IVE Group
Annual Report 2021

Plain-text annual report

IVE Group Limited Annual Report 2021 Going further since 1921 Celebrating our centenary this year, IVE is Australia’s leading holistic marketing company. With an unmatched breadth and depth of offering, we guide our clients from idea to execution. Our landscape is constantly shifting and evolving, and as marketing natives so are we. We are forever seeking new ways to navigate the marketing maze to connect our clients with customers, wherever and whenever. Specialising in creative, data-driven communications, integrated marketing, production and distribution, we bring together the capabilities, specialists and technology needed to make customer connection seamless. Balmain 1921 ASX : IGL IVE Group’s 2021 AGM will be held on Tuesday, 23 November 2021 commencing 10:00am (Sydney time) via an online platform at https://agmlive.link/IGL21. Registered office IVE Group Limited Level 3, 35 Clarence Street Sydney NSW 2000 Telephone: +61 2 8020 4400 ABN 62 606 252 644 2 IVE Group LimitedFinancial performance Business highlights Chair’s review CEO’s review Board of Directors IVE celebrates a century Operating and financial review Our vision, purpose and values Our integrated service offering Our clients Strategy and growth Continued diversification and growth opportunities Lasoo expansion Market positioning Revenue diversification Margin stability Cashflow & capital allocation Year in review Review of financial performance Environmental, social and corporate governance Directors’ report Remuneration report Lead auditor’s independence declaration Financial report Financial report contents Consolidated financial statements Notes to the consolidated financial statements Directors’ declaration Independent auditor’s report ASX additional information Corporate governance statement 4 5 8 10 12 14 16 17 18 19 20 21 22 24 25 26 27 28 33 38 46 52 70 72 73 74 79 117 119 125 128 3 By forever seeking new ways to simplify, integrate, and amplify their marketing activity, we take our clients, their businesses and their customers, further. Annual Report 2021Financial performance REVENUE $656.5m GROSS PROFIT MARGIN 48.1% (46.2% PCP) EARNINGS PER SHARE* (excluding JobKeeper) 13.5c (8.4% increase on PCP) NET DEBT $77.3m CASH ON HAND $107m EBITDA $100.2m (including JobKeeper) $85.3m (excluding JobKeeper) NPAT $30.2m (including JobKeeper) $19.9m (excluding JobKeeper) OPERATING CASHFLOW (excluding AASB 16) $97m FULL YEAR DIVIDEND 14.0c PER SHARE FULLY FRANKED *EPS based on NPAT/weighted average shares on issue. — The underlying financial results are on a non-IFRS basis and are not audited or reviewed — The underlying results are a continuing operations basis and exclude non-operating items (see reconciliation page 34) — Underlying results include net JobKeeper receipts in H1 of $14.9m 44 IVE Group LimitedBusiness highlights Strong operating performance > Delivered on earnings guidance – EBITDA $100.2m > Improved margins notwithstanding reduced revenue, achieved through flexing cost base and supply chain > Strong results in challenging environment demonstrate resilience of the business > Staff at all levels responded very well to the unprecedented and volatile operating environment Strategic initiatives > The divestment of IVE Telefundraising in October 2020 for consideration of $16.5m represented a profit on sale of $4.2m > Entered into long-term contract with Australian Community Media (ACM) on 30 October 2020, with expected revenues of circa $100m over the five-year term. To support ACM’s requirements, and further enhance service to clients, we acquired selected assets of ACM’s web offset operation in WA for a purchase consideration of $2m Balance sheet further strengthened > Strong cashflow generation, operating cashflow conversion of 131% > Net Debt reduced by $59.8m from $137.1m (30 June 2020) to $77.3m > Cash balance at 30 June 2021 of $107m > Net debt to pre AASB 16 EBITDA excluding JobKeeper of 1.3x (target net debt of 1.5x) > $50m of senior debt facility was repaid on 6 August 2021 Strong position to fund growth initiatives > Latent balance sheet capacity available of $30-40m > Provides opportunity to actively pursue earnings accretive growth initiatives (refer page 34) or further capital management 5 Annual Report 2021Improving shareholder returns > EPS growth over PCP of 8.4% > Resumption of dividends in H1 FY21 with final dividend declared of 7 cents per share fully franked, with a full year dividend of 14 cents per share fully franked > ROFE of 15% > The Company announced a share buyback on 12 November 2020. As at 25 August 2021, the Company has acquired 5.4m shares at a total cost of $7.4m (average price of $1.37 per share). This represents 3.6% of issued capital Customers and revenue IVE continues to benefit from its differentiated value proposition and a loyal, strong and diversified customer base Retention > IVE provided continuity of service and supply to all customers throughout the pandemic > Ongoing traction in share of wallet growth across IVE’s 2,800 customers > Our long-term track record of retaining clients is excellent and in FY21 IVE secured more than $100m (annualised) in contract renewals across a multitude of customers, including Woolworths, Westpac, L’Oréal, IAG, Bupa, Toyota, GlaxoSmithKline, Luxottica and Energy Australia > There was no material client loss in FY21 Growth > Continued focus on growing market- share through harnessing the power and uniqueness of IVE’s go-to-market proposition > New business momentum across all parts of the business remains strong, and despite the challenges of COVID, $58m (annualised) of new clients were on-boarded: — Australian Community Media (ACM), Bunnings, Officeworks, Simplot, Colgate, Zip Money and a number of others > The pipeline of opportunities is strong for FY22 with a number of key prospects already signed 6 IVE Group Limited77 Annual Report 2021Chair’s review As I reflect on the extraordinary year we have just been through, and in the context of this also coinciding with our centenary as a business, it has reaffirmed my optimism that as we emerge from the COVID-19 pandemic, the solid fundamentals of our business place IVE in a position of strength from which to continue growing and evolving over the years ahead. Our business was launched in March 1921 by my grandfather Oscar Selig with the printing of the inaugural issue of a local suburban newspaper called The Link in Balmain NSW. It is fair to say that our centenary year thus far has not unfolded quite as we had expected as a result of the significant disruption from the COVID-19 pandemic. We look forward to appropriately marking this milestone for the business with our staff and clients at some point over the coming months. I feel strongly that the longevity and solid foundations of our business demonstrated the resilience of IVE through a year unprecedented by the impacts of COVID. Notwithstanding the impacts of the pandemic across multiple parts of our business over the entire year, we are very pleased with both our outstanding operational performance and solid financial results. The Group delivered an EBITDA result of $100.2m (above earnings guidance), improved margins despite reduced revenue, and delivered EPS growth over the prior year of 8.4% to 13.5 cents per share (excluding any Federal Government JobKeeper support). Importantly, our balance sheet has significantly strengthened on the back of strong underlying cashflow generation and the divestment in 8 October 2020 of our outbound call centre business for consideration of $16.5m. Net debt has reduced by $59.8m, from $137.1m at 30 June 2020, to $77.3m at 30 June 2021. With a 30 June 2021 cash balance of $107m, the Board made a decision to pay down $50m of our senior facility on 6 August 2021. Following the suspension of dividends last year as a precautionary measure given the prevailing uncertainty resulting from the pandemic, we resumed as foreshadowed the payment of dividends in H1 FY21, resulting in a full year dividend of 14 cents per share fully franked. The share buyback that was actioned in November 2020 has resulted to date in the Company acquiring 5.4m shares at a total cost of $7.4m, this representing 3.6% of the issued capital. In recognition of the extraordinary efforts of our employees (approximately 1,600) over the last 18 months, the Company issued 500 IVE shares to every employee on 5 October 2021. The Company remains very well capitalised and highly liquid. The strength of our balance sheet places us in a strong position to actively pursue both organic and acquisition growth opportunities consistent with our ongoing and previously articulated strategy to evolve and expand the value proposition we take to market. IVE Group LimitedWhilst observing our stated leverage ratio of 1.5x pre AASB 16 EBITDA, we currently have $30-40m in available capacity to pursue targeted earnings accretive opportunities. Our target ROFE for growth initiatives is a minimum of 15%. Over the last year we have experienced a meaningful increase in interest from our clients and investors regarding Environmental, Social and Governance (ESG) issues. We recognise these developments and are taking proactive steps to mature and define our approach further, meet expectations, and adapting to changes in the landscape. Over the coming months, we are embarking on the next stages of our ESG journey and will welcome feedback and participation from all stakeholders. This work will result in the development of a robust and transparent ESG framework underpinned by commitments and actions, and we look forward to sharing our progress in future reporting and communications. Thank you to our CEO Matt Aitken for his continued outstanding leadership, our entire leadership and management team for their never ending commitment, and to all of our dedicated staff for their huge effort throughout the most demanding year the business has ever experienced. I also convey our thanks to Carole Campbell who stepped off the Board in November 2020. Carole joined the Board (and chaired our Audit Risk & Compliance Committee – ARCC) in November 2018, and throughout her time on the Board made a significant contribution as a fellow director, and in particular as chair of the ARCC. We welcomed Cathy Aston to the Board in December 2020, and Cathy has also taken on the role as chair of the ARCC. Thank you to my fellow directors for your ongoing contribution, expertise and support, particularly over the last 18 months. As I reflect on the extraordinary year we have just been through, and in the context of this also coinciding with our centenary as a business, it has reaffirmed my optimism that as we emerge from the COVID-19 pandemic, the solid fundamentals of our business place IVE in a position of strength from which to continue growing and evolving over the years ahead. Geoff Selig Executive Chairman 9 Annual Report 2021CEO’s review At the outset I would like to commend our staff of 1,600 for their outstanding commitment to drive hard over the last year under the most challenging set of personal and professional circumstances. I take great pride in leading a business that has a compelling offer, stable highly skilled people, a wonderful culture, and client centric philosophy. Without these core fundamentals, we could not have navigated the business so well through the unprecedented challenges of the last year. The entire year was impacted across a number of areas of the business, primarily reduced revenue, as COVID impacted the global and domestic economy, our clients, and our business in a variety of ways. Fortunately, IVE moved quickly at the outset of the pandemic in Q4 FY20 to implement a comprehensive range of measures to safeguard our staff, maintain high levels of customer service through continued operations both onsite and with staff working remotely, and to closely manage the financial components of the business due to the prevailing uncertainty and confusion. Notwithstanding the impacts of COVID, the Company delivered a strong set of financial results. Due to the impact of COVID on revenue, the Company qualified for the Federal Government JobKeeper subsidy ($14.9m was received up until the end of September 2020), which played an important role in supporting the ongoing employment of many staff across 10 the business. Revenue for the year was down 4% on prior year to $656.5m, primarily driven by reduction in client spend across the retail catalogue, travel, and events/exhibition sectors. Our long term track record of revenue retention remains excellent, with more than $100m (annualised) in contract renewals secured over the last year. Our relentless focus on growing market share through harnessing the power and uniqueness of IVE’s go-to-market proposition resulted in the Group securing $58m (annualised) of new business. The new business momentum has continued into FY22 with a number of key prospects already signed and further contract renewals. Gross profit margin increased by 1.9% to 48.1% over prior year, reflecting stable market conditions, improved work mix, and the effective management of our supply chain. We did experience challenges across our global supply chain, resulting in the need to closely manage supply shortages and freight delays. Fortunately, the response from our supply partners through the crisis continues to reaffirm the strength of relationship we have developed over many years. EBITDA excluding JobKeeper increased by 3% over prior year to $100.2m, with both EBITDA and NPAT margin improvement driven by improving gross margin and flexing the cost base. As previously communicated, the flexibility of our cost base has been core to mitigation on the IVE Group LimitedDespite the challenges of the last year, IVE is a match-fit, mature business in a strong financial position from which to build further as we transition back to more stable operating conditions. back of revenue declines since the outset of the pandemic. NPAT of $19.9m excluding JobKeeper was an 8.4% increase over last year. Capital expenditure has normalised following the completion of the Group’s major investment and expansion program over recent years. Capital expenditure for the year was $12.7m (including $4m for Group ERP/MIS upgrades), with FY22 expected to be circa $10m excluding our $3.5m investment to re-platform and transition the Lasoo business. We would expect our ongoing base business capital expenditure to continue at approximately 60% of depreciation (pre AASB 16). We divested our IVE Telefundraising business in October 2020 for consideration of $16.5m, which represented a profit on sale of $4.2m. We also entered into a long term contract with Australian Community Media (ACM) on 30 October 2020, and to further enhance our service to clients, we acquired ACM’s web offset printing operation in Western Australia for consideration of $2m. IVE has successfully over the last 5 years executed on a transformational investment and growth program that has further expanded and strengthened our integrated communications offer. The evolution and diversification of our offering has been the cornerstone of our strategy for over 20 years and has resulted in IVE’s leading market position(s), solid client base and sector spread, revenue diversification, and margin stability. Despite the challenges of the last year, IVE is a match fit, mature business in a strong financial position from which to build further as we transition back to more stable operating conditions. We are executing a range of important initiatives across the business over the year ahead and I look forward to updating shareholders in more detail at our AGM in November. My thanks to our Executive Chairman Geoff Selig for his invaluable contribution and support, our skilled and committed leadership team, and to other members of the Board for their ongoing support and encouragement over what has been a most challenging period. Matt Aitken Chief Executive Officer 11 Annual Report 2021Board of Directors Geoff Selig Executive Chairman Paul Selig Executive Director Appointed: 10 June 2015 Appointed: 10 June 2015 Sandra Hook Independent Non-Executive Director Appointed: 1 June 2016 James Todd Independent Non-Executive Director Cathy Aston Independent Non-Executive Director Gavin Bell Independent Non-Executive Director Appointed: 10 June 2015 Appointed: 15 December 2020 Appointed: 25 November 2015 12 IVE Group Limited1313 Annual Report 2021IVE celebrates a century Few ASX companies today can point to a 100-year history. Fewer still remain fortunate enough to be ideally placed to invest in a post- COVID-19 environment. This year IVE passed both milestones, as we celebrated a century in business and continued to solidify our market leading position. IVE’s story began in March 1921, when Oscar Selig returned from World War I and established The Link newspaper in Balmain. Published from a humble shopfront, The Link connected the communities of Balmain, Rozelle, Glebe and surrounding suburbs. Oscar’s son, Gordon Selig, took over in the early 1960’s and evolved the newspaper into a leading commercial printing operation called Link Printing. 100 years later, both Geoff Selig and Paul Selig are still actively involved as Executive Chairman (Geoff) and Executive Director (Paul), making it a third-generation business. Their strategic vision, drive to evolve, diversify and continually innovate ahead of the curve has supported IVE to become what it is today – Australia’s leading holistic marketing and communications company. IVE’s diversification strategy began in the late 1990’s when the then-family owned business was generating annualised turnover of just $30m. During this time IVE began to evolve from ‘just a printing company’, into a business that had a much broader value proposition to take to the marketing and communications sector. Over the last 20 years IVE’s strategy has been a combination of organic growth, as we moved into logistics, creative services, integrated marketing and web offset printing, and a disciplined acquisition program. These acquisitions saw the Group also move into data-driven personalised communications, retail display, premiums and merchandising, customer experience, marketing automation, distribution, and digital catalogues (through Lasoo), creating a company that covers the full breadth of the marketing and communications sector. Our desire to expedite the diversification and growth strategy, led IVE to list in late 2015 (ASX: IGL), and in 2019 all businesses in the Group 14 Photos, clockwise from top left: Balmain NSW, 1921; the inaugural issue of The Link newspaper, 1921; Balmain NSW, 1960; Sunshine Vic, 2021; Oscar Selig, founder, 1921; Paul, Gordon and Geoff Selig, 2015; Huntingwood NSW, 2021. came together to form one powerful, unified brand. Today IVE has 1,600 employees, with 2,800 clients that cover household Australian and global brands across the full range of sectors. We have competitors in each market segment that we operate in, but we don’t have one headline rival. The scale of our operations across Asia Pacific enables bundled offers to clients, and ensures that we’re able to generate significant buying power. IVE Group LimitedGoing further since 1921 As we look toward the future and the next chapter of our story, the fundamentals that underpin our business will remain the same as they were 20 years ago and 100 years ago. Our focus will remain on people and culture, our customer first philosophy, significant ongoing investment in our asset base and operations, and the ongoing diversification of our revenue streams. Geoff Selig 15 Annual Report 2021Operating and financial review 1616 IVE Group LimitedOur vision, purpose and values Our vision and purpose is to maintain and grow a highly respected, strong and sustainable business for all key stakeholders – our staff, our clients and our shareholders. Core to this is ensuring a value proposition that maintains its relevance to our clients’ ever-evolving communications needs. IVE unlocks value for our stakeholders through the powerful combination of our brand values that are the guiding principles of our behaviour – core to this is our ‘one company philosophy’. As specialists, we collaborate to deliver holistic customer focused solutions for our clients. Drawing on our combined skills, we partner with our clients in a flexible and friendly manner to deliver exceptional outcomes. We have a responsibility to our clients, our shareholders and our staff to be honest, upfront and accountable. Every moment matters, so we’re always on point and ready to deliver reliable, effective marketing solutions. Collaborative Accountable Smart Passionate We’re focused on leading the way with practical, progressive and innovative solutions. Always looking ahead and reading the shifts in our sector, we anticipate what’s coming next and invest accordingly. We’re a dynamic business full of genuine, passionate people – always at the ready, to deliver more for our clients. We believe in the work we do and the benefits we provide. It’s what drives us all to go further every day. 17 Annual Report 2021Our integrated service offering Specialising in creative, data-driven communi cations, integrated marketing, production and distribution, we bring together the capabilities, specialists and technology needed to make customer connection seamless. Our offering is supported by robust integrated technology platforms that make complex marketing simpler for our clients. Creative Services > Visual > Motion > Digital creative > Personalised > Structural (3D) Data-Driven Communications Production & Distribution > CX data & insights > Print > Marketing technology > Omni-channel deployment > Archive retrieval > Data enrichment > Retail display > Premiums & merchandising > Integrated logistics > Distribution > ivolve PPE Integrated Marketing > Collateral optimisation > Resource management > Supply chain > Business intelligence 18 IVE Group LimitedOur clients 1919 Annual Report 2021Strategy and growth IVE commenced the evolution to a broader product and service offering late in the 1990’s, through a combination of organic growth initiatives and a disciplined acquisition program. Core to expediting the execution of our growth and ongoing diversification strategy was our decision to list on the ASX in December 2015. Strong free cashflow, combined with access to capital, has enabled the Company to successfully execute a transformational investment and growth program over recent years to further expand and strengthen our integrated communications offer to enhance long-term client relationships. Our continued growth and diversification, and the convergence of technologies on the back of the digital revolution over the last decade, has coincided with a meaningful consolidation across the more traditional parts of the marketing communications sector. This has resulted in a more defined competitive landscape than ever before with a reduced number of competitors. IVE has led sector consolidation and innovation over the last 10 years and today has the most diversified integrated marketing communications offer in the Australian market. Core to the ongoing sustainability of the business is that the value proposition we take to market has always remained relevant by being closely aligned to our clients evolving marketing communications requirements. The diversity of IVE’s value proposition places us in a strong position relative to a number of competitors across the sector. IVE does not have one headline competitor that has an equivalent breadth of offering, and we continue to hold dominant market positions across the sub sectors in which we operate. 20 IVE Group LimitedContinued diversification and growth opportunities A clearly defined and well executed strategy has resulted in a resilient business with diversified revenue streams, well positioned to pursue growth initiatives Execution of the long-term strategy > The diversification of our offering has been a cornerstone of our strategy for over 20 years > Listing in December 2015, strong free cashflow, combined with access to capital, enabled the Company to successfully execute a transformational investment and growth program that further expanded our integrated communications offer A highly resilient business > Leading market positions, diverse revenue mix, stable margins, reliable cashflow and strong balance sheet (refer pages 24-27) Continuation of our strategy through actively pursuing current growth opportunities > Balance sheet strength will support an investment of $30-40m in growth initiatives > Growth initiatives target a minimum ROFE of 15% There is a range of initiatives and opportunities for the Company to pursue: > Enhance and amplify our Lasoo digital catalogue aggregator business > Complementary adjacencies: — With our exposure to the fibre-based packaging sector increasing, we see opportunity for both organic and acquisition growth in this sector — Expansion of integrated logistics offering to include pure 3PL clients > Bolster existing offer through further ‘bolt-on’ acquisitions 21 Annual Report 2021Continuing to expand our digital offerings further through enhancing and amplifying Lasoo > Lasoo was the first digital catalogue site in Australia, established in 2007 IVE very well positioned to capitalise on growth in digital catalogues > Strategically acquired by IVE in 2020 > Digital catalogue readership has grown 22% > Loyal and active customer base > Diverse and growing retailer base includes many of Australia’s leading retailers The Company has committed to investing in Lasoo over the next 2-3 years to improve the consumer experience, and will work closely with our retail clients to unlock opportunities to drive further revenue for their business. The enhanced platform will be launched in early 2022. from 2016 to 2020* > This growth has rapidly accelerated since COVID-19 > More retailers are considering an omni-channel approach to catalogues, comprising a mix of both digital and printed catalogues > The loyalty and activity levels of Lasoo’s growing customer and retailer base provides a solid foundation for IVE to invest further to amplify the platform > Opportunity to further expand our digital offering across our 2,800 strong client base, including over 400 retailers *Roy Morgan online survey October 2020. 9.6m shopping sessions p.a. 24m digital catalogues shopped p.a. 840,000 buy now clicks p.a. 22 IVE Group Limited23 Annual Report 2021Market positioning Strong market position across a number of key sectors > No. 1 provider in key sectors we operate in > IVE is considered an attractive counterparty given the diversity and power of our value proposition, geographical footprint and financial strength > COVID-19 has increased pressure on key competitors in some sectors. We are ideally positioned to take advantage of any opportunities The table below provides an overview of our revenue by industry sector for FY21: Revenue Sector Analysis Retail: White goods, electronics, furniture, clothing Supermarkets Health / personal products Food / beverage Financial / Corporate Services Publishing Government Health Charity / Not for Profit Tourism / Entertainment Manufacturing Telecommunications Other* Grand Total $m 132.1 74.7 68.6 16.0 100.3 47.7 27.8 19.9 14.3 13.3 11.9 10.3 119.6 656.5 % 20.1 11.4 10.4 2.4 15.3 7.3 4.2 3.0 2.2 2.0 1.8 1.6 18.2 100.0 *Other includes: Media, Service, Trade, Agency, Utilities, Automotive, Advertising Agency, Associations, Food, Transport, Broker, Building/Construction, IT, Property, Legal and others. 