaging
Continued focus on execution with expansionary capital raised to provide
funds for manufacturing, product development and geographic expansion.
Disruptive Packaging (DP) is an innovative and fast-growing manufacturer of sustainable packaging solutions.
H&G holds an approximate 15% interest in DP both directly and through a H&G managed syndicate.
Highlights
! Disruptive completed (post year-end) a c.$6 million growth capital raise, led by new investors in North America,
to fund accelerated expansion into the US$7 billion USA packaging market.
! Funding round executed at a 55% premium to H&G cost (not reflected in H&G book value).
! Accretive acquisition of two complimentary profitable logistics and packaging businesses.
! Accretive acquisition of minority shareholder in North American operations.
! Successful invention of pallet making machine that produces standard logistics grade pallets from either
cardboard or Unicor®.
Overview
! The unique strength and sustainable properties
of the core Unicor® product is unmatched in the
market, delivering performance, aesthetics and
supply chain cost savings for its customers in the
fresh produce and seafood wholesale markets.
! Demand for Disruptive’s 100% recyclable packaging
product continues to be strong globally with FY23
revenue up 80% on the same period last year and
a strong growing sales pipeline and order book.
Proceeds of the capital raise will primarily be used
to expand manufacturing capability across North
America to service this growing regional demand.
! Accretive acquisitions provide the group with
immediate positive EBITDA generation, and
operational synergies. Pro-forma combined FY23
revenue (unaudited) was $25 million and EBITDA
(unaudited) was $1 million.
! Continued generation of new sustainable IP based
on the Unicor® formula including Pallet building
machines and construction pods.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Strategy and Outlook
! The market opportunity for DP has strong tailwinds
with regulation restricting the use of harmful
materials like polystyrene and wax cardboard. With
few alternatives Disruptive is uniquely placed to
benefit from the transition to sustainable packaging
solutions.
! H&G has board representation and continues to
assist Disruptive Packaging in developing strategic
plans and M&A.
Valuation
2023
30 Sep Valuation
Basis for Valuation
H&G Investment Date
$5.3m
Net Asset backing reflecting conversion value of investment instrument
June 2022
12
ASX: HNG Other Strategic
Capital Assets
The broader H&G portfolio provides exposure to strong risk adjusted
returns, cash generation and enhanced diversification.
Other assets include income producing assets, strategic ASX listed, private equity and property investments. H&G
seeks to increase exposure to Strategic Capital Assets with potential to become Operating Assets like Mountcastle
or realise appropriate returns to recycle into other opportunities.
Unlisted Assets
! Increased investment in recycling and resource
Strategic ASX Listed Investments
! H&G’s ASX listed portfolio (excluding holdings in
recovery business, Rino Recycling. Rino is currently
commissioning a state of the art recycling
facility in Pinkenba, Queensland, with advantage
through location, scale and market offering. H&G’s
investment balances secure asset backing with
long term strategic potential.
! T Shirt Ventures continues to grow as a leading
technology provider in the large NDIS sector. H&G
increased its investment during the year.
Anagenics & FOS Capital) returned 9%, versus -0.8%
for the ASX Small Ordinaries Accumulation Index.
Since inception the portfolio has returned ~17% IRR,
crystallising returns of 28%.
! Anagenics (AN1) completed the acquisition of Face
MediGroup, giving AN1 a material scale increase and
an omni channel retail and wholesale distribution
network across Australia and New Zealand.
! FOS Capital completed an accretive acquisition of a
complementary lighting business which is expected
to significantly increase underlying earnings.
Commissioning of
Rino Recycling plant
located in Brisbane
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Artist Impression of Tallawong
Village property development,
supported by H&G
Fixed Income
! Structured secured debt investments with
strong asset backing and yields. Primarily first
mortgage, property development loans with blue
chip counterparties, jurisdictions and pre-sales
commitments underpinning low LVRs. H&G also has
first ranking secured loans to profitable private and
public operating businesses with low debt to equity
gearing ratios.
! H&G’s secured convertible note investment into
Mint Payments was part realised during the year
and repaid in full post year end, a successful
investment delivering $1.3m profit to H&G over its
duration at a 20%+ IRR.
! All loans are performing, and the weighted average
interest rate of the loans is greater than 12%.
! During the year, H&G rolled part of its debt portfolio
into a cornerstone position of the new H&G
Causeway Dynamic Credit Fund, a jointly managed
credit fund which provides quarterly income from
an asset backed secured debt portfolio.
! The fund cornerstone approach further simplifies
H&G’s balance sheet and provides enhanced return
on investment through funds management fee
income.
14
Artist impression of Parc Cronulla property
development supported by H&G
ASX: HNG Funds
Management
Challenging markets provide compelling investment opportunities.
High Conviction Fund (ASX Code HCF) continues its long-term outperformance and debt fund JV partnership
established with Causeway Asset Management.
High Conviction Fund (HCF)
! 10.7% pre-tax portfolio performance after all fees, a
moderate outperformance of 2.2% against the ASX
Small Ordinaries Accumulation Index. Including first
dividend of $0.02 per share paid during the period.
! With limited buying interest and numerous sellers,
valuations in microcap companies provide fertile
ground for the HCF strategy.
! FY23 FUM growth of 52% or $10.3m, made up of
IPO funds, share swaps and a share placement, all
were done at prevailing NTA.
Dynamic Credit Fund (DCF)
! DCF is a new offering from the partnership between
H&G and Causeway Financial.
! This partnership will offer investors a unique
opportunity to gain exposure to dynamic credit
opportunities generally only available in private
markets.
! The Fund aims to deliver investors attractive,
absolute risk adjusted returns with recurring
quarterly income, while focusing on capital
preservation.
! During the year HCF became substantial
! The fund has two initial investments yielding ~15%
shareholders in three new investments, with a total
of $6.8m invested into new and existing microcap
companies.
! Three takeover bids were received at significant
premiums for portfolio companies.
cash interest paid monthly.
“ Investment performance is delivered by
management teams continually working on their
businesses and business relationships to build
better businesses, networks and capabilities.”
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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 2023.
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
! Joseph Constable
! Kevin Eley
! Angus Murnaghan (appointed on 23 February 2023)
! Cheryl Hayman (retired on 7 March 2023)
! Peter Miller (retired on 31 December 2022)
Alexander (Sandy) Beard
B.Com, FCA, MAICD
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 Anagenics Limited (ASX:AN1) and
FOS Capital Ltd (ASX:FOS). Sandy was a director of Pure
Foods Tasmania Limited (ASX:PFT) until May 2022 and
Centrepoint Alliance Ltd (ASX:CAF) until Sep 2023.
Joseph Constable
BA(Hons), MPhil
Executive Director (appointed 30 June 2020)
Joseph has eight years of 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).
Kevin Eley
CA, F Fin, FAICD
Non-executive Director (appointed 1985, Chair from
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
Limited (ASX:SOL) in October 2021.
