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Annual Report 2024

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Annual Report 2024 B MMS Annual Report 2024 MMS ANNUAL REPORT 2022 B Header SUBHEADER Acknowledgement of Country McMillan Shakespeare Group acknowledges Aboriginal and Torres Strait Islander Peoples as the Traditional Owners and Custodians of the land. We recognise their connection to land, water and community, and pay our respects to Elders past, present and emerging. We extend our respect to Aboriginal and Torres Strait Islander Peoples living today. McMillan Shakespeare Group pays respects to and acknowledges Mãori as tangata whenua and Treaty of Waitangi partners in Aotearoa New Zealand. Our Brands With eight brands across employee benefits, fleet management and disability support services, MMS operates three segments being: − Group Remuneration Services (Maxxia, RemServ, Oly, Onboard Finance) − Asset Management Services (Interleasing, Just Honk) − Plan and Support Services (Plan Partners, Plan Tracker) McMillan Shakespeare (MMS) is a provider of salary packaging, novated leasing, disability plan management, support coordination, asset management and related financial products and services. MMS is publicly listed on the Australian Securities Exchange, trading as McMillan Shakespeare Limited (ASX:MMS). MMS employs a highly committed team of over 1,300 people across Australia and New Zealand and domestically manages programs for some of the largest public sector, corporate and charitable organisations. 1 MMS Annual Report 2024 Annual General Meeting The Annual General Meeting of the members of McMillan Shakespeare Limited A.B.N. 74 107 233 983 will be held virtually and in person on 25 October 2024 at 10.00am ADST. Please refer to the AGM notice for further details at www.mmsg.com.au/investor. mmsg.com.au Our strategy 2 Our cultural statement 3 FY24 highlights 4 Letter to shareholders 5 Directors’ Report 9 Directors 9 Directors’ meetings 10 Principal activities 11 Results 11 Dividends 11 Review of operations – Group 12 Segment review 14 Outlook 16 Risk management and key business risks 16 Directors’ experience and special responsibilities 20 Company Secretary 21 Remuneration report 22 Unissued shares 40 Directors’ interests 40 Non-audit services 40 Events occurring after the reporting date 40 Environmental regulations 41 Indemnification and insurance 41 Corporate governance practices 41 Auditor’s independence declaration 41 Directors’ declaration 41 Five year summary 42 Financial report 43 Directors’ declaration 44 Auditor’s independence declaration 45 Financial statements 46 Notes to the financial statements 51 Independent Auditors’ Report 97 Shareholder information 103 Corporate directory 105 Contents CONTENTS Our strategy OUR STRATEGY 2 MMS Annual Report 2024 Our Purpose Strong NPS Increase Productivity High ROCE Employer of Choice EPS Growth To make a difference to people’s lives Our Vision To be the trusted partner, providing solutions in making complex matters simple Our Strategic Priorities Excel in customer experience Drive technology-enabled productivity Broaden our competency-led solutions Our Outcomes 1 3 2 We know our reason for being and go above and beyond. We care for each other and value each person’s unique contribution. We work together to do the right thing and deliver better outcomes. We act with integrity, pursue excellence and constantly raise the bar. 3 MMS Annual Report 2024 Our cultural statement OUR VALUES At MMS, we’re proud of our history, our heart, and our commitment to making a difference to people’s lives. We care because people matter. We collaborate because the greatest achievements are made together, and we continuously create because some of the best innovations have yet to be imagined. Our values 4 MMS Annual Report 2024 FY24 Highlights HIGHLIGHTS FY24 dividend fully franked $1.54 24.2% Normalised Revenue $525.8m 11.5% GRS Salary Packages 412,914 4.7% Normalised ROCE 62.1% 22.1% pts Normalised UNPATA $107.6m 38.2% Normalised EPS 154.5c 42.9% Statutory NPAT $83.5m 158.9% GRS Novated Leases 79,228 7.9% High customer satisfaction GRS +46 Net promoter score High customer satisfaction AMS +29 Net promoter score High customer satisfaction PSS +57 Net promoter score Normalised EBITDA margin 33.7% 5.8% points AMS Managed Assets 15,074 4.9% PSS Customers 35,030 10.3% 5 MMS Annual Report 2024 FY24 has been a year of strong organic growth, supporting our customers during a year of economic and cost of living pressures and one of strategic execution for MMS. We made good progress on our key strategic initiatives, delivered productivity gains across the business and disposed of non-core operations. We also played an important role in assisting our customers to transition to a low carbon future. Economic and industry context Continued cost of living pressures have supported the increased relevance of salary packaging and novated leasing as many working Australians search for meaningful ways to manage the cost of car ownership and to maximise their take home pay and benefit arrangements. Since the Federal Government passed the Treasury Laws Amendment (Electric Car Discount) Bill 2022, which exempts certain non-luxury zero and low emissions vehicles from Fringe Benefits Tax (FBT), we have seen a surge in orders for Electric Vehicles 3 (EVs) from our customers, who can benefit from the environmental benefits and tax savings of switching to EVs. In March 2024, the Government introduced the “New Vehicle Efficiency Standard” which establishes a vehicle efficiency standard to regulate the carbon dioxide emissions of certain road vehicles and will commence on 1 January 2025. It will apply to new cars sold in the Australian market. Letter to shareholders Helen Kurincic Chair Rob De Luca Managing Director & Chief Executive Officer 1. Normalised refers to adjustments made for the negative earnings transitional period for the implementation of the funding warehouse, Onboard Finance (“Warehouse”). It normalises for the Warehouse’s in-year operating and establishment expenses and for an adjustment for current commissions that would have otherwise been received in period had the sales been financed via a principal and agency funder rather than through the Warehouse. Normalised financials are stated for FY24 and FY23 and will be stated up to and including FY25. 2. Underlying net profit after tax and acquisition amortisation (UNPATA), being net profit after tax but before the after-tax impact of acquisition and divestment related activities and non-operational items. 3 Electric Vehicles includes Battery Electric Vehicles (BEV) and Plug In Hybrid Electric Vehicles (PHEV). On behalf of McMillan Shakespeare (MMS, the Group or the Company), the board of directors, management team and staff, we are pleased to present our 2024 annual report. Our Normalised1 Return on Capital Employed (ROCE) improved to 62.1%, up 22.1% points, our Normalised Earnings Per Share (EPS) grew by 42.9% to 154.5 cents, our Normalised UNPATA2 was up 38.2% to $107.6 million and Statutory Net Profit after tax was up 158.9% to $83.5 million. As a result, we declared a fully franked dividend of 154 cents per share, up 24.2%. LETTER TO SHAREHOLDERS 6 MMS Annual Report 2024 Letter to shareholders During the year there were improvements in vehicle supply which has benefited both novated leasing sales and asset management. This has resulted in a decrease in average delivery times and a reduction in carry over. The National Disability Insurance Scheme (NDIS) continued to grow and evolve, with more than 650,000 participants and circa $41 billion in funding in 2024. The NDIS Independent Review, which assessed the design, operation and sustainability of the scheme, was delivered in late December 2023 with the Federal Government still to deliver its full response. We are closely monitoring the outcomes of the review and engaging with the National Disability Insurance Agency (NDIA) and other stakeholders to ensure our plan management and support co-ordination services continue to be aligned with the scheme objectives and participant needs. The National Disability Insurance Scheme Amendment (Getting the NDIS Back on Track) Bill 2024 passed Parliament on 22 August 2024 and is due to gain Royal Assent in September 2024. This is the first tranche of reforms that the Commonwealth Government is proposing and aims to clarify the existing legislation to improve the delivery of the Scheme. It introduces a new planning framework on how the NDIS will operate including lists of what are included and excluded in the Scheme. It also makes changes to how people can access the NDIS, how their needs are assessed and introduces flexible budgets. While there are currently no specific impacts to PSS, we will continue to engage with Government and the NDIA on the proposed future reforms. Financial performance In FY24 we delivered strong growth in our financial and operating performance, as we remained focused on the customer and progressed on our Simply Stronger initiatives. Our statutory NPAT grew by 158.9% to $83.5 million and our Group Normalised revenue increased by 11.5% to $525.8 million, while our Group Normalised UNPATA grew by 38.2% to $107.6 million. We also generated strong cash flow from our operations, which enabled us to invest in our growth initiatives whilst increasing our dividend to shareholders. All three of our segments delivered organic growth in FY24. Our Group Remuneration Services (GRS) segment achieved Normalised UNPATA of $80.7 million, an increase of 53.7% on FY23, and Normalised revenue of $292.5 million, an increase of 25.7% on FY23. This was driven by growth in novated lease sales with increased demand for EVs and higher novated lease yields. Our Asset Management Services (AMS) segment achieved UNPATA of $19.1 million, an increase of 2.0% on FY23. This result was driven by an increase in net amount financed (NAF) and growth in fleet size. Our Plan and Support Services (PSS) segment achieved UNPATA of $8.5 million, an increase of 6.4% on FY23. This was driven by organic customer growth and operational efficiencies. We declared a fully franked dividend of $1.54 per share for the