MAAS Group Holdings Limited
Annual Report 2023

Plain-text annual report

2 ABOUT MAAS 8 STRATEGIC FOCUS 10 FINANCIAL HIGHLIGHTS 12 CHAIRMAN’S LETTER 14 CEO REPORT 17 SUSTAINABILITY 29 OPERATING SEGMENTS 40 BOARD OF DIRECTORS 44 EXECUTIVE TEAM 46 FINANCIAL REPORT 47 CORPORATE DIRECTORY 48 DIRECTORS’ REPORT 70 AUDITOR’S INDEPENDENCE DECLARATION 72 CONSOLIDATED FINANCIAL STATEMENTS 77 NOTES TO THE CONSOLIDATED 143 DIRECTORS’ DECLARATION 144 INDEPENDENT AUDITOR’S REPORT 149 SHAREHOLDER INFORMATION FINANCIAL STATEMENTS ii | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 1 ABOUT MAAS Our objective is to deliver returns to our shareholders by driving long-term sustainable growth through strategic investment. Maas is an ASX-listed Australian industrial service and real estate business with diversified exposures across the property, civil, infrastructure and mining sectors. As an organisation, we aspire to be genuine market leaders across our five key operating segments – Construction Materials, Civil Construction & Hire, Manufacturing & Equipment Sales, and Residential & Commercial Real Estate. Our business is built on a solid foundation of values championed at every level of our organisation. We are proud of who we are and believe our commitment to these core values differentiates us from our competitors. Correct as at July 2023 1 Includes both operational and non-operational quarry assets 2 Includes Land Lease Communities, total lot yield indicative only and subject to development approvals 3 As at August 2023 GDV is an estimate of the value of the completed development at current prices. It is not adjusted for any increase or decrease in values over the period or discounted back to the completion / valuation date. Includes exchanged land contract Pictured: Maas headquarters, Dubbo NSW 2 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 3 20+ YEARS OF GROWTH Over the past 20 years, Maas has grown from a small equipment hire company based in Dubbo to a large, diverse ASX-listed corporation with global operations. Our history and success as a company and the culture we have fostered have laid the foundations of the business we are today and the business that we aspire to be in the future. 2011- 2014 2015- 2018 Maas Properties expands into Mudgee — Maas develops a Maas Properties leasehold quarry and expands to include establishes Regional commercial development — 2008- 2010 Maas quickly expands, Group Australia servicing Tier 1 clients — Wes Maas purchases projects such as on several major Bonneville Bypass, Pacific and Hume Maas restructures into Sales, Plant Maas purchases and develops South Hire and Civil Works Keswick Quarry in divisions Dubbo 2002- 2007 first bobcat and tipper truck, and establishes Maas Contracting — Highway upgrades — and the Wellington to Maas acquires stake Wollar Power Project in underground Team and plant grows — hardrock services in response to rapid Maas is successful company, EMS Group business growth on several coal mine — — expansion projects Maas expands into including Caval Maas purchases first residential Ridge Coal Mines and subdivision in Dubbo various gas projects and establishes Maas Properties small scale civil construction — Maas wins major earthworks packages in Central and Northern NSW *Time period based on calendar years 2023 Maas enters the asphalt market by acquiring the controlling stake in Austek Roads — 103 Prince Street, Orange’s first medium-density housing development granted development approval — Ongoing growth and expansion across all operating segments 2021 Expansion into Central QLD with acquisition of Amcor Quarry and Concrete and Amcor Excavations — Purchase of Willow Tree Gravel — Expansion of Commercial Properties division through acquisition of Spacey Self Storage, Maas Construction, Maas Plumbing, Badgery’s Creek development site and David Payne Constructions — 2022 Acquisition of additional quarry and concrete assets throughout QLD — Purchase of residential subdivision Ellida Estate, Rockhampton increasing lot pipeline to ~8,000 lots — MGH banking facilities increased — Expansion of Civil Electrical capability through acquisition of Garde Services — Further expansion into Central QLD with purchase of Schwarz 2019- 2020 Maas establishes itself in Orange with the purchase of Hamcon Civil and a residential subdivision — Maas purchases Macquarie Geotech — Maas acquires Forbes and West Wyalong quarries — Maas merges JLE Maas Homes division Excavations — Expansion into Victoria through acquisition of Dandy Premix — MAAS Group Holdings (MGH) included in the S&P/ ASX 300 Index and EMS — expands with purchase of Brett MAAS Group Harvey Constructions Holdings (MGH) lists — on the Australian Stock Exchange Additional residential land acquired in Bathurst, Lithgow and Griffith — Expansion into concrete batching with acquisition of Inverell Aggregates and Concrete and Redimix Concrete, Tamworth — Civil expansion with acquisition of A1 Earthworx 4 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 5 Maas continues to strategically grow its asset portfolio along the east coast of Australia. This growth supports our current regional and international operations. Our geographical growth strategy enables us to leverage infrastructure expenditure, regional population growth trends, and property demand and supply surplus. Through our Maas Hubs, we efficiently deploy resources and materials to support investment in these projects and locations. 6 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 7 Maas is firmly positioned to deliver attractive returns through the cycle Pictured: Dandy quarry, Grantville VIC STRATEGIC FOCUS STRATEGICALLY POSITIONED FOR LONG-TERM GROWTH Our investment framework is underpinned by a disciplined focus on return on capital employed (ROCE). This is enabled through our strategic fundamentals: Established and growing tangible asset base of $1.25bn in regions benefitting from multi-year tailwinds Aligned founder-led team focused to be a low cost provider in each end-market Proven track record of organic growth and accretive M&A complemented by prudent capital allocation Sharp focus on return on capital has underpinned over 20 years of growth. Founder-led culture ensures strong alignment and a solid foundation of success. Our business is strategically positioned to benefit from structural market tailwinds. Our integrated model provides a competitive advantage in markets where competition is typically sub-scale and fragmented. Maas has a strong capital position providing flexibility. Our management team is highly committed, passionate and experienced to support growth. 8 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 9 FINANCIAL HIGHLIGHTS PROFORMA REVENUE PROFORMA EBITDA $801.0M 49% Solid pipeline for FY24 and beyond $163.1M 30% High end of guidance range4 CASHFLOW CONVERSION5 TANGIBLE ASSETS6 88% 32% Driven by disciplined working capital management $1.25bn 54% Residential land bank recognised at historical cost ($15k/lot) LEVERAGE RATIO7 SAFETY - LTIFR8 2.5x Middle of target leverage range, well within covenants (3.5x), strong asset backing 3.7 45.5%9 4 Tightened Guidance Range of EBITDA $150m-$165m, provided on 8 June 2023 5 % of Proforma EBITDA before fair value gains, land inventory investment and tax 6 100% of statutory tangible assets less 25% of Austek tangible assets 7 FY23 Australian borrowing group Net debt divided by FY23 Australian borrowing group EBITDA (includes add back  of  pre- acquistion earnings) 8 Lost Time Injury Frequency Rate 9 Based on a Single-Day LTIFR. Previously reported as Five-Day LTIFR. PROFORMA EBIT $120.0M 27% Including strong 2H growth from existing businesses STATUTORY NPAT $65.5M 6% 10 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 11 CHAIRMAN’S LETTER founder, Wes Maas, our entrepreneurial continues to lead the Group admirably. Wes is supported by an experienced, stable, and passionate management team. The team are committed to maintaining the Company’s distinctive and high-performance culture and have an unwavering focus on creating value for shareholders. This will remain a key driver for the Company across every part of its operations as it continues to grow. The Company continued to enjoy significant growth during the year, through a combination of organic business growth and strategic acquisitions Dear fellow Shareholders, I’m delighted to provide MAAS Group Holdings Annual Report for FY23 and reflect on another successful year for our Company. result for FY23 of The Company delivered a record proforma EBTIDA $163.1m representing an increase of 30% from FY22 and an increase in net profit after tax of 6% to $65.5m. The robust financial results are particularly pleasing given the challenging macroeconomic conditions, and significant weather-related disruptions which impacted operations. Our ability to deliver in this environment demonstrates the resilience of our business, the quality of our assets, and our high- performing culture, with all business segments contributing to the successful result. the The Company continued to enjoy significant growth during through a combination of organic business growth and strategic acquisitions, particularly in the Construction Materials and Civil Construction and Hire segments. year, The integration of Dandy Premix, Austek, and Schwarz Excavations into the Group has enabled the Company to expand its operating footprint and offering, enhance its vertical integration capability, and provide a strong platform for long-term growth. The Company’s strong pipeline of work and the significant investments made in the Construction Materials and Property segments, have the Company well placed to again deliver earnings growth for FY24 and beyond. This, together with our capital recycling program and capital management initiatives, supports our strategy to set the business up for long-term success and deliver value creation to shareholders. is essential As a Company, we are guided by doing what is right, and using our values as a touchstone. We recognise that adopting sustainable practices long-term success. The Company has maintained a safe working environment and remains focused on continual safety improvement encapsulated by our Group-wide safety message, ‘Think Safe, Act Safe, Look After Your Mate’. for our I want to thank my fellow Directors for their support, effort, and commitment this year. I also take this opportunity to acknowledge the retirement of Stewart Butel. Stewart has made an outstanding contribution to the Maas Group board over the past three years. Stewart retires with our sincere thanks and best wishes. I would also like to congratulate and thank Wes and the executive team for their hard work and dedication in delivering a successful financial result and providing a strong platform for continued growth. The efforts of all Company staff, who are our greatest asset and have been integral to our successful year, are also acknowledged and appreciated. Finally, thank you to our shareholders, many of whom have been on the journey with Maas since the IPO. While there has been enormous progress since 2002, being founded by Wes in Dubbo with a single bobcat, I am conscious there is still more to be done. I look forward to continuing to build a great Australian business with you. Thank you for your continued support. Stephen Bizzell Chairman - MAAS Group Holdings Limited 12 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 13 Pictured: Austek Asphalt Plant, Luscombe QLD Pictured: Dandy Premix, Dandenong VIC The distinctive and high performing culture at Maas is deeply ingrained within our organisation and aligns closely with our core values represent acquisitions materials segment with the acquisition of Dandy Premix and Austek Asphalt. These two significant opportunities for the Group to expand our geographical footprint and product offering in Victoria and Queensland. Both acquisitions represent greater opportunity for long-term growth as well as leverage from our other areas of the business. CEO REPORT Maas’ culture is defined by commitment and care for the outcomes of our business at every level of the organisation and our reputation for doing what we say we will do. This is again demonstrated in our FY23 performance. Despite the challenges faced by many businesses in the past year, Maas has achieved yet another year of growth. Our net profit after tax reached $65.5M, marking a 6% increase compared to the previous year. This progress stems from a combination of our strong pipeline of work and strategic acquisitions in key segments, including Civil Construction and Hire and Construction Materials. These results are a testament to the exceptional team we have built and the unwavering dedication of everyone across our organisation. We remain committed to delivering value to both our customers and our communities, and I am extremely proud of the efforts and resilience the Group has exhibited this year. FINANCIAL RESULTS AND CAPITAL INVESTMENT In FY23, the business achieved proforma EBITDA of $163.1M. This result represents a growth of 30% on the prior financial year and is at the top end of the tightened guidance range provided by Maas of $150M-$165M in June 2023. Growth has been achieved across four of our five key operating segments despite some challenging market conditions. As a Group, we continued to grow through in our construction strategic investment We also further expanded our hub operations in Central Queensland through the acquisition of Schwarz Excavations. As experienced contractors to the rail sector and with significant synergies to our construction materials segment, Schwarz is a highly complementary business supporting our long-term growth objectives in the Central Queensland market. HARNESSING A HIGH-PERFORMING CULTURE TO ACHIEVE GROWTH is deeply The distinctive and high-performing culture at Maas ingrained within our organisation and aligns closely with our core values. As our business has continued to expand, we have made it a priority to preserve the strong culture and guiding principles upon which our company was founded. Safety remains paramount to our success, and I am proud that our culture of commitment and care extends to our safety- first mindset. At Maas, we are committed to our people and their safety. Our Health, Safety and Environment Strategy focuses on our people and risks, supported by our systems. Through genuine consultation and effective communication, we are dedicated to achieving our safety objectives and ensuring everyone goes home safely at the end of each day. Our people are our greatest asset. We continue to invest in nurturing our existing talent through training and development to ensure a highly engaged workforce committed to upholding our values. We also remain committed to attracting new talent to ensure the sustained growth of our business. We remain actively involved and deeply rooted in the communities where we operate, supporting charitable organisations, local sports clubs, and community initiatives. The communities that support us are of great importance, and we are committed to maintaining our active engagement with them. At Maas, we are a team, and we need the support of each other to be able to achieve our goals. I would like to thank everyone for their commitment to the business, passion in supporting us to grow. In and focus particular, I would like to acknowledge our executive leadership team for carving the path of success this year. I thank the Board of Directors for their invaluable guidance and support over the past year as we have driven the company forward. Lastly, I extend my thanks to our shareholders for their trust and confidence in our company throughout the course of the past year. I assure you of my continued dedication to fostering the company’s growth and fulfilling our commitments. I am excited by the future, forward-thinking and as Maas continuously challenges the status quo to achieve our goals and deliver results for our shareholders, employees, customers, and communities. remains Wes Maas Chief Executive Officer (CEO) & Managing Director 14 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 15 Maas is respectful of its social licence to operate and is committed to a sustainable future. We recognise ‘doing good’ is important not just for what we do today, but so we can continue to grow and succeed in the future. Adopting responsible practices in safety, our people and communities, environment and climate, and governance is essential for our long-term success. Pictured: Macquarie Geotech at Inland Rail site, Narromine NSW 16 | MAAS Group Holdings (ASX: MGH) Annual Report PEOPLE RISK MANAGEMENT SYSTEMS Creating a safety culture that empowers people to take ownership and look out for is critical. Our each other safety slogan, “Think Safe, Act Safe, Look After Your Mate”, is designed to focus our people safe behaviours and on mindset. Through the slogan and regular safety initiatives, we unify our team and ensure safety is at the forefront of everything we do. risk-based approach By implementing Critical Risk taking Standards, we are a to controls and establishing defences that mitigate unsafe practices and behaviours in the workplace. The Critical Risk Standards are identified through our policies and procedures and are managed by our engaged leadership through team each day toolbox talks, take five’s and ongoing safety improvement initiatives. designed standards Our WHS management systems are designed to protect workers from harm and ensure legislative compliance and the highest through safety protocols and implemented in accordance with the specific needs of our business. Through ongoing evaluations and continuous improvement, our WHS management systems will continue to evolve into one that supports the business we are today and the business we will be in the future. Our commitment to our people’s safety and well-being is paramount to our success as an organisation. We want to see our people return home safely at the end of each day. We have developed a Health and Safety Strategy that is being executed alongside our Work, Health & Safety (WHS) management systems, policies and procedures to ensure the best possible safety outcomes. The key pillars of our Health and Safety Strategy are supported by genuine consultation that empowers our people to take ownership of their work environment and contribute solutions to uphold Maas’ health and safety standards. In addition, we ensure ongoing communication facilitates leadership, engaged and accountable creating trust across our workforce. LOST TIME INJURY FREQUENCY RATE Our single-day LTIFR trend continued to decrease from 6.8 in FY22 to 3.7 in FY2310. This is a decrease of 45.5% and demonstrates the success of our safety strategy and the culture of safety that has been embedded across the organisation. 45.5% decrease 7 6 5 4 3 2 1 FY22 FY23 Single-Day LTIFR 10 LTIFR figures based on single day lost from a work-related injury or illness. Previously reported as a Five-Day LTIFR. 18 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 19 OUR PEOPLE Our people are our greatest asset. At Maas, we invest in their training and development to ensure that we have a skilled and engaged workforce committed to upholding our values of commitment to customers, leadership, teamwork, trust, candour and ownership. In the past 12 months, our workforce has continued to grow. Now, with approximately 1,800 teammates across Australia and Vietnam, we remain committed to implementing programs and initiatives that enable our team to thrive professionally and personally. CULTURE, REWARD & RECOGNITION At Maas, we are proud of our culture of commitment and care. We expect everyone in the business to show commitment and care for themselves and those around them. In return, we demonstrate the same through programs and initiatives that reward and recognise the behaviours and expectations of our culture. Through regular culture initiatives, including staff events, fundraisers and social activities, we aim to create a sense of teamwork and belonging across all areas of the organisation. We have also introduced a monthly Values Awards program those demonstrating our organisational values. This is in addition to our formal Short-Term Incentive program, which rewards staff through annual bonuses for achieving their role and performance KPIs. rewards that implemented an equity- Maas has also based Long Term Incentive Program (LTIP) to incentivise participants to act as owners, aligning their interests with shareholders over the long term. PROFESSIONAL DEVELOPMENT & TRAINING At Maas, we remain committed to ‘growing our own’ through external training and development opportunities and internal mentorship or on-the-job learning programs. In FY23, we employed 66 trade apprenticeship including positions across sponsoring in accredited programs. the Group, trainees 27 LEADERSHIP A key focus for Maas in FY23 has been the rollout of an externally facilitated leadership program. This program has been curated to support managers and people leaders to align around an ‘organisation first’ mindset. The Maas Executive Leadership team has designed the program and rolled it out to more than 130 managers across the business. Through this program, Maas aims to ensure that our culture is further enabled and supported by the appropriate leadership skills and abilities that will enable us to achieve our growth objectives. Pictured: Redimix Machine Operator, Kim, Tamworth NSW DIVERSITY & INCLUSION We support improved diversity and inclusion outcomes at Maas with a genuine, fit-for- company approach. While we acknowledge that there is room for improvement, we have made progress in FY23, and our workforce is representative of the industries in which we operate. Our Senior Executive team is represented by 31% female leadership. In FY23, we have actively worked to improve our diversity outcomes and participation across the Group, including promoting several senior females into leadership roles across the organisation. We remain committed to further improving representation across the Group, promoting a critical diversity of thought across the organisation. to remain committed We supporting Indigenous participation across the Group. Through partnerships with organisations, including the Clontarf Foundation, we support young indigenous people in apprenticeship and employment opportunities. We have also signed a Memorandum of Understanding (MOU) with the NSW Government to support from indigenous people being released 15% Female Participation 31% Female participation as Senior Executives 3.9% Indigenous Participation11 prison in Central West NSW into training and employment opportunities. Through this program, we will not only create immediate employment opportunities within the Group, but also support our communities in reducing the rate of reoffence by creating purpose and financial independence for indigenous people in our community. Islander people In Rockhampton, we work with Indigenous WorkStars to place Indigenous and Torres Strait into meaningful employment opportunities across our Civil projects. In the last six months, we have employed seven people through this program with plans to further extend our engagement over the coming year. 20 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 21 MAAS Group Holdings (ASX: MGH) Annual Report | 21 11 Indigenous participation figures based on employees who have voluntarily identified themselves as Aboriginal or Torres Strait Islander upon employment Pictured: Maas Residential Properties team at the Macquarie Titan Mud Run 2023, Dubbo NSW OUR COMMUNITIES Fundamental to our business are the communities in which we operate, and we are committed to helping to make them better, more sustainable and thriving places for those that live there today and in the future. Our local communities are integral to our success, and we are committed to supporting them in the most meaningful way possible Wes Maas, Maas Group CEO In our day-to-day operations, we do this by developing authentic communities that enhance the lifestyle of those living there and those that visit. We plan places that encourage active living and promote the natural environment. We also invest in community and shared facilities that allow people to meet and come together. Outside of our day-to-day operations, we are proud to support initiatives representing who we are as an organisation, our team and local communities’ values. Our focus in FY23 has been on supporting children’s and mental health charities, local community and sporting groups, and initiatives that support economic and social outcomes at a grassroots level. • Dolly’s Dream: As our national charity of choice for FY23, Maas raised over $16,000 to support young people and their families in addressing the impact of bullying, anxiety, depression and youth suicide through education and awareness-raising initiatives. Looking forward to FY24, we seek further opportunities to partner with Dolly’s Dream to grow our contribution to this cause. • Dubbo Regional Theatre & Convention Centre (DRTCC): Maas Group is a proud Centre Stage sponsor of the DRTCC, a critical pillar of the arts and culture community in the Dubbo region. Through our sponsorship, DRTCC has funded and supported major cultural shows and events for the community, including bringing the Sydney and Melbourne Comedy Festival to the region and prominent performing and musical artists. • The Clontarf Foundation: We are proud to have a long-term partnership with the Clontarf Foundation – supporting education, life skills, self-esteem and employment prospects of young Aboriginal and Torres Strait Islander men across regional Australia. • Dubbo Macquarie Titan Mud Run: Maas has been the major sponsor of the Dubbo Macquarie Titan Mud Run for over 10 years. This significant community event in Dubbo draws large groups of locals, promoting physical and mental health and well-being while raising funds to build community sports infrastructure and facilities. • Community sport and clubs: Maas Group have a strong connection to our communities through local sporting initiatives and clubs, including: − Dubbo CYMS and St. Johns Junior Rugby League − Rockhampton Capras training and development program − Wellington Wedgetails − Inverell Minor League − Dunedoo Football Club. 22 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 23 Our sustainable asphalt product, Carbonphalt, is produced using carbon char extracted from recycled vehicle tyres Pictured: Austek Asphalt plant, Luscombe QLD ENVIRONMENT & CLIMATE Maas remains dedicated to its journey of minimising environmental and climate-related impacts. The business has several initiatives underway across the Group to reduce adverse environmental impacts and transition to low-carbon products. In FY23, new initiatives included: • Hybrid Hydrogen fuel replacement trial: Working in partnership with Australian company HYDI, Maas commenced a hybrid hydrogen fuel system trial in a selected fleet. The use of hydrogen as a fuel has environmental benefits related to reduced fuel usage and reduces carbon monoxide and particulate matter emissions. The trial has already realised fuel savings to the Company of approximately $0.13 per kilometre, with further analysis of emissions data to be completed as the trial rollout continues across other heavy vehicle applications. • Sustainable Asphalt: Our sustainable asphalt product, Carbonphalt, uses carbon char extracted from recycled vehicle tyres. It offers improved performance as an asphalt product, and for each tonne produced, 10 vehicle tyres are removed from waste landfills and repurposed into roads. As the manufacturing process recycles 100% of each tyre, this removes a significant contributor from landfill, with an estimated 56 million tyres12 awaiting disposal at sites in Australia. The Austek asphalt plant also uses recycled tyre derived fuel (Zeroad) as its primary fuel source (as opposed to diesel). Austek is the first plant in Australia to implement this innovation. The use of the recycled tyre fuel and Recovered Carbon Black reduces the embodied carbon by up to 24% compared to a standard asphalt plant. • Recycling in concrete production: Maas continues to implement ways to reduce the environmental impact of concrete production. Returned concrete is either used to manufacture products that have uses across our construction and quarrying businesses, crushed and sold as a recycled aggregate for use in road or other civil construction, or reprocessed through the plant. This avoids placing waste concrete in landfill. By-products from the burning of coal for electricity production, referred to as fly ash, are used to supplement cement as the cementitious agent in concrete production, reducing the reliance on production and supply of cement. This reduces the net emissions of greenhouse gas associated with concrete production. Where possible, manufactured sand is used in preference to natural sand. This maximises the use of already extracted rock and reduces the reliance on the excavation of natural sand. Further, water management of each concrete plant is maximised to capture and reuse any water not retained within the batched concrete or concrete products. This reduces the total volume of ‘raw’ water required for each tonne of concrete manufactured. includes, where impacts as part of The Company aims to reduce adverse environmental its Environmental Management Framework. This feasible, using alternative fuels, diverting waste from landfill to beneficial uses, improving the energy increasing water efficiency of operations, use efficiency, the responsible sourcing of products, and progressive rehabilitation and responsible use of buffer land. The Company: • Considers environmental management as part of its decision-making processes; • Assigns accountability for environmental individuals within the performance to business; • Engages with all stakeholders (clients, communities, competitors and regulators) issues and to better understand key foster a culture of continual environmental improvement; and • Uses appropriate controls to, in order of priority, avoid, reduce, and mitigate environmental impacts and promote sustainable use of resources. We intend to extend our current initiatives to innovate and drive sustainable development for long-term value for our stakeholders. The Group recognises and supports the growing interest of our stakeholders concerning the potential risks and opportunities posed to our business and the broader sector due to climate change and the global transition towards a lower carbon economy. In 2024 we expect to demonstrate targets and a pathway towards improving our energy efficiency and reducing our own carbon footprint as well as support the national decarbonisation agenda. The pursuit of such future targets in all business segments will translate into meaningful shareholder value. The Board is currently developing a roadmap to meet future sustainability reporting requirements in accordance with the International Sustainability Standards Board first two IFRS Sustainability Standards. 12 Based on data from 2021 24 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 25 GOVERNANCE Sustainability presents both challenges and opportunities for Maas. The Board and Executive are committed to actively managing our risks and opportunities, essential for long-term sustainable performance. In the second half of 2023, the Health, Safety, and Environment Committee will be renamed to the Health, Safety, Environment and Sustainability (HSES) Committee to reflect our maturing commitment to sustainability. In addition to its current role, the HSES Committee will advise and assist the Board in relation to corporate social responsibility and sustainability. The Executive recognises that sustainability is a fundamental component of our operations and is focused on implementing continuous improvement in sustainability. Maas has adopted the ASX Corporate Governance Principles and Recommendations (4th edition) (“ASX Recommendations”) to the extent appropriate for the size, nature and maturity of the Group’s operations. Maas has prepared a statement that sets out the corporate governance practices that were in operation during the year and have identified any of the ASX Recommendations which have not been followed and, where appropriate, provides reasons for not following the ASX Recommendations. The Group’s Corporate Governance Statement and policies are available on our website at: https://investors.maasgroup.com.au/investor-centre/?page=corporate-governance 26 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 27 Pictured: Peter Hewson and Damien Porter CONSTRUCTION MATERIALS CIVIL CONSTRUCTION & HIRE MANUFACTURING & EQUIPMENT SALES RESIDENTIAL REAL ESTATE COMMERCIAL REAL ESTATE Pictured: Redimix batch plant, Dubbo NSW 28 | MAAS Group Holdings (ASX: MGH) Annual Report CONSTRUCTION MATERIALS Quarries | Concrete | Asphalt | Geo-Tech | Logistics We are a leading supplier of quarry materials, aggregates, pre-mix concrete, crushing and screening services, asphalt and transport and logistics to the civil infrastructure, building and construction, and mining sectors across the east coast of Australia. We also offer geotechnical services, including geological engineering, drilling and testing through our Macquarie Geotech business. Australia’s east coast is home to some of the most critical infrastructure projects in the country. Our quarries, concrete and asphalt plants are strategically located along the east coast – stretching from Central QLD to Victoria and provide us with an expansive product reach aligned to markets set to take advantage of the significant regional infrastructure pipeline. To expand our capabilities and increase our market share, we constantly seek to acquire strategically located quarries in new and existing markets where operational scale can be achieved. In FY23, this included the acquisition of Dandy Premix, a large concrete producer with five plants in suburban Melbourne and two self-supplying quarries in the Yarra Valley and Grantville. This strategic acquisition opens the Group to new opportunities in the fragmented Victorian market, particularly in the rail and construction sectors. FY23 also saw the Group acquire the controlling share in Austek – a significant asphalt services business servicing the Brisbane and Gold Coast markets and regional areas of Queensland and Northern NSW. $52.0m EBITDA contribution 81.8% Growth in Proforma EBITDA Strategic acquisitions, including Dandy Premix and Austek, expanding our geographical service offering in line with major infrastructure investment 30 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 31 Pictured: Blackwater Quarry, Blackwater QLD CIVIL CONSTRUCTION & HIRE Equipment Hire | Civil Construction | Electrical Transmission & Distribution Maas’ Civil Construction and Hire segment is the most mature operating segment, providing construction and above-ground plant hire and electrical services to major infrastructure projects across Australia. infrastructure Major investment across regional and metro markets has driven our acquisition strategy. In FY23, we finalised the acquisition of Schwarz Excavations, an experienced and well-regarded civil and rail contractor in Central Queensland. This acquisition will enable Maas to achieve greater pull-through when working alongside our construction materials segment on major projects in this high-growth market. Our integrated capability as a large civil and electrical contractor means we can supply services across the project lifecycle. Through our electrical transmission and distribution businesses, JLE Electrical and Garde, our Civil Construction and Hire segment is positioned to service the pipeline of renewable energy projects delivered across regional Australia over the coming years through the Renewable Energy Zones (REZ). $68.7m EBITDA contribution 38.3% Growth in Proforma EBITDA Strategic acquisition of Schwarz Excavations, expanding our Civil capability in Central Queensland 32 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 33 Pictured: Schwarz Excavation, Gracemere QLD MANUFACTURING & EQUIPMENT SALES Manufacturing | Equipment Sales Maas has established itself as a leading machinery and spare parts manufacturer in underground hard rock mining and civil tunnelling, and electrical industries. specialised equipment By leveraging global markets, we have tapped international demand into the growing for support to global infrastructure advancements and investment. In FY23, this strategy has allowed us to expand our customer base and increase our revenue while securing our position with existing manufacturing contracts, including Toll Manufacturing. In FY23, we worked closely with global distributors in key target markets to support our Jacon and Comet equipment sales. We also continue to supply parts and services to a growing active fleet, ensuring ongoing revenue streams are maintained. Our VMS manufacturing facility in Vietnam increased capacity in FY23 following challenging global supply chains experienced during the COVID-19 pandemic. Looking forward, we are confident that we will continue to see growth in this segment driven by global demand for equipment and specialist manufacturing solutions. $4.1m EBITDA contribution 129.0% Growth in Proforma EBITDA Built out a sales distribution network strategically located in key international markets to support infrastructure investment EQUIPMENT Pictured: VMS factory, Ho Chi Minh City, Vietnam 34 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 35 RESIDENTIAL REAL ESTATE Residential Developments | Home Building | Build-to-Rent | Land Lease Communities Our solid and long-term fundamentals, product mix and the geographic diversity of our assets mean that we are aligned with markets positioned to experience sustained long-term growth. By developing residential real estate assets aligned to under-supplied and high-growth markets, we ensure a pipeline that delivers a sustained long-term return. Our residential portfolio and products are diverse, with assets across Australia, including in Dubbo, Orange, Mudgee, Tamworth, Bathurst, Griffith, Lithgow, and Rockhampton, yielding a current pipeline in excess of 8,000 lots. As well as traditional greenfield subdivisions, we continue to develop our product offering to include built homes, build-to-rent and land lease communities, and our current home- building offering. This has allowed us to provide greater flexibility and affordability to a more compressed market in FY23. residential A challenging macroeconomic environment of high inflation and rising interest rates the significant headwinds created Residential Real Estate segment in FY23. This has resulted in both decreased sales volumes