16
ASX: HNG Angus Murnaghan
B.Com
Cheryl Hayman
B.Com, FAICD
Non-executive Director (appointed 23 February 2023)
Angus has almost 40 years of transactional experience
in the Australian equities markets in senior roles. He has
worked at leading finance and advisory groups including
UBS, Ord Minnett, as Managing Director of Moelis &
Company and Wentworth Securities. Angus has been
responsible for the sales and distribution function for
over 50 IPO’s ranging from $50 million to $1 billion.
Peter Miller
FCA, FAICD
Non-executive Director (appointed in 2000, retired
31 December 2022)
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.
Non-executive Director (appointed in 2016, retired
7 March 2023)
Cheryl Hayman has 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 a director of
Beston Global Food Company Ltd (ASX: BFC), Ai-Media
Technologies Limited (ASX: AIM), Silk Logistics Holdings
Limited (ASX: SLH) 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.
H&G High Conviction Limited ACN: 660 009 165
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H&G Annual Report 2023
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:
Directors
Alexander (Sandy) Beard
Joseph Constable
Kevin Eley
Angus Murnaghan
Peter Miller
Cheryl Hayman
Number of
Options
Number of
direct shares
6,000,000
-
-
-
-
-
9,440,724
425,872
-
-
234,469
-
Number of
indirect
shares
16,253,830
-
3,677,240
1,425,000
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.
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, GAICD
Phillip has been an Investment Director of the
Group since 17 May 2021. Phillip has over 13 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).
Chief Financial Officer
Nishantha Seneviratne
MBA, FCPA, FGIA, FCG, ACMA, CGMA
Nishantha was appointed the Chief Financial Officer of
Hancock & Gore on 1 March 2023. He has over 18 years
of senior managerial experience in diverse industries
with 12+ years in ASX listed investment companies.
He was the former Chief Financial Officer and Company
Secretary of Milton Corporation Limited (ASX:MLT)
(between 2012 and 2021) until it was taken over by
Washington H. Soul Pattinson Limited (ASX:SOL) in
October 2021.
Company Secretary
Michael Bower
BSc (Hons) CA FCA (resigned 23 January 2023)
Michael was appointed Company Secretary on 29 March
2022. He 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.
Automic Group
(Appointed 23 January 2023)
HNG outsourced its Company Secretary services to
Automic Group which provides market leading, cloud
based share registry technology, compliance and
governance solutions.
Ms Virginie O’Keef of Automic Group was appointed as
the Company Secretary for HNG from 23 January 2023
to 19 May 2023 and she was replaced by Max Crowley
with effect from 19 May 2023. Max is an experienced
corporate lawyer and company secretary in ASX listings,
employee equity schemes, capital raisings and providing
advice on corporate governance and compliance issues.
18
ASX: HNG Dividends
Operating and financial review
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 2022 paid on 12 December
2022; and
! Interim dividend of 0.5 cents per share for the year
ended 30 September 2023 paid on 13 June 2023.
Since the end of the financial year the directors have
declared a fully franked final dividend for the year ended
30 September 2023 of 1.0 cent per share to be paid on
21 December 2023. The dividend reinvestment plan will
not apply to this dividend.
Dividend Reinvestment Plan
During the year the Directors determined that the
Dividend Reinvestment Plan (DRP) would not be in
operation and no shares were 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.
Overview
The Group continued to further expand its investment
approach and capabilities during the financial year
ended 30 September 2023 with recruitment of
additional new team members and active management
of its portfolio of investments.
Statutory Net Profit after Tax of $8.2 million was
reported, which included:
! Dividend income of $3.8 million up 45% on prior
year with Mountcastle contributing $2.5 million in
FY23;
! Interest income from fixed interest and convertible
note investments of $1.3 million up 130% on prior
year;
! Income from funds management and advisory fees
of $1.6 million up 96% on prior year;
! Fair value gain of $5.8 million was in line with prior
year with net revaluation gains on private equity
investments amounting to $5.6 million; and
! Total operating expenses of $4.6 million was in
line with prior year with increase in employment
expenses offset by reduction in legal and
professional fees.
The Group has adopted an ‘investment entity’
accounting approach 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. The board measures
distributable profits based on Adjusted Net Profits,
which removes unrealised revaluation gains/losses
on investments in the period and adding back similar
gains/losses from prior periods crystallised during the
year.
During the current year, unrealised gains/losses
from listed investments were included in calculating
the Adjusted Net Profit Before Tax and prior year
comparatives have been revised in the table below.
Board considers Adjusted Net Profits provide a better
indication of distributable earnings:
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Net profit before income tax
Less: unrealised gains on unlisted investments (Note 2)
Add: unrealised losses on listed investments (Note 2)
Add: prior year unrealised gains crystallised in respect of Pegasus Healthcare
2023
$’000
8,174
(5,561)
1,552
–
2022
$’000
5,703
(3,154)
34
3,325
Adjusted net profit before tax
4,165
5,908
9
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
! The Group increased its investment in recycling
and resource recovery business, Rino Recycling.
The Group had a $2.3 million secured preferred
equity investment in the holding entity, QRT Finance
Trust as at 30 September 2023. During October and
November 2023 the Group completed an additional
$2.3 million equity investment to give it a $4.6
million blended position;
! The Group further developed its funds
management business. H&G High Conviction
Limited (ASX code: HCF, managed by the Group’s
wholly owned subsidiary H&G Investment
Management Ltd (HGIM)) grew its funds under
management (FUM) by $10.3 million made up of
IPO funds, share swaps and a share placement.
H&G increased its cornerstone position in HCF by
$1.1 million during the year, now amounting to a
$1.4 million position;
! The Group also established the H&G Causeway
Dynamic Credit Fund in partnership with credit fund
manager Causeway Financial, rolling $2.5 million of
H&G’s credit investments into a cornerstone stake
in the fund. H&G is the co-manager of DCF;
! Both HCF and DCF simplify H&G’s balance sheet
complexity by replacing direct exposures and
provide the Group with scalable sources of fee
generating funds under management.
A pipeline of further opportunities remains 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 continued underlying earnings growth.
Mountcastle Group also completed two accretive
acquisitions during the year bringing Pro-forma FY23
combined group EBITDA to ~$13m and revenue to
~$65m. The team are excited about the opportunities
available to Mountcastle and continue to work closely
with management to further enhance its value as
the key pillar of the Group following the increase in
ownership.
The table below, based on unaudited management
reporting for Mountcastle, for the years ended 30 June,
provides further information on the Mountcastle
investment.
Net assets at 30 September 2023 were $69.2 million.
Net Tangible Assets were 30.7 cents per share. These
amounts do not reflect contingent tax assets in respect
of $50.5 million of brought 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.
Dividends and Capital management
The Group paid fully franked dividends of 1.5 cents per
share during the financial year ended 30 September 2023.
The full year 2023 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
21 December 2023.
These funds have been used to invest in new and existing
investments. At balance date the Group held $5.6 million
in cash.