24 IVE Group Limited Revenue diversification Execution of our strategy has resulted in the increased diversification of revenue streams and broader client relationships > Revenue growth expected across the business as the economy emerges from the current COVID-19 lockdowns > Our long-term strategy of evolving our value proposition has resulted in well-diversified revenue streams across multiple sectors > We are ideally positioned to capitalise on opportunities across multiple sectors to grow market share > IVE’s broad product and service offering has resulted in a large proportion of our clients engaging with us across multiple parts of our business > The Company’s capacity to fund a range of organic and inorganic strategic initiatives will result in further diversification of revenues FY21 Revenue $656.5m Integrated marketing Data-driven communications > CX data & insights > Marketing technology > Omnichannel deployment > Archive retrieval > Data enrichment Integrated marketing > Manage IM client spend within IVE Group > Creative services > Collateral optimisation > Resource management > Supply chain > Business intelligence Retail display, premiums & merchandising > Temporary point of sale (POS) > Semi-permanent and permanent point of sale > Retail fit-outs > Window displays > Wide format digital printing > Pop-ups and event activations > Internal and external signage > Co-packing > Branded apparel & merchandise, corporate gifts, promotional products > Hygiene, PPE and safety solutions (ivolve) General commercial > Sheetfed and digital printing > Packaging Web offset printing > Catalogues > Publications/magazines > Books > Corporate Fulfilment & distribution > Letterbox distribution > Integrated logistics (kitting and fulfilment, inventory management, warehousing, pick and pack) 25 Annual Report 2021Margin stability Margins resilient despite COVID-19 impacting revenue since FY20 > Material gross margin (MGM) stable > EBITDA margin stable to FY19, declined in FY20 over period, reflects benefit of revenue diversification, stable market conditions, and effective management of supply chain > Gross margin maintained in FY20 and FY21 demonstrating capacity to flex the cost base in response to COVID-19 due to change in revenue mix post Salmat acquisition, and COVID-19. Recovery in FY21 achieved notwithstanding revenue decline on PCP > Business ‘match fit’ with improved operating leverage, ideally positioned to benefit from anticipated revenue increases as economy reopens 60% 50% 40% 30% 20% 10% 0 60% 50% 40% 30% 20% 10% 0 FY18 FY19 FY20 FY21 Material Gross Margin % (MGM) Gross Profit % EBITDA % Note: EBITDA Margin pre AASB 16 26 IVE Group LimitedCashflow & capital allocation Increased balance sheet flexibility as operating cashflows increase and capital expenditure normalises > Consistent and increasing operating > Consistently high dividend yield, albeit with cashflow generation the exception of the pandemic period > Reduced capital expenditure profile > Strong cash coverage of dividend > Introduction of buyback given softer share price and strengthening balance sheet > Well positioned to fund growth initiatives anticipated revenue increases as economy reopens $m 100 90 80 70 60 50 40 30 20 10 0 65.4 16.9 20.1 FY17 62.5 22.9 35.2 FY18 65.8 24.1 21.9 FY19 97.1 82.2 7.4 20.3 9.0 FY21 100 90 80 70 60 50 40 30 20 10 0 79.7 64.6 9.5 FY20 Capex – cash fund Dividends (declared) Share buybacks Operating cashflow (including JobKeeper) Operating cashflow (excluding JobKeeper) Operating cashflow is EBITDA, ex AASB 16 plus/minus movements in working capital FY20 and FY21 adjusted for discontinued operations 27 Annual Report 2021Year in review 2828 IVE Group LimitedThe year in review The year was impacted across a number of areas of our business, primarily reduced revenue, as the COVID-19 pandemic engulfed the world, impacting the domestic economy and our clients in a variety of ways. Fortunately, IVE moved quickly at the outset of the pandemic in Q4 FY20 to implement a broad range of measures to protect the safety and wellbeing of our valued staff, and this continued throughout the FY21 full year. Under challenging circumstances, our entire workforce of circa 1,600 staff under the leadership of our CEO Matt Aitken, continued to respond by coming together and committing to do whatever was required to ensure we continued caring for each other and maintaining high levels of service to our clients. The Company, through the period, once again continued to maintain high levels of customer service through a hybrid of continuing operations across multiple production/service facilities and staff working remotely. The Company qualified for the Federal Government’s JobKeeper Program based on the year on year revenue reduction measured at April 2020. The JobKeeper subsidy of $14.9m was received up until the end of September 2020 (Q1 FY21). Notwithstanding the impacts of reduced revenue, and as a result of the skill and commitment of our people, the Company exceeded full year earnings guidance ($98-$100m EBITDA), posting a $100.2m EBITDA result, improved margins over PCP, resulting in an 8.4% growth in earnings per share (EPS) excluding JobKeeper over PCP. The divestment of our outbound call centre business IVE Telefundraising was completed on 30 October 2020. Consideration was $16.5m, which resulted in a profit on sale of $4.2m. We entered into a long-term contract with Australian Community Media (ACM) on 30 October 2020, with expected revenues of circa $100m over the five-year term. To support ACM’s requirements, and further enhance service to clients, we acquired selected assets of ACM’s web offset operation in WA for a purchase consideration of $2m. Importantly, strong free cashflow and the divestment of our Telefundraising business for consideration of $16.5m has resulted in a significant reduction of $59.8m in net debt since 30 June last year to $77.3m. The Company entered the COVID-19 crisis in a position of strength, and the full year FY21 results on all demonstrate the resilience and underlying strength of the IVE business. Customers and revenue IVE continues to benefit from its differentiated value proposition and a loyal, strong and diversified customer base. Retention > IVE provided continuity of service and supply to all customers throughout the pandemic > Ongoing traction in share of wallet growth across IVE’s 2,800 customers was again meaningful > Our long-term track record of retaining clients is excellent and in FY21 IVE secured more than $100m (annualised) in contract renewals across a multitude of customers, including Woolworths, Westpac, L’Oréal, IAG, Bupa, Toyota, GlaxoSmithKline, Luxottica and Energy Australia > There was no material client loss in FY21. 29 Annual Report 2021Growth Supply chain > Continued and relentless focus on growing IVE’s extensive supply chain consists of: > Both domestic and global suppliers for our raw materials (primarily paper) > Both domestic and Asian supply chain for finished goods (primarily premiums and merchandise, personal protective equipment (PPE) and permanent retail display) Throughout the year, we experienced challenges across our supply chain, resulting in the need to closely manage supply shortages and shipping/airfreight delays. This has resulted in a temporarily very low level of raw materials (primarily paper) at 30 June 2021, which has resulted in an unexpected further short-term working capital benefit which will reverse to some extent as inventory levels return to normal in H1 FY22. We are hopeful with the global roll out of the vaccine, the stability and certainty of our supply chain will return to normal during H1 FY22. The response from our supply partners through the crisis continues to reaffirm the strength of relationship we have developed over many years. Capital expenditure The Company’s excellent operational footprint has capital expenditure, as previously communicated, continuing to normalise following the completion of IVE’s major investment and expansion program over recent years. > FY21 capital expenditure was $8.7m excluding MIS/ERP upgrade(s) of $4.0m > FY22 capital expenditure expected to be $10m (excludes $3.5m to re-platform and transition the Lasoo business). market-share through harnessing the power and uniqueness of IVE’s go-to-market proposition > New business momentum across all parts of the business remains strong, and despite the challenges of Covid, $58m (annualised) of new clients were on-boarded: — Australian Community Media (ACM), Bunnings, Officeworks, Simplot, Colgate, Zip Money and a number of others > The pipeline of opportunities is strong for FY22 with a number of key prospects already signed. The Company executed a range of initiatives at the outset of the pandemic in Q4 FY20 to mitigate the financial impacts of COVID-19, whilst still ensuring high levels of customer service. This group wide focus continued for the entirety of the FY21 full year, and continues as a result of COVID-19 Delta strain lockdowns over Q4 FY21 and into Q1 FY22. Flexibility across the cost base > The flexibility of our cost base has been core to mitigation since the outset of the pandemic. — The Company has executed a range of actions to reduce both short term and permanent labour cost: — Staff stand downs in H1 as a component of the ‘JobKeeper Program’ — Significant reduction/elimination of casual and temporary labour with enhanced resource sharing across the Group — Reduced hours, including overtime, for a proportion of temporary and permanent staff — Permanent labour cost reductions — Utilisation of accrued annual leave and long service leave > Reducing costs and discretionary expenditure across the Group. 30 IVE Group LimitedBanking and liquidity Capacity to support growth As outlined previously in the strategy and growth section, the current strength of our balance sheet places us in a strong position to actively pursue both organic and acquisition growth opportunities consistent with our stated strategy. Whilst observing our stated leverage ratio of 1.5x pre AASB 16 EBITDA, the Company currently has $40m in available capacity to continue the execution of its clearly articulated strategy to evolve the value proposition of the business and drive sustainable earnings growth. Our target ROFE for growth initiatives is a minimum of 15%. Share buyback update The Company announced a share buyback on 12 November 2020. As at 25 August 2021, the Company has acquired 5.4m shares at a total cost of $7.4m (average price of $1.37 per share). This represents 3.6% of issued capital. Shares on issue now 142.8m. Employee share issue In recognition of the extraordinary efforts of our employees (appoximately 1,600) over the last 18 months, the Board intends to issue 500 shares to every employee of the Company in FY22. Dividends Given the uncertainty as the COVID-19 pandemic unfolded, the Company took the pre-emptive and conservative decision in March 2020 to cancel the previously announced H1 FY20 interim dividend. At the time of our full year FY20 results in August 2020, it was decided the Company would not pay a final dividend for FY20; however, it was foreshadowed at the time that the Board intended to resume dividend payments consistent with the existing dividend policy commencing with the H1 FY21 interim dividend. The Company subsequently paid an H1 FY21 interim dividend of 7 cents per share fully franked, and today declares a final dividend of 7 cents per year fully franked, delivering a full year dividend to shareholders of 14 cents per share. Net Debt The Company has worked diligently since the outbreak of the pandemic to zealously focus on all components that drive liquidity and the strength of our balance sheet. The period saw a significant reduction in net debt from $137.1m at 30 June 2020 to $77.3m at 30 June 2021, with cash on hand of $107m at 30 June 2021. Net debt reduction primarily driven by significant free cashflow and proceeds of the divestment of our Telefundraising business in October 2020. $50m of senior debt facility was repaid on 6 August 2021. 31 Annual Report 202132 IVE Group LimitedReview of financial performance Basis of preparation IVE’s Financial Report for FY2021 is presented in accordance with Australian Accounting Standards which comply with International Financial Reporting Standards (IFRS). The Directors believe the non-IFRS underlying results better reflect the underlying operating performance and is consistent with prior year reporting, this differs from the IFRS presentation. In this report, certain non-IFRS financial information (underlying) has also been included to allow investors to understand the underlying performance of IVE. The non-IFRS financial information relates to FY2021 and FY2020 results presented before the impact of certain non- operating items and on a continuing business basis, which allow for a direct comparison to FY2020. The non-IFRS underlying financial information has not been audited or reviewed. Financial information in this report is expressed in millions and has been rounded to one decimal place. This differs from the interim Financial Report where numbers are expressed in thousands. As a result, some minor rounding discrepancies occur. Financial Results on an IFRS and underlying basis (underlying where noted) Revenue Gross Profit % of Revenue Underlying EBITDA continuing operations (inc JobKeeper) Underlying EBITDA continuing operations (ex JobKeeper) EBITDA Depreciation and amortisation EBIT Net finance costs NPBT Income tax expense NPAT from continuing operations NPATA continuing operations Underlying NPAT continuing operations (inc JobKeeper) Underlying NPAT continuing operations (ex JobKeeper) Underlying NPATA continuing operations (inc JobKeeper) Underlying NPATA continuing operations (ex JobKeeper) FY21 & FY20 Post AASB 16 Actual FY2021 Actual FY2020 Variance $m Variance % 656.5 316.0 48.1% 100.2 85.3 96.2 47.2 49.0 12.1 36.9 12.3 24.7 28.6 30.2 19.9 34.1 23.8 677.4 313.0 46.2% 97.9 82.8 85.8 85.5 0.3 10.7 (10.4) 10.4 (20.8) (16.1) 29.0 18.5 33.1 22.6 (20.9) (3.1%) 3.0 - 2.2 2.5 1.0% 4.2% 2.3% 3.0% 10.4 12.2% (38.3) (44.8%) 48.7 1.4 47.3 1.9 45.4 44.7 1.2 1.4 1.0 1.2 - 12.9% 456.4% 17.9% 218.9% 277.8% 4.1% 7.5% 3.1% 5.4% 33 Annual Report 2021Review of financial performance – continued Non-operating items excluded from underlying NPAT IFRS to underlying NPAT reconciliation IFRS NPAT (continuing) Restructure costs Acquisition costs JobKeeper Financial asset write down (net of interest rec'd) Insurance payout Others Sub total non operating items Tax effect of adjustments Underlying NPAT (ex JobKeeper) Actual FY2021 24.7 3.3 1.0 (14.9) 2.9 (0.7) 0.1 (8.2) 3.4 19.9 All financial commentary is based on a continuing operations basis, this is in order for comparatives to PCP to be meaningful. — Premiums and Merchandising continues to reflect the impacts of COVID-19 due to less exhibitions and events > Despite the negative impacts of COVID on parts of the business other sectors continued to perform strongly: — Retail Display had a strong growth year on year — Sheet fed print and logistics continued to perform strongly — COVID resulted in many clients increasing 1 to 1 communications with their with customers through our Data-Driven Communications division (DDC) — Many clients/sectors not impacted by COVID and activity levels remain strong (eg: healthcare and not for profit) — No client losses of note during FY21 Revenue Total revenue for the Group for FY21 was $656.5m. This includes the full year of acquisition revenue for Salmat Marketing Solutions (now IVE Distribution) and Reach Media of $99.0m compared to half year in FY20 of $50.0m. FY21 also saw the impact of Australian Community Media (ACM) acquisition revenue of $5.7m not in PCP. Normalised for the acquisitions, revenue declined by $75.6m from PCP. The main drivers in the decreased revenue relate to: > Full year impacts of COVID-19 negatively impacting revenues over primarily Q4 in FY20 — Catalogue production and distribution revenue impacted due to major supermarket clients not needing to advertise as a result of significantly increased sales through the crisis. Some retail clients also reduced/ cancelled catalogue production and distribution due to a combination of ongoing supply issues and store closures. — Travel sector clients reduced spend over the period, however it should be noted that we are still doing work for travel clients albeit at reduced levels. 34 IVE Group LimitedEarnings IFRS and underlying Gross Profit was 48.1% and compares to 46.2% in PCP > The Group’s gross profit (revenue less material cost of goods sold) has remained stable over the period with a small increase over PCP. The increase reflects: — benefits of paper price reduction savings in FY21 — benefits of work mix, bringing more work into ‘IVE Group’ operations as the Group continues to refine offering to its clients — continuing to procure well through leveraging the Group’s scale across the supply chain Production and Administration expense on IFRS basis reflect the net benefits of the Federal Government JobKeeper scheme of $14.9m in Q1 of FY21 (net of amounts paid to staff placed on stand down) which is a credit to the profit and loss and reflected as an offset reducing labour expense. > On an underlying and continuing business basis (excluding JobKeeper benefit) production and selling labour is an increase to PCP of $2.4m ($177.4m to PCP $175.0m), this has largely been driven by: — Normalised for full year impact of acquisitions Salmat/Reach and ACM over FY20 total labour decrease over PCP is $4.6m. — FY20 labour costs were reduced due to initiatives to manage the early stages of COVID-19 impacts i.e. staff stand downs, annual leave, reduced hours and temporary pay decreases, FY21 does not reflect the same level of labour reduction benefits. > On an underlying and continuing business basis, production and administrations expenses (excluding depreciation and pre AASB 16) is a decrease to PCP of $1.6m ($77.0m to PCP $78.6m): — Normalised for full year impact of acquisitions Salmat/Reach and ACM over FY20, total production and administration expense decrease over PCP is $7.0m — Cost base continues to be well managed IFRS EBITDA of $96.2m also includes the net benefits of JobKeeper of $14.9m, as well as non- operating items excluded from the underlying EBITDA. The non-operating items relate to restructuring costs of $3.3m, comprised primarily of redundancies and business relocation costs. Acquisition costs of $1.0m which include the financial asset transaction costs, and legal and consulting fees associated with acquisitions including ACM and Telefundraising divestment. Also included in non-operating items is proceeds of insurance claim of $0.7m and a loss on sale of fixed asset of $0.4m. Underlying EBITDA of $85.3m excluding JobKeeper on a continuing business basis compares to FY20 of $82.8m growth of 3% despite the reduction in revenue. The increase in EBITDA to PCP is due to higher than PCP gross profit as well as continued well managed cost base. Depreciation and amortisation (pre AASB 16) remained in line with PCP. IFRS net finance costs of $12.1m to $10.7m PCP, increase reflects the impact of financial asset revaluation of $2.9m (net of interest received), and profit on interest rate hedge. On an underlying basis net finance costs of $9.5m compares to PCP of $10.7m post AASB 16, pre AASB 16 is $6.3M to PCP of $7.3m reflecting the lower net debt position. IFRS NPAT of $24.7m profit to loss of ($20.8m) PCP, with PCP impacted by $40.0m goodwill impairment. Underlying NPAT excluding JobKeeper of $19.9m compares to FY20 of $18.5m, growth of 7.5%, a strong result given FY21 was a full year post COVID-19 whereas FY20 reflected only 4 of months COVID-19 impacts. Earnings per share (EPS) on a IFRS basis 20.0 cps, on an underlying basis excluding JobKeeper 13.5 cps and an 8.4% growth on PCP. 35 Annual Report 2021 Review of financial performance – continued Net debt and Balance sheet IVE Group Limited Net Debt Loans . borrowings – short term Loans & borrowings – long term Loans & borrowings* – Sub Total Less Cash Net Debt Actual FY2021 6.5 177.3 183.8 106.5 77.3 Actual FY2020 6.9 181.8 188.7 51.6 137.1 * Loans & borrowings are gross of facility establishment costs. * Excludes right of use liabilities impacts from adopting AASB 16. Net debt reduced from 30 June 2020 from $137.1m to $77.3m at 30 June 2021. As at 30 June 2021 working capital facility of $30.0m is fully undrawn. Increase in cash balance on PCP reflecting: > operating cashflow generation > decrease in working capital > JobKeeper > proceeds from divestment of Tele fundraising On 6 August 2021, IVE repaid $50.0m of facilities including cancelling $35.0m of the facility, this will result in reduced interest expense in FY22. IVE’s senior debt facility matures in April 2023. Capital Expenditure Group wide targeted investment and maintenance Group wide MIS upgrades Total Excludes Land & Buildings acquired as part of ACM acquisition ($2.0m). Actual FY2021 8.7 4.0 12.7 FY21 capital expenditure was $8.7m excluding MIS/ERP upgrade(s) of $4.0m. MIS/ERP upgrades continue to be rolled out with all projects on time and in line with business cases, full ERP rollout expected to be completed in FY23. FY22 capital expenditure expected to be circa $10m excluding MIS/ERP upgrade(s) and Lasoo investment. 36 IVE Group LimitedCashflow EBITDA Movement in NWC/non cash items in EBITDA Operating Cash Flow Capital expenditure (net) Investments Payments for acquisitions & deferred considerations Proceeds on disposing net assets Net cash flow before financing and taxation Tax Payments of bank loans Payment of finance lease liabilities Payment of share buy back Dividends paid Interest paid Discontinued operations Net cash flow Operating cash conversion to EBITDA Underlying cashflow is presented on a continuing operations basis. Underlying FY2021 $m Stat FY2021 $m 100.2 30.8 131.0 (9.0) (5.4) (1.9) 0.0 114.8 (13.3) (3.2) (29.9) (7.4) (10.3) (8.7) 0.0 41.9 131% 96.3 30.6 126.9 (9.0) (5.4) (1.9) 15.2 125.8 (12.1) (3.2) (29.9) (7.4) (10.3) (8.7) 0.6 54.8 132% Operating cash conversion very strong at 131% to EBITDA on an IFRS and underlying basis. Large reduction in working capital mainly driven by reduced inventory holdings and excellent debtors collections. Debtors well managed with no write offs of note during the period, collection days also decreasing along with balances outstanding in 90 days plus. FY22 inventory levels to increase on our 30 June 2021 position given current supply chain volatility. Cashflow reflects share buyback of 5.450m shares at a cost of $7.4m. FY21 Final dividend of 7.0 cps fully franked. 37 Annual Report 2021Environmental, social and corporate governance Over the last 12 months, we have experienced a meaningful increase in interest from our clients and investors regarding Environmental, Social and Governance (ESG) issues. At IVE, the Board recognises these developments and we are taking steps to mature and define our approach further, meet expectations and adapt to changes in the landscape. We recognise the critical role of ESG in our long-term success and the responsibility we have to our people, customers, investors and wider stakeholders to do the right thing. We have a long history of adapting to change and acting responsibly. From this position of strength, we will be able to meet the needs of our stakeholders, address risks, leverage opportunities and remain a partner of choice. When we look at environmental factors as they pertain to IVE we are focusing on such issues as pollution, environmental stewardship, forest management, resource depletion, energy usage, carbon emissions and climate change risks and opportunities. When we think about social aspects, we consider data security, privacy and governance, human rights and specifically concerns regarding child and slave labour issues, employment considerations, health and safety practices, wellbeing, equality, diversity and product safety. Finally, governance as it relates to areas such as shareholder rights, legal compliance and due diligence, prevention of bribery and corruption, the Board, Chair and Director skills, accounting practices and transparency. IVE has developed policies and solid positions on a range of ESG issues and these efforts are detailed in the following pages. We recognise this is a rapidly evolving landscape and there is much to do. So, we are embarking on a journey that will see us reduce the negative impacts of our operations and bolster the positive contribution we make to society. Over the coming months, we are embarking on the next stages of our ESG journey and welcome feedback and participation from our stakeholders. This work will result in the development of a robust and transparent ESG framework underpinned by commitments and actions, and we look forward to sharing our progress in future reporting and communications. People and culture Proudly inclusive, we believe we are an employer of choice across all the sectors in which we operate, continuing to attract and retain the best diversity of talent. Our IVE Care program is focused on ensuring and improving the wellbeing, diversity and inclusion, and health and safety of all our employees. We believe in ‘a better you, a better workplace’ for our people and for their families. The impacts and challenges of the pandemic continued throughout FY21, and we wanted to acknowledge the fantastic efforts and contribution of all of our employees in successfully meeting these impacts and challenges. The business has maintained a resolute focus on keeping our employees and their families safe, and our employees have been fantastic 38 in this regard. Whether it was through working from home as required, social distancing, mask wearing or applying additional hygiene measures, every employee has been fantastic in helping us maintain a safe and healthy workplace across all sites. The business has also maintained a close focus on workload impacts across FY21 due to the pandemic. Again, our employees have been fantastic in their co-operation to assist the business to successfully meet these challenges. In particular, we have seen great co-operation from employees in assisting with leave taking from time to time, and especially so in Q1 when the impacts of the pandemic were most strongly felt. IVE Group Limited39 Annual Report 2021Environmental, social and corporate governance – continued Diversity & Inclusion We come from many different nationalities, backgrounds, experiences and lines of work. Our rich diversity is at the centre of our success, and at the heart of our evolution as Australia’s leading holistic marketing company. An inclusive working environment that embraces our unique differences and diverse perspectives, brings greater creativity and innovation, leads to higher wellbeing, productivity and engagement, and importantly, enables us to better reflect and relate to our customers. Diversity & Inclusion benefits us all. IVE is committed to ensuring diversity and inclusion permeate all areas and levels of our business, with every individual feeling included, safe and supported to express themselves authentically. In recognition and support of this, we have established IVE’s Diversity & Inclusion Program, reinforcing our commitment to growing a diverse and inclusive organisational culture encompassing and benefiting all employees. For additional information about IVE’s Diversity & Inclusion Program or to express your interest in contributing and supporting upcoming diversity and inclusion events and initiatives, please contact your manager or alternatively you may forward your feedback to hr@ivegroup.com.au. > Gender equality and inclusion > Cultural and linguistic diversity > Intergenerational and mature age > Aboriginal and Torres Strait Islander Australians > LGBTI > Disability 16 D i v e r s i t y & I n c l u s i o n . We are exceptionally proud of our people. Our IVE Care program aims to help our people, through recognition and support, to achieve their personal and professional goals. Designed to create an environment that embraces our diverse workforce, our employee wellbeing program provides our 1,600+ employees access to a wide range of benefits, including: Health and wellbeing Our Employee Assistance Program (EAP) helps employees resolve issues and challenges arising in the workplace or in their personal life in a positive way. The EAP provides access to independent, confidential counselling and advice from qualified and experienced psychologists, and allied health professionals. IVE also provides periodic onsite health assessments to help employees understand and increase awareness of their health. Education, information programmes and health and wellbeing campaigns are also made available to assist employees in making changes for a healthier lifestyle. As a result of awareness initiatives, access to our EAP has increased by 50% over the past 18 months. Flu vaccinations were again offered across the IVE business during FY21. The business conducted an employee awareness initiative aligned to RUOK Day. 40 Lifestyle benefits IVE Rewards program provides our employees and their families the opportunity to stretch their dollar further through significant savings at all of their favourite retailers. Our employees spent more than $1.3m through this program across FY21, yielding savings of close to $80k. Wealth and security IVE have partnered with Bupa to provide a corporate health insurance offer with an employee discount on rates. In addition to receiving competitive premiums, the cover reduces the waiting periods for certain benefits and provides access to the Bupa Life Skills program. IVE has also made an additional superannuation fund choice available to employees via a key client partner. Personal, family and community Our Workplace