and enquiry rates during FY23. for Our ability to utilise the services of Maas’ other operating segments, including planning, civil construction, machinery hire, electrical transmission and distribution, construction materials, and building supplies, enables us to develop property assets efficiently, with greater delivery control. This control will allow us to continue to realise future growth. $12.8m EBITDA contribution 56.4% Decline in Proforma EBITDA Increased housing starts and completions and introduction of built-form housing and growth of Build-to-Rent portfolio in line with market demand 36 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 37 Pictured: Southlakes Estate, Dubbo NSW COMMERCIAL REAL ESTATE Commercial Real Estate | Commercial Construction | Leasing | Building Materials In FY23, our Commercial Real Estate operating segment experienced significant growth with a gross development value (GDV) of approximately $872m and 37 development projects either underway or in the delivery pipeline. Our portfolio of assets across the commercial, industrial, self-storage, childcare, retail and hotel and serviced apartment sectors has been strategically identified to return long- term growth to the Group. Over the coming year, we will focus on delivering our existing pipeline and asset recycling whilst evaluating potential opportunistic acquisitions in the industrial, self-storage and childcare sectors. commercial Our construction division maintains a strong pipeline of work. We also have the option to leverage these internal capabilities to capture additional value through the commercial development and construction value chain, unlocking additional revenue opportunities for the Group. Our occupancy rates across the portfolio remain strong, reinforcing our commitment to delivering top-tier real estate solutions for businesses of all sizes. Additionally, our Spacey Self Storage assets remain a key part of our portfolio, and our current utilisation rates are consistently at 95% or higher. $41.7m EBITDA contribution 68.5% Growth in Proforma EBITDA Development portfolio continued to expand with the acquisitions of sites in the industrial, self-storage, childcare and serviced apartment asset classes 38 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 39 Pictured: Newcastle Fruit Market, Sandgate NSW STEPHEN BIZZELL B. Com. MAICD WES MAAS MICHAEL MEDWAY BBus (Accountancy), CA, MAICD DAVID KEIR BASc (Built Environment), GradDip Urban & Regional Planning, GradDip Project Management TANYA GALE BCom, GAICD Non-Executive Chairman (appointed 21 October 2020) Chief Executive Officer (CEO) & Managing Director (appointed 18 April 2019) Non-Executive Director (appointed 21 October 2020) Non-Executive Director (appointed 5 October 2021) Executive Director (appointed 13 October 2022) Wes Maas was just 22 when he founded Maas and has been critical in growing it from one Bobcat and a tipper truck to a successful ASX-listed organisation. Today, with over 20 years of experience in the business, Wes and the leadership team are responsible for achieving strategic growth and delivering returns to Maas’ shareholders. Wes has been instrumental in setting the vision leading Maas into the independent construction materials, equipment, services and property provider it is today. He has set and ingrained the business’s values, creating a culture and organisation with a strong identity in all its operating segments. Other current directorships None Former directorships (last 3 years) None Special responsibilities Managing Director and Chief Executive Officer Interests in shares 173,381,789 Stephen was appointed to the Board in 2020 as part of the IPO of Maas. He brings over 25 years of experience in the mining, energy, and financial services sectors. Stephen is chairman of Bizzell Capital Partners Pty Ltd and is also a Director of Strike Energy Ltd (ASX: STX); Renascor Resources Ltd (ASX: RNU); Armour Energy Ltd (ASX: AJQ); and Savannah Goldfields Ltd (ASX: SVG). Stephen is a former Director of Queensland Treasury Corporation, is currently a Board Trustee of Brisbane Grammar School and is a member of the Queensland Advisory Board for Starlight Children’s Foundation. Stephen has extensive governance experience having served as a director or chairman of 14 ASX listed companies and was previously an executive director of Arrow Energy for 12 years until its takeover in 2010, a co- founder and director of Bow Energy until its takeover in 2012 and a co-founder and director of Stanmore Resources until 2020. He holds a Bachelor of Commerce from the University of Queensland. Other current directorships Armour Energy Ltd (since 9 March 2012) Savannah Goldfields Ltd (since 28 June 1996) Renascor Resources Ltd (since 1 September 2010) Strike Energy Ltd (since 31 December 2018) Former directorships (last 3 years) None Special responsibilities Chairman of the Company Member of the Audit and Risk Committee Member of the Remuneration andNomination Committee Member of the Health, Safety and Environment Committee Interests in shares 748,721 Michael has worked in the professional accounting industry for over 30 years. He has been a Chartered Accountant for over 25 years, and his background has seen him work across various firms in Sydney and Regional NSW. As the principal of Lincoln Partners Dubbo and later a director of Lincoln Partners Pty Ltd, Michael has acted as the external accountant for Wes Maas and his companies since 2002 and Maas Group upon its formation. Michael retired from Lincoln Partners Pty Ltd in June 2020 and was subsequently appointed to the Board as part of the IPO process. Michael holds a Bachelor of Business (Accountancy) from The University of Technology, Sydney and recently became a graduate of the Australian Institute of Company Directors. Other current directorships None Former directorships (last 3 years) None Special responsibilities Chairman of the Remuneration and Nomination Committee Chairman of the Audit and Risk Committee Member of the Remuneration and Nomination Committee Member of the Health, Safety and Environment Committee Interests in shares 538,651 David was appointed to Maas Board of Directors in September 2021. David is a highly experienced executive with over 35 years of experience in the property industry. He is currently the Chief Commercial Officer for the Port of Brisbane, overseeing all including the extensive the Port’, property portfolio and trade activities. David has prior experience as CEO of a number of national property companies. David holds a Bachelor of Applied Science, Built Environment from the Queensland University of Technology, Graduate Diplomas in Project Management and Urban and Regional Planning. He has completed the Executive Management Program at Wharton School, University of Pennsylvania. Business Tanya joined Maas in July 2019 with over 20 years of experience in the property and construction sector and a track record in the preparation and execution of IPOs, acquisitions and post-transaction integration. Tanya has strong FP&A, financial management and accounting skills developed from a broad base of experience in large corporations, mid- size subsidiaries and start-ups. Tanya supports the growth across the real estate and construction segments. Tanya was appointed to the Board in October 2022. Other current directorships None Former directorships (last 3 years) None Other current directorships None Special responsibilities Director Corporate Development Former directorships (last 3 years) None Interests in shares 158,182 Special responsibilities Chairman of the Audit and Risk Committee Chairman of the Remuneration and Nomination Committee Member of the Related Party Committee Member of the Audit and Risk Committe Interests in shares 12,500 40 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 41 FORMER DIRECTORS STEWART BUTEL B. Science (Geology), Grad Dip in Business Studies, Advanced Certificate of Coal Mining, GAICD NEAL O’CONNOR B. Laws and Dip. Legal Practice, GAICD Non-Executive Director (resigned 31 July 2023) Non-Executive Director (resigned 1 August 2022) Stewart has more than 45 years of experience in management and board roles in the resource industry in New South Wales, Queensland and Western Australia. Stewart joined Wesfarmers Limited in 2000 and was managing director of Wesfarmers Resources between 2006 and 2016. Stewart is a past director of a number of ASX listed and unlisted companies. He is past President of the Queensland Resources Council, served on the board of the Minerals Council of Australia and other resource industry bodies. Other current directorships None Former directorships (last 3 years) None Special responsibilities Chairman of the Health, Safety & Environment Committee Chairman of the Related Party Committee Interests in shares 63,034* Neal has over 30 years experience in law as well as extensive experience in the resource industry. Neal is currently a non-executive director of Mitchell Services Ltd (ASX:MSV) and acts as a consultant to Carter Newell Lawyers. Neal is a former director of Stanmore Coal Ltd (ASX:SMR) and was previously General Counsel, Company Secretary and an Executive Committee Member of Xstrata Holdings Pty Ltd and Xstrata Queensland Limited. Neal is a Solicitor of the Supreme Court of Queensland, Solicitor of the High Court of Australia, Solicitor of the High Court of England and Wales, and a member of the Australian Institute of Company Directors. Other current directorships Mitchell Services Limited (since 21 October 2015) Former directorships (last 3 years) None Special responsibilities Chairman of the Remuneration & Nomination Committee Member of the Audit and Risk Committee Member of the Remuneration & Nomination Committee Member of the Related Party Committee Interests in shares 25,437* ‘Other current directorships’ quoted above are current directorships for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. ‘Former directorships (last 3 years)’ quoted above are directorships held in the last 3 years for listed entities only and excludes directorships of all other types of entities, unless otherwise stated. *Information current at date of resignation as a Director 42 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 43 EXECUTIVE TEAM CRAIG BELLAMY Chief Financial Officer (CFO) Craig joined Maas in 2019 as Chief Financial Officer and Company Secretary. He is responsible for all financial aspects of the Group, including accounting, treasury, budgeting and tax. Craig has over 30 years of experience and previously held executive roles, including Chief Executive Officer and Chief Financial Officer for ASX Listed Entities Devine Limited and Unity Pacific Group Limited (formerly Trinity Group Limited). Craig holds a Bachelor of Business (Accountancy) and is a Chartered Accountant. ANDREW LETFALLAH Chief Operations Officer (COO) Andy is responsible for delivering profitable growth and operational excellence across the Maas Group through a corporate service governance model, with over 20 years of experience in various leadership roles in sales, operations and finance within large, listed organisations. Andy brings a strong background in business integration and growth enablement. Andy is a Six Sigma Black Belt and holds a Bachelor of Commerce Degree in Marketing, Management and Human Resources and a Master of Business Administration (MBA) with a major in Technology. CANDICE O’NEILL Company Secretary and General Counsel Candice is an experienced senior executive, having held Company Secretary and senior legal counsel positions across the mining, technology and professional services sectors. She has a Bachelor of Business and Bachelor of Laws (LLB) from the University of Newcastle and a Master of Business Administration (MBA) from the University of Queensland. She is admitted as a Solicitor of the Supreme Court of Queensland. TIM SMART Head of Investor Relations & Corporate Strategy Tim joined Maas in 2023 to lead the Group’s Corporate Strategy and Investor Relations. He is responsible for developing the overarching Corporate Strategy and co-ordinating the Group’s interactions and messaging with the investment community. Tim has over 25 years of public markets experience and previously held executive roles, including Managing Director and Head of Product within UBS APAC Equity Research as well as Executive Director and Deputy Head of Asian Research at Macquarie Bank. Tim holds a Bachelor of Commerce (Accountancy) and is a Chartered Accountant. CHRISTINE ASHCROFT Group Health and Safety Manager Christine leads the Group health and safety function across Maas, including monitoring and executing health and safety strategies to ensure safety compliance and excellence. Prior to joining Maas, Christine held senior safety positions in major mining organisations and the water industry, including at Newcrest Mining Limited – Cadia Valley Operations and Alkane Resources Limited. Christine holds a Postgraduate Diploma in Health Science (OHS), Lead Auditor Integrated Management Systems Exemplar Global - AU TL QM EM OH, MAICD. DAMIEN PORTER Director, Business Development With more than 20 years of experience in hiring, operations and sales, Damien brings a comprehensive knowledge of the equipment and machinery industry. Damien spent many years working for a major equipment hire company. Damien has been with Maas since 2005 and oversees upwards of 100 employees and machinery at any given time. JOSH LARGE Director, Civil Construction and Hire Josh has over 20 years experience in the civil and electrical industry, as the founder JLE Group. Josh’s experience includes design, engineering, and project delivery in the civil, electrical infrastructure and construction sectors, from bulk earthworks to transmission and distribution across major projects. As Director of the Civil, Construction and Hire business, Josh is focused on building high- performing teams throughout the Group with a balance on project delivery requirements, client relationships and commercial outcomes to ensure the business remains the partner of choice for our clients. MEGAN BYRNE Manager Corporate Finance Megan joined Maas in February 2022 and is responsible for the Corporate Finance activities of the Group, including business acquisitions and other corporate development activities. Megan has over 15 years of experience in Construction Materials and has previously held various strategy and finance roles at Holcim Australia & New Zealand. Megan holds a Bachelor of Commerce and is a Chartered Accountant. 44 | MAAS Group Holdings (ASX: MGH) Annual Report MAAS Group Holdings (ASX: MGH) Annual Report | 45 CORPORATE DIRECTORY 30 JUNE 2023 Directors Stephen G Bizzell - Non-Executive Chairman Wesley J Maas Michael J Medway - Non-Executive Director - Non-Executive Director David B Keir - Executive Director Tanya E Gale - Managing Director and Chief Executive Officer Company Secretaries Candice O’Neill Craig Bellamy Registered Office and Principal Place of Business 20L Sheraton Road Dubbo NSW 2830 Auditor Solicitors BDO Audit Pty Ltd Level 10, 12 Creek Street Brisbane QLD 4000 Duffy Elliott 148 Brisbane Street Dubbo NSW 2830 Maddocks Angel Place Level 27, 123 Pitt Street Sydney NSW 2000 Bankers Commonwealth Bank of Australia Limited Level 9, 201 Sussex Street Sydney NSW 2000 Westpac Banking Corporation Level 3, 275 Kent Street Sydney NSW 2000 Stock Exchange Listing MAAS Group Holdings Limited shares are listed on the Australian Securities Exchange (ASX code: MGH) Website www.maasgroup.com.au 46 | MAAS Group Holdings (ASX: MGH) Financial Report MAAS Group Holdings (ASX: MGH) Financial Report | 47 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity' or 'Group') consisting of MAAS Group Holdings Limited (referred to hereafter as the 'company' or 'parent entity' or 'MGH') and the entities it controlled at the end of, or during, the year ended 30 June 2023. DIRECTORS The following persons were directors of MAAS Group Holdings Limited during the whole of the financial year and up to the date of this report, unless otherwise stated: Stephen G Bizzell - Chairman Wesley J Maas - Managing Director and Chief Executive Officer Michael J Medway David B Keir Tanya E Gale (appointed 13 October 2022) Neal M O'Connor (resigned 1 August 2022) Stewart Butel (resigned 31 July 2023) PRINCIPAL ACTIVITIES During the financial year the principal activities of the consolidated entity consisted of: ● Construction Materials ● Civil, Construction and Hire ● Residential Real Estate ● Commercial Real Estate ● Manufacturing The Construction Materials activities of the consolidated entity for the year consisted of the operation of fixed and mobile plant quarries, crushing services, concrete, transport services, asphalt services and geotechnical services within Australia. The Civil, Construction and Hire activities of the consolidated entity for the year consisted of civil, construction and hire of above-ground, underground and specialised electrical equipment, electrical infrastructure services and machinery sales within Australia. The Residential Real Estate activities of the consolidated entity for the year consisted of residential development and residential construction in New South Wales and Queensland. The Commercial Real Estate activities of the consolidated entity for the year consisted of commercial development, commercial construction and building materials supplies in New South Wales, Queensland and Australian Capital Territory. The Manufacturing activities of the consolidated entity for the year consisted of the manufacture of equipment and the sale of equipment and spare parts. The consolidated entity conducted its operations from Australia, Vietnam and Indonesia with sales to multiple global jurisdictions. DIVIDENDS Dividends paid during the financial year were as follows: Final dividend for the year ended 30 June 2022 of 3.5 cents (2021: 3 cents) per ordinary share Interim dividend for the year ended 30 June 2023 of 3 cents (2022: 2 cents) per ordinary share Consolidated 2022 $'000 8,649 5,887 2023 $'000 10,831 9,788 20,619 14,536 A final dividend of 3 cents per ordinary share for the year ended 30 June 2023 was declared on 17 August 2023 taking the total dividends declared in relation to FY23 to 6 cents (FY22: 5.5 cents). All dividends paid in the period and declared subsequent to year end were fully franked. MAAS Group Holdings Limited Directors' report 30 June 2023 OPERATING AND FINANCIAL REVIEW Earnings Summary The Group delivered a record Proforma EBITDA result for the year end 30 June 2023 of $163.134m, representing an increase of 30.4% from FY22 ($125.130m). Accompanying this result was an increase in consolidated Proforma Revenue of 48.6% to $801.000m (FY22 $539.095m) and an increase in Statutory NPAT by 6.3% to $65.455m (FY22 $61.562m). Growth was achieved across four of the five operating segments, with Construction Materials, Civil Construction & Hire, Commerical Real Estate and Manufacturing all reporting strong returns. Residential Real Estate contributed to the result however the segment was impacted by the sharp interest rates rises throughout the year and consequent challenging market conditions. Strategic acquisitions in the Construction Material and Civil Construction & Hire segments also contributed to the growth in FY23. The Group’s result reinforces the track record of delivering continued organic growth mixed with accretive acquisitions. Disciplined capital allocation with a focus on return on capital has allowed for all five operating segments to contribute to this record result in FY23. The Group delivered this result amidst challenging macroeconomic conditions, in particular, persistent high inflation and ongoing interest rate increases which existed throughout FY23, as well as significant weather-related disruptions which impacted operations in the first half of FY23. An overview of operating segment performance is summarised below. Construction Materials Proforma revenue in the Construction Materials segment increased by 88.25% to $229.664m (FY22 $122.000m) with proforma EBITDA increasing by 81.8% to $52.028m (FY22 $28.600m). This growth was underpinned by increases in average selling price, quarry sales volumes and concrete volumes from existing operations and acquisitions. The entry to Victoria through the Dandy Premix acquisition has resulted in the segment achieving an established presence in the Victorian Construction Materials market which achieved strong concrete sales and delivery since acquisition driven by heightened demand on major state government projects. The segment result was delivered despite the impact of significant wet weather across the segment’s operating regions in the first half of FY23 and increasing fuel and energy costs throughout the whole of FY23. The significant wet weather events during the first half of FY23 impacted revenues through the delay of projects and decreased production efficiency resulting in higher costs. Favourable operating conditions returned during the second half of FY23, driving an increase in demand and production efficiency. The segment continues to manage inflationary risks through regular customer pricing reviews and continued focus on leveraging procurement power across the Group. While wet weather remains a material risk, the segment witnessed more favourable weather and improved operating conditions in the second half of FY23. Civil, Construction & Hire Proforma revenue in the Civil, Construction & Hire segment increased by 46.86% to $370.536m (FY22 $252.300m) with proforma EBITDA increasing by 38.3% to $68.717m (FY22 $49.700m). The increase was driven by a combination of organic growth of existing operations and acquisitions with Garde contributing for the full period and Schwarz Excavations for eleven months in the year ended 30 June 2023. Integration synergies continue to be realised through consolidation of leadership, assets, equipment pools, systems and shared services for project management, engineering and administration support. The Civil, Construction & Hire segment year-on-year result was driven by enhanced project delivery across major infrastructure projects. The growth of the segment continued to benefit from the integrated industrial services offering to major infrastructure projects across the east coast of Australia. While the segment results were impacted adversely during the first half of FY23 due to wet weather, strong project delivery and efficiency returned in the second half of FY23. 48 | MAAS Group Holdings (ASX: MGH) Financial Report 2 3 MAAS Group Holdings (ASX: MGH) Financial Report | 49 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 MAAS Group Holdings Limited Directors' report 30 June 2023 Residential Real Estate Mergers and Acquisition Proforma revenue in the Residential Real Estate segment decreased by 13.4% to $89.667m (FY22 $103.562m) with proforma EBITDA decreasing 56.4% to $12.832m (FY22 $29.447m). The decrease was driven by reduced sales volumes with 181 settlements (including 55 build to rent) in the period (FY22: 270 lots including 30 build to rent). Subdued buyer sentiment arose due to a combination of consecutive interest rate rises and cost of living pressures which negatively impacted sales volumes. Despite the adverse sentiment, the segment noted increased home delivery with 172 build starts and 174 build completions (FY22: 155 Starts; 110 Completions). The land delivery and home building programs are scalable and controlled, allowing flexibility to react to market demand. Valuation adjustments were noted related to the continued delivery of the Build-to-Rent program of $4.168m (FY22: $4.328m). Increased uncertainty continued in residential real estate during the period, arising from numerous successive increases in interest rates by the Reserve Bank of Australia (RBA) and the inflationary impacts on build costs. The combination of the higher interest rates and the frequency of increases has dampened market conditions in the segment, causing an increased time to covert sales from inquiry to settlement. The uncertainty in this segment is expected to continue throughout FY24. The inflationary pressure on housing construction costs continues to be a risk to the industry. The acquisition by the Group of a building supplies business in FY22 has assisted in mitigating this risk through improved supply chains and procurement practices. Commercial Real Estate Proforma revenue in the Commercial Real Estate segment increased by 61.8% to $138.216m (FY22 $85.4291m) with proforma EBITDA increasing by 68.5% to $41.677m (FY22 $24.731m). The result was underpinned by the growth of commercial construction businesses and the increased project delivery from commercial construction contracts. Cost inflation on projects was mitigated through procurement activities from the building supplies business unit, supporting comparably stable project margins. Valuation increases from the commercial development portfolio resulted in the recognition of $26.243m (FY22: $14.515m) revaluation as the projects reached key milestones. The portfolio of assets continued to expand during the period with the Group now holding industrial sites, self-storage facilities, childcare development locations as well as other commercial development properties. At varying stages of development, the portfolio represents a gross development value of $871.800m as at 30 June 2023 with significant ability to self-perform projects through construction capability and the building supplies business unit. Increased uncertainty continued in broader real estate markets during the year ended 30 June 2023, arising from numerous successive increases in interest rates by the RBA and the inflationary impacts on build costs. The combination of a higher interest rate environment dampened market conditions in areas of the Commercial Real Estate industry, although some asset classes, such as industrial property, remain resilient from these headwinds with strong demand remaining. While the Group anticipates the uncertainty of broader real estate markets to impact this segment in FY24, given the broadness of the asset classes within the portfolio, it is unlikely to materially impact the segment. The inflationary pressure on construction costs continues to be a risk to the industry however shorter lifecycle of projects within the segment assist in job cost management. The acquisition by the Group of a building supplies business in FY22 has assisted in mitigating this risk through improved supply chains and procurement practices. Manufacturing Proforma revenue in the Manufacturing segment increased by 54.6% to $30.570m (FY22 $19.800m) with proforma EBITDA increasing by 129.0% to $4.102m (FY22 $1.800m). Improved operating conditions as the external supply market normalises post COVID and realisation of operational efficiencies in both production and sales has resulted in the improved performance of this division. Significant investment in Jacon brand recognition contributed to increased distribution pathways for machine sales. Trading conditions are expected to remain stable in FY24 with planned distribution channel expansion into the United States and Europe. The Group continued to pursue strategic acquisitions through the hub and spoke model which expands operations while realising synergies and offer accretive growth during the year to 30 June 2023 with a total investment of $178.821m across four acquisitions: (1) Schwarz Excavations Pty Ltd (Schwarz) was acquired in July 2022 and is reported in the Civil, Construction & Hire segment. Based in Central Queensland, the acquisition further enhances the Group’s contracting capabilities in the region, offering synergies with existing operations and assets. (2) Clermont Quarries (Clermont) was acquired in September 2022 and is reported in the Construction Materials segment. This acquisition in Central Queensland contained four hard rock quarries complimenting the existing operations and capability in the region. (3) Dandy Premix Quarries Pty Ltd (Dandy) was acquired in December 2022 and is reported in the Construction Materials segment. Based in South East Melbourne, Dandy is an integrated construction materials business operating five concrete plants, a sand quarry and a hard rock quarry. This acquisition represents the entry into the Victorian metro market for the Group. (4) A 75% interest in Austek Asphalt was acquired in May 2023 and is reported in the Construction Materials segment. Based in South East Queensland, the Asphalt operator is a downstream user of quarry productions and represents an expansion of current capabilities for the Group. Further details on the acquisitions are set out in note 37 to the financial statements. Cash Flow and Working Capital Statutory operating cash inflows before payments for land inventory increased 45.8% to $113.659m (FY22 $77.908m) as a result of higher earnings and greater working capital management. The Group continues to take a proactive approach in managing credit default risk, including monitoring customers trading activity, particularly within the construction industry. Operating cashflows were reduced by the further investment inland inventory of $111.095m which exhibits a multiyear lag between englobo and project acquisition and settlement as developed lots. Significant investing cash outflows occurred during the period as the Group transacted on opportunities that aligned with operational strategy or incurred capital expenditure that passed return on capital benchmarks. This included the acquisition of four businesses as mentioned above and material commercial property acquisitions of the Quest Hotel in Dubbo, NSW ($15.610m) and the Sandgate development site in Newcastle, NSW ($24.724m). These commercial property acquisitions continue to build the Group’s diversified asset portfolio with additions to commercial and future industrial redevelopment. The cash payments for property plant and equipment during the period totalled $82.158m and was split between $46.000m for Growth and $36.158mfor Maintenance. The Group is committed to continuing to measure assets against performance benchmarks and undertaking capital recycling where required. The Group issued 29,389,177 new ordinary shares during the year ended 30 June 2023. This resulted in the value of share capital increasing by 27.33% to $550.778m (FY22 $432.530m). The share capital increase is represented by $118.408m from capital raises (net of transaction costs), a DRP of $1.507m and $2.499m as part consideration for businesses acquired during the period offset by $4.166m of shares withdrawn from the market via buyback. Refer to note 24 for further information. Group Debt and Dividends Net debt excluding AASB 16 property leases increased by 72.8% to $442.875m over the year to 30 June 2023 (FY22 $256.240m) largely driven by the investing cash outflows discussed above. The Group received continued support from its banking partners during the period with increases in banking facility limits to $600.000m (FY22 $500.000m). This increase included an $85.000m increase to the term loan and a $15.000m increase to the equipment finance facility. In addition to this facility, the Group also retains the consent to source separate commercial property funding of up to $200.000m in aggregate from financiers for commercial property projects with $8.000m drawn at 30 June 2023. All banking covenants were adhered with during the period. The Board Policy of a dividend payout ratio of 20%-40% of Cash NPAT has continued during the year ended 30 June 2023, underpinned by strengthened earnings. The Board has declared a 3c fully franked dividend on the 17th August 2023 in relation to the year end 30 June 2023. Combined with the 3c fully franked interim dividend paid, there was a 9.0% growth in dividends during FY23. 50 | MAAS Group Holdings (ASX: MGH) Financial Report 4 5 MAAS Group Holdings (ASX: MGH) Financial Report | 51 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 Principal Risks The Group acknowledges a range of risks that exist across the operations. It is committed to building a strong risk management culture to ensure the Group continues to deliver on its vision and strategy. This includes the development and incorporation of risk management procedures into strategic plans and budgets, and regular reporting on the status of key risks to relevant committees and the Board. (1) Economic Conditions – The RBA has continued to increase interest rates over the last twelve months and there is a risk of further interest rate rises. The Group, particularly in the Residential and Commercial Real Estate segments, operate in an environment where customer demand may be impacted by negative economic sentiment, and this may delay the demand of the Group’s sales or impact selling prices and carrying values. The Group also relies on external suppliers for the delivery of its services and has been and may continue to be impacted by supply chain interruptions and cost inflation. (2) Infrastructure Programs and Government Policy – The Group benefits from offering large infrastructure projects an integrated service solution, with such projects usually dependent on government fiscal policy decisions. Changes in government infrastructure fiscal policy direction can impact the Group results positively through via stimulus, and adversely through spending restriction. (3) Wet Weather – The Group activities have and can be impacted by extreme weather events, including prolonged periods of rain. These weather events can impact both productivity and access to work sites, resulting in delayed revenue and increased costs. (4) Workforce Management and Skilled Labour – The Group is dependent on its ability to attract and retain employees in order to operate and grow the business. The market for labour is highly competitive and there is no guarantee that the Group will be able to identify, recruit and retain the employees required to operate the business at current levels and / or to enable the growth of the business in accordance with its plans. (5) Health & Safety – The Group operates in environments where inherent safety risk can arise in the normal course of business. The Group operates across a diverse network of site locations and physical equipment which includes the operation of large light and heavy vehicle fleet where there is a potential ongoing risk of accidents which could cause injury or death notwithstanding the safety systems of the Group. (6) Capital Management – The Group’s continued ability to effectively implement its strategy over time may depend in part on its ability to raise additional funds, manage its capital position effectively and/or refinance its existing debt. Capital mismanagement or access to additional working capital if required, may impact Maas Group’s growth aspirations. (7) Competition and loss of revenue – The industries in which the Group operates are highly competitive and are expected to remain so. Any increase in competition could result in loss of market share, reduced operating margins, and price reductions. Although the Company has a sound track record in securing new contracts and competing effectively, there can be no assurance that any or all of its businesses will continue to perform in the future. (8) Acquisitions – The Group has and will continue to pursue strategic acquisitions to deliver on its strategic plan. To finance any future acquisitions, the Group may procure additional debt and/or seek to raise equity capital, which may further dilute the holdings of shareholders. There can be no assurance that the Group will be able to identify suitable candidates for successful acquisitions at acceptable prices, or successfully execute acquisitions and integration of targets once identified. (9) Environmental, Social and Governance (ESG) Considerations – The Group acknowledges the growing demands of our stakeholders in ESG, and the potential risks and opportunities posed to our business, and the broader sector, as a result of our environmental footprint, climate change and the anticipated global transition towards a lower carbon economy. The Group is committed to defining benchmarks for ESG performance and subsequent metrics to measure performance. The Group acknowledges there is a risk of ESG inaction which could result in potential non-compliance fines and mismanaged community expectations. The board is currently developing a roadmap to meet future sustainability reporting requirements in accordance with the International Sustainability Standards Board's first two IFRS Sustainability Standards. MAAS Group Holdings Limited Directors' report 30 June 2023 Reconciliation of Statutory Revenue (audited) to Proforma Revenue (unaudited), profit before income tax (audited) to EBITDA, Adjusted EBITDA (unaudited) Proforma EBITDA (unaudited), EBIT, Adjusted EBIT (unaudited), Proforma EBIT (unaudited). Reconciliation of Statutory Net Profit After Tax (NPAT) attributable to owners of MAAS Group Holdings Limited (audited) to Proforma NPAT (unaudited) and Statutory Basic Earnings Per Share (audited) to Proforma Earnings Per Share (unaudited). Statutory Revenue Revenue Normalisations Proforma Revenue Profit before income tax expense Finance costs Interest revenue EBIT Amortisation Depreciation EBITDA Transaction costs relating to business combinations Other non-recurring expenses Adjusted EBIT Adjusted EBITDA Adjusted EBITDA Non-Controlling Interest EBITDA Pre-acquisition EBITDA Share-based payment expense Fair value movement on contingent consideration Proforma EBITDA Adjusted EBIT Non-Controlling Interest EBITDA Pre-acquisition EBITDA Share-based payment expense Fair value movement on contingent consideration Depreciation & Amortisation Normalisations Proforma EBIT Statutory NPAT Attributable to Owners of MAAS Group Holdings Limited NPAT Normalisations Proforma NPAT Statutory Basic EPS (Cents) Basic EPS Normalisations (Cents) Proforma Basic EPS (Cents) Consolidated 2023 $'000 805,324 (4,324) 2022 $'000 517,121 21,974 801,000 539,095 94,343 21,849 (521) 115,671 7,515 35,745 158,931 3,317 1,377 87,571 7,178 (45) 94,704 4,892 25,677 125,273 3,122 409 120,365 163,625 98,235 128,804 163,625 (748) - 955 (698) 128,804 - 2,103 769 (6,546) 163,134 125,130 120,365 (748) - 955 (698) 92 98,235 - 2,103 769 (6,546) (361) 119,966 94,200 65,455 3,462 61,562 (363) 68,917 61,199 20.66 1.08 21.42 (0.04) 21.74 21.29 52 | MAAS Group Holdings (ASX: MGH) Financial Report 6 7 MAAS Group Holdings (ASX: MGH) Financial Report | 53 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 MAAS Group Holdings Limited Directors' report 30 June 2023 Proforma Revenue, Proforma NPAT, Proforma EPS, Proforma EBITDA, Proforma EBIT, EBITDA, Adjusted EBITDA, Adjusted EBIT are non-IFRS earnings measures which do not have any standardised meaning prescribed by