Portfolio
Significant changes to the portfolio of investments
improved the quality and cash generation of the
portfolio during and subsequent to the end of the
financial year, as follows:
! The Group increased its interest in Mountcastle
Group with the acquisition of a further 40.3%
shareholding (completed in November 2023)
from its shareholder partner. The consideration
comprised a cash component of $5.0 million at
completion, issuance of 15 million shares at 35
cents per share, transfer of H&G’s unencumbered
equity in Hyde Rd Trust to the shareholder partner
and a deferred cash consideration of $5.0 million
payable in November 2024;
! The Group also agreed to move to 100% ownership
of Mountcastle Group, with the binding acquisition
of minority shareholders in exchange for 21.6 million
H&G shares issued at 35 cents per share. The
share issuance and completion is subject to H&G
shareholder approval at its February 2024 AGM;
! The Group agreed to sell its interest in the Hyde
Rd Trust 76% (increased from 73% through
acquisition of minority interests during the year) to
its Mountcastle shareholder partner as part of the
aforementioned transaction;
! The Group’s unlisted preferred equity investment
in Disruptive Packaging (through an $8.4 million
Group-managed Trust of which $5.3 million balance
sheet contribution by the Group) converted to
ordinary equity in November 2023 after Disruptive
completed a c.$6 million growth capital raise, led
by new investors in North America. The funding
round was executed at a 55% premium to H&G
cost however H&G’s interest was held at cost at
30 September 2023;
20
ASX: HNG Mouncastle
Revenue $m
EBITDA $m(1)
Group’s ownership interest(2)
Group’s carrying value
(1)
2022 included positive impact of $0.3m from Hyde Road property
(2) Binding agreement to move to 100% ownership reached post year-end
2023
2022
52.9
10.3
49.4%
25.0
49.3
10.4
49.4%
21.1
Outlook
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 value from Mountcastle and other investments,
simplify and diversify the balance sheet, and broaden
revenue streams from off balance sheet funds under
management..
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.
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.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Environmental regulation
Meetings of directors
The number of meetings of directors held during the
year and the number of meetings attended by each
director are shown in the table below.
Meetings
Held
Meetings
Attended
8
8
8
6
2
2
8
8
8
6
2
2
Directors
Alexander (Sandy) Beard
Joseph Constable
Kevin Eley
Angus Murnaghan1
Cheryl Hayman2
Peter Miller3
1
2
3
Appointed 23 Feb 2023
Retired on 7 Mar 2023
Retired on 31 Dec 2022
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.
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
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 3 November 2023, the Group acquired an
additional 40.3% of its 49.4% owned investee company
Mountcastle. The consideration for the acquisition
comprised of $5 million cash on completion; 15 million
HNG ordinary shares at 35 cents per share; transfer of
H&G’s unencumbered equity in Hyde Rd Trust to the
shareholder Partner requiring a loan repayment to the
Trust’s lender of $3.47 million by 31 March 2024 and
interest; and a deferred cash consideration of $5 million
payable 1 year after completion.
On 16 November 2023, the Group signed binding
agreements to acquire the remaining Mountcastle
shareholders equity and move to 100% ownership. The
consideration for the acquisition comprises 21.6 million
H&G shares at 35 cents per share. Issuance of the
shares and completion is subject to H&G shareholder
approval to be sought at its February 2024 AGM.
On 21 November 2023, the Company declared a fully
franked final dividend in respect of the financial year
ended 30 September 2023 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.
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.
22
ASX: HNG Remuneration
Report (audited)
The remuneration report outlines the director and
executive remuneration arrangements of the Company
for the 2023 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 2023. Unless
otherwise indicated, the individuals were KMP for the
entire financial year.
Directors
Alexander (Sandy) Beard
Executive Chair
Joseph Constable
Executive Director
Kevin Eley
Non-Executive Director
Angus Murnaghan
Non-Executive Director (appointed 23 February 2023)
Peter Miller
Non-Executive Director (retired 31 December 2022)
Cheryl Hayman
Non-Executive Director (retired 7 March 2023)
Executives
Nicholas Atkinson
Investment Director
Phillip Christopher
Investment Director
Nishantha Seneviratne
Chief Financial Officer (appointed 1 March 2023)
Michael Bower
Company Secretary (resigned 23 January 2023)
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 restructuring, the
board is retaining the Committee’s Charter as guidance
to the Board on remuneration and nomination 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.
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.
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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.
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 reviewed
annually 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.
24
ASX: HNG Employment contracts
Terms of employment of executives are generally
formalised in employment letters to each of the KMP.
KMP’s must adhere to a minimum notice period as
stipulated in their contracts of employment:
! Sandy Beard, Executive Chair has a six-month
notice period.
! Joseph Constable has a three-month notice period.
! The Investment Directors have a three-month
notice period.
! The CFO has fixed term contract with a two month
notice period.
Aside from statutory requirements, the payment of any
negotiated termination benefit is at the discretion of the
Board.
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.
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
Vesting amount
Up to 10%
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
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Executive and Board remuneration splits:
y
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a
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a
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$
30 September 2023
DIRECTORS
Alexander Beard
Kevin Eley
Peter Miller
Cheryl Hayman
Joseph Constable(3)
Angus Murnaghan(4)
300,000
43,836
10,959
18,265
195,834
25,571
–
–
–
–
61,400
–
Total directors
594,465
61,400
EXECUTIVES
Nicholas Atkinson
Phillip Christopher(5)
Nishantha Seneviratne(6)
Michael Bower(1)
295,541
303,874
151,667
67,000
150,000
250,000
50,000
–
Total Executives
818,082
450,000
Total KMP remuneration
1,412,547
511,400
30 September 2022
DIRECTORS
Alexander Beard
Kevin Eley
Peter Miller
Cheryl Hayman
Joseph Constable(3)
67,579
43,836
43,836
43,836
152,295
–
–
–
–
43,000
Total directors
351,382
43,000
EXECUTIVES
Nicholas Atkinson
Phillip Christopher
Michael Bower(1)
Iain Thompson(2)
286,926
279,045
108,000
94,295
–
100,000
–
–
Total Executives
768,266
100,000
Total KMP remuneration
1,119,648
143,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
-
r
e
p
u
S
)
b
(
n
o
i
t
a
u
n
n
a
$
25,819
4,658
1,151
1,918
24,635
2,740
60,921
)
c
(
s
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$
–
–
–
–
–
–
–
e
c
i
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e
s
g
n
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)
c
(
e
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a
e
l
$
n
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a
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e
n
u
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e
r
e
g
a
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n
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c
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e
P
e
l
b
a
i
r
a
v
%
l
a
t
o
T
$
–
–
–
–
–
–
–
325,819
48,494
12,110
20,183
281,869
28,311
–
–
–
–
21.8
–
716,786
–
26,257
25,912
15,949
–
226,332
126,264
–
–
7,496
7,589
2,732
–
705,626
713,639
220,348
67,000
68,118
352,596
17,817
1,706,613
129,039
352,596
17,817
2,423,399
6,407
4,438
4,438
4,438
19,487
39,208
–
–
–
–
–
–
–
–
–
–
5,136
73,986
48,274
48,274
48,274
219,918
5,136
438,726
–
23,999
23,999
–
9,820
226,332
126,264
–
4,272
5,991
6,354
–
(594)
543,248
535,662
108,000
107,793
57,818
356,868
11,751
1,294,703
97,026
356,868
16,887
1,733,429
41.7
42.2
–
4.0
–
–
53.3
52.7
22.7
–
–
–
–
–
–
–
19.6
(a) Short-term benefits
(b) Post-employment benefits
(c) Long-term benefits
(1) Appointed as Company Secretary on 29 March 2022 and resigned
on 23 January 2023.
