Joyce Corporation
Annual Report 2021

Plain-text annual report

20 21 ANNUAL REPORT ABN: 80 009 116 269 CONTENTS Chairman’s Letter CEO’s Address Who We Are Unique Value Propositions KWB Group Commentary Bedshed Commentary Board of Directors Company Secretaries Consolidated Financial Reports 3 4 6 7 8 10 12 14 16 2 J O Y C E C O R P O R A T I O N L T D A N N U A L R E P O R T 2 0 2 1 CHAIRMAN’S LETTER Joyce Corporation has continued to strengthen in 2021 – weathering the storm of COVID-19, and ultimately emerging stronger than ever. We are well positioned to look forward with optimism and confidence about our Company’s prospects. During the 2021 Financial Year the Company benefited greatly from strong consumer spending as Australians spent an increased proportion of their disposable income on their homes. When COVID-19 first arrived no one was sure of its impact on the economy, but most were concerned about the negative potential. Our businesses took steps to keep our staff and customers safe, preserve cash, manage our supplier relationships, and, where possible, keep our businesses trading to maintain our connection with our customers. It is right to acknowledge the swift and significant initiative of the Federal Government introducing JobKeeper that extensively cushioned the Australian economy. As one of the many retail oriented businesses that benefitted from this policy, the Board believed it was right and proper to return JobKeeper funds to the Government. This reflects our values in action. Whilst the response to COVID-19 was the dominant issue of the year, the Board and senior management continued their focus on strategic decision-making and execution to position Joyce Corporation for the near and long-term. The KWB Group expansion in NSW has been hugely successful, with four stores opening during the year, and further expansion into the Sydney suburbs underway. KWB has a wide range of highly skilled people covering the design, build and installation of kitchen and wardrobe solutions in existing homes, giving it a unique place in Australia’s home renovation market. The KWB Group now has a reach extending across Queensland, South Australia and New South Wales, with longer-term opportunities in untapped locations including in Victoria and Western Australia. With a ‘capital light’ business model, strong margins, excellent cash flow and significant organic growth potential, our investment in KWB in 2013 has been spectacularly successful and I would like to acknowledge the dedication and hard work of everyone at KWB, led by its Managing Director, John Bourke. With revenue more than doubling between 2016 and 2021, our partnership with KWB has evolved into KWB becoming a core asset for Joyce Corporation. Bedshed’s expansion in NSW was led by the opening of an online E-store, supported by a creative media and marketing campaign. The E-store is to be followed by two bricks and mortar stores in the first half of the 2022 Financial Year. The E-store will complement the new openings, creating a strong brand presence in Sydney to ensure new franchisees can get off to the best possible start in a new market. Bedshed’s franchisee model is one of Australian businesses’ enduring success stories. Our franchisees are the heart and soul of Bedshed, and on behalf of the Board and shareholders I thank them for their hard work and professionalism, which ultimately drives the success of the brand. At the Group level we commenced the process of Board renewal. I assumed the Chair’s role in November 2020 from Mike Gurry, who has remained on the board to ensure a smooth transition. On behalf of shareholders I sincerely thank him for his leadership of the Company through some challenging issues and setting the Company on its current trajectory. The Board recognises the need for further changes in the near term as the business foundations are strong, allowing the Board to consider the needs for the company moving forward. I thank all Board members for their valuable insights, experience and collegiality. In December we appointed Dan Madden as CEO, replacing Keith Smith. Dan has excellent corporate experience, having previously held the positions of Managing Director and CFO at ASX listed entities. His leadership and focus on adopting a collegiate and collaborative approach with all stakeholders has been most welcome, and the Board looks forward to continuing to work closely with Dan and the rest of the leadership team. Following the divestment of Lloyds Auctions in 2020 and faced with the uncertainty of COVID-19, the Board focused on consolidation, strengthening the balance sheet and maintaining liquidity. As the strength of the businesses became clear, our focus shifted to driving strong operational performance and positioning the Company for the next phase of its journey. The Board has resolved to pay a fully franked final dividend of 10 cents per share, bringing our total dividend for the 2021 Financial Year to 17 cents per share. This is an increase of 7 cents from prior year and a record for Joyce Corporation. The total dividend of 17 cents per share represents 63% of normalised profit and is consistent with our stated intention of aiming for full year dividend payments to be between 60- 80% of normalised NPAT. Joyce will continue to focus on organic revenue growth in 2022 through further expansion of KWB showrooms in NSW and Bedshed franchisee network expansion in NSW and across Australia. We will also consider attractive inorganic growth opportunities in complementary areas that may offer synergies, or the potential to leverage our current strengths, in order to drive our growth ambitions. Whilst we approach 2022 with confidence we also remain mindful that COVID-19 continues to create a number of challenges as a result of the uncertain and volatile retail environment for operators, consumers and suppliers. As a Board and leadership team we will continue to proactively address these challenges. I would like to thank the hundreds of people who come to work for Joyce and our partner businesses every day. As we know, there have been, and remain, some acute challenges in parts of Australia over the past 12 months and our people have been resilient and committed throughout. Without this we would not have been able to deliver the success we have had over the last Financial Year. Finally, my thanks to you, Joyce Corporation’s shareholders, for your ongoing and valued support of the Company. I can assure you that the Board remains driven to continue to pursue a high level of operational performance and long- term sustainable revenue growth, to drive share price appreciation and healthy dividends to our shareholders. Jeremy Kirkwood Chair 3 ANNUAL REPORT 2021JOYCE CORPORATION LTDCEO’S ADDRESS In 2021 the strength of Joyce Corporation’s partnerships, strong brands and talented people combined to produce an exceptional result for shareholders. We entered this financial year facing a lot of uncertainty, but with a clear strategy to manage the effects of COVID-19, and the architecture in place to take advantage of what became very strong trading conditions. When I joined the Company in December 2020, I was struck by the willingness of everyone in the business to roll their sleeves up and get to work, making sure that no matter what the external environment produced, we would be prepared and ready to take advantage. The effort and hard work of our staff, business partners and franchisees allowed us to remain steadfast, committed and dedicated to our shareholders, customers, partners and colleagues. In doing so, we were able to deliver a strong financial result for the 2021 Financial Year with record revenue, profit and dividends for our shareholders. Ultimately, this has been a successful year for Joyce Corporation with strong Group revenue growth, which has increased by 30% against the 2020 Financial year, to $111.2 million. Our revenue outcome was driven by a combination of positive market conditions, strong operational performance and strategic organic growth which led us to recognise EBITDA of $24.3 million, an increase of 46% on the 2020 Financial Year. Net Profit After Tax attributable to Joyce Shareholders for the financial year is a record at $7.6 million and we remain well placed to continue our performance into 2022 and beyond. Pleasingly, earnings per share of $0.27 increased by 71% from the prior year, and we have declared a record full year dividend at 17 cents per share, which represents 63% of normalised NPAT and a 10 cent increase from the prior year. As a result, we have closed the year in a good position with a healthy balance sheet. As at 30 June 2021 the Group had a strong net consolidated cash position of $19.9 million compared to $4.9 million at 30 June 2020. Funds will be used for the payment of the final dividend (approx. $2.8 million) and working capital and growth purposes. Our business has been particularly resilient to the COVID-19 pandemic. Both KWB Group and Bedshed have benefited from a lift in Australian consumer spending, but this only tells part of the story. With an overriding focus on organic growth, we have been able to continue to open new stores within the KWB Group and deliver record revenue and profit in that business. When coupled with strategic decisions, such as keeping Bedshed’s supply chains active during the early stages of the pandemic, and developing Bedshed’s e-commerce platform, we have gained market share and emerged stronger as a result. KWB Financial Results KWB continued to see strong growth, with revenue increasing by 33% from $67.5 million in the 2020 financial year to $89.7 million by 30 June 2021. Earnings Before Interest and Tax (EBIT) of $16.3 million was up by 45% from the prior financial year, and the consistent trend of improving profit margins continued with EBIT at 18% of revenue (compared to 17% in 2020 and 15% in 2019). KWB continued to deliver its store expansion plan, with four new showrooms opened in NSW, all of which traded strongly compared to historic early trading volumes of previous newly established stores. 4 J O Y C E C O R P O R A T I O N L T D A N N U A L R E P O R T 2 0 2 1 These new stores are delivering an accelerated payback on the investment required for their establishment. The new showroom openings demonstrate that KWB can deliver high levels of sales from the outset, and approximately four stores per annum are planned for the 2022 and 2023 financial years. Bedshed Financial Results Both the Bedshed Franchising and Company-Owned Store businesses performed strongly in the 2021 Financial Year. Combined Bedshed Franchising and Company-Owned operations revenue grew from $18.3 million to $21.5 million over the 2021 Financial Year and EBIT increased by over 200% to $5.9 million, up from $1.8 million. The Franchising operation increased EBIT to $2.6 million compared to $2 million in the 2020 Financial Year and continued its trend of improving profit margins with EBIT at 54% of revenue (compared to 50% in 2020 and 48% in 2019). Other The strong financial performance also allowed us to hand back $1.5 million in JobKeeper payments we received during the year, which we believe this was the right thing to do and was in accordance with our values. JobKeeper was treated as a one-off income in the first half of the financial year, with a corresponding expense in the second half of the financial year. During the year we streamlined the Joyce Group structure following the finalisation of the divestment of Lloyds Online Auctions and receipt of $3.3 million associated with the transaction. Outlook The continued and consistent revenue growth across our businesses provides a robust platform for both capital appreciation and strong dividends for Joyce Corporation investors. Looking ahead, we approach 2022 with confidence. Joyce will continue to invest in growing its network, with a near term focus on expanding KWB in growth areas of NSW and converting the strong interest from potential new Bedshed franchisees into network growth in NSW and across Australia in 2022. In addition to the primary focus on organic revenue growth, the Company will continue to apply a disciplined approach when evaluating other potential investment opportunities that have a natural fit to our expertise and existing portfolio. Whilst we have a great recipe for growth, we remain mindful that COVID-19 creates an uncertain retail environment, due to current and potential future lockdowns within Australia and overseas sourcing countries, and by giving rise to challenges such as the continuing escalation of global shipping costs. Together with the Board, the leadership team will continue to proactively assess and manage these risks. I thank the leadership group within our network for their valued contribution and support, as well as the entire Joyce family of staff and business partners who work together to get the best outcomes for both our customers and shareholders. Finally, I would like to thank Chairman Jeremy Kirkwood and the Board for their faith in me to lead this company. Sincerely, Dan Madden Joyce Corporation Consolidated Results FY 21 ($’000) FY 20 ($’000) Variance ($) Variance (%) Revenue (from continuing operations) 111,224 85,757 25,467 Gross Profit (from continuing operations) 58,807 45,037 13,770 Total Group Expenses 30,870 27,534 (3,336) Expenses (% of revenue) 28% 33% n/a EBITDA (from continuing operations) 24,292 16,603 7,689 EBITDA Margin 22% 19% n/a 30% 31% -12% 5% 46% 3% Net Profit After Tax (from continuing operations) 12,995 2,674 10,321 386% NPAT Attributable to JYC Members 77,,557744 ((11,,110077)) EPS - cents (from continuing operations)1 26.92 15.76 Joyce Corporation Consolidated Results Closing Group Cash Debt Net Cash/(Debt) Jun ‘21 ($'000) Jun '20 ($'000) 19,881 10,643 - (5,751) 88,,668811 11.16 778844%% 71% Variance ($) Variance (%) 19,881 4,892 14,989 306% 1 – FY20 EPS is based on NPAT attributable to JYC Shareholders from Continuing Operations net of impairment loss. A N N U A L R E P O R T 2 0 2 1 J O Y C E C O R P O R A T I O N L T D 5 WHO WE ARE Fast growing ASX-listed company invested in and operating quality Australian businesses with exciting organic growth potential. Committed to delivering increased earnings while establishing a solid platform for future growth. Ongoing success comes from partnering with successful businesses that have a strong potential to grow and be market leaders. OUR VISION We seek to make a meaningful positive difference to the lives of our shareholders, partners, franchisees, employees and customers. OUR PURPOSE Prosper in business together We help quality small to medium Australian businesses unlock their growth potential and succeed on the national stage. OUR PRIMARY OBJECTIVE To drive revenue growth and deliver above average returns. 6 J O Y C E C O R P O R A T I O N L T D A N N U A L R E P O R T 2 0 2 1 UNIQUE VALUE PROPOSITIONS WORKING TOGETHER IS KEY TO SUCCESS Shareholders Track record of Total Shareholder Returns. Partners Track record of growth and long-term mindset. Franchises Deep sector and operational knowledge and supportive growth-focused approach. Employees Ability to make an impact growing national brands in a supportive team environment. Customers Quality products and services, deep product knowledge and convenience. A N N U A L R E P O R T 2 0 2 1 J O Y C E C O R P O R A T I O N L T D 7 7 ANNUAL REPORT 2021JOYCE CORPORATION LTDFY21 BUSINESS UNIT PERFORMANCE SALES 89,693 67,498 64,964 59,937 FY18 FY19 FY20 FY21 NET REVENUE ($000s) FY18 – FY21 CAGR 10.6% EBIT 16,320 11,269 9,480 8,372 FY18 FY19 FY20 FY21 EBIT ($000s) FY18 – FY21 CAGR 18.2% 8 J O Y C E C O R P O R A T I O N L T D A N N U A L R E P O R T 2 0 2 1 JOHN BOURKE MANAGING DIRECTOR - KWB GROUP CHRIS PALIN FINANCIAL DIRECTOR - KWB GROUP KWB Group Commentary KWB is a leader in Australia’s home renovation market, delivering outstanding kitchen and wardrobe solutions to customers renovating their homes. Our Kitchen Connection and Wallspan brands operate a network of 25 sites across Queensland, NSW and South Australia. We are proudly the only Kitchen and Wardrobe renovation company to achieve over 1,500 Five Star reviews on Productreview.com.au - Australia’s largest independent consumer review website. KWB Group is looking forward with optimism to FY22. We are well placed, with a great team, a fantastic product suite and a loyal customer base that is helping us continue to grow. John Bourke Managing Director KWB COVID-19 saw Australians spending more time in their homes - and more of that time renovating them. In the past 12 months the KWB Group has designed and installed more than 4,000 kitchens and 2,000 wardrobes in Australian homes. A combination of strong demand, and an expansion of our footprint, saw our orders grow by more than 40% year-on-year. This had a flow on effect to installations, which saw sales revenue increase by over 30% compared to 2020. This year we pushed ahead with our expansion in NSW, with new stores opening in Tweed Heads, Tuggerah, Castle Hill and Artarmon. The location of each store has been strategically chosen to take advantage of existing or emerging renovation markets. The combination of timing, a strong marketing campaign and the excellent performance of our team, saw each of these new stores exceed their targets and make a significant contribution to the Group’s final result. Our business survives and thrives on the referrals of our customers, and we can only do that if we consistently deliver a superior product and service. We are fortunate that we have the people in place to do this, and I personally thank everyone who is a part of the KWB Group – employees, suppliers, and contractors, as well as our colleagues in Joyce Corporation, who have contributed every day to deliver our results. The outlook for KWB Group for 2022 is positive. Market conditions entering the new financial year appear to be maintaining the momentum we built through 2021. We will continue to increase our installation capacity to match the strong consumer demand, which will give us the best opportunity to grow sales over FY22. We have plans to add another four showrooms in the 2022 Financial Year – in Penrith, Belrose, Casula and Auburn – which will put us in a position to reach our goal of being Sydney’s number one kitchen renovator by the end of this year, building our network to a total of 28 stores. A N N U A L R E P O R T 2 0 2 1 J O Y C E C O R P O R A T I O N L T D 99 ANNUAL REPORT 2021JOYCE CORPORATION LTDFY21 BUSINESS UNIT PERFORMANCE SALES 19,241 18,113 21,531 20,096 FY18 FY19 FY20 FY21 NET REVENUE ($000s) FY18 - FY21 CAGR 4.4% EBIT 2,424 1,998 5,886 3,593 FY18 FY19 FY20 FY21 EBIT ($000s) FY18 - FY21 CAGR 31.0% 10 ANNUAL REPORT 2021JOYCE CORPORATION LTDGavin Culmsee GENERAL MANAGER - BEDSHED Bedshed Commentary Bedshed is one of Australia’s leading brands, supplying quality bedding and furnishings to generations of Australian families. Bedshed operates a 37 store network, including 32 franchise stores, instantly recognisable by their distinctive purple colour and tagline of “No one’s better in the bedroom.” Bedshed also operates a new and growing e-commerce business that complements and supports our bricks and mortar stores. Looking ahead, we are entering 2022 with confidence after a strong finish to 2021. Retail spending in Australia remains strong, although we always need to be mindful that economic circumstances could be volatile over the short to medium term. We are in a great position to leverage the opportunities before us and grow our network, with two new franchise stores planned for NSW, opening in the lead up to Christmas 2021. Gavin Culmsee Bedshed General Manager 2021 was another strong year for Bedshed, with record revenue of $21.5 million across our 37 store network. Despite the COVID-19 pandemic, retail spending in Australia has been robust, as government stimulus measures and restrictions on travel, saw consumers spend more money at home. Pleasingly, revenue from our franchisee network increased by more than 20% from the prior year and EBIT by more than 30%. Bedshed, with its