IFRS and therefore may not be comparable to Revenue, NPAT, EPS, EBIT and EBITDA presented by other companies. These measures, which are unaudited, are important to management as an additional way to evaluate the consolidated entity’s performance. SPECIAL RESPONSIBILITIES OF DIRECTORS The following changes occurred during the year in the sub-committees: (1) Audit and Risk Committee: Adjusted EBITDA excludes the effects of significant items of income and expenditure which may have an impact on the quality of earnings because of isolated or non-recurring events. Proforma EBITDA is adjusted for the pre-acquisition EBITDA of business combinations where the company is entitled to pre-completion profits and non-operational items during the year including share-based payments and fair value movement of contingent consideration. Proforma Revenue is normalised for pre-acquisition revenue of business combinations where the company is entitled to pre-completion revenue as well as the reversal of non-controlling interest revenue. Proforma EBIT is normalised for one off depreciation adjustments as well as the reversal of non-controlling interest depreciation and amortisation. Proforma NPAT (Net Profit After Tax) is normalised for the NPAT impact of Proforma EBIT above in addition to Proforma interest. Proforma EPS (Earnings Per Share) is calculated using Proforma NPAT divided by the weighted average number of ordinary shares. SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS There were no other significant changes in the state of affairs of the consolidated entity during the financial year ended outside of those discussed above, in the Chairman's Letter, Chief Executive Officer's Report and Operating and Financial Review. MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR Dividend The Directors declared a fully franked final dividend of 3 cents per share on 17 August 2023, which reflects a full year dividend of 6 cents per share, an increase of 9.0% from the prior year. Long Term Incentive Program (LTIP) On the 17th August 2023 the Directors approved an Award in relation to FY22 under the LTIP program previously approved by shareholders. No other matter or circumstance has arisen since 30 June 2023 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 in future financial years. LIKELY DEVELOPMENTS AND EXPECTED RESULTS OF OPERATIONS The Group enters FY24 with operations and strategies consistent with that of FY23. There is a focus on continued execution of business excellence and consolidation of processes of newly acquired businesses. This includes potential capital recycling programs which will be delivered in line with internal return on capital benchmarks. Other than items discussed above, in the Chairman's Letter, Chief Executive Officer's Report and Operating and Financial Review, no other information on likely developments in operations of the Group and the expected results of operations have been included in this report because the directors believe it would be likely to result in the unreasonable prejudice to the Group. ENVIRONMENTAL REGULATION The Group is subject to various environmental regulations under Commonwealth and State laws. To the Directors knowledge, the Group has conducted its operations in accordance with this legislation and has not been subject to any penalty by the relevant authority. The nature of the Group's operations requires ongoing discussion with relevant authorities responsible for monitoring and regulating the environmental impact of the Group's activities. David Keir was Chair of the Audit and Risk Committee up until 28 November 2022 at which point, he held a position as a Committee Member for the remainder of the period. Michael Medway commenced as Chair of the Audit and Risk Committee on 28 November 2022, having held a position as Committee Member up until this date. Neal O’Connor, who resigned as a director on 1 August 2022, was a member the Audit and Risk Committee up until his resignation as a director. Stephen Bizzell was appointed to the vacancy as a committee member on 1 August 2022. (2) Remuneration and Nomination Committee: Neal O’Connor, who resigned as a director on 1 August 2022, was a member and Chair of the Remuneration and Nomination Committee up until his resignation. Michael Medway was appointed Chair of the Remuneration and Nomination Committee on 1 August 2022 and Stephen Bizzell was appointed to the vacancy as a Committee Member at the same date. Michael Medway vacated the Chair on 28 November 2022 with David Keir appointed as Chair as at the same date. Michel Medway held a position as Committee Member for the remainder of the period. (3) Health, Safety and Environment Committee: Stewart Butel was Chair of the Health, Safety and Environment Committee up until his resignation as a director on 31 July 2023. Michael Medway was a Committee Member for the period up until 31 July 2023 at which point he was appointed as Chair of the Health, Safety and Environment Committee. Stephen Bizzell was a Committee Member for the period. Tanya Gale was appointed to the vacancy as a Committee Member on 31 July 2023. MEETINGS OF DIRECTORS The number of meetings of the company's Board of Directors ('the Board') and of each Board committee held during the year ended 30 June 2023, and the number of meetings attended by each director were: Full Board Audit and Risk Committee Remuneration and Nomination Committee Stephen G Bizzell Wesley J MaasA Stewart A ButelB Neal M O'Connor* Michael J Medway David B KeirC Tanya GaleD** Stephen G Bizzell Wesley J MaasA Stewart A Butel Neal M O'Connor* Michael J Medway David B KeirC Tanya GaleD** Attended 20 20 19 2 20 20 14 Held 20 20 20 2 20 20 14 Attended 4 - - - 4 4 - Held 4 - - - 4 4 - Attended 2 - - - 2 2 - Health, Safety & Environment Committee Held 2 - 2 - 2 - - Attended 2 - 2 - 2 - - Related Party Committee Attended - - 1 - - 1 - Held 2 - - - 2 2 - Held - - 1 - - 1 - A Attended Audit & Risk Committee, Remuneration and Nomination Committee and Health, Safety and Environment Committee meetings but not as a member of the relevant committee (by invitation) B Attended Audit & Risk Committee meetings but not as a member of the relevant committee (by invitation) C Attended Health, Safety and Environment Committee meetings but not as a member of the relevant committee (by invitation) D Attended Audit & Risk Committee, Remuneration and Nomination Committee and Health, Safety and Environment Committee meetings but not as a member of the relevant committee (by invitation) Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. * Resigned 1 August 2022 ** Appointed 13 October 2022 54 | MAAS Group Holdings (ASX: MGH) Financial Report 8 9 MAAS Group Holdings (ASX: MGH) Financial Report | 55 MAAS Group Holdings Limited Directors' report 30 June 2023 The performance rights for Executive Directors included in the information above will be subject to shareholder approval at the Annual General Meeting. The table below summarises the Executive LTI remuneration outcome for the FY22 Award. The Award for the Executive Directors’ is to be approved at the upcoming Annual General Meeting. No accounting expense has been incurred by the Group in FY23 in relation to this Award as the performance rights were not approved at 30 June 2023. This table is unaudited. Name Wesley Maas* Craig Bellamy Tanya Gale* Candice O’Neill FY22 LTI Award** $'000 180 126 81 n/a ** Value of FY22 Award if awarded at 30 June 2022. The accounting value of the incentive will depend on the fair value of the performance right at Grant Date and may be higher or lower than the value shown. The Remuneration and Nomination Committee will continue to review the effectiveness of all our incentive arrangements to ensure they align with shareholder and other stakeholder expectations and drive long term performance outcomes. I invite you to review our full remuneration report set out in sections 1 – 7 below and welcome any feedback. Yours faithfully David Keir Chair, Remuneration and Nomination Committee MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 REMUNERATION REPORT - AUDITED LETTER FROM THE REMUNERATION & NOMINATION COMMITTEE CHAIR Dear Shareholders, On behalf of the Board, I am pleased to present our 2023 Remuneration Report. At Maas Group we are committed to creating long term value for all our stakeholders and the Board continues to work together with the CEO, Wes Maas, to ensure our remuneration and incentive arrangements align the interests of both our employees and shareholders. FY23 Performance and Remuneration Outcomes The Group has continued to deliver on its long-term strategy and has reported a strong result again in FY23. Sales Revenue increased by 55.7% to $805.324m (FY22:$517.121m), pro forma EBIT increased by 27.3% to $119.966m (FY22 $94.200m) and statutory net profit after tax increased by 6.3% to $65.455m (FY22 $61.562m). The Board declared a fully franked dividend of 3 cents per share, resulting in a full year fully franked dividend of 6 cents for FY23 (FY22 5.5 cents). Despite the difficult market conditions, impacted by record wet weather events, rising interest rates with a backdrop of high inflation, and the continued disruption of international supply chains, the Board is extremely pleased with the Group's performance in FY23 and we would like to thank Wes, the leadership team, and all our employees for their commitment and achievements during the year. Changes to the Remuneration Framework During FY23 Changes were made to the Short-Term Incentive (STI) program in FY23 which included the incorporation of a STI for the CEO, Wes Maas, into his remuneration package. The STI for the CEO includes a range of financial and non-financial goals. Further details on the financial outcomes of the STI’s for the Executives is included in section 5. Long Term Incentive Plan (LTIP) Recognising the need to attract and retain high calibre employees, our shareholders approved the Group’s Long Term Incentive Plan (LTIP) in November 2021. The LTIP was established to enable the award of equity incentives to eligible employees and contractors, linking the reward of key staff with the achievement of strategic goals and the long-term performance of the Group. Eligible participants will receive an Award based on the financial performance of the Group for the preceding year, measured against targets set by the Board. Earnings before Interest and Tax (EBIT) is considered the appropriate measure to determine the value of the Award. The participant will receive the Award value in Performances Rights with performance hurdles linked to Earnings Per Share growth (EPS CAGR) and Return on Equity for the four financial years following the Award year. The vesting of the performance rights will be linked to achieving the performance hurdles and continued employment by the participant at the vesting date. The participants include executive KMP (Executive), other executives and senior managers who have been identified as key drivers of Maas Group’s performance and long term success. The grant date for the annual Awards will be aligned with the Annual General Meeting of Shareholders. The Board has approved the initial annual award program (Award) under the LTIP on 17 August 2023 as follows: ● Award of 550,950 performance rights relating to the FY22 financial year. The number of rights to be granted have been determined using the face value of the award ($2,203,800) divided by the share price using the volume weighted average price (VWAP) during the 20-day period immediately after the issue of the FY22 results ($4.00). The performance rights will vest in August 2026 with EPS CAGR and average Return on Equity hurdles for the four year period ending 30 June 2026. Further information can be found in section 6. 56 | MAAS Group Holdings (ASX: MGH) Financial Report 10 11 MAAS Group Holdings (ASX: MGH) Financial Report | 57 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 TABLE OF CONTENTS 1. Key Management Personnel 2. Remuneration Framework 3. Employment Contracts 4. Company Performance 5. Executive STI 6. Executive LTI 7. Additional statutory disclosures The Directors present the Remuneration Report for the financial year ended 30 June 2023. This report forms part of the Directors’ Report and has been prepared and audited in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key Management Personnel (KMP) are those persons having authority and responsibility for planning, directing and controlling the activities of the Group and includes the Board of Directors. 1. KEY MANAGEMENT PERSONNEL (KMP) The table below sets out the individuals considered to be KMP during FY2023 KMP Directors Stephen Bizzell Wesley Maas Stewart Butel Michael Medway David Keir Tanya Gale Neal O’Connor Executives Craig G Bellamy Candice O’Neill Position Non-Executive Chair Managing Director and Chief Executive Officer Non-Executive Director Non-Executive Director Non-Executive Director Executive Director, Corporate Development Non-Executive Director Term as KMP Full Financial Year Full Financial Year Full Financial Year (Resigned 31 July 2023) Full Financial Year Full Financial Year Appointed 13 October 2022 Resigned 1 August 2022 Chief Financial Officer and Company Secretary Company Secretary and General Counsel Full Financial Year Appointed 17 October 2022 2. REMUNERATION FRAMEWORK The broad objective of Maas Group’s remuneration framework is to ensure reward for performance which is competitive and appropriate for the results delivered. The framework aligns remuneration outcomes with the achievement of strategic objectives and the creation of long-term value for shareholders and other stakeholders. Our Vision: To deliver market leading property, construction, and infrastructure solutions by: ● Delivering on customer solutions ● Empowering our team ● Harnessing our culture ● Being the lowest cost producer Our Values: ● Trust – only earned through action ● Teamwork – focussed on safety and solutions ● Commitment – delivering on commitments to customers ● Leadership – the courage to strive for excellence ● Candour – transparent conversation to get it right ● Ownership – empowered to get it done and be accountable for the results Guiding principles for the Groups remuneration ● Performance expectations – accountability through clear financial and non-financial goals ● Shareholder alignment – culture of care and commitment with employees incentivised to act as owners and the interest of shareholders and staff are aligned over the long term ● Focus on long term equity incentive – at risk, equity-based incentives for senior staff prioritising long term performance MAAS Group Holdings Limited Directors' report 30 June 2023 2.1. REMUNERATION GOVERNANCE The Board of Directors is responsible for approving the Group’s remuneration framework, monitoring and managing the performance of the CEO, Executives and management, and approving and managing succession plans. The Remuneration and Nomination Committee assists and advises the Board of Directors in fulfilling its responsibilities to shareholders and other stakeholders by ensuring that the Group has remuneration policies that: ● attract, retain and motivate high quality Directors, Executives and management who will generate value for shareholders; ● are fair and reasonable, having regard to the performance of the Group and the individual; ● are market competitive based on role, location and industry; ● are aligned to the Board’s vision, values and overall business objectives; ● motivate the CEO, Executives and management team to pursue long term growth and success of the Group; and ● demonstrate a clear relationship between the achievement of the Group’s strategic objectives and performance of the CEO, Executives and management. The Remuneration and Nomination Committee may seek professional advice from employees of the Group and from appropriate external advisors at the Group’s cost. 2.2. NON-EXECUTIVE DIRECTOR REMUNERATION Fees and payments to Non-Executive Directors reflect the demands and responsibilities of their role. Non-Executive Directors fees and payments are reviewed annually by the Remuneration and Nomination Committee. The Remuneration and Nomination Committee may, from time to time, receive advice from independent remuneration consultants to ensure Non-Executive Directors fees and payments are appropriate and in line with the market. The Chairman's fees are determined independently of the fees of other Non-Executive Directors based on comparative roles in the external market. The Chairman is not present at any discussions relating to the determination of his own remuneration. Non-Executive directors do not receive share options or other performance-based incentives. The maximum aggregate amount which has been approved by the shareholders for payments to the Directors is $750,000 per annum, determined at the Annual General Meeting held on 21 October 2020. The table below sets out the fees for Non-Executive Directors which are inclusive of superannuation. The committee fees reflect the additional time commitment required for the committees on which the Non-Executive Board member serves. Base Fees Chairman Non-Executive Director Independent Non-Executive Director Additional Committee Fees Audit & Risk Committee Remuneration & Nomination Committee Health, Safety & Environment Committee Related Party Committee Chair ($’000) $5 $5 $5 $5 Annual Fees ($’000) $100 $65 Member ($’000) $5 $5 $5 $5 The remuneration of Non-Executive Directors for the year ended 30 June 2023 is detailed in section 7.2 of this report. 58 | MAAS Group Holdings (ASX: MGH) Financial Report 12 13 MAAS Group Holdings (ASX: MGH) Financial Report | 59 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 MAAS Group Holdings Limited Directors' report 30 June 2023 2.3. EXECUTIVE REMUNERATION 4. COMPANY PERFORMANCE AND REMUNERATION OUTCOME The Group’s remuneration policies aim to reward Executives based on their position, level of responsibility and individual performance. The remuneration structure includes both fixed and variable components as set out in the following table: The Group aims to align its Executive remuneration to its strategic and business objectives and the creation of shareholder value. The table below summarises the performance indicators of the Group over the last five years. Component Purpose Approach FY23 marked the twenty-year anniversary since Wes Maas first established operations in Dubbo. Despite the challenging operating environment, the Group delivered another year of strong earnings growth. Fixed Remuneration At risk short-term incentive (STI) At risk long-term incentive (LTI) Attract and retain high quality, talented Executives by providing a market competitive and fair remuneration. Consists of base cash salary, superannuation, leave entitlements and other non-cash benefits. Market benchmarking and annual review based on individual performance. Incentivise Executives to achieve annual financial and non-financial KPI’s linked to the Groups strategic plan and annual business objectives and priorities. Award in cash based on an assessment of performance over the preceding year by reference to Group performance against annual financial targets and individual performance KPI’s. The STI target is a fixed % of base salary and award can range from 0% to 100% of target. Align Executive and other key management accountability and remuneration with the long-term interests of shareholders and other stakeholders by rewarding sustained Group performance over the long term. Award of Performance Rights based on the annual EBIT performance of the preceding year. The Performance Rights vest after four years, subject to achieving objective financial performance hurdles and continuity of service by the participant. The LTI can be delivered in ordinary shares or cash and is aligned to delivering ongoing returns for shareholders. The remuneration of Executives and STI and LTI outcomes for the year ended 30 June 2023 are summarised in sections 5 – 6 and section 7.1 below. Base salaries below are for the year ended 30 June 2023 and are reviewed annually by the Remuneration and Nomination committee. 3. EMPLOYMENT CONTRACTS Key terms of employment contracts of Executives are presented in the table below: Name Wesley Maas Craig Bellamy Tanya Gale Candice O’Neill Contract Position Duration Unlimited Chief Executive Officer Chief Financial Officer and Company Secretary Unlimited Unlimited Executive Director, Corporate Development Unlimited Company Secretary and General Counsel Termination Payment Notice Period Twelve Months Six Months Six Months Six Months Three Months Three Months Three Months Three Months Sales Revenue (Statutory) Sales Revenue (Proforma) Proforma Earnings Before Interest Tax and Depreciation (EBITDA) Proforma Earnings Before Interest and Tax (EBIT) Net Profit After Income Tax (Statutory) Net Profit After Income Tax (Proforma) Return on Equity (Statutory) Dividends Declared (cents per share) Dividends Paid (cents per share) Share Price at Year End ($ per share)* Basic Earnings Per Share (cents per share) Diluted Earnings Per Share (cents per share) Basic Earnings Per Share (Proforma, cents per share) Performance Based Incentives to KMP FY20 FY22 FY21 FY23 $’000 $’000 $’000 $’000 805,324 193,440 517,121 277,562 801,000 539,095 283,400 221,800 64,655 49,855 20,694 32,454 24% n/a n/a n/a 10.10 10.10 15.84 - 163,134 119,966 65,455 68.917 12% 6.0 6.5 2.65 20.66 20.38 21.75 113 125,130 94,195 61,562 61.199 17% 5.5 5.0 3.63 21.42 21.26 21.29 114 75,907 59,807 34,569 39,607 20% 5.0 2.0 5.60 14.37 14.33 16.42 - FY19 $’000 39,076 192,000 50,000 35,700 9,220 21,500 17% n/a n/a n/a n/a n/a n/a - * The company's shares first traded on the ASX on 4 December 2020 after the successful completion of its IPO. Accordingly, no share price information has been provided prior to the 2021 financial year. The above table includes non-IFRS earnings measures. These are defined in the Directors’ report and in section 6 below. 5. EXECUTIVE FY2023 SHORT TERM INCENTIVE (STI) OUTCOMES STIs for Executives are based on the achievement of annual financial and non-financial KPI’s linked to the Group's strategic plan and annual business objectives and priorities. The table below sets out the Executive STI outcomes for FY2023: Name Wesley Maas Craig Bellamy Tanya Gale Candice O’Neill* STI maximum opportunity $ 72,000 72,000 54,000 14,000 % 20% 20% 20% 10% STI Outcome $ - 57,600 43,200 12,462 % - 80% 80% 90% Wesley Maas elected to not receive a STI this year. The STI outcomes for Craig Bellamy, Tanya Gale and Candice O’Neill were measured based on a weighted approach. This approach considered the Groups financial performance in FY23 against budgets, execution of agreed personal objectives, culture fostered within teams, retention of key staff and ability to execute a lean management strategy. * Candice O’Neill achieved 90% of pro-rated STI from commencement date (17 October 2022) to 30 June 2023. 60 | MAAS Group Holdings (ASX: MGH) Financial Report 14 15 MAAS Group Holdings (ASX: MGH) Financial Report | 61 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 6. EXECUTIVE LONG-TERM INCENTIVE (LTI) OUTCOMES LTI’s for Executives are based on a profit share allocation of Earnings Before Interest and Tax (EBIT) for the preceding financial year. The initial allocation (Award) is based on a percentage of the participants base salary and is designed to grow over time as the Group’s earnings grow. The annual Award is based on the Group’s actual EBIT against Target EBIT (100%) with adjustments for Threshold (70%) and Maximum (130%). The Board will set Target EBIT annually as part of the Group’s budget process. The LTI is issued as Performance Rights with financial performance hurdles tested over the four-year period post allocation. The table below sets out the key components of the LTI structure for Executives: Who is Eligible to Participate? What is the LTI Structure? Award Value How are the number of Performance Rights Issued determined? • • • • • • • • • Invitation program for Executive KMP and other executives and managers in the Group. Invitation is annual and participants must exhibit the Group core values. Annual award of Performance Rights linked to the underlying MGH securities. The Performance Rights do not receive distributions or voting until vesting. Based on a profit pool allocation of EBIT for preceding financial year Maximum annual profit share pool for all KMP and non KMP participants 5% of annual EBIT. Individual allocation determined based on starting % of base salary (17.5% – 50%) which can grow over time as the Group’s earnings grow. The number of Performance Rights allocated are calculated as the Award Value divided by the Share Price The Share Price is determined using the volume weighted average share price (VWAP) during the 20-day period immediately after the issue of the annual financial statements. What is the Vesting Period? • The Performance Rights will vest four years post allocation, subject to meeting the Performance Hurdles and ongoing employment by the participant What are the Performance Hurdles? • • • Earnings Per Share – compound annual growth rate over the four financial years post Award. This is considered the underlying value driver for the Group and over the longer term should align with Total Shareholder Return (TSR) Return on Equity – average over the four financial years post-award. Measure of the efficiency of the deployment of capital. Hurdles are set to be challenging for management with a stretch component but without encouraging inappropriate risk taking. What is the weighting of the performance hurdles • • 50% EPS hurdle 50% Return on Equity Can the hurdles be adjusted • No (subject to ASX Listing Rule adjustments) Participant Leaves • If participant is a good leaver they will retain a portion of their unvested Performance Rights, pro-rated for time served and subject performance testing. Change of Control • The Board retains discretion in the unlikely event of change of control. On 17 August 2023 the Board approved the LTI Award for FY22, noting that the LTI Award of the CEO and other Executive Board members are subject to shareholder approval at the AGM. MAAS Group Holdings Limited Directors' report 30 June 2023 The key elements of the FY22 Award is set out in the following table. The EPS CAGR and Return on Equity range are for the purposes of testing criteria for vesting of Performance Rights. The range does not constitute earnings guidance for the Group. Further definition of key criteria relevant for measuring the LTIP will be provided in the financial year in which performance rights are granted. Element FY22 Award Share Price to set # Performance Rights EPS CAGR Average Return on Equity $4.00 – 20 day (VWAP 18 August 2022 to 14 September 2022) 50% Weighting Threshold 7.5% Maximum 12.5% 50% Weighting Threshold 15% Maximum 20% Grant Date AGM CEO / Executive Directors subject to shareholder approval Performance Testing 1 July 2023 to 30 June 2026 Vesting Expiry 31 August 2026 29 August 2036 The Board will approve the calculation of the financial hurdles which will be based on reported results in the audited financial statements. The reported earnings for the Group includes the fair value remeasurement of deferred equity consideration relating to acquisitions. This can result in earning fluctuations based on movements in MGH’s share price (a decrease in share price results in a positive fair value adjustment, an increase in share price results in a negative fair value adjustment). The Board considers that the fair value movements on deferred equity consideration do not reflect the underlying performance of the Group and will be normalised in the EPS CAGR and Return on Equity calculations for vesting testing, removing the impact of these adjustments. The Board has considered the fair value remeasurement relating to development projects held for investment. While these movements are non-cash, the Board believes that they reflect the economic value added (or deducted) during the relevant reporting period in relation the development projects. As a result, the fair value remeasurement on developments held for investment will be included in the calculation of EPS CAGR and Return on Equity for vesting testing. 62 | MAAS Group Holdings (ASX: MGH) Financial Report 16 17 MAAS Group Holdings (ASX: MGH) Financial Report | 63 MAAS Group Holdings Limited Directors' report 30 June 2023 7.4. EQUITY MOVEMENTS SHAREHOLDING The number of shares in the MGH held during the financial year by each Non-Executive Director and Executive, including their personally related parties, is set out in the table below: 1 July 2022 Sold Purchased Remuneration Non-Executive Directors Stephen Bizzell Stewart Butel Neal O’Connor Michael Medway David Keir Total Executives Wesley Maas Craig G Bellamy Tanya Gale Candice O’Neill Total Total 685,979 61,376 25,437 285,640 - 1,058,432 158,063,039 181,081 - - 158,244,120 159,302,552 - - - - - - - - - - - - 62,742 1,658 - 253,011 12,500 329,911 15,318,750 - - - 15,318,750 15,648,661 - - - - - - - - - - - - (i) Balance of shares at time of commencing or ceasing to be a KMP Other Change(i) 30 June 2023 - - (25,437) - - (25,437) 748,721 63,034 - 538,651 12,500 1,362,906 - - 158,182 - 158,182 173,381,789 181,081 158,182 - 173,721,052 132,745 175,083,958 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 7. STATUTORY DISCLOSURES 7.1. EXECUTIVE REMUNERATION The table below sets out the Executive Remuneration of Maas Group Base Salary /Fees $'000 360 360 360 360 243 - 138 - 1,101 720 Tanya Gale Wesley Maas FY23 FY22 Craig Bellamy FY23 FY22 FY23 FY22 Candice O’Neill FY23 FY22 FY23 FY22 Rem. Totals Short Term Post Employment Long Term Short Term Incentive Other(i) $'000 - 18 22 15 16 - 10 - 48 33 $'000 - - 58 114 43 - 12 - 202 114 Super- annuation $'000 27 36 27 36 24 - 15 - 93 72 Employee Benefits $'000 - - - - - - - - - - Equity Based Awards (ii)(iii) $'000 - - - - - - - - - - Total $'000 387 414 467 525 326 - 175 - 1,355 939 Fixed % 100% 100% 88% 78% 87% -% 93% -% 92% 88% Perform- ance based % -% -% 12% 22% 13% -% 7% -% 8% 12% (i) (ii) (iii) Other includes the movement in annual leave and other non-monetary benefits. Equity based Awards – accounting expense for share-based payments in accordance with AASB2, can be negative if an amount is reversed. As the grant date for the FY2022 LTI Award is post 30th June 2023 no accounting expense has been recognised. 7.2. NON-EXECUTIVE DIRECTOR REMUNERATION The table below sets out the Non-Executive Director Remuneration of Maas Group Short Term Post Employment Long Term Base Salary/ fees $'000 90 91 77 77 6 77 77 74 72 55 323 374 Short Term Incentive $'000 - - - - - - - - - - - - Other $'000 - - - - - - - - - - - - Super- annuation $'000 10 9 8 8 1 8 8 7 8 5 35 37 Employee Benefits $'000 - - - - - - - - - - - - Equity Based Awards Total $'000 $'000 100 100 85 85 7 85 85 81 80 60 357 411 - - - - - - - - - - - - Fixed % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Perform- ance based % -% -% -% -% -% -% -% -% -% -% -% -% Stewart Butel Neil O’Connor Stephen Bizzell FY23 FY22 FY23 FY22 FY23 FY22 Michael Medway FY23 FY22 FY23 FY22 FY23 Rem. Totals FY22 David Keir 7.3. EXECUTIVE LTI PLAN OUTSTANDING PERFORMANCE RIGHTS There were no performance rights outstanding as at 30 June 2023. 64 | MAAS Group Holdings (ASX: MGH) Financial Report 18 19 MAAS Group Holdings (ASX: MGH) Financial Report | 65 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 7.5. RELATED PARTY DISCLOSURES RELATED PARTY TRANSACTIONS – WESLEY MAAS: ● Wesley Maas is a director of Property Maintenance Australia Pty Ltd (PMA). During the 2023 financial year, the consolidated entity engaged PMA to provide commercial flights to the consolidated entity’s locations throughout Australia. Flights are charged at cost to the consolidated entity and the total charge for the 2023 financial year was $453,165 (2022: $175,872). The contract was based on normal terms and conditions. Amounts payable at 30 June 2023 to PMA totalled $54,678 (2022: $50,566). ● The consolidated entity leased premises from Emma Maas, the wife of Wesley Maas, on a short-term and ad-hoc basis. The rental charged during the year of $28,050 (2022: $28,600) was based on market rates. ● The consolidated entity leased premises from Yarrandale Pty Ltd, an entity controlled and/or associated with Wesley ● Maas. The rental charged during the year of $334,985 (2022: $318,482) was based on market rates. In May 2021, the consolidated entity leased premises from Maas Homebush Pty Ltd, an entity controlled and/or associated with Wesley Maas. The rental charged was based on market rates and commenced after a three-month rent-free period, which ended in July 2021. The rental charge during the 2023 financial year was $509,722 (2022: $491,549). ● During the 2023 financial year, Yarrandale Pty Ltd as trustee for the Yarrandale Investments Trust, W&E Maas Holdings Pty Limited as trustee for the Maas Family Trust, Regional Properties Australia Pty Limited as trustee for the Regional Properties Australia Unit Trust and Maas Homebush Pty Limited engaged the consolidated entity to consult on a property portfolio. Consulting Fees paid to the consolidated entity during the year totalled $61,821. An Income in advance liability existed for the consolidated entity at 30 June 2023 of $46,000 in relation to the above. Prior Year: ● At the Company's AGM held on 9 November 2021, shareholder approval was obtained for MAAS Group Developments Pty Ltd, a wholly-owned subsidiary of the company, to exercise an option with MGFP Holdings Pty Limited as trustee for MGFP Unit Trust to acquire the current Liberal Site at a market value of $6,950,000. MGFP Holdings Pty Limited is jointly controlled by the parents of Wesley Maas and Emma Maas with the underlying beneficial and economic interest in the MGFP Unit Trust also jointly held by the parents of Wesley Maas and Emma Maas. ● At the Company's AGM held on 9 November 2021, shareholder approval was obtained for MAAS Group Developments Pty Ltd, a wholly-owned subsidiary of the company, to exercise an option with W&E Maas Holdings Pty Limited as trustee for the Maas Family Trust to purchase all of the shares in MAAS Group Properties Sheraton View Pty Limited at an exercise price of $100. On exercise of the option, Choice Investments (Dubbo) Pty Ltd (an entity controlled and/or associated with Wesley Maas), who paid the first and second instalments of the purchase price and all transaction costs in relation MAAS Group Properties Sheraton View Pty Limited's purchase of the Sheraton Site, was entitled to repayment of these amounts totalling $1,469,854. Wesley and Emma Maas are controlling shareholders of W&E Maas Holdings Pty Limited and beneficiaries of the Maas Family Trust. ● At the Company's AGM held on 9 November 2021, shareholder approval was obtained for MAAS Group Developments Pty Ltd, a wholly-owned subsidiary of the company, to purchase all of the shares in Maas Group Properties Bunglegumbie East Pty Ltd at a purchase price of $100. On completion of the share purchase, W&E Maas Holdings Pty Limited acting as trustee for the Maas Family Trust, who funded the deposit and all transaction costs in relation MAAS Group Properties Bunglegumbie East Pty Ltd's purchase of the Bunglegumbie Site, was entitled to repayment of these amounts totalling $158,371. Wesley and Emma Maas are controlling shareholders of W&E Maas Holdings Pty Limited and beneficiaries of the Maas Family Trust. ● During the 2022 financial year, the consolidated entity recovered expenses of $1,786 from Choice Investments Dubbo Pty Ltd, an entity controlled and/or associated with Wesley Maas. RELATED PARTY TRANSACTIONS – STEPHEN BIZZELL: ● In December 2022 the consolidated entity engaged Centec Securities Pty Ltd (Centec) to execute share buy back orders announced to the market in that month. Centec is wholly owned indirectly by Stephen Bizzell, and Stephen is the sole director. During the year Centec executed the buy back of 1,581,253 MGH shares and charged the consolidated entity $3,203 in brokerage. Brokerage payable at 30 June 2023 was $49 for a share buy back executed 29 June 2023 and settled with MGH 3 July 2023. RELATED PARTY TRANSACTIONS – MICHAEL MEDWAY: ● Michael Medway provided consultancy services to the consolidated entity under usual commercial terms. Services included due diligence services with respect to acquisitions of businesses and or assets. The value of the services provided in 2023 was nil (2022: $79,000). MAAS Group Holdings Limited Directors' report 30 June 2023 Aggregate amounts of each of the above types of other transactions with key management personnel of MAAS Group Holdings Limited: Amounts recognised as revenue: Other revenue: Consulting fee income received from entity controlled by key management personnel Amounts recognised as an expense: Payment for goods and services: Advisory services – acquisitions Rent Travel Other transactions: Brokerage paid to entity controlled by key management personnel Costs recovered from related party Unsubscribed DRP shares underwritten by companies associated with the CEO Amounts recognised as assets and liabilities: At the end of the reporting period the following aggregate amounts were recognised in relation to the above transactions: Current liabilities (amounts payable) Consolidated 2023 $ 2022 $ 15,821 - - 872,757 453,165 1,325,922 79,000 838,631 175,872 1,093,503 3,203 - - - 1,786 3,986,640 Consolidated 2023 $ 2022 $ 100,727 138,556 This concludes the remuneration report. SHARES UNDER OPTION There were no unissued ordinary shares of MAAS Group Holdings Limited under option outstanding at the date of this report. SHARES UNDER PERFORMANCE RIGHTS Unissued ordinary shares of MAAS Group Holdings Limited under performance rights at the date of this report are as follows: Grant date 23/12/2021 23/12/2021 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 Vesting date 23/12/2022 23/12/2023 22/03/2023 22/03/2024 22/03/2025 22/03/2026 22/03/2027 30/06/2023 30/06/2024 30/06/2025 Exercise price $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Number under rights 18,868 18,868 8,696 8,696 8,696 8,695 8,695 33,271 33,271 33,271 181,027 Those granted a performance right, upon vesting, are entitled to receive one ordinary share per performance right held. Performance rights that have vested but have not yet been issued are included above as these have not expired as at the dare of this report. For further information regarding the issuance and mechanics of the performance rights, refer to note 42 Share-based payments. 