(2) Resigned as Chief Financial Officer and Company Secretary
on 29 March 2022 to take-up a full-time position at Mountcastle
Pty Ltd.
(3)
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.
(4) Angus Murnaghan was appointed as a non-executive director on
23 February 2023 (Refer Note 20(b) for related party transactions)
(5) Phillip Christopher’s short-term bonus of $250,000 comprised
$100,000 relating to FY22.
(6) Appointed as Chief Financial Officer on 1 March 2023.
26
ASX: HNG
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 2021 to 2023 financial years.
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 post FY21
would more accurately reflect the Group’s performance. 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
2019
2020
2021
2022
2023
Statutory NPAT ($000)
Adjusted NPBT ($000)
Share price at year end ($)
Ordinary dividends declared (cents)
Special dividends declared (cents)
Statutory Earnings per Share (cents)
Total Shareholder Returns (%)
1,461
N/A
0.32
0.75
–
1.9
(22%)
(12,699)
N/A
0.16
–
–
(19.3)
(50%)
15,599
4,684
0.29
1.00
–
11.6
81%
5,600
5,908
0.30
1.50
0.50
2.7
10%
8,174
4,165
0.37
1.50
–
3.7
27%
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 2023 was $109,098 which is within the approved amount.
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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.
7
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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 2023
DIRECTORS
Alexander Beard
Joseph Constable
Kevin Eley
Angus Murnaghan
Peter Miller
Cheryl Hayman
EXECUTIVES
Nicholas Atkinson
Phillip Christopher
Michael Bower
Opening
balance
Purchases
Disposals
Changes
in KMPs
Closing
balance
Of which
Indirect
interest
24,723,959
425,872
3,577,240
–
29,374,067
744,030
970,595
–
100,000
1,500,000
–
–
5,250,000
2,484,811
100,000
178,600
191,919
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(29,374,067)
(744,030)
25,694,554
425,872
3,677,240
1,500,000
–
–
16,253,830
–
3,677,240
1,500,000
–
–
–
–
(100,000)
5,428,600
2,676,730
–
4,450,000
1,000,000
–
The key management personnel and their relevant interest in the unquoted options of the Company as at year end
are as follows:
30 September 2023
DIRECTORS
Alexander Beard
EXECUTIVES
Nicholas Atkinson
Opening
balance
Purchases
Disposals
Changes
in KMPs
Closing
balance
Of which
Indirect
interest
6,000,000
500,000
–
–
–
–
–
–
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 2023
EXECUTIVES
Nicholas Atkinson
Phillip Christopher
Opening
balance
Purchases
Disposals
Changes
in KMPs
Closing
balance
Of which
Indirect
interest
9,000,000
4,500,000
–
–
–
–
–
–
9,000,000
4,500,000
–
–
End of Audited Remuneration Report
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’
28
ASX: HNG 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 30.
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 $46,457 (2022: $56,971) has been charged by UHY Haines Norton for the provision of non-audit services
during the year in respect of taxation services.
Options
On 15 April 2021, the Company signed an agreement granting the management of SPOS Group an option to purchase
the SPOS Group entities from the Company. The option was exercisable at any time within 5 years of granting for
$2.09 million, plus outstanding loan balances less distributions made by SPOS to the Company since the option
grant date. The option was exercised effective 1 September 2023 at the agreed value and all outstanding loan
balances to the Company was settled. Consequently, ownership of the SPOS group entities were fully transferred
to SPOS management at year end.
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, 7,000,000 of the options remain unexercised.
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
21 November 2023
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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 2023, I declare that to the best of my knowledge and belief, there have been:
(i) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation
to the audit; and
(ii) no contraventions of any applicable code of professional conduct in relation to the audit.
Mark Nicholaeff
Partner
Sydney
Dated: 21 November 2023
UHY Haines Norton
Chartered Accountants
30
ASX: HNG
Financial
Report 3
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1
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Consolidated Statement of Profit or
Loss and Other Comprehensive Income
for the year ended 30 September
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
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
Profit from continuing operations after income tax
Other comprehensive income, net of tax
Note
10
2
10
10
10
11
2023
$’000
3,791
1,331
1,612
175
6,909
5,845
(702)
(134)
(2,925)
(12)
(112)
(695)
8,174
–
8,174
–
2022
$’000
2,611
579
821
418
4,429
5,864
(707)
(232)
(1,792)
(26)
(180)
(1,653)
5,703
(103)
5,600
–
Total comprehensive income from continuing operations
attributable to owners of Hancock & Gore Ltd.
8,174
5,600
Earnings per share attributable to the ordinary equity holders
of the Company:
Basic earnings per share
Diluted earnings per share
Note
5
5
2023
Cents
2022
Cents
3.7
3.5
2.7
2.6
32
ASX: HNG Consolidated Balance Sheet
as at 30 September 2023
Note
2023
$’000
2022
$’000
Assets
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Related party receivables
Prepayments
Financial assets at fair value through profit and loss
Financial assets at amortised cost
Total current assets
NON-CURRENT ASSETS
Property, plant and equipment
Right-of-use assets
Intangible assets
Financial assets at fair value through profit and loss
Financial assets at amortised cost
Deferred tax assets
Total non-current assets
Total assets
Liabilities
CURRENT LIABILITIES
Trade and other payables
Related party payables
Lease liabilities
Provisions
Total current liabilities
NON-CURRENT LIABILITIES
Lease liabilities
Provisions
Deferred tax liabilities
Total non-current liabilities
Total liabilities
Net assets
EQUITY
Share capital
Reserves
Accumulated losses
Other components of equity
Total equity
9
12
12
3
3
13
17
14
3
3
11
15
15
17
16
17
16
11
6
18
5,644
1,245
–
142
11,858
6,075
24,964
13
150
712
44,053
324
–
45,252
70,216
179
–
128
580
887
22
60
–
82
969
69,247
72,623
24,359
(27,735)
–
69,247
13,508
1,367
1,295
113
11,098
503
27,884
39
206
712
32,689
3,650
–
37,296
65,180
667
60
262
60
1,049
23
34
–
57
1,106
64,074
72,623
19,451
(24,651)
(3,349)
64,074
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Consolidated Statement
of Changes in Equity
for the year ended 30 September 2023
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s
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f
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$‘000
$‘000
$‘000
$‘000
$‘000
$‘000
$‘000
$‘000
58,274
15,599
1,296
348
265
(24,651)
(3,349)
47,782
Balance at
30 September 2021
Profit for the period
Total comprehensive
income for the period
–
–
–
–
15,150