year, inclusive of the final dividend of $0.78 per share payable on 27 September 2024. This represents a payout ratio of 100% of Normalised UNPATA. Dividends are paid out of Normalised UNPATA reflecting our aim of avoiding shareholders being negatively impacted during the warehouse transition period. Strategic priorities In FY24 we continued to progress our clear strategy and Simply Stronger program aimed at achieving our vision of being a trusted partner and providing solutions which make complex matters simple. This strategic ambition has clear intent to deliver increased productivity, continuing to drive customer advocacy through strong Net Promoter Scores (NPS), whilst also generating high ROCE, EPS growth and to be an employer of choice. We have three strategic priorities to achieve this vision: excelling in customer experience, driving technology-enabled productivity, and broadening our competency-led solutions. In FY24 we have delivered a number of key Simply Stronger initiatives that are now driving improvements for our customers and people. In our GRS segment, the Employer Connect portal is being well received by clients who highlight the ease of use and expanded information provided. We soft launched Oly, an innovative brand that will enable small and medium sized business employees to access and manage a novated lease directly from a simple digital interface. Oly’s brand proposition also includes making the benefits of the EV Discount available to a wider audience. FY25 will see the full rollout and promotion of Oly. Our investment in technology and artificial intelligence, via our data consolidation initiative in the AMS segment, is delivering better outcomes for our trans-Tasman customers with increased visibility of data enabling better decision making for leasing customers. In our PSS segment our investments in automation and low-touch channels have delivered business efficiencies and improved processing and turnaround times for customers. Over the course of the whole Simply Stronger program (FY23–FY25) we expect to invest $35 million in capital expenditure having invested $19 million in FY24. The program is on track for delivery in FY25 with an expected commitment of ~$11m. LETTER TO SHAREHOLDERS 7 MMS Annual Report 2024 Operational highlights We achieved a number of operational milestones and successes in FY24, reflecting our continued focus on the customer and executing on our strategy. Some of the highlights include: – GRS: We achieved strong novated lease sales up 23.0% on previous corresponding period (pcp) driven by increased demand for EVs, which comprised 41.0% of new novated lease sales during the period, up from 16.0% in FY23. Whilst we were unsuccessful in renewing the South Australian Government contract post 30 June 2024, we renewed our novated leasing services contract with the Queensland Government and soft launched our new Oly brand to provide the benefits of novated leasing into new markets. Improved vehicle supply led to a reduction in delivery times for new vehicles and a reduction in carry over. We also implemented our No Wet Ink initiative, a digital signature solution which reduces paperwork and simplifies the novated lease process. – AMS: We delivered a 16.2% increase in the NAF and a 4.9% growth of assets managed. During the period we launched a new website for Just Honk that enables a fully digital end-to-end search, trade-in and purchase process, a new dealer portal for quoting and delivery vehicles, and new products including green finance for zero and low emissions vehicles. – PSS: We grew our customer base by 10.3% to 35,030, despite slower participant scheme growth and the commencement of the NDIS PACE4 program rollout, which affected the volume of plan reassessments. We also invested in automating channel processes in our operations to improve integrity checks and the ingestion of invoices that produced faster payment times. Warehouse and Capital Management We continued to progress our capital management strategy through the ongoing implementation of Onboard Finance, our warehouse funding initiative launched in FY22, achieving our target of 20% of monthly volume of leases financed. The strategic and financial benefits of Onboard Finance include diversifying our funding sources, increasing annuity-based income, creating a new source of income and generating higher overall value per transaction. Our capital allocation framework remains unchanged, with our main priority to reinvest in the business in order to deliver sustainable growth. After which we will fund any strategic acquisitions, and deleverage as appropriate, before returning capital to shareholders as fully franked dividends in the first instance. We will do this in alignment with our dividend policy that aims to pay out between 70–100% of Normalised UNPATA. Our debt to EBITDA ratio was 0.5x (down from 1.3x in FY23). Our commitment to ESG – environmental, social, and governance. We are committed to making a positive difference to people’s lives through our ESG initiatives. During the period, we continued to deliver on our sustainability strategy, which was introduced in FY21 to provide a clear framework for driving positive environmental and social outcomes for our stakeholders and communities in which we operate. We have continued to make progress on our sustainability strategy. Over the last year we have reduced our total greenhouse gas emissions by 19% pcp, promoted the uptake of EVs among our customers and clients, achieved gender pay equality in like-for-like roles and implemented our first Reflect Reconciliation Action Plan (RAP) and Accessibility and Inclusion Plan (AIP). Since establishing our baseline year, we have transitioned to renewable electricity (in offices where we can select the energy retailer), used technology to engage with our stakeholders to reduce our travel footprint and exited our office space in the UK. Our office space at Melbourne Central Towers achieved a 5.5-star NABERs energy rating. All our people completed required compliance training and we continued to focus on gender equality and our FY30 target of 40-40-20 gender presentation at Board, Other Executives, General Managers and Senior Manager levels. We achieved 43% female gender representation at Board (including the CEO) level. This year also saw our partnership with Jigsaw Australia come to life with four Jigsaw trainees each completing a skilled work placement across the business. We received positive feedback from Jigsaw Australia and the trainees themselves about the skills they developed and their experience at MMS. We look forward to welcoming future trainees to MMS in FY25. Through our Reflect RAP, we continued to embed our deliverables and support reconciliation. Our Executive Leadership team and RAP Working Group participated in cultural awareness training. We provided opportunities for our people to continue their education about our shared history through webinars with guest speakers and offering indigenous experiences. Through our membership of Supply Nation, we continue to look for opportunities to purchase goods and services to support economic opportunities for First Nations communities. As a result of our continued efforts with regards to sustainability practices, our Morgan Stanley Capital International Environment, Social and Governance (ESG) Rating increased from A to AA. Since the release of our first strategy, the sustainability landscape has evolved and coupled with upcoming reporting changes, we are looking to the future and have updated our Sustainability Strategy for the FY25 – FY28 period which we look forward to sharing in our FY24 Sustainability Report. Letter to shareholders 4 PACE is NDIA’s new system to make it easier and safer for participants to view and manage their NDIS funds and their service providers LETTER TO SHAREHOLDERS 8 MMS Annual Report 2024 Letter to shareholders Our people We are proud of our people. They have demonstrated resilience, agility and dedication in delivering positive outcomes for our customers and shareholders. We are committed to providing a safe, inclusive and rewarding work environment for our people, where they can grow and thrive. We invest in our people’s development, wellbeing and engagement, and recognise and reward their performance and achievements. We also foster a culture of feedback and continuous improvement and encourage our people to share their ideas and insights. This year we embarked on an exciting creative process to reimagine our Company’s culture and values, inviting all our people to participate through workshops, focus groups and questionnaires. Our new values are authentic; they were designed by our people, for our people – making them emblematic not only of MMS but of the passionate team of over 1,300 individuals who make up our businesses. Focus and outlook We enter FY25 with a clear strategy focused on our three strategic priorities. We expect many of the market conditions in FY24 to carry into FY25, including continued inflation and cost of living pressures as well as potential regulatory changes for the NDIS. We expect continued increases in auto-supply and increased pricing competition throughout FY25. This is coupled with more manufacturers and models with more price-points becoming available within the Australian EV market. Whilst we note that the FBT benefit on plug-in hybrids is scheduled to expire on 1 April 2025, the FBT discount on battery EVs continues with the Government committed to review by mid-2027. We will continue to pursue organic growth across all our segments and from new channels such as Oly which aims to deliver the benefits of novated leasing to a broader market. In Onboard Finance we will continue to target ~20% (excluding Oly) of novated lease volume through FY25, with a Normalisation adjustment of ~$(9m) expected (subject to market conditions). The Warehouse is expected to contribute incremental earnings post the Normalisation transition period. FY25 will be the last year our results are Normalised. In FY25 we will complete the Simply Stronger program deliverables which include new customer facing apps, improved customer self-service capability and progressing technology