Giving Program has been developed to build a stronger link between IVE Group and the community. We believe each of us have an important role to play in the broader community. We have designed this program around a number of great charity partners to provide employees with a simple and effective way to regularly donate from their pre-tax earnings. IVE Group Limited Diversity and inclusion We come from many different nationalities, backgrounds, experiences and lines of work. Our rich diversity is at the centre of our success, and at the heart of our evolution as Australia’s leading holistic marketing company. An inclusive working environment that embraces our unique differences and diverse perspectives, brings greater creativity and innovation, leads to higher wellbeing, productivity and engagement, and importantly, enables us to better reflect and relate to our customers. IVE Group is committed to ensuring diversity and inclusion permeates all areas and levels of our business, with every individual feeling included, safe and supported to express themselves authentically. In recognition and support of this, we have established IVE’s Diversity and Inclusion Program, reinforcing our commitment to growing a diverse and inclusive organisational culture encompassing and benefiting all employees. Our Diversity and Inclusion program identifies six key areas of focus: > Gender equality and inclusion > Cultural and linguistic diversity > Intergenerational and mature age > Aboriginal and Torres Strait Islander Australians > LGBTIQ (lesbian, gay, bisexual, trans/transgender, intersex, queer) > Disability In FY20 we ran employee events related to both Pride Week and International Women’s Day and we again partnered with the Australian Network on Disability to participate in their ‘Stepping Into’ internship program. Workplace health and safety (WH&S) IVE Group is committed to providing a healthy and safe workplace for all of our employees, contractors, visitors and suppliers, through our ‘IVE Care’ program. IVE Care embeds WH&S principles into everything that we do. Our WH&S commitments include: > Engagement programs to ensure that our people are involved in identifying, and enabling the solutions to WHS risks. > Empowering our people to make informed, effective, risk based decisions through education, instruction and continual improvement models. > Using innovation and continual improvement pathways to consistently improve WHS performance. > Always seeking to set industry best approaches to critical risk management. > Achievement of our objectives, targets and actions through evidence-based decision- making. > Planning, implementation and evaluation of all activities for operational excellence. > Education through information, instruction, data and analytics. We have a dedicated, full-time team continually enhancing our WH&S processes and amplifying awareness to ensure all of our people, across all of our locations, experience the best work conditions possible. In FY21 IVE continued to build on engagement with employees with the underlying goal of shifting our people’s relationship with workplace health and safety from the transactional and compliance based towards an empowerment relationship where people are encouraged and supported to use informed judgement and sound risk management techniques. In FY21, this was continued through the launch of the ‘Who are you staying safe for’ campaign – utilising IVE personnel to tell their stories across the business to personalise the safety message. Sustainability and risk management As the expectations on corporate responsibility increase, and as transparency becomes more prevalent, IVE recognises the need to act on sustainability and is committed to engaging and collaborating with our clients and investors to provide an ethical and sustainable partnership. Modern slavery involves the exploitation of human beings, and is completely unacceptable. IVE recognises that we have a responsibility to 41 Annual Report 2021Environmental, social and corporate governance – continued improve our understanding and mitigate the risks of it occurring within our operations and supply chains and have implemented controls to ensure the integrity of our suppliers. Through the ongoing assessment of our quality, information security, ethical and environmental practices, IVE continues to focus on being a responsible business that values what’s important to our customers. IVE’s accreditations continue to make us a preferred partner for many of our customers. Quality assurance FS 729422 IVE understands the importance of quality management and has maintained certification to ISO 9001 in Quality Management for 20 years. This commitment to quality ensures we can provide superior products and services to our customers, measured in terms of performance, reliability and durability and returned in customer satisfaction and loyalty. We regularly receive positive and welcomed feedback from our clients and strive to continue to provide this level of excellence from marketing technology through to production and distribution. Ethical sourcing and environmental management IVE Group continues to deliver a number of processes to ensure that we have a focus on improved sustainability and the ongoing protection of the environments that we source from, work in and supply. IVE expects all our suppliers (companies and individuals who conduct business with any IVE Group business unit) to adhere to the same ethical values we uphold and as such has put in place controls to ensure that every supplier is assessed, complies to our values and standards, and meets and exceeds our delivery expectations. Through the blending of our best practices and our socially responsible supply base, we are able to achieve the optimal levels of cost efficiency, product/service effectiveness and product safety in a sustainable, inclusive and socially ethical manner. IVE are active members of Supplier Ethical Data Exchange (SEDEX). Supplier membership is highly regarded, and allows IVE to assess risk relating to labour standards, health and safety, environmental impact and provide supply chain visibility. We understand that ensuring good business practices is important to our clients, our employees, our shareholders and we support the introduction of the Australian Modern Slavery Act 2018. We continue to hold accreditation with the Programme for the Endorsement of Forest Certification® (PEFC), which tracks forest-based products from sustainable sources to the final product. It demonstrates close monitoring of each step of the supply chain through independent auditing to ensure that unsustainable sources are excluded. Additionally, certification of our fibre, paper and fibre-based product supply chains to Forest Stewardship Council® standards assure they 42 IVE Group Limitedare free from any direct or indirect involvement in activities that violate traditional and human rights in forestry operations, as required by the International Labour Organization (ILO) Convention 169.4. Our outstanding credentials include ISO 14001 Environment certification and our focus remains on delivering our promise of continual improvement by establishing sustainability targets that reflect our commitment to our customers and the communities we work in. Paper As the largest printer in Australia, IVE is a significant user of paper from sustainably managed forests. These sustainably run forests help prevent the land being sold and lost to non-forest use eg: agriculture or infrastructure development. The benefits of ‘forest land’ include prevention of soil erosion, improved water quality – fighting salinity, providing habitat for native birds and wildlife and reducing the use of fertiliser and chemicals. Forests are also an important source of CO2 capture, acting as a ‘carbon sink’ – taking more carbon dioxide out of the atmosphere than they produce. The industry is a leading recycler as 87% of paper is recovered for recycling in Australia, a substantial increase from 28% in 1990. [Specifically 77% of catalogues are recycled (Australasian Catalogue Association 2014)*]. Recycling complements the need for virgin wood fibre, further supporting the growth in fibre based packaging as an environmentally sustainable alternative to plastic. Around 70% of our paper requirement is sourced offshore as the Australian paper we use is quite specific in nature. We source paper from North America, Finland, Sweden, Germany, South Korea and China. Though we have seen a proliferation of electronic screens across society, findings conclude that 74% of consumers prefer to read from paper than from screens and 71% enjoy the tactile nature of paper. Consumers also fundamentally believe that when sourced from sustainably managed forests, paper and print remain a sustainable way to communicate. Source: “The Attractiveness and Sustainability of Paper and Print” – Two Sides survey July 2016 Data security IVE invests over $2 million dollars annually to ensure we maintain best in class data security certifications such as ISO 27001, PCI DSS (RoA) and IRAP, all of which are complex and provide a mature information security profile that supports our customer’s obligations and commitment to protecting their customers’ data. In 2021, IVE completed a group wide full infrastructure upgrade which demonstrates our commitment to continual investment and improvement in the confidentiality, integrity and availability of our information systems and the future growth of our business. Over the past 12-24 months IVE Group has invested significantly in enterprise grade software and hardware to advance our maturity in protecting the business from cyber security risks. We also have several key initiatives underway to uplift our capabilities through endpoint, email and internet protection. We believe that IVE leads the way in providing robust and technologically advanced systems, with the highest security requirements giving our customers the assurance they require. Risk Management Framework The purpose of the Risk Management Framework is to provide a mechanism for IVE to identify opportunities and challenges that could impact the business, understand the risk appetite, and ensure appropriate mitigations are in place. Together with the senior executives, the Risk Register is reviewed on a quarterly basis to ensure that risk mitigation is in place for all identified risks, and includes recent events such as COVID-19, and economic impacts affecting sales and client demand and supply volatility. In the last review conducted in May 2021, the following key risks were identified as being the most relevant to the business achieving its operational and financial targets: 43 Annual Report 2021Environmental, social and corporate governance – continued Key Risk Description Risk Appetite Mitigation Pandemic Failure to respond and recover from the effects of the COVID-19 pandemic resulting in the potential loss of employee health, suppliers and customers. Environment External macro- economic factors Environmental, Social, and Governance (ESG) Environmental damage and impact caused by IVE's operations, for example emissions or discharges to land and water and to adequately report on environmental and social damage. Pressure from investors due to lack of disclosure and policy to support ESG. Reduced general economic conditions across Australia, lower employment levels and deterioration in consumer confidence may reduce demand for marketing and communications services and products. Competition Increased competitive behaviour in various market segments. IVE will take a balanced approach to the risks associated with changes in the macro environment. The level of risk taken will be planned for each risk event. This will be measured by monitoring: > Manage work from home for employees wherever possible/ monitor employee’s health, additional cleaning at sites, provide hand sanitiser and temperature checks, split shifts > Pandemic/Business Continuity > employee health, > the revenue to budget in customer sectors, > increased debtor days, forward bookings; and > economic indicators. IVE will take a balanced approach to the risks associated with climate change. The level of risk taken will be planned for each risk event. This will be measured by monitoring of production downtime due to climate change events, Government reporting on environment/ emissions and ASX disclosures. IVE will take a balanced approach to the risks associated with changes in the macro environment. The level of risk taken will be planned for each risk event. This will be measured by monitoring: > the revenue to budget in customer sectors, > increased debtor days’ forward bookings; and > economic indicators. IVE will take risks in response to competition and the competitive environment that represents value for money in the returns obtained for the risk taken. This will be measured through: > pricing and margin pressures, > talent and client retention; and > competitor mergers or failures. Plans (BCP), identification of Key Customers/Suppliers/Staff and Functions, site redundancy, staff stand downs, revenue and cost forecast management > Essential service support for clients/supply chain mitigation > IVE COVID-19 Site Safety Procedure > BCP and DRP plans, site redundancy, staff stand downs, revenue, and cost forecast management > Government and ASX disclosures and reporting > ISO 14001 certification > Appropriate and up to date certification for all suppliers > Ongoing gathering of accreditations for IVE's responses to RFPs > Due Diligence on suppliers > Use of bigger, reputable suppliers > Monitor pricing in the market > Continuous engagement with customers > Driving consistent and high-level customer service > Ensure flexibility in operating model across multiple sites > Monitor pricing in the market > Continuous engagement with customers > Driving consistent and high-level customer service > Participate in industry consolidation if the opportunity meets appropriate risk and return parameters 44 IVE Group LimitedKey Risk Description Risk Appetite Mitigation IT, Systems & Security Cybersecurity Failure to protect the business from ransomware, phishing, data leakage, hacking or insider threat. IVE has no appetite and will avoid all risk events associated with Cybersecurity risk. This will be measured by data breaches or incidents, client audit failures or negative public relations. Supply Chain Supply Chain Volatility Disruption to the availability of key inputs and/or sustained price increases.* IVE will execute caution when working with suppliers of key inputs. There is low risk appetite for non-supply or cost increases. This is measured by lead times, cost increases and supplier noncompliance with SLAs. > ISO 27001 certified > External Penetration Testing conducted annually > Quarterly Vulnerability Scans > Restricted Firewalls > Appropriate level of Cyber Information Security Policies > Improved technologies and software > Inputs readily available through multitude of suppliers > Ability to pass costs on to customers > Plan production in advance > Use of larger, reputable suppliers > Sourcing from alternative countries to avoid regional tensions in South East Asia Climate risks Risks elevated within the risk register included the effects of climate change and the impact on the supply chain through the past year, with Australia experiencing bushfires and floods, and more recently a pandemic. IVE’s business portfolio is diverse and is supported by a portfolio of relatively fixed, long life assets across a number of locations. This diversity of portfolio strongly positions the Company to mitigate and manage its exposure to physical climate risks and to maximise the business opportunities it may present. IVE’s major supply chains are also diversified across multiple regions – especially our paper supplies which are drawn from multiple destinations in Europe, Asia, the United States and locally in Australia. It is IVE’s intention to further analyse the potential for climate change risk and the impacts of such risks, as well as regulation and legislation developments, known as ‘transition risks’ specifically related to climate change, as part of our regular Risk Review. This analysis would include the environmental factors such as water and energy usage, supply chain diversity, transportation and physical risks which form part of our current certifications in Environment, Quality and Information Security and any transition risks that may affect IVE’s business or suppliers. Additional information IVE Group Ltd Level 3, 35 Clarence Street Sydney NSW 2000 For further information contact: Geoff Selig Executive Chairman + 61 2 9089 8550 Darren Dunkley Chief Financial Officer + 61 2 8020 4400 45 Annual Report 2021Directors’ report for the year ended 30 June 2021 4646 IVE Group LimitedOperating and financial review The profit after tax of the Group for the year ended 30 June 2021 was $29,481 thousand (2020: loss after tax of $20,189 thousand). A review of operations and results of the Group for the year ended 30 June 2021 are set out in the Operating and Financial Review, which forms part of the Annual Financial Report. Dividends The directors have declared a final dividend of 7.0 Australian cents per share, fully franked, to be paid on 14 October 2021 to shareholders on the register at 15 September 2021. Total dividends of $10,282 thousand were declared and paid by the Company to members during the 2021 financial year. Further details on dividends are included in Note 21 of the Financial Report. Significant changes in the state of affairs In the opinion of the directors there were no other significant changes in the state of affairs of the Group that occurred during the financial year under review. The directors present their report together with the consolidated financial statements of the Group comprising of IVE Group Limited (the Company), and its subsidiaries (the Group) for the financial year ended 30 June 2021 and the auditor’s report thereon. Principal activities The principal activities of the Group during the course of the financial year were: > Conceptual and creative design across print, mobile and interactive media; > Printing and distribution of catalogues, magazines, marketing and corporate communications materials and stationery; > Manufacturing of point of sale display material and large format banners for retail applications; > Personalised communications including marketing automation, marketing mail, publication mail, eCommunications, multi- channel solutions, and call centre services; > Data analytics, customer experience strategy, and CRM; and > Outsourced communications solutions for large organisations including development of customised multi-channel management models covering creative and digital services, supply chain optimisation, inventory management, warehousing and logistics. The Group services all major industry sectors in Australia including financial services, publishing, retail, communications, property, clubs and associations, not-for-profit, utilities, manufacturing, education and government. 47 Annual Report 2021Directors’ report – continued Information on Directors The directors of the Company at any time during or since the end of the financial year are: Director Experience, special responsibilities and other directorships Geoff Bruce Selig Executive Chairman Appointed: 10 June 2015 Gavin Terence Bell Independent Non-Executive Director Appointed: 25 November 2015 Geoff has over 30 years' experience in the marketing communications sector. Geoff was managing director of IVE Group prior to moving into the role of executive chairman following the Company’s listing on the ASX in December 2015. Geoff is a director of Caxton Group and Caxton Print Holdings, and also sits on the board of The Lysicrates Foundation. He was the State President of the NSW Liberal Party from 2005-8. Geoff holds a Bachelor of Economics from Macquarie University and is a member of the Australian Institute of Company Directors. Gavin is an experienced director, executive and lawyer. Gavin is currently a director of Smartgroup Corporation Limited (ASX: SIQ). Prior to becoming a director, Gavin was the CEO of global law firm Herbert Smith Freehills. He was a partner in the firm for 25 years. Gavin holds a Bachelor of Laws from the University of Sydney and a Master of Business Administration from the AGSM, University of New South Wales. Committee: Chair of the Nomination & Remuneration Committee and Member of the Audit, Risk & Compliance Committee. Carole Louise Campbell Independent, Non-Executive Director Appointed: 21 November 2018 Ceased: 24 November 2020 Carole Campbell is a professional company director with more than 30 years’ experience across a diverse range of industries including professional services, financial services, media, mining and industrial services. Carole commenced her career with KPMG and has held executive roles with Macquarie Group, Westpac Institutional Bank, Seven West Media, Bis Industries and Merivale. Carole is a Non-Executive Director and Chair of Audit Committee of FlexiGroup Limited (ASX: FXL) and Deputy Chair of Council and Chair of the Finance, Audit and Risk Management Committee of the Australian Film Television and Radio School. She is also a Non-Executive Director of The Sydney Film Festival. Sandra Margaret Hook Independent Non-Executive Director Appointed: 1 June 2016 Carole is a Fellow of Chartered Accountants Australia and New Zealand (FCA) and a Graduate Member of the Australian Institute of Company Directors (GAICD). Committee: Chair of the Audit, Risk & Compliance Committee. Sandra has over 25 years’ experience in sales and marketing, building and leading commercially successful businesses, driving growth and leading change. She has a track record in delivering brand and portfolio strategies, transitioning traditional organisations in rapidly evolving environments and brings a strong focus on customer-centric growth and digital transformation at Board level. Sandra was formerly Managing Director and CEO of NewsLifeMedia, a division of News Limited; CEO of News Magazines, and held various senior executive roles with Australia’s largest media companies including News Limited, Foxtel, Federal Publishing Company, Murdoch Magazines and Fairfax. Sandra is currently a non-executive director of MedAdvisor Limited (ASX: MDR), Redhill Education (ASX: RDH), Sydney Fish Market Limited and CRC Fight Food Waste. She is also a Trustee of the Sydney Harbour Federation Trust. Committees: Member of the Nomination & Remuneration Committee. 48 IVE Group LimitedDirector Experience, special responsibilities and other directorships Paul Stephen Selig Executive Director Appointed: 10 June 2015 Paul’s career commenced in banking and treasury management before moving into the print and marketing communications sector over 25 years ago. He has been a director of the Company since 2012, and appointed to IVE Group Limited on its incorporation in 2015. Paul is an experienced director and investor having run the Caxton Group family office for over 15 years. James Scott Charles Todd Independent Non-Executive Director Appointed: 10 June 2015 Paul is also a director of Caxton Group, Caxton Print Holdings and Caxton Property Developments. He holds a Bachelor of Economics (Hons) from Macquarie University. James is an experienced company director, corporate adviser and investor. He commenced his career in investment banking and has taken active roles in a range of private and public companies. He was until recently Managing Director of Wolseley Private Equity, an independent private equity firm he co-founded in 1999. James is also a Non-Executive Director of three other ASX listed companies, HRL Holdings Limited (ASX: HRL), Coventry Group Limited (ASX: CYG) and Bapcor Limited (ASX: BAP). James holds a Bachelor of Commerce and a Bachelor of Laws from the University of New South Wales, and a Graduate Diploma of Applied Finance from the Financial Services Institute of Australasia (FINSIA), where he is a Fellow. He is also a member of the Australian Institute of Company Directors. Committees: Member of the Audit, Risk & Compliance Committee and Nomination & Remuneration Committee. Catherine Ann Aston Independent, Non-Executive Director Appointed: 15 December 2020 Cathy is an internationally experienced executive and non-executive director across a diverse range of sectors including telecommunications, digital, government and financial services. She has a broad commercial background with senior roles including CEO, CFO, marketing, strategy and digital business. Cathy is currently a director of Macquarie Investment Management Ltd, IMB Bank Ltd (Chair, Risk Committee) and Over The Wire Ltd (ASX: OTW; Chair, Audit and Risk Committee). Cathy holds a Bachelor of Economics from Macquarie University and a Master of Commerce from the University of NSW. She is a Senior Fellow of the Financial Services Institute of Australasia and a graduate of the Australian Institute of Company Directors. Committees: Chair of the Audit, Risk and Compliance Committee, Member of the Nomination and Remuneration Committee. 49 Annual Report 2021Directors’ report – continued Company Secretaries Naomi Dolmatoff Sarah Prince Sarah was appointed as joint Company Secretary on 25 November 2020. Sarah is an experienced Company Secretary and has worked with ASX- listed entities in the biotech, technology, managed funds, legal and mining and resources industries. Sarah holds a Bachelor of Arts, Bachelor of Laws and a Graduate Diploma of Applied Corporate Governance. Sarah is a member of The Governance Institute of Australia and is admitted as a Solicitor of the Supreme Court of New South Wales. Darren Dunkley Darren has been the Chief Financial Officer (CFO) of the Group since 2012, and has been with IVE for over 15 years. He has over 25 years of experience with a range of blue chip companies including Sharp Corporation, ANZ Banking Group Ltd and Nashua Australia. Darren has a Bachelor of Commerce majoring in Accounting and is a CPA. Naomi was appointed as joint Company Secretary on 26 March 2019 and resigned effective 25 November 2020. Naomi is an experienced Company Secretary and has worked with ASX- listed entities in the financial services, technology, telecommunications and mining and resources industries. Naomi holds a Bachelor of Commerce (Finance) with distinction and a Graduate Diploma in Applied Corporate Governance. Naomi is also an Associate of both the Governance Institute of Australia and the Chartered Governance Institute (UK). Directors’ interests and benefits The relevant interests of each director in the shares of the Company as at the date of this report are disclosed in the Remuneration Report (on page 68). Meetings of Directors The number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are: Board Audit, Risk & Compliance Committee (ARCC) Nominations & Remuneration Committee (NRC) Other Committees Eligible Attended Eligible Attended Eligible Attended Eligible Attended Geoff Selig Gavin Bell Sandra Hook Paul Selig James Todd Carole Campbell* Catherine Aston** 17 17 17 17 17 7 7 17 16 17 17 16 7 7 - 4 - - 4 1 2 - 4 - - 4 1 2 - 5 5 - 5 - - - 5 5 - 5 - - * Carole Campbell resigned as a director of the Company on 24 November 2020. ** Catherine Aston was appointed as a director of the Company on 15 December 2020. 2 - - - - 1 1 2 - - - - 1 1 50 IVE Group LimitedEnvironmental regulation The Group's operation is not subject to any significant environmental regulations under either Commonwealth or State legislation. However, the Board believes that the Group has adequate systems in place for the management of its environmental requirements and is not aware of any breach of those environmental requirements as they may apply to the Group during the period covered by this report. Events subsequent to reporting date Aside from below, there has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years. On 6 August 2021, the Group voluntarily repaid $50,000 thousand, and cancelled $35,000 thousand of the available facility. The Group also terminated an interest rate swap hedge entered earlier in the year. Likely developments Information about likely developments in the operations of the Group and the expected results of those operations in future financial years has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the Group. Indemnification and insurance of officers During the financial year, the Group paid a premium insuring the directors of the Group, the Company secretaries, and executive officers to the extent permitted by the Corporations Act 2001. The Group indemnified its directors and company secretaries to the extent permitted by law against a liability incurred. Indemnification and insurance of auditor During or since the end of the financial year the Group has not indemnified or made a relevant agreement to indemnify the auditor of the Group against a liability incurred as the auditor. In addition, the Group has not paid, or agreed to pay, a premium in respect of a contract insuring against a liability incurred by the auditor. Insurance premiums During the financial year the Company has paid premiums in respect of directors’ and officers’ liability insurance contracts for the year ended 30 June 2021. In addition, since the financial year, the Company paid or agreed to pay premiums in respect of such insurance contracts for the year ending 30 June 2022. Such insurance contracts insure against certain liability (subject to specific exclusions) for persons who are or have been directors or executive officers of the Company. The directors have not included details of the nature of the liabilities covered or the amount of the premiums paid in respect of the directors’ and officers’ liability insurance contracts, as such disclosure is prohibited under the terms of the contract. 