Transactions with owners in their capacity as owners:
Issue of Share Capital
Costs associated with
issues of shares
Share based payments
in respect of issue of
shares
Dividends paid
–
(4,018)
(801)
–
–
–
–
Transfer to profit
reserves
Balance at
30 September 2022
Profit for the period
Total comprehensive
income for the period
14,349
(4,018)
–
5,600
–
–
-
–
–
Transactions with owners in their capacity as owners:
Issue of Share Capital
Costs associated with
issues of shares
Share based payments
in respect of issue of
shares
Dividends paid
–
(3,362)
–
–
–
–
–
–
–
(3,362)
8,174
–
–
–
–
–
–
–
–
–
–
–
–
361
–
–
–
–
–
–
–
–
–
–
–
5,600
5,600
–
–
–
–
–
(5,600)
–
–
–
–
–
–
–
–
5,600
5,600
15,140
(801)
361
(4,018)
10,681
–
–
–
–
–
–
–
–
–
–
–
–
–
361
–
361
–
–
–
–
–
–
–
8,174
8,174
–
–
–
–
–
–
–
–
–
–
–
–
8,174
8,174
–
–
361
(3,362)
(3,001)
–
(265)
(11,258)
3,349
–
72,623
17,181
1,296
709
265
(24,651)
(3,349)
64,074
72,623
21,993
1,296
1,070
–
(27,735)
–
69,247
Transfer to profit
reserves
Balance at
30 September 2023
34
ASX: HNG
Consolidated Statement
of Cash Flows
for the year ended 30 September 2023
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Dividends received
Interest received
Interest paid
Note
2023
$’000
2022
$’000
1,429
(3,982)
2,739
994
(7)
1,295
(3,797)
2,611
572
(17)
Net cash inflow from operating activities
9
1,174
664
Cash flows from investing activities
Proceeds from disposals of investments
Purchase of investments
Loans provided
Loans repaid
Payments for property, plant and equipment
20,498
(21,304)
(8,635)
3,737
(15)
33,709
(37,695)
(5,294)
5,000
–
Net cash (outflow) from investing activities
(5,718)
(4,280)
Cash flows from financing activities
Proceeds from issue of shares and before issue costs
Share issues costs
Dividends paid
Payment of lease liabilities
Loans with related parties
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at end of the period
6
6
9
9
–
–
(3,362)
(171)
13
15,150
(801)
(4,018)
(241)
(333)
(3,520)
9,757
(8,064)
13,710
5,644
6,141
7,569
13,710
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Notes to the
Consolidated
Financial Statements
for the year ended 30 September 2023
1 Corporate information
The consolidated financial statements of Hancock & Gore Ltd (the Company) and its subsidiaries (the Group) for
the year ended 30 September 2023 were authorised for issue in accordance with a resolution of the directors on
21 November 2023.
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 Level 5, 107 Pitt 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.
36
ASX: HNG 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
Other
2023
$’000
–
–
68
68
2022
$’000
2,310
650
–
2,960
Realised gains/(losses) on disposals of listed investments
1,768
(216)
Unrealised gain/(losses) on revaluation of unlisted investments (3)
Mountcastle Group(1)
Hyde Road Property(2)
SPOS Group
T-Shirt Ventures/Provider Choice
Other unlisted financial instruments
Unrealised gains/(losses) on listed investments
4,496
1,887
(790)
–
(32)
5,561
(1,552)
3,196
–
(1,124)
1,000
82
3,154
(34)
Total fair value gains on financial instruments at fair value
through profit or loss
5,845
5,864
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(1) Mountcastle Group was independently revalued as at 30 Sep 2023 and the Group’s 49.4% interest was revalued at $25 million
based on Mountcastle’s updated maintainable earnings. Unrealised gain on Mountcastle investment amounted to $4.5 million as
at 30 September 2023.
(2) Hyde Rd property was revalued at $13 million as at 30 September 2023 and the Group’s interest in the Hyde Rd Trust was valued
at $6.4 million, recognising an unrealised gain of $1.9 million for the current financial year.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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
Financial liabilities
Trade and other payables
Related party payables
Lease liabilities
b) Financial assets at fair value through profit or loss
Current assets
Listed equities
Unlisted equities
Non-current assets
Unlisted equities
Unlisted convertible notes
Amounts recognised in profit or loss
Note
9
12
12
3b
3c
15
15
17
Note
3d
3d
3d
3d
2023
$’000
5,644
1,247
–
57,911
4,399
2022
$’000
13,508
1,367
1,295
43,787
4,153
69,201
64,110
629
–
150
779
2023
$’000
11,858
–
667
60
285
1,012
2022
$’000
10,722
376
11,858
11,098
41,553
2,500
31,114
1,575
44,053
32,689
55,911
43,787
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.
38
ASX: HNG 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(f).
For further information about the methods and assumptions used in determining fair value refer to note 3(d).
c) Financial assets at amortised cost
Current assets
Term deposit
Loan receivables
Non-current assets
Loan receivables
Note
2023
$’000
–
6,075
4,075
324
6,399
2022
$’000
202
301
503
3,650
4,153
Loans receivable as at 30 September 2023 generate interest returns between 10%–16%. $4.075 million of the
loans outstanding as at 30 September 2023 were settled within 2 months after year end and no expected
credit loss has been provided.
d) 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).
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
3
Financial assets and financial liabilities
continued
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.
Assets and liabilities at fair value by hierarchy as at 30 September 2023
Financial assets at fair value at 30 September 2023:
Listed equities
Unlisted equities
Convertible note securities
Level 1
$’000
11,858
–
–
11,858
Level 2
$’000
–
–
–
–
Level 3
$’000
–
41,553
2,500
Total
$’000
11,858
41,553
2,500
44,053
55,911
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.
40
ASX: HNG 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 2023:
Investment
Mountcastle
Group
(49.4%
interest)
Disruptive
Packaging
Trust
(65.54%
interest)
T-Shirt
Ventures
(<5%)
QRT Finance
Trust
(<5%)
Hyde Road
Trust
6,395
Fixed income
investments
2,500
Total
44,053
Valuation
$’000
Basis of
Valuation
25,000
Capitalisation
of future
maintainable
earnings,
adjusted for
net debt and
surplus assets.
5,340
2,548
2,270
Net asset
backing
reflecting
conversion
value of
investment
instrument.
Acquisition
price of
additional
preferred
equity
Net asset
backing
reflecting
carrying value
of investment
instrument
and income
and profit
participation
entitlement
Net asset
backing of
the trust with
underlying
property
revalued at
year end
Value at
expected
redemption
amount
Material
Unobservable
Inputs
Future
maintainable
earnings
Inputs Used
$13.0m
Relationship of
unobservable inputs
to fair value
+/- 10% change would
result in a change in fair
value of +/- $2.3m
Capitalisation
multiple
5.4x
$45m
Conversion
valuation of
underlying
operating
business
Total value of
equity
$29.0m
Future profit
participation
$Nil
A change in the
multiple of +/- 0.5x
would result in a
change in fair value of
+/- $2.2m
A 10% decrease would
have $nil effect on
fair value due to a
ratchet mechanism
on conversion in the
instrument.