modernisation with an expected commitment of ~$11m during the year. We will continue to invest in and focus on our strategic priorities: excelling in customer experience, driving technology-enabled productivity, and broadening our competency-led solutions. We would like to thank our people for their dedication and performance, our customers and clients for their trust and loyalty, and our shareholders for their support and confidence. Yours sincerely, Helen Kurincic Chair Rob De Luca Managing Director & Chief Executive Officer LETTER TO SHAREHOLDERS 9 MMS Annual Report 2024 The Directors of McMillan Shakespeare Limited (MMS, The Group or Company) present this report on the consolidated entity, consisting of the Company and the entities that it controlled at the end of, and during, the financial year ended 30 June 2024. Directors The Directors of the Company during the whole of the financial year and up to the date of this report (Directors) are as follows: Ms Helen Kurincic (Independent Non-Executive Director, Chair of the Board) Mr Rob De Luca (Managing Director and CEO) Mr Bruce Akhurst (Independent Non-Executive Director) Mr John Bennetts (Non-Executive Director) Mr Ross Chessari (Non-Executive Director) Ms Kathy Parsons (Independent Non-Executive Director) Ms Arlene Tansey (Independent Non-Executive Director) Details of the qualifications, experience and special responsibilities of the Directors are set out on pages 20 and 21. Independent Directors, as determined in accordance with the Company’s definition of independence, were independent as at 30 June 2024. Directors’ Report DIRECTORS’ REPORT 10 MMS Annual Report 2024 Directors’ Report DIRECTORS’ REPORT Directors’ meetings The number of meetings held and attended by the board of Directors (Board) (including meetings of committees of the Board) during the financial year ended 30 June 2024 were as indicated in the table below. Board Meetings Audit, Risk & Compliance Committee Meetings Director Eligible to Attend Attended Eligible to Attend Attended Ms H. Kurincic (Chair) 14 14 5 5 Mr R. De Luca (Managing Director and CEO) 14 14 - - Mr B. Akhurst 14 14 5 5 Mr J. Bennetts 14 13 - - Mr R. Chessari 14 14 - - Ms K. Parsons 14 14 5 5 Ms A. Tansey 14 14 5 5 People, Culture and Remuneration Committee Nomination Committee Director Eligible to Attend Attended Eligible to Attend Attended Ms H. Kurincic (Chair) 5 5 1 1 Mr R. De Luca (Managing Director and CEO) - - - - Mr B. Akhurst 5 5 1 1 Mr J. Bennetts - - - - Mr R. Chessari - - - - Ms K. Parsons 5 5 - - Ms A. Tansey 5 5 1 1 MMS Annual Report 2024 11 Directors’ Report DIRECTORS’ REPORT Principal activities The principal activities of the Company and its controlled entities were the provision of salary packaging, novated leasing, disability plan management, support co-ordination, asset management and related financial products and services. In the opinion of the Directors, there were no significant changes in the nature of activities of the Company and its controlled entities during the course of the financial year ended 30 June 2024 that are not otherwise disclosed in this Annual Report. Results The Group’s profit after income tax for the year amounted to $83,547,072 (2023: $32,272,419). Refer to the Letter to Shareholders (page 5) and the Review of Operations (page 12) for further commentary. Dividends Dividends paid by the Company during the financial year ended 30 June 2024 are as follows: Dividends 2024 2023 Final dividend for the financial year ended 30 June 2023 of 66 cents (2023: 74 cents) per ordinary share paid on 22 September 2023 fully franked at the tax rate of 30% (2023: 30%) $45,964,396 $51,535,838 Interim dividend for the financial year ended 30 June 2024 of 76 cents (2023: 58 cents) per ordinary share paid on 22 March 2024 fully-franked at the tax rate of 30% (2023: 30%) $52,928,698 $40,392,954 Total $98,893,094 $91,928,792 Subsequent to the financial year ended 30 June 2024, the Directors declared a final dividend of 78 cents per ordinary share (2023: 74 cents per ordinary share) (fully franked at the tax rate of 30%) to be paid on 27 September 2024, bringing the total dividend to be paid for the financial year ended 30 June 2024 to 154 cents per ordinary share (2023: 124 cents per ordinary share). Ex-dividend date 12 September 2024 Record date for determining entitlements to the dividend 13 September 2024 Dividend payment date 27 September 2024 12 MMS Annual Report 2024 Directors’ Report DIRECTORS’ REPORT Review of operations – Group MMS delivered strong growth across financial and operating performance in FY24 as the Group progressed and delivered on a number of key strategic initiatives. We continued to support customers during a year of cost-of-living pressures as our service offering helped customers as they looked to maximise their take home pay and benefit arrangements. Through novated leasing and asset management we assisted our clients and customers in their transition to a low-carbon future. Each segment delivered organic business growth on the prior comparative year with GRS increasing novated lease sales by 23.0%, AMS increasing NAF by 16.2% and PSS increasing customers by 10.3%. During FY24, MMS continued to make progress on its strategy and Simply Stronger initiatives with a focus on excelling in customer experience, driving technology led productivity and broadening its competency-led solutions. A key area of focus for the Company in FY24 was supporting Australians looking to transition to lower carbon emission vehicles. Following the passage of the Treasury Laws Amendment (Electric Car Discount) Bill 2022 on 12 December 2022, MMS has seen elevated inquiry and activity from customers seeking an EV. This growth continued in FY24, with EVs comprising 41.0% of new novated lease sales during the year up from 16.0% in FY23. MMS also soft launched Oly during the year, a new novated leasing brand offering for employees from small and medium sized businesses, to capitalise on a larger market for novated leasing. In FY24 MMS continued the implementation of its funding warehouse, Onboard Finance. During the year, 20% (excluding Oly) of monthly novated lease volumes were financed through Onboard Finance and as at 30 June 2024, it held receivables of $325.6m in relation to novated leases funded via Onboard Finance. 13 MMS Annual Report 2024 Group financial performance summary Continuing operations1 2024 $’000 2023 $’000 Change % Statutory Revenue 521,018 464,004 12.3% Normalised Revenue2,3 525,811 471,375 11.5% Normalised EBITDA2,3,4 177,019 131,283 34.8% Normalised UNPATA2,3,5 107,649 77,920 38.2% UNPATA2,5 90,402 66,413 36.1% Statutory NPAT 90,057 64,449 39.7% Discontinued operations1 Statutory NPAT (6,510) (32,177) 79.8% Total operations Statutory NPAT 83,547 32,272 158.9% Normalised EPS 2,3 (cents) 145.2 119.6 21.4% Total dividend per share (cents) 154.0 124.0 24.2% Normalised ROCE3,6 (%) 62.1% 40.0% 22.1% 1 Continuing operations. All financial information and metrics in the review of operations are from continuing operations only unless otherwise stated. In relation to discontinued operations, on 31 July 2023, the Group completed the sale of its Australian Asset Finance Aggregation business (trading as UFS and NFC), and on 30 November 2023 the Group also completed the sale of its Asset Management Services UK businesses. As a result of these sales the Aggregation and UK businesses are no longer presented in the segment note and are discontinued operations. 2 Normalised Revenue, Normalised EBITDA, Normalised UNPATA, UNPATA and Normalised EPS are non-IFRS metrics used for management reporting. The Group believes Normalised UNPATA and UNPATA reflects what it considers to be the underlying performance of the business. 3 Normalised refers to adjustments made for the negative earnings transitional period for the implementation of the funding warehouse, Onboard Finance (“Warehouse”). It normalises for the Warehouse’s in-year operating and establishment expenses and for an adjustment for current commissions that would have otherwise been received in period had the sales been financed via a principal and agency funder rather than through the Warehouse. Normalised financials are stated for FY24 and FY23 and to be stated up to and including FY25. Normalised impacts in FY24 were Revenue $(4.8)m, EBITDA $(23.2)m, EBIT $(24.6)m and UNPATA of $(17.2)m and FY23 Revenue $(7.4)m, EBITDA $(15.3m), EBIT $(16.4)m and UNPATA of $(11.5)m. 4 Earnings before interest, tax, depreciation (excluding fleet and warehouse depreciation) and amortisation (EBITDA) excludes the pre-tax impact of acquisition and divestment related activities, and non-operational items otherwise excluded from UNPATA on a post-tax basis. 5 Underlying net profit after tax and acquisition amortisation (UNPATA), being net profit after tax but before the after-tax impact of acquisition and divestment related activities and non-operational items. 