award-winning marketing campaigns, trusted product range, and commitment to customer service, was well positioned to cater to strong demand for homewares and home furnishings. An updated marketing campaign – with the key message “No one uses the bedroom quite like you” – helped drive brand awareness, store traffic and sales growth. Our franchise model is a key driver of our success. Our franchisees are very committed, and loyal, with a number of partners staying with us since the 1980’s, and just one franchised store up for sale in nine years. This year we transferred our Company-Owned store in Helensvale to an existing Bedshed franchisee, and we continue to manage inquiries from potential new franchisees – a positive reflection on the Bedshed brand and the success of the franchise model. Bedshed’s e-commerce platform, launched in Sydney during the year, gave us a low-cost entry to the Sydney market. Supported by a marketing campaign, the e-commerce offering is building brand awareness and creating an attractive environment for new franchise operators as we build our presence in Australia’s biggest consumer market. We continued to focus on improving our business, developing our systems, and refreshing our sales training, giving our people the best opportunity to succeed. Ultimately, we are a people business – connecting our customers to the products they need to have a great night’s sleep. Our people, including our franchisees and company store staff, are resilient and committed. Their dedication and professionalism have helped us navigate the challenges of COVID-19 and successfully execute our strategy. A N N U A L R E P O R T 2 0 2 1 J O Y C E C O R P O R A T I O N L T D 1111 ANNUAL REPORT 2021JOYCE CORPORATION LTDBOARD OF DIRECTORS Jeremy Kirkwood (appointed Chair 30 November 2020) Jeremy was appointed a Non-Executive Director in January 2020. He has extensive experience in corporate strategy, investment banking and global capital market and provides invaluable strategic input and guidance to the Company’s board and management team. Jeremy is a principal of Pilot Advisory Group and was previously a Managing Director at Credit Suisse, Morgan Stanley and Austock. He has primarily worked in public markets, undertaking merger and acquisitions and capital raisings for companies principally in the metals and mining, energy and infrastructure sectors. Jeremy is a Director of Talisman Mining Limited (Chair until July 2020), Trustee of the RE Ross Trust and Director of Hillview Quarries Pty Ltd, Nurture care Pty Ltd and Independent Schools Victoria. Karen Gadsby Deputy Chair (appointed Deputy Chair 1 May 2019) Bachelor of Commerce, FCA, MAICD Karen has had 17 years’ Chair/Non-Executive Director experience and has held directorships across the publicly-listed, private, government and not-for-profit sectors in Western Australia and Victoria. Karen has a finance background. She was a Chartered Accountant with Coopers and Lybrand and then worked as a senior executive with North Limited for 13 years, in various executive roles across the areas of finance, commercial, risk, IT and human resources. Michael Gurry Non-Executive Director, former Chair (November 2018 - November 2020) Bachelor of Science (UWA), Dip AICD, FAIM, SF Fin, FAICD Mike Gurry is a Non-Executive Director of Joyce Corporation Ltd and Bedshed Franchising Pty Ltd and has over 25 years’ experience as a chairman and non-executive Director. Mike was Chairman of Joyce Corporation from Dec 2018 to Dec 2020 having joined the Board in 2008. He has served on numerous Boards, including listed, Government and not-for-profit organisations. Currently, he serves on the St John Ambulance Board and is a Councilor of HBF Ltd. Mike’s business career included involvement in a broad range of industries in which he enjoyed considerable success. Mike is an exceptional business strategist with outstanding stakeholder and change management skills. In 2018 he was awarded the Order of Australia (AM). 12 Other current directorships of listed entities Talisman Mining Ltd Former directorships of listed companies in the last 3 years Kin Mining NL (resigned 31 July 2019) Zenitas Healthcare Ltd (resigned 2 March 2018) Special responsibilities Member of the Audit and Risk Committee Member of the Remuneration Committee Member of the Nomination Committee Interests in shares and options held directly, indirectly, or beneficially 132,978 ordinary shares Other current directorships of listed entities None Former directorships of listed companies in the last 3 years Talisman Mining Ltd (retired 4 November 2020) Special responsibilities Chair KWB Board Chair of the Audit and Risk Committee Member of the Remuneration Committee Member of the Nomination Committee Interests in shares and options held directly, indirectly, or beneficially 87,500 ordinary shares Other current directorships of listed companies None Former directorships of listed companies in last 3 years None Special responsibilities Member of the Audit and Risk Committee Member of the Remuneration Committee Member of the Nomination Committee Member KWB Board Interests in shares and options held directly, indirectly, or beneficially 140,593 ordinary shares ANNUAL REPORT 2021JOYCE CORPORATION LTDDaniel Smetana Non-Executive Director, former Chair (January 1985 to November 2018) Diploma of Commerce, FCPA, FAIM, FAICD Dan is a Non-Executive Director and former Chairman of Joyce Corporation Ltd and Bedshed Franchising Pty Ltd. He has had 50 years’ Chair/Non Executive Director experience and has held directorships across various sectors including Defence Reserves Support Council – WA, Youth Focus, Western Power, WASO, Edge Employment, IFAP, WA Federation of PCYC and Korab Resources Limited. Dan is a visionary leader who has been deeply involved with Joyce Corporation in Executive, Chair or NED roles since 1984. Timothy Hantke Non-Executive Director Bachelor of Commerce, FAIM, FAICD Tim specialises in mentoring and coaching CEOs, senior executives and business owners, along with being a commercial mediator and professional company director. Having held a broad variety of roles within organisations of all sizes, Tim now focuses on key board positions and mentoring others. His focus is to work with leaders and to get to the source of their thinking and behaviours, and help them find new ways of communicating, collaborating, and negotiating to meet their organisational, professional and personal goals. Travis McKenzie Non-Executive Director Bachelor of Law, Bachelor of Commerce, GAICD Travis has had extensive experience on private boards since 2009. These organisations operated in multiple industries including marketing, education and property development. This experience, particularly in the marketing and property space, will be particularly relevant to the Joyce Board. His work in derivatives and foreign exchange trading has allowed Travis to experience business and operating in Europe and the Americas, as well as here in Australia. This exposure to international thinking allows Travis to bring new perspectives to the Group and fresh approaches. His original career as a Lawyer brings new skills to the Board and provides thought leadership for management in issue resolution. Other current directorships of listed companies None Former directorships of listed companies in last 3 years Korab Resources Ltd (retired 1 January 2020) Special responsibilities Member of the Audit and Risk Committee Member of the Remuneration Committee Member of the Nomination Committee Interests in shares and options held directly, indirectly, or beneficially 11,062,440 ordinary shares Other current directorships of listed companies None Former directorships of listed companies in last 3 years None Special responsibilities Chair Bedshed Franchising Pty Ltd Member of the Audit and Risk Committee Chair of the Remuneration Committee Chair of the Nomination Committee Interests in shares and options held directly, indirectly, or beneficially 20,000 ordinary shares Other current directorships of listed companies None Former directorships of listed companies in last 3 years None Special responsibilities Alternate Director Bedshed Franchising Pty Ltd Member of the Audit and Risk Committee Member of the Remuneration Committee Member of the Nomination Committee Interests in shares and options held directly, indirectly, or beneficially 15,086 ordinary shares 13 ANNUAL REPORT 2021JOYCE CORPORATION LTDINFORMATION ON SECRETARIES Daniel Madden CEO and Group Company Secretary (appointed 1 December 2020) Bachelor of Commerce, ACC, ACA, Governance Institute of Australia Other current directorships of listed companies None Former directorships of listed companies in last 3 years Talisman Mining Ltd (resigned 4 November 2020) Interests in shares and options held directly, indirectly, or beneficially Nil Dan was appointed as CEO of Joyce Corporation Ltd on 1 December 2020 and has a reputation as a values driven, people oriented manager with a collaborative approach which is consistent with the Joyce Way. Dan was previously the Managing Director and CEO of Talisman Mining Ltd, an ASX listed mineral exploration and development company with a track record of creating shareholder value. Dan was appointed as Managing Director of Talisman in 2016, having been Chief Financial Officer and Company Secretary since 2009. Dan’s prior background was in finance as CFO/General Manager Finance in ASX listed and large international organisations, including more than 17 years’ experience in the resource sector, including Xstrata Nickel Australasia, Jubilee Mines NL and Perilya Ltd. Dan is an Associate Member of the Institute of Chartered Accountants of England and Wales and a member of the Governance Institute of Australia. He graduated from the University of Birmingham with a degree in Commerce and Accounting. Tim Allison CFO and Group Company Secretary (appointed 1 April 2021). Bachelor of Commerce, CAANZ, AGIA, ACG, GradDip Applied Finance Other current directorships of listed companies None Former directorships of listed companies in last 3 years None Interests in shares and options held directly, indirectly, or beneficially Nil Tim was appointed as CFO and Company Secretary of Joyce on 1 April 2021. His career spans more than 10 years across multiple industries with a focus on finance, including roles as CFO, General Manager of Finance and in CFO Advisory consulting. Tim is Chartered Accountant, having qualified at BDO Audit in Perth, WA. Tim is also a member of the Governance Institute of Australia, has a Graduate Diploma in Applied Finance from Kaplan and is an invited member of the Advisory Board Centre. Tim brings to Joyce a diverse skill set including process automation; big data analysis; enhancement of strategic reporting and enhancing governance standards. 14 ANNUAL REPORT 2021JOYCE CORPORATION LTDA N N U A L R E P O R T 2 0 2 1 J O Y C E C O R P O R A T I O N L T D 1515 ANNUAL REPORT 2021JOYCE CORPORATION LTDDIRECTORS’ REPORT DIRECTORS’ REPORT YEAR ENDED 30 JUNE 2021 Your Directors present their report on the Consolidated Entity, consisting of Joyce Corporation Ltd (“the Company”) and the entities it controlled at the end of, or during, the year ended 30 June 2021 (“the financial year”). DIRECTORS The names of the Company’s Directors in office during the financial year and until the date of this report are as stated below. Directors were in office for this entire period unless otherwise stated. Name Position Jeremy Kirkwood Non-Executive Director (Chair) Appointment date 14 January 2020 Karen Gadsby Non-Executive Director (Deputy Chair) 1 July 2017 Daniel Smetana Non-Executive Director 30 November 1984 Michael Gurry Non-Executive Director Timothy Hantke Non-Executive Director Travis McKenzie Non-Executive Director 8 May 2007 9 June 2006 1 July 2019 SECRETARIES Daniel Madden Tim Allison PRINCIPAL ACTIVITIES CEO and Group Company Secretary (appointed 1 December 2020) CFO and Group Company Secretary (appointed 1 April 2021) During the financial year, the principal continuing activities of the Consolidated Entity consisted of being: - Majority owner of 51% of KWB Group Pty Ltd, operator of retail kitchen and wardrobe showrooms; - Franchisor of the Bedshed chain of retail bedding stores; and - Owner of four Bedshed retail stores. 16 Page 2 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD DIRECTORS’ REPORT DIRECTORS’ REPORT REVIEW AND RESULTS OF OPERATIONS YEAR ENDED 30 JUNE 2021 During the financial year, the Consolidated Entity achieved revenue from continuing operations of $111.22 million (2020: $85.76 million) and a profit from continuing operations before tax of $19.11 million (2020: $5.77 million) and after tax of $13.00 million (2020: $2.67 million). The FY20 profit numbers were after deducting $5.53 million of impairments. Financial position At 30 June 2021, the Consolidated Entity had total equity of $26.64 million (2020: $21.65 million). Cash and cash equivalents increased from $10.64 million at 30 June 2020 to $19.88 million at 30 June 2021. Unused finance facilities were $9.84 million (2020: $4.41 million). FUTURE DEVELOPMENTS, PROSPECTS AND BUSINESS STRATEGIES The Consolidated Entity plans to further develop the KWB business and continue to invest to grow the showroom network in New South Wales. The Bedshed business will develop through a planned expansion of its network of franchised stores with a particular focus in New South Wales. In addition to the focus on organic revenue growth the Company will continue to evaluate other investment opportunities that have a natural fit to its expertise and existing portfolio. DIVIDENDS Dividends declared or paid during the financial year are as follows: FY19 final fully franked dividend of 5.0 cents per share FY20 interim fully franked dividend of 5.0 cents per share FY20 final fully franked dividend of 5.0 cents per share FY21 interim fully franked dividend of 7.0 cents per share Total dividends paid 2021 $000 - - 1,405 1,971 3,376 2020 $000 1,397 1,404 - - 2,801 The Directors resolved that a FY21 final dividend of 10 cents per share, fully franked, be paid by Joyce Corporation Limited on 1 October 2021 to all shareholders registered as at the record date of 14 September 2021. Page 3 of 80 17 ANNUAL REPORT 2021JOYCE CORPORATION LTD DIRECTORS’ REPORT SIGNIFICANT CHANGES IN STATE OF AFFAIRS DIRECTORS’ REPORT YEAR ENDED 30 JUNE 2021 Throughout the year, a number of KWB showrooms and Bedshed stores experienced intermittent closures and trading restrictions as a result of the impact of COVID-19 outbreaks across Australia. Other than the disclosed above, there were no other significant changes in the state of affairs of the Consolidated Entity during the year ended 30 June 2021. SIGNIFICANT AFTER REPORTING DATE EVENTS The Directors resolved that a FY21 final dividend of 10 cents per share, fully franked, be paid by Joyce Corporation Limited on 1 October 2021 to all shareholders registered as at the record date of 14 September 2021. The full impact of the COVID-19 pandemic continues to evolve at the date of this report. The Consolidated Entity is actively monitoring the global and national situation and its impact on the Consolidated Entity’s financial condition, liquidity, operations, suppliers, industry and workforce. Given the daily evolution of the COVID-19 pandemic and government’s responses to curb its spread, at this point the Consolidated Entity is not able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition, or liquidity for the 2022 financial year. Other than disclosed above, no event has occurred since the reporting date to the date of this report that has significantly affected, or may significantly affect the Consolidated Entity’s operations, the results of those operations, or the Consolidated Entity’s state of affairs. MEETING OF DIRECTORS The numbers of meetings of the Company’s Board of Directors and of each Board Committee held during the financial year and the number of meetings attended by each Director were: Directors Board of Directors Audit & Risk Committee Remuneration Committee Nomination Committee Jeremy Kirkwood Karen Gadsby Michael Gurry Daniel Smetana Timothy Hantke Travis McKenzie A 13 13 13 13 13 13 B 13 13 13 13 11 13 A 4 4 4 4 4 4 B 4 4 4 4 4 4 A 3 3 3 3 3 3 B 3 3 3 3 2 3 A 1 1 1 1 1 1 B 1 1 1 1 1 1 A = Number of meetings held during the time the Director held office or was a member of the committee during the financial year. B = Number of meetings attended during the time the Director held office or was a member of the committee during the financial year. 18 Page 4 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED The remuneration reports details the key management personnel (KMP) remuneration arrangements for the Consolidated Entity, in accordance with the requirements of the Corporations Act 2001 and its Regulations. KMP are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: A. Principles used to determine the nature and amount of remuneration B. Service agreements C. Details of remuneration D. Share-based compensation E. Link between remuneration policy and company performance F. Voting at the 2020 Annual General Meeting G. Independent salary and incentive review H. Loans or other transactions with directors and KMP The information provided in this remuneration report is also included in the financial report which has been audited as required by section 308(3C) of the Corporations Act 2001. As well as the directors previously mentioned in this Directors’ Report, other KMP of the Consolidated Entity include: KMP Daniel Madden Tim Allison John Bourke Chris Palin Gavin Culmsee Derek Fowler Keith Smith(a) Position Held CEO and Group Company Secretary, Joyce Corporation Ltd from 1 December 2020 CFO and Group Company Secretary, Joyce Corporation Ltd from 1 April 2021 Managing Director, KWB Group Pty Ltd Finance Director, KWB Group Pty Ltd General Manager, Bedshed Franchising Pty Ltd CFO, Joyce Corporation Ltd from 19 August 2019 to 7 August 2020 Acting CEO, Joyce Corporation Ltd from 1 July 2019 to 30 March 2020 CEO, Joyce Corporation Ltd from 31 March 2020 to 30 November 2020 Group Company Secretary, Joyce Corporation Ltd to 1 April 2021 (a) Refer to the ASX announcement dated 5 August 2020 for further details. A. PRINCIPLES USED TO DETERMINE THE NATURE AND AMOUNT OF REMUNERATION Remuneration committee The Remuneration Committee Charter establishes the role of the Remuneration Committee, which is to review and make recommendations on Board remuneration; senior management remuneration; executive share plan participation; human resource and remuneration policies and senior management succession planning, appointments and terminations. The main responsibilities of include reviewing and making the Remuneration Committee recommendations on remuneration policies for the Consolidated Entity including those governing the Directors and the KMP. Page 5 of 80 19 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED The Remuneration Committee comprises a majority of Non-Executive Directors and at least three members. The Chair of the Remuneration Committee is appointed by the Board and is a Non-Executive Director. The Remuneration Committee meets as and when required by the Remuneration Committee Chair and at least twice annually. The Committee may invite persons deemed appropriate to attend meetings and may take any independent advice as it considers necessary or appropriate. Any Committee member may request the Chair to call a meeting. During the year, the Remuneration Committee reviewed and updated its Charter. A copy of the Remuneration Committee Charter is available on the Joyce Corporation website. Remuneration policies The objective of the Consolidated Entity’s executive reward framework is to ensure reward is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of the Consolidated Entity’s strategic objectives and the creation of value for shareholders. The Remuneration Committee and Board ensure that executive reward satisfies the following key criteria: - Competitiveness and reasonableness; - Acceptability to shareholders; - Performance linkage / alignment of executive compensation to organizational results; - Transparency; and - Capital management. In consultation with external remuneration consultants, where appropriate, the Consolidated Entity has structured an executive remuneration framework that is market competitive and complementary to the reward strategy of the organisation. The framework aligns to shareholders’ interests by: - Having economic profit as a core component of the framework’s design; - Focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price and delivering constant return on assets as well as focusing the executive on key non-financial drivers of value; and - Attracting and retaining high calibre executives. The framework aligns to program participants’ interests by: - Rewarding capability and experience; - Reflecting competitive reward for contribution to growth in shareholder wealth; - Providing a clear structure for earning rewards; and - Providing recognition for contribution. Non-Executive Director’s remuneration Fees and payments to Non-Executive Directors reflect the demands that are made on and the responsibilities of the Directors. Non-Executive Directors’ fees and payments are reviewed annually by the Board. The Board considers, where appropriate, the advice of independent remuneration consultants to ensure Non-Executive Directors’ fees and payments are appropriate and in line with comparable entities. The Chair’s fees are determined independently to the fees of Non-Executive Directors, based on appropriately comparable roles. The Chair is not present at any discussions relating to the determination of their own remuneration. The current base remuneration was last independently reviewed by Godfrey Remuneration Group in April 2021 and is effective 1 July 2021. Fees incurred for this reviewed totalled $12,000. From 1 July 2021, Non-Executive Directors will receive additional fees for the Chairing of a committee. 