51 Annual Report 2021Directors’ report – continued Remuneration Report (Audited) Introduction This Remuneration Report (Report), which has been audited, describes the Key Management Personnel (KMP) remuneration arrangements for the 12 months ended 30 June 2021 for IVE Group, in accordance with the Corporations Act 2001 (Cth) (Corporations Act) and its regulations. The Report is designed to provide shareholders with an understanding of IVE Group’s remuneration philosophy and the link between this philosophy and IVE Group’s strategy and performance. The Board is committed to having remuneration policies and practices which are designed to ensure remuneration is equitable, competitive and reasonable to attract and retain key talent who are critical to IVE Group’s business success, align with long-term interests of the Company and its shareholders, and to ensure that any incentives do not reward conduct that is contrary to the Company’s values or risk appetite. IVE Group will align remuneration to strategies and business objectives and provide a balance between fixed and variable rewards to ensure that rewards are given for performance. Remuneration structures are designed to be transparent to employees and other stakeholders and easily understood. In addition, the remuneration framework is designed to be acceptable to shareholders by being consistent with market practice and creating value for shareholders. The 2021 financial year (FY21) saw the continuation of the economic, social and health impacts of the COVID-19 pandemic. Our shareholders, employees and clients continued to be impacted and market conditions remained very challenging. In this context, the financial and non-financial performance of the Company during 2021 was strong. The Company was well positioned at the commencement of the pandemic. The changes we implemented during 2020 and 2021 further helped us to address the pandemic. We were also very well served by the outstanding leadership shown by the leadership team. The Board is mindful that the unprecedented impact of COVID-19 has affected IVE Group’s people in many different ways and are extremely proud of the manner in which its people rose to the challenges presented to continue to focus on delivering excellent service and products to its customers. In recognition, all staff, other than the Directors, 52 will be offered 500 shares in IVE Group for nil consideration following the release of this Annual Report. These shares are being offered in recognition of staff efforts and sacrifices during the COVID-19 pandemic. No changes were made to the overall KMP remuneration framework for FY21. The potential STIP payments to the Chief Executive Officer (CEO) and Chief Financial Officer (CFO) were increased to $300,000 and $180,000 respectively to better reflect market remuneration and to increase the proportion of performance related remuneration. These changes were consistent with external benchmarking undertaken during FY20. No other change was made to the remuneration package of any other KMP and none is proposed for FY22. The performance of the Company and the leadership shown by the leadership team is reflected in the remuneration outcomes for FY21. The Company achieved an EBITDA result of $100.2M on an underlying basis including JobKeeper and post AASB 16. This resulted in the target for the payment of the key financial component of the Short Term Incentive (STI) being achieved. The majority of the non-financial performance measures were also satisfied. This included measures and targets including but not limited to WHS, net working capital and various strategic business initiatives. The STI outcomes for the Executive Chair, CEO and CFO ranged from 85% to 90%. Further details of payments and the STI’s are provided later in this Report. The 2018 Long Term Incentive (LTI) grant reached the end of its three-year vesting period on 30 June 2021. None of the relevant rights vested as the TSR and EPS performance conditions were not met. The EPS condition, in particular, was heavily influenced by the impact of the pandemic across the last two years of the vesting period. At the 2020 Annual General Meeting, only 41.9% of the shares on issue were cast in relation to the adoption of the Remuneration Report for the year ended 30 June 2020. Of those votes cast, 57.70% voted in favour of adoption of the Remuneration Report and 42.30% of votes cast voted against the resolution. The votes cast against the resolution represented only 17.7% of the total share register. However, as more than 25% of the votes cast voted against the resolution, the vote constitutes a ‘first strike’ for the purposes of the Corporations Act. IVE Group LimitedWe have consulted with both investors and proxy advisors to understand their views on the Remuneration Report. Representatives of the majority of the shares which were voted against adoption have informed us that the reasons they voted against adoption were not primarily related to the Remuneration Report. We did however receive some feedback from a limited number of shareholders and proxy advisors in relation to the Remuneration Report. Key aspects of this feedback and the actions we propose to take in response are set out below. This needs to be considered in the context of the majority of voting shareholders having voted in favour of the adoption of the Remuneration Report. The Board will continue to review the effectiveness of the Company’s remuneration practices and to ensure they are appropriately benchmarked and they align with strategic performance objectives, to appropriately rewards its executives and deliver shareholder value. The Board considers that the members of the Nomination and Remuneration Committee (NRC) possess the necessary expertise and independence to fulfil their responsibilities and are able to access independent experts in remuneration for advice should this be required. The governance processes in relation to remuneration are working effectively and the Board trusts that shareholders find this Report useful and informative. As outlined in the Operating and Financial Review, the FY21 financial performance was impacted by the unprecedented global COVID-19 pandemic. This is in the context of a competitive market and challenging macro-economic environment. The Board believes that the remuneration outcomes for the Executive KMP for the 2021 financial year reflect this and satisfy the goals of the remuneration framework. The remuneration report contains the following sections: > Introduction > Persons covered by this Report > Overview of the remuneration framework for Executive KMPs > Linking reward and performance > Grant of Performance Share Rights and the Long Term Incentive Plan > Non-Executive Director remuneration framework > Contractual arrangements with Executive KMPs > Details of remuneration for KMPs > Rights Granted to Executive KMP > Directors and Executive KMP shareholdings in IVE Group Limited > Other statutory disclosures Issue raised Response Remuneration element Remuneration quantum Senior executive and director remuneration is high relative to EPS growth Remuneration reductions in FY20 should have been higher The specific performance conditions for the STI should be disclosed The EPS growth performance condition for the LTI is not sufficiently challenging STI LTI Executive remuneration has been externally benchmarked and is market based and there has only been one increase to director fees since the Company listed in 2015 (some feedback incorrectly suggested there had been two increases). The Board feels remuneration levels are appropriate for the size and complexity of the Company. The reductions were significant and voluntary and the Board feels they were appropriate in the circumstances. The STI was suspended in FY20 and no payments were made. The performance conditions for the FY21 STI are included in this Report. The Board feels that the performance condition is appropriate in the context of the current challenging market conditions. 53 Annual Report 2021Directors’ report – continued Who this report covers This report covers Non-Executive Directors and Executive KMPs (collectively KMP) and includes: Non-Executive Directors Gavin Bell Carole Campbell Sandra Hook James Todd Catherine (Cathy) Aston Role Independent Non-Executive Director Independent Non-Executive Director (resigned 24 November 2020) Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director (appointed 15 December 2020) Executive Key Management Personnel Geoff Selig Paul Selig Matthew (Matt) Aitken Darren Dunkley Executive Chairman Executive Director Chief Executive Officer Chief Financial Officer & Company Secretary Overview of IVE Group’s remuneration framework for Executive KMP The objective of IVE Group’s remuneration philosophy is to ensure Executive KMP are rewarded for business performance and retained to continue to grow the business. The objectives underpinning the remuneration philosophy are that remuneration will: > Be competitive and reasonable to attract and retain key talent; > Align to IVE Group’s strategies and business objectives; > Provide a balance between fixed and variable rewards; > Be transparent and easily understood; and > Be acceptable to shareholders. A key factor in IVE Group’s business success will be being able to attract and retain key talent and the remuneration framework has been designed to enable this. Governance IVE Group has established the NRC whose role is to assist the Board with its remuneration responsibilities, including reviewing and recommending to the Board for approval, arrangements for executives, Executive Directors and Non-Executive Directors. The NRC has three members, all of whom are independent, including an independent committee chair. The members of the NRC have appropriate qualifications and experience to enable the NRC to fulfil its role. In addition, the Board has appointed Gavin Bell as the Lead Independent Director to fulfil the role of chair whenever the Executive Chairman is conflicted and to assist in reviewing the Executive Chairman’s performance as part of the Board performance evaluation process. External remuneration consultants The Terms of Reference for the NRC requires that any remuneration consultants engaged be appointed by the NRC. No remuneration consultants were engaged in FY21. Any advice that may be received from remuneration consultants in future will be carefully considered by the NRC to ensure it is given free of undue influence by IVE Group executives. 54 IVE Group LimitedStructure of Remuneration The remuneration framework for Executive KMP includes both fixed and performance-based pay. Fixed remuneration Fixed remuneration is set using a combination of historical levels and sector comparisons. Fixed remuneration includes base pay, statutory contributions for superannuation and non- monetary benefits. Paying Executive KMP the right fixed remuneration is a key tool in attracting and retaining the best talent. The NRC reviews the fixed remuneration of Executive KMP on an annual basis. No change was made to the fixed remuneration of any of the Executive KMP during FY21. In addition, the NRC has determined that fixed remuneration for FY22 will stay the same with no increases to be made. This does not include the temporary fixed remuneration salary reduction ranging between 25% – 50% applying to the three months ended 30 June 2020 agreed to by the Executive KMP and Directors. Fixed remuneration is the major component of the Executive Chairman’s remuneration. Through his family arrangements, he has an interest in a substantial shareholding in the Company. This provides significant alignment with shareholders’ experience. Short Term Incentive (STI) The NRC reviews the achievement of STI targets at the end of each year and sets STI targets for the following year. The STI is the main tool for rewarding the current year’s performance of the business. In FY21, Executive KMP (excluding Paul Selig) were eligible to receive an STI payment of between 21% and 48% of fixed remuneration. The STI is a cash incentive payment and full payment is conditional on achievement of the following: > The key financial performance target for the Group, specifically, pro-forma Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) for the year in review; > Group level Workplace Health and Safety targets for the year in review; > Individual financial and non-financial performance targets relevant to the individual Executive KMP which includes strategic and other measurements. Individual measurements vary depending on the nature and specific strategic areas attributable to the Executive KMP to align with the IVE Group’s strategic objectives. The Board determines the STI payment for Executive KMP by allocating a percentage weighting across the above measures. At the end of the financial year, the Board assesses the individual and collective performance against the STI measures and retains an overall discretion in relation to the assessment of performance. The percentage weightings across financial and non-financial targets, and the assessed performance achieved during FY21 for each of the KMP to whom an STI payment was made was as follows. Non-financial KPIs for KMP The non-financial performance measures for the Executive KMP were as follows: KMP Group EBITDA target Individual financial targets Non-financial targets Total STI achieved % Target % Achieved % Target % Achieved % Target % Achieved Geoff Selig Matt Aitken 40.00 40.00 40.00 40.00 0.00 0.00 0.00 0.00 60.00 45.00 100.00 60.00 50.00 100.00 Darren Dunkley 40.00 40.00 17.00 17.00 43.00 33.00 100.00 85% 90% 90% 55 Annual Report 2021Directors’ report – continued > Geoff Selig, Executive Chairman Effective leadership of the Group and Board, the profitable divestment of IVE Telefundraising, successful securing of the Australian Community Media (ACM) long term contract including the acquisition of ACM’s operation in WA, Workplace Health and Safety targets, effective engagement and management of key relationships in the areas of investor relations, banking and audit. > Matt Aitken, Chief Executive Officer Effective leadership of the business, successful securing of the Australian Community Media (ACM) long term contract, Workplace Health and Safety targets, effective oversight of retail display/web offset/DDC MIS projects, further refine the WHS function to lead the deployment of the FY21 Group-wide plan, develop business plan to enhance and amplify our Lasoo digital catalogue aggregator business, achieve working capital targets. > Darren Dunkley, Chief Financial Officer Effective leadership of Group financial oversight and reporting, the profitable divestment of IVE Telefundraising, successful acquisition of ACM’s operation in WA, Workplace Health and Safety targets, active involvement in the implementation of retail display/web offset/ DDC/MIS projects, effective leadership of the finance ERP scoping and implementation project, effective engagement and management of key relationships in the areas of investor relations, banking and audit. The FY21 Actual STI and FY22 maximum STI amounts for Executive KMP are shown in the table on page 58. Long Term Incentive (LTI) The Board has established an LTI Plan as outlined in prior years’ Remuneration Reports and outlined in the section in this Report entitled ’Share based remuneration‘. The LTI Plan was last approved by shareholders at IVE’s 2018 Annual General Meeting (AGM) and will be considered for approval again by shareholders at the 2021 AGM. The LTI Plan is largely used to reward long-term sustainable performance. 56 The LTI Plan facilitates the offer of Performance Share Rights (Rights) to key executives and the Rights vest and convert to ordinary shares on a one-for-one basis, subject to meeting specific performance conditions. The current performance conditions are: > relative total shareholder return (TSR); and > compound annual earnings per share growth based on NPAT (EPS) over a three-year performance period. The LTI Plan, including the combination of TSR and EPS hurdles, has been designed commensurate with IVE Group’s long-term strategic objectives so that Executive KMP will only receive a substantial component of LTI when there has been strong absolute and relative performance. The grant of Rights during FY21 to the Executive Chairman was approved by shareholders at the 2020 AGM and the Rights to be granted to the Executive Chairman for FY22 will be submitted for approval by shareholders at the 2021 AGM. The Board has the discretion to amend the future vesting terms and performance hurdles at the grant of each award of Rights to ensure that they are aligned to market practice and ensure the best outcome for IVE Group. The Board also has the discretion to change the LTI Plan and to determine whether LTI grants will be made in future years. There is no-retesting of performance hurdles. The Board makes changes to the level of LTI to grant each year based on reviews of total remuneration packages for executives. The NRC decided to not increase the level of long term incentives for FY22. They will remain in-line with the same quantum agreed in respect of FY19, FY20 and FY21. The NRC believe that the issue of long term equity incentivises and aligns management’s remuneration with shareholders’ longer term interests. The staged approach to executive remuneration over recent years has led to the current level of executive remuneration which the Board feels is appropriate in the challenging and competitive sector in which the Group operates. All rewards, other than fixed remuneration, are subject to achieving the performance conditions outlined above. Assessment of performance Performance of Executive KMPs is assessed against the agreed non-financial and financial targets on a regular basis. Based on this assessment, the Executive Chairman will make a recommendation to the NRC for Board approval of the amount of STI and LTI to award (as applicable) to each KMP, other IVE Group Limitedthan the Executive Chairman. Recommendations in relation to the Executive Chairman are made by the chair of the NRC, for Board approval. The NRC assesses the actual performance of IVE Group and the Executive Chairman against the agreed targets and recommends the amount of the STI and LTI (as applicable) to be paid for approval by the Board. Executive KMP remuneration – paid, vested and targets The table below presents the STI and LTI paid and vested to Executive KMP during FY20 and FY21. The FY20 STIP was suspended due to the pandemic. Accordingly, all STIP entries for that year are $0. Further detail on remuneration is included in the tables at the end of this Report. All in $ STI LTI – Number of Rights Geoff Selig FY21 Maximum 200,000 Actual 170,000 Granted 384,615 FY20 200,000 0 147,058 Matt Aitken FY21 300,000 270,000 384,615 FY20 150,000 0 147,058 Darren Dunkley Paul Selig FY21 FY20 FY21 FY20 180,000 162,000 288,461 80,000 0 0 0 0 0 110,294 0 0 Not applicable Not applicable Vested Not applicable (3 year vesting) Not applicable (3 year vesting) Not applicable (3 year vesting) Not applicable (3 year vesting) Not applicable (3 year vesting) Not applicable (3 year vesting) Further detail on the value of the Rights granted is included in the tables at the end of this Report. Proportions of fixed and variable remuneration The Board and NRC consider annually the fixed remuneration and proportion of variable remuneration that is dependent on performance (‘at risk’) for each Executive KMP. The relative proportions of fixed versus variable pay (as a percentage of total remuneration) received by Executive KMP during the past two financial periods and proposed for the next financial period are shown below. This chart shows the staged process the NRC has undertaken to increase the proportion of at risk remuneration. As shown below, no changes are proposed to Executive KMP remuneration for FY22 following the assessment of performance, and the annual review of fixed remuneration and STI and LTI targets. There were also no changes during FY21 other than increases to the FY21 STI of the CEO and the CFO which were designed to incentivise performance in what remains an uncertain period. The apparent increase in fixed remuneration from FY20 to FY21 reflects the voluntary temporary reductions in remuneration during FY20 and the promotion of the CEO. 57 Annual Report 2021Directors’ report – continued All in $ Fixed Remuneration1 STI LTI FY20 Actual FY21 Actual FY22 Agreed FY20 Actual5 FY21 Actual FY22 Maximum FY20 Grant2 FY21 Grant2 FY22 Grant2 Geoff Selig Matt Aitken6 Darren Dunkley Paul Selig4 835,566 952,000 952,000 537,864 640,000 640,000 400,971 420,000 420,000 289,794 330,000 330,000 0 0 0 0 170,000 200,000 200,000 200,000 200,0003 270,000 300,000 200,000 200,000 200,000 162,000 180,000 150,000 150,000 150,000 0 0 N/A N/A N/A 1 Fixed remuneration includes superannuation and excludes annual leave loading. 2 LTI grant is the $ value of the grant approved by the Board. 3 FY22 LTI grant for Geoff Selig is subject to shareholder approval. 4 Due to the specific nature of his role, Paul Selig does not participate in the LTI Plan. 5 The STI was suspended during FY20. 6 Matt Aitken was appointed CEO on 5 August 2019. The Board uses a fair value method to determine the value of performance rights issued under the LTI Plan, which was last approved by shareholders in 2018. This is consistent with the required accounting treatment of rights and the basis on which the KMP remuneration arrangements were agreed. The Board recognises that some stakeholders advocate the use of the face value method to determine the value of performance rights. A face value approach does not take into account the risk that rights may not vest and that the rights are not entitled to dividends. In a year where there is no change to remuneration arrangements, a move to a face value approach would effectively reduce the Executive KMP’s remuneration. The Executive KMP’s remuneration arrangements were agreed assuming a fair value approach. The FY22 LTI will again use a fair valuation calculation to determine the quantity of performance rights to Geoff Selig Matt Aitken Darren Dunkley Paul Selig 1 Based on the closing share price on 1 July 2020 of $0.86 per share. be granted to Executive KMP. Given the significant volatility in the Company’s share price since March 2020 to the date of this report as a result of the COVID-19 pandemic, the Board agreed that the measurement date for the fair valuation report will be based on the volume weight average price of the 20 trading days following the release of the Company’s full year 2021 results, as was done in 2020. The Board believes that this will allow the market to absorb the full year results and align the fair valuation closer to the date of grant, noting that a different valuation methodology is applied per AASB 2 share based payments. If a face value method were used, the FY21 LTI grant for each of the Executive KMP would be as indicated in the table below. The number of performance rights to be granted under the FY22 LTI will be determined and reported in the 2022 remuneration report. FY21 Fair Value (No. of rights) FY21 Face Value1 (No. of rights) 384,615 384,615 288,461 0 232,558 232,558 174,975 N/A 58 IVE Group LimitedHow reward is linked to performance Performance indicators and link to performance Notwithstanding the impacts of the unprecedented COVID-19 pandemic during the 2020 and 2021 financial years, IVE Group’s financial performance has been strong since listing on the ASX in December 2015. Performance of the business is reflected in the outcome of the variable components to the remuneration framework: > full STI payments are only made if Executive KMP meet agreed financial and non-financial targets for the year in review (and the FY20 STI payment was suspended due to the impact of COVID-19); and > LTI grants only vest if IVE Group achieves the targets set for TSR and EPS over a three-year performance period. Performance rights granted to KMP in 2017 under the FY18 LTI reached their vesting date during FY21. Of these, NIL performance rights granted to KMP vested and 111,485 unvested performance rights lapsed in accordance with the IVE Group Equity Incentive Plan rules as set out below: Total LTI Grant FY18 60% of Performance Share Rights Earnings Per Share Target (EPS) 40% of Performance Share Rights Relative Total Shareholder Return (TSR) 0 60,810 50,675 N/A 111,485 N/A 36,486 30,405 N/A 66,891 N/A 24,324 20,270 N/A 44,594 Vested Lapsed N/A 0 0 N/A 0 N/A 60,810 50,675 N/A 111,485 Geoff Selig Matt Aitken Darren Dunkley Paul Selig The relevant performance conditions were as follows: 60% of Performance Share Rights Earnings Per Share Target (EPS) 40% of Performance Share Rights Relative Total Shareholder Return (TSR) EPS Target 7.75% Performance Share Rights Granted Vested Less than 90% of target achieved 90–99% of target achieved Target achieved or exceeded Nil 80% 100% Company ranks below 50th percentile Company ranks at the 50th percentile Company ranks between the 50th and 75th percentile Company ranks at or above 75th percentile Nil 50% Straight line vesting 100% Accumulated pro-forma EPS growth over the three-year vesting period between FY18 to FY20 was less than 90% of the EPS Target. Accordingly, none of the EPS tranche of performance rights vested. IVE Group was ranked as 17 (38.46 percentile) compared to the relevant FY18 LTI peer group as at 30 June 2020. Accordingly, none of the TSR tranche of performance rights vested. Unvested rights were forfeited in accordance with the LTI plan rules. 59 Annual Report 2021Directors’ report – continued Key financial metrics over the last seven years are shown below: Revenue ($m) EBITDA ($m) Net profit after tax ($m) Dividend payment (cents per share)1 Dividend payout ratio1, 5 Share price change ($)2 EPS (NPAT) EPS (NPATA) N/A N/A N/A N/A N/A FY15 337.4 30.9 FY16 382.0 42.8 9.7 20.9 FY17 496.6 55.2 24.6 FY18 695.4 73.2 32.4 FY194 FY203 723.6 82.0 677.4 57.3 33.0 18.5 N/A 12.7 15.5 16.3 N/A 69% 71% 71% 0.0 0% FY21 656.7 59.3 19.9 0.14 67% N/A (0.043) +0.162 (0.23) (1.26) +0.655 0.267 0.286 0.232 0.258 0.227 0.252 0.228 0.253 0.125 0.152 0.135 0.162 The above results are prepared on an underlying continuing business basis, pre AASB 16. Underlying continuing business basis results exclude all non-operating items including JobKeeper. This better reflects the underlying operating performance and is consistent with guidance. 1 Only applicable post-listing on ASX. 2 Calculated as close price on 30 June for the applicable year. 3 FY20 revenue, EBITDA and NPAT have been updated on a continuing business basis i.e. excluding TeleFundraising for FY21 comparative purposes. 4 FY19 and prior years revenue, EBITDA, NPAT and EPS have not been adjusted for TeleFundraising divestment in FY21. 5 FY21 dividend payout ratio is based on underlying NPAT including JobKeeper. Grant of Performance Share Rights During the year, the Company made offers of Rights under the LTI Plan with clear performance measures. On 25 November 2020, offers were made granting 1,884,613 performance rights under the Senior Leadership Team Plan. Of these, 384,615 were granted to Geoff Selig for which approval for the issue was obtained under ASX Listing Rule 10.14 at the 2020 Annual General Meeting. These Rights vest following the release of the FY23 financial results if certain performance conditions are met during the Performance period which is 1 July 2020 to 30 June 2023. In total there were 3,061,076 unvested Rights at 30 June 2021 from the FY19, FY20 and FY21 offers. There were no offers of options during the year and there are no unvested options. 