6 Normalised return on capital employed (ROCE), is based on last 12 months’ Normalised earnings before interest and tax (EBIT). Normalised EBIT (continuing operations for FY24 and total operations for FY23) is before the pre-tax impact of acquisition and divestment related activities and non-operational items otherwise excluded from UNPATA on a post-tax basis. Capital employed (excluding lease liabilities) used in the calculations includes the add back of impairment of acquired intangible asset charges incurred in the respective financial period and also includes add back for the Warehouse. Note: The non-IFRS metrics presented in this Review of Operations have not been audited in accordance with the Australian Auditing Standards. Directors’ Report DIRECTORS’ REPORT 14 MMS Annual Report 2024 Segment review Group Remuneration Services (GRS) Growth in GRS revenue was supported by a 23.0% increase in novated lease sales, a 10.0% increase in novated lease yield and full year benefit of elevated interest rates on the salary packaging float. The Group continued to capture the EV opportunity presented by the Federal Government’s electric car discount, as more Australians look to transition to lower carbon emission vehicles, whilst also capitalising on the value proposition of novated leasing. The uplift in demand for EVs continued during FY24, with EVs making up 43.2% of new novated lease orders, up from 21.4% in FY23. Vehicle supply, which has been constrained for several years, saw improvements during the year. This resulted in a decrease in average delivery times and a reduction in carry over in the year. Total carry over revenue to benefit future years as at 30 June 2024 was $24.8m, down from $32.3m as at 30 June 2023. During the year, MMS introduced a new brand making novated leases available to employees of small and medium- sized businesses to help fulfil this segment’s demand. Oly is an innovative brand that will enable employees to access and manage a novated lease directly from a simple and digital interface. Part of Oly’s brand proposition is to make the benefits of the EV FBT discount available to a wider audience. Oly was soft launched in market ahead of its full rollout in FY25. Oly is one of the key Simply Stronger initiatives and is already showing early positive customer interest. Following tender processes, RemServ renewed its longstanding Queensland Government Novated Leasing Services contract whilst Maxxia was unsuccessful in renewing the South Australia Government contract (ended 30 June 2024). GRS continues to take appropriate measures to minimise the impact on future earnings. GRS introduced a number of other initiatives during FY24 including a digital signature solution improving efficiencies and the novated leasing customer experience. The business rolled out Employer Connect, an online portal providing expanded reporting for employers. Group Remuneration Services (GRS) 2024 $m 2023 $m Change % Revenue 289.1 225.5 28.2% Normalised Revenue2,3 292.5 232.8 25.7% Normalised EBITDA2,3,4 131.8 90.2 46.2% Normalised UNPATA2,3,5 80.7 52.5 53.7% Refer notes on the Group Financial performance summary table above. Directors’ Report DIRECTORS’ REPORT 15 MMS Annual Report 2024 Asset Management Services (AMS) The AMS segment experienced improvements in the availability of supply and delivery of vehicles within the business buyer market to pre-pandemic levels. This underpinned a 16.2% increase in the net amount financed and a 4.9% growth in managed assets. Strong and sustained demand for high quality used vehicles supported remarketing yields remaining elevated. The Asset Written Down Value (WDV) of $363.2m (including fleet assets funded utilising principal and agency arrangements) was up 13.2% on FY23. This was underpinned by improved vehicle supply and customers replacing units that have been out of contract with new vehicles. AMS’s FY23 result included ~$1.6m EBITDA from a one off financial benefit from the expiration of larger customer contracts. Excluding this impact, AMS growth in FY24 would have been 8.8%. In response to organisations and governments increasingly looking to reduce their carbon footprint, AMS introduced a new green financing product for zero and low emissions vehicles available to our fleet customers. Throughout the year, AMS continued its focus on introducing digital tools to enhance customer interactions and increase efficiencies. Initiatives included the launch of a new Just Honk website that enables a fully digital end-to-end sales process, a new dealer portal, and an enhanced data platform that utilises artificial intelligence to enable enhanced decision making for our trans-Tasman customers. Asset Management Services (AMS) 2024 $m 2023 $m Change % Revenue 177.8 187.4 (5.1%) EBITDA4 29.5 28.7 2.7% UNPATA5 19.1 18.7 2.0% Refer notes on the Group Financial performance summary table above. Plan and Support Services (PSS) Growth in PSS revenue was achieved via organic growth with a 10.3% increase in plan management and support coordination customers to 35,030. The performance was achieved despite the slowing entry to the scheme and the commenced rollout of the NDIS’s system called PACE, which affected the volume of plan assessments and reviews, impacting the uptake of plan management services. PSS continued its focus on enhancing digital tools to improve customer experiences and outcomes and operational efficiencies. In FY24, investments were made in integrity checks, automation and low-touch channels to improve the ingestion of invoices and reduce payment time frames. Continued investment in our scalable platform enabled PSS to grow despite there being no increase made by the NDIA to pricing arrangements for plan management and support coordination during the year. PSS fully supports the NDIA’s ongoing focus on preventing fraud and conflicts of interest and ensuring the NDIS delivers value for money. During the year $53.3m of invoices identified by PSS integrity checks were withheld for further investigation prior to any payment whilst PSS supported Scheme savings of $88.9 million year for services customers received under the price guide limit. The National Disability Insurance Scheme Independent Review report was handed to Minister Shorten in December 2023 for review and consultation within Government. The Report made 26 recommendations with 139 action points for the Government to consider with recommended actions 4.1, 10.3 and 10.5 to potentially have implications for MMS if the Government adopts these recommendations in full. Subsequently the National Disability Insurance Scheme Amendment (Getting the NDIS Back on Track) Bill 2024 was passed on 22 August 2024 and is due for Royal Assent in September 2024. MMS will continue to engage with the NDIA, Government and the sector regarding the Independent Review and the Getting the NDIS Back on Track Bill. Plan and Support Services (PSS) 2024 $m 2023 $m Change % Revenue 50.6 48.6 4.3% EBITDA4 13.1 12.3 6.7% UNPATA5 8.5 8.0 6.4% Refer notes on Group Financial Performance Summary table above. Directors’ Report DIRECTORS’ REPORT 16 MMS Annual Report 2024 Directors’ Report DIRECTORS’ REPORT Discontinued operations On 31 July 2023, the Group completed the sale of its Australian Asset Finance Aggregation business (trading as UFS and NFC, Aggregation Business). On 30 November 2023, MMS also completed the sale of its Asset Management Services UK business. As a result of these sales the Aggregation and UK businesses are no longer presented in the segment note and are discontinued operations. Outlook We enter FY25 with a clear strategy focused on our three strategic priorities. We expect many of the market conditions in FY24 to carry into FY25, including continued inflation and cost of living pressures as well as potential regulatory changes for the NDIS. We expect continued increases in auto-supply and increased pricing competition throughout FY25. This is coupled with more manufacturers and models with more price-points becoming available within the Australian EV market. Whilst we note that the FBT benefit on plug-in hybrids is scheduled to expire on 1 April 2025, the FBT discount on battery EVs continues with the Government committed to review by mid-2027. We will continue to pursue organic growth across all our segments and from new channels such as Oly which aims to deliver the benefits of novated leasing to a broader market. In Onboard Finance we will continue to target ~20% (excluding Oly) of novated lease volume through FY25, with a Normalisation adjustment of ~$(9m) expected (subject to market conditions). The Warehouse is expected to contribute incremental earnings post the Normalisation transition period. FY25 will be the last year our results are Normalised. In FY25 we will complete the Simply Stronger program deliverables which include new customer facing apps, improved customer self-service capability and progressing technology modernisation with an expected commitment of ~$11m during the year. We will continue to invest in and focus on our strategic priorities: excelling in customer experience, driving technology-enabled productivity, and broadening our competency-led solutions. Risk management and key business risks MMS maintains a Risk Management Framework (the Framework) to support the identification, assessment, management, monitoring, and reporting of internal and external sources of risk that could impact on the Group’s operations and strategic objectives. The Framework is based on the principles and guidelines identified in Risk Management Standard AS ISO 31000:2018 and is underpinned by a proactive risk management culture. Risk management is a continuous process that is embedded within day-to-day operational activities of the Group with active involvement of the Executive Leadership Team and oversight from the Board Audit, Risk and Compliance Committee (ARCC), and the Board. The Group’s Risk Management Policy and the ARCC Charter can be found on the Company’s website: https://mmsg.com.au/governance. The Group’s internal audit function also periodically reviews and provides independent assurance regarding the adequacy of controls and processes for managing risks and compliance obligations. Outlined below are key risks to which the Group is exposed together with the strategies employed to mitigate and manage those risks. This is not an exhaustive list of all actual or potential risks that may affect the Group and the strategies employed to mitigate these risks cannot provide absolute assurance that a risk will not materialise. Risks presented in this section are in no particular order. 