A 10% increase would
increase valuation by
$0.5m
+/- 10% movement
would result in a
change in fair value of
units by +/- $0.1m
A $2.0 million
profit participation
entitlement would
increase the valuation
by $0.1m
Value of
underling
property
$13.0m
+/- 10% movement in
value would change
net asset value by +/-
$0.98m
n/a
n/a
n/a
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
3
Financial assets and financial liabilities
continued
e) 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.
2023
Less than 1 year
1–2 year
2–3 years
Total
2022
Less than 1 year
1–2 year
2–3 years
Total
Trade
and other
payables
$’000
Related
party
payables
$’000
Finance
lease
liabilities
$’000
639
–
–
639
667
–
–
667
–
–
–
–
60
–
–
60
128
22
–
150
262
23
–
285
Total
$’000
767
22
–
789
989
23
–
1,012
Trade and other payables and related party payables are not interest bearing. The weighted average interest
rate inherent in the finance lease liabilities is 4.4% (2022: 4.0%).
f) 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.
42
ASX: HNG 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.
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.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
3
Financial assets and financial liabilities
continued
g) 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.
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.
44
ASX: HNG 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.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
4 Dividends
a) Dividends paid during the year:
Fully franked final dividend of 1.0 cent per share for the year ended
30 September 2022 paid on 12 December 2022 (2022: fully franked
1.0 cent per share paid on 3 December 2021)
Fully franked interim dividend of 0.5 cents per share for the year ended
30 September 2023 paid on 13 June 2023 (2022: fully franked 0.5 cents
per share paid on 30 September 2022)
No special dividend paid for the year ended 30 September 2023
(2022: fully franked 0.5 cents per share paid on 30 September 2022)
Total dividends
Amounts retained on employee loan funded share plans
2023
$’000
2022
$’000
2,254
1,789
1,127
–
3,381
(19)
1,127
1,127
4,043
(25)
Dividends paid
3,362
4,018
b) Dividends proposed but not recognised as a liability as at 30 September:
Fully franked final dividend of 1.0 cent per share for the year ended
30 September 2023 payable on 21 December 2023 (2022: fully franked
1.0 cent per share paid on 12 December 2022)
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%
(2022: 26%)
Franking debits that will arise from the payment of dividends
subsequent to the end of financial year
2023
$’000
2022
$’000
2,254
2,254
2023
$’000
2022
$’000
8,037
8,271
(751)
7,286
(751)
7,520
46
ASX: HNG d) Dividend reinvestment plan
The Company has a dividend reinvestment plan (DRP). Brief details of the DRP is given below:
! 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;
! 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.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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
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
2023
Cents
2022
Cents
3.7
3.7
3.5
3.5
2023
$’000
8,174
–
2.7
2.7
2.6
2.6
2022
$’000
5,600
–
Profit from continuing operations after income tax attributable to
equity holders of the parent
8,174
5,600
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
8,174
361
8,535
5,600
361
5,961
2023
Number
2022
Number
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share
223,034,200
210,246,017
Adjustments for calculation of diluted earnings per share:
Options issued not exercised
Performance rights and employee loan funded share plan
3,518,518
14,382,787
3,523,079
14,343,821
Weighted average number of ordinary and potential ordinary shares
used as the denominator in calculating diluted earnings per share
240,935,505
228,112,917
Further information on the potentially dilutive equity instruments can be found in note 6.
48
ASX: HNG 6
Issued capital
a) Movements in ordinary shares
Movement in share capital
Opening balance
Issued under capital raising
Share issue costs
Options exercised
2023
No. of Shares
225,362,325
–
–
–
2023
$’000
2022
No. of Shares
72,623
–
–
–
178,907,789
45,454,536
–
1,000,000
2022
$’000
58,274
15,000
(801)
150
Balance as at 30 September
225,362,325
72,623
225,362,325
72,623
b) Movements in ordinary shares during the year
No additional shares were issued during the year ended 30 September 2023 (2022: Company raised
$7.41 million before costs from the issue of 22,451,514 shares on 25 November 2021 through the initial private
placement, and $7.59 million before costs from the issue of 23,003,022 shares on 10 February 2022 through a
conditional placement).
No additional options were issued during the year ended 30 September 2023 (2022: 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.
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 2023 is as follows:
Balance as at 30 September 2022
Loan repayments from dividends retained
Balance as at 30 September 2023
Number
of Shares
2,328,125
–
2,328,125
Total
$’000
448
(18)
430
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
6
Issued capital
continued
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 2023.
The performance rights are included in the calculation of Diluted Earnings Per Share.
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
50
2023
$’000
65,112
296,028
–
2022
$’000
65,112
296,028
–
361,149
361,149
ASX: HNG
7 Business combinations
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.
Details of controlled entities that are not consolidated as part of the investment entity are included in Note 25.
b) Accounting policy
Business combinations
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 3 November 2023, the Group acquired an additional 40.3% of its 49.4% owned investee company
Mountcastle. The consideration for the acquisition comprised of $5 million cash on completion; 15 million
HNG ordinary shares at 35 cents per share; transfer of H&G’s unencumbered equity in Hyde Rd Trust to the
shareholder Partner requiring a loan repayment to the Trust’s lender of $3.47 million by 31 March 2024 and
interest; and a deferred cash consideration of $5 million payable 1 year after completion.
On 16 November 2023, the Group signed binding agreements to acquire the remaining Mountcastle
shareholders equity and move to 100% ownership. The consideration for the acquisition comprises 21.6 million
H&G shares at 35 cents per share. Issuance of the shares and completion is subject to H&G shareholder
approval to be sought at its February 2023 AGM.
On 21 November 2023, the Company declared a fully franked final dividend in respect of the financial year
ended 30 September 2023 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.
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1
5
Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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
Cash and cash equivalents
2023
$’000
5,644
–
5,644
2022
$’000
13,508
202
13,710
b) Reconciliation of profit after income tax to net cash inflow from operating activities:
Profit from continuing operations after income tax
Adjustments to reconcile profit before tax to net cash flows:
Net (gains) on assets and liabilities at fair value through profit or loss
Non-cash employee benefits expense – share-based payments
Depreciation and amortisation
In specie Dividends
Capitalised Interest
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
Net cash (outflow) from operating activities
2023
$’000
8,174
(5,845)
361
134
(966)
(224)
(489)
(29)
–
(488)
546
1,174
2022
$’000
5,600
(5,864)
361
232
–
–
152
32
(51)
277
(75)
664
c) 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.
52
ASX: HNG 10 Other income and expense items
a) Expenses information
Depreciation and amortisation expensed to profit and loss
Plant and equipment
Right of use asset
Employee benefit expenses
Salary and wages
Superannuation expense
Directors’ fees
Share based payments
Other
b) 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
2023
$’000
2022
$’000
14
120
134
1,901
127
439
361
97
2,925
2023
$’000
230
1,101
–
1,331
8
7
15
1,316
42
190
232
1,104
90
219
361
18
1,792
2022
$’000
26
499
54
579
9
17
26
553
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5
Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
10 Other income and expense items
continued
c) Accounting policies
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.