60 IVE Group LimitedThe terms of the Equity Incentive Plan which provide the framework under which the LTI grants were made in FY18, FY19, FY20 and FY21 are as follows: Feature Terms of the IVE Group Equity Incentive Plan Type of security Valuation Performance Share Rights which are an entitlement to receive fully paid ordinary IVE Group Limited shares (as traded on the ASX) on a one-for-one basis. The number of Performance Share Rights for each KMP is calculated by dividing the allocated value of the LTI award for that KMP by the fair value of a Performance Share Right. The fair value is calculated using a Monte Carlo simulation approach for the Awards subject to the Relative TSR condition and a risk neutral assumption is used the value the Awards subject to the EPS condition. For the Executive Chairman and Managing Director (if applicable), the LTI grant, as recommended by the Board, will be submitted for approval by shareholders at the relevant Annual General Meeting, as required by the ASX Listing Rules. Performance Period The Performance Period is the three-year period 1 July to 30 June inclusive. Performance Conditions The number of Performance Share Rights that may vest will be determined by reference to: > Earnings Per Share (EPS) compound annual growth over the Performance Period. EPS growth will be calculated as IVE Group’s underlying Net Profit After Tax adjusted for amortisation of customer contracts (NPATA) divided by the undiluted weighted average shares on issue throughout the Performance Period, using the following formula: EPS CAGR = 3 ( ————————––– ) — 1 Year 3 EPS Year 0 EPS (Benchmark 1); and > Relative Total Shareholder Return (TSR) performance of the Company in comparison to similar companies in a peer group determined by the Board. The peer group for the FY21 offer is the ASX Small Ordinaries Index. The TSR of each company will be measured from the start of the Performance Period to the end of the Performance Period (Benchmark 2), (collectively the Performance Conditions). Together Benchmark 1 and Benchmark 2 comprise the total Performance Conditions but act independently relative to their specific target component of 60% and 40% of Performance Share Rights, respectively. Re-testing There is no re-testing. Any unvested LTI after the test at the end of the Performance Period will lapse immediately. 61 Annual Report 2021 Directors’ report – continued Feature Forfeiture Clawback Terms of the IVE Group Equity Incentive Plan All Rights will lapse if the participant elects to cease employment with IVE Group prior to the Conversion Date (being the date that Performance Share Rights convert to shares). Rights will immediately lapse if the participant is dismissed or removed from office as an employee for any reason which entitles IVE Group to dismiss the participant without notice or if the participant acts fraudulently, dishonestly or in breach of their obligations to the Company. The only exception to the lapse of rights if for a Good Leaver reason detailed below: > Any unvested Rights will not lapse if the participant’s employment with IVE Group ceases due to death, ill-health, total permanent disability or sale of the business in which they are employed. > Rights for employees who cease employment due to death will vest in full upon cessation. > Rights for other good leavers will remain on foot and will be tested against the Performance Conditions as at the Vesting Date, vesting on a pro-rata basis. The Board has discretion to allow vesting for other reasons, such as retirement or redundancy. The Board has broad 'clawback' powers if, amongst other things, the participant has acted fraudulently or dishonestly, engaged in gross misconduct or has acted in a manner that has brought the Company into disrepute, or there is a material financial mis-statement, or the Company is required or entitled under law or company policy to reclaim remuneration from the participant, or the participant’s entitlements vest as a result of the fraud, dishonesty or breach of obligations of any other person and the Board is of the opinion that the incentives would not have otherwise vested. TSR Peer Group for FY21 Offer The peer group for FY2021 differs to previous years where the Board sought to include similar companies and, in addition to their size, considered characteristics such as being a direct competitor, operating in a similar industry or sector, generating revenue in Australia only, being exposed to domestic economic conditions including consumer spending and marketing spend. Due to changes in the market and the lack of material numbers of useful comparator companies, the peer group chosen for the FY 2021 grant are the companies who are included in the ASX Small Ordinaries Index at the commencement of the performance period, being 1 July 2020. Non-Executive Director Remuneration Non-Executive Directors enter into service agreements through letters of appointment which are not subject to a fixed term. Non-Executive Directors receive a fee for their contribution as Directors. Fees are determined with reference to the demands of the role and the responsibilities carried out by Directors. The fee setting process also takes into account market levels, the need to attract high quality Directors and the size and complexity of the Company. Directors receive fees for their role as members of the Board and, where applicable, for additional responsibilities. Non-Executive Directors do not receive additional fees for being a Chair or member of a Board Committee. Non-Executive Directors do not receive any variable or performance-based remuneration. Where Directors are required to provide additional services, these are paid on a fixed fee basis or determined on an hourly basis depending on the nature of the service. There were no additional services provided in FY21 by Non- Executive Directors. During FY21, the Board did not increase fees paid to Non-Executive Directors and no increase is proposed for FY22. As set out earlier, this follows Non-Executive Directors agreeing to a temporary fee reduction of 50% applying to the three months 62 IVE Group Limitedended 30 June 2020, as a result of COVID-19 and is reflected in the remuneration paid in the 2020 financial year. The current annual fees provided to Non-Executive Directors are shown below (inclusive of superannuation): Chair fee Non-Executive Director fee (effective since 1 July 2018) services, retirements benefits (other than statutory superannuation) or termination benefits. Executive Directors are not remunerated separately for acting as Directors. Directors are not required under the Constitution or any other Board policy to hold any shares in IVE Group. N/A as Executive Chairman $105,000 The remuneration paid to Non-Executive Directors is detailed in the tables later in this Report. The total Non-Executive Director fee pool has a maximum value of $1 million per annum. The total amount paid to Non-Executive Directors in FY21 was $414,072, being 41% of the approved fee pool. There is no intent to seek approval to increase the Non- Executive Director fee pool at the 2021 AGM. Non-Executive Directors do not receive fees that are contingent on performance, shares in return for their Name: Title: Geoff Selig Executive Chairman Contractual arrangements with Executive KMPs Remuneration and other conditions of employment are set out in the Executive KMP’s employment contracts. The key elements of these employment contracts are summarised below: Terms of Agreement: No fixed term – subject to termination provisions detailed below Details: Annual remuneration includes cash salary, superannuation and non-cash benefits Termination: Incentives – eligible to participate in short term incentive and equity remuneration plans Termination – 12 months written notice (except in certain circumstances, such as where committed any breach or material neglect of the material terms of his contract of employment, or any act of serious or wilful misconduct) by Company or employee. All payments on termination will be subject to the termination benefits cap under the Corporations Act 2001 in the absence of shareholder approval. Post-employment – 12 months restraint provisions. Name: Title: Paul Selig Executive Director Terms of Agreement: No fixed term – subject to termination provisions detailed below Details: Annual remuneration includes cash salary, superannuation and non-cash benefits Termination: Incentives – discretionary bonus Termination – 3 months written notice (except in certain circumstances, such as where committed any breach or material neglect of the material terms of his contract of employment, or any act of serious or wilful misconduct) by Company or employee. All payments on termination will be subject to the termination benefits cap under the Corporations Act 2001 in the absence of shareholder approval. Post-employment – 12 months restraint provisions. 63 Annual Report 2021 Directors’ report – continued Name: Title: Matt Aitken Chief Executive Officer (appointed 5 August 2019) Terms of Agreement: No fixed term – subject to termination provisions detailed below Details: Annual remuneration includes cash salary, superannuation and non-cash benefits Termination: Incentives – eligible to participate in short term incentive and equity remuneration plans Termination – 9 months written notice (except in certain circumstances, such as where committed any breach or material neglect of the material terms of his contract of employment, or any act of serious or wilful misconduct) by Company or employee. All payments on termination will be subject to the termination benefits cap under the Corporations Act 2001 in the absence of shareholder approval. Post-employment – 3 months restraint provisions. Redundancy: 6 months’ pay in circumstance where employment is terminated due to redundancy. Name: Title: Darren Dunkley Chief Financial Officer Terms of Agreement: No fixed term – subject to termination provisions detailed below Details: Annual remuneration includes cash salary, superannuation and non-cash benefits Termination: Incentives – eligible to participate in short term incentive and equity remuneration plans Termination – 6 months written notice (except in certain circumstances, such as where committed any breach or material neglect of the material terms of his contract of employment, or any act of serious or wilful misconduct) by Company or employee. All payments on termination will be subject to the termination benefits cap under the Corporations Act 2001 in the absence of shareholder approval. Post-employment – 3 months restraint provisions. Redundancy: 6 months’ pay in circumstance where employment is terminated due to redundancy. 64 IVE Group Limited Details of Remuneration The table below provides remuneration prepared for on a statutory basis for directors and Executive KMPs year ended 30 June 2021 (except as noted below). Fixed Remuneration Variable Remuneration Name Year Cash, salary and fees3 Super- annuation Other long term benefits Short term incentive Fair value of LTI award4 Total Total performance related Percentage performance related Executive Directors Geoff Selig 2021 930,306 21,694 2020 814,564 21,003 Paul Selig 2021 308,306 21,694 2020 270,373 19,421 Non-Executive Directors Gavin Bell 2021 105,000 2020 91,875 0 0 Carole Campbell1 2021 38,479 3,656 Sandra Hook James Todd Cathy Aston2 2020 83,904 7,971 2021 95,890 9,110 2020 83,904 7,971 2021 95,890 9,118 2020 83,904 7,971 2021 51,989 4,939 2020 0 0 Other Executive KMP 0 0 0 0 0 0 0 0 0 0 0 0 0 0 170,000 58,556 1,180,556 228,556 19.4% 0 0 0 0 0 0 0 0 0 0 0 0 0 39,472 875,038 39,472 0 0 0 0 0 0 0 0 0 0 0 0 330,000 289,794 105,000 91,875 42,135 91,875 105,000 91,875 105,008 91,875 56,928 0 0 0 0 0 0 0 0 0 0 0 0 0 4.5% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Darren Dunkley Matt Aitken 2021 403,131 21,694 162,000 45,155 631,980 207,155 32.8% 2020 379,968 21,003 0 48,382 449,353 48,382 10.8% 2021 618,306 21,694 270,000 60,041 970,041 330,041 34.0% 2020 516,861 21,003 0 36,904 574,768 36,904 6.4% 1 Carole Campbell was appointed as a Director on 21 November 2018 and resigned effective 25 November 2020. 2 Cathy Aston was appointed as a director on 15 December 2020. 3 Cash, salary and fees includes annual leave and long service leave. 4 2021 Fair value of LTI award is net of FY18 shares which lapsed during the year (as noted in table below relating to FY18). Fair value of LTI reflects accounting impacts during period, NIL shares actually vested/paid 65 Annual Report 2021Directors’ report – continued Rights granted to Executive KMP FY21 KMP Number of rights granted in FY21 Vesting conditions Grant date Fair value at grant date Expiry date Geoff Selig 384,615 Matt Aitken 384,615 Darren Dunkley 288,261 Relative TSR and Compound annual EPS growth over 3 years Relative TSR and Compound annual EPS growth over 3 years Relative TSR and Compound annual EPS growth over 3 years 25 November 2020 $200,000 25 November 2020 $200,000 25 November 2020 $150,000 After vesting following release of FY23 financial results. Any unvested Rights expire. After vesting following release of FY23 financial results. Any unvested Rights expire. After vesting following release of FY23 financial results. Any unvested Rights expire. FY20 KMP Number of rights granted in FY20 Vesting conditions Grant date Fair value at grant date Expiry date Geoff Selig 147,058 Matt Aitken 147,058 Darren Dunkley 110,294 Relative TSR and Compound annual EPS growth over 3 years Relative TSR and Compound annual EPS growth over 3 years Relative TSR and Compound annual EPS growth over 3 years 27 November 2019 $200,000 27 November 2019 $200,000 27 November 2019 $150,000 After vesting following release of FY22 financial results. Any unvested Rights expire. After vesting following release of FY22 financial results. Any unvested Rights expire. After vesting following release of FY22 financial results. Any unvested Rights expire. 66 IVE Group LimitedFY19 KMP Number of rights granted in FY19 Vesting conditions Grant date Fair value at grant date Expiry date Geoff Selig 130,718 Matt Aitken 130,718 Darren Dunkley 98,039 Relative TSR and Compound annual EPS growth over 3 years Relative TSR and Compound annual EPS growth over 3 years Relative TSR and Compound annual EPS growth over 3 years 21 November 2018 $200,000 21 November 2018 $200,000 21 November 2018 $150,000 After vesting following release of FY21 financial results. Any unvested Rights expire. After vesting following release of FY21 financial results. Any unvested Rights expire. After vesting following release of FY21 financial results. Any unvested Rights expire. FY18 Performance rights granted to KMP under the FY18 LTI vested during FY21. Of these, nil performance rights vested and 111,485 unvested performance rights lapsed in accordance with the IVE Group Equity Incentive Plan rules. KMP Matt Aitken Number of rights granted in FY18 60,810 Darren Dunkley 50,675 Vesting conditions Grant date Fair value at grant date Expiry date Lapse 17 November 2017 $90,000 17 November 2017 $75,000 Relative TSR and Compound annual EPS growth over 3 years Relative TSR and Compound annual EPS growth over 3 years 60,810 unvested performance rights lapsed. 50,675 unvested performance rights lapsed. After vesting following release of FY20 financial results. Any unvested Rights expire. After vesting following release of FY20 financial results. Any unvested Rights expire. 67 Annual Report 2021Directors’ report – continued Director and Executive KMP Shareholding The table below provides the number of shares in IVE Group Limited held by each Director and Executive KMP during the period, including their related parties: Shares acquired Shares disposed Balance at 30 June 2021 Balance at 30 June 2020 Shares received during the period on exercise of Performance Share Rights Executive Directors Geoff Selig, Executive Chairman1 12,867,263 Paul Selig1 12,910,231 Non-Executive Directors Gavin Bell Sandra Hook James Todd Carole Campbell2 Cathy Aston3 Executive KMP Darren Dunkley, CFO and Company Secretary Matt Aitken, Chief Executive Officer 122,697 12,919 122,336 50,000 - 52,270 7,032 - - - - - - - - - - - - - - - 5,000 - - - - - - - - - - - 12,867,263 12,910,231 122,697 12,919 122,336 50,000 5,000 52,270 7,032 1 Geoff Selig and Paul Selig are each beneficiaries of the Selig Family Trust No. 5, the trustee of which holds 12,860,231 shares. 2 Carole Campbell resigned as a director on 24 November 2020. Holdings under ‘Balance at 30 June 2021’ are shown as known as at the date of resignation and set out in the Final Director Interest Notice lodged with ASX on 25 November 2020. 3 Cathy Aston was appointed as a Director of the Company on 15 December 2020. Holdings under ‘Balance at 30 June 2020’ are the holdings as at the date of appointment as set out in the Initial Director’s Interest Notice lodged with ASX on 15 December 2020. Loans to directors and executives Shares issued on the exercise of options No loans were made to directors and executives of IVE Group including their close family and entities related to them during the year. Shares under option There were no unissued ordinary shares of IVE Group under option outstanding at the date of this report. Shares under performance rights There were no unissued ordinary shares of IVE Group under Rights outstanding at the date of this report. In total there were 3,061,076 unvested Rights at 30 June 2021. There were no ordinary shares of IVE Group Limited issued on the exercise of options during the year ended 30 June 2020 and up to the date of this report. Shares issued on the exercise of Performance Share Rights Nil rights vested during the year and nil shares were issued on exercise of Rights during the year. This concludes the remuneration report, which has been audited. 68 IVE Group LimitedNon-audit services Lead auditor’s independence declaration The Lead auditor’s independence declaration is set out on page 70 and forms part of the directors’ report for the financial year ended 30 June 2021. Rounding off The Group is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 24 March 2016 and in accordance with that Instrument, amounts in the consolidated financial statements and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. This report is made in accordance with a resolution of the directors: Geoff Selig Director Dated at Sydney this 25th day of August 2021 During the year, KPMG, the Group’s auditor has performed certain other services in addition to its statutory duties. The Board has considered the non-audit services provided during the year by the auditor, and, in accordance with the advice received from the Audit Committee, is satisfied that: 1. the non-audit services provided during the financial year by KPMG as the external auditor were compatible with the general standard of independence for auditors imposed by the Act; and 2. any non-audit services provided during the financial year by KPMG as the external auditor did not compromise the auditor independence requirements of the Corporations Act 2001 (Cth) for the following reasons: a) b) all non-audit services are subject to corporate governance procedures adopted by the Group and have been reviewed by those charged with governance throughout the year to ensure they do not impact the integrity and objectivity of the auditor; and the nature of the services provided do not undermine the general principles relating to audit independence in accordance with APES 110: Code of Ethics for Professional Accountants, as they did not involve reviewing or auditing the auditor’s own work, acting in a management or decision- making capacity for the Group, acting as an advocate to the Group or jointly sharing the risks and rewards. Details of the amounts paid to the auditor of the Group, KPMG, for audit and non-audit services provided during the year are set out in Note 31 of the Financial Report. 69 Annual Report 2021Directors’ report – continued Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of IVE Group Limited I declare that, to the best of my knowledge and belief, in relation to the audit of IVE Group Limited for the financial year ended 30 June 2021 there have been: Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. ii. i. PAR_SIG_01  PAR_NAM_01  PAR_POS_01  PAR_DAT_01  PAR_CIT_01  To the Directors of IVE Group Limited I declare that, to the best of my knowledge and belief, in relation to the audit of IVE Group Limited for the financial year ended 30 June 2021 there have been: i. KPMG no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and Daniel Camilleri ii. no contraventions of any applicable code of professional conduct in relation to the audit. Partner PAR_SIG_01  PAR_NAM_01  PAR_POS_01  PAR_DAT_01  Sydney PAR_CIT_01  25 August 2021 KPMG Daniel Camilleri Partner Sydney 25 August 2021 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 54 70 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 54 IVE Group Limited                     71 Annual Report 2021Financial report for the year ended 30 June 2021 7272 IVE Group LimitedConsolidated Financial Statements Consolidated statement of profit or loss and other comprehensive income Consolidated statement of financial position Consolidated statement of changes in equity Consolidated statement of cash flows Notes to the Consolidated Financial Statements 1. Reporting entity 2. Basis of preparation 3. Significant accounting policies 4. Revenue 5. Other income 6. Personnel expenses 7. Expenses 8. Finance income and finance costs 9. Taxes 10. Cash and cash equivalents 11. Trade and other receivables 12. Inventories 13. Property, plant and equipment 14. Leases 15. Intangible assets and goodwill 16. Trade and other payables 17. Loans and borrowings 18. Employee benefits 19. Provisions 79 79 80 89 89 89 90 90 90 93 94 94 95 96 98 99 99 100 100 20. Share-based payments 21. Capital and reserves 22. Earnings per share 23. Acquisitions 24. Operating segments 25. Financial risk management and financial instruments 26. Capital commitments 27. Related parties 28. Group entities 29. Parent entity disclosures 30. Subsequent events 31. Auditors’ remuneration 32. Deed of cross guarantee 33. Discontinued operation 34. Contingencies Directors’ declaration Independent auditor’s report 74 75 76 77 101 102 103 103 104 105 111 111 112 113 113 114 114 115 116 117 119 73 Annual Report 2021 Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2021 In thousands of AUD Note 2021 Continuing operations Revenue Cost of sales Gross profit Other income Production expenses Administrative expenses Other expenses Results from operating activities Finance income Finance costs Net finance costs Profit / (loss) before tax Income tax expense Profit / (loss) from continuing operations Discontinued operation Profit from discontinued operation, net of tax* Profit / (loss) for the year Other comprehensive income Items that are or may be reclassified to profit or loss Cash flow hedges – effective portion of changes in fair value (net of tax) Cash flow hedges – reclassified to profit or loss (net of tax) Total other comprehensive income (loss) 4 5 8 9 33 656,457 (340,465) 315,992 724 (147,224) (115,602) (4,831) 49,059 517 (12,644) (12,127) 36,932 (12,256) 24,676 4,805 29,481 (361) 493 132 2020 Restated* 677,362 (364,382) 312,980 168 (151,121) (109,706) (52,021) 300 149 (10,812) (10,663) (10,363) (10,398) (20,761) 572 (20,189) (392) 224 (168) Total comprehensive income/(loss) for the year 29,613 (20,357) Profit/ (loss) attributable to: Owners of the Company Profit / (loss) for the year Total comprehensive income/(loss) attributable to: Owners of the Company Total comprehensive income/(loss) for the year Earnings per share Basic earnings (loss) per share (dollars) Diluted earnings (loss) per share (dollars) Basic earnings (loss) per share (dollars) – continuing operations Diluted earnings (loss) per share (dollars) – continuing operations 22 22 22 22 29,481 29,481 29,613 29,613 0.20 0.20 0.17 0.17 (20,189) (20,189) (20,357) (20,357) (0.14) (0.14) (0.14) (0.14) *The comparative consolidated statement of profit or loss and other comprehensive income has been restated to show the discontinued operation separately from continuing operations (see Note 33). The notes on pages 79 to 116 are an integral part of these consolidated financial statements. 74 IVE Group LimitedConsolidated statement of financial position As at 30 June 2021 In thousands of AUD Note 2021 2020 Restated* Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Contract asset Financial asset Other current assets Total current assets Deferred tax assets Property, plant and equipment Right of use assets Intangible assets and goodwill Total non-current assets Total assets Liabilities Trade and other payables Lease liabilities Loans and borrowings Employee benefits Contract liabilities Current tax payable Provisions Total current liabilities Loans and borrowings Lease liabilities Employee benefits Provisions Total non-current liabilities Total liabilities Net assets Equity Share capital Reserves Retained earnings Total equity 10 11 12 4 9 13 14 15 16 17 18 4 19 17 18 19 21 106,474 100,408 43,844 4,174 1,056 1,762 647 258,365 14,961 100,122 96,228 131,085 342,396 600,761 92,795 27,937 2,791 18,850 8,263 3,283 - 153,919 167,044 91,823 6,568 4,745 270,180 424,099 176,662 149,066 (185) 27,781 176,662 51,640 103,590 56,267 3,654 521 - 2,519 218,191 15,295 107,132 115,548 145,069 383,044 601,235 84,028 34,343 3,102 16,996 5,805 3,252 993 148,519 169,855 108,084 6,700 3,575 288,214 436,733 164,502 156,502 (582) 8,582 164,502 *Refer to Notes 13 and 15 on 2020 restatements. The notes on pages 79 to 116 are an integral part of these consolidated financial statements. 75 Annual Report 2021Consolidated statement of changes in equity For the year ended 30 June 2021 In thousands of AUD Note Share capital Share- based payment reserve Hedging reserve Retained earnings Total equity Balance at 1 July 2019 Initial application of AASB 16 Adjusted balance 1 July 2019 Total comprehensive income for the year Loss for the year Other comprehensive loss Total comprehensive income for the year Transactions with owners of the Company Performance share rights Issue of share capital Dividends to owners of the Company Total transactions with owners of the Company Balance at 30 June 2020 Balance at 1 July 2020 Total comprehensive income for the year Profit for the year Other comprehensive income Total comprehensive income for the year Transactions with owners of the Company Performance share rights Share buy back Dividends to owners of the Company Total transactions with owners of the Company Balance at 30 June 2021 156,468 - 156,468 - - - - 34 - 34 156,502 156,502 - - - - (7,436) - (7,436) 149,066 20 21 21 20 21 21 119 - 119 - - - 79 - - 79 198 198 - - - 265 - - 265 463 (612) 49,832 205,807 - (9,649) (9,649) (612) 40,183 196,158 - (20,189) (20,189) (168) (168) - (168) (20,189) (20,357) - - - - - - 79 34 (11,412) (11,412) (11,412) (11,299) (780) (780) 8,582 164,502 8,582 164,502 - 29,481 29,481 132 132 - - - - - 132 29,481 29,613 - - 265 (7,436) (10,282) (10,282) (10,282) (17,453) (648) 27,781 176,662 The notes on pages 79 to 116 are an integral part of these consolidated financial statements. 76 IVE Group LimitedConsolidated statement of cash flows For the year ended 30 June 2021 In thousands of AUD Note 2021 2020* Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operating activities Interest received Interest paid Income tax paid JobKeeper Payment received Payment of acquisition costs Payment of restructure costs Net cash from operating activities 10 Cash flows from investing activities Proceeds from sale of property, plant and equipment Acquisition of property, plant and equipment and intangible assets Acquisitions of businesses, net of cash acquired 23 Net proceeds on disposal of business (net of transactions costs)* Acquisition of financial asset (including transactions costs) Net cash used in investing activities Cash flows from financing activities Proceeds from bank loans Repayment of loans and borrowings Payment of transaction costs for loans and issued capital Dividends paid Payment of lease liabilities Share buy back (net of transaction costs) Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year 728,932 (618,861) 110,071 202 (8,878) (12,064) 21,521 (403) (3,683) 106,766 785,812 (686,461) 99,351 102 (10,153) (8,896) 10,193 (3,570) (8,080) 78,947 471 880 (9,503) (1,855) 15,165 (5,354) (1,076) - (3,234) - (10,282) (29,904) (7,436) (50,856) 54,834 51,640 106,474 (10,389) (25,543) - - (35,052) 36,000 (21,135) (237) (11,412) (26,972) - (23,756) 20,139 31,501 51,640 *The Group has elected to present a statement of cash flows that analyses all cash flows in total – i.e. including both continuing and discontinuing operations, amounts relating to discontinued operations by operating, investing and financing activities are disclosed in Note 33. The notes on pages 79 to 116 are an integral part of these consolidated financial statements. 