17 MMS Annual Report 2024 Risk description Risk management strategy Macroeconomic environment A downturn in economic conditions may affect customer demand for our products and services, our access to and cost of funding, and the financial condition of our customers, partners, and suppliers, resulting in an adverse impact to the Group’s operations and/or financial performance. – Regular monitoring of the external environment including the economic outlook to inform strategic planning, portfolio management, corporate treasury and credit activities. − Active management of financial risks in line with policies approved by the Board. − Ongoing oversight of the Group’s financial risk profile by the Executive Credit, Residual Value and Treasury Committees. − Client diversification to reduce reliance on any single client relationship. Changes in government policy and regulation Changes to government policy and regulation and particularly those applicable to Financial Services, the National Disability Insurance Scheme (NDIS), taxation (including Fringe Benefits Tax (FBT)), consumer data and privacy, and Climate Change may have an adverse impact on the Group’s operations and/or financial performance. – The Group has dedicated legal, government and industry affairs teams with responsibility for monitoring and advising on legislative, regulatory and industry developments to enable the Group to adapt and respond. − Proactive engagement across state and federal governments and regulators, including making submissions relating to proposed changes in laws, regulatory and licensing environments which may impact the Group. − Active participation and support of peak industry bodies such as the National Automotive Leasing and Salary Packaging Association (NALSPA), the Australian Finance Industry Association (AFIA), and Disability Intermediaries Australia (DIA). − Business model diversification and development of products and services to support clients and customers transition to EVs. Competition and customer contracts The Group’s businesses are affected by competing suppliers of salary packaging, novated leasing, asset financing, and NDIS plan management and support coordination products and services. A sustained increase in competition from existing competitors, new entrants or disruptors, or loss of a material client contract(s), may result in a failure to grow and/or loss of market share or revenues in some segments. – Focus on continual improvement in our product and service offerings to attract and retain customers through proactive client engagement and relationship management, product and digital innovation and appropriate customer service. − Ongoing monitoring of market trends (e.g., customer, competitor and technology) and maintaining a disciplined approach to pricing. − Client diversification to reduce reliance on any single client relationship. Global motor vehicle supply chain dynamics Global motor vehicle supply chain dynamics may affect business segment sales volumes, customer order backlogs and new and used vehicle pricing resulting in potential adverse impacts to the Group’s financial condition and performance. – The Group closely monitors supply chain risks and maintains a strategic approach to procurement which aims to strengthen and broaden our relationships with supply chain partners including original equipment manufacturers (OEMs) and dealer groups. − Active management of residual value risk taken by the AMS segment in line with the Group’s Asset Risk Policy with oversight from the Executive Residual Value Committee. Transformation and delivery of strategic initiatives The Group’s growth strategy is underpinned by a comprehensive transformation program aimed at delivering innovation of products and services and productivity benefits through digitisation. These initiatives may not be delivered in line with the planned scope, timeline, or budget, and/or the anticipated benefits may not be realised. – The Group has appointed a Chief Transformation Officer and established a Transformation Office to oversee the Group’s strategic projects program. − Development and implementation of Project and Organisational Change Frameworks, Methodologies and Tools to support the successful delivery of initiatives and realisation of anticipated benefits. − Transformation initiatives are oversighted by project steering committees, the Executive Program Governance Committee (PGC) and the Board. Directors’ Report DIRECTORS’ REPORT 18 MMS Annual Report 2024 Risk description Risk management strategy Sustainability and climate change The Group’s stakeholders are increasingly informing their decisions based on our ESG credentials. A failure to appropriately respond to and address ESG topics that are significant to our business and key stakeholders could have an adverse impact on the Group’s operations, financial performance and/or reputation including our social licence to operate. – The Board is responsible for approving the Group’s sustainability strategy, targets and approving external communications relating to MMS strategy and performance. − The Group has established a Sustainability Committee chaired by the CEO and comprising representatives from Finance, Risk, Sustainability and Procurement which is responsible for driving and supporting the implementation of programs and initiatives that support the sustainability strategy. − Materiality reviews are undertaken at periodic intervals to identify the most relevant risks and opportunities (topics) for the Group. − CEO and key executives have performance metrics and targets addressing sustainability priorities. − Refer to our website www.mmsg.com.au/sustainability for further information about sustainability at MMS. Financial and balance sheet risks The Group is exposed to various financial risks arising from its operations including risks associated with access to equity capital and debt funding, liquidity management, interest rates and credit spreads, the provision of credit and the residual value of leased assets. These risks have the potential to affect the Group’s competitive position, operations, financial condition and performance. – The Group actively manages its material financial risks in line with policies approved by the Board. − Active oversight of the Group’s financial risk profile and adherence to relevant financial covenants by the Executive Credit, Residual Value and Treasury Committees. − The Group has established a diversified panel of third party lenders and internal funding capability through Onboard Finance for novated leasing. − Refer also to the section titled ‘Financial Risk Management’ on page 78. Technology, data availability, and integrity A failure or disruption of information technology services (including infrastructure, hardware, software, digital platforms) and/or the availability and integrity of data could have a material adverse impact on the Group’s reputation, operations and financial performance. – The Group’s Technology and Digital team have dedicated resources, systems, and technical expertise to manage and mitigate technology and data risks. − Ongoing oversight of technology risk by the Information and Communications Technology Risk Committee, the Executive Risk and Compliance Committee and the Board. − The Group maintains a comprehensive crisis management frame- work incorporating business continuity plans, disaster recovery plan, and cyber security incident response plan to respond to major technology failures and other unplanned disruptions to the Group’s operations. This includes the regular review of plans, completion of exercises / simulations, and training. Cybersecurity, data protection, and privacy A cyber incident could disrupt the Group’s operations and result in the loss or compromise of information assets. In addition, any unauthorised disclosure or misuse of confidential information and/or a failure to maintain adequate data protection and privacy controls may have an adverse impact on the Group’s reputation, operations and financial performance and expose the Group to regulatory enforcement action, litigation and other disputes. – Active management of cyber security risk through policies and standards, technical controls, operating procedures, and compulsory training. − A dedicated Cyber Security Team is tasked with protecting key information assets, identifying, and effectively responding to threats. Third party support arrangements for cyber incident response and recovery are also in place. − The Group maintains a privacy compliance framework including a Privacy Policy, supporting procedures, training, and other controls including regular internal monitoring of privacy compliance. − Ongoing oversight of the Group’s cybersecurity, data protection and privacy compliance risk profile by the Executive Risk and Compliance Committee and the Board. Directors’ Report DIRECTORS’ REPORT 19 MMS Annual Report 2024 Risk description Risk management strategy Key suppliers A sustained interruption to or reduction in the quality of the products and services that are provided by our key suppliers may have an adverse impact on the Group’s reputation, operations and/or financial performance. – The Group’s procurement function and designated supplier relationship owners maintain commercial and contractual arrangements across the supplier base including supplier due diligence and ongoing oversight of supplier performance in line with the Group’s Procurement Strategy, Policy and Supplier Code of Conduct. − Where commercially appropriate, the Group will seek to engage suppliers that contribute to positive community and environmental outcomes, including those that maintain relevant sustainability certifications. MMS is also a member of Supply Nation. Regulatory compliance and licensing The Group’s businesses are subject to various laws, licenses, regulations, and rules. A material breach of relevant obligations or a failure to meet compliance and conduct requirements may have an adverse impact on the Group’s reputation, operations, and/ or financial performance and expose the Group to regulatory enforcement action and/or litigation. – The Group has implemented risk management and compliance frameworks including policies, procedures, tools, training, and other controls. – Ongoing monitoring and oversight of compliance with obligations by Executive Management, including regular reporting to the Executive Risk and Compliance Committee and the Board. People and culture The Group’s ability to attract and retain key senior management and operating personnel may be affected by a range of factors including labour market dynamics, our employee value proposition, and organisational culture. These dynamics may also contribute to increased direct and indirect labour costs which could impact the Group’s financial performance. A failure to appropriately manage the physical and psychological health and wellbeing of employees, other workers or visitors to the Group’s premises, or a failure to comply with relevant workplace health and safety laws and regulations may have an adverse impact on the