54
ASX: HNG
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
Profit from continuing operations before income tax expense
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
Income tax expense/(benefit)
2023
$’000
2022
$’000
–
–
–
–
–
–
–
–
2023
$’000
8,174
2,043
–
–
92
832
(198)
(698)
–
(1,159)
(6)
(906)
–
–
154
154
234
(285)
(51)
103
103
2022
$’000
5,703
1,426
154
–
94
91
(39)
(386)
–
(320)
(293)
(624)
103
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
11
Income tax
continued
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:
2023
$’000
2022
$’000
–
–
–
–
–
–
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$‘000
$‘000
$‘000
$‘000
$‘000
$‘000
$‘000
$‘000
–
(4,451)
159
2,103
159
(2,348)
–
–
–
(52)
71
4,432
–
4
(34)
(2,204)
(28)
(48)
37
2,228
(28)
–
–
–
Balance at
30 September 2022
(Charges)/credits
to profit or loss
Balance at
30 September 2023
e) Tax losses
The Group has accumulated capital losses of $27.4 million and revenue losses of $23.1 million brought to
account at 30 September 2023. 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 $2.4 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.
56
ASX: HNG
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.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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
2023
$’000
1,200
(29)
1,171
–
74
74
1,245
–
2022
$’000
272
(29)
243
1,050
74
1,124
1,367
1,295
1,245
2,662
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.
58
ASX: HNG The Group has not experienced a material change in credit losses arising from COVID-19 impacts on our
customers.
c) Deferred consideration receivable
Nil (2022: as part of the sale of BLC Cosmetics to Anagenics Limited (ASX: AN1), the Group was entitled to a
deferred consideration of $1,050,000 as at 30 September 2022 and was received after the year end).
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 2022
Derecognition on deconsolidation
Additions
Depreciation charge
Net book amount at 30 September 2023
2023
$’000
2022
$’000
47
(34)
13
183
(144)
39
Plant and
equipment
$’000
39
(39)
15
(2)
13
b) Accounting policies
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.
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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.
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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
! Rental equipment
3 to 10 years
1 to 7 years
9
5
Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
14 Intangible assets
Intangible assets
Goodwill
Impairment
Net carrying value of Goodwill
a) Movements during the year
Net book amount at 30 September 2022
Net book amount at 30 September 2023
2023
$’000
2022
$’000
712
–
712
712
–
712
Goodwill
$’000
712
712
b) Allocation of goodwill
Goodwill at 30 September 2023 relates solely to the acquisition of Supervised Investments Australia Ltd
(now H&G Investment Management Ltd) 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. Funds Under Management (FUM) grew by 52% during the year following the launch of the
Hyde Rd Trust and listing of H&G High Conviction Fund to H&G High Conviction Limited (ASX: HCF).
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 75% of forecast annual return, the carrying value of goodwill would approximate fair
value per the VIU calculation.
60
ASX: HNG 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.
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.
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6
Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
14 Intangible assets
continued
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
2023
$’000
2022
$’000
179
–
179
667
60
727
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.
16 Provisions
Current
Employee benefits
Non-current
Employee benefits
62
2023
$’000
2022
$’000
580
580
60
60
60
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Accounting policies
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, bonus, 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.
17 Leases
a) Right of use assets
Property leases
Accumulated depreciation
b) Movements in right of use assets during the year
Net book amount at 30 September 2022
Derecognition on deconsolidation
Additions
Depreciation charge
Net book amount at 30 September 2023
c) Lease liabilities
Current
Non-current
2023
$’000
193
(43)
150
2023
$’000
128
22
150
2022
$’000
776
(570)
206
Property
leases
$’000
206
(206)
193
(43)
150
2022
$’000
262
23
285
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
17 Leases
continued
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
e) Accounting policies
Right-of-use-assets
2023
$’000
6
60
2022
$’000
17
40
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.
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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.
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
2023
$’000
21,993
1,296
1,070
–
2022
$’000
17,181
1,296
709
265
24,359
19,451
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.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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
Retained profits and accumulated losses
Total equity
Profit or loss
Profit or loss for the financial year
Total comprehensive income for the financial year
2023
$’000
15,830
54,255
2022
$’000
27,757
36,518
70,084
64,275
804
33
837
438
300
738
69,247
63,537
72,623
72,623
37,851
1,296
1,070
–
34,976
1,296
709
265
(43,593)
(46,332)
69,247
63,537
6,237
6,237
5,248
5,248
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ASX: HNG 20 Related party transactions
a) Key management personnel compensation
Short-term employee benefits
Post-employment benefits
Long-term benefits
Share-based payments
2023
$’000
2022
$’000
1,923,947
129,039
17,817
352,596
1,262,648
97,026
16,887
356,868
2,423,399
1,733,429
Detailed remuneration disclosures are provided in the remuneration report on pages 23 to 28.
b) Other transactions with key management personnel
An entity related to Angus Murnaghan provided share market advice and consultancy services to the Group
entities and was paid $88,000 for the period 1 June 2023 to 30 Sep 2023.
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 and distributions from Mountcastle Pty Ltd of $2,452,650, Hamlon Pty Ltd of
$790,000 and Hyde Road Trust of $227,364. 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.
Hamlon Pty Ltd also fully paid its inter-company loan to the Group of $582,288 during the year. SPOS Group
which included Hamlon Pty Limited and The Point of Sale Centre (New Zealand) Limited exited the HNG Group
on 1 September 2023 consequent to SPOS Group exercising its option granted 15 April 2021 to purchase SPOS
Group entities from the HNG Group.
HGL Logistics Pty Ltd, which was a consolidated entity of the Group held the head lease of premises used by
the Hamlon Pty Limited for warehousing and office space. On 1 March 2023, HGL Logistics Pty Ltd was sold to
Hamlon effectively transferring the lease to Hamlon. Rent and occupancy costs paid by Hamlon to the Group
prior to acquiring HGL Logistics was $175,242 (excluding GST).
The Group and Hamlon share IT support and telecommunications services. $36,000 (excluding GST) was
recharged by the Group to Hamlon for costs paid by the Group.
The Group received management fees from DP Trust of $120,000 and distributions from the Hyde Road Trust
of $227,000 during the year.
Loan of $500,000 granted by the Group to Hyde Road Trust in the prior year to established the trust was
repaid in full during the current year.
Loan granted to H&G Capital Ventures (Pty) Ltd (formerly Mulga Capital Pty Ltd) of $144,000 toward
establishment and employment costs was written off during the year.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
20 Related party transactions
continued
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
2023
$’000
1,234,950
(1,234,950)
–
–
–
–
–
21 Commitments and contingencies
a) Commitments
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.
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
AASB as issued by the Australian Accounting Standards Board (AASB).
68
ASX: HNG
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 2023.
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.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
22 Summary of significant accounting policies
continued
c) New and amended accounting standards and interpretations
There are no other new standards, interpretations or amendments to existing standards that are effective
for the first time for the financial year beginning 1 October 2022 that have a material impact on the amounts
recognised in the prior periods or will affect the current or future periods.