20 Page 6 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED Non-Executive Directors’ fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The limit currently stands at $700,000 per annum and was approved by shareholders at the Annual General Meeting on 30 November 2017. Executive remuneration Fixed Component The level of fixed remuneration is set to provide a base level of remuneration, which is both appropriate to the position and is competitive with appropriately comparable roles. Fixed remuneration is reviewed annually by the Remuneration Committee and the process involves review of the Consolidated Entity’s performance, the segment within which the executive operates and the individual’s performance. Variable Component – Short-Term Incentives Goals are agreed at the start of each financial year and consist of one or more key performance indicators (KPI's) incorporating both financial and non-financial corporate and individual-specific measures of performance. These measures are aligned to the Consolidated Entity’s strategic objectives at the time. Examples of the types of measures used are targets for safety, profit, cash balances and segment specific KPI's. At the end of the financial year, the Remuneration Committee assesses the actual performance of the Consolidated Entity, the relevant segment and the individual against the agreed KPI targets. When the Consolidated Entity, or the relevant segment and the individual achieve their KPI’s, the Board will reward the KMP with a cash bonus paid after the end of the financial year being assessed. The amount paid is a discretionary percentage of a pre-determined (by the Board) maximum amount contingent on the results achieved. No bonus is awarded where performance falls below the minimum threshold set. Variable Component - Long Term Incentives The Remuneration Committee offers Performance Rights in the Joyce Corporation Ltd Rights Plan (JRP). The JRP was approved by shareholders at the Annual General Meeting on 27 November 2018. KPI’s set under the JRP are linked to achievement of targeted shareholder return measures over a rolling 3-year period. B. SERVICE AGREEMENTS This remuneration report outlines the Director and Executive remuneration arrangements with the Consolidated Entity in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, KMP are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Consolidated Entity, directly or indirectly, including any Director of the Consolidated Entity. For the purposes of this report, the term "Executive" encompasses the Directors, KMP and other senior executives of the organisation. The employment conditions of all KMP are formalised in contracts. The directors, CEO and CFO are engaged by Joyce Corporation Ltd. All Executives are permanent employees of subsidiaries within the Consolidated Entity. Page 7 of 80 21 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED Contractual arrangements Remuneration arrangements for KMP are formalised in employment agreements. Details of these contracts is set out below. Daniel Madden Tim Allison John Bourke Chris Palin Gavin Culmsee Term of agreement Notice period in months Termination payment in months rolling rolling rolling rolling rolling 3 3 3 3 3 3 3 3 3 3 The Consolidated Entity can terminate each contract by providing the required written notice period or providing payment in lieu of the notice period (based on the fixed component of the KMP’s remuneration). The Consolidated Entity may terminate a KMP or Executive for serious misconduct without notice. Where termination with cause occurs, the Executive is only entitled to that portion of remuneration that is fixed up to the date of termination. 22 Page 8 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED C. DETAILS OF REMUNERATION The remuneration summary of KMP for the current and prior financial year is set out below. Fixed remuneration Annual and long service leave Non- monetary benefits Post- employment benefits Variable remuneration Cash bonus paid Equity- settled shares Equity-settled performance rights Other Total Performance related Name Note Year Salary Non-executive Directors Jeremy Kirkwood (a) 2021 105,559 2020 30,893 Karen Gadsby (b) 2021 104,862 Daniel Smetana 2020 80,667 2021 82,031 2020 80,667 Michael Gurry (c) 2021 116,704 Timothy Hantke Travis McKenzie 2020 132,429 2021 82,031 2020 80,667 2021 72,264 2020 35,650 Anthony Mankarios 2021 - (d) 2020 353,386 2021 563,451 2020 794,359 Other Key Management Personnel Daniel Madden (e) 2021 229,250 2020 - Tim Allison (f) 2021 58,750 John Bourke Chris Palin Gavin Culmsee Lee Hames 2020 - 2021 334,247 2020 333,966 2021 264,200 2020 264,429 2021 272,617 2020 270,320 2021 - - - - - - - - - - - - - - - - - - - - - - - - - - - - (g) 2020 171,923 7,057 Derek Fowler (h) 2021 37,179 2020 154,545 Keith Smith (i) 2021 173,211 2020 296,347 2021 1,369,454 - - - - - - - - - - - - - - - - - - - - - 10,028 2,935 9,962 7,663 7,793 7,663 11,087 12,581 7,793 7,663 6,865 3,387 - 8,305 53,528 50,197 12,230 15,939 - - 3,616 5,424 - - 10,642 45,079 31,328 41,071 12,490 35,640 26,443 32,463 2,655 25,899 27,552 25,680 - - - 14,745 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 140,274 98,084 110,959 77,518 81,400 59,270 - 47,620 (10,513) 4,628 23,630 12,821 14,682 - (50,725) 16,455 161,646 - - - - - - - - - - - - - - - - 189,474 - 189,474 - - - - - - - - - - - - - - 95,596 24,869 28,153 - 120,000 - - - - - - - - - - - - - - - - - 115,587 33,828 114,824 88,330 89,824 88,330 127,791 145,010 89,824 88,330 79,129 39,037 - 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 551,165 34.4% 616,979 0.0% 1,034,030 18.3% 8.4% 0.0% 0.0% 0.0% 55.4% 19.4% 55.1% 19.3% 35.6% 19.6% 0.0% 23,518 280,937 - - - - 67,790 - 344,945 875,187 - 504,449 272,847 696,136 - 85,084 19,833 - - - - - - 400,853 467,655 402,655 - 241,345 19.7% 54,924 182,048 396,183 469,369 0.0% 0.0% 24.1% 25.6% (19,605) 149,064 185,276 332,633 95,596 726,394 2,838,812 40.7% 2020 1,491,530 7,057 123,013 156,794 - 402,492 - 19,833 2,200,719 19.2% Totals 2021 1,932,905 - (19,605) 202,592 185,276 332,633 95,596 726,394 3,455,791 33.4% 2020 2,285,889 7,057 123,013 206,991 - 402,492 189,474 19,833 3,234,749 18.9% (a) Chair effective 1 December 2020. (b) Karen Gadsby received fees for additional duties performed over and above her duties as a NED. (c) Chair to 30 November 2020. (d) Resigned 24 November 2019. Salary consisted of termination payment ($245,966) and NED fees ($107,420). (e) Appointed CEO and Joint Group Company Secretary, Joyce Corporation Ltd effective 1 December 2020. Appointed CFO and Joint Group Company Secretary, Joyce Corporation Ltd effective 1 April 2021. (f) (g) Interest in Lloyds Online Auction Pty Ltd disposed effective 17 June 2020. (h) Contract ended effective 7 August 2020. Other payments consisted of payment in lieu of notice ($11,538) and unused annul leave ($12,091). (i) CEO, Joyce Corporation Ltd from 31 March 2020 to 30 November 2020; Group Company Secretary, Joyce Corporation Ltd to 1 April 2021. Other payments consisted of $100,000 paid on conclusion of modified contract and unused annual leave ($61,646). Page 24 of 97 23 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED STI - Cash Bonus The details of the STI variable component of KMP remuneration paid during the current and prior financial year is set out below. 100% level STI % financial conditions % non- financial conditions STI financial condition STI non- financial condition Note Year % of the financial condition achieved % of the non- financial condition achieved STI payable 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 - - - - - - - - - - - - - - - - - - - - 140,274 98,084 110,959 77,518 111,000 72,280 - 47,620 - - - 120,000 362,233 415,502 362,233 415,502 (a) (a) (a) (a) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 92.84% 100.00% 92.83% 100.00% 66.67% 76.00% - 100.00% - - - 0% 7.16% 0% 7.17% 0% 33.33% 24.00% - 0% - - - 100.00% 130,235 98,084 103,007 77,518 74,000 54,933 - 47,620 - - - - 307,242 278,155 307,242 278,155 10,039 - 7,952 - 37,000 17,347 - - - - - 120,000 54,991 137,347 54,991 137,347 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% - 100.00% - - - 0% 100.00% 0% 100.00% 0% 20.00% 25.00% - 0% - - - 100.00% 140,274 98,084 110,959 77,518 81,400 59,270 - 47,620 - - - 120,000 332,633 402,492 332.633 402,492 Name Non-executive Directors Jeremy Kirkwood Karen Gadsby Daniel Smetana Michael Gurry Timothy Hantke Travis McKenzie Anthony Mankarios Other Key Management Personnel Daniel Madden Tim Allison John Bourke Chris Palin Gavin Culmsee Lee Hames Derek Fowler Keith Smith Totals (a) KMP cash bonus STI’s are payable at the discretion of the directors and are based on key performance criteria, which require performance to meet or exceed predetermined targets. Key performance criteria include both financial and non-financial criteria. 24 Page 10 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED D. SHARE-BASED COMPENSATION Performance rights granted as compensation under the JRP Recognition and measurement The agreements in place can only be equity-settled and are accounted for accordingly. The cost of equity-settled transactions with employees is measured using their fair value at the date which they were granted. In determining the fair value, where non-market based conditions are attached, no account is taken of any performance conditions. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which any performance conditions are met, ending on the date on which the employee becomes fully entitled to the award (vesting date). The cumulative expense recognised for these transactions at each reporting date reflects the extent to which the vesting period has expired and the proportion of the awards that are expected to ultimately vest. No expense is recognised for awards that do not ultimately vest due to a performance condition not being met. On conversion the performance rights convert to one ordinary share. Terms and conditions During the current financial year, 127,002 ‘FY21 performance rights’ were issued to Daniel Madden, 208,448 to John Bourke, 164,879 to Chris Palin and 140,484 issued to Gavin Culmsee. In addition and in recognition of past performance, 141,677 ‘FY20 performance rights’ were issued to John Bourke and 112,065 to Chris Palin. These are subject to continued employment and meeting pre-determined performance criteria. During the prior financial year, 137,032 ‘FY20 performance rights’ were issued to Keith Smith and 76,387 issued to Gavin Culmsee. Rights are subject to continued employment and meeting pre- determined performance criteria. Page 11 of 80 25 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED Reconciliation of performance rights The reconciliation of the performance rights is set out below. Year Granted Balance at start of year Granted during year Vested Forfeited Other Number - Number 127,002 Number - Number - Number Daniel Madden FY21 John Bourke John Bourke Chris Palin Chris Palin Gavin Culmsee FY21 FY20(b) FY21 FY20(b) FY21 - - - - - 208,448 141,677 164,879 112,065 140,484 - - - - - - - - - - - - - - - - - - Gavin Culmsee FY20 Keith Smith FY20 76,387 137,032 - (137,032)(a) 213,419 894,555 (137,032) 970,942 1,411 Balance at end of year Maximum value yet to vest Number 127,002 208,448 141,677 164,879 112,065 140,484 76,387 - $000 185 464 126 367 100 130 39 - - - - - - - (a) Keith Smith share-based payment In the contractual arrangements finalised and signed on 9 October 2020 it was agreed to issue Joyce Corporation Ordinary Shares to Keith Smith in lieu of his performance rights upon his departure from the Company. (b) As the granting of the ‘FY20 performance rights’ to the KWB KMP’s was in recognition of past performance, the share-based payment expense relating to these rights for the previous financial year was fully expensed in the current year. Details of performance rights Details of the performance rights on issue as at 30 June 2021 are summarised below. FY20 Rights Beneficiary John Bourke Chris Palin Gavin Culmsee Number of Rights Granted Fair Value per right (JYC share price on grant date) Total fair value Commencement date Expected vesting date Vesting conditions No. of rights expected to vest 141,677 $2.67 112,065 $2.67 76,387 $1.55 $378,278 1 July 2019(b) 30 June 2022 (3 years) Profit metric of KWB EBIT cumulative over 3 years(a) 141,677 $299,214 1 July 2019(b) 30 June 2022 (3 years) Profit metric of KWB EBIT cumulative over 3 years(a) 112,065 $118,400 1 July 2019 30 June 2022 (3 years) Profit metric of Bedshed EBIT cumulative over 3 years(a) 76,387 (a) The expense recognised in respect of the performance rights is based on the Board’s assessment of the probability that certain milestone earnings will be achieved, measured cumulatively over the three-year period commencing 1 July 2020 and ending 30 June 2022. There are three milestones: “threshold”; “target”; and “stretch and above”. Meeting these milestones results in, respectively, 25%, an additional 25%, and the final 50% of the rights vesting into ordinary shares. (b) As the granting of the ‘FY20 performance rights’ to the KWB KMP’s was in recognition of past performance, the share-based payment expense relating to these rights for the previous financial year was fully expensed in the current year. The formal grant date of the FY20 Rights to John Bourke and Chris Palin was determined post year end and under the requirements of the Australian Accounting Standards, the associated accounting expense is based on the underlying share price at formal grant date. 26 Page 12 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED FY21 Rights Beneficiary Daniel Madden John Bourke Chris Palin Gavin Culmsee Number of Rights Granted Fair Value per right (JYC share price on grant date) Total fair value Commencement date Expected vesting date Vesting conditions No. of rights expected to vest 127,002 $1.64 208,448 $2.67(c) 164,879 $2.67(c) 140,484 $1.11 $208,283 1 December 2020(b) 30 June 2023 (3 years) Profit metric of Group NPAT cumulative over 3 years(a) 63,501 - 127,002 $556,556 $440,227 $155,937 1 July 2020 30 June 2023 (3 years) Profit metric of KWB EBIT cumulative over 3 years(a) 104,224 - 208,448 1 July 2020 30 June 2023 (3 years) Profit metric of KWB EBIT cumulative over 3 years(a) 82,440 - 164,879 1 July 2020 30 June 2023 (3 years) Profit metric of Bedshed EBIT cumulative over 3 years(a) 70,242 - 140,484 (a) The expense recognised in respect of the performance rights is based on the Board’s assessment of the probability that certain milestone earnings will be achieved, measured cumulatively over the three-year period commencing 1 July 2021 and ending 30 June 2023. There are three milestones: “threshold”; “target”; and “stretch and above”. Meeting these milestones results in, respectively, 25%, an additional 25%, and the final 50% of the rights vesting into ordinary shares. (b) Daniel Madden’s contract of employment commenced on 1 December 2020 and as a result for the year 30 June 2021 only a prorated expense was recognised. (c) The formal grant date of the ‘FY21 performance rights’ to John Bourke and Chris Palin was determined post year end and under the requirements of the Australian Accounting Standards, the associated accounting expense is based on the underlying share price at formal grant date. Option and holding rights granted as compensation During the financial year, no options were granted or vested as equity compensation benefits to any Director or Executive of the Consolidated Entity (2020: nil). Option holdings During the financial year, there were no options on issue to any Director or Executive of the Consolidated Entity (2020: nil). Partly paid ordinary shares as compensation There were no partly paid ordinary shares held or granted during the financial year as compensation (2020: nil). Page 13 of 80 27 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED Share holdings The number of shares in the Company held during the financial year by each Director and KMP of the Consolidated Entity, including their personally related parties, are set out below. Balance 1 July 2020 Granted as remuneration On exercise of options Jeremy Kirkwood - Karen Gadsby 20,000 Daniel Smetana 11,062,440 Michael Gurry Timothy Hantke Travis McKenzie Daniel Madden Tim Allison John Bourke Chris Palin 56,878 20,000 15,086 - - 65,359 - Gavin Culmsee 20,000 Derek Fowler Keith Smith(a) - 62,500 TOTAL 11,322,263 - - - - - - - - - - - - 63,731 63,731 - - - - - - - - - - - - - - On-market purchases Other net change Balance 30 June 2021 132,978 67,500 - - 132,978 87,500 - 109,139 11,171,579 83,715 - - - - 100,000 - 20,000 - - - - - - - - - - - (126,231) 140,593 20,000 15,086 - - 165,359 - 40,000 - - 404,193 (17,092) 11,773,095 (a) Keith Smith resigned on 30 November 2020 and ceased to be a KMP at that date. E. LINK BETWEEN REMUNERATION POLICY AND COMPANY PERFORMANCE The Consolidated Entity provided executives with variable remuneration in the form of short-term and long-term incentives as described in Part A of the Remuneration Report. These incentives are payable upon the achievement of certain goals covering both financial and non-financial, corporate and individual measures of performance. Included in the measures are contributions to profit, cash targets and departmental functional KPI's. The following table shows the revenue, profit and dividends for the last five years for the Consolidated Entity, as well as the share price at the end of the respective financial year. The dividend includes ordinary and special dividends paid or payable in respect of each financial year. FY21 $000 FY20 $000 FY19 $000 FY18 $000 FY17 $000 Revenue from continuing operations (a) 111,224 85,757 84,205 78,093 64,726 Profit from continuing operations after tax (a) 12,995 2,674 6,385 6,204 3,794 Share price at year-end $ Dividends (cents) 2.65 17.0 1.10 10.0 1.53 12.7 1.42 11.0 1.60 11.5 (a) Revenue and profit exclude discontinued operations. 