66 | MAAS Group Holdings (ASX: MGH) Financial Report 20 21 MAAS Group Holdings (ASX: MGH) Financial Report | 67 MAAS Group Holdings Limited Directors' report 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S REPORT 30 JUNE 2023 MAAS Group Holdings Limited Directors' report 30 June 2023 SHARES ISSUED ON THE EXERCISE OF OPTIONS This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. There were no ordinary shares of MAAS Group Holdings Limited issued on the exercise of options during the year ended 30 June 2023 and up to the date of this report. On behalf of the directors ___________________________ Stephen G Bizzell Chairman 17 August 2023 Brisbane ___________________________ Wesley J Maas Managing Director and Chief Executive Officer SHARES ISSUED ON THE EXERCISE OF PERFORMANCE RIGHTS There were no ordinary shares of MAAS Group Holdings Limited issued on the exercise of performance rights during the year ended 30 June 2023 and up to the date of this report. INDEMNITY AND INSURANCE OF DIRECTORS, OFFICERS OR AUDITOR The company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the company or any related entity against a liability incurred by the auditor. During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the company or any related entity. During the financial year the company paid a premium to insure each of the directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in a capacity of Director other than conduct involving a wilful breach of duty in relation to the Group. The contract of insurance prohibits the disclosure of the nature of the liabilities covered and the amount of the premium paid. The Corporations Act does not require disclosure of the information in these circumstances. 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 the purpose of taking responsibility on behalf of the company for all or part of those proceedings. 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 33 to the financial statements. 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 services as disclosed in note 33 to the financial statements 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. ROUNDING OF AMOUNTS The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. 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 immediately after this directors' report. 68 | MAAS Group Holdings (ASX: MGH) Financial Report 22 23 MAAS Group Holdings (ASX: MGH) Financial Report | 69 Tel: +61 7 3237 5999 Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 Fax: +61 7 3221 9227 www.bdo.com.au www.bdo.com.au Level 10, 12 Creek Street Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Level 10, 12 Creek Street Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek Street Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia DECLARATION OF INDEPENDENCE BY T R MANN TO THE DIRECTORS OF MAAS GROUP HOLDINGS LIMITED DECLARATION OF INDEPENDENCE BY T R MANN TO THE DIRECTORS OF MAAS GROUP HOLDINGS LIMITED As lead auditor of MAAS Group Holdings Limited for the year ended 30 June 2023, I declare that, to the best of my knowledge and belief, there have been: As lead auditor of MAAS Group Holdings Limited for the year ended 30 June 2023, I declare that, to the DECLARATION OF INDEPENDENCE BY T R MANN TO THE DIRECTORS OF MAAS GROUP HOLDINGS best of my knowledge and belief, there have been: LIMITED 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and relation to the audit; and 2. No contraventions of any applicable code of professional conduct in relation to the audit. As lead auditor of MAAS Group Holdings Limited for the year ended 30 June 2023, I declare that, to the 2. No contraventions of any applicable code of professional conduct in relation to the audit. best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in This declaration is in respect of MAAS Group Holdings Limited and the entities it controlled during the This declaration is in respect of MAAS Group Holdings Limited and the entities it controlled during the period. period. 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 MAAS Group Holdings Limited and the entities it controlled during the period. T R Mann T R Mann Director Director BDO Audit Pty Ltd BDO Audit Pty Ltd T R Mann Brisbane, 17 August 2023 Director Brisbane, 17 August 2023 BDO Audit Pty Ltd Brisbane, 17 August 2023 BDO Audit Pty Ltd ABN 33 134 022 870 is a member of a national association of independent entities which are all members of BDO BDO Audit Pty Ltd ABN 33 134 022 870 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 Pty Ltd and BDO Australia Ltd are members Australia Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit 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 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. member firms. Liability limited by a scheme approved under Professional Standards Legislation. 70 | MAAS Group Holdings (ASX: MGH) Financial Report 70 | MAAS Group Holdings (ASX: MGH) Financial Report BDO Audit Pty Ltd ABN 33 134 022 870 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 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. 70 | MAAS Group Holdings (ASX: MGH) Financial Report 70 | MAAS Group Holdings (ASX: MGH) Financial Report MAAS GROUP HOLDINGS LIMITED CONTENTS 30 JUNE 2023 Consolidated statement of profit or loss and other comprehensive income ........................................................ 72 Consolidated statement of financial position ..................................................................................................................... 73 Consolidated statement of changes in equity ..................................................................................................................... 75 Consolidated statement of cash flows ..................................................................................................................................... 76 Notes to the consolidated financial statements ................................................................................................................. 77 General information .....................................................................................................................................................................77 Note 1. Significant accounting policies ............................................................................................................................................77 Note 2. Note 3. Critical accounting judgements, estimates and assumptions ...................................................................... 81 Note 4. Operating segments ................................................................................................................................................................... 82 Note 5. Revenue ................................................................................................................................................................................................ 86 Note 6. Other income ......................................................................................................................................................................................91 Note 7. Expenses ................................................................................................................................................................................................92 Note 8. Income tax ...........................................................................................................................................................................................92 Note 9. Cash and cash equivalents ......................................................................................................................................................95 Note 10. Trade and other receivables ...................................................................................................................................................95 Note 11. Contract assets ................................................................................................................................................................................ 96 Note 12. Inventories ........................................................................................................................................................................................... 96 Note 13. Non-current assets classified as held for sale ............................................................................................................97 Note 14. Other assets ....................................................................................................................................................................................... 98 Investments accounted for using the equity method ......................................................................................... 98 Note 15. Note 16. Investment properties .............................................................................................................................................................. 100 Note 17. Property, plant and equipment ...........................................................................................................................................101 Intangibles ........................................................................................................................................................................................ 104 Note 18. Note 19. Trade and other payables ......................................................................................................................................................107 Note 20. Contract liabilities .........................................................................................................................................................................107 Note 21. Borrowings and lease liabilities ......................................................................................................................................... 108 Note 22. Employee benefits .........................................................................................................................................................................111 Note 23. Provisions ............................................................................................................................................................................................. 112 Note 24. Issued capital .................................................................................................................................................................................... 113 Note 25. Other equity .......................................................................................................................................................................................116 Note 26. Reserves ................................................................................................................................................................................................117 Note 27. Retained profits ..............................................................................................................................................................................118 Note 28. Dividends .............................................................................................................................................................................................118 Note 29. Financial instruments ................................................................................................................................................................119 Note 30. Fair value measurement ......................................................................................................................................................... 122 Note 31. Contingent liabilities ...................................................................................................................................................................124 Note 32. Commitments .................................................................................................................................................................................124 Note 33. Remuneration of auditors ......................................................................................................................................................124 Note 34. Key management personnel disclosures ....................................................................................................................124 Note 35. Related party transactions .................................................................................................................................................... 125 Note 36. Parent entity information .......................................................................................................................................................127 Note 37. Business combinations .............................................................................................................................................................128 Note 38. Interests in subsidiaries ............................................................................................................................................................134 Note 39. Events after the reporting period ...................................................................................................................................... 137 Note 40. Cash flow information ...............................................................................................................................................................138 Note 41. Earnings per share .......................................................................................................................................................................139 Note 42. Share-based payments ........................................................................................................................................................... 140 Directors’ declaration ..................................................................................................................................................................... 143 Independent auditor’s report to the members of MAAS Group Holdings Limited ...........................................144 MAAS Group Holdings (ASX: MGH) Financial Report | 71 MAAS Group Holdings Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2023 MAAS GROUP HOLDINGS LIMITED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2023 MAAS Group Holdings Limited Consolidated statement of financial position As at 30 June 2023 MAAS GROUP HOLDINGS LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2023 Note Consolidated 2023 $'000 2022 $'000 Consolidated 2023 $'000 2022 $'000 Note 805,324 517,121 ASSETS 5 15 6 6 12 18 17 7 8 REVENUE Share of (losses)/profits of associates accounted for using the equity method Other income Interest revenue Net fair value gain on investment properties EXPENSES Purchases of raw materials and consumables used and changes in inventories Employee benefits expense Amortisation expense Depreciation expense Transaction costs relating to business combinations Legal, audit, accounting and consultants Motor vehicle and plant expenses Insurance and registration Repairs and maintenance Rent - property and equipment short-term and low-value leases Travel and accommodation Other expenses Finance costs PROFIT BEFORE INCOME TAX EXPENSE Income tax expense PROFIT AFTER INCOME TAX EXPENSE FOR THE YEAR OTHER COMPREHENSIVE INCOME Items that may be reclassified subsequently to profit or loss Foreign currency translation Other comprehensive income for the year, net of tax TOTAL COMPREHENSIVE INCOME FOR THE YEAR Profit for the year is attributable to: Non-controlling interest Owners of MAAS Group Holdings Limited Total comprehensive income for the year is attributable to: Non-controlling interest Owners of MAAS Group Holdings Limited Basic earnings per share Diluted earnings per share (11) 7,438 521 30,494 761 9,689 45 18,843 (389,375) (164,600) (7,515) (35,745) (3,317) (4,911) (41,033) (6,174) (36,897) (5,873) (6,258) (25,876) (21,849) (248,358) (97,679) (4,892) (25,677) (3,122) (3,255) (20,618) (6,751) (24,960) (1,230) (3,139) (12,029) (7,178) 94,343 87,571 (28,440) (26,009) 65,903 61,562 484 484 861 861 66,387 62,423 27 448 65,455 - 61,562 65,903 61,562 448 65,939 - 62,423 66,387 62,423 41 41 Cents 20.66 20.38 Cents 21.42 21.26 Current assets Cash and cash equivalents Trade and other receivables Contract assets Inventories Non-current assets classified as held for sale Other assets Total current assets Non-current assets Inventories Investments accounted for using the equity method Investment properties Property, plant and equipment Intangibles Deferred tax asset Total non-current assets Total Assets LIABILITIES Current liabilities Trade and other payables Contract liabilities Borrowings and lease liabilities Income tax Employee benefits Provisions Other - deferred consideration payable Total current liabilities Non-current liabilities Borrowings and lease liabilities Deferred tax liability Employee benefits Provisions Total non-current liabilities Total Liabilities Net Assets 9 10 11 12 13 14 12 15 16 17 18 8 19 20 21 8 22 23 21 8 22 23 69,369 128,229 33,940 104,442 2,000 11,031 349,011 145,245 8,750 226,761 508,924 178,144 27,008 1,094,832 52,452 84,692 26,785 87,895 - 13,799 265,623 77,599 8,761 124,600 323,225 137,160 11,985 683,330 1,443,843 948,953 119,831 14,543 52,065 8,602 10,005 13,036 - 218,082 493,141 76,641 1,041 25,646 596,469 67,411 19,979 57,908 1,162 7,273 3,434 1,261 158,428 272,231 48,509 499 13,335 334,574 814,551 493,002 629,292 455,951 The above consolidated statement of profit or loss and other comprehensive income The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with should be read in conjunction with the accompanying notes the accompanying notes 26 72 | MAAS Group Holdings (ASX: MGH) Financial Report The above consolidated statement of financial position should be read in conjunction with the accompanying notes The above consolidated statement of financial position should be read in conjunction with the accompanying notes 27 MAAS Group Holdings (ASX: MGH) Financial Report | 73 MAAS Group Holdings Limited Consolidated statement of financial position As at 30 June 2023 MAAS GROUP HOLDINGS LIMITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2023 MAAS Group Holdings Limited Consolidated statement of changes in equity For the year ended 30 June 2023 MAAS GROUP HOLDINGS LIMITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2023 EQUITY Issued capital Other equity Reserves Retained profits Equity attributable to the owners of MAAS Group Holdings Limited Non-controlling interest TOTAL EQUITY Note 24 25 26 27 Consolidated 2023 $'000 2022 $'000 550,778 9,759 (106,117) 172,459 626,879 2,413 432,530 3,354 (107,556) 127,623 455,951 - 629,292 455,951 Refer to note 37, Business combinations, for details of the restatement of the comparative period for finalisation of provisional accounting for a business combination. CONSOLIDATED Balance at 1 July 2021 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 24) Share-based payments (note 42) Dividends paid (note 28) Issued capital $'000 279,635 Other equity $'000 3,354 Reserves $'000 (109,186) Retained profits $'000 80,597 Non- controlling interests $'000 - Total equity $'000 254,400 - - - 152,895 - - - - - - - - - 61,562 861 - 861 61,562 - 769 - - - (14,536) - - - - - - - 61,562 861 62,423 152,895 769 (14,536) 455,951 Balance at 30 June 2022 432,530 3,354 (107,556) 127,623 CONSOLIDATED Balance at 1 July 2022 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Net contributions of equity, net of transaction costs (note 24) Share-based payments (note 42) Non-controlling interests on acquisition of subsidiary (note 37) Deferred consideration (note 25) Deferred consideration - shares issued (note 24 and note 25) Dividends paid (note 28) Issued capital $'000 432,530 Other equity $'000 3,354 Reserves $'000 (107,556) Retained profits $'000 127,623 Non- controlling interests $'000 - Total equity $'000 455,951 - - - 114,894 - - - 3,354 - - - - - - - 9,759 (3,354) - - 65,455 448 65,903 484 - - 484 484 65,455 448 66,387 - 955 - - - - - - - - - - 114,894 955 1,965 - 1,965 9,759 - (20,619) - - - (20,619) Balance at 30 June 2023 550,778 9,759 (106,117) 172,459 2,413 629,292 The above consolidated statement of financial position should be read in conjunction with the accompanying notes The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes The above consolidated statement of financial position should be read in conjunction with the accompanying notes 28 74 | MAAS Group Holdings (ASX: MGH) Financial Report The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes 29 MAAS Group Holdings (ASX: MGH) Financial Report | 75 MAAS Group Holdings Limited Consolidated statement of cash flows For the year ended 30 June 2023 MAAS GROUP HOLDINGS LIMITED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2023 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest and other finance costs paid Income taxes paid Net cash from operating activities before payments for land inventory (inclusive of GST) Payments for land inventory (inclusive of GST) Net cash from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payment for purchase of businesses, net of cash acquired Payments for investment property Payments for property, plant and equipment Payments for intangibles Payments for deposits Proceeds from disposal of investment properties Proceeds from disposal of property, plant and equipment Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares Proceeds from borrowings Repayment of borrowings Payment of lease liabilities Payment for contingent and deferred consideration (long term) Share buy-back Share issue transaction costs Dividends paid Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Note Consolidated 2023 $'000 2022 $'000 845,931 (695,191) 521 (21,109) (16,493) 536,271 (440,487) 45 (6,213) (11,708) 113,659 (111,095) 77,908 (70,457) 2,564 7,451 (145,073) (65,428) (82,158) (111) (464) 2,147 23,486 (96,314) (66,218) (59,104) - (792) 3,000 9,003 (267,601) (210,425) 115,005 287,486 (86,302) (8,264) (1,901) (4,166) (792) (19,112) 94,653 225,966 (62,627) (13,312) (1,323) - (1,509) (4,418) 281,954 237,430 16,917 52,452 34,456 17,996 40 37 24 40 40 40 40 24 24 Cash and cash equivalents at the end of the financial year 9 69,369 52,452 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2023 NOTE 1. GENERAL INFORMATION The financial statements cover MAAS Group Holdings Limited as a consolidated entity consisting of MAAS Group Holdings Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is MAAS Group Holdings Limited's functional and presentation currency. MAAS Group Holdings Limited is an ASX listed company limited by shares, incorporated and domiciled in Australia. A description of the nature of the consolidated entity's operations and its principal activities are included in note 4 - Operating Segments. The financial statements were authorised for issue, in accordance with a resolution of directors, on 17 August 2023. The directors have the power to amend and reissue the financial statements. NOTE 2. SIGNIFICANT ACCOUNTING POLICIES The principal accounting policies adopted in the preparation of the financial statements are set out either in the respective notes or below. These policies have been consistently applied to all the years presented, unless otherwise stated. NEW OR AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS 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. The adoption of these standards and interpretations did not have any significant impact on the financial performance or position of the consolidated entity. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. BASIS OF PREPARATION These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001, as appropriate for for-profit oriented entities. These financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board ('IASB'). HISTORICAL COST CONVENTION The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of financial assets at fair value through profit or loss, and investment properties. Assets held for sale are measured at fair value less costs of disposal, with the exception of investment property held for sale which is measured at fair value. CRITICAL ACCOUNTING ESTIMATES The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3. PARENT ENTITY INFORMATION In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated entity only. Supplementary information about the parent entity is disclosed in note 36. PRINCIPLES OF CONSOLIDATION The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of MAAS Group Holdings Limited ('company' or 'parent entity') as at 30 June 2023 and the results of all subsidiaries for the year then ended. MAAS Group Holdings Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity 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. Subsidiaries are fully consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from the date that control ceases. The above consolidated statement of cash flows should be read in conjunction with the accompanying notes The above consolidated statement of cash flows should be read in conjunction with the accompanying notes 30 76 | MAAS Group Holdings (ASX: MGH) Financial Report 31 MAAS Group Holdings (ASX: MGH) Financial Report | 77 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 2. Significant accounting policies (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the consolidated entity. The acquisition of subsidiaries in a business combination is accounted for using the acquisition method of accounting - refer note 37. A change in ownership interest, without the loss of control, is accounted for as an equity transaction, where the difference between the consideration transferred and the book value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent. Non-controlling interest in the results and equity of subsidiaries are shown separately in the statement of profit or loss and other comprehensive income, statement of financial position and statement of changes in equity of the consolidated entity. Losses incurred by the consolidated entity are attributed to the non-controlling interest in full, even if that results in a deficit balance. Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity. The consolidated entity recognises the fair value of the consideration received and the fair value of any investment retained together with any gain or loss in profit or loss. FOREIGN CURRENCY TRANSLATION Functional and presentation currency The consolidated financial statements are presented in Australian dollars ($), which is MAAS Group Holdings Limited’s functional and presentation currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss and other comprehensive income, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss and other comprehensive income on a net basis within other gains/(losses). Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss and translation differences on non-monetary assets such as equities classified as at fair value through other comprehensive income are recognised in other comprehensive income. Group companies The results and financial position of foreign operations that have a functional currency different from the presentation currency are translated into the presentation currency as follows: ● assets and liabilities are translated at the closing rate at the reporting date ● income and expenses for each statement of profit or loss and other comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions), and ● all resulting exchange differences are recognised in other comprehensive income. On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, the associated exchange differences are reclassified to profit or loss, as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. FINANCIAL INSTRUMENTS Investments and other financial assets Classification The consolidated entity classifies its financial assets in the following measurement categories: ● those to be measured subsequently at fair value (either through other comprehensive income ("OCI"), or through profit or loss), and those to be measured at amortised cost. ● The classification depends on the consolidated entity’s business model for managing the financial assets and the contractual terms of the cash flows. For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments that are not held for trading, this will depend on whether the consolidated entity has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). The consolidated entity reclassifies debt investments when and only when its business model for managing those assets changes. Measurement At initial recognition, the consolidated entity measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Measurement of cash and cash equivalents and trade and other receivables are measured at amortised cost. Cash and cash equivalents Refer to note 9. Debt instruments Subsequent measurement of debt instruments depends on the consolidated entity's business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the consolidated entity classifies its debt instruments: ● Amortised cost: Assets that are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses), together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss and other comprehensive income. ● FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Movements in the carrying amount are taken through OCI, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses) and impairment expenses are presented as separate line item in the statement of profit or loss and other comprehensive income. ● FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises. Equity instruments The consolidated entity subsequently measures all equity investments at fair value. The consolidated entity measures its investments in equity instruments at FVPL. Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of profit or loss and other comprehensive income as applicable. 78 | MAAS Group Holdings (ASX: MGH) Financial Report 32 33 MAAS Group Holdings (ASX: MGH) Financial Report | 79 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 2. Significant accounting policies (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 2. Significant accounting policies (continued) NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Investments Investments includes non-derivative financial assets with fixed or determinable payments and fixed maturities where the consolidated entity has the positive intention and ability to hold the financial asset to maturity. This category excludes financial assets that are held for an undefined period. Investments are carried at amortised cost using the effective interest rate method adjusted for any principal repayments. Gains and losses are recognised in profit or loss when the asset is derecognised or impaired. Impairment The consolidated entity assesses on a forward looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables and contract assets, the consolidated entity applies the simplified approach permitted by AASB 9, which requires expected lifetime losses to be recognised from initial recognition of the trade receivables and contract assets. Where there has not been a significant increase in exposure to credit risk since initial recognition, a 12-month expected credit loss allowance is estimated. This represents a portion of the asset's lifetime expected credit losses that is attributable to a default event that is possible within the next 12 months. Where a financial asset has become credit impaired or where it is determined that credit risk has increased significantly, the loss allowance is based on the asset's lifetime expected credit losses. The amount of expected credit loss recognised is measured on the basis of the probability weighted present value of anticipated cash shortfalls over the life of the instrument discounted at the original effective interest rate. IMPAIRMENT OF NON-FINANCIAL ASSETS At the end of each reporting period, the consolidated entity assesses whether there is any indication that an asset may be impaired. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss. Where it is not possible to estimate the recoverable amount of an individual asset, the consolidated entity estimates the recoverable amount of the cash-generating unit to which the asset belongs. FINANCE COSTS Finance costs are recognised as expenses in the period in which they are incurred, except where they are included in the costs of qualifying assets. The capitalisation rate used to determine the amount of finance costs to be capitalised to qualifying assets is the weighted average interest rate applicable to the entity’s borrowings during the period. Finance costs include interest on bank overdrafts and short-term and long-term borrowings, amortisation of discounts or premiums relating to borrowings, amortisation of ancillary costs incurred in connection with the arrangement of borrowings, finance lease charges and certain exchange differences arising from foreign currency borrowings. GOODS AND SERVICES TAX ('GST') AND OTHER SIMILAR TAXES Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. ROUNDING OF AMOUNTS The company is of a kind referred to in Corporations Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Corporations Instrument to the nearest thousand dollars, or in certain cases, the nearest dollar. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS NOT YET MANDATORY OR EARLY ADOPTED Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2023. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Allowance for expected credit losses The allowance for expected credit losses assessment for trade receivables and contract assets requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience, historical collection rates and forward-looking information that is available. Refer to note 10 for further information. Estimation of useful lives of assets The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortisation charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down. There was no material adjustment required to the estimated useful lives of any assets during the financial year (2022: no adjustment). Goodwill and other indefinite life intangible assets The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment, whether goodwill and other indefinite life intangible assets have suffered any impairment. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates based on the current cost of capital and growth rates of the estimated future cash flows. Refer to note 18 for further information. Investment properties Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position. Investment properties are revalued annually by independent professional valuers or periodically at Directors' valuation. The critical inputs underlying the estimated fair value of investment properties are contained in note 30. Any change in these inputs may impact the fair value of the investment properties. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. Impairment of non-financial assets other than goodwill and other indefinite life intangible assets The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is determined. This involves fair value less costs of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions using information available at the reporting date. 80 | MAAS Group Holdings (ASX: MGH) Financial Report 34 35 MAAS Group Holdings (ASX: MGH) Financial Report | 81 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 3. Critical accounting judgements, estimates and assumptions (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 4. Operating segments (continued) NOTE 3. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS (CONTINUED) NOTE 4. OPERATING SEGMENTS (CONTINUED) Incremental borrowing rate Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease commencement date. Such a rate is based on what the consolidated entity estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment. Business Combinations (i) Deferred consideration and contingent consideration The deferred consideration liability is the difference between the total purchase consideration, usually on an acquisition of a business combination, and the amounts paid or settled up to the reporting date, discounted to net present value. Contingent consideration included in Provisions (note 23), is measured at fair value and has been estimated using present value techniques by discounting the probability-weighted estimated cashflows. The future cashflows are contingent on certain hurdles being met in the future and where contingent consideration includes a variable number of shares, the contingent liability fair value is affected by the fluctuations in the company’s share price (on date of acquisition and each reporting date). The consolidated entity applies provisional accounting for any business combination. Any reassessment of the liability during the earlier of the finalisation of the provisional accounting or 12 months from acquisition date is adjusted for retrospectively as part of the provisional accounting rules in accordance with AASB 3 Business Combinations. Thereafter, at each reporting date, the contingent consideration liability is reassessed against revised estimates and any increase or decrease in the fair value of the liability will result in a corresponding gain or loss to profit or loss. The increase in the deferred consideration liability resulting from the passage of time is recognised as a finance cost. (ii) Fair value of net assets acquired Business combinations are initially accounted for on a provisional basis. The fair value of assets acquired, liabilities and contingent liabilities assumed are initially estimated by the consolidated entity taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and may have an impact on the assets and liabilities, depreciation and amortisation reported. Refer to note 37 for further information. Rehabilitation provisions Restoration provisions are based on estimates of the future cost to rehabilitate currently disturbed areas. Future costs associated with dismantling and removing assets as well as restoring sites to the required condition under permit, requires assumptions of removal and closure dates, application of environmental legislation, available technologies, regulatory requirements, cost inflation and consultant cost estimates. NOTE 4. OPERATING SEGMENTS Identification of reportable operating segments During the current financial year, following significant growth in the commercial real estate operations, management split the Real Estate segment into two segments: residential and commercial. The current reportable segments are: Residential Real Estate; Commercial Real Estate; Civil, Construction and Hire; Manufacturing; and Construction Materials. The 30 June 2022 comparatives have been restated to reflect these changes. The reportable segments of the business are as follows: SEGMENT DESCRIPTION OF SEGMENT 1. Residential Real Estate Develops, invests, builds and sells residential land and housing 2. Commercial Real Estate Commercial Construction: builds and constructs commercial developments Commercial Development and Investment: delivers commercial property and industrial developments, and investing in commercial real estate 3. Civil, Construction and Hire Civil Construction: civil infrastructure construction, roads, dams and mining infrastructure Plant Hire and Sales: above and underground plant hire for major infrastructure and tunnelling projects Electrical Services: electrical infrastructure, communications and specialised services 4. Manufacturing Manufacturing, sales and distribution of underground construction and mining equipment and parts 5. Construction Materials Quarries: supply of quarry materials and concrete to construction projects Crushing and Screening: mobile crushing and screening for quarries, civil works and mining Geotechnical services Asphalt Services Other This includes corporate The operating segments are based on the internal reports that are reviewed and used by the Board of Directors (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments. At the operating segment level the CODM reviews EBITDA (earnings before interest, tax, depreciation and amortisation) and EBIT. The accounting policies adopted for internal reporting to the CODM are consistent with those adopted in the financial statements. The information reported to the CODM is on a monthly basis. Intersegment transactions Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation. Intersegment receivables, payables and loans Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation. Segment assets Segment assets are measured in the same way as in the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. Segment liabilities Segment liabilities are measured in the same way as in the financial statements. These liabilities are allocated based on the operations of the segment. Major customers For the years ended 30 June 2023 and 30 June 2022, there was no customer who contributed more than 10% to the consolidated entity's revenue. 