Group’s reputation, operations and/ or expose the Group (and individuals) to regulatory enforcement action and/or litigation. – The Group has adopted strategies, policies and processes for the recruitment, development, and retention of talent, and for fostering an inclusive, diverse, and engaged workforce. − Succession plans are maintained for Key Management Personnel (KMPs), Executive and Senior Leadership roles. − The Group’s remuneration framework aims to attract, motivate, and retain high performing individuals and provide market competitive remuneration. − The Group maintains a health, safety and wellbeing framework including policies, procedures, reporting, training and education. − The Board People, Culture and Remuneration Committee (PCRC), Chief People Officer, and relevant management committees and working groups have responsibility for overseeing strategies and programs related to people, culture, remuneration and workplace health and safety. Directors’ Report DIRECTORS’ REPORT 20 MMS Annual Report 2024 John Bennetts B Ec, LLB Appointed: 1 December 2003 Positions: Non-Executive Director Mr Bennetts is an experienced investor and has been the founder and director of a number of successful Australian companies. He owns businesses in varied industries including technology and finance. Mr Bennetts is a Non-Executive Director of Sacred Heart Mission. He was a founder of Cellestis Limited and private equity investment firm, Mooroolbark Investments Pty Limited (M-Group). He has also provided corporate advisory services to a range of companies in Australia and Asia. Prior to the establishment of M-Group, he was a senior executive of pioneering Australian multinational IT company, Datacraft Limited and also practised as a commercial lawyer. Rob De Luca B Ec, MBA Appointed: 16 May 2022 Positions: Chief Executive Officer Managing Director Mr De Luca joined MMS in May 2022 and has over 20 years’ experience in the Financial Services, Wealth Management, Disability and Healthcare sectors, including roles as Managing Director of Bankwest, CEO of the National Disability Insurance Agency (NDIA). Prior to joining MMS, Mr De Luca was CEO of Zenitas Healthcare. Helen Kurincic MBA, FAICD, FGIA Appointed: 15 September 2018 (Non-Executive Director), 21 October 2020 (Chair) Positions: Chair of the Board, Chair of the Nomination Committee Member of the Audit, Risk and Compliance Committee Member of the People, Culture and Remuneration Committee Ms Kurincic is a Non-Executive Director of Ramsay Health Care Limited and Carlton Football Club Limited. She has formerly held Board roles across the publicly listed, private, not-for-profit and government sectors including Non-Executive Chair of Integral Diagnostics Limited, Non-Executive Director of Estia Health Limited, insurer HBF Health Limited, Domain Principal Group, DCA Group and Melbourne Health. Past management roles include Chief Operating Officer and Director of Genesis Care from its earliest inception, creating and developing the first and largest radiation oncology and cardiology business across Australia, CEO of Heart Care Victoria and CEO of Benetas. Ms Kurincic is a Fellow of the Australian Institute of Company Directors and Governance Institute of Australia. She has also completed the Cambridge Institute for Sustainability Leadership NED Programme. Ms Kurincic is considered an independent director under the Company’s definition of independence. Bruce Akhurst B Ec (Hons), LLB, FAICD Appointed: 1 April 2021 Positions: Non-Executive Director, Chair of the Remuneration and Nomination Committee Member of the Audit, Risk and Compliance Committee Member of the Nomination Committee Mr Akhurst is currently the Chairman of Tabcorp Holdings Limited and also Chair of the Peter McCallum Cancer Foundation. Mr Akhurst was previously the CEO of Sensis, Group MD and General Counsel of Telstra, Partner of Mallesons Stephen Jaques, Council Member of RMIT University and a Director of Vocus Group Limited. Mr Akhurst is considered an independent director under the Company’s definition of independence. Directors’ experience and special responsibilities DIRECTORS’ REPORT 21 MMS Annual Report 2024 Ashley Conn B Comm, CA, MBA Appointed: 5 October 2020 Resigned: 12 March 2024 Positions: Chief Financial Officer Company Secretary Mr Conn is the CFO and Company Secretary and has over 20 years of financial services experience. Previously Mr. Conn was the CFO of CSG Ltd and prior to that had been an investment banker working in Australia and New York predominantly for Goldman Sachs and Morgan Stanley. Arlene Tansey BBA, MBA, Juris Doctor, FAICD Appointed: 7 November 2022 Positions: Non-Executive Director, Member of the Audit, Risk and Compliance Committee Member of the People Culture and Remuneration Committee Member of the Nomination Committee Ms Tansey is a Non-Executive Director of TPG Telecom, Aristocrat Leisure Limited, Lendlease Investment Management, and La Trobe Finance. She is also a Board member of the Australian National Maritime Museum and University of Wollongong Global Enterprises. She is formerly Non-Executive Director of WiseTech Global Limited, Infrastructure NSW and the Australian Institute of Company Directors (NSW). Before becoming a non-executive Director, Ms Tansey worked in commercial and investment banking in Australia (ANZ Banking Group and Macquarie Bank) and in investment banking and law in the United States. She holds a Juris Doctor from the University of Southern California Law Centre and an MBA from New York University. Ross Chessari LLB, M Tax Appointed: 1 December 2003 Positions: Non-Executive Director Mr Chessari is a founder and director of the investment manager, SciVentures Investments Pty Limited (SciVentures). Prior to founding SciVentures, Mr Chessari was the Managing Director of ANZ Asset Management and the General Manager of ANZ Trustees. Mr Chessari has participated in the growth and development of the Company and has significant interest in the Company’s continued success. Kathy Parsons B Comm, CA Appointed: 22 May 2020 Positions: Non-Executive Director Chair of the Audit, Risk and Compliance Committee Member of the People, Culture and Remuneration Committee Ms Parsons is currently a Non-Executive Director of Nick Scali Limited and Shape Australia Corporation Limited. She brings to the board extensive finance and risk management experience. Ms Parsons was formerly an audit partner at Ernst & Young where she spent time as a partner in the firm’s US, UK and Australian practices. In addition to her audit client responsibilities, she was part of the firm’s Oceania Assurance Leadership team as the Professional Practice Director with responsibility for assurance quality and risk management in the region. Ms Parsons is considered an independent Director under the Company’s definition of independence. Directors’ experience and special responsibilities DIRECTORS’ REPORT 22 MMS Annual Report 2024 Letter from the Chair of the People, Culture and Remuneration Committee I am pleased to present the Remuneration Report for the financial year ended 30 June 2024 (FY24). MMS is committed to sustainable performance and delivering value to our customers and shareholders. We recognise the importance of aligning executive remuneration with the interests of shareholders and the long-term sustainable growth of the Company. Our remuneration framework aligns with our strategic priorities, is based on our remuneration principles being fair and transparent and is consistent with market practice and governance standards. For FY24 there were no changes made to the MMS remuneration framework. For the Chief Executive Officer (CEO), there was no increase to fixed remuneration whilst the at risk short-term incentive (STI) maximum percentage of fixed remuneration was increased from 50% to 60%. MMS Performance Outcomes in FY24 Linking remuneration outcomes with performance is key. MMS has delivered strong financial performance during FY24, with Group Normalised revenue from continuing operations up 11.5% and Normalised UNPATA from continuing operations up 38.2%. We have made solid progress on our Simply Stronger program, with a number of key projects delivered. FY24 short-term incentive outcomes In FY24, the STI was assessed against a balanced scorecard of key measures encompassing financial, sustainability, strategic, customer and people objectives, reflecting the key priorities for the year. The Board awarded STI payments to the CEO and Chief Financial Officer (CFO) of 82% and 61% of maximum opportunity respectively, reflecting performance across the balanced scorecard. Scorecard performance for the CEO is outlined below. – Financial objectives (Maximum achieved): FY24 financials demonstrated an uplift of 38.2% for Normalised UNPATA. – Sustainability objectives (Maximum achieved): Our commitment to supporting customers transition to EVs has seen strong performance in novated leasing, supported by the Commonwealth’s FBT exemption for electric vehicles. MMS continues to assist customers maximise benefits and transition to lower emission vehicles. – Strategic objectives (Target achieved): Solid progress was made on the Simply Stronger program. Key initiatives delivered included Employer Connect portal and digital signatures across Maxxia and RemServ, invoice payment automation in PSS and soft launching Oly a new product which extends the benefits of novated leasing to small and medium businesses and their employees. – Customer objectives (Board discretion applied, not achieved): Customer objectives include Net Promotor Scores (NPS) reflecting customer advocacy and customer growth. For GRS and PSS our NPS scores remained strong at +46 and +57. The Group performed well in growing customers with GRS delivering increases in novated lease sales (up 35% on pcp), AMS increased Net Amount Financed (NAF) by 16.2% and while PSS increased plan managed and support co-ordination customers by 10.3%, this was less than the growth target. During the period, the Group renewed its Queensland Government Novated Leasing Services contract, but was unsuccessful in renewing the South Australian Government contract. Whilst 2 out of 3 measures achieved the maximum, the Board chose to apply discretion, noting a range of other customer metrics resulting in this measure not being achieved. – People objectives (Maximum achieved): Through a range of people and leadership initiatives we increased productivity with cost-to-income ratio reducing from 72.1% to 66.3%1 and employee turnover reducing year on year from 26% to 22%. Long term incentive outcomes The FY22 long-term incentive (LTI) was tested during the year against earnings per share (EPS) and return on capital employed (ROCE)2. The FY22 LTI outcomes included, one- year strategic targets achieved, EPS growth was achieved at 100% and three-year ROCE was achieved at 54.5%. This will result in the granting of 28,777 shares for Executive KMP. The CEO is not eligible for the FY22 LTI grant as he commenced on 16 May 2022. The Board will continue to monitor and review the remuneration framework and practices to ensure they remain aligned with the Company’s strategy, values, stakeholder expectations and support the continued sustainable growth of MMS. We thank you for your support and look forward to your feedback on this FY24 Remuneration Report. Bruce Akhurst Non-Executive Director and Chair of the People, Culture and Remuneration Committee Remuneration Report (Audited) 22 REMUNERATION 1 Cost-to-income ratio reduction, relates to Continuing Operations. 