28 Page 14 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Remuneration REPORT – audited YEAR ENDED 30 JUNE 2021 REMUNERATION REPORT – AUDITED F. VOTING AT THE 2020 ANNUAL GENERAL MEETING (AGM) At the 2020 Annual General Meeting (“AGM”), the majority of shareholders votes cast, 62.53%, were in favour of adopting the 2020 Remuneration Report – Audited (“Remuneration Report”). However, 37.47% of the votes cast were against the Remuneration Report, constituting a “second strike” under the Corporations Act 2001 (Cth) (“Corporations Act”). The subsequent board spill resolution required to be held under the Corporations Act was not carried. Shareholders should note that the 2021 Remuneration Report requires a 75% majority vote at the FY2021 AGM, otherwise the Company will receive a “first strike”. As with previous years, during FY2021, the Remuneration Committee and the Board considered the views of shareholders and continues to assess the appropriateness of the Company’s remuneration policies and competitiveness to ensure it aligns with the Company’s performance against key business goals and objectives. While no changes have been made to the remuneration policy for the Board during FY2021, the Board is committed to ensuring there is continued demonstrable alignment between performance and compensation for key management personnel. G. INDEPENDENT SALARY AND INCENTIVE REVIEW There was independent advice sought in November 2020 with respect to the CEO’s LTI. The review was undertaken by independent professional firm, Godfrey Remuneration Group in conjunction with the review of NED fees referred to in part A above. H. LOANS OR OTHER TRANSACTIONS WITH DIRECTORS AND KMP There are no loans outstanding with any Director as at 30 June 2021 (2020: $nil). During the financial year, the entities of the Consolidated Entity entered into the following transactions with related parties: Related Party Type of transaction Received dividend payments totalling Key Management Personnel $1,974,236, with $8,628 reinvested under the Company’s DRP. Other than the items disclosed above, there are no other material transactions with KMP not in the ordinary course of business. END OF AUDITED REMUNERATION REPORT. Page 15 of 80 29 ANNUAL REPORT 2021JOYCE CORPORATION LTD DIRECTORS’ REPORT – cont. YEAR ENDED 30 JUNE 2021 DIRECTORS’ REPORT CONT. INSURANCE OF OFFICERS During the financial year, Joyce Corporation Ltd paid a premium to insure the Directors, Secretaries and KMP of the Consolidated Entity. A clause in the relevant insurance policy prevents the disclosure of the amount of the premium. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers of the Consolidated Entity and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company or more broadly to the Consolidated Entity. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. PROCEEDINGS ON BEHALF OF THE COMPANY No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for taking responsibility on behalf of the Company for all or part of those proceedings. PERFORMANCE IN RELATION TO ENVIRONMENTAL REGULATION Joyce Corporation Ltd is party to licenses issued by the Environmental Protection Authority as per NGER Act 2007 and various other authorities throughout Australia. These licenses regulate the management of air and water quality, the storage and carriage of hazardous materials and disposal of wastes associated with the Consolidated Entity’s properties. There have been no new or material known breaches associated with the Consolidated Entity’s license conditions. NON-AUDIT SERVICES Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in Note 29. The Directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the $36,000 of non-audit services provided by BDO during the year (as disclosed in Note 29) do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: - All non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and - None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the company, acting as advocate for the company or jointly sharing economic risks and rewards. AUDITOR'S INDEPENDENCE DECLARATION A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 32. 30 Page 16 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD DIRECTORS’ REPORT – cont. YEAR ENDED 30 JUNE 2021 DIRECTORS’ REPORT CONT. ROUNDING OF AMOUNTS The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Signed in accordance with a resolution of the Directors made pursuant to section 298(2) of the Corporations Act 2001. J Kirkwood Chair Perth, 31 August 2021 Page 17 of 80 31 ANNUAL REPORT 2021JOYCE CORPORATION LTD auditor’s independence declaration Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au YEAR ENDED 30 JUNE 2021 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY NEIL SMITH TO THE DIRECTORS OF JOYCE CORPORATION LTD DECLARATION OF INDEPENDENCE BY NEIL SMITH TO THE DIRECTORS OF JOYCE CORPORATION LTD As lead auditor of Joyce Corporation Ltd for the year ended 30 June 2021, I declare that, to the best of my knowledge and belief, there have been: As lead auditor of Joyce Corporation Ltd for the year ended 30 June 2021, I declare that, to the best of 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in my knowledge and belief, there have been: relation to the audit; and 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in 2. No contraventions of any applicable code of professional conduct in relation to the audit. relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Joyce Corporation Ltd and the entities it controlled during the period. This declaration is in respect of Joyce Corporation Ltd and the entities it controlled during the period. Neil Smith Director Neil Smith Director BDO Audit (WA) Pty Ltd Perth, 31 August 2021 BDO Audit (WA) Pty Ltd Perth, 31 August 2021 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 32 BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. ANNUAL REPORT 2021JOYCE CORPORATION LTD corporate governance statement YEAR ENDED 30 JUNE 2021 CORPORATE GOVERNANCE STATEMENT Joyce Corporation Ltd (“the Company”) and the Board are committed to achieving and demonstrating a high standard of corporate governance. The Company has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (4th edition) published by the ASX Corporate Governance Council. The 2021 Corporate Governance Statement reflects the corporate governance practices in place throughout the financial year. The Company’s current Corporate Governance Statement can be viewed at www.joycecorp.com.au. Page 19 of 80 33 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 Joyce Corporation Ltd AND CONTROLLED ENTITIES ABN: 80 009 116 269 Annual Financial Report For the Year Ended 30 June 2021 34 Page 20 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2021 Consolidated 2021 $000 2020 $000 Note Continuing operations Revenue Cost of sales Gross profit Other revenue Variable costs Contribution margin Expenses from continuing operations Employment expenses Occupancy expenses Marketing expenses Administration expenses Profit before depreciation, impairment, interest, tax Depreciation and amortisation Profit before impairment, interest, tax Impairment of non-financial assets Profit before interest, tax Net interest Profit before tax Income tax expense Profit for the year from continuing operations Profit / (loss) for the year from discontinued operations Profit for the year Profit is attributable to: Continuing operations: Ordinary equity holders of the company Non-controlling interests Discontinued operations: Ordinary equity holders of the company Non-controlling interests 22 22 22 22 22 22 22 22 22 23 26 111,224 (52,417) 58,807 4,385 (8,030) 55,162 (22,031) (1,238) (2,694) (4,907) 24,292 (4,663) 19,629 - 19,629 (521) 19,108 (6,113) 12,995 85,757 (40,720) 45,037 3,938 (4,838) 44,137 (19,828) (1,444) (2,654) (3,608) 16,603 (4,606) 11,997 (5,526) 6,471 (699) 5,772 (3,098) 2,674 - (2,319) 12,995 355 7,574 5,421 12,995 - - - (1,107) 3,781 2,674 (1,655) (664) (2,319) The consolidated statement of profit or loss should be read in conjunction with the accompanying notes. 35 Page 21 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 CONSOLIDATED STATEMENT OF PROFIT OR LOSS FOR THE YEAR ENDED 30 JUNE 2021 Earnings / (loss) per share (cents per share) for profit / (loss) attributable to ordinary equity holders of the Company: Basic earnings / (loss) per share: Earnings / (loss) from continuing operations Earnings / (loss) from discontinued operations Diluted earnings / (loss) per share: Earnings / (loss) from continuing operations Earnings / (loss) from discontinued operations Basic earnings / (loss) per share excluding impairment expense amount: Earnings from continuing operations Earnings / (loss) from discontinued operations Note 19 19 19 Consolidated 2021 cents 2020 cents 26.92 - 26.92 26.92 - 26.92 26.92 - 26.92 (3.95) (5.90) (9.85) (3.95) (5.90) (9.85) 15.76 (5.90) 9.86 The consolidated statement of profit or loss should be read in conjunction with the accompanying notes. 36 Page 22 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2021 Profit for the year Other comprehensive income Items that will not be reclassified to profit or loss Other comprehensive income for the year, net of tax Note Consolidated 2021 $000 12,995 - - 2020 $000 355 - - Total comprehensive income for the year 12,995 355 Total comprehensive income for the year arises from: Continuing operations Discontinued operations Total comprehensive income for the year Total comprehensive income for the year attributable to: Continuing operations: Ordinary equity holders of the company Non-controlling interests Discontinued operations: Ordinary equity holders of the company Non-controlling interests 26 12,995 - 12,995 2,674 (2,319) 355 7,574 5,421 12,995 - - - (1,107) 3,781 2,674 (1,655) (664) (2,319) The consolidated statement of comprehensive income should be read in conjunction with the accompanying notes. 37 Page 23 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2021 ASSETS Current assets Cash and cash equivalents Trade receivables Inventories Other receivables and prepayments Other financial assets Total current assets Non-current assets Other receivables and prepayments Deferred tax assets Right-of-use assets Property, plant and equipment Investment property Intangible assets Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Dividend payable Provisions Loans and borrowings Lease liabilities Provision for income tax Total current liabilities Non-current liabilities Loans and borrowings Lease liabilities Deferred tax liabilities Provisions Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserve Retained earnings / (accumulated losses) Parent entity interest Non-controlling interest TOTAL EQUITY Note 9 10 11 12 13 12 23 24 14 15 5 16 21 17 6 24 23 6 24 23 17 18 20 27 Consolidated 2021 $000 19,881 591 3,225 464 582 24,743 114 6,005 12,454 8,892 9,623 7,450 44,538 2020 $000 10,643 886 2,974 4,168 179 18,850 157 5,564 10,195 8,807 9,623 7,510 41,856 69,281 60,706 19,747 - 2,410 - 3,974 1,710 27,841 - 9,788 4,364 649 14,801 12,774 1,405 1,575 521 3,370 484 20,129 5,230 8,587 3,851 1,256 18,924 42,642 39,053 26,639 21,653 18,397 742 3,893 23,032 3,607 26,639 18,280 20 (305) 17,995 3,658 21,653 The consolidated statement of financial position should be read in conjunction with the accompanying notes. 38 Page 24 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2021 Consolidated Cash flows from / (used in) operating activities Receipts from customers Payments to suppliers and employees Income tax paid Interest received / (paid) Net cash flows from operating activities Cash flows from / (used in) investing activities Purchase of property, plant and equipment Purchase of intangible assets Proceeds from sale of discontinued operations Proceeds from sale of property, plant and equipment Net cash flows from investing activities Cash flows from / (used in) financing activities Dividends paid Dividends paid to non-controlling interests Payment of lease liabilities Repayment of borrowings Proceeds from borrowings Net cash flows (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 Reconciliation of cash Cash at bank and in hand Note 30 26 27 24 6 9 9 2021 $000 115,904 (83,931) (4,815) 8 27,166 (1,394) - 3,300 111 2,017 (4,760) (5,472) (3,963) (5,750) - (19,945) 9,238 10,643 19,881 2020 $000 91,117 (74,119) (3,535) (106) 13,357 (645) (180) 1,957 67 1,199 (1,398) (1,465) (3,711) (16,498) 12,300 (10,772) 3,784 6,859 10,643 19,881 19,881 10,643 10,643 The consolidated statement of cash flows should be read in conjunction with the accompanying notes. 39 Page 25 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2021 Contributed Equity Reserves Balance at 1 July 2019 Total comprehensive income / (loss) for the year: Loss attributable to members of the parent entity Profit attributable to non- controlling interests Total comprehensive income / (loss) for the year Transactions with owners in their capacity as owners: Carrying value of non- controlling interests disposed Shares issued Share-based payments Dividends paid or provided for Balance at 30 June 2020 Note $000 18,090 - - - - 190 - - 18,280 26 18 20 21 $000 - - - - - - 20 - 20 Retained Earnings / (Losses) Non- Controlling Interest $000 5,258 $000 2,868 Total Equity $000 26,216 (2,762) - (2,762) - 3,117 3,117 (2,762) 3,117 355 - (862) (862) - - (2,801) (305) - - (1,465) 3,658 Contributed Equity Reserves Retained Earnings / (Losses) Non- Controlling Interest Note $000 18,280 $000 20 $000 (305) $000 3,658 - - - - - - 7,574 - 7,574 - 5,421 5,421 7,574 5,421 12,995 Balance at 1 July 2020 Total comprehensive income / (loss) for the year: Profit attributable to members of the parent entity Profit attributable to non- controlling interests Total comprehensive income / (loss) for the year 190 20 (4,266) 21,653 Total Equity $000 21,653 Transactions with owners in their capacity as owners: Shares issued Share-based payments Dividends paid or provided for Balance at 30 June 2021 18 20 21 117 - - 18,397 - 722 - 742 - - (3,376) 3,893 - - (5,472) 3,607 117 722 (8,848) 26,639 The consolidated statement of changes in equity should be read in conjunction with the accompanying notes. 40 Page 26 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. CORPORATE INFORMATION The consolidated financial statements of Joyce Corporation Ltd (“the Company”) for the financial year ended 30 June 2021 were authorised for issue in accordance with a resolution of the Directors of the Company dated 31 August 2021. Joyce Corporation Ltd is a company incorporated in Australia and limited by shares which are publicly traded on the Australian Securities Exchange. The Company is a for-profit entity for the purpose of this financial report. The nature of the operations and principal activities of the Company and its controlled entities are described in the Directors’ Report. The consolidated financial statements comprise the financial statements of Joyce Corporation Ltd and its controlled subsidiaries (“the Consolidated Entity”). Critical Accounting Estimates and Judgements: COVID-19 pandemic Judgement has been exercised in considering the impacts the COVID-19 pandemic has had, or may have, on the Consolidated Entity based on known information. This consideration extends to the nature of the products and services offered, customers, supply chain, staffing and geographic regions in which the Consolidated Entity operates. There does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the Consolidated Entity unfavourably at the reporting date. Significant Accounting Policy: Basis of preparation These general-purpose financial statements for the financial year ended 30 June 2021 have been prepared in accordance with requirements of the Corporations Act 2001 and Australian Accounting Standards. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Historical cost convention These financial statements have been prepared under the historical cost convention, except for the investment property and certain other financial instruments which are measured at fair value. Significant Accounting Policy: Principles of consolidation The Company controls an entity when the Company 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 to direct the activities of the entity. All controlled entities have a 30 June financial year end. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Consolidated Entity controls another entity. Refer to Note 27 in relation to the list of controlled entities. Consolidated financial statements are the financial statements of the Consolidated Entity presented as those of a single economic entity. The consolidated financial statements are prepared using uniform accounting policies for like transactions and other events in similar circumstances. All significant intra-group balances and transactions, including income, expenses and dividends, are eliminated in full on consolidation. 41 Page 27 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The results of the investees acquired or disposed of during the financial year are accounted for from the respective dates of acquisition or up to the dates of disposal. On disposal, the attributable amount of goodwill, if any, is included in the determination of the gain or loss on disposal. Non-controlling interests, being that portion of the profit or loss and net assets of subsidiaries attributable to equity interests held by persons outside the Consolidated Entity, are shown separately within the Equity section of the consolidated Statement of Financial Position and in the consolidated Statement of Profit or Loss and Other Comprehensive Income. Amounts held on trust for the Bedshed ‘Marketing Fund’ and Bedshed ‘Deposit Guarantee’ are not funds of the Consolidated Entity and have not been consolidated. Significant Accounting Policy: Comparatives When required by accounting standards, comparative figures have been adjusted to maintain consistency with classification and presentation for the current financial year. Significant Accounting Policy: Rounding of amounts The Company is of a kind referred to in ASIC Legislative Instrument 2016/191, relating to the ‘rounding off’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with the instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. Significant Accounting Policy: Functional and presentation currency Items included in the financial statements of each of the Consolidated Entity’s entities are measured using the currency of the primary economic environment in which the entity operation (‘the functional currency’). The consolidated financial statements are presented in Australian dollar ($), which is the Company’s functional and presentation currency. 2. SIGNIFICANT AFTER REPORTING DATE EVENTS The Directors resolved that a FY21 final dividend of 10 cents per share, fully franked, be paid by Joyce Corporation Limited on 1 October 2021 to all shareholders registered as at the record date of 14 September 2021. The full impact of the COVID-19 pandemic continues to evolve at the date of this report. The Consolidated Entity is actively monitoring the global and national situation and its impact on the Consolidated Entity’s financial condition, liquidity, operations, suppliers, industry and workforce. Given the daily evolution of the COVID-19 pandemic and government’s responses to curb its spread, at this point the Consolidated Entity is not able to estimate the effects of the COVID-19 pandemic on its results of operations, financial condition, or liquidity for the 2022 financial year. Other than disclosed above, no event has occurred since the reporting date to the date of this report that has significantly affected, or may significantly affect the Consolidated Entity’s operations, the results of those operations, or the Consolidated Entity’s state of affairs. 