82 | MAAS Group Holdings (ASX: MGH) Financial Report 36 37 MAAS Group Holdings (ASX: MGH) Financial Report | 83 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 4. Operating segments (continued) 30 JUNE 2023 NOTE 4. OPERATING SEGMENTS (CONTINUED) Operating segment information Consolidated 2023 Revenue Sales to external customers Intersegment sales Total sales revenue Other revenue Interest revenue Total revenue Adjusted EBITDA* Depreciation and amortisation Adjusted EBIT* Interest revenue Finance costs Transaction costs relating to business combinations Other non-recurring expenses Profit/(loss) before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Total assets Total assets includes: Investments in associates Acquisition of non-current assets Liabilities Segment liabilities Total liabilities Residential Real Estate Commercial Real Estate $’000 $’000 Civil, Construction and Hire $’000 Manu- facturing $’000 Construction Materials $’000 Eliminations and Adjustments $’000 Other $’000 Total $’000 89,025 - 89,025 642 14 89,681 115,393 15,574 130,967 7,251 11 138,229 334,358 35,342 369,700 2,774 45 372,519 29,933 - 29,933 637 14 30,584 220,609 6,901 227,510 4,543 6 232,059 - - - 159 431 590 - (57,817) (57,817) - - (57,817) 789,318 - 789,318 16,006 521 805,845 12,832 41,713 68,723 4,102 52,742 (15,889) (598) 163,625 (14) (798) (21,542) (639) (19,314) (953) - (43,260) 12,818 14 (770) 40,915 11 (310) 47,181 45 (2,767) 3,463 14 (360) 33,428 6 (2,283) -16,842 431 (15,359) (598) - - - - - - (6) - - - - - (3,311) (1,377) - - 12,062 40,616 44,453 3,117 31,151 (36,458) (598) 212,827 316,848 363,047 57,624 468,433 30,751 (5,687) 120,365 521 (21,849) (3,317) (1,377) 94,343 (28,440) 65,903 1,443,843 1,443,843 8,750 - - - - 34,751 59,637 76,481 1,076 210,486 - - - 8,750 (1,154) 381,277 33,050 58,610 173,644 11,849 159,461 378,141 (204) 814,551 814,551 * Adjusted EBITDA and Adjusted EBIT excludes effects of significant items of income and expenditure which may have an impact on the quality of earnings such as bargain purchases from business combinations, transaction costs relating to business combinations, and other non-recurring expenses. MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 4. Operating segments (continued) NOTE 4. OPERATING SEGMENTS (CONTINUED) Consolidated - 2022 Revenue Sales to external customers Intersegment sales Total sales revenue Other revenue Interest revenue Total revenue Adjusted EBITDA* Depreciation and amortisation Adjusted EBIT* Interest revenue Finance costs Transaction costs relating to business combinations Other non-recurring expenses Profit/(loss) before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Total assets Total assets includes: Investments in associates Acquisition of non- current assets Liabilities Segment liabilities Total liabilities Residential Real Estate $'000 Commercial Real Estate $'000 Civil, Construction and Hire $'000 Manu- facturing $'000 Construction Materials $'000 Eliminations and Adjustments $'000 Other $'000 Total $'000 99,961 - 99,961 177 12 100,150 61,115 6,533 67,648 2,585 1 70,234 221,273 30,560 251,833 440 2 252,275 19,462 317 19,779 (2) 23 19,800 108,082 6,481 114,563 4,028 7 118,598 - - - - - - - (43,891) (43,891) - - (43,891) 509,893 - 509,893 7,228 45 517,166 29,238 24,004 49,782 1,791 27,331 (1,933) (1,409) 128,804 (6) (348) (17,930) (1,432) (11,170) (2) 319 (30,569) 29,232 12 (514) 23,656 1 (15) 31,852 2 (1,786) 359 23 (403) 16,161 7 (1,192) (1,935) - (3,268) (1,090) - - 98,235 45 (7,178) - - - - (8) - - - (253) (2,861) - (409) - - 28,730 23,642 30,060 (21) 14,723 (8,473) (1,090) 151,633 183,037 308,906 47,312 236,283 24,429 (2,647) (3,122) (409) 87,571 (26,009) 61,562 948,953 948,953 8,761 - - - - 63,545 116,134 70,546 115 82,114 - - - 8,761 (777) 331,677 51,251 39,163 126,715 13,061 72,832 187,822 2,158 493,002 493,002 * Adjusted EBITDA and Adjusted EBIT excludes effects of significant items of income and expenditure which may have an impact on the quality of earnings such as bargain purchases from business combinations, transaction costs relating to business combinations, and other non-recurring expenses. Geographical information For the financial year ended 30 June 2023, revenue from external customers attributed to foreign countries amounted to $27.759m (30 June 2022: $9.137m). This related to the sales of underground equipment and toll manufacturing from the Manufacturing segment. Countries where revenue from the sale of underground equipment directly and through international distribution networks included Mongolia, Indonesia, Papua New Guinea and New Zealand. No revenues attributed to an individual foreign country is material. The total non-current assets, other than financial instruments and deferred tax assets, located in Australia amounted to $1,054.412m (2022 - $657.620m) and non-current assets located in foreign countries (Vietnam and Indonesia) amounted to $9.062m (2022 - $9.554m). No non-current assets in an individual foreign country are material. 84 | MAAS Group Holdings (ASX: MGH) Financial Report 38 39 MAAS Group Holdings (ASX: MGH) Financial Report | 85 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 4. Operating segments (continued) 30 JUNE 2023 NOTE 4. OPERATING SEGMENTS (CONTINUED) Accounting policy for operating segments Operating segments are presented using the 'management approach', where the information presented is on the same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the allocation of resources to operating segments and assessing their performance. NOTE 5. REVENUE Revenue from contracts with customers Construction - civil infrastructure (i) Construction - residential (i) Construction - commercial (i) Electrical service (i) Repairs (i) Sale of goods - plant, equipment, parts, building materials, road-base, concrete and asphalt (ii) Land development and resale (ii) Geotechnical services (ii) Other revenue Equipment and machinery hire Rent Other revenue Consolidated 2023 $'000 142,857 52,069 92,230 71,911 1,038 308,584 36,986 23,227 728,902 60,416 5,664 10,342 76,422 2022 $'000 63,384 38,291 49,779 47,989 1,886 171,762 64,685 19,374 457,150 52,743 2,164 5,064 59,971 Revenue 805,324 517,121 Disaggregation of revenue The consolidated entity derives revenue from the transfer of goods and services over time and at a point in time for all major revenue sources indicated above. Revenue from contracts with customers is derived from the sale of goods and services to global customers located in countries including Australia, Vietnam, Indonesia, Mongolia, Papua New Guinea and New Zealand. Management does not review revenue by country. Refer to note 4 for disaggregation of revenue by geographical region. (i) Revenue recognised over time (ii) Revenue recognised at a point in time MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 5. Revenue (continued) NOTE 5. REVENUE(CONTINUED) Included in the following tables are reconciliations of the disaggregated revenue and other income with the consolidated entity's reportable segments (refer note 4). Residential Real Estate Commercial Real Estate $'000 $'000 Civil, Construction and Hire $'000 Manu- facturing $'000 Construction Materials $'000 Eliminations and Adjustments $'000 Other $'000 Total $'000 - 52,069 - - - - - 99,501 - - 170,242 - - 85,969 1,038 - - - - - - - - - - - 31,436 54,562 29,933 198,335 36,956 - 30 - - - - - - 24,446 89,025 130,967 311,811 29,933 222,781 - - 57,889 - 4,729 - - - - - - - - - - (27,385) - (7,271) (14,058) - 142,857 52,069 92,230 71,911 1,038 (5,682) 308,584 - (1,219) 36,986 23,227 (55,615) 728,902 (2,202) 60,416 89,025 130,967 369,700 29,933 227,510 - (57,817) 789,318 Residential Real Estate Commercial Real Estate $'000 $'000 Civil, Construction and Hire $'000 Manu- facturing $'000 Construction Materials $'000 Eliminations and Adjustments $'000 Other $'000 Total $'000 642 7,251 60,663 637 9,272 159 (2,202) 76,422 - - (57,889) - (4,729) - 2,202 (60,416) 642 7,251 2,774 637 4,543 159 - 16,006 2023 Construction - civil infrastructure Construction - residential Construction - commercial Electrical service Repairs Sale of goods - plant, equipment, parts, building materials, road-base, concrete and asphalt Land development and resale Geotechnical services Revenue from contracts with customers Equipment and machinery hire Total sales revenue per segment 2023 Other revenue Equipment and machinery hire disclosed in sales revenue per segment Total other revenue per segment Revenue 89,667 138,218 372,474 30,570 232,053 159 (57,817) 805,324 86 | MAAS Group Holdings (ASX: MGH) Financial Report 40 41 MAAS Group Holdings (ASX: MGH) Financial Report | 87 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 5. Revenue (continued) 30 JUNE 2023 NOTE 5. REVENUE (CONTINUED) 2022 Construction - civil infrastructure Construction - residential Construction - commercial Electrical service Repairs Sale of goods - plant, equipment, parts, building materials, road- base, concrete and asphalt Land development and resale Geotechnical services Revenue from contracts with customers Equipment and machinery hire Total sales revenue per segment 2022 Other revenue Equipment and machinery hire disclosed in sales revenue per segment Total other revenue per segment Residential Real Estate $'000 Commercial Real Estate $'000 Civil, Construction and Hire $'000 Manu- facturing $'000 Construction Materials $'000 Eliminations and adjustments $'000 - - 56,312 - - 91,131 - - 47,989 1,886 - - - - - - - - - - (27,747) (15,202) 8,669 - - Total $'000 63,384 23,089 64,981 47,989 1,886 - 38,291 - - - - 8,321 57,285 19,779 94,427 (8,050) 171,762 61,670 - 3,015 - - - - - - 19,374 - - 64,685 19,374 99,961 67,648 198,291 19,779 113,801 (42,330) 457,150 - - 53,542 - 762 (1,561) 52,743 99,961 67,648 251,833 19,779 114,563 (43,891) 509,893 Residential Real Estate Commercial Real Estate $'000 $'000 Civil, Construction and Hire $'000 Manu- facturing $'000 Construction Materials $'000 Eliminations and adjustments $'000 Total $'000 177 2,585 53,982 (2) 4,790 (1,561) 59,971 - - (53,542) - (762) 1,561 (52,743) 177 2,585 440 (2) 4,028 - 7,228 Revenue 100,138 70,233 252,273 19,777 118,591 (43,891) 517,121 ACCOUNTING POLICY FOR REVENUE RECOGNITION Construction - civil infrastructure The consolidated entity derives revenue from providing services to civil construction projects across Australia. Contracts entered into may be for the construction of one or several separate stages in a project (deliverables). The construction of each individual deliverable is generally taken to be one performance obligation. Where contracts are entered for the building of deliverables, the total transaction price is allocated across each deliverable based on stand-alone selling prices. The transaction price is normally fixed at the start of the project. It is normal practice for contracts to include bonus and penalty elements based on timely construction or other performance criteria known as variable consideration, discussed below. MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 5. Revenue (continued) NOTE 5. REVENUE (CONTINUED) The performance obligation is fulfilled over time and as such revenue is recognised over time. As work is performed on the assets being constructed they are controlled by the customer and have no alternative use to the consolidated entity, with the consolidated entity having a right to payment for performance to date. Generally, contracts identify various inter-linked activities required in the construction process. Revenue is recognised on the measured output of each process based on appraisals that are agreed with the customer on a regular basis. Revenue earned is typically invoiced monthly or in some cases on achievement of milestones or to match major capital outlay. Invoices are paid on normal commercial terms, which may include the customer withholding a retention amount until finalisation of the construction. Certain construction projects entered into receive payment prior to work being performed in which case revenue is deferred on the statement of financial position. Construction - residential & commercial The consolidated entity derives revenue from the construction of residential houses and commercial developments. Contracts entered into for the construction of a residential dwelling or commercial developments are to be taken to be one performance obligation and a stand-alone selling price. The performance obligation is fulfilled over time and as such revenue is recognised over time. As work is performed on the assets being constructed they are controlled by the customer and have no alternative use to the consolidated entity, with the consolidated entity having a right to payment for performance to date. Generally, contracts identify various inter-linked activities required in the construction process. Revenue is recognised on the measured input, being stage of completion of costs incurred against budgeted costs. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Customers are invoiced based on the achievement of milestones (included in the contract). Payment is received following invoice on normal commercial terms. At reporting date, the amounts invoiced are likely to differ from the stage of completion. The difference is recognised as either a contract asset or contract liability. Equipment and machinery hire The consolidated entity generates revenue from the provision of dry hire and wet hire of plant and equipment to many infrastructure projects throughout Australia. Contracts include separate mobilisation and demobilisation fees and a schedule of rates for the dry hire or wet hire. Dry hire revenue is generated from hire of equipment only, no supply of driver, maintenance or fuel, whereas wet hire includes a driver and can include maintenance services and fuel. These form of contracts may vary in scope however all wet hires have one common performance obligation, being the provision of equipment and driver to the customer which includes mobilisation and dismantling, and maintenance services and any ancillary materials that are required to fulfil the obligation. The mobilisation fees, maintenance services and ancillary materials are generally taken to be one performance obligation as the customer does not benefit from these services on its own, are not considered distinct and therefore are grouped with other items in the contract, being the hire of equipment. Equipment and machinery rental periods are typically short-term and is recognised at fixed rates over the period of hire. Customers are in general invoiced on a monthly basis and payment is received following invoice on normal commercial terms. Electrical service revenue The consolidated entity performs electrical services specialising in underground and overhead power line construction and High Voltage and Low Voltage cable jointing for supply authorities and mining professionals. Contracts may include multiple processes required to be performed for each milestone set in the project. Milestones may be performed by the Group or by other contractors employed by the customer and as such are accounted for as separate obligations. The transaction price is allocated to each performance obligation based on the stand-alone selling price. The total transaction price may include a variable pricing element which is accounted for in accordance with the policy on variable consideration. Performance obligations are fulfilled over time with revenue recognised in the accounting period in which the electrical services are rendered based on the amount of the expected transaction price allocated to each performance obligation as the customer continues to control the asset as it is enhanced. 88 | MAAS Group Holdings (ASX: MGH) Financial Report 42 43 MAAS Group Holdings (ASX: MGH) Financial Report | 89 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 5. Revenue (continued) 30 JUNE 2023 NOTE 5. REVENUE (CONTINUED) Customers are typically invoiced on a monthly basis for an amount that is calculated on a schedule of rates that is aligned with the stand alone selling prices for each performance obligation. Payment is received following invoice on normal commercial terms. Service revenue: repairs The consolidated entity performs repairs to machinery in the underground mining, tunnelling, civil construction and rail industries. Contracts include a schedule of rates that is aligned with the stand alone selling prices of the service provided. The performance obligation is fulfilled over time and as such revenue is recognised over time because the customer simultaneously receives and consumes the benefits provided by the entity’s performance. Revenue is recognised on the measured output with reference to the services performed to date. Customers are typically invoiced on a monthly basis for an amount that is calculated on a schedule of rates that is aligned with the stand alone selling prices for each performance obligation. Payment is received following invoice on normal commercial terms. Sales of goods – plant, equipment, parts, building materials, road-base, concrete and asphalt The consolidated entity sells plant, equipment, parts, building materials, road-base, concrete and asphalt. Sale of these goods usually contains only one performance obligation, with revenue recognised at the point in time when the material is transferred to the customer. The revenue is measured at the transaction price agreed under the contract. In most cases, the consideration is due when the goods have been transferred to the customer. Land development and resale The consolidated entity develops and sells residential properties. Property revenue is recognised when control over the property has been transferred to the customer. This is generally at the point when legal title has transferred to the customer as properties are not developed based on the specific needs of individual customers. The revenue is measured at the transaction price agreed under the contract. Geotechnical services The consolidated entity provides a range of Geotechnical consulting services to its clients including onsite earthworks testing, lab materials testing, geotechnical investigations & drilling, and concrete testing. Individual contracts are typically short-term in nature and relate to a discrete project or asset. Revenue is recognised in the accounting period in which the services are rendered, at a point-in-time when the results are provided to the client (the performance obligation). Payment is generally due within 30 days from completion of the services. Consulting services are generally short-term in nature with most contracts completed within 30 days. Manufacturing sales The consolidated entity recognises a contract asset over the period in which the performance obligation is fulfilled and recognises contract liabilities arise where payments are received prior to work being performed. Revenue is recognised at the point in time when the manufactured machine is transferred to the customer. Manufacturing sales are included in Sale of goods - plant, equipment, parts, road-base and aggregates revenue stream. Variable consideration It is common for contracts to include performance bonuses or penalties assessed against the timeliness or cost effectiveness of work completed or other performance related KPIs. Where consideration in respect of a contract is variable, the expected value of revenue is only recognised when the uncertainty associated with the variable consideration is subsequently resolved, known as “constraint” requirements. The consolidated entity assesses the constraint requirements on a periodic basis when estimating the variable consideration to be included in the transaction price. The estimate is based on all available information including historic performance. Where modifications in design or contract requirements are entered into, the transaction price is updated to reflect these. Where the price of the modification has not been confirmed, an estimate is made of the amount of revenue to recognise whilst also considering the constraint requirement. MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 5. Revenue (continued) NOTE 5. REVENUE (CONTINUED) Contract assets and liabilities AASB 15 uses the terms ‘contract asset’ and ‘contract liability’ to describe what is commonly known as ‘accrued revenue’ and ‘deferred revenue’. Contract assets are balances due from customers under contracts as work is performed and therefore a contract asset is recognised over the period in which the performance obligation is fulfilled. This represents the entity’s right to consideration for the services transferred to date. Amounts are generally reclassified to receivables when these have been certified or invoiced to a customer. Contract liabilities arise where payment is received prior to work being performed. Warranties and defect periods Generally construction and services contracts include defect and warranty periods following completion of the project. These obligations are not deemed to be separate performance obligations and therefore estimated and included in the total costs of the contracts. Where required, amounts are recognised accordingly in line with AASB 137 Provisions, Contingent Liabilities and Contingent Assets. Loss making contracts A provision is made for the difference between the expected cost of fulfilling a contract and the expected unearned portion of the transaction price where the forecast costs are greater than the forecast revenue. Dividends and interest Dividend revenue is recognised when the right to receive a dividend has been established, and interest revenue is recognised using the effective interest method. Rent Rent revenue from investment properties is recognised on a straight-line basis over the lease term. Lease incentives granted are recognised as part of the rental revenue. Contingent rentals are recognised as income in the period when earned. NOTE 6. OTHER INCOME Net gain on disposal of property, plant and equipment Net gain on disposal of investment property Insurance recoveries Net reimbursement of expenses Fair value gain on remeasurement of contingent consideration (note 23) Other income Net fair value gain on investment properties Fair value gain - commercial real estate assets Fair value gain - residential real estate build-to-rent assets Fair value gain attributable to third-parties Net fair value gain Consolidated 2023 $'000 4,131 1,742 333 534 698 2022 $'000 2,649 - 305 189 6,546 7,438 9,689 Consolidated 2023 $'000 27,678 4,168 31,846 2022 $'000 14,515 4,328 18,843 (1,352) - 30,494 18,843 90 | MAAS Group Holdings (ASX: MGH) Financial Report 44 45 MAAS Group Holdings (ASX: MGH) Financial Report | 91 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 8. Income tax (continued) NOTE 8. INCOME TAX (CONTINUED) NOTE 7. EXPENSES Profit before income tax includes the following specific expenses: Finance costs Interest and finance charges paid/payable on borrowings Interest and finance charges paid/payable on lease liabilities and chattel mortgages Finance costs expensed Superannuation expense Defined contribution superannuation expense Share-based payments expense Share-based payments expense - employee benefits NOTE 8. INCOME TAX Income tax expense Current tax Deferred tax - origination and reversal of temporary differences Adjustment recognised for prior periods Difference in overseas tax rates Aggregate income tax expense Deferred tax included in income tax expense comprises: Increase in deferred tax assets Increase in deferred tax liabilities Deferred tax - origination and reversal of temporary differences Numerical reconciliation of income tax expense and tax at the statutory rate Profit before income tax expense Tax at the statutory tax rate of 30% Tax effect amounts which are not deductible/(taxable) in calculating taxable income: Non-assessable income Other non-deductible expenses Adjustment recognised for prior periods Difference in overseas tax rates Income tax expense Amounts credited directly to equity Aggregate current and deferred tax arising in the period and not recognised in net profit or loss or other comprehensive income but directly debited or credited to equity Consolidated 2023 $'000 2022 $'000 17,007 4,842 4,248 2,930 21,849 7,178 11,524 7,180 955 769 Consolidated 2023 $'000 20,715 7,032 190 503 2022 $'000 13,085 12,924 - - 28,440 26,009 (8,201) 15,233 (3,548) 16,472 7,032 12,924 94,343 87,571 28,303 26,271 (1,083) 527 27,747 190 503 (690) 253 25,834 - 175 28,440 26,009 Consolidated 2023 $'000 2022 $'000 (2,452) (303) Deferred tax asset Deferred tax asset comprises temporary differences attributable to: Amounts recognised in profit or loss: Carried forward losses acquired through business combinations Property, plant and equipment Employee benefits Provisions Customer contracts/relationships Transaction/issuance costs Other Deferred tax asset Movements: Opening balance Credited to profit or loss Credited to equity Additions through business combinations (note 37) Closing balance Deferred tax liability Deferred tax liability comprises temporary differences attributable to: Amounts recognised in profit or loss: Property, plant and equipment Deferred/contingent consideration Customer contracts/relationships Other Deferred tax liability Movements: Opening balance Charged to profit or loss Charged to equity Additions through business combinations (note 37) Closing balance Provision for income tax Provision for income tax Consolidated 2023 $'000 2022 $'000 3,251 12,556 3,340 1,782 536 918 4,625 2,460 3,685 2,316 1,949 - 967 608 27,008 11,985 11,985 8,201 6,822 - 4,361 3,548 2,904 1,172 27,008 11,985 Consolidated 2023 $'000 2022 $'000 68,111 - 4,086 4,444 43,402 1,889 2,209 1,009 76,641 48,509 48,509 15,233 4,370 8,529 25,338 16,472 2,601 4,098 76,641 48,509 Consolidated 2023 $'000 2022 $'000 8,602 1,162 92 | MAAS Group Holdings (ASX: MGH) Financial Report 46 47 MAAS Group Holdings (ASX: MGH) Financial Report | 93 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2023 NOTE 8. INCOME TAX (CONTINUED) Accounting policy for income tax The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the applicable income tax rate for each jurisdiction, adjusted by the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied when the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted, except for: ● when the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or ● when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 NOTE 9. CASH AND CASH EQUIVALENTS Current assets Cash on hand Cash at bank Consolidated 2023 $'000 4 69,365 2022 $'000 20 52,432 69,369 52,452 Accounting policy for cash and cash equivalents Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. 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. NOTE 10. TRADE AND OTHER RECEIVABLES The carrying amount of recognised and unrecognised deferred tax assets are reviewed at each reporting date. Deferred tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent that it is probable that there are future taxable profits available to recover the asset. Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same taxable authority on either the same taxable entity or different taxable entities which intend to settle simultaneously. MAAS Group Holdings Limited (the 'head entity') and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. The head entity and each subsidiary in the tax consolidated group continue to account for their own current and deferred tax amounts. The tax consolidated group has applied the 'separate taxpayer within group' approach in determining the appropriate amount of taxes to allocate to members of the tax consolidated group. In addition to its own current and deferred tax amounts, the head entity also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from each subsidiary in the tax consolidated group. The company, in conjunction with other members of the tax-consolidated group, has entered into a tax funding arrangement which sets out the funding obligations of members of the tax-consolidated group in respect of tax amounts. The tax funding arrangements require payments to/from the head entity equal to the current tax liability (asset) assumed by the head entity and any tax-loss deferred tax asset assumed by the head entity, resulting in the company recognising an inter-entity payable (receivable) equal in amount to the tax liability (asset) assumed. The inter-entity payable (receivable) is at call. Contributions to fund the current tax liabilities are payable as per the tax funding arrangement and reflect the timing of the head entity’s obligation to make payments for tax liabilities to the relevant tax authorities. The company, in conjunction with other members of the tax-consolidated group, has also entered into a tax sharing agreement. The tax sharing agreement provides for the determination of the allocation of income tax liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote. Current assets Financial assets at amortised cost: Trade receivables Less: Allowance for expected credit losses Other receivables GST receivable Movements in the allowance for expected credit losses are as follows: Opening balance Additional provisions recognised Receivables written off during the year as uncollectable Closing balance Accounting policy for trade and other receivables Consolidated 2023 $'000 2022 $'000 119,429 (887) 118,542 9,687 - 76,827 - 76,827 7,109 756 128,229 84,692 Consolidated 2023 $'000 - 2,693 (1,806) 2022 $'000 - 301 (301) 887 - Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade receivables are recognised initially at the amount of consideration that is unconditional unless they contain significant financing components, when they are recognised at fair value. The consolidated entity holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. (a) Fair values of trade and other receivables Due to the short term nature of the current receivables, the carrying amount is considered to be the same as their fair value. 94 | MAAS Group Holdings (ASX: MGH) Financial Report 48 49 MAAS Group Holdings (ASX: MGH) Financial Report | 95 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 10. Trade and other receivables (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 12. Inventories (continued) NOTE 10. TRADE AND OTHER RECEIVABLES (CONTINUED) NOTE 12. INVENTORIES (CONTINUED) (b) Other receivables at amortised cost These amounts generally arise from transactions outside the usual operating activities of the consolidated entity. Interest is charged at commercial rates where the repayment exceeds 12 months. Collateral is not normally obtained. The non- current receivables are due and payable within 2 years from the end of the reporting period. - Raw materials, finished goods and parts Raw materials, finished goods and parts are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure. Costs of purchased inventory are determined after deducting rebates and discounts received or receivable. (c) Impairment and risk exposure Note 29 sets out information of financial assets and exposure to credit risk. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Refer note 29 for the consolidated entity's exposure to foreign currency risk. NOTE 13. NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE NOTE 11. CONTRACT ASSETS Current assets Contract assets Consolidated 2023 $'000 2022 $'000 33,940 26,785 The increase in contract assets of $7.155m was driven by both the Civil, Construction and Hire and Commercial Real Estate Segments. In the Civil, Construction and Hire segment, an increase in both the number and value of projects due to organic growth and the acquisition of Schwarz Excavations resulted in the higher contract asset movement. In the Commercial Real Estate segment, an increase in both the number and value of projects due to growth resulted in the higher movement. Accounting policy for contract assets Contract assets are recognised when the consolidated entity has transferred goods or services to the customer but where the consolidated entity is yet to establish an unconditional right to consideration. Contract assets are treated as financial assets for impairment purposes. NOTE 12. INVENTORIES Current assets Raw materials - at cost Finished goods - at cost Land held for development and resale Machines held for resale - at cost Non-current assets Land held for development and resale Total inventories Amounts recognised in profit or loss Inventories recognised as an expense during the year Consolidated 2023 $'000 9,525 33,155 21,646 40,116 2022 $'000 6,868 27,560 23,460 30,007 104,442 87,895 145,245 77,599 249,687 165,494 Consolidated 2023 $'000 318,991 2022 $'000 262,008 Accounting policy for inventories Inventories are carried at the lower of cost and net realisable value and comprise of the following: - Land held for development and resale Cost includes the costs of acquisition, development and holding costs such as rates, taxes and finance costs. Land held for development and resale not expected to be realised within the next 12 months has been classified as non-current. Current assets Investment properties - at fair value Reconciliation Reconciliation of the fair values at the beginning and end of the current and previous financial year are set out below: Opening balance Transfers from/(to) investment properties (note 16) Additions Properties sold Closing balance Consolidated 2023 $'000 2,000 2022 $'000 - - 2,000 - - 4,280 (1,280) 12 (3,012) 2,000 - The investment properties held for sale at 30 June 2023 consisted of a commercial property with a fair value of $2.000m, situated in Newcastle NSW. The asset is presented within total assets of the Commercial Real Estate segment in note 4. Accounting policy for non-current assets or disposal groups classified as held for sale Non-current assets and assets of disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continued use. They are measured at the lower of their carrying amount and fair value less costs of disposal. Investments properties held for sale are measured at fair value. For non- current assets or assets of disposal groups to be classified as held for sale, they must be available for immediate sale in their present condition and their sale must be highly probable. An impairment loss is recognised for any initial or subsequent write down of the non-current assets and assets of disposal groups to fair value less costs of disposal. A gain is recognised for any subsequent increases in fair value less costs of disposal of a non-current assets and assets of disposal groups, but not in excess of any cumulative impairment loss previously recognised. Non-current assets are not depreciated or amortised while they are classified as held for sale. Interest and other expenses attributable to the liabilities of assets held for sale continue to be recognised. Non-current assets classified as held for sale and the assets of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current assets. The liabilities of disposal groups classified as held for sale are presented separately on the face of the statement of financial position, in current liabilities. 96 | MAAS Group Holdings (ASX: MGH) Financial Report 50 51 MAAS Group Holdings (ASX: MGH) Financial Report | 97 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 15. Investments accounted for using the equity method (continued) NOTE 14. OTHER ASSETS Current assets Prepaid expenses Deposits Other current assets NOTE 15. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Non-current assets Investment in associate Reconciliation Reconciliation of the carrying amounts at the beginning and end of the current and previous financial year are set out below: Opening carrying amount Profit/(loss) after income tax Closing carrying amount Interests in associates Consolidated 2023 $'000 5,856 3,925 1,250 2022 $'000 4,826 7,100 1,873 11,031 13,799 Consolidated 2023 $'000 2022 $'000 8,750 8,761 8,761 (11) 8,000 761 8,750 8,761 In May 2021, the company acquired a 45.71% interest in the 1990 Elizabeth Property Unit Trust (“1990 Trust”) which holds a development site in the Western Sydney Airport precinct at Badgery’s Creek. The company is guaranteed two seats on the board of the trustee of the 1990 Trust and participates in significant and financial operating decisions. Although the company does not have control of the Trust, it does have significant influence. Interests in associates are accounted for using the equity method of accounting. Information relating to associates that are material to the consolidated entity are set out below: Name 1990 Elizabeth Property Unit Trust Principal place of business / Country of incorporation Australia Ownership interest 2023 % 45.71% 2022 % 45.71% NOTE 14. OTHER ASSETS (CONTINUED) Summarised financial information The information disclosed reflects the amounts presented in the financial statements of the relevant associates and not MGH’s share of those amounts. They have been amended to reflect adjustments made by the company when using the equity method, including fair value adjustments and modifications for differences in accounting policy. Summarised statement of financial position Current assets Non-current assets Total assets Current liabilities Total liabilities Net assets Summarised statement of profit or loss and other comprehensive income Revenue Net fair value gain/(loss) on investment property Expenses Profit/(loss) before income tax Other comprehensive income Total comprehensive income Reconciliation of the consolidated entity's carrying amount Consolidated entity's share of net assets (45.71%) Closing carrying amount Accounting policy for associates 2023 $'000 631 19,000 2022 $'000 360 19,026 19,631 19,386 489 489 220 220 19,142 19,166 793 (385) (431) 128 1,874 (337) (23) 1,665 - - (23) 1,665 8,750 8,761 8,750 8,761 Associates are entities over which the consolidated entity has significant influence but not control or joint control. Investments in associates are accounted for using the equity method. Under the equity method, the share of the profits or losses of the associate is recognised in profit or loss and the share of the movements in equity is recognised in other comprehensive income. Investments in associates are carried in the statement of financial position at cost plus post- acquisition changes in the consolidated entity's share of net assets of the associate. Goodwill relating to the associate is included in the carrying amount of the investment and is neither amortised nor individually tested for impairment. Dividends received or receivable from associates reduce the carrying amount of the investment. When the consolidated entity's share of losses in an associate equals or exceeds its interest in the associate, including any unsecured long-term receivables, the consolidated entity does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. The consolidated entity discontinues the use of the equity method upon the loss of significant influence over the associate and recognises any retained investment at its fair value. Any difference between the associate's carrying amount, fair value of the retained investment and proceeds from disposal is recognised in profit or loss. 98 | MAAS Group Holdings (ASX: MGH) Financial Report 52 53 MAAS Group Holdings (ASX: MGH) Financial Report | 99 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 16. Investment properties (continued) NOTE 16. INVESTMENT PROPERTIES (CONTINUED) NOTE 16. INVESTMENT PROPERTIES Minimum lease payments receivable on leases of investment properties are as follows: Non-current assets Investment properties - at fair value Investment properties under construction - at cost Reconciliation Reconciliation of the carrying amounts at the beginning and end of the current and previous financial year are set out below: Balance at 1 July Additions Additions through business combinations (note 37) Disposals Transfer (to)/from non-current assets held for sale (note 13) Fair value gain - commercial real estate assets Fair value gain - residential real estate build-to-rent assets Transfer from/(to) inventory Transfer from property, plant and equipment (note 17) Balance at 30 June Amounts recognised in profit or loss for investment properties Rental income Direct operating expenses from property that generated rental income Direct operating expenses from property that did not generate rental income Significant estimate - Valuations of investment properties Refer to note 30 for further information on fair value measurement. Leasing arrangements Consolidated 2023 $'000 2022 $'000 226,348 413 69,849 54,751 226,761 124,600 124,600 65,428 - (405) (2,000) 27,678 4,168 6,576 716 25,843 72,856 16,171 - 1,280 14,515 4,328 (10,393) - 226,761 124,600 Consolidated 2023 $'000 5,554 (1,477) (884) 2022 $'000 2,350 (385) (282) The investment properties are leased to tenants under operating leases with rentals payable monthly. Lease payments for some contracts include CPI increases. Where considered necessary to reduce credit risk, the consolidated entity may obtain bank guarantees for the term of the lease. Although the consolidated entity is exposed to changes in the residual value at the end of the current leases, the consolidated entity typically enters into new operating leases and therefore will not immediately realise any reduction in residual value at the end of these leases. Expectations about the future residual values are reflected in the fair value of the properties. Within 1 year Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years Between 4 and 5 years Later than 5 years Consolidated 2023 $'000 6,601 5,910 5,392 5,126 4,877 3,055 2022 $'000 2,728 2,559 2,486 2,171 1,866 2,617 30,961 14,427 Accounting policy for investment properties Investment properties principally comprise of freehold land and buildings held for long-term rental and capital appreciation that are not occupied by the consolidated entity. Investment properties are initially recognised at cost, including transaction costs, and are subsequently remeasured annually at fair value. Movements in fair value are recognised directly to profit or loss. Investment properties are derecognised when disposed of or when there is no future economic benefit expected. Transfers to and from investment properties to inventories are determined by a change in use evidenced by internal and external factors. During the period, the group transferred Build-to-Rent land to investment property. The fair value on the date of change of use from investment properties to inventories and vice-versa is deemed the cost for the subsequent accounting. Investment properties also include properties under construction for future use as investment properties. These are carried at fair value, or at cost where fair value cannot be reliably determined and the construction is incomplete. NOTE 17. PROPERTY, PLANT AND EQUIPMENT Non-current assets Quarry land - at cost Less: Accumulated amortisation Land and buildings - at cost Less: Accumulated depreciation Hire machinery and equipment - at cost Less: Accumulated depreciation Plant and equipment - at cost Less: Accumulated depreciation Motor vehicles - at cost Less: Accumulated depreciation Assets under construction - at cost Consolidated 2023 $'000 89,443 (2,153) 87,290 93,220 (6,809) 86,411 130,362 (28,448) 101,914 198,585 (39,440) 159,145 71,271 (10,695) 60,576 2022 $'000 43,582 (901) 42,681 39,329 (4,404) 34,925 123,307 (26,000) 97,307 140,817 (30,170) 110,647 24,872 (8,052) 16,820 13,588 20,845 508,924 323,225 100 | MAAS Group Holdings (ASX: MGH) Financial Report 54 55 MAAS Group Holdings (ASX: MGH) Financial Report | 101 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 17. Property, plant and equipment (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 17. Property, plant and equipment (continued) NOTE 17. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) NOTE 17. PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Reconciliations Accounting policy for property, plant and equipment Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions Additions through business combinations (note 37) Disposals Transfers from/(to) inventory Exchange differences Transfers in/(out) Depreciation expense Balance at 30 June 2022 Additions Additions through business combinations (note 37) Disposals Transfers from/(to) inventory Exchange differences Transfer to investment property (note 16) Transfers in/(out) Depreciation expense Quarry land $'000 28,238 66 14,840 - - - - (463) Land and buildings $'000 30,531 1,666 Hire equipment and machinery $'000 93,979 12,378 5,536 - 68 427 (887) (2,416) - (3,041) 41 - 3,827 (9,877) Plant and equipment Motor vehicles Assets under construction Total $'000 58,698 6,110 39,538 (2,333) 9 70 18,875 (10,320) $'000 14,261 4,395 1,234 (837) - - 91 (2,324) $'000 7,290 36,061 $'000 232,997 60,676 - (143) 61,148 (6,354) (180) - (21,906) (277) (62) 497 - (25,677) 42,681 603 34,925 5,116 97,307 23,627 110,647 10,017 16,820 4,185 20,845 44,315 323,225 87,863 48,293 - 32,724 (285) - - - (3,000) (1,287) - 126 (716) 19,551 (5,030) - (12,155) (2,724) - - 4,874 (9,015) 53,636 (4,715) 19,663 (1,377) 2,758 (823) 157,074 (19,355) (7) (3) 11 - (825) - (3,545) 123 - 3,634 (14,064) - 27,623 (6,349) - (52,682) - (716) - (35,745) Balance at 30 June 2023 87,290 86,411 101,914 159,145 60,576 13,588 508,924 All property, plant and equipment except for land and assets under construction, are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of property, plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised through profit or loss. A formal assessment of recoverable amount is made when impairment indicators are present. The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. The cost of fixed assets constructed within the consolidated entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads. 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. All other repairs and maintenance are recognised as expenses in profit or loss during the financial period in which they are incurred. Depreciation: The depreciable amount of all fixed assets including land improvements, quarry land & buildings, but excluding freehold land, is depreciated on either the diminishing value method or units of production method over the asset’s useful life to the consolidated entity commencing from the time the asset is held ready for use. Estimated useful lives for each class of depreciable asset are as follows: Quarry land Buildings Leasehold improvements Hire equipment and machinery Plant and equipment Motor vehicles 6-65 years 2-10 years 20-25 years 3-10 years 3-10 years 4-8 years Quarry land is amortised based on the rate of annual depletion of reserves over the estimated reserves. The remaining useful life of each asset is reassessed at regular intervals. Where there is a change during the period to the useful life of the mineral reserve, amortisation rates are adjusted prospectively from the beginning of the reporting period. Right-of-use assets included in property, plant & equipment is summarised below: The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. Right-of-use assets: Balance at 1 July 2021 Additions Additions through business combinations Disposals Depreciation expense Balance at 30 June 2022 Additions Additions through business combinations Disposals Depreciation expense Land and Buildings $'000 12,065 1,572 2,132 - (2,026) Hire equipment and machinery $'000 39,991 - - (1,417) (3,720) 13,743 2,492 19,386 (109) (3,515) 34,854 - - (2,219) (3,333) Plant and equipment Motor vehicles $'000 5,288 - - - (273) 5,015 - - (432) (194) $'000 5,128 - - (301) (538) 4,289 - - (553) (428) Total $'000 62,472 1,572 2,132 (1,718) (6,557) 57,901 2,492 19,386 (3,313) (7,470) Balance at 30 June 2023 31,997 29,302 4,389 3,308 68,996 Buildings, plant and equipment, and motor vehicles under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter. If the consolidated entity is reasonably certain to exercise a purchase option, the right of use asset is depreciated over the underlying assets useful life. 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 gains and losses are recognised in profit or loss in the period in which they arise. Accounting policy for right-of-use assets A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. 102 | MAAS Group Holdings (ASX: MGH) Financial Report 56 57 MAAS Group Holdings (ASX: MGH) Financial Report | 103 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 17. Property, plant and equipment (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 18. Intangibles (continued) NOTE 17. PROPERTY, PLANT AND QUIPMENT (CONTINUED) NOTE 18. INTANGIBLES (CONTINUED) Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The consolidated entity has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of 12 months or less (without extension option) and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. Impairment testing for goodwill and intangibles with indefinite lives: The calculations use cash flow projections based on cash flow forecasts covering a five-year period. The cash flows are based on past results adjusted for current market conditions and known contracts. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. These growth rates are consistent with forecasts included in industry reports specific to the industry in which each CGU operates. Goodwill and indefinite-lived intangible assets are monitored by management at the following level: NOTE 18. INTANGIBLES Non-current assets Goodwill - at cost Brand names - at cost Customer contracts/relationships - at cost Less: Accumulated amortisation Extraction rights - at cost Less: Accumulated amortisation Other intangibles - at cost Less: Accumulated amortisation Consolidated 2023 $'000 2022 $'000 107,271 86,002 45,092 30,572 22,450 (9,431) 13,019 16,898 (5,695) 11,203 1,787 (228) 1,559 14,230 (5,138) 9,092 13,786 (2,516) 11,270 224 - 224 178,144 137,160 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Additions through business combinations Amortisation expense Balance at 30 June 2022 Additions Additions through business combinations (note 37) Transfers in Amortisation expense Goodwill Brand names $'000 9,192 $'000 34,682 Customer contracts/ relationships $'000 6,597 Extraction rights $'000 3,590 Other intangibles $'000 224 51,320 - 86,002 - 21,269 - - 21,380 - 30,572 - 14,520 - - 5,760 (3,265) 9,092 - 8,220 - (4,293) 9,307 (1,627) 11,270 111 3,000 - (3,178) - - 224 - - 1,379 (44) Total $'000 54,285 87,767 (4,892) 137,160 111 47,009 1,379 (7,515) Balance at 30 June 2023 107,271 45,092 13,019 11,203 1,559 178,144 2023 Construction Materials Electrical Homes Constructions Commercial Constructions Commercial Developments Manufacturing Civil & Plant Hire Building Materials Asphalt Services Indefinite- lived intangible assets $'000 7,560 8,040 2,230 6,500 - 2,492 1,600 2,150 14,520 Goodwill $'000 3,261 15,322 7,010 25,243 1,954 8,399 25,336 1,280 19,466 Total $'000 10,821 23,362 9,240 31,743 1,954 10,891 26,936 3,430 33,986 Total goodwill and indefinite lived intangible assets 107,271 45,092 152,363 2022 Construction Materials Electrical Homes Constructions Commercial Constructions Commercial Developments Manufacturing Civil & Plant Hire Building Materials Indefinite- lived intangible assets $'000 7,560 8,040 2,230 6,500 - 2,492 1,600 2,150 Goodwill $'000 3,261 15,322 7,010 25,243 1,954 8,399 23,533 1,280 Total $'000 10,821 23,362 9,240 31,743 1,954 10,891 25,133 3,430 Total goodwill and indefinite lived intangible assets 86,002 30,572 116,574 Given the consolidated entity is structured in a vertically integrated manner, recent acquisitions of the consolidated entity are used to generate cashflows that are not independent from other assets of the consolidated entity. Accordingly, the Schwarz acquisition is reported within the Civil, Construction and Hire operating segment and both the Dandy and Clermont acquisitions are reported within the Construction Materials operating segment. As a result of the Austek acquisition, one new CGU exists in the Construction Materials segment, this is the Asphalt Services CGU. The Electrical, Homes Constructions, Commercial Constructions, Commercial Developments, Manufacturing and Building Materials remain unchanged from the comparative period and represent their respective operating segments. 104 | MAAS Group Holdings (ASX: MGH) Financial Report 58 59 MAAS Group Holdings (ASX: MGH) Financial Report | 105 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 18. Intangibles (continued) 30 JUNE 2023 NOTE 18. INTANGIBLES (CONTINUED) MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 18. Intangibles (continued) The following table sets out the key assumptions for the value in use: Goodwill Construction Materials Electrical Homes Constructions Commercial Constructions Commercial Developments Manufacturing Civil & Plant Hire Building Materials Asphalt Services Terminal growth rate (a) Pre-tax discount rate (b) 2023 % 3% 3% 3% 3% 3% 3% 3% 3% 3% 2022 % 3% 3% 3% 3% 3% 3% 3% 3% - 2023 % 15.0% 15.0% 16.1% 15.7% 15.7% 18.0% 14.6% 15.7% 15.0% 2022 % 11.6% 10.7% 11.5% 11.2% 11.2% 15.5% 10.7% 11.2% - (a) This is the weighted average growth rate used to extrapolate cash flows beyond the budget period. The rates are consistent with forecasts included in industry reports. (b) Reflects specific risks relating to the relevant segments and the countries in which they operate. In performing the value-in-use calculations for each CGU, the consolidated entity has applied post-tax discount rates to discount the forecast future attributable post-tax cash flows. The equivalent pre-tax rates are disclosed in the table. The annual sales growth rate used within value-in-use assessments vary and are based on a mixture of past performance, management’s expectations of market development and internal growth benchmarks. There is a risk that any erosion of future economic conditions, caused by persistent inflation or rising interest rates, could impact the consolidated entity’s products and services offered, customers, supply chain, staffing and geographical regions in which the group operates. Judgment has been used in considering the impact of economic erosion on the assumptions used in the value in use calculations noting that assumptions have been determined with reference to current and historical performance and current independent expert economists' forecasts. As the value in use recoverable amount across all CGUs significantly exceed their respective carrying value, the Group expects that any reasonably possible adverse change in the value in use model assumptions in isolation or combination would not result in an impairment. Sensitivity Management have made judgements and estimates in respect of impairment testing. Should judgements and estimates not occur, the carrying value of goodwill may vary. Any reasonable change in the key assumptions on which the estimates and/or discount rate are based would not cause the carrying amount of the CGU to exceed the recoverable amount. Accounting policy for intangible assets Intangible assets that are acquired are initially recognised at cost. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life intangible assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangible assets are reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by changing the amortisation method or period. Brand names Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, goodwill is tested annually for impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not subsequently reversed. Goodwill acquired is allocated to each of the Cash Generating Units (“CGU”) expected to benefit from the combination’s synergies. Impairment is determined by assessing the recoverable amount of the CGU to which the goodwill relates. The recoverable amount of a CGU is determined based on value-in-use calculations which require the use of assumptions. NOTE 19. TRADE AND OTHER PAYABLES Current liabilities Financial liabilities at amortised cost: Trade payables GST payable Other payables Consolidated 2023 $'000 2022 $'000 79,593 5,084 35,154 48,616 - 18,795 119,831 67,411 Refer to note 29 for further information on financial instruments. Accounting policy for trade and other payables Trade payables are amounts due to suppliers for goods purchased or services provided in the ordinary course of business. Trade payables are generally due for settlement within 30 days and therefore are all classified as current. Other payables and accrued expenses generally arise from normal transactions within the usual operating activities of the consolidated entity and comprise items such as employee taxes, employee on costs and other recurring items. A liability is recorded for goods and services received prior to balance date, whether invoiced to the consolidated entity or not. Trade payables are normally settled within 45 days. The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short term nature. NOTE 20. CONTRACT LIABILITIES Current liabilities Contract liabilities Consolidated 2023 $'000 2022 $'000 14,543 19,979 14,543 19,979 Under the terms of contract the consolidated entity is sometimes required to provide performance guarantees (refer note 31). Brand names acquired in a business combination that qualify for separate recognition are recognised as intangible assets at their fair values. Brand names are not amortised on the basis that they have an indefinite life and are reviewed annually. The decrease in contract liabilities was driven by the delivery of a large number of machines by the Manufacturing segment for which deposits were received prior to June 2022 ($3.354m). Customer contracts/relationships Customer contracts acquired in a business combination are amortised on a straight-line basis over the period of their expected benefit, being their finite life of 3-5 years. Extraction rights Extraction rights are amortised over the life of the lease hold inclusive of any available option periods. 106 | MAAS Group Holdings (ASX: MGH) Financial Report 60 61 MAAS Group Holdings (ASX: MGH) Financial Report | 107 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 20. Contract liabilities (continued) 30 JUNE 2023 NOTE 20. CONTRACT LIABILITIES (CONTINUED) Unsatisfied performance obligations The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $14.543m as at 30 June 2023 ($19.979m as at 30 June 2022) and is expected to be recognised as revenue in future periods as follows: Within 6 months Accounting policy for contract liabilities Consolidated 2023 $'000 14,543 2022 $'000 19,979 Contract liabilities represent the consolidated entity's obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the customer. NOTE 21. BORROWINGS AND LEASE LIABILITIES Current liabilities Secured: Bank loans (a) Multi-option facility (a) Vendor financing (b) Chattel mortgages (a) Lease liabilities - plant & equipment and motor vehicles (a) (c) Unsecured: Loans - other Lease liabilities - land and buildings (c) Non-current liabilities Secured: Bank loans (a) Bank loan - Projects (a) Vendor financing (b) Chattel mortgages (a) Lease liabilities - plant & equipment and motor vehicles (a) (c) Unsecured: Lease liabilities - land and buildings (c) Total borrowings and lease liabilities Refer to note 29 for further information on financial instruments. Consolidated 2023 $'000 2022 $'000 3,653 - 670 27,946 16,750 3,984 10,000 17,411 16,522 7,258 - 3,046 472 2,261 52,065 57,908 344,048 8,000 7,221 101,183 2,438 175,235 9,913 7,561 50,171 16,312 30,251 13,039 493,141 272,231 545,206 330,139 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 21. Borrowings and lease liabilities (continued) NOTE 21. BORROWINGS AND LEASE LIABILITIES (CONTINUED) (a) Bank loans and multi-option facility In November 2022, the company received approval for the increase of its banking facility limits from $500.000m to $600.000m, consisting of a $85.000m increase to the term loan and a $15.000m increase to the hire purchase facility. The increased facility will provide additional liquidity to the company under a common terms deed arrangement. $165.000m of the $600.000m facility relates to a hire purchase facility whilst the balance of the facilities comprised a term loan, and a multi-option cash advance and bank guarantee facility. The multi-option facility is an interchangeable bank facility which allows the company to change between cash advances and contract performance guarantees. The balance of the contract performance guarantees as at 30 June 2023 amounted to $38.545m (refer note 31). The term loan has a 3-year term and is non-amortising. The multi-option facility also has a 3-year term with maturity in FY25 and an annual requirement to fully repay the cash advance component for a period of 7 consecutive days. The repaid amount is then able to be redrawn after the 7-day period. The facilities are secured by a combination of General Security Agreements and mortgages over Australian group assets and property interests. Interest on the bank loans is calculated using the Bank Bill Swap (BBSY) Bid rate plus a relevant margin. Total transaction costs were $2.308m and unamortised transaction costs of $0.650m have been offset against the bank loans at 30 June 2023. Included in bank loans is a 60 billion VND facility in Vietnam which is secured by land use rights and related assets. The facility can be denominated in the currencies of VND or USD and attracts interest rates of 6.5% for VND and 4.4% for USD. The loan is denominated in VND. (b) Vendor Financing Loans relate to land held for resale and development and are secured against the respective assets. Vendor financing loans comprise the following: Southlakes (i) Arcadia (ii) Logan (iii) Gilgandra (iv) Veravista (v) Ellida (vi) Consolidated 2023 $'000 - 4,891 - - - 3,000 2022 $'000 1,200 5,483 516 1,375 6,650 9,748 7,891 24,972 (i) Southlakes - Fixed interest rate of 9.99% and annual repayments (principal and interest) of $1.000m and a final payment of $2.000m on 6 August 2024. The obligations of this agreement were settled ahead of specified contractual payment dates with the remaining balance settled in July 2022. (ii) Arcadia - Interest free loan of $6.880m with penalty interest charged only on late payments per the fixed rate for judgement debts by the Uniform Civil Procedure Rules. The facility is secured by assets acquired and the loan is to be repaid in 9 instalments, 4 at $0.670m and 5 at $0.840m. The first instalment of $0.670m was made on the 1st of March 2022 with the remaining 8 instalments due each anniversary of the transaction completion date with the final payment due 1st of March 2030. (iii) Logan - Interest free loan of $1.033m with penalty interest of 10% charged only on late payments. The facility was secured by assets acquired and the loan was repaid in 2 instalments of $0.516m due each anniversary of the transaction completion date: 26 August 2021 and 26 August 2022. (iv) Gilgandra - loan of $2.750m with penalty interest charged at the bank bill swap rate plus 6% charged only on late payments. The facility was secured by assets acquired and the loan was repaid in 2 instalments of $1.375m due each anniversary of the transaction completion date: 17 August 2021 and 17 August 2022. (v) Veravista - Interest Free. First instalment of $1.500m was paid on the settlement date of 31 July 2021, and the second instalment of $6.650m was paid 1 year after completion on 26 July 2022. Penalty interest, not incurred, was payable at 7% per annum 1 year from completion until the balance of the price paid. (vi) Ellida - Interest free. The first instalment of $5.000m was paid on the settlement date of 24 June 2022, the second instalment of $7.000m was paid within 12 months of the settlement date (31 May 2023), and the last instalment of $3.000m due the later of 24 months after the settlement date or 10 business days after receiving notice that a Development Application has been approved. All loan repayments scheduled since the reporting period and up to the date to when the financial statements were authorised to issue have been paid. 108 | MAAS Group Holdings (ASX: MGH) Financial Report 62 63 MAAS Group Holdings (ASX: MGH) Financial Report | 109 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 21. Borrowings and lease liabilities (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 21. Borrowings and lease liabilities (continued) NOTE 21. BORROWINGS AND LEASE LIABILITIES (CONTINUED) NOTE 21. BORROWINGS AND LEASE LIABILITIES (CONTINUED) (c) Lease liabilities Plant & equipment and motor vehicles: The consolidated entity leases various plant and equipment under finance lease and hire purchase. The leases are secured over the individual motor vehicles and equipment that the lease relates to. Refer to note 17 for right-of-use assets disclosures relating to plant & equipment and motor vehicles under hire purchase. Land and buildings: The consolidated entity has leases for warehouses and offices. Rental contracts are typically made for a fixed period of 3 - 5 years with options to extend. With the exception of short-term leases and leases of low value underlying assets, each lease is reflected on the statement of financial position. The consolidated entity classifies its right-of-use assets in a consistent manner to its property, plant and equipment. Most extension options have been included in the lease liability. Refer to note 17 for right-of-use assets disclosures relating to the land and buildings. Fair value The fair values of borrowings are not materially different from their carrying amounts, since the interest payable on borrowings is either close to current market rates or the borrowings are of a short term nature. Compliance with loan covenants The consolidated entity has complied with the financial covenants of its borrowing facilities during the 2023 and 2022 reporting periods. Financing arrangements The consolidated entity had access to the following undrawn borrowing facilities at the end of the reporting period: Total facilities Bank loans* Multi-option facility (including contract performance guarantees)** Vendor financing Loans - other Equipment finance facility Used at the reporting date Bank loans* Multi-option facility (including contract performance guarantees)** Vendor financing Loans - other Equipment finance facility Unused at the reporting date Bank loans* Multi-option facility (including contract performance guarantees)** Vendor financing Loans - other Equipment finance facility Consolidated 2023 $'000 2022 $'000 376,637 70,000 7,891 - 165,438 619,966 356,353 38,545 7,891 - 148,317 551,106 20,284 31,455 - - 17,121 68,860 296,098 70,000 24,972 472 153,159 544,701 189,132 40,298 24,972 472 90,263 345,137 106,966 29,702 - - 62,896 199,564 * The used bank loan facility excludes borrowing costs capitalised. ** The used multi-option facility includes performance guarantees of $38.545m (2022: $30.297m) - refer note 31. Accounting policy for borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Borrowing costs on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. Borrowings are removed from the consolidated statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Borrowings are classified as current liabilities unless the consolidated entity has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. Accounting policy for lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity's incremental borrowing rate. Lease payments comprise of fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period in which they are incurred. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. NOTE 22. EMPLOYEE BENEFITS Current liabilities Annual leave Long service leave Non-current liabilities Long service leave Accounting policy for employee benefits Short-term employee benefits Consolidated 2023 $'000 7,746 2,259 2022 $'000 5,875 1,398 10,005 7,273 1,041 499 11,046 7,772 Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled wholly within 12 months after the end of the reporting period in which the employees render the related service are recognised in respect of employees' services up to the end of the reporting period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave is presented as provision for employee benefits. All other short-term employee benefit obligations are presented as payables. 110 | MAAS Group Holdings (ASX: MGH) Financial Report 64 65 MAAS Group Holdings (ASX: MGH) Financial Report | 111 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 22. Employee benefits (continued) 30 JUNE 2023 NOTE 22. EMPLOYEE BENEFITS (CONTINUED) Other long-term employee benefits The liability for annual leave and long service leave not expected to be settled within 12 months of the reporting date are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on high quality corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. Defined contribution superannuation expense Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred. Other long-term employee benefits The liabilities for long service leave and annual leave which is not expected to be settled wholly within 12 months after the end of the reporting period in which the employees render the related service is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on corporate bonds with terms and currencies that match, as closely as possible, the estimated future cash outflows. The consolidated entity's obligations for long-term employee benefits are presented as non-current provision for employee benefits the consolidated statement of financial position, except where the consolidated entity does not have an unconditional right to defer settlement for at least 12 months after the end of the reporting period, in which case the obligations are presented as a current provision for employee benefits. NOTE 23. PROVISIONS Current liabilities Rehabilitation Warranties Contingent consideration Other provisions Non-current liabilities Rehabilitation Contingent consideration Rehabilitation Consolidated 2023 $'000 168 543 10,336 1,989 2022 $'000 - 98 3,256 80 13,036 3,434 3,816 21,830 - 13,335 25,646 13,335 38,682 16,769 Close-down and restoration costs include the dismantling and demolition of infrastructure and the removal of residual materials and remediation of disturbed areas. Provisions for close-down and restoration costs do not include any additional obligations which are expected to arise from future disturbance. The costs are based on the net present value of the estimated future costs of a site closure plan. Estimated changes resulting from new disturbance, updated cost estimates including information from tenders, changes to the lives of operations and revisions to discount rates are capitalised within property, plant and equipment. These costs are then depreciated over the lives of the assets to which they relate. The amortisation or ‘unwinding’ of the discount applied in establishing the net present value of provisions is charged to the statement of profit or loss in each period as part of finance costs. MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 23. Provisions (continued) NOTE 23. PROVISIONS (CONTINUED) Contingent consideration The contingent consideration at 30 June 2023 relates to the acquisition of Schwarz, Dandy and Austek (refer note 37) and includes the balance outstanding for the acquisitions completed in the 2021 and 2022 financial years. The contingent consideration at 30 June 2022 relates to the acquisition of A1 Earthworx, Maas Brothers, Stanaway, Brett Harvey, Inverell, Blackwater Quarries, and Garde completed in the 2022 financial year, and includes the balance outstanding for the Amcor acquisition that was completed in the 2021 financial year. Warranties The provision represents the estimated warranty claims in respect of products sold which are still under warranty at the reporting date. The provision is estimated based on historical warranty claim information, sales levels and any recent trends that may suggest future claims could differ from historical amounts. Movements in provisions Movements in each class of provision during the current financial year are set out below: Consolidated - 30 June 2023 Carrying amount at the start of the year Additional provisions recognised Additions through business combinations (note 37) Fair value gain Payments - settled in equity (note 24) Payments - settled in cash Unwinding of interest Contingent Warranties $'000 98 445 consideration Rehabilitation $'000 - 3,213 $'000 16,591 - Other provisions $'000 80 1,909 - - - - - 17,754 (698) (841) (640) - 718 - - - 53 - - - - - Total $'000 16,769 5,567 18,472 (698) (841) (640) 53 Carrying amount at the end of the year 543 32,166 3,984 1,989 38,682 Accounting policy for provisions Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance cost. Refer to note 37 for accounting policy on contingent consideration. NOTE 24. ISSUED CAPITAL Ordinary shares - fully paid Consolidated 2023 Shares 2022 Shares 326,553,273 297,164,096 2023 $'000 550,778 2022 $'000 432,530 112 | MAAS Group Holdings (ASX: MGH) Financial Report 66 67 MAAS Group Holdings (ASX: MGH) Financial Report | 113 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 24. Issued capital (continued) 30 JUNE 2023 NOTE 24. ISSUED CAPITAL (CONTINUED) Movements in ordinary share capital Details Balance Institutional placement (a) Shares issued as part consideration for acquisition of A1 Earthworx Shares issued as part consideration for acquisition of Redimix Concrete Shares issued as part consideration for acquisition of Stanaway Shares issued under the Share Purchase Plan (b) Shares issued to underwriter under the Dividend Reinvestment Plan (c) Shares issued as consideration for acquisition of Maas Brothers Conditional Placement (d) Shares issued under the Dividend Reinvestment Plan (c) Shares issued as consideration for the acquisition of Brett Harvey Shares issued as consideration for the acquisition of 22 Mar 2022 Blackwater Quarries Shares issued under the Dividend Reinvestment Plan (b) 19 April 2022 Shares issued as consideration for the acquisition of GARDE 31 May 2022 Transaction costs arising on share issues, net of tax 22 Dec 2021 Balance Shares issued under the Share Purchase Plan (b) Conditional placement - outstanding commitments Shares issued to Founder and management (a) Institutional placement (a) Shares issued under the Share Purchase Plan (b) Shares issued under the Dividend Reinvestment Plan (c) Shares issued as consideration for the acquisition of Dandy (note 37) Shares issued to Founder and management (a) Shares issued to Founder and management (a) Shares issued to Founder and management (a) Shares issued as consideration for acquisition of Maas Brothers Shares issued as consideration for acquisition of Amcor On-market share buy-back (d) Transaction costs arising on share issues, net of tax 30 June 2022 19 July 2022 19 July 2022 3 Aug 2022 3 Aug 2022 22 Aug 2022 12 Oct 2022 19 Dec 2022 23 Dec 2022 24 Feb 2023 6 Mar 2023 15 Mar 2023 27 June 2023 13 Feb 2023 to 29 June 2023 Date 1 July 2021 8 July 2021 Shares 266,839,092 8,915,909 Issue price $5.50 $'000 279,635 49,038 16 Aug 2021 444,444 $4.69 2,084 8 Sept 2021 91,098 $4.83 440 29 Sept 2021 6 Oct 2021 to 30 June 2022 1,800,000 $5.20 9,360 2,132,277 $5.50 11,728 12 Nov 2021 405,383 $3.33 1,350 12 Nov 2021 12 Nov 2021 to 10 Dec 2021 7 Dec 2021 6,109,000 $4.60 28,101 5,436,361 2,054,422 $5.50 $4.21 29,900 8,649 1,136,842 $4.80 5,457 193,798 873,496 731,974 297,164,096 636,364 18,181 1,287,500 8,750,000 1,601,325 453,816 979,863 14,508,750 1,617,500 86,250 323,334 707,547 (1,581,253) $4.60 $4.70 $4.51 $5.50 $5.50 $4.00 $4.00 $4.00 $3.32 $2.55 $4.00 $4.00 $4.00 $2.60 $4.74 891 4,106 3,300 (1,509) 432,530 3,500 100 5,150 35,000 6,405 1,507 2,499 58,035 6,470 345 841 3,354 (4,166) (792) Balance 30 June 2023 326,553,273 550,778 (a) Share placement 30 June 2023 On 3 August 2022, MGH issued 8,750,000 fully paid ordinary shares in the company at $4.00 per share to institutional and professional investors under the Institutional Placement announced on 29 July 2022. MGH also issued 1,287,500 fully paid ordinary shares at $4.00 per share in the company under the first tranche of the Founder and Management Placement announced on 29 July 2022. The second tranche of 14,508,750 ordinary shares in the company was issued on 23 December 2022. The share placement was completed on 6 March 2023. MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 24. Issued capital (continued) NOTE 24. ISSUED CAPITAL (CONTINUED) 30 June 2022 On 8 July 2021, the company issued 8,915,909 fully paid ordinary shares at $5.50 per share to institutional investors. This placement was part of the company's capital raising announced on 1 July 2021. The placement was ratified by the company's shareholders at its Annual General Meeting held on 9 November 2021. (b) Share Purchase Plan 30 June 2023 On 19 July 2022, MGH issued 636,364 fully paid ordinary shares in the company at an issue price of $5.50. These were the remaining shares to be issued to investors pursuant to outstanding commitments to subscribe for the Share Purchase Plan Shortfall previously announced and approved at the 2021 Annual General Meeting of 9 November 2021. On 29 July 2022, as part of its capital raising, the company announced a Share Purchase Plan (SPP), and on 22 August 2022 MGH issued 1,601,325 fully paid ordinary shares in the company at an issue price of $4.00 per share in terms of the SPP. The SPP was not underwritten. 