2 Return on capital employed (ROCE) is based on last 12 months’ earnings before interest and tax (EBIT) adjusted for the pre-tax impact of acquisition related and non-business operational items. Capital employed (excluding lease liabilities) used in the calculations includes the add back of impairment of acquired intangible asset charges incurred in the respective financial year. 23 MMS Annual Report 2024 Contents Section Reference Key Management Personnel Section 1 Page 23 Overview of FY24 Executive remuneration framework and policy Section 2 Page 24 Detail of FY24 Executive remuneration Section 3 Page 25 FY24 Outcomes and the link to performance Section 4 Page 29 Non-Executive Director remuneration Section 5 Page 33 Remuneration governance Section 6 Page 35 Other statutory disclosures Section 7 Page 38 Remuneration Report (Audited) 23 REMUNERATION 1. Key Management Personnel This Report has been prepared in accordance with Section 300A of the Corporations Act 2001 and outlines the remuneration arrangements in place for the Key Management Personnel (KMP) of the Company. This comprises all NEDs and those senior employees who have authority and responsibility for planning, directing and controlling the activities of the Company. The table below sets out the Company’s Executive KMP and Non-Executive Directors during FY24. Name Position Term as KMP in 2024 Executive KMP Mr R. De Luca Chief Executive Officer (CEO) and Managing Director Full year Mr A. Conn Group Chief Financial Officer (CFO) and Company Secretary Full year1 Non-Executive Directors Ms H. Kurincic Non-Executive Chair Full year Mr B. Akhurst Non-Executive Director Full year Mr J. Bennetts Non-Executive Director Full year Mr R. Chessari Non-Executive Director Full year Ms K. Parsons Non-Executive Director Full year Ms A. Tansey Non-Executive Director Full year 1 Mr Ashley Conn resigned on 12 March 2024, he has remained throughout his notice period performing the role of CFO and Company Secretary with his employment with MMS to conclude on 12 September 2024 24 MMS Annual Report 2024 2. Overview of FY24 executive remuneration framework and policy MMS’s executive remuneration framework is designed to attract, motivate and retain highly qualified and experienced executives. It is intentionally structured to align executives to the creation of long-term shareholder value by successfully executing on our purpose, strategy and delivering strong benefits for our customers, while ensuring behaviours that are aligned with MMS’ values. Our Purpose To make a positive difference to people’s lives Our Strategic priorities Our Values Remuneration strategy – guiding principles Market competitive, retains key talent Performance based and equitable Aligned with shareholders Underpinned by sound governance and risk management Remuneration framework for Executive KMP Fixed Remuneration Short-term Incentive (STI) Long-term Incentive (LTI) Base salary, salary-sacrificed benefits and applicable fringe benefits tax. Employer superannuation contributions. Annual ‘at risk’ remuneration assessed against financial and non-financial measures aligned to deliver strategic priorities. Long-term ‘at risk’ remuneration to align Executive KMP with delivery of long-term value to shareholders. Positioned using appropriate benchmarks, reflecting size and complexity of role, responsibilities, experience and skills. Assessed against a balanced scorecard of measures over the financial year. Delivered as 50% cash and 50% rights which convert into shares following one-year deferral period, subject to continued service. An annual grant of performance rights assessed over a three-year performance period against CAGR EPS and average ROCE. Minimum shareholding requirement of 50% of one-year’s fixed remuneration (within 5 years of appointment as Executive KMP) to further support alignment between the interests of our executives and our shareholders. See section 6 for more detail. Remuneration Report (Audited) REMUNERATION Excel in customer experience Drive technology-enabled productivity Broaden our competency-led solutions 25 MMS Annual Report 2024 FY24 Executive remuneration framework Remuneration Report (Audited) REMUNERATION 25 Fixed Annual Remuneration STI 1 – 50% Share Rights 1 year service deferral Vest STI 1 – 50% Cash Grant / Payment Year 2 Vesting Period Year 1 Year 3 Year 4 LTI – Performance Rights 1 STI is granted at the beginning of the FY, (except for CEO – granted at the AGM, with 50% paid in cash after FY audited results and 50% delivered in rights which convert into shares after 1 year subject to continued service). 3. Detail of FY24 executive remuneration FY24 Fixed remuneration Fixed remuneration is reviewed annually against appropriate benchmarks and having regard to the size and complexity of role, responsibilities, experience and skills of the individual. Fixed remuneration for the Executive KMP is outlined below. No increases were made in FY24 (other than the statutory 0.5% increase in superannuation guarantee contribution, effective 1 July 2023). Base salary Other benefits 1 Superannuation Fixed remuneration Mr R. De Luca 755,928 20,504 27,399 803,831 Mr A. Conn 575,856 21,450 27,399 624,705 1 Other benefits reflect motor vehicle packaging payments. Pay mix for performance Opportunity levels for Executive KMP as a percentage of fixed remuneration under the STI and LTI plans are outlined in the table below. The CEO’s pay mix (with each component expressed as a percentage of total reward) is set out below. As shown, the CEO’s remuneration package is more heavily weighted to the performance tested components. % of fixed STI target STI maximum LTI opportunity CEO 40% 60% 100% CFO 25% 40% 55% Target 42% 8% 8% 42% Maximum 38.5% 38.5% 11.5% 11.5% Fixed STI – cash STI - deferred LTI (face value) 26 MMS Annual Report 2024 Remuneration Report (Audited) REMUNERATION FY24 Short-term incentive The STI is assessed over the financial year against a balanced scorecard of financial and non-financial measures that are aligned to the delivery of MMS’ strategic priorities. Further detail on the structure of our STI is outlined below. Element Description Opportunity levels ($ of fixed remuneration) The maximum opportunity levels offered to the Executive KMP in FY24 were: − 60% of fixed remuneration for the CEO (this increased from a maximum of 50% of fixed remuneration in FY23 to a maximum of 60% of fixed remuneration in FY24); and − 40% of fixed remuneration for the CFO. Performance period STI awards are assessed over a 1-year period i.e. the financial year. Allocation methodology Following assessment of the gateway and scorecard metrics (outlined below), STI awards are delivered 50% in cash and 50% in rights which convert into shares after a 1 year deferral period subject to continued service. The number of rights is determined by dividing the award by the 5-day volume weighted average (VWAP) MMS share price up to 30 June 2024. Gateway Executive KMP are only eligible for an STI award where the STI Risk, Compliance and Conduct Gateway is met which requires the following: − All compliance training is confirmed as successfully completed for self and teams; − There are no material breaches to any company policy or risk appetite; and − There are no regulatory or reputational risk issues of a material nature. Scorecard metrics Subject to the Executive KMP remaining employed for the performance period, STI outcomes are assessed and measured utilising a balanced scorecard: Focus Area Objectives CEO Weighting % CFO Weighting % Financial Deliver sustainable growth in operating performance 50% 50% Sustainability Implement sustainability strategies to support reduced emission outcomes or other associated sustainability measures 10% 10% Strategy Deliver business strategies to support sustainable growth 10% 10% Customer Excel in customer outcomes and experience 15% 15% People Implement people and culture strategies to improve employee attraction, productivity and retention. 