42 Page 28 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 3. FINANCIAL RISK MANAGEMENT The Consolidated Entity's operations expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Consolidated Entity's overall risk management program seeks to minimise potential adverse effects on the financial performance of the Consolidated Entity. The Consolidated Entity holds the following financial instruments: Financial assets Cash and cash equivalents Trade receivables Other receivables Other financial assets Financial liabilities Trade and other payables Loans and borrowings Dividend payable Lease liabilities Market risk Note 9 10 12 13 16 6 21 24 2021 $000 19,881 591 130 582 21,184 19,747 - - 13,762 33,509 2020 $000 10,643 886 3,240 179 14,948 12,774 5,751 1,405 11,957 31,887 (i) Foreign exchange risk The Consolidated Entity’s exposure to foreign currency risk is not material and is largely limited to purchases of inventory within the company-owned Bedshed stores. (ii) Cash flow interest rate risks The Consolidated Entity's main interest rate risk arises from its borrowings activities. Borrowings issued at variable rates expose the Consolidated Entity to cash flow interest rate risk. The Consolidated Entity’s polices seek to manage both interest rate and liquidity risks (see below), by assessment of expectations about interest rates in the medium term and the Consolidated Entity’s need for flexibility to minimise the Consolidated Entity’s interest expense. 43 Page 29 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS As at the reporting date, the Consolidated Entity had the following variable and fixed rate financial instruments: Financial assets Cash and cash equivalents Financial liabilities CBA market rate loan 1 CBA market rate loan 2 2021 Average interest rate Fixed Variable Average interest rate Fixed $000 Variable 2020 $000 0.01% - 19,881 0.01% - 10,643 2.25% 2.25% - - - 3.12% 3.08% - - - - - 4,751 1,000 5,751 An analysis by maturities is provided in (b) below. The Consolidated Entity analyses its interest rate exposure on a dynamic basis. Various scenarios are modelled taking into consideration refinancing, renewal of existing positions and alternative financing. Based on the various scenarios, the Consolidated Entity manages its cash flow interest rate risk adopting an appropriate mix of fixed versus variable rate debt and an appropriate mix of debt maturities to provide it with flexibility to repay debt as quickly as possible whilst having liquidity available to take advantage of business opportunities as they arise. (a) Credit risk Credit risk is limited to high credit quality financial institutions with which deposits are held and high credit quality wholesale customers with which the Consolidated Entity trades. Credit risk is managed on a Consolidated Entity basis. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to wholesale customers, including outstanding receivables and committed transactions. For banks and financial institutions, only independently rated parties with a minimum rating of 'A' are accepted. If wholesale customers are independently rated, these ratings are used. Otherwise, if there is no independent rating, the credit quality of the customer is assessed internally, considering its financial position, past performance and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set internally. The compliance with credit limits by wholesale customers is regularly monitored by line management. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets. For wholesale customers without credit rating, the Consolidated Entity generally retains title over the goods sold until full payment is received. The Consolidated Entity does not hold any credit derivatives to offset its credit exposure. The Consolidated Entity trades only with recognised, creditworthy third parties and as such collateral is not requested nor is it the Consolidated Entity's policy to securitise its trade receivables. 44 Page 30 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates: Cash and cash equivalents Trade receivables Other receivables Other financial assets (b) Liquidity risk AA- Non-rated Non-rated Non-rated 2021 $000 19,881 591 130 582 21,184 2020 $000 10,643 886 3,240 179 14,948 Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. The Consolidated Entity manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. Due to the dynamic nature of its underlying businesses, the Consolidated Entity aims at maintaining flexibility in funding by keeping committed credit lines available and, where possible, with a variety of counterparties. Surplus funds are generally invested in term deposits or used to repay debt. Financing arrangements Refer to Note 6 in relation to the financing facilities available at reporting date. 45 Page 31 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Maturities of financial assets and financial liabilities The tables below present, as at the reporting date, the Consolidated Entity’s financial assets and liabilities in relevant maturity groupings based on the remaining period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Year ended 30 June 2021 Consolidated financial assets Cash and cash equivalents Trade receivables Other receivables Other financial assets Consolidated financial liabilities Trade and other payables Loans and borrowings Dividend payable Lease liabilities ≤ 6 months $000 6-12 months $000 1-5 years $000 > 5 years $000 Total $000 19,881 591 16 582 21,070 19,747 - - 1,985 21,732 - - - - - - - - 1,989 1,989 - - 114 - 114 - - - 8,884 8,884 - - - - - - - - 904 904 19,881 591 130 582 21,184 19,747 - - 13,762 33,509 Net maturity (662) (1,989) (8,770) (904) (12,325) Year ended 30 June 2020 Consolidated financial assets Cash and cash equivalents Trade receivables Other receivables Other financial assets Consolidated financial liabilities Trade and other payables Loans and borrowings Dividend payable Lease liabilities ≤ 6 months $000 6-12 months $000 1-5 years $000 > 5 years $000 10,643 886 3,083 179 14,791 12,774 521 1,405 1,786 16,486 - - - - - - - 157 - 157 - - - 1,584 1,584 - 5,230 - 8,531 13,761 - - - - - - - - 56 56 Total $000 10,643 886 3,240 179 14,948 12,774 5,751 1,405 11,957 31,887 Net maturity (1,695) (1,584) (13,604) (56) (16,939) 46 Page 32 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Capital risk management Management manages the capital of the Consolidated Entity in order to maintain a stable debt to equity ratio, to provide shareholders with adequate returns and ensure that the Consolidated Entity can fund its operations and continue as a going concern. The Consolidated Entity’s debt and capital includes ordinary share capital and financial liabilities, supported by financial assets. The Consolidated Entity is not subject to any externally imposed capital requirements. Management manages the Consolidated Entity’s capital by assessing the Consolidated Entity’s financial risks and adjusting its capital structure in response to changes in these risks. These responses include the management of debt levels, dividends to shareholders and share issues. Estimates and judgements are continually re-evaluated in order to contemplate the most up to date information available to management. 4. SEGMENT INFORMATION (a) Operating segments Operating Segments are identified based on internal reports about components of the Consolidated Entity that are regularly reviewed by the chief operating decision makers (The Board of Directors and the CEO) in order to allocate resources to the segments and to assess their performance. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets. The Consolidated Entity has the following operating segments: - Operation of retail kitchen and wardrobe showrooms; - Bedshed retail bedding franchise operation; and - Company-owned retail bedding stores. Transfer prices between operating segments are set on an arms-length basis and in a manner consistent with transactions with third parties. Previous operations of valuation, online and physical auction sites were divested on 17 June 2020 and are reported under Discontinued Operations. (b) Geographic segments The Consolidated Entity operates in one principal geographical area namely that of Australia (country of domicile). Each Segment is managed on a national basis and management consider that geographic areas are not a consideration in Segment performance. (c) Information about major customers No single customer of the Consolidated Entity generated more than 10% of the Consolidated Entity’s revenue during the year ended 30 June 2021 (2020: none). In the retail operations of the Consolidated Entity, namely KWB and Bedshed company-owned Stores, no single customer represents a material amount of revenue. 47 Page 33 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table presents revenue and profit information and certain asset and liability information regarding operating segments for the year ended 30 June 2021. Continuing operations Continuing operations Revenue Revenue Inter-segment sales Total segment revenue Timing of revenue recognition: At a point in time Over time Unallocated revenue Total consolidated revenue Result Segment result Unallocated expenses net of unallocated income Income tax expense Net consolidated profit/(loss) for the year Assets and liabilities as at 30 June 2021 Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information for the year ended 30 June 2021 Capital expenditure on PPE and intangibles Depreciation and amortisation Retail Kitchen Showrooms $000 Bedshed Franchise Retail Bedding Stores $000 $000 89,693 - 89,693 89,693 - 89,693 4,834 - 4,834 - 4,834 4,834 16,697 - 16,697 16,697 - 16,697 16,320 2,629 3,257 41,549 8,540 12,308 32,550 2,205 6,556 Total $000 111,224 - 111,224 106,390 4,834 111,224 - 111,224 22,206 (3,098) (6,113) 12,995 62,397 6,884 69,281 41,311 1,331 42,642 1,346 3,450 25 82 9 1,043 1,380 4,575 48 Page 34 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table presents revenue and profit information and certain asset and liability information regarding operating segments for the year ended 30 June 2020. Continuing operations Continuing operations Discontinued operations Retail Kitchen Showrooms Bedshed Franchise $000 $000 Retail Bedding Stores $000 67,498 3,996 14,263 - - - Revenue Revenue Inter-segment sales Total segment revenue 67,498 3,996 14,263 67,498 - 67,498 - 14,263 3,996 3,996 - 14,263 11,269 1,992 (201) 30,613 8,417 10,148 22,123 2,002 7,703 Timing of revenue recognition: At a point in time Over time Unallocated revenue Total consolidated revenue Result Segment result Unallocated expenses net of unallocated income Income tax expense Net consolidated profit/(loss) for the year Assets and liabilities as at 30 June 2020 Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information for the year ended 30 June 2020 Capital expenditure on PPE and intangibles Depreciation and amortisation 588 191 41 3,201 21 1,285 820 4,507 Total $000 85,757 - 85,757 81,761 3,996 85,757 - 85,757 13,060 (7,288) (3,098) 2,674 49,178 11,528 60,706 31,828 7,225 39,053 Total $000 15,595 - 15,595 15,595 - 15,595 - 15,595 (1,700) (1,060) 441 (2,319) - - - - - - - 1,250 49 Page 35 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 5. INTANGIBLE ASSETS Software development Goodwill Total intangible assets 2021 $000 120 7,330 7,450 2020 $000 180 7,330 7,510 Acquired both separately and from a business combination Intangible assets acquired separately are capitalised at cost. Following initial recognition, the cost model is applied to each individual class of intangible assets. Where amortisation is charged on assets with finite lives, this expense is taken to the Consolidated Statement of Profit or Loss through the ‘depreciation and amortisation’ expense line item. Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits (or losses) in the period in which the expenditure is incurred. Intangible assets are tested for impairment where an indicator of impairment exists and annually in the case of intangible assets with indefinite lives, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Consolidated Entity’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is not amortised, instead, it is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units (CGU’s) for impairment testing. CGU’s to which goodwill is allocated as at 30 June 2021 are as follows: - KWB Group Pty Ltd cash generating unit; and - Bedshed Franchising cash generating unit. 50 Page 36 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Software development Costs incurred in developing products or systems and costs incurred in acquiring software and licenses that will contribute to future financial benefits through revenue generation and/or cost reduction are capitalised to software and systems. Costs capitalised include external direct costs of materials and service, direct payroll and payroll related costs of employees’ time spent on the project. Amortisation is calculated on a straight-line basis over periods generally ranging from 3 to 5 years. IT development costs include only those costs directly attributable to the development phase and are only recognised following completion of technical feasibility and where the Consolidated Entity has an intention and ability to use the asset. Critical Accounting Estimates and Judgements: Capital development investments Discounted cash flow models are used for business cases. These include assumptions and estimates of business outcomes and are used for capital investments, such as software. The Consolidated Entity has made an assessment to amortise software development costs over 5 years. Impairment of non-financial assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill that have undergone impairment are reviewed for possible reversal of the impairment at each reporting date. Critical Accounting Estimates and Judgements: Impairment of non-financial assets The Consolidated Entity assesses impairment at each reporting date by evaluating conditions specific to the Consolidated Entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates and judgements. 51 Page 37 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS An analysis of intangible assets is presented below. Goodwill 2021 $000 2020 $000 Software Development 2021 $000 2020 $000 Consolidated 2021 $000 2020 $000 7,330 15,933 180 2,436 7,510 18,369 Year ended 30 June Net of accumulated impairment and amortisation at 1 July Additions Impairment Disposals Amortisation Net of accumulated impairment and amortisation at 30 June - - - - - (4,377) (4,226) - 7,330 7,330 At 30 June Cost (gross carrying amount) Disposals Accumulated impairment Accumulated amortisation Net carrying amount 11,734 - (4,404) - 7,330 17,778 (4,226) (6,222) - 7,330 - - - (60) 120 180 - - (60) 120 180 - (2,436) - - - - (60) 180 (4,377) (6,662) - 180 7,450 7,510 2,616 (2,436) - - 180 11,914 - (4,404) (60) 7,450 20,394 (6,662) (6,222) - 7,510 Goodwill Goodwill as at 30 June 2021 reflects the interest in the KWB Group, acquired in October 2014 and the value of the Bedshed Franchising Pty Ltd activities, purchased in 2006. Software development Software development as at 30 June 2021 reflects the value of the HarmoniQ point of sale system in the Bedshed Franchise and Retail Bedding Stores segments. Impairment The Consolidated Entity assesses impairment at each reporting date by evaluating conditions specific to the Consolidated Entity that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Impairment of $nil (2020: $4.38 million) has been recognised in respect of goodwill. 52 Page 38 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Allocation of goodwill Goodwill is allocated to cash-generating units which are based on the Consolidated Entity’s operating segments: Kitchen Showrooms segment Bedshed Franchising segment Total goodwill Impairment of goodwill 2021 $000 1,023 6,307 7,330 2020 $000 1,023 6,307 7,330 The recoverable amount of each CGU above is determined based on value-in-use calculations. Value- in-use is calculated based on the present value of cash flow projections over a 5-year period with the period extending beyond the existing budget for FY22 extrapolated using estimated growth rates. The cash flows are discounted using risk-adjusted pre-tax discount rate. The following assumptions were used in the value-in-use calculations: Kitchen Showrooms segment Bedshed Franchising segment Pre–tax Discount Rate 2021 9.81% 9.81% Pre–tax Discount Rate 2020 9.66% 9.66% Growth Rate 2021 2.36% 2.36% Growth Rate 2020 5.00% 2.00% The Consolidated Entity’s value-in-use calculations incorporated a terminal value component beyond the 5-year projection period for all the operating segments. Impairment of goodwill for the financial year ended 30 June 2021 was $nil (2020: $4.38 million). The FY20 impairment was due to changes in the estimates of future results and terminal value for the Bedshed Stores segment and the sale of the majority ownership of Lloyds Online Auctions Pty Ltd. Impact of possible changes in key assumptions No reasonably possible changes in the key assumptions above would result in the carrying amount of the CGUs exceeding their recoverable amounts. 53 Page 39 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual Financial Report YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 6. LOANS AND BORROWINGS AND FINANCING FACILITIES AVAILABLE Current Bank loans Non-current Bank loans Total loans and borrowings 2021 $000 - - - 2020 $000 521 5,230 5,751 Secured liabilities and assets pledged as security The bank loans are secured by first mortgages over the Consolidation Entity’s freehold land and buildings, including those classified as investment properties. Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. Refer to Note 24 in relation to lease liabilities. Compliance with loan covenants The Consolidated Entity has complied with the financial covenants of its borrowing facilities during the financial year. Financing facilities available At reporting date, the following financing facilities had been negotiated and were available: Total facilities: CBA market rate loan 1 CBA market rate loan 2 CBA multi option facility NAB business loan Total available facilities Facilities used at reporting date: CBA market rate loan 1 CBA market rate loan 2 CBA multi option facility NAB business loan Total used facilities Facilities unused at reporting date: CBA market rate loan 1 CBA market rate loan 2 CBA multi option facility NAB business loan Total unused facilities 54 2021 $000 4,551 875 415 4,000 9,841 - - - - - 4,551 875 415 4,000 9,841 2020 $000 4,751 1,000 415 4,000 10,166 4,751 1,000 - - 5,751 - - 415 4,000 4,415 Page 40 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Key terms of finance facilities Facility CBA market rate loan 1 CBA market rate loan 2 CBA multi option facility NAB business loan 7. CONTINGENT LIABILITIES Loan term 2 years 2 years 2 years 4 years Expiry date 27/09/2021 27/09/2021 27/09/2021 31/07/2024 At 30 June 2021, the Consolidated Entity had entered into the following guarantees: • KWB Group has retail lease bank guarantees held against the equity in the 97 Trade Street, Lytton property as at 30 June 2021 of $0.96 million (30 June 2020: $0.62 million). • Bedshed Retail Stores have bank guarantees relating to payment of lease obligations as at 30 June 2021 of $0.37 million (30 June 2020: $0.83 million). No provision has been made in the financial statements in respect of these contingencies as the possibility of a probable outflow under these guarantees is considered remote. The KWB Group also has cash-backed rental deposits supporting showroom leases as at 30 June 2021 of $60,000 (30 June 2020: $98,000). Significant Accounting Policy: Financial guarantees Where material, financial guarantees are issued. These require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due. The guarantees are recognised as a financial liability at fair value on initial recognition. The guarantee is subsequently measured at the higher of the amount determined in accordance with the expected credit loss model under AASB 9 Financial Instruments and the amount initially recognised less, where appropriate, cumulative amounts recognised in accordance with AASB 15 Revenue from Contracts with Customers. Where the Consolidated Entity gives guarantees in exchange for a fee, revenue is recognised under AASB 15. The fair values of financial guarantee contracts are assessed using a probability weighted discounted cash flow approach. The probability is based on: - The likelihood of the guaranteed party defaulting in a given period; - The proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and - The maximum loss exposed if the guaranteed party were to default. 