30 June 2022 On 1 July 2021, as part of its capital raising, the company announced a Share Purchase Plan. The company entered into irrevocable agreements with a small number of sophisticated investors (the Underwriters) for them to subscribe for any shortfall in the SPP offer to the extent of $15.000m. To the extent the SPP Offer was not fully subscribed by existing shareholders, the Underwriters agreed to subscribe for the shares not taken up upon the same terms (SPP Shortfall Shares). In addition to the irrevocable commitments to subscribe for any SPP Shortfall Shares received, the company agreed, to the extent there is insufficient SPP Shortfall Shares available upon completion of the SPP Offer, to undertake an additional placement of ordinary shares to the Underwriters for an amount not exceeding $15.000m at the SPP issue price of $5.50 per share. The following are the shares issued in terms of the SPP: SPP Shares: (i) 6 October 2021 – 41,369 shares SPP Shortfall shares (ii) 21 October 2021 – 690,908 shortfall shares (iii) 12 November 2021 – 54,545 shortfall shares (iv) 30 June 2022 – 1,181,818 shortfall shares (c) Dividend Reinvestment Plan 30 June 2023 In accordance with the terms of the Dividend Reinvestment Plan (DRP) relating to the 2022 final dividend, the issue price of shares under the DRP was $3.32 per share with 453,816 shares issued under the DRP to shareholders who elected to participate. The DRP was not underwritten. 30 June 2022 The shares issued on 12 November 2021, were issued in terms of the Dividend Reinvestment Plan (DRP) underwriting agreement for the 2021 interim dividend. The underwriter agreed to underwrite the subscription of 405,383 ordinary shares in the company for the purchase price of $3.33 per share, these being the shortfall shares not subscribed for under the DRP, which was approved by shareholders at the MGH Annual General Meeting of 9 November 2021. In accordance with the terms of the DRP relating to the 2021 final dividend, the issue price of shares under the DRP was $4.21 per share with 1,428,124 shares issued under the DRP to shareholders who elected to participate and 626,298 shares to the Underwriter in relation to the DRP shortfall. In accordance with the terms of the DRP relating to the 2022 interim dividend, the issue price of shares under the DRP was $4.70 per share with 873,496 shares issued under the DRP to shareholders who elected to participate. (d) Share buy-back On 20 December 2022, the Board approved an on-market share buy-back of up to 10% of MGH’s issued ordinary share capital within the following 12 months. The timing and number of shares to be purchased has been dependent on the prevailing share price, market conditions and the group’s capital position and requirements. As at 30 June 2023, 1,581,253 shares had been purchased through share buy-backs. 114 | MAAS Group Holdings (ASX: MGH) Financial Report 68 69 MAAS Group Holdings (ASX: MGH) Financial Report | 115 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 24. Issued capital (continued) 30 JUNE 2023 NOTE 24. ISSUED CAPITAL (CONTINUED) Capital risk management The consolidated entity's objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 NOTE 26. RESERVES Foreign currency reserve Share-based payments reserve Business combinations under common control Transactions with non-controlling interests Consolidated 2023 $'000 704 2,076 (109,000) 103 2022 $'000 220 1,121 (109,000) 103 (106,117) (107,556) The consolidated entity would look to raise capital when an opportunity to invest in a business or company was seen as value adding relative to the current company's share price at the time of the investment. Foreign currency reserve The consolidated entity is subject to certain financing arrangements covenants and meeting these is given priority in all capital risk management decisions. There have been no events of default on the financing arrangements during the financial year. The capital risk management policy remains unchanged from the 2022 financial report. Accounting policy for issued capital Ordinary shares are classified as equity. 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. The reserve is used to recognise exchange differences arising from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services. Business combinations under common control Any difference between the cost of the acquisition and the amounts at which the acquired assets and liabilities are recorded for business combinations under common control have been recognised in the Business combinations under common control reserve. NOTE 25. OTHER EQUITY Deferred consideration Consolidated 2023 $'000 9,759 2022 $'000 3,354 Transactions with non-controlling interests Transactions with non-controlling interests are accounted for as equity transactions. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: The deferred consideration at 30 June 2023 represents the value of the shares to be issued to the vendors of: ● Dandy on the first, second and third anniversaries of the acquisition ● Schwarz on the first, second and third anniversaries of the acquisition The deferred consideration at 30 June 2022 represents the value of the shares that were issued to the vendor of Amcor on the second anniversary of the acquisition in the 2023 financial year. Movements Opening balance Shares to be issued to the vendor of Schwarz (note 37) Shares to be issued to the vendor of Dandy (note 37) Shares issued to the vendor of Amcor (note 24) Closing balance Consolidated 2023 $'000 3,354 3,762 5,997 (3,354) 2022 $'000 3,354 - - - 9,759 3,354 Consolidated Balance at 1 July 2021 Foreign currency translation Share-based payment expenses (refer note 42) Balance at 30 June 2022 Foreign currency translation Share-based payment expenses (refer note 42) Balance at 30 June 2023 Foreign currency reserve $'000 (641) 861 - Share-based payments reserve $'000 352 - 769 Business combinations under common control $'000 (109,000) - - Transactions with non- controlling interests $'000 103 - - Total $'000 (109,186) 861 769 220 484 - 704 1,121 - 955 (109,000) - - 103 - - (107,556) 484 955 2,076 (109,000) 103 (106,117) 116 | MAAS Group Holdings (ASX: MGH) Financial Report 70 71 MAAS Group Holdings (ASX: MGH) Financial Report | 117 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 NOTE 27. RETAINED PROFITS NOTE 29. FINANCIAL INSTRUMENTS Consolidated Financial risk management objectives Retained profits at the beginning of the financial year Profit after income tax expense for the year Dividends paid (note 28) Retained profits at the end of the financial year NOTE 28. DIVIDENDS Dividends Dividends paid during the financial year were as follows: Final dividend for the year ended 30 June 2022 of 3.5 cents (2021: 3 cents) per ordinary share Interim dividend for the year ended 30 June 2023 of 3 cents (2022: 2 cents) per ordinary share Franking credits Franking credits available for subsequent financial years based on a tax rate of 30% 2023 $'000 127,623 65,455 (20,619) 2022 $'000 80,597 61,562 (14,536) 172,459 127,623 Consolidated 2023 $'000 10,831 2022 $'000 8,649 9,788 5,887 20,619 14,536 Consolidated 2023 $'000 66,838 2022 $'000 41,013 The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk, price risk and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the consolidated entity. The consolidated entity uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate, foreign exchange and other price risks, ageing analysis for credit risk. The Board has overall responsibility for the determination of the consolidated entity’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for day to day management of these risks to the Chief Financial Officer. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below: Market risk Market risk arises from the use of interest bearing, tradeable and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk), foreign exchange rates (currency risk) or other market factors (other price risk). Foreign currency risk The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial liabilities denominated in a currency that is not the entity's functional currency. The risk is measured using sensitivity analysis and cash flow forecasting. The carrying amount of the consolidated entity's foreign currency denominated financial assets and financial liabilities at the reporting date, shown in Australian Dollars, were as follows: Consolidated The above amounts represent the balance of the franking account as at the end of the financial year, adjusted for: ● ● ● franking credits that will arise from the payment of the amount of the provision for income tax at the reporting date franking debits that will arise from the payment of dividends recognised as a liability at the reporting date franking credits that will arise from the receipt of dividends recognised as receivables at the reporting date Dividend reinvestment plan During the year, the company had a Dividend Reinvestment Plan (DRP) in operation. Under the DRP, eligible shareholders elected to have dividends and some or all of their ordinary shares automatically reinvested in additional MGH shares at a discount to the volume-weighted average price (“VWAP”) for the 5 days immediately after the day after the record date. The Board determined that the discount to the VWAP was 2.5%. No DRP is applicable for FY23 dividends, See note 24 for more information on MGH’s issued capital. Dividends not recognised at the end of the reporting period In addition to the above dividends, since year end the Directors have recommended the payment of a final dividend of 3.0 cents per fully paid ordinary share (refer to note 39). Accounting policy for dividends Dividends are recognised when declared during the financial year. Financial assets Cash and Cash Equivalents (USD) Cash and Cash Equivalents (VND) Cash and Cash Equivalents (IDR) Trade and other receivables (VND) Trade and other receivables (USD) Trade and other receivables (EUR) Trade and other receivables (SGD) Trade and other receivables (IDR) Financial liabilities Bank Loans (VND) Bank Loans (USD) Trade and other payables (VND) Trade and other payables (EUR) Trade and other payables (USD) Trade and other payables (SGD) 2023 $'000 13 135 201 38 136 601 6 1,716 2,846 (2,749) (897) (448) (14) (102) (59) (4,269) 2022 $'000 146 40 176 26 222 184 - 1,441 2,235 (4,541) (1,065) (276) (145) (717) (6) (6,750) Net liabilities denominated in foreign currencies (1,423) (4,515) 118 | MAAS Group Holdings (ASX: MGH) Financial Report 72 73 MAAS Group Holdings (ASX: MGH) Financial Report | 119 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 29. Financial instruments (continued) 30 JUNE 2023 NOTE 29. FINANCIAL INSTRUMENTS (CONTINUED) The consolidated entity had net liabilities denominated in foreign currencies of $1.423m as at 30 June 2023 (2022: net liabilities of $4.515m). Based on this exposure, had the Australian dollar weakened/strengthened by 10% (2022: weakened/strengthened by 10%) against these foreign currencies with all other variables held constant, the consolidated entity's profit before tax for the year would have been $0.142m lower/higher (2022: $0.452m lower/higher) and equity would have been $0.142m lower/higher (2022: $0.452m lower/higher). The percentage change is the expected overall volatility of the significant currencies, which is based on management's assessment of reasonable possible fluctuations taking into consideration movements over the last 12 months each year and the spot rate at each reporting date. Price risk The consolidated entity is not exposed to any significant price risk. Interest rate risk The consolidated entity's main interest rate risk arises from long-term borrowings. Borrowings obtained at variable rates expose the consolidated entity to interest rate risk. Borrowings obtained at fixed rates expose the consolidated entity to fair value interest rate risk. As at the reporting date, the consolidated entity had the following variable rate borrowings: Bank Loans (inclusive of Multi-Option Facility) and equipment finance Impact on profit and equity +1.00% -1.00% Consolidated 2023 $'000 378,401 2022 $'000 207,800 Consolidated 2023 $'000 3,784 (3,784) 2022 $'000 2,078 (2,078) An analysis by remaining contractual maturities is shown in 'liquidity' below. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the statement of financial position and notes to the financial statements. The consolidated entity does not hold any collateral. The consolidated entity assess on a forward-looking basis in estimating expected credit losses to trade receivables and contract assets. The simplified approach to measuring expected credit losses has been applied. To measure the risk of expected credit losses, trade receivables have been grouped based on days past due and reviewed by management at the business unit level. Where any issues are highlighted that indicate that the consolidated entity may be exposed to expected credit losses, the issues are reported to executive management for consideration and the establishment of an action plan. Should expected credit losses not materialise in the future, the provision may be reversed based dependent on the existence of expected credit losses. The provision at year-end is considered representative across all customers of the consolidated entity based on recent sales experience, historical collection rates, and forward-looking information that is available. MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 29. Financial instruments (continued) NOTE 29. FINANCIAL INSTRUMENTS (CONTINUED) Liquidity risk The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial assets and liabilities. Remaining contractual maturities The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the statement of financial position. Consolidated - 2023 Non-derivatives Non-interest bearing Trade payables Other payables Vendor financing Contingent consideration Interest-bearing Bank loans Other loans Chattel mortgages and lease liabilities Total non-derivatives Consolidated - 2022 Non-derivatives Non-interest bearing Trade payables Other payables Vendor financing Deferred consideration Contingent consideration Interest-bearing Bank loans Vendor financing Other loans Chattel mortgages and lease liabilities Total non-derivatives Between 1 1 year or less $'000 and 5 years Over 5 years $'000 $'000 Remaining contractual maturities $'000 79,593 40,238 670 10,336 21,455 - 56,230 208,522 - - 6,020 21,830 367,783 - 123,862 519,495 - - 2,520 - 79,593 40,238 9,210 32,166 - - 21,500 24,020 389,238 - 201,592 752,037 Between 1 1 year or less $'000 and 5 years Over 5 years $'000 $'000 Remaining contractual maturities $'000 48,616 18,795 16,211 1,261 682 21,348 1,200 472 29,168 137,753 - - 6,020 - 4,737 196,917 - - 77,366 285,040 - - 2,520 - - - - - 2,975 5,495 48,616 18,795 24,751 1,261 5,419 218,265 1,200 472 109,509 428,288 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than 1 year. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments approximate their fair values. 120 | MAAS Group Holdings (ASX: MGH) Financial Report 74 75 MAAS Group Holdings (ASX: MGH) Financial Report | 121 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2023 NOTE 30. FAIR VALUE MEASUREMENT Fair value hierarchy The following tables detail the consolidated entity's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability Consolidated - 2023 Assets Investment properties Total assets Liabilities Contingent consideration Total liabilities Consolidated - 2022 Assets Investment properties Total assets Liabilities Contingent consideration Total liabilities Level 1 $'000 Level 2 $'000 Level 3 $'000 Total $'000 - - - - - - - - Level 1 $'000 Level 2 $'000 - - - - - - - - 226,348 226,348 226,348 226,348 32,166 32,166 Level 3 $'000 32,166 32,166 Total $'000 69,849 69,849 69,849 69,849 16,591 16,591 16,591 16,591 Valuation techniques for fair value measurements categorised within level 1 The fair values of listed equity securities are based on quoted market prices at the end of the reporting period. The quoted market price used for financial assets held by the consolidated entity is the bid price. Valuation techniques for fair value measurements categorised within level 2 and level 3 - Investment properties Investment properties are revalued annually based on independent assessments by a member of the Australian Property Institute having recent experience in the location and category of investment property being valued or periodically at Directors’ valuation. Valuers have considered valuation techniques including direct comparison method, capitalisation approach and/or discounted cash flow analysis in arriving at the fair values as at the reporting date. The direct comparison method involves the analysis of comparable sales of similar properties and adjusting the sale prices to that reflective of the investment properties. The capitalisation approach captures an income stream into a present value using revenue multipliers or single-year capitalisation rates. The discounted cash flow method involves the estimation and projection of an income stream over a period and discounting the income stream with an expected rate of return. All resulting fair value estimates for properties are included in level 3. Investment properties that are held for sale at the reporting date and which were valued at their selling price, have been included in level 2. - Contingent consideration Where there are EBITDA hurdles the fair value of the contingent cash consideration has been estimated using present value techniques, by discounting the probability-weighted estimated future cash outflows. The fair value of the contingent share consideration has been estimated based on the probability of achieving future hurdles which impacts the number of shares to be issued, using the share price (at acquisition date and reporting date). MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 30. Fair value measurement (continued) NOTE 30. FAIR VALUE MEASUREMENT (CONTINUED) Level 3 assets and liabilities Movements in level 3 assets and liabilities during the current and previous financial year are set out below: Consolidated Balance at 1 July 2021 Transfers into level 3 Gains recognised in profit or loss Additions Disposals/settlements Balance at 30 June 2022 Transfers into level 3 Gains recognised in profit or loss Additions Disposals/settlements Balance at 30 June 2023 Investment properties $'000 26,925 3,998 18,843 20,083 - Contingent consideration $'000 (2,000) - 6,546 (22,137) 1,000 69,849 60,043 31,846 65,428 (405) (16,591) - 698 (17,754) 1,481 Total $'000 24,925 3,998 25,389 (2,054) 1,000 53,258 60,043 32,544 47,674 1,076 226,761 (32,166) 194,595 Total gains for the previous year included in profit or loss that relate to level 3 assets held at the end of the previous year 18,843 6,546 25,389 Total gains for the current year included in profit or loss that relate to level 3 assets held at the end of the current year 31,846 698 32,544 The level 3 assets and liabilities unobservable inputs and sensitivity are as follows: Description Unobservable inputs Investment properties (including investment properties held for sale) Capitalisation rate Range (weighted average) 5% - 7.75% (6.47%) Land rate (per sqm) $1.46-$8,527 ($1,327) Sensitivity The estimated fair value would increase/(decrease) if capitalisation rate was lower/(higher) The estimated fair value would increase/(decrease) if land rate was higher/(lower) Contingent consideration Expected EBITDA Hurdle $630,000 - $22,500,000 The estimated fair value would Number of shares 0 - 4,498,579 increase/(decrease) if EBITDA Hurdle result was exceeded/(underperformed) The estimated fair value would increase/(decrease) if the number of shares issued increased/(decreased) Accounting policy for fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. 122 | MAAS Group Holdings (ASX: MGH) Financial Report 76 77 MAAS Group Holdings (ASX: MGH) Financial Report | 123 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 NOTE 35. RELATED PARTY TRANSACTIONS Parent entity MAAS Group Holdings Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 38. Associates Interests in associates are set out in note 15. Key management personnel Disclosures relating to key management personnel are set out in note 34 and the remuneration report included in the directors' report. Transactions with related parties The following transactions occurred with related parties: Other revenue: Management fee income received from entity controlled by key management personnel Payment for goods and services: Advisory services – acquisitions Rent Travel Other transactions: Brokerage paid to entity controlled by key management personnel Costs recovered from related party Unsubscribed DRP shares underwritten by companies associated with the CEO Consolidated 2023 $ 15,821 2022 $ - - 872,757 453,165 79,000 838,631 175,872 3,203 - - - 1,786 3,986,640 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 30. Fair value measurement (continued) 30 JUNE 2023 NOTE 30. FAIR VALUE MEASUREMENT (CONTINUED) For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. NOTE 31. CONTINGENT LIABILITIES Contract performance guarantees Consolidated 2023 $'000 38,545 2022 $'000 30,297 These contract performance guarantees are amounts that can be called on by customers or third parties to rectify works carried out that have not been performed to the satisfaction of the customer or third party. Guarantees are issued to third parties to complete the required infrastructure projects required for its land development activities. NOTE 32. COMMITMENTS The Group held no commitments as at 30 June 2023. NOTE 33. REMUNERATION OF AUDITORS During the financial year the following fees were paid or payable for services provided by BDO Audit Pty Limited, the auditor of the company, and its network firms: Audit services Audit or review of the financial statements Other services Due diligence services - independent accountants report Due diligence services - business acquisitions and other transactions Tax consulting services Financial modelling Total remuneration of BDO - Australia Audit services - network firms of BDO Audit or review of the financial statements NOTE 34. KEY MANAGEMENT PERSONNEL DISCLOSURES Compensation Consolidated 2023 $ 2022 $ 571,342 495,270 3,450 493,066 131,504 22,500 - 148,545 57,099 37,500 650,520 243,144 1,221,862 738,414 7,500 12,319 The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Short-term employee benefits Post-employment benefits Consolidated 2023 $'000 1,589 128 2022 $'000 1,241 109 1,717 1,350 124 | MAAS Group Holdings (ASX: MGH) Financial Report 78 79 MAAS Group Holdings (ASX: MGH) Financial Report | 125 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 35. Related party transactions (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 35. Related party transactions (continued) NOTE 35. RELATED PARTY TRANSACTIONS (CONTINUED) NOTE 35. RELATED PARTY TRANSACTIONS (CONTINUED) RELATED PARTY TRANSACTIONS – WESLEY MAAS: ● Wesley Maas is a director of Property Maintenance Australia Pty Ltd (PMA). During the 2023 financial year, the consolidated entity engaged PMA to provide commercial flights to the consolidated entity’s locations throughout Australia. Flights are charged at cost to the consolidated entity and the total charge for the 2023 financial year was $453,165 (2022: $175,872). The contract was based on normal terms and conditions. Amounts payable at 30 June 2023 to PMA totalled $54,678 (2022: $50,566). ● The consolidated entity leased premises from Emma Maas, the wife of Wesley Maas, on a short-term and ad-hoc basis. The rental charged during the year of $28,050 (2022: $28,600) was based on market rates. ● The consolidated entity leased premises from Yarrandale Pty Ltd, an entity controlled and/or associated with Wesley ● Maas. The rental charged during the year of $334,985 (2022: $318,482) was based on market rates. In May 2021, the consolidated entity leased premises from Maas Homebush Pty Ltd, an entity controlled and/or associated with Wesley Maas. The rental charged was based on market rates and commenced after a three-month rent-free period, which ended in July 2021. The rental charge during the 2023 financial year was $509,722 (2022: $491,549). ● During the 2023 financial year, Yarrandale Pty Ltd as trustee for the Yarrandale Investments Trust, W&E Maas Holdings Pty Limited as trustee for the Maas Family Trust, Regional Properties Australia Pty Limited as trustee for the Regional Properties Australia Unit Trust and Maas Homebush Pty Limited engaged the consolidated entity to consult on a property portfolio. Consulting Fees paid to the consolidated entity during the year totalled $61,821. An Income in advance liability existed for the consolidated entity at 30 June 2023 of $46,000 in relation to the above. Prior Year: ● At the Company's AGM held on 9 November 2021, shareholder approval was obtained for MAAS Group Developments Pty Ltd, a wholly-owned subsidiary of the company, to exercise an option with MGFP Holdings Pty Limited as trustee for MGFP Unit Trust to acquire the current Liberal Site at a market value of $6,950,000. MGFP Holdings Pty Limited is jointly controlled by the parents of Wesley Maas and Emma Maas with the underlying beneficial and economic interest in the MGFP Unit Trust also jointly held by the parents of Wesley Maas and Emma Maas. ● At the Company's AGM held on 9 November 2021, shareholder approval was obtained for MAAS Group Developments Pty Ltd, a wholly-owned subsidiary of the company, to exercise an option with W&E Maas Holdings Pty Limited as trustee for the Maas Family Trust to purchase all of the shares in MAAS Group Properties Sheraton View Pty Limited at an exercise price of $100. On exercise of the option, Choice Investments (Dubbo) Pty Ltd (an entity controlled and/or associated with Wesley Maas), who paid the first and second instalments of the purchase price and all transaction costs in relation MAAS Group Properties Sheraton View Pty Limited's purchase of the Sheraton Site, was entitled to repayment of these amounts totalling $1,469,854. Wesley and Emma Maas are controlling shareholders of W&E Maas Holdings Pty Limited and beneficiaries of the Maas Family Trust. ● At the Company's AGM held on 9 November 2021, shareholder approval was obtained for MAAS Group Developments Pty Ltd, a wholly-owned subsidiary of the company, to purchase all of the shares in MAAS Group Properties Bunglegumbie East Pty Ltd at a purchase price of $100. On completion of the share purchase, W&E Maas Holdings Pty Limited acting as trustee for the Maas Family Trust, who funded the deposit and all transaction costs in relation MAAS Group Properties Bunglegumbie East Pty Ltd's purchase of the Bunglegumbie Site, was entitled to repayment of these amounts totalling $158,371. Wesley and Emma Maas are controlling shareholders of W&E Maas Holdings Pty Limited and beneficiaries of the Maas Family Trust. ● During the 2022 financial year, the consolidated entity recovered expenses of $1,786 from Choice Investments Dubbo Pty Ltd, an entity controlled and/or associated with Wesley Maas. RELATED PARTY TRANSACTIONS – STEPHEN BIZZELL: ● In December 2022 the consolidated entity engaged Centec Securities Pty Ltd (Centec) to execute share buy back orders announced to the market in that month. Centec is wholly owned indirectly by Stephen Bizzell, and Stephen is the sole director. During the year Centec executed the buy back of 1,581,253 MGH shares and charged the consolidated entity $3,203 in brokerage. Brokerage payable at 30 June 2023 was $49 for a share buy back executed 29 June 2023 and settled with MGH 3 July 2023. RELATED PARTY TRANSACTIONS – MICHAEL MEDWAY: ● Michael Medway provided consultancy services to the consolidated entity under usual commercial terms. Services included due diligence services with respect to acquisitions of businesses and or assets. The value of the services provided in 2023 was nil (2022: $79,000). Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Current payables: Trade payables to key management personnel Trade payables to entities controlled by key management personnel Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Consolidated 2023 $ 2022 $ - 100,727 88,000 50,566 NOTE 36. PARENT ENTITY INFORMATION Set out below is the supplementary information about the legal parent entity (MAAS Group Holdings Limited). Statement of profit or loss and other comprehensive income Profit/(loss) after income tax Other comprehensive income for the year, net of tax Total comprehensive income Statement of financial position Total current assets Total non-current assets Total assets Total current liabilities Total non-current liabilities Total liabilities Net assets Equity Issued capital Other equity Share-based payments reserve Retained profits/(accumulated losses) Total equity Parent 2023 $'000 88,078 - 88,078 2022 $'000 (5,938) - (5,938) Parent 2023 $'000 836,941 167,254 1,004,195 16,945 367,751 384,696 619,499 550,778 9,759 2,076 56,886 619,499 2022 $'000 453,535 161,885 615,420 319 188,433 188,752 426,668 432,530 3,354 1,121 (10,337) 426,668 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity has provided guarantees in respect of banking facilities provided to the group (refer note 21). Contingent liabilities The parent entity had no other contingent liabilities as at 30 June 2023 and 30 June 2022 that have not been disclosed in note 31. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2023 and 30 June 2022. 126 | MAAS Group Holdings (ASX: MGH) Financial Report 80 81 MAAS Group Holdings (ASX: MGH) Financial Report | 127 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 37. Business combinations (continued) NOTE 37. BUSINESS COMBINATIONS (CONTINUED) Acquisition of Austek On 26 May 2023, the consolidated entity completed the acquisition of a 75% controlling interest in Austek Group of companies (Austek). Austek specialises in asphalt repairs, road maintenance, road rehabilitation and spray seal services in both Regional and Southeast Queensland. The Austek acquisition gives the Group a strategic entry into the asphalt market, with an experienced minority interest partner. As a downstream user of quarry products, the Austek acquisition represents an expansion in construction materials capability for the Group. The consideration formed a completion cash payment of $33.821m. Further consideration of $10.976m, comprising of cash and shares, may be payable contingent on EBIT hurdles across the next 12 months. The Austek Group of companies operates in the Construction Materials segment. In accordance with accounting standards, the acquisition has been completed on a provisional basis and finalisation of the assessment of fair values of the identifiable assets and liabilities acquired may result in adjustments to the amounts disclosed in the table below. MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 36. Parent entity information (continued) 30 JUNE 2023 NOTE 36. PARENT ENTITY INFORMATION (CONTINUED) Significant accounting policies The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 2, except for the following: ● ● ● Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be an Investments in subsidiaries are accounted for at cost, less any impairment, in the parent entity. Investments in associates are accounted for at cost, less any impairment, in the parent entity. indicator of an impairment of the investment. NOTE 37. BUSINESS COMBINATIONS (A) BUSINESS COMBINATIONS Summary of acquisition Acquisition of Schwarz On 1 July 2022, the consolidated entity entered into an agreement to acquire Schwarz Excavations Pty Ltd (Schwarz) for an initial cash payment of $34.159m. 913,194 Consideration shares are to be issued in equal share tranches annually over the next three years to the value of $3.762m. Further cash consideration may be payable, contingent on Schwarz achieving certain EBITDA targets for the three financial years following completion up to $3.000m. The acquisition completed on 22 July 2022. Schwarz is a provider of plant hire, rail maintenance, civil construction and haulage services in Rockhampton and Central Queensland. The Schwarz business operates in the Civil, Construction & Hire segment. In accordance with accounting standards, the acquisition has been completed on a provisional basis and finalisation of the assessment of fair values of the identifiable assets and liabilities acquired may result in adjustments to the amounts disclosed in the table below. Acquisition of Clermont Quarries On 1 August 2022, the consolidated entity entered into an agreement to acquire four hard rock quarries and two sand quarries in the Isaac region of Central Queensland for a cash payment of $14.525m These quarries primarily service the areas surrounding Clermont, Middlemount, and Dysart, and are expected to produce in excess of 350,000 tonnes of quarry materials per annum. The acquisition was completed on 20 September 2022. The Clermont Quarries business operates in the Construction Materials segment. In accordance with accounting standards, the acquisition has been completed on a provisional basis and finalisation of the assessment of fair values of the identifiable assets and liabilities acquired may result in adjustments to the amounts disclosed in the table below. Acquisition of Dandy On 16 December 2022, the consolidated entity completed the acquisition of Dandy Premix. The consideration formed a cash payment of $66.305m and the issue of 3,331,533 shares in MGH. 979,863 of the Consideration Shares were issued on 19 December 2022, with the remaining 2,351,670 Consideration Shares to be issued in equal share tranches annually over the next three years. Further cash consideration may be payable, contingent on the approval of a permit across Dandy's immediate operating area up to $5.000m. An additional payment up to $22.000m may be payable, related to vendor led negotiations, applications, and approvals for Work Plans in Dandy’s operating region over the course of the next 5 - 9 years. The additional payment is regarded as an independent transaction from the business combination with no amount recognised on acquisition. Dandy is an integrated construction materials business in south-east Melbourne operating five concrete plants, a sand quarry and a hard rock quarry. The Dandy Premix business operates in the Construction Materials segment. In accordance with accounting standards, the acquisition has been completed on a provisional basis and finalisation of the assessment of fair values of the identifiable assets and liabilities acquired may result in adjustments to the amounts disclosed in the table below. 