77 Annual Report 202178 IVE Group LimitedNotes to the consolidated financial statements For the year ended 30 June 2021 1. Reporting entity IVE Group Limited (the ultimate parent entity or the Company) is a company domiciled in Australia. Its registered address is Level 3, 35 Clarence Street, Sydney NSW 2000. This consolidated financial report as at and for the year ended 30 June 2021 comprises the Company and its subsidiaries (IVE or Group). The Group is a for-profit entity. The Group is primary involved in: > Conceptual and creative design across print, mobile and interactive media; > Printing and distribution of catalogues, magazines, marketing and corporate communications materials and stationery; > Manufacturing of point of sale display material and large format banners for retail applications; > Personalised communications including marketing automation, marketing mail, publication mail, eCommunications, multi- channel solutions, and call centre services; > Data analytics, customer experience strategy, and CRM; and > Outsourced communications solutions for large organisations including development of customised multi-channel management models covering creative and digital services, supply chain optimisation, inventory management, warehousing and logistics. The Group services all major industry sectors in Australia including financial services, publishing, retail, communications, property, clubs and associations, not-for-profit, utilities, manufacturing, education and government. 2. Basis of preparation (a) Statement of compliance The consolidated financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements comply with International Financial Reporting Standards (IFRSs) adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were authorised for issue by the Board of Directors on 25 August 2021. Details of the Group’s accounting policies is included in Note 3. (b) Functional and presentation currency These consolidated financial statements are presented in Australian dollars, which is the Company’s functional currency. The Company is of a kind referred to in ASIC Corporations Instrument 2016/191 dated 24 March 2016, and in accordance with that Instrument, all financial information presented in Australian dollars has been rounded to the nearest thousand unless otherwise stated. (c) Use of estimates and judgements In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 June 2020. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively. (i) Judgements Information about judgements made in applying the Group’s accounting policies that have the most significant effects on the amounts recognised in the consolidated financial statements is included in the following notes: > Note 3(e) & (f) – estimation of useful lives of assets > Note 3(j) – provisions > Note 25 – Level 2 and 3 fair values of equity securities, interest rate swaps and forward exchange contracts; and > Note 14 – lease term: whether the Group is reasonably certain to exercise extension options. (ii) Assumptions and estimation uncertainties Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment in the year ending 30 June 2021 is included in the following notes: > Note 3(h)(ii) & 15 – impairment testing for cash generating units containing goodwill 79 Annual Report 2021Notes to the consolidated financial statements – continued 2. Basis of preparation (continued) (ii) Subsidiaries > Note 23 – acquisitions: fair value measured on a provisional basis; and > Note 25 – measurement of Expected Credit Loss (ECL) allowance on trade receivables. Measurement of fair values When measuring the fair value of an asset or a liability, the group uses market observable data if possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows: > Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. > Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). > Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). 3. Significant accounting policies The accounting policies set out below have been applied consistently during the period presented in these consolidated financial statements, and have been applied consistently by all entities in the Group, except for the adoption of new accounting standards (see Note 3(s)). (a) Basis of consolidation (i) Business combinations The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except those related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-exiting relationships. Such amounts are generally recognised in profit or loss. Any contingent consideration is measured at fair value at the date of acquisition, with subsequent changes in the fair value of the contingent consideration recognised in profit or loss. 80 Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases. (iii) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealised income and expenses arising from intra- group transactions, are eliminated in preparing the consolidated financial statements. (b) Foreign currency Foreign currency transactions Transactions in foreign currencies are translated to the functional currency of the Group (Australian dollars) at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the exchange rate at the reporting date. Foreign currency differences arising on retranslation are recognised in profit or loss. (c) Financial instruments (i) Recognition and initial measurement Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at fair value through profit and loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. (ii) Classification and subsequent measurement The Group classifies its financial instruments in the following measurement categories: at amortised cost, at fair value through profit and loss (FVTPL) and at fair value through other comprehensive income (FVOCI). IVE Group LimitedFinancial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL: > It is held within a business model whose objective is to hold assets to collect contractual cash flows; and > Its contractual terms give rise on a specified dates to cash flow that are solely payments of principal and interest on the principal amount outstanding. A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL: > It is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and > Its contractual terms give rise on a specified dates to cash flow that are solely payments of principal and interest on the principal amount outstanding. On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis. All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise. Financial assets at amortised costs These assets are subsequently measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss. Financial liabilities – Classification, subsequent measurement and gains and losses Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held- for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit and loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also recognised in profit or loss. (iii) Derecognition Financial assets The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset. The Group enters into transactions whereby it transfers assets recognised in its statement of financial position but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised. Financial liabilities The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss. (iv) Offsetting Financial asset and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when the Group currently has a legally enforceable right to set off 81 Annual Report 2021Notes to the consolidated financial statements – continued 3. Significant accounting policies (continued) the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. (v) Derivative financial instruments and hedge accounting Derivative financial instruments and hedge accounting The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met. Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit or loss. The Group designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast transactions arising from changes in foreign exchange rates and interest rates. At inception of designated hedging relationships, the Group documents the risk management objective and strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged item and the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other. Cash flow hedges When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognised in OCI and accumulated in the hedging reserve. The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss. The Group designates only the change in fair value of the spot element of forward exchange contracts as the hedging instrument in cash flow hedging relationships. The change in fair value of the forward element of forward exchange contracts (‘forward points’) is separately accounted for as a cost of hedging and recognised in a costs of hedging reserve within equity. 82 When the hedged forecast transaction subsequently results in the recognition of a non- financial item such as inventory, the amount accumulated in the hedging reserve and the cost of hedging reserve is included directly in the initial cost of the non-financial item when it is recognised. For all other hedged forecast transactions, the amount accumulated in the hedging reserve and the cost of hedging reserve is reclassified to profit or loss in the same period or periods during which the hedged expected future cash flows affect profit or loss. If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge accounting is discontinued prospectively. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the hedging reserve remains in equity until, for a hedge of a transaction resulting in the recognition of a non-financial item, it is included in the non-financial item’s cost on its initial recognition or, for other cash flow hedges, it is reclassified to profit or loss in the same period or periods as the hedged expected future cash flows affect profit or loss. If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the hedging reserve and the cost of hedging reserve are immediately reclassified to profit or loss. (d) Share capital Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. (e) Property, plant and equipment (i) Recognition and measurement Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment. IVE Group LimitedAny gains and losses on disposal of an item of property, plant and equipment (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) are recognised in profit or loss. (ii) Subsequent costs Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance are expensed as incurred. (iii) Depreciation Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use. Depreciation is calculated to write off the cost of property, plant and equipment less their estimated residual values using the straight-line basis over their estimated useful lives. Depreciation is generally recognised in profit or loss, unless the amount is included in the carrying amount of another asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. The estimated useful lives for the current year of significant items of property, plant and equipment are as follows: > Leasehold improvements shorter of lease term and life of asset > plant and equipment 3 – 20 years > fixtures and fittings 5 – 10 years Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (f) Intangible assets and goodwill (i) Goodwill Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. (ii) Other intangible assets Intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses. (iii) Subsequent expenditure Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred. (iv) Amortisation Amortisation is calculated to write off the cost of intangible assets less their estimated residual values using the straight-line method over their estimated useful lives, and is generally recognised in profit or loss. Goodwill is not amortised. The estimated useful lives are as follows: > computer software 3 years > customer relationships 5-9 years Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. (g) Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the first-in, first-out principle. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. (h) Impairment (i) Non-derivative financial assets The Group recognises loss allowances for expected credit loss (ECL) on financial assets measured at amortised costs. The Group measures loss allowance at an amount equal to lifetime ECL. Loss allowances for trade receivables are always measured at an amount equal to lifetime ECLs. When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment including forward-looking information. The Group assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due. The Group considers a financial asset to be in default when the debtor is unlikely to pay its credit 83 Annual Report 2021Notes to the consolidated financial statements – continued 3. Significant accounting policies (continued) (ii) Non-financial assets obligations to the Group in full, without recourse by the Group to actions such as realising security (if any is held). Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. Measurement of ECLs ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present values of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset. Credit-impaired financial assets At each reporting date, the Group assesses whether financial assets carried at amortised cost are credit-impaired. A financial asset is 'credit-impaired' when one or more events that have a detrimental impact on the estimated future cash flows of the financial assets have occurred. Evidence that a financial asset is credit-impaired includes the following observable data: > A breach of contract such as a default or being more than 90 days past due; > It is probable that the debtor will enter bankruptcy or other financial reorganisation. Presentation of allowance for ECL in the statement of financial position Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets. Write-off The gross carrying amount of a financial asset is written off when the Group has no reasonable expectation of recovering a financial asset in its entirety or a portion thereof. The Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery. The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. 84 The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating unit (CGU). Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (i) Employee benefits (i) Defined contribution plans A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. IVE Group Limited(ii) Other long-term employee benefits (i) Restructuring The Group’s net obligation in respect of long- term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Remeasurements are recognised in profit or loss in the period in which they arise. (iii) Short-term employee benefits Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. (iv) Share-based payment transactions The grant-date fair value of equity-settled share- based payment awards granted to employees is generally recognised as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non- market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. (j) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost. A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating losses are not provided for. (ii) Make good provision A make good provision is recognised when the Group enters into a lease contract that requires the property to be returned to the lessor in its original condition. The provision is based on the expected future cost of the refurbishment discounted to reflect current market assessments. Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue over-time, or at a point in time. Recognising of revenue over-time The Group is involved in a range of services relating to print, communications, creative and digital services, supply chain optimisation, inventory management, warehousing and logistics. Revenue is recognised on the rendering of services in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed based on surveys of work performed. Recognising of revenue at a point in time The Group recognises revenue of when it transfers control over a good or service to a customer. Customers obtain control when the goods are delivered to and have been accepted. Invoices are generated at that point in time. Invoices are usually payable within 30 days. (l) Leases At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contracts conveys the right to control the use of an identified asset for a period of time in exchange for consideration. (i) As a lessee At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contracts to each lease component on the basis of its relative stand- alone prices. The Group recognises a right-of-use asset and lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease 85 Annual Report 2021Notes to the consolidated financial statements – continued 3. Significant accounting policies (continued) liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case, the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. The Group determines its incremental borrowing rate by obtaining interest rates from external financing sources. Lease payments included in the measurement of the lease liability comprise the following: > fixed payments, including in-substance fixed payments; > variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; > amounts expected to be payable under a residual value guarantee; and > the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount 86 expected to be payable under a residual value guarantee, if the Group’s changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in- substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of- use asset has been reduced to zero. The Group presents separately right-of-use assets that do not meet the definition of investment property, and lease liabilities in statement of financial position. Short-term leases and leases of low-value assets The Group has elected not to recognise right-of-use assets and liabilities for leases of low-value assets and short-term leases, including IT equipment. The Group recognises lease payments associated with these leases as an expense on a straight-line basis over the lease term. (ii) As a lessor At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand- alone prices. When the Group acts as a lessor, it determines a lease inception whether such lease is a finance lease or an operating lease. To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset. When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease. If an arrangement contains lease and non-lease components, then the Group applies AASB 15 to allocate the consideration in the contract. Generally, the accounting policies applicable to the Group as a lessor in the comparative period IVE Group Limitedwere not different from AASB 16 except for the classification of the sub-lease. > taxable temporary differences arising on the initial recognition of goodwill. Finance income comprises net gain on financial assets at FVTPL and interest income on funds invested. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Finance costs comprise net loss on financial assets at FVTPL and interest expense on borrowings. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method. Foreign currency gains and losses are reported on a net basis as either finance income or finance cost depending on whether foreign currency movements are in a net gain or net loss position. (n) Government grants The Group recognises a conditional government grant relating to the JobKeeper Payment scheme in the consolidated statement of profit or loss as a credit to wages and salaries when the grant becomes receivable. (o) Income tax Income tax expense comprises current and deferred tax. Current and deferred tax are recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income. (i) Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. (ii) Deferred tax Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for: > temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss; or > temporary differences related to investments in associates to the extent that the Company is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future, and The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. (iii) Tax exposures In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made. (iv) Tax consolidation IVE Group Limited and its wholly owned Australian controlled entities formed a tax consolidated group on 16 December 2015. As a consequence, these entities are taxed as a single entity and the deferred tax asset and liabilities of these entities are offset in the consolidated financial statements. (p) Good and services tax (GST) Revenue, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the 87 Annual Report 2021Notes to the consolidated financial statements – continued 3. Significant accounting policies (continued) asset or as part of an item of expense. Receivables and payables are shown inclusive of GST. 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. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which is recoverable from, or payable to, the taxation authority is classified as operating cash flows. (q) Earnings per share The Group presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees. (r) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. It has been determined the Board of Directors is the chief operating decision maker, as they are ultimately responsible for allocating resources and assessing performance. (s) Adoption of new accounting standards and interpretations The Group has adopted all new and amended Australian Accounting Standards and Australian Accounting Standards Board (AASB) interpretations that are mandatory for the current reporting period and relevant to the Group, other than, the interpretation relating to ‘Configuration or Customisation Costs in a Cloud Computing Arrangement’, and these other standards and interpretations have not resulted in any material changes to the Group's financial report. 88 Configuration or Customisation Costs in a Cloud Computing Arrangement In April 2021, the International Financial Reporting Standards Interpretations Committee (IFRIC) issued a final agenda decision, Configuration or customisation costs in a cloud computing arrangement. The decision discusses whether configuration or customisation expenditure relating to cloud computing arrangements is able to be recognised as an intangible asset and if not, over what time period the expenditure is expensed. The Group's accounting policy has historically been to capitalise all costs related to cloud computing arrangements as intangible assets in the Statement of Financial Position. The adoption of this agenda decision could result in a reclassification of these intangible assets to either a prepaid asset in the Statement of Financial Position and/or an expense in the Statement of Profit or Loss and other Comprehensive Income, impacting both the current and/or prior periods presented.* As at 30 June 2021: > The Group has not adopted this IFRIC agenda decision as it has yet to complete its assessment of the impact. The Group expects to adopt this IFRIC agenda decision in its half year financial statements ending on 31 December 2021. > Intangible assets relating to cloud computing arrangements of approximately $1,000 thousand have been capitalised on the Statement of Financial Position and will be subject to this detailed assessment. In particular, the Group is determining how much of this amount relates to the build of a middle ware owned software that bridges the Group’s source and the cloud software systems. The cost relating the build of middle ware would remain as an intangible asset of the Group. *As it is impractical to determine the cumulative effect, at the beginning of the current period, of applying a new accounting policy to all prior periods, the Group shall apply the requirement of AASB 101 ‘Accounting Policies, Changes in Accounting Estimates and Errors’ to adjust the comparative information to apply the new accounting policy retrospectively after the detailed assessment is complete from the earliest date practicable being 1 July 2021. Any adjustment required from this change will be made to opening retained earnings. (t) New standards and interpretations not yet adopted There are no new or amended standards and interpretations that are expected to have a significant impact on the Group’s consolidated financial statements. IVE Group Limited4. Revenue The Group’s operations and main revenue streams are those described in Note 1. The tables below provide information on the Group’s revenue and contract balances derived from contracts with customers. (a) Disaggregation of revenue In thousands of AUD Products and services transferred at a point in time Services transferred over time 2021 608,816 47,641 656,457 2020 Restated* 626,638 50,724 677,362 *2020 has been restated to exclude discontinued operations, and to re-classify Distributions revenue of $49,979 thousand from over time to a point in time. The restated disclosure for Distribution has not affected any other section of the consolidated financial statements. (b) Contract balances In thousands of AUD Receivables, which are included in ‘Trade and other receivables’ Contract assets Contract liabilities 5. Other income In thousands of AUD Other income 6. Personnel expenses In thousands of AUD Wages and salaries Contributions to defined contribution plans Share-based payment expense 2021 100,530 1,056 8,263 2020 98,552 521 5,805 2021 724 2020 168 2021 153,239 12,468 265 165,972 2020 158,273 13,096 112 171,481 The Group has credited to wages and salaries $16,241 thousand relating to the JobKeeper Payment scheme (30 June 2020: $16,887 thousand). Refer Note 3(n). 89 Annual Report 2021Notes to the consolidated financial statements – continued 7. Expenses Included in the consolidated statement of profit or loss and other comprehensive income: In thousands of AUD Depreciation and amortisation Impairment of goodwill Acquisition and transaction costs Restructuring costs Note 15 8. Finance income and finance costs In thousands of AUD Interest income Derivative net change in fair value Net foreign exchange gain Finance income Interest expense Financial assets net change in fair value Net foreign exchange losses Finance costs Net finance costs 9. Taxes In thousands of AUD Current tax expense Current year Changes in estimates related to prior years Deferred tax expense Origination and reversal of temporary differences Total tax expense 90 2021 47,203 - 973 3,190 2021 202 315 - 517 (9,508) (3,100) (36) (12,644) (12,127) 2021 12,110 (173) 11,937 319 12,256 2020 45,455 40,000 3,570 8,697 2020 102 - 47 149 (10,812) - - (10,812) (10,663) 2020 Restated* 8,000 255 8,255 2,143 10,398 IVE Group LimitedNumerical reconciliation between tax expense and pre-tax accounting profit In thousands of AUD Profit (loss) before tax Tax using the Company’s domestic tax rate of 30% (Non-assessable income) / non-deductible expenses – (net) Changes in estimates related to prior years Other items (net) 2021 36,932 (11,080) 1,198 (173) 151 2020 Restated* (10,363) (3,109) 13,085 255 167 12,256 10,398 *2020 has been restated to exclude discontinued operations. Recognised deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following: In thousands of AUD Property, plant and equipment Right-of-use assets Inventories Intangible assets Lease liabilities Employee benefits Provisions Other items Assets 2021 - - - - Liabilities Net 2020 1,353 2021 (484) 2020 - 2021 (484) 2020 1,353 - - - (23,440) (29,146) (23,440) (29,146) (1,342) (1,510) (1,342) (1,510) (4,613) (5,934) (4,613) (5,934) 32,061 38,442 9,148 2,371 1,260 8,040 2,338 1,712 - - - - - - - - 32,061 38,442 9,148 2,371 1,260 8,040 2,338 1,712 Tax assets/(liabilities) 44,840 51,885 (29,879) (36,590) 14,961 15,295 Set off of tax (29,879) (36,590) 29,879 36,590 - - Net deferred tax assets 14,961 15,295 - - 14,961 15,295 91 Annual Report 2021Notes to the consolidated financial statements – continued 9. Taxes (continued) Movement in temporary differences during the year 2021 In thousands of AUD Balance 1 July 2020 Disposal of discontinued operations operation Acquisition through business combination Recognised in equity Recognised in profit or loss Balance 30 June 2021 Property, plant and equipment 1,353 Right-of-use assets (29,146) Inventories Intangible assets Lease liabilities Employee benefits Provisions Other items (1,510) (5,934) 38,442 8,040 2,338 1,712 15,295 (2) - - 143 - (211) - (1) (70) - - - - - 112 - - 112 - - - - - - - (57) (57) (1,835) (484) 5,706 (23,440) 168 1,178 (6,381) 1,207 33 (395) (319) (1,342) (4,613) 32,061 9,148 2,371 1,260 14,961 2020 In thousands of AUD Balance 1 July 2019 Initial application of AASB 16 Acquisition through business combination Recognised in equity Recognised in profit or loss Balance 30 June 2020 Property, plant and equipment 3,221 - - Right-of-use assets - (30,414) (4,873) Inventories Intangible assets Lease liabilities Employee benefits Provisions Other items (1,527) (4,922) - - - 40,314 7,919 5,386 3,459 13,536 - (3,684) (1,445) 4,771 - (2,242) 4,790 973 412 - (940) - - - - - - - 71 71 (1,868) 1,353 6,141 (29,146) 17 1,230 (6,662) (852) 224 (373) (1,510) (5,934) 38,442 8,040 2,338 1,712 (2,143) 15,295 The gross amount of capital losses for which no deferred tax asset is recognised is $2,054 thousand (2020: $654 thousand). There is no expiry date for these losses. 