55 Page 41 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 8. FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS Fair value hierarchy The Consolidated Entity uses various methods in estimating the fair value of instruments. The methods comprise: Level 1: The fair value is based on quoted market prices (unadjusted) in active markets for identical assets or liabilities at the end of the reporting period. Level 2: The fair value is determined using valuation techniques which maximise the use of observable market data and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Level 3: If one or more of the significant inputs is not based on observable market data, the asset is included in level 3. The fair value measurement, valuation technique and inputs used in fair valuing the non-financial instruments are set out as follows: Class of property Property and buildings Office and warehouse, Osborne Park WA Investment property Office and factory, Lytton QLD Fair value hierarchy Level 2 Carrying Value June 2021 $000 Valuation technique Range of Key un- observable inputs un- observable inputs 5,450 Management valuation Capitalisation rate 5.25% - 5.75% Level 2 9,620 Management valuation Capitalisation rate 6.00% - 7.25% Significant Accounting Policy: Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes. The carrying value less impairment provision of trade receivables and the carrying value payables are assumed to approximate their fair values due to their short-term nature. 56 Page 42 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand and deposits held at call with financial institutions. Refer to Note 3 in relation to the management of financial risks of cash. Bank overdrafts are shown within borrowings in current liabilities on the statement of financial position. Funds held in Trust Consolidated cash and cash equivalents balances exclude funds allocated for the specific use of operating the Approved Purposes activities on behalf of the Company’s Bedshed franchisees. Approved Purposes cash is included in Other Financial Assets. At 30 June 2021, the total of this balance was $0.58 million (2020: $0.18 million). For the purposes of the statement of cash flows, cash and cash equivalents are comprised of the following: Cash at bank and on hand 10. TRADE RECEIVABLES Current Trade receivables Allowance for expected credit loss Total current trade receivables 2021 $000 2020 $000 19,881 10,643 2021 $000 597 (6) 591 2020 $000 892 (6) 886 Trade and other receivables are non-interest bearing. Trade and other receivables are recognised at amortised cost, less an allowance for expected credit loss. Each operating segment’s policy requires customers to pay in accordance within agreed payment terms. Depending on the operating segment, trade receivables are generally due for settlement within 30 days. At 30 June, the ageing analysis of current trade receivables is as follows: Within one year 2021 $000 591 2020 $000 886 Other balances within trade and other receivables are neither impaired nor past due. It is expected that these other balances will be received when due. 57 Page 43 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Movements in the allowance for expected credit loss for trade and other receivables were as follows: At 1 July (Credit) / charge for the year At 30 June 2021 $000 216 (210) 6 2020 $000 20 196 216 Critical Accounting Estimates and Judgements: Expected credit losses Debtors in each of the Consolidated Entity segments have been reviewed for the potential of non- recovery. The review is based on the lifetime expected credit loss, grouped based on days overdue and makes assumptions to allocate an overall expected credit loss rate. These assumptions include recent sales experience, historical collection rates, the impact of the COVID-19 pandemic and forward- looking information that is available. The allowance for expected credit losses is calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower. 11. INVENTORIES Current Stock on hand at cost Provision for impairment(a) 2021 $000 3,360 (135) 3,225 2020 $000 3,092 (118) 2,974 (a) Write-downs of inventories to net realisable value recognised as an expense during the financial year amounted to $17,000 (2020: $20,000). Significant Accounting Policy: Inventory Inventories are stated at the lower of cost and net realisable value. Cost comprises expenditure incurred in acquiring the inventories and in bringing them to their existing condition and location. Costs are assigned to individual items of inventory on a basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs to make the sale. Critical Accounting Estimates and Judgements: Net realisable value of inventory In determining the number of write-downs required for inventory, the Consolidated Entity has made judgements based on the expected net realisable value of that inventory. Historic experience and current knowledge of the products has been used in determining any write-downs to net realisable value. 58 Page 44 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 12. OTHER RECEIVABLES AND PREPAYMENTS Current Debtor – disposal of Lloyds Online Auctions Pty Ltd(a) Allowance for expected credit loss(b) Accrued revenue Prepayments Other receivables Total current other assets Non-current Other receivables(c) 2021 $000 - - 104 280 80 464 2020 $000 3,290 (210) 877 208 3 4,168 114 157 (a) Refer to Note 26 in relation to the material terms of the disposal transaction. (b) This allowance was for the expected credit loss associated with any shortfall on the debtor for the Lloyds Online Auctions Pty Ltd sale made on 17 June 2020. The assumptions applied to this amount included historical collection rates, the impact of the COVID-19 pandemic and forward-looking information that is available. (c) Non-current other receivables are cash-backed rental deposits for the KWB Group. Significant Accounting Policy: Investments and other financial assets Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Subsequent measurement Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. 13. OTHER FINANCIAL ASSETS Current Funds held in trust 2021 $000 582 2020 $000 179 59 Page 45 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 14. PROPERTY, PLANT AND EQUIPMENT Year ended 30 June 2021 At 1 July 2019At 1 July 2018, At 1 July 2020, net of depreciation Additions Impairment Disposals Depreciation charge for the year At 30 June 2021, net of accumulated depreciation At 30 June 2021 Cost Accumulated depreciation Accumulated impairment Net carrying amount Property and buildings(a) $000 5,500 - - - (46) 5,454 Plant and equipment Leasehold improvements Total $000 1,886 801 - (58) (629) 2,000 $000 $000 1,421 593 - (36) (540) 8,807 1,394 - (94) (1,215) 1,438 8,892 6,845 (242) (1,149) 5,454 5,165 (3,165) - 2,000 4,182 16,192 (6,151) (1,149) 8,892 (2,744) - 1,438 (a) Property and buildings – leased includes an office/warehouse property which is owned by the Company and is partially leased to unrelated third parties. Year ended 30 June 2020 At 1 July 2019At 1 July 2018, At 1 July 2019, net of depreciation (restated) Additions Impairment Disposals Depreciation charge for the year At 30 June 2020, net of accumulated depreciation At 30 June 2020 Cost Accumulated depreciation Accumulated impairment Net carrying amount Property and buildings(a) Plant and equipment Leasehold improvements Total $000 $000 $000 $000 6,709 - (1,149) - (60) 5,500 6,845 (196) (1,149) 5,500 2,557 337 - (336) (672) 1,886 4,269 (2,383) - 1,886 2,235 11,501 308 - (507) (615) 645 (1,149) (843) (1,347) 1,421 8,807 3,777 (2,356) - 1,421 14,891 (4,935) (1,149) 8,807 (a) Property and buildings – leased includes property which is owned by the Company and is leased to unrelated third parties. 60 Page 46 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policy: Property, plant and equipment Land and buildings are shown at carrying value, based on periodic valuations completed by external, professionally qualified valuers, less depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. All other property, plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Consolidated Entity and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the Consolidated Statement of Profit or Loss and Other Comprehensive Income during the reporting period in which they are incurred. Refer to Note 8 in relation to the fair value measurement and valuation technique used. Depreciation is calculated over the estimated useful life of the asset as follows: - - - - Plant and equipment – 1 to 20 years; Leasehold improvements – 3 to 15 years or shorter of lease term; Buildings – 30 to 50 years; and Motor Vehicles – 3 to 6 years. The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in the Consolidated Statement of Profit or Loss. On the sale of revalued assets, the profit element of the revalued amount is taken through the Consolidated Statement of Profit or Loss. 61 Page 47 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 15. INVESTMENT PROPERTY Balance at 30 June Fair value measurement 2021 $000 9,623 2020 $000 9,623 For the financial year ended 30 June 2021, the annual review was performed by management. Refer to Note 8 in relation to the fair value measurement and valuation technique used. Critical Accounting Estimates and Judgements: Treatment of investment property in Lytton, QLD In accordance with AASB 140 Investment Property, the KWB Group property located at 97 Trade Street, Lytton, QLD is classified as an investment property as the significant portion is under an operating lease to an external third-party manufacturer earning rental income. Critical Accounting Estimates and Judgements: Revaluation of investment property The investment property is subject to an annual review in comparison to fair market value. The review is completed by either an independent expert or based on management’s valuation. The independent valuation is performed by an external, professionally qualified valuer who holds a recognised relevant professional qualification and has specialised expertise in the property being valued. For the year ended 30 June 2021, a management valuation was performed. 62 Page 48 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 16. TRADE AND OTHER PAYABLES These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the reporting date which are unpaid. The amounts are unsecured and are usually paid within 45 days of recognition. Due to their short-term nature, the carrying amounts of trade and other payables are considered to be the same as their fair values. Unsecured liabilities Trade payables Sundry creditors Contract liabilities(a) Accruals and other payables 2021 $000 4,318 44 10,996 4,389 19,747 2020 $000 2,227 35 7,980 2,532 12,774 (a) These are deposits from customers for goods and services to be provided by the Consolidated Entity after reporting date. 17. PROVISIONS Provisions are comprised of the following: Current Make good provision Employee benefits Non-current Make good provision Employee benefits Movement in provisions 2021 $000 - 2,410 2,410 349 300 649 The movement in provisions during the financial year is set out in the table below. Opening balance at 1 July 2020 Additional / (amount released) Closing balance at 30 June 2021 Employee Benefits Make good provision $000 2,483 227 2,710 $000 348 1 349 2020 $000 60 1,515 1,575 288 968 1,256 Total $000 2,831 228 3,059 63 Page 49 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Make good provision The provision relates to assets used in KWB’s retail kitchen and wardrobe showrooms and is reduced in value over five years and at the time of sale. Provision for employee benefits Wages and salaries and annual leave Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in the provision for employee benefits in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Long service leave The liability for long service leave is recognised in the provision for employee benefits at a value that considers employees’ services up to the reporting date and is measured at the amounts expected to be paid when the liabilities are settled. Significant Accounting Policy: Provisions Provisions for legal claims, service warranties and make good obligations are recognised when the Consolidated Entity has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are several similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Where appropriate, provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as interest expense. 64 Page 50 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 18. ISSUED CAPITAL Ordinary shares carry one vote per share and carry the right to dividends. Opening share capital Issued and fully paid ordinary shares 27,588,255 (2018: Fully paid ordinary shares issued during the year 27,588,255) Closing share capital Movement in ordinary shares on issue: At 1 July 2020 Final payment on partly paid ordinary shares (a) Fully paid ordinary shares issued during the year Dividend reinvestment plan issues At 30 June 2021 2021 $000 18,280 117 18,397 Number 28,099,834 63,731 8,719 28,172,284 2020 $000 18,090 190 18,280 $000 18,280 95 22 18,397 Movement in number of shares In the contractual arrangements finalised and signed on 9 October 2020 it was agreed to issue 63,731 fully paid ordinary shares to Keith Smith. Refer to Note 20 in relation to details of the share-based payment. Significant Accounting Policy: Issued capital Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options for the acquisition of a business are not included in the cost of the acquisition as part of the purchase consideration. If the entity reacquires its own equity instruments, e.g. as the result of a share buy-back, those instruments are deducted from equity and the associated shares are cancelled. No gain or loss is recognised in the Consolidated Statement of Profit or Loss and the consideration paid including any directly attributable incremental costs (net of income taxes) is recognised directly in equity. 65 Page 51 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 19. EARNINGS / (LOSS) PER SHARE Basic and diluted earnings per share are calculated based on a weighted average of any shares issued during the financial year. The following reflects the earnings / (loss) and share numbers used in the continuing operations basic and diluted earnings per share computations: Basic earnings per share: Net profit / (loss) attributable to ordinary Joyce shareholders from continuing operations 2021 2020 $000 7,574 (1,107) Weighted average number of ordinary shares Number 28,139,008 28,047,202 Earnings / (loss) per share Cents per share 26.92 (3.95) Diluted earnings per share: Net profit / (loss) attributable to ordinary Joyce shareholders from continuing operations $000 7,574 (1,107) Weighted average number of ordinary shares(a) Number 28,139,008 28,047,202 Earnings / (loss) per share Cents per share 26.92 (3.95) Basic earnings per share excluding impairment expense amount: Net profit attributable to ordinary Joyce shareholders from continuing operations excluding impairment expense amount $000 7,574 4,419 Weighted average number of ordinary shares Number 28,139,008 28,047,202 Earnings per share Cents per share 26.92 15.76 (a) The ‘FY20 and FY21 Performance Rights’ have not been included in the denominator of the diluted shares as the quantum of these rights that will vest will only be determinable at a future date. Regardless, the impact on diluted earnings per share would be immaterial. The Company has established a dividend reinvestment plan under which holders of ordinary shares can elect to have all or part of their dividend entitlements satisfied by the issue of new ordinary shares rather than being paid in cash. 66 Page 52 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 20. SHARE-BASED PAYMENTS A total share-based payments expense of $722,359 was recognised in the year (FY20: $19,733). (a) Keith Smith share-based payment In the contractual arrangements finalised and signed on 9 October 2020 it was agreed to issue Joyce Corporation ordinary shares to Keith Smith. The market price of Joyce Corporation shares at the close of business on 9 October 2020 was $1.50 and 63,731 shares were issued. This results in an accounting value for the issue of $95,596. The shares rank equally with the ordinary shares already on issue by the Company. No funds were received or applied in the issue, as the shares were issued in recognition of Keith Smith’s contribution to the Company. The cost of the share-based payment was recognised during the year, together with a corresponding increase in equity. As such, an expense of $95,596 was recognised in the Consolidated Statement of Profit or Loss during the year. (b) Key Management Personnel performance rights The offer of performance rights is designed to provide long-term incentives for Key Management Personnel to deliver long-term shareholder returns. The performance rights are issued under the Joyce Corporation Ltd Rights Plan with eligible participants being granted performance rights which only vest if certain performance targets are met. Details of the performance rights on issue are summarised below. FY20 Rights Beneficiary John Bourke Chris Palin Gavin Culmsee Number of Rights Granted Fair Value per right (JYC share price on grant date) Total fair value Commencement date Expected vesting date Vesting conditions No. of rights expected to vest 141,677 $2.67(b) 112,065 $2.67(b) 76,387 $1.55 $378,278 1 July 2019(b) 30 June 2022 (3 years) Profit metric of KWB EBIT cumulative over 3 years(a) 141,677 $299,214 1 July 2019(b) 30 June 2022 (3 years) Profit metric of KWB EBIT cumulative over 3 years(a) 112,065 $118,400 1 July 2019 30 June 2022 (3 years) Profit metric of Bedshed EBIT cumulative over 3 years(a) 76,387 (a) The expense recognised in respect of the performance rights is based on the Board’s assessment of the probability that certain milestone earnings will be achieved, measured cumulatively over the three-year period commencing 1 July 2020 and ending 30 June 2022. There are three milestones: “threshold”; “target”; and “stretch and above”. Meeting these milestones results in, respectively, 25%, an additional 25%, and the final 50% of the rights vesting into ordinary shares. (b) As the granting of the ‘FY20 performance rights’ to the KWB KMP’s was in recognition of past performance, the share-based payment expense relating to these rights for the previous financial year was fully expensed in the current year. The formal grant date of the FY20 Rights to John Bourke and Chris Palin was determined post year end and under the requirements of the Australian Accounting Standards, the associated accounting expense is based on the underlying share price at formal grant date. 67 Page 53 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FY21 Rights Beneficiary Daniel Madden John Bourke Chris Palin Gavin Culmsee Number of Rights Granted Fair Value per right (JYC share price on grant date) Total fair value Commencement date Expected vesting date Vesting conditions No. of rights expected to vest 127,002 $1.64 208,448 $2.67(c) 164,879 $2.67(c) 140,484 $1.11 $208,283 1 December 2020(b) 30 June 2023 (3 years) Profit metric of Group NPAT cumulative over 3 years(a) $556,556 $440,227 $155,937 1 July 2020 30 June 2023 (3 years) Profit metric of KWB EBIT cumulative over 3 years(a) 1 July 2020 30 June 2023 (3 years) Profit metric of KWB EBIT cumulative over 3 years(a) 1 July 2020 30 June 2023 (3 years) Profit metric of Bedshed EBIT cumulative over 3 years(a) 63,501 - 127,002 104,224 - 208,448 82,440 - 164,879 70,242 - 140,484 (a) The expense recognised in respect of the performance rights is based on the Board’s assessment of the probability that certain milestone earnings will be achieved, measured cumulatively over the three-year period commencing 1 July 2021 and ending 30 June 2023. There are three milestones: “threshold”; “target”; and “stretch and above”. Meeting these milestones results in, respectively, 25%, an additional 25%, and the final 50% of the rights vesting into ordinary shares. (b) Daniel Madden’s contract of employment commenced on 1 December 2020 and as a result for the year 30 June 2021 only a prorated expense was recognised. (c) The formal grant date of the ‘FY21 performance rights’ to John Bourke and Chris Palin was determined post year end and under the requirements of the Australian Accounting Standards, the associated accounting expense is based on the underlying share price at formal grant date. Significant Accounting Policy: Share-based payment Schemes in place can only be equity-settled and are accounted for accordingly. The cost of equity- settled transactions with employees is measured using their fair value at the date which they were granted. In determining the fair value, no account is taken of any performance conditions. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which any performance conditions are met, ending on the date on which the employee becomes fully entitled to the award (vesting date). The cumulative expense recognised for these transactions at each reporting date reflects the extent to which the vesting period has expired and the proportion of the awards that are expected to ultimately vest. No expense is recognised for awards that do not ultimately vest due to a performance condition not being met. Critical Accounting Estimates and Judgements: Share-based payments The Consolidated Entity initially measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Estimating fair value for share-based payment transactions requires determination of the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This estimate also requires determination of the most appropriate inputs to the valuation model as well as an assessment of the probability of achieving non-market based vesting conditions. The probability of achieving non-market based vesting conditions of performance options is assessed at each reporting period. 68 Page 54 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 21. DIVIDENDS Dividends declared or paid during the financial year are as follows: Ordinary shares: FY19 final fully franked dividend of 5.0 cents per share FY20 interim fully franked dividend of 5.0 cents per share FY20 final fully franked dividend of 5.0 cents per share FY21 interim fully franked dividend of 7.0 cents per share Total dividends paid Franking account balance 2021 $000 - - 1,405 1,971 3,376 2020 $000 1,397 1,404 - - 2,801 The amount franking credits available for subsequent financial years from continued operations are: Franking credits available for subsequent financial years at 30% Dividend payable Dividend payable at 30 June Consolidated 2020 $000 2021 $000 Parent entity 2020 $000 2021 $000 5,508 5,544 2,833 2,389 2021 $000 - 2020 $000 1,405 The FY20 interim fully franked dividend of $1.40 million resolved on 25 February 2020 was paid on 25 September 2020, (deferred from 6 May 2020 due to the commercial uncertainty surrounding the COVID-19 pandemic). The Directors resolved that a FY21 final dividend of 10 cents per share, fully franked, be paid by Joyce Corporation Limited on 1 October 2021 to all shareholders registered as at the record date of 14 September 2021. 69 Page 55 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 22. REVENUE, INCOME AND EXPENSES (a) Revenue from continuing operations Revenue from contracts with customers Sale of goods Franchise revenue Other revenue Rental revenue Freight recovered Gain / (loss) on lease modification Other revenue Government grants 2021 $000 106,390 4,834 111,224 632 291 480 1,155 1,827 4,385 2020 $000 81,761 3,996 85,757 569 189 45 1,127 2,008 3,938 Significant Accounting Policy: Presentation of government grants Government grants relating to JobKeeper are recognised in profit or loss in other revenue over the period necessary to match them with the costs that they are intended to compensate. Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Consolidated Entity will comply with all attached conditions. Disaggregation of revenue Management review the business at the level of disaggregation shown as per Note 4. The disaggregation of revenue follows the operating segments identified, being revenue from the following activities and arrangements: - Retail Kitchen Showrooms and Retail Bedding Stores, revenue is earnt at the point of product delivery; and - Franchising, the majority of revenue is earnt through payments made by the Franchisees for the services Bedshed provide in connection with the Franchise. In understanding the segments, the organisation rarely considers the geographic location of the customer as being the driver to an increased understanding. There were no new revenue streams during the financial year ended 30 June 2021 (2020: nil). 70 Page 56 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The following table lays out the facts and circumstances that pertain to the Company’s contracts for continuing operations with customers and depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. Operating segment / Factor Nature of the revenue Market Economic drivers of revenue Contractual arrangements Retail Kitchen Showrooms - Sale of goods - “Do It For Me” renovations - Consumer confidence; - Growth in disposable income; and - Spend on renovations - Standard form contract Specific revenue recognition criteria - Recognition at the point of product delivery Contractual assets or liabilities - Bank guarantees, - Customer deposits Bedshed Franchise - Franchise revenue - Franchising in specialty retail Retail Bedding Stores Joyce Corporation - Sale of goods - Rental revenue - Specialty retail - Commercial real estate - Consumer confidence; and - Growth in disposable income - Consumer confidence; and - Growth in disposable income - Property cycle - Standard form contract - Recognition based on business written sales from franchised stores - Standard form contract - Lease agreement - Recognition at the point of product delivery - Recognition is monthly as defined in the relevant lease agreement - Nil - Bank guarantees, - Customer deposits - Nil 71 Page 57 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (b) Expenses from continuing operations Cost of sales Cost of goods Total cost of sales Variable costs Freight Wages - commissions Warranty costs Total variable costs Employment expenses Superannuation contributions Payroll tax Wages and other employee benefits Total employment expenses Impairment of non-financial assets Bedshed Joondalup goodwill (Note 5) Lloyds Online Auctions Pty Ltd goodwill (Note 5) Howe St property (Note 14) Total impairment of non-financial assets Net interest income / (expense) Interest income Interest expense Interest expense on lease liabilities Net interest expense Depreciation and amortisation Depreciation – property, plant & equipment Amortisation – right-of-use asset Amortisation – software Total depreciation and amortisation Administration expenses IT, communications and network costs Consultancy fees Travel expenses Insurance Accounting and audit fees Legal fees Other administration expenses Expected credit loss (Note 10) Repayment of government grants Total administration expenses 72 2021 $000 2020 $000 (52,417) (52,417) (40,720) (40,720) (241) (6,613) (1,176) (8,030) (1,970) (1,133) (18,928) (22,031) - - - - 27 (19) (529) (521) (1,215) (3,388) (60) (4,663) (1,174) (201) (251) (294) (205) (120) (1,386) 210 (1,486) (4,907) (190) (3,738) (910) (4,838) (1,690) (1,053) (17,085) (19,828) (1,820) (2,557) (1,149) (5,526) 29 (135) (593) (699) (1,346) (3,260) - (4,606) (1,001) (130) (400) (243) (319) (247) (1,058) (210) - (3,608) Page 58 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Lease payments and other expenses included in the statement of profit or loss and other comprehensive income – continuing operations Lease payments Minimum lease payments - operating lease 2021 $000 (3,963) 2020 $000 (3,711) Significant Accounting Policy: Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the relevant taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable or payable. The Consolidated Statement of Cash Flows includes cash flows on a gross basis. The net amount of GST recoverable from, or payable to, the relevant taxation authority is included with other receivables or payables in the Consolidated Statement of Financial Position. 23. INCOME TAX The major components of income tax expense for the financial year ended 30 June are: Current Income tax Current income tax expense Under / (over) provision in respect of prior years Deferred income tax Relating to origination and reversal of temporary differences Utilisation of unused tax losses Under / (over) provision in respect of prior years Income tax expense relating to continuing operations 2021 $000 6,012 29 (67) - 139 6,113 2020 $000 3,619 - (531) 26 (16) 3,098 Income tax (benefit) / expense relating to discontinued operations - (441) Income tax expense relating to overall operations 6,113 2,657 73 Page 59 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS A reconciliation of income tax expense applicable to accounting profit before income tax at the statutory income tax rate to income tax expense at the Consolidated Entity’s effective income tax rate for the financial years ended 30 June 2021 and 30 June 2020 is as follows: Profit before income tax – continuing operations 2021 $000 19,108 2020 $000 5,772 Income tax expense calculated at the statutory income tax rate of 30% (2020: 30%) 5,732 1,732 Tax effect of amounts which are non-deductible (taxable) in calculating taxable income: Entertainment Share-based payments Other items not allowed / (not assessable) for income tax purposes Impairment expense Deferred tax assets not brought into account (Under) / over provision in respect of prior years Other permanent differences Income tax expense recognised in profit or loss – continuing operations 13 217 (66) - 38 168 11 6,113 - - (34) 1,658 - (258) - 3,098 Significant Accounting Policy: Tax consolidation Joyce Corporation Ltd and its 100%-Australian-owned subsidiaries are a tax group. Members of the group have not entered into any tax sharing or tax funding arrangements. At the reporting date, the possibility that the head entity will default on its tax payment obligations is remote. The head entity of the tax group is Joyce Corporation Ltd. Significant Accounting Policy: Measurement method adopted under UIG 1052 Tax Consolidation Accounting The head entity and the controlled entities in the tax group continues to account for their own current and deferred tax amounts. The group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax group. The current and deferred tax amounts are measured in a systematic manner that is consistent with the broad principles in AASB 112 Income Taxes. In addition to its own current and deferred tax amounts, the head entity also recognises current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax group. Significant Accounting Policy: Tax consolidation contributions / (distributions) The Consolidated Entity has recognised no consolidation contribution or distribution adjustments. 74 Page 60 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The major components of deferred income tax at 30 June 2021 are as follows: Deferred tax liabilities Investment property Trade & other receivables Fair value gains on other intangible assets Right-of-use asset Balance at 30 June 2021 Deferred tax assets Property, plant and equipment Trade and other payables Other employer obligations Provisions Lease liabilities Other Balance at 30 June 2021 Opening balance 1 July 2020 $000 Recognised in profit or loss statement $000 Closing balance 30 June 2021 $000 332 204 260 3,055 3,851 887 125 794 142 3,580 36 5,564 31 (199) - 681 513 (179) 62 20 5 549 (16) 441 363 5 260 3,736 4,364 708 187 814 147 4,129 20 6,005 The major components of deferred income tax at 30 June 2020 are as follows: Opening balance 1 July 2019 $000 Recognised in profit or loss statement $000 De-recognition of Lloyds Online Auctions Pty Ltd $000 Closing balance 30 June 2020 $000 Deferred tax liabilities Investment property Trade & other receivables Fair value gains on other intangible assets Right-of-use asset Balance at 30 June 2020 Deferred tax assets Property, plant and equipment Trade and other payables Other employer obligations Provisions Lease liabilities Other Unused Tax losses Balance at 30 June 2020 304 5 260 3,939 4,508 324 155 842 162 4,660 4 55 6,202 28 179 - (643) (436) 563 (30) 197 (20) (774) (40) 543 439 - 20 - (241) (221) - - (245) - (306) 72 (598) (1,077) 332 204 260 3,055 3,851 887 125 794 142 3,580 36 - 5,564 75 Page 61 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Significant Accounting Policy: Deferred tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting, nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised, or the deferred income tax liability is settled. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. 24. RIGHT-OF-USE ASSETS AND LEASE LIABILITIES Right-of-use assets relates to the following: Year ended 30 June 2021 At 1 July 2020, net of accumulated amortisation Additions Amortisation charge for the year Modifications to lease terms Variable lease payment adjustments Disposals At 30 June 2021, net of accumulated amortisation Property and buildings Plant and equipment Total $000 $000 $000 10,148 5,721 (3,383) (124) 92 - 12,454 47 - (5) - (42) - - 10,195 5,721 (3,388) (124) 50 - 12,454 76 Page 62 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Year ended 30 June 2020 At 1 July 2019, net of accumulated amortisation (restated) Additions Amortisation charge for the year(a) Modifications to lease terms Variable lease payment adjustments Disposals At 30 June 2020, net of accumulated amortisation (a) Relates solely to continuing operations. Property and buildings Plant and equipment Total $000 $000 $000 12,129 2,780 (3,246) (164) (327) (1,024) 10,148 374 - (14) - - (313) 47 12,503 2,780 (3,260) (164) (327) (1,337) 10,195 The following amounts relating to leased assets have been included as income or expense in the Consolidated Statement of Profit or Loss and Other Comprehensive Income during the year: Rental income (included in Other income) Gain / (loss) on lease modification (included in Other income) Interest expense (included in Net interest expense) Expense relating to short term leases (included in Occupancy expenses) Expense relating to leases of low value assets that are not short-term leases (included in Administration expenses) Lease liabilities relates to the following: Current Lease liabilities Non-current Lease liabilities 2021 $000 632 480 530 73 3 2020 $000 569 45 593 12 3 2021 $000 2020 $000 3,974 3,370 9,788 8,587 Critical Accounting Estimates and Judgements: Leases Determining the incremental borrowing rate Where the interest rate implicit in a lease is not known, the Consolidated Entity is required to determine the incremental borrowing rate, being the rate of interest the Consolidated Entity would have to pay to borrow a similar amount, over a similar term, with similar security to obtain an asset of similar value in a similar economic environment. As this information may not be readily available, the Consolidated Entity is required to estimate its incremental borrowing rate, using such information as is available and adjusting reflect the particular circumstances of each lease. 77 Page 63 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Determining the lease term The Consolidated Entity has in place a number of property leases with terms that can be renewed for an additional term, equal to the period of the original lease. In determining the lease term, the Consolidated Entity is required to determine: - Whether there is an actual or implied extension or renewal option. An implied extension or renewal option will exist if both the lessee and lessor would incur a more than insignificant penalty if the lease were not extended or renewed; and - Whether the Consolidated Entity is reasonably certain to exercise any actual or implied extension options considering all facts and circumstances relating to the lease. Critical Accounting Estimates and Judgements: Nature of leasing activities As a lessee The Consolidated Entity leases a number of properties. The lease contracts provide for payments to increase each year by a fixed percentage, to increase each year by inflation, to be reset periodically to market rental rates, or to remain fixed over the lease term. 25. CAPITAL AND LEASING COMMITMENTS The following changes to commitments have occurred during the financial year. Retail Kitchen Showrooms segment: 4 new showroom leases; and - - The renewal of 2 leases for existing showrooms There were no significant changes to capital and leasing commitments in the Retail Bedding Stores segment. 26. DISCONTINUED OPERATIONS During the financial year ended 30 June 2020, the Consolidated Entity ceased ownership of its Online Auctions segment. The subsidiary was sold in multiple transactions with effect from 17 June 2020 and is reported as discontinued operations where applicable. Disposal of 10% interest On 2 March 2020, Joyce Corporation Ltd sold 10% of its interest in Lloyds Online Auctions Pty Ltd to the Lloyds Legacy Trust for $1.44 million. Disposal of 46% interest On 17 June 2020, Joyce Corporation Ltd sold its remaining 46% interest in Lloyds Online Auctions Pty Ltd to Jacqst Enterprises Pty Ltd as trustee for the Sarkis Family Trust No 6 (being an entity controlled by Steve Sarkis, a Director of Lloyds Online Auctions Pty Ltd), for $3.80 million. 78 Page 64 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS The material terms the transaction for the sale of the 46% interest are set out below: - Joyce Corporation Ltd through its wholly owned subsidiary, Joyce International Pty Ltd agreed to sell 3,151,830 fully paid ordinary shares in Lloyds Online Auctions Pty Ltd (representing a 46% shareholding in Lloyds Online Auctions Pty Ltd) to Jacqst Enterprises Pty Ltd as trustee for the Sarkis Family Trust No 6 (“the Buyer”). - The Buyer had to pay an aggregate consideration of $3.80 million for the acquisition of the shares: - A $0.50 million non-refundable deposit was payable by the Buyer to Joyce Corporation Ltd (“Deposit”) on execution of the sale agreement. - The remaining $3.30 million of the purchase price was payable by the Buyer to an escrow account, with the full amount being payable by 24 September 2020. - The $3.30 million was released to Joyce Corporation Ltd on completion of the transaction. The receivable amount was secured via the share investment. This amount was received by Joyce Corporation during the current financial year. As at 30 June 2020, a total of $1.95 million had been received according to the payment schedule, being: - $1.44 million relating to the 10% interest; and - $0.51 million relating to the 46% interest. These multiple transactions were treated as a single event in the consolidated financial statements, as they were all designed to achieve a single overall commercial effect. The financial performance and cash flow information are for the period 1 July 2019 to 17 June 2020 was as follows: Discontinued operations Revenue Expenses (Loss) / profit before income tax benefit / (expense) Income tax benefit / (expense) (Loss) / profit of discontinued operation after income tax (Loss) on disposal of the division after income tax (a) (Loss) / profit from discontinued operations Net cash inflow from operating activities Net cash (outflow) from investing activities Net cash (outflow) from financing activities Net increase in cash generated by the discontinued division 2020 $000 15,595 (17,463) (1,868) 358 (1,510) (809) (2,319) 2020 $000 1,147 (198) (309) 640 79 Page 65 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Details of the disposal of the division: Consideration received or receivable: Received Deferred Total disposal consideration Carrying amount of net assets sold (b) Carrying amount of non-controlling interest Goodwill (Loss) on sale before income tax Income tax (expense) / benefit (Loss) on sale after income tax 2020 $000 1,957 3,290 5,247 2,775 (862) 4,226 (892) 83 (809) The carrying amount of assets and liabilities as at the date of disposal (17 June 2020) were: Current assets Current liabilities Current net assets / (liabilities) Non-current assets Non-current liabilities Non-current net assets / (liabilities) Net assets $000 2,698 (3,956) (1,258) 5,104 (1,071) 4,033 2,775 Critical Accounting Estimates and Judgements: Disposal transaction Judgement has been exercised in treatment of the Lloyds Online Auctions Pty Ltd disposal on 2 March 2020 and 17 June 2020 as a single transaction due to the one commercial outcome intended. 