128 | MAAS Group Holdings (ASX: MGH) Financial Report 82 83 MAAS Group Holdings (ASX: MGH) Financial Report | 129 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 37. Business combinations (continued) 30 JUNE 2023 NOTE 37. BUSINESS COMBINATIONS (CONTINUED) Details of the acquisition are as follows: MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 37. Business combinations (continued) NOTE 37. BUSINESS COMBINATIONS (CONTINUED) Revenue and profit contribution Cash and cash equivalents Trade receivables Income tax refund due Inventories Prepayments Other current assets Quarry land Land and buildings Plant and equipment Intangibles Trade and other payables Deferred tax liability Employee benefits Lease liability Net assets acquired Goodwill Non-controlling interests Clermont Quarries Fair value $'000 - - - 1,833 - - 2,729 - 6,991 3,000 - - (28) - Schwarz Fair value $'000 2,961 2,050 1,013 - 186 1,970 - 4,620 28,373 1,200 (2,407) (1,804) (266) - Dandy Fair value $'000 93 348 - 527 698 172 45,564 22,700 30,292 - (475) (3,792) (1,287) (15,040) Austek Fair value $'000 682 11,148 73 451 207 6,081 - 5,404 10,401 21,540 (20,930) (2,933) (481) (4,347) Total Fair value $'000 3,736 13,546 1,086 2,811 1,091 8,223 48,293 32,724 76,057 25,740 (23,812) (8,529) (2,062) (19,387) 14,525 - - 37,896 1,803 - 79,800 - - 27,296 19,466 (1,965) 159,517 21,269 (1,965) Acquisition-date fair value of the total consideration transferred Representing: Cash paid or payable to vendor MAAS Group Holdings Limited shares issued to vendor MAAS Group Holdings Limited shares to be issued to vendor in future periods (Deferred Consideration) Contingent consideration 14,525 39,699 79,800 44,797 178,821 14,525 34,159 66,305 33,821 148,810 - - - - 8,495 - 8,495 3,762 1,778 - 5,000 - 10,976 3,762 17,754 If the acquisitions had occurred on 1 July 2022, the consolidated results for the year ended 30 June 2023 would have been as follows: Schwarz Dandy Austek Other consolidated entities Revenue $'000 46,426 74,041 98,435 218,902 Net profit for the period after tax $'000 4,030 8,338 11,303 23,671 703,626 54,542 922,528 78,213 The amounts in the above table have been calculated using the results of each subsidiary and adjusting them for: ● ● differences in the accounting policies between the consolidated entity and the subsidiary, and the additional depreciation and amortisation that would have been charged assuming the fair value adjustments to property, plant and equipment and intangible assets had applied from 1 July 2022, together with the consequential tax effects. The acquired businesses contributed the following revenues and net profit to the consolidated entity from the dates of their respective acquisitions to 30 June 2023: Schwarz Dandy Austek Revenue $'000 45,672 43,958 12,368 Net profit for the period after tax $'000 3,855 6,177 1,790 101,998 11,822 It is impractical to isolate the post-acquisition revenue and net results for the period for Clermont Quarries given the acquisition has been operationally consumed within Regional Quarries Australia Pty Ltd. 14,525 39,699 79,800 44,797 178,821 Acquired receivables Cash used to acquire business, net of cash acquired: Acquisition-date fair value of the total consideration transferred Less: cash and cash equivalents Less: shares issued by company as part of consideration Less: shares to be issued in future periods (Deferred Consideration) Less: contingent consideration 14,525 - 39,699 (2,961) 79,800 (93) 44,797 (682) 178,821 (3,736) - - - - (2,499) - (2,499) (3,762) (1,778) (5,997) (5,000) - (10,976) (9,759) (17,754) Net cash used 14,525 31,198 66,211 33,139 145,073 Schwarz Dandy Austek Fair value of acquired receivables $'000 2,050 348 11,148 Gross contractual amount due $'000 (2,050) (348) (11,148) Loss allowance recognised on acquisition $'000 - - - 13,546 (13,546) - Acquisition-related costs Acquisition-related costs were not directly attributable to the issue of shares are disclosed separately in the statement of profit or loss and other comprehensive income as Transaction costs relating to business combinations: Acquisition costs $'000 3,317 (B) SUMMARY OF ACQUISITION - FINALISATION OF PROVISIONAL ACCOUNTING On 19 May 2022, the consolidated entity entered into an agreement to purchase the shares of DPG Civil Pty Ltd and its subsidiaries (Garde). 130 | MAAS Group Holdings (ASX: MGH) Financial Report 84 85 MAAS Group Holdings (ASX: MGH) Financial Report | 131 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 37. Business combinations (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 37. Business combinations (continued) NOTE 37. BUSINESS COMBINATIONS (CONTINUED) NOTE 37. BUSINESS COMBINATIONS (CONTINUED) For 30 June 2022, this business combination had initially been accounted for on a provisional basis in accordance with AASB 3 Business combinations. Therefore the fair value of assets acquired and liabilities assumed were initially estimated by the consolidated entity taking into consideration all available information at the reporting date. Fair value adjustments on the finalisation of the business combination accounting is retrospective, where applicable, to the period the combination occurred and therefore may have an impact on the assets and liabilities, depreciation and amortisation reported. The consolidated entity has finalised the accounting for this business combination and in doing so adjusted assets and liabilities shown in the table below. These adjustments resulted in an increase in goodwill being recognised. As noted above the finalisation accounting is retrospective and therefore the adjustment impacts the 30 June 2022 financial year. These adjustments had no impact on the 30 June 2022 statement of profit or loss and other comprehensive income. Details of the fair value of the net assets acquired as recorded on a provisional basis and the final position as impacting the fair value of net assets acquired as at 30 June 2022, are as follows: The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer's previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition-date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. Cash and cash equivalents Trade receivables Income tax refund due Prepayments Other current assets Property, plant and equipment Intangibles Deferred tax asset Trade and other payables Current tax liability Deferred tax liability Employee benefits Lease liability Net identifiable assets acquired Goodwill Provisional fair value $'000 2,263 5,107 814 116 1,939 10,960 12,960 2,166 (2,518) (14) (2,601) (380) (2,132) 28,680 Movement $'000 - (436) 71 (4) (1,459) 654 - (1,311) (2,729) (1) 1,315 (26) (654) (4,580) Final fair value $'000 2,263 4,671 885 112 480 11,614 12,960 855 (5,247) (15) (1,286) (406) (2,786) 24,100 9,538 4,518 14,056 Fair value of the total consideration transferred 38,218 (62) 38,156 Accounting policy for business combinations The acquisition method of accounting is used to account for business combinations, unless it is a combination involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. The consideration transferred is the sum of the acquisition-date fair values of the assets transferred, equity instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition costs are expensed as incurred to profit or loss. On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at the acquisition-date. Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous carrying amount is recognised in profit or loss. Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent changes in the fair value of the contingent consideration classified as an asset or liability is recognised in profit or loss. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. 132 | MAAS Group Holdings (ASX: MGH) Financial Report 86 87 MAAS Group Holdings (ASX: MGH) Financial Report | 133 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2023 NOTE 38. INTERESTS IN SUBSIDIARIES The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 2: Principal place of business / Country of incorporation Australia Australia Name MAAS Group Pty Limited Machinery Sales Pty Limited [formerly Rookharp] MAAS Plant & Equipment Pty Limited [formerly named EMS Plant & Equipment Pty Limited] Large Industries Pty Limited Hamcon Civil Pty Limited Miller Metals Forbes Pty Limited MAAS Plant Hire Pty Limited MAAS Civil Pty Limited MAAS Administration Pty Limited Macquarie Geotechnical Pty Limited Amcor Excavations Pty Limited A1 Earthworx Mining & Civil Pty Limited Schwarz Excavations Pty Limited Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia EMS Group Pty Limited Jacon Equipment Pty Limited Jacon Equipment (South Africa) Pty Limited EMS Labour Hire Pty Limited MAAS Repairs Pty Limited [formerly named EMS Repairs Pty Limited] EMS Equipment Hire Pty Limited EMS Admin Pty Limited Dubbo Parts Pty Limited [formerly named Regional Transport Spares Pty Limited] PT JTECH Jasa Pertambangan Australia Australia South Africa Australia Australia Australia Australia Australia Indonesia JLE Group Holdings Pty Limited JLE Electrical Projects Pty Limited JLE Manufacturing Pty Limited JLE Engineering Pty Limited JLE Admin Pty Limited JLE Hire Pty Limited JLE Utilities Services Pty Limited JLE Mining & Tunnelling Pty Limited [formerly EMS Mine Site Electrical Pty Limited] DPG Civil Pty Limited Elbac Pty Limited Garde Services Pty Limited Regional Group Australia Pty Limited Regional Hardrock Pty Limited Regional Hardrock Unit Trust Regional Hardrock (Dubbo) Pty Limited Regional Quarries Australia Pty Limited Regional Hardrock (Willow Tree) Pty Limited Regional Hardrock Willow Tree Unit Trust Regional Hardrock (Orange) Pty Limited Regional Hardrock (Inverell) Pty Limited Regional Hardrock Inverell Unit Trust Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Ownership interest 2022 % 100% 100% 2023 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% 100% - 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 38. Interests in subsidiaries (continued) NOTE 38. INTEREST IN SUBSIDIARIES (CONTINUED) Principal place of business / Country of incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Name Regional Hardrock (Forbes) Pty Limited Regional Hardrock (Forbes) Unit Trust Regional Hardrock (West Wylong) Pty Limited Regional Hardrock (West Wylong) Unit Trust Regional Hardrock (Gilgandra) Pty Limited Regional Hardrock (Gilgandra) Unit Trust Regional Sands (Dubbo) Pty Limited Regional Sands Dubbo Unit Trust Sand Quarries Australia Pty Limited Regional Crushing & Screening Pty Limited Regional Concrete Australia Pty Limited Regional Precast Australia Pty Limited Regional Group Resources Pty Limited Amcor Quarries & Concrete Pty Limited Gracemere Property Pty Limited Gracemere Property Unit Trust Regional Concrete (Tamworth) Pty Limited Regional Concrete Tamworth Unit Trust Blackwater Quarries Pty Limited Dawson Quarries Pty Limited Regional Hardrock Yatala Pty Limited Regional Hardrock Yatala Unit Trust Regional Hardrock Clermont Pty Limited Regional Hardrock Clermont Unit Trust Dandy Premix Quarries Pty Limited Casey Concrete Pty Limited South East Resources Unit Trust Regional Quarries Riviera Pty Limited Regional Quarries Riviera Unit Trust Azure Asphalt Holdings Pty Limited Austek Asphalt Services Pty Limited Austek Plant Hire Pty Limited Austek Production Pty Limited AUSTEK Spray Seal Pty Limited Haydos Pty Limited MAAS Group Developments Pty Limited MAAS Group Westwinds Pty Limited MAAS Group Properties Durham Park Pty Limited MAAS Group Properties Bombira Pty Limited MAAS Group Properties Southlakes Pty Limited MAAS Group Properties Highlands Pty Limited MAAS Group Properties Magnolia Pty Limited MAAS Group Properties Arcadia Pty Limited MAAS Group Properties Logan Pty Limited MAAS Group Properties Eagle View Pty Limited [formerly Australia Browns Lane] Australia Eykan Holdings Pty Limited Australia Bizitay Pty Limited Australia Southlakes Child Care Centre No1 Pty Limited Australia Southlakes Child Care Centre No 1 Unit Trust Australia MAAS Commercial CC SL No2 Pty Limited MAAS Commercial CC SL No2 Unit Trust Australia MAAS Homes Pty Limited [formerly Bourke Construction] Australia Australia MAAS Group Properties Ulan Pty Limited Ownership interest 2022 2023 % % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% - 100% - 100% - 100% - 100% - 100% - 100% - 100% - 100% - 75% - 75% - 75% - 75% - 75% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 134 | MAAS Group Holdings (ASX: MGH) Financial Report 88 89 MAAS Group Holdings (ASX: MGH) Financial Report | 135 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 38. Interests in subsidiaries (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 38. Interests in subsidiaries (continued) NOTE 38. INTEREST IN SUBSIDIARIES (CONTINUED) NOTE 38. INTEREST IN SUBSIDIARIES (CONTINUED) Name Gunnedah Land Holdings Pty Limited Gunnedah Property Unit Trust MAAS Commercial Developments Pty Limited MAAS Self Storage (Western) Pty Limited MAAS Self Storage (Southern) Pty Limited MAAS Group Southern Unit Trust MAAS Residential Developments Pty Limited MAAS Group Construction Pty Limited MAAS Group Properties Bunglegumbie Pty Limited MAAS Group Properties Liberal Pty Limited MAAS Group Properties Liberal Unit Trust Astley's Building Supplies Pty Limited Brett Harvey Constructions Pty Limited MAAS Building Materials Pty Limited MAAS Building Pty Limited MAAS Commercial Bultje Holdings Pty Limited MAAS Commercial Bultje Unit Trust MAAS Commercial Cobbora Pty Limited MAAS Commercial Cobbora Unit Trust MAAS Commercial Fitzroy Pty Limited MAAS Commercial Fitzroy Unit Trust MAAS Commercial Leeds Pty Limited MAAS Commercial Leeds Unit Trust MAAS Commercial Oliver House Pty Limited MAAS Commercial Oliver House Unit Trust MAAS Commercial Parafield Pty Limited MAAS Commercial Parafield Unit Trust MAAS Commercial Shopping C SL Holding Pty Limited MAAS Commercial Shopping Centre SL UT Pty Limited MAAS Constructions (Dubbo) Pty Limited MAAS Group Properties 103 Prince Pty Limited MAAS Group Properties Bunglegumbie East Pty Limited MAAS Group Properties Collina Pty Limited MAAS Group Properties Ellida Pty Limited MAAS Group Properties Killarney Pty Limited MAAS Group Properties Leeds Pty Limited MAAS Group Properties Miriam Pty Limited MAAS Group Properties RBD Holdings Pty Limited MAAS Group Properties RBD Unit Trust MAAS Group Properties Sheraton View Pty Limited MAAS Group Properties Veravista Pty Limited MAAS Group RAAF Residential Pty Limited MAAS Investments Holdings Pty Limited MAAS Investments No1 Unit Trust MAAS Investments Properties No1 Unit Trust MAAS Property Management Pty Limited MAAS Self Storage (Canberra) Pty Limited MAAS Self Storage (Eastern) Pty Limited MAAS Plumbing Pty Limited R Maas Investments Pty Limited Regional Demolition Pty Limited Principal place of business / Country of incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Ownership interest 2022 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 2023 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Name S Maas Investments Pty Limited Spacey Storage Pty Limited Stanaway Pty Limited MAAS Commercial Property Management Pty Limited MAAS Commercial Gurwood Pty Limited MAAS Commercial Gurwood Unit Trust MAAS Commercial Rural Pty Limited MAAS Commercial Rural Unit Trust MAAS Commercial Maria Pty Limited MAAS Commercial Maria Unit Trust MAAS Commercial Tringa Pty Limited MAAS Commercial Tringa Unit Trust Principal place of business / Country of incorporation Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia EMS International Pty Limited [formerly EmS Vietnam] VMS Engineering Company Limited EMS Power Solutions UK Limited Australia Vietnam United Kingdom Ownership interest 2022 2023 % % 100% 100% 100% 100% 100% 100% - 100% - 100% - 100% - 100% - 100% - 100% - 100% - 100% - 100% 100% 100% 100% 100% 100% 100% Unless otherwise stated, the subsidiaries have share capital consisting solely of ordinary shares that are held directly by the consolidated entity, and the proportion of ownership interests held equals the voting rights held by the consolidated entity. NOTE 39. EVENTS AFTER THE REPORTING PERIOD Dividend The Directors declared a fully franked final dividend of 3 cents per share on 17 August 2023, which reflects a full year dividend of 6 cents per share, an increase of 9.0% from the prior year. Long Term Incentive Program (LTIP) On the 17th August 2023 the Directors approved an award in relation to FY22 under the LTIP program previously approved by shareholders. No other matter or circumstance has arisen since 30 June 2023 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 in future financial years. 136 | MAAS Group Holdings (ASX: MGH) Financial Report 90 91 MAAS Group Holdings (ASX: MGH) Financial Report | 137 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 30 JUNE 2023 NOTE 40. CASH FLOW INFORMATION Reconciliation of profit after income tax to net cash from operating activities Profit after income tax expense for the year Adjustments for: Depreciation Amortisation Net gain on disposal of property, plant and equipment Net fair value gain on investment properties Share of loss/(profit) - associates Share-based payments Fair value adjustments to contingent consideration Net (gain)/ loss on disposal of investment property Unwinding of interest on vendor financing Amortisation of borrowing costs Change in operating assets and liabilities: Increase in trade and other receivables Increase in contract assets Increase in inventories Increase in deferred tax assets Increase in prepayments Increase in current income tax receivable/payable Decrease/(increase) in other operating assets Increase in trade and other payables Increase/(decrease) in contract liabilities Increase in deferred tax liabilities Increase in employee benefits Increase in other provisions Consolidated 2023 $'000 65,903 35,745 7,515 (4,131) (31,846) 11 955 (698) (1,742) 211 529 (30,746) (7,155) (84,413) (15,023) (411) 8,526 11,106 30,442 (5,436) 19,603 1,212 2,407 2022 $'000 61,562 25,677 4,892 (2,649) (18,843) (761) 769 (6,546) 12 464 501 (28,363) (18,166) (44,590) (6,452) (2,623) 983 (1,551) 12,736 10,212 19,073 1,065 49 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 40. Cash flow information (continued) NOTE 40. CASH FLOW INFORMATION (CONTINUED) Changes in liabilities arising from financing activities Consolidated Balance at 1 July 2021 Net cash from/(used in) financing activities Acquisition plant & equipment by means of finance lease Changes through business combinations (note 37) Fair value adjustment on contingent consideration Acquisition of land held for resale Acquisition of investment property Amortisation and present value unwinding Balance at 30 June 2022 Net cash from/(used in) financing activities Shares issued for contingent consideration Acquisition plant & equipment by means of finance lease Changes through business combinations (note 37) Fair value adjustment on contingent consideration Amortisation and present value unwinding Other Bank loans and Multi-option facility $'000 50,581 Vendor financing Leases Chattel mortgages $'000 20,639 $'000 47,824 $'000 36,805 Deferred and contingent consideration $'000 2,666 Total $'000 158,515 148,050 (14,599) (13,312) 29,888 (1,323) 148,704 - - - - - - - - 11,818 6,650 501 464 1,572 2,132 - - - - - - - - - - - 1,572 23,055 25,187 (6,546) - - (6,546) 11,818 6,650 - 965 199,132 24,972 38,216 66,693 17,852 346,865 156,040 (17,292) (8,264) 62,436 (1,901) 191,019 - - - - 529 - - - - - 211 - - 2,492 19,387 - - 654 - - - - - - (841) (841) - 2,492 17,754 37,141 (698) (698) - - 740 654 Net cash from operating activities 2,564 7,451 Balance at 30 June 2023 355,701 7,891 52,485 129,129 32,166 577,372 Non-cash investing and financing activities Dividend reinvestment plan share issues Share based payments Partial settlement of business combinations through the issue of shares Consolidated 2023 $'000 1,507 955 6,694 2022 $'000 14,105 769 49,633 NOTE 41. EARNINGS PER SHARE Profit after income tax Non-controlling interest Consolidated 2023 $'000 65,903 (448) 2022 $'000 61,562 - Profit after income tax attributable to the owners of MAAS Group Holdings Limited 65,455 61,562 Weighted average number of ordinary shares used in calculating basic earnings per share Adjustments for calculation of diluted earnings per share: Deferred consideration for business combinations (note 25) Share rights granted to employees of Macquarie Geotechnical Pty Ltd to be issued in three equal tranches on the third, fourth and fifth anniversaries of the acquisition (note 42 (b)) Performance rights (note 42 (a)) Number 316,895,984 Number 287,412,227 2,810,379 707,547 1,346,687 181,027 1,346,687 51,854 Weighted average number of ordinary shares used in calculating diluted earnings per share 321,234,077 289,518,315 138 | MAAS Group Holdings (ASX: MGH) Financial Report 92 93 MAAS Group Holdings (ASX: MGH) Financial Report | 139 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 41. Earnings per share (continued) 30 JUNE 2023 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 Note 42. Share-based payments (continued) NOTE 41. EARNINGS PER SHARE (CONTINUED) NOTE 41. EARNINGS PER SHARE (CONTINUED) Cents 20.66 20.38 Cents 21.42 21.26 (c) Summary of movements in share rights and performance rights Set out below are summaries of share rights and the performance rights: Basic earnings per share Diluted earnings per share Accounting policy for earnings per share Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to the owners of MAAS Group Holdings Limited, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year. Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. NOTE 42. SHARE-BASED PAYMENTS (a) Long term incentive plan On 9 November 2021, the company's members approved a Long Term Incentive Plan (the Plan) to enable equity incentives including Performance Rights, Options, and Shares to be issued under the Plan to eligible Directors, employees and contractors. The Plan is to assist the company to attract and retain key staff, whether employees or contractors. The Plan will: ● enable the Company to incentivise and retain existing key management personnel and other eligible employees and ● contractors needed to achieve the Company’s business objectives; link the reward of key staff with the achievement of strategic goals and the long-term performance of the Company; and ● align the financial interest of participants of the Plan with those of Shareholders. No performance rights were issued during FY23. In FY22, on 23 December 2021, the Board granted 37,736 performance rights to an employee. 50% of the performance rights will vest 12 months after the grant date and the remaining 50% will vesting 24 months after the grant date. Vesting of each of the performance rights are contingent on the employee remaining employed with MGH with any non-vested performance rights forfeited at the date of resignation. The performance rights are subject to individual key performance indicators. The value of the performance rights granted was $186,793. On 30 June 2022, the Board granted 143,291 performance rights to employees. For the five tranches totalling 43,478 performance rights, 20% of these rights will vest on 22 March 2023 with the remaining 80% vesting equally over a further 4-year period ending 22 March 2027 (20% per annum). For the three tranches totalling 99,813 performance rights, 33.3% of the performance rights will vest 12 months after the issue date and the remaining 66.67% will vest equally over a further 2-year period ending 30 June 2025 (33.33% per annum). Vesting of each of the above tranches are contingent on the respective employees remaining employed with MGH with any non-vested performance rights forfeited at the date of resignation. All performance rights are subject to individual key performance indicators. The value of the performance rights granted was $650,000. (b) Share rights On 21 December 2020, MAAS Group Holdings Limited (MGH) agreed to an issue of 1,346,687 ordinary shares in MGH to the employees of Macquarie Geotechnical Pty Ltd. The shares will be issued in three equal tranches on the third, fourth, and fifth anniversaries of the completion date (21 December 2020) of the Macquarie Geotechnical Pty Ltd acquisition. The total value of the rights granted is $2,693,737 based on $2 per share and will be expensed over the vesting period. 2023 Grant date Vesting date 20/12/2020 20/12/2020 20/12/2020 23/12/2021 23/12/2021 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 20/12/2023 20/12/2024 20/12/2025 23/12/2022 23/12/2023 22/03/2023 22/03/2024 22/03/2025 22/03/2026 22/03/2027 30/06/2023 30/06/2024 30/06/2025 2022 Grant date Vesting date 20/12/2020 20/12/2020 20/12/2020 23/12/2021 23/12/2021 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 30/06/2022 20/12/2023 20/12/2024 20/12/2025 23/12/2022 23/12/2023 22/03/2023 22/03/2024 22/03/2025 22/03/2026 22/03/2027 30/06/2023 30/06/2024 30/06/2025 Balance at Exercise the start of the year 448,896 448,896 448,895 18,868 18,868 8,696 8,696 8,696 8,695 8,695 33,271 33,271 33,271 1,527,714 price $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Balance at Exercise the start of the year 448,896 448,896 448,895 - - - - - - - - - - 1,346,687 price $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Granted - - - - - - - - - - - - - - Granted - - - 18,868 18,868 8,696 8,696 8,696 8,695 8,695 33,271 33,271 33,271 181,027 Exercised - - - - - - - - - - - - - - Exercised - - - - - - - - - - - - - - Expired/ Balance at the end of forfeited/ the year other 448,896 - 448,896 - 448,895 - 18,868 - 18,868 - 8,696 - 8,696 - 8,696 - 8,695 - 8,695 - 33,271 - 33,271 - - 33,271 1,527,714 - Expired/ Balance at the end of forfeited/ the year other 448,896 - 448,896 - 448,895 - 18,868 - 18,868 - 8,696 - 8,696 - 8,696 - 8,695 - 8,695 - 33,271 - 33,271 - 33,271 - 1,527,714 - The weighted average remaining contractual life of share rights and performance rights outstanding at the end of the financial year was 1.42 years (2022: 2.42 years). Those granted a performance right, upon vesting, are entitled to receive one ordinary share per performance right held. Performance rights that have vested but have not yet been issued are disclosed above as they have not expired as at 30 June 2023. Accounting policy for share-based payments Equity-settled and cash-settled share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the amount of cash is determined by reference to the share price. 140 | MAAS Group Holdings (ASX: MGH) Financial Report 94 95 MAAS Group Holdings (ASX: MGH) Financial Report | 141 MAAS Group Holdings Limited Notes to the consolidated financial statements 30 June 2023 MAAS GROUP HOLDINGS LIMITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Note 42. Share-based payments (continued) 30 JUNE 2023 NOTE 41. EARNINGS PER SHARE (CONTINUED) The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the employees to receive payment. No account is taken of any other vesting conditions. The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award, the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less amounts already recognised in previous periods. The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows: ● during the vesting period, the liability at each reporting date is the fair value of the award at that date multiplied by ● the expired portion of the vesting period. from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability at the reporting date. All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash paid to settle the liability. Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other conditions are satisfied. If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the total fair value of the share-based compensation benefit as at the date of modification. If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining vesting period, unless the award is forfeited. If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled and new award is treated as if they were a modification. MAAS Group Holdings Limited Directors' declaration 30 June 2023 MAAS GROUP HOLDINGS LIMITED DIRECTOR’S DECLARATION 30 JUNE 2023 In the directors' opinion: ● ● ● ● 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 International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 2 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 2023 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. This declaration is made in accordance with a resolution of the Board of Directors. ___________________________ Stephen G Bizzell Chairman 17 August 2023 Brisbane ___________________________ Wesley J Maas Managing Director and Chief Executive Officer 142 | MAAS Group Holdings (ASX: MGH) Financial Report 96 97 MAAS Group Holdings (ASX: MGH) Financial Report | 143 Tel: +61 7 3237 5999 Fax: +61 7 3221 9227 www.bdo.com.au Level 10, 12 Creek Street Brisbane QLD 4000 GPO Box 457 Brisbane QLD 4001 Australia INDEPENDENT AUDITOR'S REPORT To the members of MAAS Group Holdings Limited Report on the Audit of the Financial Report Opinion We have audited the financial report of MAAS Group Holdings Limited (the Company) and its subsidiaries (the Group), which comprises the consolidated statement of financial position as at 30 June 2023, the consolidated statement of profit or loss and other comprehensive income, 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 and the directors’ declaration. In our opinion the accompanying financial report of the Group, is in accordance with the Corporations Act 2001, including: (i) Giving a true and fair view of the Group’s financial position as at 30 June 2023 and of its financial performance for the year ended on that date; and (ii) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of the Company, would be in the same terms if given to the directors as at the time of this auditor’s report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current 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. Revenue recognition Key audit matter How the matter was addressed in our audit The assessment of revenue recognition was significant to our audit because revenue is a material balance in the financial statements for the year ended 30 June 2023 and the Group derives revenue from a significant number of streams. The assessment of revenue recognition and measurement required significant auditor effort. Our procedures included, amongst others: • • • • Assessing the revenue recognition policy for compliance with AASB 15 Revenue from Contracts with Customers Documenting the processes and assessing the internal controls relating to revenue processing and recognition Tracing a sample of revenue transactions to supporting documentation Assessing the adequacy of the Group's disclosures within the financial statements. Valuation and disclosures of non-financial assets including goodwill and indefinite life intangibles Key audit matter How the matter was addressed in our audit The Group’s disclosures in respect to intangible assets, including the impairment assessments of goodwill and other intangible assets are included in Note 18. The carrying value of intangible assets represent a significant asset of the Group. The Group is required to annually test the amount of goodwill and indefinite useful life intangible assets for impairment and assess other intangible assets for impairment indicators. This annual impairment test was significant to our audit because the goodwill and intangible assets balance is material to the financial statements and because management’s assessment process is complex, highly judgmental and includes estimates and assumptions relating to expected future market or economic conditions. Our procedures included, amongst others: • • • • • • Evaluating management’s determination of the Group’s Cash Generating Units ("CGU's") to ensure they are appropriate, including being at a level no higher than the operating segments of the Group Evaluating management’s process regarding the valuation of the Group’s goodwill and other intangible assets Assessing the Group’s assumptions and estimates relating to forecast revenue, costs, capital expenditure, discount rates and growth rates Involving our internal specialists to assess the discount rates against comparable market information Assessing the disclosures related to the impairment assessment by comparing these disclosures to our understanding of the matter and the applicable accounting standards Challenging key assumptions by performing sensitivity analysis on the growth rates and discount rate assumptions used. BDO Audit Pty Ltd ABN 33 134 022 870 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 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. 144 | MAAS Group Holdings (ASX: MGH) Financial Report 144 | MAAS Group Holdings (ASX: MGH) Financial Report BDO Audit Pty Ltd ABN 33 134 022 870 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 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. MAAS Group Holdings (ASX: MGH) Financial Report | 145 MAAS Group Holdings (ASX: MGH) Financial Report | 145 Business combinations Investment Properties Key audit matter How the matter was addressed in our audit Key audit matter How the matter was addressed in our audit The Group’s disclosures in respect to business combinations are included in Note 37. The audit of the accounting for the business combinations is a key audit matter due to the significant judgment and complexity involved in assessing the determination of the fair value of identifiable intangible assets and the consideration paid/payable. The assessment of business combinations required significant auditor effort. Our procedures included, amongst others: • • • • • • • • Obtaining an understanding of the transactions including an assessment of the accounting acquirer and whether the transaction constituted a business or an asset acquisition Comparing the assets and liabilities recognised on acquisition against the historical financial information Evaluating management’s assessment of the fair value of the consideration paid/payable Evaluating management’s assessment of the identifiable assets and liabilities acquired Engaging with internal experts on the appropriateness of the calculation of identifiable intangible assets Assessing the adequacy of the Group's disclosures of the acquisitions Evaluating management’s assessment of each of the contingent amounts booked at acquisition date and reporting date, including the accounting for contingent consideration in the form of shares or cash Reviewing and challenging management’s assumptions in respect of the probability of occurrence linked to financial hurdles and non- financial hurdles, at initial recognition. The balance of investment properties is material and determining the fair value involves significant judgements. Significant auditor effort and focus was required on this balance resulting in this being a key audit matter for our audit. Our procedures included, amongst others: • • • • • Evaluating management’s assessment of the fair value of the properties by obtaining external valuations for investment properties held at year end Assessing the professional competence and objectivity of the valuer and evaluate the appropriateness of the methods and assumptions used Reviewing management’s classification of assets to ensure classification in the financial statements is in accordance with AASB 140 Investment Property Evaluation of capitalised costs recognised and challenging management on the appropriateness of the treatment in accordance with AASB 140 Investment Property Critically assessing the disclosures in relation to the determination of the fair value of the investment properties by comparing these disclosures to the external valuations obtained and our understanding of the applicable accounting standards. 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 2023, 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. BDO Audit Pty Ltd ABN 33 134 022 870 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 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 Pty Ltd ABN 33 134 022 870 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 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. 146 | MAAS Group Holdings (ASX: MGH) Financial Report 146 | MAAS Group Holdings (ASX: MGH) Financial Report MAAS Group Holdings (ASX: MGH) Financial Report | 147 MAAS Group Holdings (ASX: MGH) Financial Report | 147 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 56 to 67 of the directors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of MAAS Group Holdings Limited, for the year ended 30 June 2023, 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 Pty Ltd T R Mann Director Brisbane, 17 August 2023 MAAS GROUP HOLDINGS LIMITED SHAREHOLDER INFORMATION 30 JUNE 2023 The shareholder information set out below is current as at 07 August 2023. DISTRIBUTION OF EQUITABLE SECURITIES Analysis of number of equitable security holders by size of holding 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and Over Number of Holders 1,637 1,406 450 593 99 4,185 Number of Fully Paid Shares 755,685 3,724,950 3,470,948 15,740,218 302,492,758 326,184,559 Ordinary Shares % of Total Securities Issued 0.23 1.14 1.06 4.83 92.74 100 EQUITY SECURITY HOLDERS Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Name W & E MAAS HOLDINGS PTY LTD MRS EMMA MARGARET MAAS HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED CITICORP NOMINEES PTY LIMITED J P MORGAN NOMINEES AUSTRALIA PTY LIMITED MR WESLEY JOHN MAAS EMS INVEST PTY LTD NATIONAL NOMINEES LIMITED BNP PARIBAS NOMINEES PTY LTD MR THOMAS PAUL CAVANAGH DJ PORTER HOLDINGS PTY LTD NETWEALTH INVESTMENTS LIMITED MRS LEESA ROOKE ROOKHARP INVESTMENTS PTY LIMITED WILSLAY PTY LTD MR DAVID MICHAEL ROOKE ROOKHARP CAPITAL PTY LIMITED MRS KIMBERLEY GAI LARGE R MAAS HOLDINGS PTY LTD S MAAS HOLDINGS PTY LTD Total SUBSTANTIAL HOLDERS Substantial holders in the company are set out below Ordinary Shares W & E MAAS Number Held 77,166,985 41,349,267 17,596,153 16,958,368 16,270,081 15,409,065 14,257,703 12,403,310 7,975,769 7,361,523 7,234,067 4,969,480 4,853,986 4,824,023 4,366,728 3,204,490 3,124,660 2,209,089 2,036,667 2,036,667 265,608,081 % of Total Shares Issued 23.66 12.68 5.39 5.20 4.99 4.72 4.37 3.80 2.45 2.26 2.22 1.52 1.49 1.48 1.34 0.98 0.96 0.68 0.62 0.62 81.43 Number Held 173,381,789 % of Total Shares Issued 53.15% BDO Audit Pty Ltd ABN 33 134 022 870 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 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. 148 | MAAS Group Holdings (ASX: MGH) Financial Report 148 | MAAS Group Holdings (ASX: MGH) Financial Report MAAS Group Holdings (ASX: MGH) Financial Report | 149 MAAS GROUP HOLDINGS LIMITED SHAREHOLDER INFORMATION 30 JUNE 2023 VOLUNTARY ESCROW Shares subject to voluntary Escrow are set out below Ordinary Shares Number Shares Date Escrow Period Ends 148,148.00 64,195,120.67 600,000.00 365,987.00 148,148.00 64,195,117.67 365,987.00 664,375.00 600,000.00 131,282,883 16 August 2023 31 August 2023 29 September 2023 31 May 2024 16 August 2024 31 August 2024 31 May 2025 31 August 2025 29 September 2025 VOTING RIGHTS The voting rights attached to ordinary shares are set out below: Ordinary shares All issued shares carry one vote per share and carry the rights to dividends. There are no other classes of equity securities. 150 | MAAS Group Holdings (ASX: MGH) Financial Report MAAS Group Holdings (ASX: MGH) Annual Report | 151 Disclaimer: This is the Annual Report for MAAS Group Holdings Limited (ACN 632 994 542) (“MGH”). The information contained in this report should not be taken as financial product advice and has been prepared as general information only without consideration of your particular investment objectives, financial circumstances, or particular needs. This report is not an invitation, offer or recommendation (express or implied) to apply for or purchase or take any other action with respect to securities in MGH. This report contains forward looking statements [including the outlook for the business for FY24] . These statements are not guarantees of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of MGH, and which may cause actual results or performance to differ materially from those expressed or implied by the forward looking statements contained in this report. No representation is made that any of these statements will come to pass or that results will be achieved. Similarly, no representation is given that the assumptions upon which forward looking statements may be based are reasonable. These forward looking statements and forecasts are based on information available to MGH as of the date of this report. Except as required by law or regulation (including the ASX Listing Rules) MGH undertakes no obligation to update or revise these forward looking statements. Pictured: JLE high voltage project 

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