92 IVE Group Limited10. Cash and cash equivalents In thousands of AUD Bank balances Petty cash Cash and cash equivalents in the statement of cash flows Reconciliation of cash flows from operating activities In thousands of AUD Profit (loss) from continuing operations Profit (loss) from discontinued operations Non-cash items Depreciation, amortisation and impairment Impairment of goodwill Share based payment expense Derivative net change in fair value Interest expense Financial assets net change in fair value Restructuring costs Income tax expense Other income Cash items Acquisition in investing activities Net gain/(loss) on disposal of property, plant and equipment Change in trade and other receivables Change in inventories Change in current assets Change in prepayment Change in trade and other payables Change in provisions and employee benefits Cash generated from operating activities Income tax paid Net cash from operating activities 2021 106,468 6 2020 51,633 7 106,474 51,640 2021 24,676 628 47,203 - 265 (315) 630 3,100 - 12,256 675 570 439 90,127 735 12,461 1,773 (520) 13,178 1,076 118,830 (12,064) 106,766 2020 Restated* (20,761) 1,606 45,455 40,000 112 - 659 - 727 10,398 - - (683) 77,513 25,489 9,792 1,382 1,381 (23,082) (4,632) 87,843 (8,896) 78,947 93 Annual Report 2021Notes to the consolidated financial statements – continued 11. Trade and other receivables In thousands of AUD Current Trade receivables Allowance for impairment Derivative receivable Other receivables Lease receivable 12. Inventories In thousands of AUD Finished goods Work in progress Raw materials Allowance for inventory obsolescence 2021 2020 101,530 (2,008) 99,522 315 571 - 98,552 (2,220) 96,332 - 6,925 333 100,408 103,590 2021 3,368 13,578 28,198 45,144 (1,300) 43,844 2020 3,377 8,748 45,102 57,227 (960) 56,267 During the year, raw materials, consumables and changes in finished goods and work in progress recognised as cost of sales amounted to $340,465 thousand (2020: $364,382 thousand). During 2021 financial year an analysis of aged inventory and previous write-offs was performed which resulted in an increase in provision amounting to $340 thousand. 94 IVE Group Limited13. Property, plant and equipment In thousands of AUD Cost Leasehold improvements Plant and equipment restated* Capital work in progress Land and buildings Fixtures and fittings Total Balance at 1 July 2019 18,476 175,995 3,482 Initial application of AASB 16 (1,186) (31,610) - Adjusted balance 1 July 2019 17,290 144,385 3,482 Acquisitions through business combination Additions Transfer within PPE Disposals Balance at 30 June 2020 restated* 756 1,925 973 1,795 2,078 - (1,988) - - (2,078) - 19,971 147,243 1,404 Balance at 1 July 2020 19,971 147,243 1,404 - - - - - - - - Acquisitions through business combination Additions Transfer within PPE Disposals - 1,926 - 4,138 97 - - (97) - (1,412) 2,000 - - 1,619 199,572 - (32,796) 1,619 166,776 200 392 1,929 4,112 - - (1,988) 2,211 170,829 2,211 170,829 - 110 2,000 6,174 - - (1,412) Balance at 30 June 2021 21,897 150,066 1,307 2,000 2,321 177,591 Depreciation and impairment losses Balance at 1 July 2019 Initial application of AASB 16 Adjusted balance 1 July 2019 Depreciation for the year Disposals Balance at 30 June 2020 Balance at 1 July 2020 Depreciation for the year Disposals 5,225 (228) 4,997 1,915 58,293 (13,311) 44,982 12,519 - (1,645) 6,912 6,912 2,027 - 55,856 55,856 12,103 (502) Balance at 30 June 2021 8,939 67,457 - - - - - - - - - Carrying amounts At 1 July 2020 restated* At 30 June 2021 13,059 91,387 12,958 82,609 1,404 1,307 - - - - - - - - - - 2,000 776 64,294 - (13,539) 776 153 - 929 929 144 - 50,755 14,587 (1,645) 63,697 63,697 14,274 (502) 1,073 77,469 1,282 1,248 107,132 100,122 *The cost of PPE is held in capital work in progress account till it is available for use. A restatement has been made to transfer $2,660 thousand from this account to intangible asset (Note 15). This amount and capital work in progress was previously part of the plant and equipment account. Security At 30 June 2021 the carrying amount of total assets less the written down value of finance leased assets were held as security for bank facilities. 95 Annual Report 2021Notes to the consolidated financial statements – continued 14. Leases A. Leases as lessee The Group leases warehouses and factory facilities. The leases typically run up to a period of 10 years, with an option to renew the lease after that date. Lease payments are renegotiated periodically to reflect market rentals. Some leases provide for additional rent payments that are based on changes in local price indices. These leases were entered into many years ago as combined leases of land and buildings. One of the Group’s properties has been sub-let. The lease and sub-lease has expired in 2021. The Group also leases production equipment under a number of leases with contract terms of one to five years. The Group leases IT equipment with contract terms of one to three years. These leases are short term and/or leases of low-value items. The Group has elected not to recognise right-of-use assets and lease liabilities for these leases. Information about leases for which the Group is a lease is presented below. (i) Right-of-use assets The Group presents right-of-use assets that do not meet the definition of investment property in the statement of financial position. Right-of-use assets that meet the definition of investment property are presented within lease receivable. The carrying amounts of right-of-use assets are as below. Property, plant and equipment In thousands of AUD Property Production equipment 93,725 (17,801) 16,293 544 (879) 91,882 91,882 (18,513) 3,370 (193) 76,546 Balance as at 1 July 2019 Depreciation charge for the year Acquisitions through business combination Additions to right-of-use assets Disposals of right-of-use assets Balance as at 30 June 2020 Balance as at 1 July 2020 Depreciation charge for the year Additions to right-of-use assets Disposals of right-of-use assets Balance as at 30 June 2021 (ii) Amounts recognised in profit or loss In thousands of AUD Interest on lease liabilities Income from sub-leasing right-of-use assets credited within ‘expenses’ Expenses relating to short-term leases Expenses relating to leases of low-value assets, excluding short-term leases of low-value assets (iii) Amounts recognised in statement of cash flows In thousands of AUD Total cash outflow for leases 96 26,912 (6,897) - 3,651 - 23,666 23,666 (7,448) 3,464 - 19,682 2021 4,293 134 134 829 2021 33,636 Total 120,637 (24,698) 16,293 4,195 (879) 115,548 115,548 (25,961) 6,834 (193) 96,228 2020 5,042 120 207 819 2020 32,014 IVE Group Limited(iv) Extension options Some property leases contain extension options exercisable before the end of the non-cancellable contract period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement date whether it is reasonably certain to exercise the extension options. The Group reassesses whether it is reasonably certain to exercise the options if there is significant event or changes in circumstances within its control. B. Leases as lessor The Group leases out some its leased properties. All leases are classified as operating leases from a lessor perspective with the exception of a sub-lease, which the Group classified as a finance sub-lease. This finance sub-lease ended during April 2021. (i) Finance lease During the year, the Group recognised zero interest income on lease receivables (2020: $23 thousand). The following table sets out the maturity analysis of lease receivables, showing the undiscounted lease payments to be received after the reporting date. In thousands of AUD Less than one year Total undiscounted lease receivable Unearned finance income Net investment in the lease (ii) Operating lease 2021 2020 - - - - 333 333 - 333 The Group has classified some sub-leased property as operating leases, because they do not transfer substantially all of the risks and rewards incidental to the ownership of the assets. Rental income recognised by the Group during the year was $134 thousand (2020: $120 thousand). The following table sets out a maturity analysis of lease payments, showing the undiscounted lease payments to be received after the reporting date. In thousands of AUD Less than one year Between one to five years More than five years Total 2021 86 155 - 241 2020 134 241 - 375 97 Annual Report 2021Notes to the consolidated financial statements – continued 15. Intangible assets and goodwill In thousands of AUD Note Goodwill Computer software restated* Capital work in progress restated* Customer relationships Total Cost Balance at 1 July 2019 Acquisitions through business combination Other additions Balance at 30 June 2020 restated* Balance at 1 July 2020 Disposal Transfer to computer software Other additions Balance at 30 June 2021 Amortisation and impairment losses Balance at 1 July 2019 Amortisation for the year Impairment losses Balance at 30 June 2020 Balance at 1 July 2020 Amortisation for the year Balance at 30 June 2021 Carrying amounts At 1 July 2020 restated* At 30 June 2021 143,617 11,038 13,061 - 808 4,212 156,678 16,058 156,678 (9,984) 16,058 (487) 33 824 - 2,066 2,890 2,890 - 1,454 (1,454) 28,616 184,095 7,653 21,522 - 6,278 36,269 211,895 36,269 (478) 211,895 (10,949) - - - 4,001 - 146,694 4,001 21,026 - - 40,000 40,000 40,000 - 40,000 116,678 106,694 8,355 2,245 - 10,600 10,600 3,110 13,710 5,458 7,316 - 1,436 35,791 204,947 - - - - - - - - - 12,128 4,098 - 16,226 16,226 3,926 20,152 20,483 6,343 40,000 66,826 66,826 7,036 73,862 2,890 1,436 20,043 15,639 145,069 131,085 *2020 has been restated to include capital work in progress transferred from PPE (Note 13) of $2,660 thousand relating to computer software. For the year ended 30 June 2021 no impairment of goodwill has been recognised (2020: $40,000 thousand). Impairment testing for cash-generating units containing goodwill The Group completes impairment testing for eight CGUs/groups of CGUs. The carrying amount of any goodwill summarised by operating division is set out below: In thousands of AUD Production (Franklin WEB CGU) Production & Distribution (group of CGUs) Data-Driven Communications (group of CGUs) 2021 29,141 39,047 38,506 106,694 2020 29,141 39,047 48,490 116,678 98 IVE Group LimitedGoodwill impairment test is performed by applying value in use calculations. The calculations for all CGU’s use cash flow projections based on budgeted EBITDA approved by the Board. The EBITDA has been developed using past experience and industry knowledge. A post-tax WACC rate of 7.6% to 8.9% (2020: 8.56% to 11.5%) has been used based on the size and nature of each CGU. A 1% to 2% (2020: 1% to 2%) growth allowance in the 5 year cash flow projections and terminal growth has been used based on management’s estimate of the long-term compound EBITDA growth rate, consistent with the assumptions that a market participant would make. Whilst the near-term future economic consequences of COVID-19 remain uncertain, the experience to date of the impacts of COVID-19 has been taken into consideration in the preparation of the projected cash flows for the FY22 budget and the business plans for FY23 to terminal value. As at 30 June 2021, the amount by which the estimated recoverable amount exceeded the carrying amount for the CGU’s impaired in the previous year were: 'Franklin Web' CGU $41,014 thousand, and 'Distribution' CGU $14,046 thousand . Management has identified that a reasonably possible change in assumptions could cause the carrying amount to exceed the recoverable amount. An increase in WACC of 0.5% combined with a decrease of forecast EBITDA over the 5 year projection period of 18% for 'Franklin WEB' and 39% for 'Distribution' CGU would reduce the recoverable amount to be equal to the carrying amount. There are no other reasonable possible changes in assumptions that would give rise to impairment 16. Trade and other payables In thousands of AUD Current Trade payables Accrued expenses Forward exchange contracts used for hedging 17. Loans and borrowings In thousands of AUD Current Equipment finance Non-current Bank loan Equipment finance Bank loan 2021 2020 64,909 26,810 1,076 92,795 59,264 24,205 559 84,028 2021 2020 2,791 3,102 159,424 7,620 167,044 159,095 10,760 169,855 As at 30 June 2021, the amended Syndicated Facilities Agreement has a carrying amount of $159,424 thousand and face value of $160,000 thousand (2020: carrying amount of $159,095 thousand and face value of $160,000 thousand). These facilities have an interest rate of BBSY plus a margin, and mature on 5 April 2023. The Group was in compliance with all loan covenants as at 30 June 2021. 99 Annual Report 2021Notes to the consolidated financial statements – continued 18. Employee benefits In thousands of AUD Current Liability for long service leave Liability for annual leave Non-current Liability for long service leave 19. Provisions In thousands of AUD Restructuring Balance at 1 July 2020 Provisions made during the year Provisions reversed during the year Balance at 30 June 2021 Current Non-current 147 - (147) - - - - 2021 2020 8,931 9,919 18,850 6,568 25,418 Make good 4,421 495 (171) 4,745 - 4,745 4,745 8,150 8,846 16,996 6,700 6,700 Total 4,568 495 (318) 4,745 - 4,745 4,745 100 IVE Group Limited20. Share-based payments During the year ended 30 June 2021, the Company granted Performance Share Rights (Rights) under the Equity Incentive Plan (EIP). The Rights are an entitlement to receive fully paid ordinary IVE Group Limited Shares on a one-for-one basis. Further details on the Rights are described below. Type of arrangement Date of grant Number granted Contractual life Vesting conditions Weighted average fair value Valuation methodology Expected dividend Other key valuation assumptions Share price at valuation date Expected volatility Risk free interest rate Dividend yield Senior Leadership Team Award 24 November 2020* 1,884,613 3 years and 2 months The Rights are subject to the following Performance Conditions: sixty percent of the Rights are referenced against achieving Earnings Per Share Target (EPS), and forty percent are referenced against achieving Relative Shareholder Return (TSR) target. The performance period is 1 July 2020 to 30 June 2023 inclusive. The vesting date is expected to be on or soon after the approval of IVE’s 2023 Annual Financial Report. $0.52 The EPS target was calculated using a risk-neutral assumption, whereas the TSR target has been valued using a Monte Carlo simulation approach. Holders of performance share rights are not entitled to receive dividends prior to vesting. $0.79 45% 0.23% 10.6% *Share rights issued to Directors required shareholder approval. This occurred at the Group’s 2020 Annual General Meeting. During the year, 1,885 thousand Rights were granted (2020: 647 thousand), 159 thousand lapsed (2020: 98 thousand), and 3,061 thousand remain outstanding (2020: 1,335 thousand). Total expense relating to share-based payments has been disclosed in Note 6 of this consolidated financial statements. 101 Annual Report 2021Notes to the consolidated financial statements – continued 21. Capital and reserves Issued and paid up capital (In thousands of AUD) 142,756,952 (June 2020: 148,207,285) ordinary shares fully paid Movement in ordinary share capital Date Details 1-Jul-19 2-Sep-19 30-Jun-20 1-Jul-20 Opening balance Issue of shares under the Equity Incentive Plan Closing balance Opening balance 21 December 2020 to 30 June 21 Share buyback (including transaction costs) 2021 149,066 2020 156,502 Number of shares 148,179,157 Issue price 28,128 $1.21 148,207,285 148,207,285 (5,450,333) highest price paid: $1.59 / lowest price paid $1.23 Total $’000 156,468 34 156,502 156,502 (7,436) 30-Jun-21 Closing balance 142,756,952 149,066 Dividends On 25 August 2021, the directors have declared a fully franked dividend of 7.0 cents per share to be paid on 14 October 2021 to shareholders on the register at 15 September 2021. The final dividend payout is $9,993 thousand (2020: nil). A liability has not been recognised as the dividend was declared after the reporting date. The following dividends were declared and paid during the year ended 30 June 2021: In thousands of AUD 2021 Interim 2020 ordinary Cents per share Total amount Date of payment 7.0 10,282 15 April 2021 On 15 April 2021 a dividend of 7 cents per share (100% franked) was declared and paid by the directors. The dividend was paid out of opening retained profits and profits earned up to that date. The following dividends were declared and paid during the year ended 30 June 2020: In thousands of AUD 2020 Final 2019 ordinary Dividend franking account In thousands of AUD Amount of franking credits available to shareholders of IVE Group Limited for subsequent financial years Cents per share Total amount Date of payment 7.7 11,412 24 October 2019 2021 16,441 2020 8,839 The ability to utilise the franking credits is dependent upon the ability to declare dividends. 102 IVE Group Limited22. Earnings per share In dollars Basic earnings (loss) per share Diluted earnings (loss) per share Basic earnings (loss) per share – continuing operations Diluted earnings (loss) per share – continuing operations In thousands Earnings 2021 0.20 0.20 0.17 0.17 2020 Restated* (0.14) (0.14) (0.14) (0.14) Profit (loss) after income tax attributable to owners of the Company used in calculating basic and diluted earnings per share 29,481 (20,189) Profit (loss) after income tax attributable to owners of the Company used in calculating basic and diluted earnings per share – continuing operations Weighted average number of ordinary shares 24,676 (20,761) Weighted average number of ordinary shares used in calculating basic earnings per share 146,851 148,202 Weighted average number of ordinary shares used in calculating diluted earnings per share 147,734 148,635 *2020 has been restated to exclude discontinued operations. 23. Acquisitions On 30 October 2020, IVE acquired selected assets of Australian Community Media’s (ACM) web offset printing operation in Mandurah, Western Australia. It is being integrated into IVE’s Production & Distribution business. The following summarises the major classes of consideration transferred, and the provisionally recognised amounts of assets acquired and liabilities assumed at the acquisition date: In thousands of AUD Consideration transferred Initial cash paid Completion adjustment received* Identifiable assets acquired and liabilities assumed Inventories Property, plant and equipment Deferred tax assets/(liabilities) Employee benefits Goodwill on acquisition Total 2,000 (223) 1,777 37 2,000 112 (372) 1,777 - *The completion adjustment includes working capital and balance sheet date adjustments. These adjustments are made in the ordinary course of a transaction to reflect the difference between normalised expectations around balance sheet items at the time of signing and actual balances on transaction completion. 103 Annual Report 2021Notes to the consolidated financial statements – continued 23. Acquisitions (continued) Management have measured the assets and liabilities acquired at fair value. The fair value of property, plant and equipment, and deferred tax assets is final. If new information obtained within one year from the acquisition date about facts and circumstances that existed at the acquisition date identifies adjustments to the above amounts, or any additional provisions that existed at the acquisition date, then the accounting for the acquisition will be revised. The business of ACM is being integrated into IVE. The profit before tax contribution of these acquisitions are indistinguishable from existing business unit results. On this basis a disclosure of profit before tax is impracticable. The total revenue since acquisition is $5,734 thousand. Individually this business is considered immaterial. If this acquisition had occurred from beginning of the reporting period the combined Group revenue would have been estimated at $659,888 thousand. The Group has not estimated the profit before tax for the reasons provided above. Acquisition-related costs totaling $78 thousand has been included in Other expenses in the Group’s consolidated statement of profit or loss and other comprehensive income. 24. Operating segments The Group has identified one operating segment (whole of business) based on the internal reports that are reviewed and used by the Board (Chief Operating Decision Maker or 'CODM') in assessing performance and in determining the allocation of resources. The Board reviews the internal report on a monthly basis. The key measure of performance used by the CODM to assess performance is earnings before interest, tax, depreciation and amortisation (EBITDA). A reconciliation of the reportable segment's EBITDA to profit before income tax expense is shown below. Profit and loss, total assets and liabilities for the reportable segment is consistent with the primary statements included in this consolidated interim financial report. In thousands of AUD EBITDA Depreciation, amortisation and impairment Net finance costs Profit (loss) before income tax *2020 has been restated to exclude discontinued operations. 2021 96,262 (47,203) (12,127) 36,932 2020 Restated* 85,755 (85,455) (10,663) (10,363) 104 IVE Group Limited25. Financial risk management and financial instruments Overview The Group has exposure to the following risks from its use of financial instruments: a. credit risk b. liquidity risk c. market risk This note presents information about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. Risk management framework The Company's board of directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The CFO is responsible for developing and monitoring the Group’s risk management policies. He reports regularly to the Board of Directors on its activities. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations. The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. Credit risk Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers. Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: In thousands of AUD Cash and cash equivalents Trade and other receivables Financial assets Note 10 11 Carrying amounts 2021 106,474 100,408 1,762 2020 51,640 103,590 - 208,644 155,230 105 Annual Report 2021Notes to the consolidated financial statements – continued 25. Financial risk management and financial instruments (continued) Trade receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated the industry under the current economic environment. Additional allowances have been made for this uncertainty. The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of services are made to customers with an appropriate credit history based on enquiries through the Group’s Finance department. Ongoing customer credit performance is monitored on a regular basis. The aging of the trade and other receivables at the end of the reporting period that were not impaired was as follows: In thousands of AUD Neither past due nor impaired Past due 1–30 days Past due 31–90 days Past due 91 days and over Carrying amounts 2021 60,345 27,405 10,527 3,824 102,101 2020 58,711 29,566 8,527 9,006 105,810 The movement in the allowance for impairment in respect of receivables during the year was as follows: In thousands of AUD Balance at beginning of the year Assumed in a business combination in current year Impairment loss recognised Amounts written off Balance at end of year 2021 2,220 - 524 (736) 2,008 2020 1,814 151 1,247 (992) 2,220 106 IVE Group LimitedLiquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group manages working capital and forecasts cash flow to meet its financial obligations. The Group also has undrawn facility of $30,000 (2020: $30,000) for general corporate and working capital purpose. The facility will mature on 5 April 2023. The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted, and include estimated interest payments: 30 June 2021 In thousands of AUD Non-derivative financial liabilities Trade and other payable Lease liabilities Equipment finance Bank loans Derivative financial liabilities Forward exchange contracts used for hedging 30 June 2020 In thousands of AUD Non-derivative financial liabilities Trade and other payable Lease liabilities Equipment finance Bank loans Derivative financial liabilities Forward exchange contracts used for hedging Contractual cash flows Carrying amount Total 12 mths or less 1-5 years More than 5 years 91,719 91,719 119,760 129,725 10,411 11,051 159,424 168,414 91,719 27,937 3,194 3,056 - 92,723 7,857 165,358 - 9,065 - - 381,314 400,909 125,906 265,938 9,065 1,076 1,076 1,076 1,076 1,076 1,076 - - - - Contractual cash flows Carrying amount Total 12 mths or less 1-5 years More than 5 years 83,469 83,469 142,427 160,560 13,862 14,753 159,095 172,917 83,469 34,343 3,332 3,441 - - 104,164 22,053 11,421 169,476 - - 398,853 431,699 124,585 285,061 22,053 559 559 559 559 559 559 - - - - 107 Annual Report 2021Notes to the consolidated financial statements – continued 25. Financial risk management and financial instruments (continued) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates, equity prices and interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return. Currency risk The Group is exposed to currency risk to the extent that there is a mismatch between the currencies in which purchases are denominated and the respective functional currencies of Group entities. The functional currency of the Group is the Australian dollar (AUD). The currencies in which these transactions are primarily denominated are Euro, US dollars and AUD. During the year, 3% (2020: 9%) of total group purchases were made in foreign currencies. The Group has used forward exchange contracts to hedge its currency risk, most with a maturity of less than one year from the reporting date. These forward exchange contracts has been designated as a cash flow hedge, and have a zero fair value at the reporting date (2020: $6 thousand). The Group has performed effectiveness testing and recognised the full fair value amount net of deferred tax of zero thousand in other comprehensive income (2020: $4 thousand). Based on the results of the test no in-effectiveness has been recognised in the profit or loss. Exposure to currency risk The summary quantitative data about the Group’s exposure to currency risk as reported to the management of the Group is as follows: In thousands of AUD Equipment finance loan Next three months forecast purchases Forward exchange contracts Net exposure Sensitivity analysis As at 30 June 2021 As at 30 June 2020 Euro 6,860 - (6,860) - NZD - 1 (1) - Euro 8,820 1,346 (10,166) - USD - 1 (1) - The impact of exchange rate movements on profit is subject to other variables including movement in market prices. The impact of exchange rate movements on profit and loss is not material. Interest rate risk The Group has entered into interest rate swap contracts to minimise its variable interest exposure on bank loans. As at 30 June 2021, after taking into account the effect of the interest rate swaps $94,424 thousand of the carrying amount of the bank loan is exposed to variable rates. The interest rate swap has been designated as a fair value hedge. Its fair value at reporting date was $315 thousand (2020: nil). 