80 Page 66 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 27. RELATED PARTY DISCLOSURES Ultimate controlling entity The ultimate controlling entity of the Consolidated Entity is Joyce Corporation Ltd. Shares held by Joyce Corporation Ltd The consolidated financial statements include the financial statements of Joyce Corporation Ltd and the subsidiaries listed in the following table. Joyce International Pty Ltd Sierra Bedding Pty Ltd Bedshed Franchising Pty Ltd Joyce Investments 1 Pty Ltd Joyce Investments 2 Pty Ltd Joyce Investments 3 Pty Ltd Joyce Investments 4 Pty Ltd Joyce Consolidated Holdings Pty Ltd KWB Group Pty Ltd KWB Property Holdings Pty Ltd Brisbane Investment Holdings Pty Ltd Trade Gold Installations Qld Pty Ltd Trade Gold Installations NSW Pty Ltd Trade Gold Installations SA Pty Ltd % Equity interest 2021 100 100 100 100 100 100 100 100 51 51 51 51 51 51 2020 100 100 100 100 100 100 100 100 51 51 51 51 51 51 Country of incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Critical Accounting Estimates and Judgements: Determining control of subsidiaries (AASB 10) In determining whether the Consolidated Entity has control over subsidiaries that are not wholly owned, judgement is applied to assess the ability of the Company to control the day-to-day activities of the partly-owned subsidiary and its economic outcomes. In exercising judgement, the commercial and legal relationships that the Company has with other owners of partly owned subsidiaries are taken into consideration. Changes in agreements with other owners of partly owned subsidiaries could result in a loss of control and subsequently de-consolidation. Upon acquisition of partly-owned subsidiaries by the Company, judgement is exercised concerning the value of net assets acquired on the date of acquisition. The non-controlling interest’s share of net assets acquired, fair value of consideration transferred and subsequent period movements in value thereof, are disclosed as outside equity interest. 81 Page 67 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (a) Related Party Transactions Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated. During the financial year, the entities of the Consolidated Entity entered into the following transactions with related parties: Key Management Personnel compensation Fixed remuneration employee benefits Variable remuneration employee benefits Post-employment benefits Termination benefits Share-based payments (Note 20) 2021 $ 1,913,300 332,633 202,592 185,276 821,990 3,455,791 2020 $ 2,415,959 402,492 206,991 - 209,307 3,234,749 Other transactions Dividends paid to KMP 2021 $ 1,974,236 2020 $ 600,625 $8,628 (FY20: $nil) of dividends payable to KMP’s were reinvested under the Company’s DRP. Other than the items disclosed above, there are no other material related party transactions during the financial year. (b) Non-controlling interest The effect on the equity attributable to the owners of Joyce Corporation Ltd during the year is as follows: Carrying amount of non-controlling interests acquired Profits attributable to non-controlling interests Carrying value of non-controlling interests disposed (Note 26) Dividends paid to non-controlling interest Closing carrying amount of non-controlling interest 2021 $000 3,658 5,421 - (5,472) 3,607 2020 $000 2,868 3,117 (862) (1,465) 3,658 Disposals Refer to Note 26 in relation to the Consolidated Entity’s discontinued operations. 82 Page 68 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Set out below is summarised financial information for each subsidiary that has non-controlling interests that are material to the Consolidated Entity. The amounts disclosed for each subsidiary are before inter-group eliminations. Statement of financial position Current assets Current liabilities Current net assets Non-current assets Non-current liabilities Non-current net assets KWB Consolidated Group 2020 $000 6,820 (13,122) (6,302) 2021 $000 14,693 (22,518) (7,825) Lloyds Consolidated Group 2020 $000 - - - 2021 $000 - - - 25,831 (10,645) 15,186 22,769 (9,001) 13,768 - - - - - - - - - - Net assets 7,361 7,466 Accumulated NCI 3,607 3,658 Statement of financial performance (including discontinued operations) Revenue Profit / (loss) for the year Total comprehensive income KWB Consolidated Group 2020 $000 67,498 7,717 7,717 2021 $000 89,693 11,063 11,063 Lloyds Consolidated Group 2020 $000 15,595 (1,510) (1,510) 2021 $000 - - - Profit allocated to NCI 5,421 3,781 Dividends paid to NCI (5,472) (1,465) - - (664) - Statement of cash flow Cash flow from operating activities Cash flow (used in) investing activities Cash flow (used in) financing activities Net increase / (decrease) in cash and cash equivalents KWB Consolidated Group 2020 $000 11,769 (702) (10,940) 2021 $000 23,569 (1,274) (13,896) Lloyds Consolidated Group 2020 $000 1,147 (198) (309) 2021 $000 - - - 8,399 127 - 640 83 Page 69 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 28. PARENT ENTITY DISCLOSURES (a) Financial position - as at 30 June Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Issued capital Reserve Retained earnings Net equity (b) Financial performance - for the year ended 30 June Profit for the year Total comprehensive profit 2021 $000 936 23,464 24,400 1,063 1 1,064 2020 $000 2,356 26,701 29,057 2,560 5,233 7,793 23,336 21,264 18,397 742 4,197 23,336 2021 $000 4,609 4,609 18,280 20 2,964 21,264 2020 $000 2,817 2,817 i. Guarantees entered into by the parent entity in relation to the debts of its subsidiaries No such guarantees existed as at 30 June 2021 (2020: $nil). ii. Contingent liabilities of the parent entity No contingent liabilities existed within the parent entity as at 30 June 2021 (2020: $nil). iii. Commitments for the acquisition of property plant and equipment by the parent entity No commitments existed for the acquisition of property plant and equipment by the parent entity as at 30 June 2021 (2020: $nil). 84 Page 70 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 29. AUDITOR’S REMUNERATION Auditors of the Consolidated Entity Audit or review of the financial statements: Group Total audit or review of the financial statements Non-audit services: Taxation services Total non-audit services Total services provided by BDO 2021 $000 2020 $000 124 124 36 36 160 118 118 10 10 128 30. CASH FLOW STATEMENT RECONCILIATIONS Reconciliation of non-cash investing and financing activities Non-cash investing and financing activities disclosed in other notes are: - Acquisition of right-of-use assets, refer to Note 24. - Dividends satisfied by the issue of shares under the dividend reinvestment plan, refer to Note 18. Reconciliation of net debt Cash and cash equivalents Loans and borrowings - repayable within one year Loans and borrowings - repayable after one year Net debt Cash and liquid investments Gross debt - floating Net debt Reconciliation of net cash flow to movement in net debt: Net debt at beginning of year Increase / (decrease) in cash Net repayment of / (increase) in long-term loans Movements in net debt Net debt at end of year 2021 $000 19,881 - - 19,881 19,881 - 19,881 2020 $000 10,643 (521) (5,230) 4,892 10,643 (5,751) 4,892 4,892 (3,341) 9,238 5,751 14,989 3,668 4,565 8,233 19,881 4,892 85 Page 71 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Reconciliation of lease liability Lease liability payable within one year Lease liability payable after one year Total lease liabilities Reconciliation of net cash flow to movement in lease liability: Lease liability at beginning of year Lease payments in cash s) in cash Interest Lease additions Variable lease payment adjustments and modifications to leases Leases associated with discontinued operations Movements in lease liabilities 2021 $000 3,974 9,788 13,762 2020 $000 3,370 8,587 11,957 11,957 14,470 (3,963) 529 5,668 (429) - 1,805 (3,711) 593 2,754 (543) (1,606) (2,513) Lease liabilities at end of year 13,762 11,957 Reconciliation of net profit / (loss) after tax to the net cash flows from continuing operations Net profit after taxation Adjustments for: Depreciation and amortisation Issue of shares Impairment of Howe St property Impairment of goodwill Share-based payment Changes in assets and liabilities: (Increase) / decrease in inventories (Increase) / decrease in trade and other receivables (excluding receivable for discontinued operations) (Increase) / decrease in other assets (Increase) / decrease in net deferred tax assets and liabilities (Decrease) / increase in trade and other payables (Decrease) / increase in provisions 2021 $000 2020 $000 12,995 2,674 4,663 95 - - 722 (251) 742 (403) 72 7,077 1,454 4,606 190 1,149 4,377 20 172 (282) (148) (437) (87) 1,123 Net cash flows from operating activities 27,166 13,357 86 Page 72 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 31. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET ADOPTED The Consolidated Entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the Consolidated Entity: • Amendments to IAS 1: Classification of Liabilities as Current or Non-current; • Reference to the Conceptual Framework – Amendments to IFRS 3; • Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16; • Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37; and • Interest Rate Benchmark Reform – Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. 87 Page 73 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 DIRECTORS’ DECLARATION In the Directors’ opinion: (a) (b) (c) (d) the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with the International Financial Reporting Standards as issued by the International Accounting Standards Board as described in Note 1 to the financial statements; the attached financial statements and notes give a true and fair view of the Consolidated Entity’s financial position as at 30 June 2021 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The Directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the Directors J Kirkwood Chair Perth, 31 August 2021 88 Page 74 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Auditor’s report Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au Tel: +61 8 6382 4600 Fax: +61 8 6382 4601 www.bdo.com.au YEAR ENDED 30 JUNE 2021 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia 38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR'S REPORT INDEPENDENT AUDITOR'S REPORT To the members of Joyce Corporation Ltd To the members of Joyce Corporation Ltd Report on the Audit of the Financial Report Opinion Report on the Audit of the Financial Report We have audited the financial report of Joyce Corporation Ltd (the Company) and its subsidiaries (the Opinion Group), which comprises the consolidated statement of financial position as at 30 June 2021, the We have audited the financial report of Joyce Corporation Ltd (the Company) and its subsidiaries (the consolidated statement of profit or loss, the consolidated statement of comprehensive income, the Group), which comprises the consolidated statement of financial position as at 30 June 2021, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, and notes to the financial report, including a summary of significant accounting policies consolidated statement of profit or loss, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year and the directors’ declaration. then ended, and notes to the financial report, including a summary of significant accounting policies In our opinion the accompanying financial report of the Group, is in accordance with the Corporations and the directors’ declaration. Act 2001, including: In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its (i) Act 2001, including: financial performance for the year ended on that date; and Giving a true and fair view of the Group’s financial position as at 30 June 2021 and of its Complying with Australian Accounting Standards and the Corporations Regulations 2001. financial performance for the year ended on that date; and (i) (ii) Basis for opinion Complying with Australian Accounting Standards and the Corporations Regulations 2001. (ii) We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Basis for opinion those standards are further described in the Auditor’s responsibilities for the audit of the Financial We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under Report section of our report. We are independent of the Group in accordance with the Corporations those standards are further described in the Auditor’s responsibilities for the audit of the Financial 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) 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 that are relevant to our audit of the financial report in Australia. We have also fulfilled our other APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) ethical responsibilities in accordance with the Code. that are relevant to our audit of the financial report in Australia. We have also fulfilled our other We confirm that the independence declaration required by the Corporations Act 2001, which has been ethical responsibilities in accordance with the Code. given to the directors of the Company, would be in the same terms if given to the directors as at the We confirm that the independence declaration required by the Corporations Act 2001, which has been time of this auditor’s report. given to the directors of the Company, would be in the same terms if given to the directors as at the We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis time of this auditor’s report. for our opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis Key audit matters for our opinion. Key audit matters are those matters that, in our professional judgement, were of most significance in Key audit matters our audit of the financial report of the current period. These matters were addressed in the context of Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation. 89 ANNUAL REPORT 2021JOYCE CORPORATION LTD Auditor’s report YEAR ENDED 30 JUNE 2021 Carrying Value of Goodwill and Other Assets Key audit matter How the matter was addressed in our audit The Group is required under Australian Accounting Our procedures included, but were not limited to the Standard AASB 136 Impairment of Assets (“AASB following: 136”), to perform an annual impairment test of the carrying value of goodwill. • Evaluating the Group’s categorisation of CGUs and the allocation of goodwill and other assets to the As set out in note 5 in the financial statements, the carrying value of the CGUs based on our Directors’ assessment of the recoverability of goodwill understanding of the Group’s businesses; using the value in use (“VIU”) methodology requires the exercise of significant judgement, in particular in estimating future growth rates, discount rates and the expected cash flows of cash generating units (“CGUs”) to which the goodwill and other assets have been allocated. • • • • • • Evaluating management’s ability to accurately forecast cash flows by assessing the precision of the prior year forecasts against actual outcomes; Comparing the Group’s forecast cash flows to the board approved budget; Using our valuation specialists to assess management’s discount rates based on external data available; Performing sensitivity analysis on the growth and discount rates; Testing the mathematical accuracy of the impairment models; and Assessing the adequacy of the disclosures in note 5 in the financial statements. Other information The directors are responsible for the other information. The other information comprises the information in the Group’s annual report for the year ended 30 June 2021, but does not include the financial report and the auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 90 ANNUAL REPORT 2021JOYCE CORPORATION LTD Auditor’s report YEAR ENDED 30 JUNE 2021 Responsibilities of the directors for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the ability of the group to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf This description forms part of our auditor’s report. Report on the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in pages 19 to 29 of the directors’ report for the year ended 30 June 2021. In our opinion, the Remuneration Report of Joyce Corporation Ltd, for the year ended 30 June 2021, complies with section 300A of the Corporations Act 2001. Responsibilities The directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. BDO Audit (WA) Pty Ltd Neil Smith Director Perth, 31 August 2021 91 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 ASX ADDITIONAL INFORMATION AS AT 25 AUGUST 2021 Additional information is required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in this report. The information is provided below. (a) Distribution of shareholders Category 1 - 1,000 1,001 – 5,000 5,001 - 10,000 10,001 – 100,000 100,001 – and over Rounding Total Holders 201 201 99 167 39 707 Fully Paid Ordinary Shares 95,256 526,246 775,134 4,742,008 22,033,640 28,172,284 % 0.34 1.87 2.75 16.83 78.21 0.00 100.00 (b) Substantial shareholdings The number of shares held or controlled at the report date by substantial shareholders were as follows: Ordinary Shareholder Daniel Smetana(a) UFBA – John Roy Westwood Total Fully Paid Ordinary Shares 11,171,579 1,845,000 13,016,579 % 39.65 6.55 46.20 (a) As at 20 August 2021 Daniel Smetana has a direct interest in 10,260,400 fully paid ordinary shares (27 August 2020: 10,254,129). (c) Voting Rights Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands. 92 Page 78 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 ASX ADDITIONAL INFORMATION AS AT 25 AUGUST 2021 (d) Shareholdings - Twenty Largest Holders of Quoted Equity Securities – ungrouped The number of shares held at the report date by the twenty largest holders of quoted equity securities: Ordinary Shareholder 1 ADAMIC PTY LTD 2 UFBA PTY LTD 3 DANIEL SMETANA 4 ONE MANAGED INVT FUNDS LTD <1 A/C> TRAFALGAR PLACE NOMINEES PTY LTD 5 6 MR DONALD TEO 7 MR DAN SMETANA 8 STARBALL PTY LTD 9 MR DANIEL ALEXANDER SMETANA 1 0 1 1 1 2 1 3 1 4 1 5 1 6 1 7 1 8 1 9 2 0 VANWARD INVESTMENTS LIMITED TREASURE ISLAND HIRE BOAT COMPANY PTY LTD JUDITH ANNA SMETANA GLIOCAS INVESTMENTS PTY LTD CONARD HOLDINGS PTY LTD MOAT INVESTMENTS PTY LTD FELIX SMETANA FARROW RD PTY LTD MAN INVESTMENTS (NSW) PTY LTD MARTEHOF PTY LTD EPIC TRUSTEES LIMITED Fully paid Ordinary Shares 7,711,568 1,800,000 1,224,651 1,000,000 990,233 990,000 734,022 653,222 563,726 507,474 % 27.37 6.39 4.35 3.55 3.51 3.51 2.61 2.32 2.00 1.80 504,291 1.79 497,924 375,738 347,940 333,017 307,116 240,000 219,680 209,679 201,695 1.77 1.33 1.24 1.18 1.09 0.85 0.78 0.74 0.72 Totals: Top 20 holders of ORDINARY FULLY PAID SHARES Total Remaining Holders Balance 19,411,976 8,760,308 68.90 31.10 93 Page 79 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD Annual financial REPORT YEAR ENDED 30 JUNE 2021 ASX ADDITIONAL INFORMATION AS AT 25 AUGUST 2021 (e) Secretaries Daniel Madden Tim Allison CEO and Group Company Secretary CFO and Company Secretary (f) Registered Office 75 Howe Street Osborne Park, WA 6017 Tel: +61 8 9445 1055 (g) Share Registry Computershare Investor Services Pty Limited Level 11 172 St Georges Terrace Perth, WA 6000 (Within Australia) 1300 850 505 (Outside Australia) +61 3 9415 4000 (h) Auditors BDO Audit (WA) Pty Ltd 38 Station Street Subiaco, WA 6008 Tel: +61 8 6382 4600 94 Page 80 of 80 ANNUAL REPORT 2021JOYCE CORPORATION LTD 95 ANNUAL REPORT 2021JOYCE CORPORATION LTD96 ANNUAL REPORT 2021JOYCE CORPORATION LTDABN: 80 009 116 269 Email: investors@joycecorp.com.au Website: joycecorp.com.au Tel: +61 8 9445 1055 75 Howe Street Osborne Park, WA 6017 Australia 

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