New standards, amendments to standards and interpretations that are effective for annual periods beginning
on or after 1 Jan 2023 have not been early adopted in preparing these financial statements. None of these are
expected to have a material effect on the financial statements of the Group.
23 Remuneration of auditors
The auditor of the Group is UHY Haines Norton Sydney who were appointed at the AGM in 2021.
a)
Amounts paid or due and payable to UHY Haines Norton Sydney and
related network firms
Audit or review of the financial report of the entity and any other entity
in the consolidated group
Other non-audit services in relation to the entity and any other entity
in the consolidated group
2023
$’000
2022
$’000
93,196
101,053
46,457
56,971
139,653
158,024
Other non-audit services related to taxation services provided for HNG and its Group entities $46,457 (2022:
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 in addition 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 $7,700 to Rothsay Audit & Assurance Pty Ltd for the audit of its
30 September 2022 financial report (2022: $8,250).
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.
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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
Hancock & Gore Ltd
HGL Logistics Pty Ltd
HGL Investments Pty Ltd
H&G Investment Management Ltd
H&G Capital Ventures Pty Ltd
(formerly Mulga Capital Pty Ltd)
Ownership
interest
held by the
Group
2023
%
Ownership
interest
held by the
Group
2022
%
100
–
100
100
80
100
100
100
100
80
Country of
Incorporation
Australia
Australia
Australia
Australia
Australia
c)
Controlled entities accounted for as an investee and not consolidated
into these financial statements
Name of entity
Hamlon Pty Limited (trading as SPOS)
The Point-of-Sale Centre (New Zealand) Limited
Hyde Road Trust
DP Trust*
Ownership
interest
held by the
Group
2023
%
Ownership
interest
held by the
Group
2022
%
–
–
76
66
100
100
73
70
Country of
Incorporation
Australia
New Zealand
Australia
Australia
(*) DP Trust has ordinary and B class units. The Group holds 66% 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.
d) Changes in controlled entities
In respect of controlled entities forming part of the investment entity:
! There were no new controlled entities added to the Group during the year ended 30 September 2023.
! On 1 March 2023, the Company disposed of its interest in HGL Logistics Pty Ltd.
! On 19 July 2023, Mulga Capital Pty Ltd changed its company name to H&G Venture Capital Pty Ltd.
In respect of controlled entities that were not consolidated but accounted for as investments:
! On 1 September 2023, the Company disposed of its interest in Hamlon Pty Ltd and the Point of Sale
Centre (New Zealand) Limited.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Directors’
Declaration
for the year ended 30 September 2023
In the directors’ opinion:
(a)
the consolidated financial statements and notes set out on pages 31 to 71 are in accordance with the
Corporations Act 2001, including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory
professional reporting requirements, and
(ii) giving a true and fair view of the consolidated entity’s financial position as at 30 September 2023 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
21 November 2023
72
ASX: HNG Independent
Auditor’s Report
To the Members of Hancock & Gore Limited
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Hancock & Gore Limited and the entities it controlled (together the Group)
for the year-ended 30 September 2023, which comprises the consolidated statement of financial position as at
30 September 2023, 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. giving a true and fair view of the Group’s financial position as at 30 September 2023 and of its financial
performance for the year ended on that date; and
ii. complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for Opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of
our report. We are independent of the Group in accordance with the auditor independence requirements of the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s
APES 110 Code of Ethics for Professional Accountants (the Code) that are relevant to our audit of the financial report
in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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.
VALUATION OF FINANCIAL INSTRUMENTS
Why a key audit matter
How our audit addressed the risk
As an investment entity, the Group’s investments
in other entities are prescribed to be valued at fair
value in accordance with AASB 9.
This can involve significant judgement and
estimation uncertainty, particularly for investments
classed as level 2 or level 3 in the fair value
hierarchy.
The Group has significant investments and other
financial instruments which are accounted
at fair value. We considered the valuation of
financial assets to be a significant risk area due
to the materiality of the balance to the financial
statements as a whole and the level of estimation
uncertainty involved.
We performed the following audit procedures, amongst
others:
! We assessed the appropriateness of the Group’s
valuation policies;
! We assessed whether the classification of financial
assets appeared appropriate;
! We agreed key inputs from management’s
calculation to supporting documentation, including
confirmations and publically available market data;
! We recalculated an expected fair value of financial
assets and compared it to management’s valuation
! We performed procedures in accordance with
Australian Auditing Standards for assessing the
work of an expert employed by management
! We also assessed the reasonability and
completeness of the company’s disclosures
against the requirements of Australian Accounting
Standards.
74
ASX: HNG IMPAIRMENT OF GOODWILL
Why a key audit matter
How our audit addressed the risk
The Group has a significant goodwill balance
relating to its acquisition of Supervised Investments
Australia Limited (SIAL).
AASB 136 requires entities to assess whether
goodwill balances are impaired on at least an
annual basis. This assessment involves significant
judgement and estimation uncertainty.
We considered this a significant risk area due to the
materiality of the goodwill balance to the financial
statements as a whole and the level of estimation
uncertainty involved.
We performed the following audit procedures, amongst
others:
! We reconciled goodwill balances recorded to
supporting documentation, including acquisition
documentation
! We assessed whether indicators of impairment
were noted in respect of SIAL
! We assessed the reasonability of management’s
impairment calculation including key assumptions
! We performed an independent assessment of
the value in use of SIAL in accordance with the
requirements of AASB 136 and compared this to the
relevant carrying value
! We also assessed the reasonability and
completeness of the company’s disclosures
against the requirements of Australian Accounting
Standards.
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 2023, 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.
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
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:
! 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.
! 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.
! Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the directors.
! 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.
! 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.
! 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.
76
ASX: HNG 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.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 23 to 28 of the directors’ report for the year ended
30 September 2023.
In our opinion, the Remuneration Report of Hancock & Gore Limited for the year ended 30 September 2023,
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
Dated: 21 November 2023
UHY Haines Norton
Chartered Accountants
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Hancock & Gore Limited ACN: 009 657 961H&G Annual Report 2023
Shareholder
Information
The shareholder information set out below was applicable
as at 13 November 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 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
b) Options
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
c) Performance Rights
Holding
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
78
Number of
holders
Securities
held
310
330
139
326
177
124,695
873,966
1,091,319
12,487,520
226,284,825
%
0.05
0.36
0.45
5.18
93.95
1,282
240,862,325
100.00
Number of
holders
Securities
held
–
–
–
–
2
5
–
–
–
–
6,500,000
6,500,000
Number of
holders
Securities
held
–
–
–
–
2
2
–
–
–
–
13,500,000
13,500,000
%
–
–
–
–
100.00
100.00
%
–
–
–
–
100.00
100.00
ASX: HNG Equity security holders
The names of the twenty largest holders of quoted equity securities are listed below:
Ordinary shares
#
1
2
Name
SERY PTY LIMITED
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
3 MR ALEXANDER DAMIEN HARRY BEARD + MRS PASCALE MARIE BEARD
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