108 IVE Group LimitedExposure to interest risk At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was: In thousands of AUD Fixed rate instruments Financial liabilities – leases liabilities Financial liabilities – equipment finance Effect of interest rate swaps – notional amount Variable rate instruments Financial assets – bank balances Financial liabilities – bank loans Effect of interest rate swaps – notional amount Carrying amounts 2021 2020 (119,760) (10,411) 65,000 (65,171) 106,474 (160,000) 65,000 11,474 (142,427) (13,862) - (156,289) 51,633 (160,000) - (108,367) Fair value sensitivity analysis for fixed rate instruments The Group accounts for any fixed rate financial assets and liabilities at fair value through profit or loss. Cash flow sensitivity analysis for variable rate instruments A change of 10 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by $11 thousand (2020: $108 thousand). This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis as 2020. 109 Annual Report 2021Notes to the consolidated financial statements – continued 25. Financial risk management and financial instruments (continued) Measurement of fair values The table below gives information on the valuation technique and unobservable inputs of financial assets or liabilities categorised as a Level 2 in the fair value hierarchy. Type Valuation technique Financial asset Interest rate swaps Forward exchange contracts The valuation is based on market share price of the investee after taking into account the Group’s economic interest, and lack of voting rights and marketability. The fair value is calculated using the present value of the estimated future cash flow based on observable yield curves. The fair value is determined using quoted forward exchange rates and present value of estimated future cash flow based on observable yield curves. Fair values versus carrying amounts Significant unobservable inputs The Group’s economic interest, and lack of voting rights and marketability. Relationship between the fair value and unobservable inputs The unobservable inputs are applied as a fixed percentage discount to the fair value. Not applicable Not applicable Not applicable Not applicable As at the reporting date, the carrying value of other financial assets and liabilities as at the end of the financial year are considered to approximate their fair value. Capital management The primary objective of the Group's capital management is to maintain a strong capital base through cash flow management in order to sustain future development of the business and maximise shareholder value. There were no changes in the Group's approach to capital management during the year. The Group is subject to externally imposed capital requirements (being financial loan covenants – refer to Note 17). 110 IVE Group Limited26. Capital commitments As at 30 June 2021, the Group has $950 thousand commitment to purchase plant and equipment (2020: nil). 27. Related parties Key management personnel compensation Key management personnel compensation comprised the following: In AUD Short-term employee benefits Post-employee benefits Share-based payments Related party transactions and outstanding balances In AUD 2021 2020 3,249,298 2,325,354 113,598 163,752 106,342 124,758 3,526,648 2,556,454 Transaction value year ended 30 June 2021 Transaction value year ended 30 June 2020 Caxton Property Developments Pty Ltd – sales 3,606 - Paul Selig (director of the Company), holds positions in Caxton Property Developments Pty Ltd that results in him having control or significant influence over the financial or operating policies of this entity. During the year ending 30 June 2021, the Group sold goods and services to Caxton Property Developments Pty Ltd. The terms and conditions of the transactions above were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to other third parties on an arm’s length basis. 111 Annual Report 2021Notes to the consolidated financial statements – continued 28. Group entities Ultimate parent entity IVE Group Limited Controlled entities Caxton Print Group Holdings Pty Limited Caxton Print Group Pty Limited IVE Group Australia Pty Limited IVE Group Victoria Pty Limited Task 2 Pty Limited Pareto Fundraising Pty Limited Pareto Phone Pty Limited James Bennett & Associates Pty Limited IVE Employment (Australia) Pty Limited IVE Employment (Victoria) Pty Limited Taverners No. 13 Pty Limited AIW Printing (Aust) Pty Limited AIW Printing Unit Trust IVE Group Asia Limited Guangzhou IVE Trading Company Limited IVE Singapore Pte Limited SEMA Holdings Pty Ltd SEMA Infrastructure Pty Ltd SEMA Operations Pty Ltd John W Gage & Co Pty Ltd IVE Distribution Pty Ltd Lasoo Pty Ltd Reach Media New Zealand Limited Ownership 2021 % 2020 % 100 100 100 100 100 100 - 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 All entities are incorporated in Australia except for: IVE Group Asia Limited (incorporated in Hong Kong, China), Guangzhou IVE Trading Company Limited (incorporated in China), IVE Singapore Pte Limited (incorporated in Singapore), and Reach Media New Zealand Limited (incorporated in New Zealand). 112 IVE Group Limited29. Parent entity disclosures As at, and throughout, the financial year ending 30 June 2021 the parent entity of the Group was IVE Group Limited. In thousands of AUD Result of parent entity Profit/(loss) for the year Other comprehensive income Total comprehensive income for the year Financial position of parent entity at year/period end Current assets Total assets Current liabilities Total liabilities Total equity of the parent entity comprising of: Share capital Other equity reserve Accumulated losses (net of dividend paid) Total equity 2021 (0.2) - (0.2) 574 47,887 171 171 280,378 (146,662) (86,000) 47,716 2020 (0.4) - (0.4) 31 65,504 104 104 287,781 (146,662) (75,719) 65,400 IVE Group Limited was incorporated on 10 June 2015, but did not undertake any trading activities until its listing (IPO) on the Australian Stock Exchange (ASX) on 16 December 2015 where it also contemporaneously acquired Caxton Print Group Holdings Pty Ltd (CPGH). An internal restructure took place resulting in IVE Group Limited becoming the holding company of CPGH. The Directors elected to account for the restructure as a capital re-organisation rather than a business combination. In the Directors' judgement, the continuation of the existing accounting values is consistent with the accounting that would have occurred if the assets and liabilities had already been in a structure suitable to IPO and most appropriately reflects the substance of the internal restructure. As such, the consolidated financial statements of the new IVE Group have been presented as a continuation of the pre - existing accounting values of assets and liabilities in CPGH's financial statements. Accordingly, the other equity reserve represents the difference between the fair value of the share capital at the date of the IPO and historical book values of the assets and liabilities of the Group. 30. Subsequent events Aside from below, there have been no other events subsequent to balance date which would have a material effect on the Group's consolidated financial statements at 30 June 2021. On 6 August 2021, the Group voluntarily repaid $50,000 thousand, and cancelled $35,000 thousand of the available facility. The Group also terminated an interest rate swap hedge entered earlier in the year. 113 Annual Report 2021Notes to the consolidated financial statements – continued 31. Auditors' remuneration In AUD Audit services Auditors of the Company – KPMG Audit and review of financial reports Other services Auditors of the Company – KPMG Taxation services Transaction services 2021 2020 391,460 391,460 403,220 403,220 116,829 90,950 207,779 52,867 681,400 734,267 32. Deed of cross guarantee Pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785 the wholly-owned subsidiaries listed below are relieved from the Corporations Act 2001 requirements for preparation, audit and lodgement of financial reports, and directors’ reports. It is a condition of the Instrument that the Company and each of the subsidiaries enter into a Deed of Cross Guarantee. The effect of the Deed is that the Company guarantees to each creditor payment in full of any debt in the event of winding up of any of the subsidiaries under certain provisions of the Corporations Act 2001. If a winding up occurs under other provisions of the Act, the Company will only be liable in the event that after six months any creditor has not been paid in full. The subsidiaries have also given similar guarantees in the event that the Company is wound up. The Company and its subsidiaries amended its Deed of Cross Guarantee on 30 October 2020. The subsidiaries subject to the Deed are: a. Caxton Print Group Holdings Pty Limited b. c. IVE Group Australia Pty Limited IVE Group Victoria Pty Limited d. Caxton Print Group Pty Limited e. Task 2 Pty Limited f. Pareto Fundraising Pty Limited g. James Bennett & Associates Pty Limited h. IVE Employment (Australia) Pty Limited i. j. IVE Employment (Victoria) Pty Limited Taverners No. 13 Pty Limited k. AIW Printing (Aust) Pty Limited l. SEMA Holdings Pty Limited m. SEMA Infrastructure Pty Limited n. SEMA Operations Pty Limited o. John W. Gage & Co Pty Limited p. IVE Distribution Pty Limited A consolidated statement of profit or loss and other comprehensive income and consolidated statement of financial position, comprising the Company and controlled entities which are a party to the Deed, after eliminating all transactions between parties to the Deed of Cross Guarantee, for the year ended 30 June 2021 is not materially different to that set out on pages 74 and 77 of this financial report. 114 IVE Group Limited33. Discontinued operation On 30 October 2020, the Group sold its telefundraising business (Pareto Phone Pty Ltd). In the previous financial year the Group closed down its Asian operation. (i) Results of discontinued operation In thousands of AUD Note 2021 Revenue Cost of sales Gross profit Production expenses Administrative expenses Results from operating activities Finance income Net gain on sale of discontinued operation Profit before tax Income tax expense Profit from discontinued operations *2020 has been restated to include telefundraising. 4,695 (109) 4,586 (1,649) (2,033) 904 - 4,177 5,081 (276) 4,805 2020 Restated* 15,057 (629) 14,428 (6,534) (6,304) 1,590 16 1,606 (1,034) 572 The profit from the discontinued operation of $4,805 thousand (2020: loss of $572 thousand) is attributable entirely to the owners of the Company. (ii) Cash flows from (used in) discontinued operation In thousands of AUD Net cash used in operating activities Net cash from investing activities 2021 628 15,165 2020 1,979 - 115 Annual Report 2021Notes to the consolidated financial statements – continued 33. Discontinued operation (continued) (iii) Net gain on sale of discontinued operation (Telefundraising) In thousands of AUD Consideration received Initial cash received Completion adjustment paid* Assets and liabilities disposed Cash Receivables Prepayment Deferred tax assets Other assets Property, plant and equipment Intangible asset Trade creditors Employee benefits Provisions Costs incurred Net gain on sale of sale of discontinued operation Total 16,500 (250) 16,250 (467) (1,134) (102) (70) (98) (213) (10,947) 231 1,302 44 (11,454) (619) 4,177 *The completion adjustment includes working capital and balance sheet date adjustments. These adjustments are made in the ordinary course of a transaction to reflect the difference between normalised expectations around balance sheet items at the time of signing and actual balances on transaction completion. 34. Contingencies The Group has filed a claim for compensation against one of its advisors for damages incurred in relation to advice given regarding its financial asset acquisition and subsequent write down. The claim is ongoing as at the date of this report. Further disclosure of the matter could prejudice the claim. 116 IVE Group LimitedIVE Group Limited Directors’ Declaration 1 In the opinion of the directors of IVE Group Limited (the Company): (a) the consolidated financial statements and notes, set out on pages 74 to 116, are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. 2 There are reasonable grounds to believe that the Company and the group entities identified in Note 28 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those group entities (refer Note 32) pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785. 3 The directors draw attention to Note 2 to the consolidated financial statements, which includes a statement of compliance with International Financial Reporting Standards. Signed in accordance with a resolution of directors. Geoff Selig Director Dated at Sydney this 25th day of August 2021 117 Annual Report 2021118 IVE Group LimitedIndependent Auditor’s Report To the shareholders of IVE Group Limited Independent Auditor’s Report Report on the audit of the Financial Report To the shareholders of IVE Group Limited Opinion Report on the audit of the Financial Report We have audited the Financial Report of IVE Group Limited (the Company). Opinion In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: We have audited the Financial Report of  giving a true and fair view of the IVE Group Limited (the Company). Group’s financial position as at 30 In our opinion, the accompanying Financial June 2021 and of its financial Report of the Company is in accordance performance for the year ended on with the Corporations Act 2001, including: that date; and   giving a true and fair view of the complying with Australian Accounting Group’s financial position as at 30 Standards and the Corporations June 2021 and of its financial Regulations 2001. performance for the year ended on that date; and The Financial Report comprises:  Consolidated Statements of financial position as at 30 June 2021; The Financial Report comprises:  Consolidated Statements of profit or loss and other comprehensive income, Consolidated statements of changes in equity, and Consolidated statements of cash flows for the year then ended;  Consolidated Statements of financial position as at 30 June 2021;  Notes including a summary of significant accounting policies; and  Directors’ Declaration.  Consolidated Statements of profit or loss and other comprehensive income, Consolidated statements of changes in equity, and Consolidated statements of cash flows for the year then ended; The Group consists of the Company and the entities it controlled at the year-end or from time to time during  Notes including a summary of significant accounting the financial year. policies; and  Directors’ Declaration.  Basis for opinion complying with Australian Accounting Standards and the Corporations Regulations 2001. We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. Basis for opinion We are independent of the Group in accordance with the Corporations Act 2001 and the ethical We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with the Code. 103 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 103 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. 119 Annual Report 2021 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 period. This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on this matter. Assessment of carrying value of goodwill Refer to Note 15 ‘Intangible assets and goodwill’ to the Financial Report (Goodwill: $107m) The key audit matter How the matter was addressed in our audit A key audit matter for us was the Group’s annual testing of goodwill for impairment, given the size of the balance (being 19% of total assets) and the significantly higher estimation uncertainty continuing from the business disruption impact of the COVID-19 global pandemic. Certain conditions impacting the Group increased the judgement applied by us when evaluating the evidence available. We focussed on the significant forward-looking assumptions the Group applied in their value in use models, including:  Assessment of the Cash Generating Units (CGUs). The Group had several operating businesses and product lines during the year, necessitating our consideration of the Group’s determination of CGUs, based on the smallest group of assets that generate largely independent cash inflows;  Forecast operating cash flows, growth rates and terminal growth rates – the Group has experienced significant business disruption, as a result of COVID-19 in addition to continuing competitive market conditions and the pace of technological change and digital disruption in the printing industry;  Assessment of the discount rates. These are complicated in nature and vary according to the conditions and environment the specific CGU is subject to from time to time; and Our procedures included:  We considered the Group’s determination of their CGUs based on our understanding of the Group’s business and how independent cash inflows were generated, against the requirements of the accounting standards;  We analysed the impact of the Group’s internal reporting to assess their monitoring and management of activities, and the consistency of the allocation of goodwill to CGUs;  We considered the appropriateness and application of the value in use method applied by the Group to perform the annual test of goodwill for impairment against the requirements of the accounting standards;  We assessed the integrity of the value in use models used, including the accuracy of the underlying calculations and formulas;  We met with management to understand the impact of COVID-19 to the Group and impact of government response programs to the FY21 results;  We agreed the Group’s cash flow forecasts, including capital expenditure to the Board approved budget and strategy;  We assessed the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models; 120 104 IVE Group Limited  Level of disclosure of the key assumptions used in the Group’s valuation models. The Group uses complex models to perform their annual testing of goodwill for impairment. The models are largely manually developed, use adjusted historical performance, and a range of internal and external sources as inputs to the assumptions. The Group have not always met prior forecasts, raising our concern for reliability of current forecasts. Complex modelling using forward-looking assumptions tends to be prone to greater risk for potential bias, error and inconsistent application. These conditions necessitate additional scrutiny by us, in particular to address the objectivity of sources used for assumptions, and their consistent application. Given the nature of these judgments, we involved our valuation specialists and senior staff with experience in the industry and the Group’s business in assessing this key audit matter.  We assessed the Group’s underlying methodology and documentation for the allocation of corporate costs to the forecast cash flows contained in the value in use model, for consistency with our understanding of the business and the criteria in the accounting standards;  We considered the sensitivity of the models by varying key assumptions, such as forecast growth rates, terminal growth rates and discount rates, within a reasonably possible range. We considered the interdependencies of key assumptions when performing the sensitivity analysis and what the Group consider to be reasonably possible. We did this to identify those CGUs at higher risk of impairment and those assumptions at higher risk of bias or inconsistency in application and to focus our further procedures;  We challenged the Group’s significant forecast cash flow and growth assumptions in light of the expected continuation of unprecedented uncertainty of business disruption and impacts of the COVID-19 global pandemic in addition to continued competitive market conditions and digital disruption. We compared forecast growth rates and terminal growth rates to authoritative published studies of industry trends and expectations and considered differences for the Group’s operations. We used our knowledge of the Group, business and customers, and our industry experience. We sourced authoritative and credible inputs from our specialists and market advisors;  We checked the consistency of the growth rates to the Group’s revised plans and our experience regarding the feasibility of these in the printing industry and the COVID-19 economic environment in which they operate;  We assessed the impact of technology and market changes on the Group’s key assumptions, specifically the continued market for catalogues and other printed materials as a marketing and communications tool, for indicators of bias and inconsistent application, using our industry knowledge and information published by reputable sources;  We assessed the impact of technology and market changes on the Group’s key assumptions, specifically the continued market for catalogues and other printed materials as a 105 121 Annual Report 2021 marketing and communications tool, for indicators of bias and inconsistent application, using our industry knowledge and information published by reputable sources;  Working with our valuation specialists we independently developed a discount rate range considered comparable using publicly available market data for comparable entities, adjusted by risk factors specific to the Group and the industry it operates in; and  We assessed the disclosures in the financial report using our understanding of the issue obtained from our testing and against the requirements of the accounting standards. Other Information Other Information is financial and non-financial information in IVE Group Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Operating and Financial Review, Director’s Report and Remuneration Report. The Chairman’s Report and Chief Executive Officer’s Report are expected to be made available to us after the date of the Auditor’s Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinions In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we 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. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. 122 106 IVE Group Limited Responsibilities of the Directors for the Financial Report The Directors are responsible for:  preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001;  implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and  assessing the Group’s ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they 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 objective is:   to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report. 107 123 Annual Report 2021 Report on the Remuneration Report Opinion Directors’ responsibilities In our opinion, the Remuneration Report of IVE Group Limited for the year ended 30 June 2021, complies with Section 300A of the Corporations Act 2001. The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 34 to 52 of the Directors’ report for the year ended 30 June 2021. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Daniel Camilleri Partner Sydney 25 August 2021 124 108 IVE Group Limited ASX additional information Additional information required by the Australian Securities Exchange (ASX) and not disclosed elsewhere in the Annual Report is set out below. The shareholder information below is correct as at 21 July 2021. IVE Group Limited shares are traded on the ASX under the code ‘IGL’. Share registry Registered office Principal Place of Business Link Market Services Level 12, 680 George Street Sydney NSW 2000 Phone: +61 1300 554 474 Level 3, 35 Clarence Street Sydney NSW 2000 Phone: +61 2 8020 4400 Building B, 350-374 Parramatta Road Homebush NSW 2140 Phone: +61 2 8020 4400 Substantial shareholders of ordinary shares (as reported to the ASX)* Name Caxton Print Holdings Pty Ltd as trustee for the Selig Family Trust No. 5** Castle Point Funds Management Anthony Young Ryan Young Number of Shares Held 11,210,231 9,428,189 8,990,160 8,940,738 % 8.02 6.36 6.1 6.0 * The above table includes a correction removing COPIA Investment Partners, who ceased to be a substantial holder in September 2017. ** The above disclosure is presented in accordance with ASX Listing Rule 4.10. As at 21 July, 2021, Caxton Print Holdings Pty Ltd as trustee for the Selig Family Trust No. 5, held a total of 12,860,231 fully paid ordinary shares (9.01%) Distribution of shareholders and shareholdings – ordinary shares There are 142,756,952 ordinary shares on issue held by 3,843 shareholders. Range 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total Ordinary Shares 319,070 3,353,168 5,325,246 38,243,036 95,516,432 % 0.22 2.35 3.73 26.79 66.91 No. of holders 562 1,184 662 1,289 146 % 14.62 30.81 17.23 33.54 3.80 142,756,952 100.00 3,843 100.00 Distribution of performance right holders and holdings – performance share rights (unlisted) There are 3,061,076 unlisted performance share rights on issue that have been issued under an employee share plan. These are held by 7 employees. Range 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total Performance Share Rights - - - % - - - 51,470 3,009,606 1.68 98.32 3,061,076 100.00 No. of holders - - - 1 6 7 % - - - 14.29 85.71 100.00 125 Annual Report 2021Unmarketable parcels The number of shareholders holding less than a marketable parcel of ordinary shares is 126 for 9,642 shares, based on IVE’s closing share price of $1.49, on 21 July 2021. Twenty largest shareholders Rank Name 1 2 3 4 5 6 7 8 8 9 10 11 12 13 14 15 16 17 18 19 CAXTON PRINT HOLDINGS PTY LTD* HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED NATIONAL NOMINEES LIMITED CITICORP NOMINEES PTY LIMITED STRATEGIC VALUE PTY LTD RYLELAGE PTY LTD MR STEPHEN CRAIG JERMYN SCJ PTY LTD STRATEGIC VALUE PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED EXLDATA PTY LTD CAXTON PRINT HOLDINGS PTY LTD* CENTRAL MUTUAL (INVESTMENTS) PTY LTD BNP PARIBAS NOMS PTY LTD MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED BNP PARIBAS NOMS(NZ) LTD TAVERNERS J PTY LTD MR TREVOR READ UBS NOMINEES PTY LTD DOROTHY PRODUCTIONS PTY LTD 20 JOHN BARNES FOUNDATION LIMITED No. Shares 11,210,231 9,463,404 8,357,875 6,366,347 4,635,316 4,440,463 3,000,000 3,000,000 2,149,292 2,074,611 1,874,958 1,650,000 1,307,580 1,250,142 1,146,583 1,090,109 1,079,769 1,000,001 785,825 681,995 666,890 % 7.85 6.63 5.85 4.46 3.25 3.11 2.10 2.10 1.51 1.45 1.31 1.16 0.92 0.88 0.80 0.76 0.76 0.70 0.55 0.48 0.47 Total 67,231,391 47.10 Balance of register 75,525,561 52.90 Grand total 142,756,952 100.00 * As at 21 July 2021, Caxton Print Holdings Pty Ltd as trustee for the Selig Family Trust No. 5, held a total of 12,860,231 fully paid ordinary shares (9.01%) 126 IVE Group Limited On-Market Buy Back Voluntary escrow There is a current on-market buy back. Voting rights The voting rights attached to ordinary shares are set out below: > On a show of hands every member present at a meeting in person or by proxy shall have one vote, and upon a poll, one vote for each fully paid share held. > Holders of performance rights do not have voting rights on the performance rights held by them. There were no ordinary shares held in a voluntary escrow arrangement as at 21 July 2021. Stock Exchange Listing IVE Group securities are only listed on the ASX. 127 Annual Report 2021Corporate Governance Statement The Board is responsible for the overall corporate governance of IVE Group Limited, including adopting appropriate policies and procedures designed to ensure that the IVE Group is properly managed to protect and enhance Shareholder interests. The Board monitors the operational and financial position and performance of IVE and oversees its business strategy, including approving the strategic goals of IVE. The Board is committed to maximising performance, generating appropriate levels of Shareholder value and financial return, and sustaining the growth and success of IVE. In conducting business with these objectives, the Board is committed to ensuring that IVE is properly managed to protect and enhance Shareholder interests, and that IVE, its Directors, officers and employees operate in an appropriate environment of corporate governance. Accordingly, the Board has created a framework for managing IVE, including adopting relevant internal controls, risk management processes and corporate governance policies and practices, which it believes are appropriate for IVE’s business and that are designed to promote the responsible management and conduct of IVE. Details of IVE’s key governance policies and the charters for the Board and each of its committees are available on IVE’s website at https://investors.ivegroup.com.au/Investor- Centre/?page=corporate-governance. The Corporate Governance Statement reports against the 4th edition of the ASX Corporate Governance Council’s Principles and Recommendations (ASX Principles) and the practices detailed in the Corporate Governance Statement are current as at 25 August 2021. It has been approved by the Board and is available on the IVE website under Investors at https://investors.ivegroup.com.au/Investor- Centre/?page=corporate-governance. Going further since 1921 ivegroup.com.au 

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