15% 15% Total 100% 100% 27 MMS Annual Report 2024 Remuneration Report (Audited) REMUNERATION FY24 Short-term incentive (continued) Element Description Process for assessing performance conditions To determine the full extent to which financial performance measures are satisfied, the Board relies on the audited financial results, adjusted to reflect normalised performance and vesting is determined in accordance with the STI Plan Rules. As outlined in section 6, the Board retains overarching discretion in respect to STI outcomes to ensure that awards made to Executive KMP are fair, appropriate and reasonable having regard to a range of factors including but not limited to, the interests of shareholders and consideration of one-off material items which are outside of the control of management. In the event that the Executive KMP takes approved unpaid leave for a period exceeding three months during FY24, employment will be deemed on a pro-rata basis to reflect the period of continuous service during the financial year, unless the Board determines otherwise. Voting and dividend entitlements No voting rights or dividend entitlements attach to the Rights. Malus (i.e. forfeiture of awards) If the Board determines that an act of fraud, defalcation, gross misconduct, or that any other circumstance has occurred in relation to the affairs of the Group and the Board determines an inappropriate benefit has been obtained by the participant, the participant will forfeit any right or interest in an STI award (including rights on foot) under the STI Plan Rules. Treatment upon cessation of employment If the Executive KMP leaves employment with the Company prior to the end of the 1 year STI deferral period, the rights will lapse without any payment to the employee (subject to the discretion of the Board). Change of control On a change of control, the Board has discretion to waive the performance conditions attached to the rights. Hedging No Executive KMP can enter a transaction that is designed or intended to hedge the executive’s exposure to any unvested rights. Executive KMPs are required to provide declarations to the Board on their compliance with this policy. 28 MMS Annual Report 2024 Remuneration Report (Audited) REMUNERATION FY24 Long-term incentive granted in FY24 MMS’ LTI plan is designed to align Executive KMP with delivery of long-term value to shareholders (along with MMS’ minimum shareholding requirements that are detailed in section 6). Further detail on the LTI awards granted in FY24 is outlined below. Element Description Opportunity levels (% of fixed remuneration) The opportunity levels offered to the Executive KMP in FY24 were: − 100% of fixed remuneration for the CEO; and − 55% of fixed remuneration for the CFO. Instrument & allocation methodology The LTI is granted in performance rights, which are allocated on a face value basis by dividing the LTI opportunity by the VWAP of MMS shares based on the last 5 trading days up to the start of the performance period i.e. 30 June 2024. Performance period Three-year performance period from 1 July 2023 to 30 June 2026. Performance hurdles MMS uses ROCE and EPS hurdles as they are aligned with the Company’s focus on earnings growth and capital optimisation. Given MMS’s limited peers in the Australian context, relative measures are not considered appropriate. Subject to the Executive KMP remaining employed for the performance period, vesting of the Performance Rights is subject to the achievement of two performance hurdles: − The Company’s CAGR in Normalised EPS which applies to 50% of the Performance Rights; and − Average Normalised ROCE over the performance period which applies to 50% of the Performance Rights. The following vesting schedules apply to Performance Rights (with vesting on a straight-line basis between each level of performance). Normalised EPS (CAGR) Performance Period Level of performance (%) Percentage of awards vesting 3 years to FY26 <7% 0% Target 7% 50% Maximum 12% 100% Average Normalised ROCE Performance Period Level of performance (%) Percentage of awards vesting 3 years to FY26 <45% 0% Target 45% 50% Maximum 50% 100% Calculation of Normalised EPS (CAGR) shall be based on comparing the Normalised EPS results in the final year of the performance period (including any impairment losses) to the Normalised EPS results for FY23 as the base year. The ROCE performance condition is based on the Company’s average Normalised ROCE over the performance period. Process for assessing performance conditions To determine the full extent to which the financial performance hurdles are satisfied, the Board relies on the audited financial results, adjusted to reflect normalised performance and vesting is determined in accordance with the LTI Plan Rules. As outlined in section 6, the Board retains overarching discretion in respect of LTI vesting outcomes to ensure that awards made to Executive KMP are fair, appropriate and reasonable having regard to a range of factors including, but not limited to, the interests of shareholders and consideration of one-off material items which are outside of the control of management. In the event that the Executive KMP takes approved unpaid leave for a period exceeding three months during FY24, FY25, of FY26 the vesting criteria outlined above with respect of the performance hurdles and the executive’s continued employment will be deemed on a pro-rata basis to reflect the period of continuous service during the relevant financial year, unless the Board determines otherwise. 29 MMS Annual Report 2024 Remuneration Report (Audited) REMUNERATION FY24 Long-term incentive (continued) Element Description Voting and dividend entitlements No voting rights or dividend entitlements attach to the Rights. Malus (i.e. forfeiture of awards) If the Board determines that an act of fraud, defalcation, gross misconduct, or that any other circumstance has occurred in relation to the affairs of the Group and the Board determines an inappropriate benefit has been obtained by the participant, the participant will forfeit any performance rights in accordance with the Long-term incentive plan rules. Treatment upon cessation of employment If the Executive KMP leaves employment with the Company prior to the date specified in the Invitation Letter, the Rights will lapse without any payment to the employee (subject to the discretion of the Board). Change of control On a change of control, the Board has discretion to waive the performance conditions attached to the Performance Rights. Hedging No Executive KMP can enter a transaction that is designed or intended to hedge the executive’s exposure to any unvested rights. Executive KMPs are required to provide declarations to the Board on their compliance with this policy. 4. FY24 Outcomes and the link to performance MMS financial performance FY20 to FY24 The table below sets out the Company’s performance over the past five years in respect of key financial and non-financial indicators. Metric FY24 FY23 FY22 FY21 FY20 Net profit attributable to Company members ($’000) $83,547 $32,272 $70,349 $61,065 $1,269 Underlying net profit after income tax (UNPATA)1 ($’000) $83,892 $74,741 $82,072 $79,213 $69,028 Normalised UNPATA2 ($’000) $101,139 $86,248 $83,766 $71,898 N/A NPAT growth 158.9% (54.1%) 15.2% >100% (98.0%) Normalised UNPATA growth 17.3% 3.0% 3.6% 14.8% (22.2%) Dividends paid ($’000) $98,893 $91,929 $50,375 $23,369 $59,591 Dividend payout ratio3 100% 100% 100% 66% 42% Share price as at 30 June $17.52 $18.06 $9.74 $12.95 $9.08 Market capitalisation (A$m) $1,220.1 $1,257.8 $753.7 $1,002.1 $702.6 Normalised earnings per share (cents) 145.2 119.6 108.3 78.9 1.6 Normalised earnings per share growth 21.4% 10.5% 37.2% (9.73%) N/A ROCE 5 62% 40% 39% 33% 20% 1 UNPATA is calculated as net profit after tax but before the after-tax impact of acquisition and divestment related activities and non-operational items. 2 Normalised refers to adjustments made for the negative earnings transitional period for the implementation of the funding warehouse, Onboard Finance (“Warehouse”). It normalises for the Warehouse’s in-year operating and establishment expenses and for an adjustment for commissions that would have otherwise been received in period had the sales been financed via a principal and agency funder rather than through the Warehouse. Normalised financials are stated for FY24, FY23 and FY22 and are currently expected to be stated up to and including FY25. For FY21 normalisations only include an adjustment to remove the impact of JobKeeper. 3 Dividend payout ratio is calculated as total dividends declared for the financial year divided by Normalised UNPATA for the financial year. 4 Normalised earnings per share is based on Normalised UNPATA. 5 Return on capital employed (ROCE) is based on last 12 months’ Normalised earnings before interest and tax (EBIT) adjusted for pre-tax impact of acquisition and divestment related activities and non-operational items. Capital employed (excluding lease liabilities) used in the calculations includes the add back of impairment of acquired intangible asset charges incurred in the respective financial year and also includes the add back for the Warehouse in FY24, FY23 and FY22. 30 MMS Annual Report 2024 Actual STI outcomes FY24 Short term incentive scorecards included both financial and non-financial measures, with both a target and maximum opportunity. The measures are clearly defined and were a mix of financial, sustainability, strategy, customer and people. Actual STI outcomes delivered to Executive KMP in FY24 are set out in the table below. Executive Target STI opportunity Target STI opportunity Maximum STI opportunity Maximum STI opportunity % of maximum FY24 STI awarded % of maximum FY24 STI forfeited $ Value STI - 50% Cash Executive KMP $ (% of FAR) $ (% of FAR) R. De Luca 321,532 40% 482,299 60% 82% 18% 196,939 A. Conn 156,176 25% 249,882 40% 61% 39% 76,527 An overview of the performance against the FY24 scorecard for the CEO is outlined below. KPI Measures Overall Assessment Financial (CEO 50%) Not achieved Target Maximum Deliver operating performance growth MMS Normalised UNPATA Sustainability (CEO 10%) Not achieved Target Maximum Implement sustainability strategies to support low and zero emission vehicle solutions EV new novated lease sales Strategy (CEO 10%) Not achieved Target Maximum Deliver business strategies to support sustainable growth Progress on Simply Stronger initiatives delivered on time and within budget Customer (CEO 15%) Not achieved Target Maximum Excel in customer outcomes and experience NPS and customer growth People (CEO 15%) Not achieved Target Maximum Implement people and culture strategies to improve staff productivity People and leadership productivity initiatives including cost to income ratio and employee turnover. Total Outcome Remuneration Report (Audited) REMUNERATION 31 MMS Annual Report 2024 LTI vesting in FY24 Incentive outcomes The table below outlines the LTI that qualified for vesting based on the performance against the metrics in FY24. The vesting entitlement is subject to Executive KMP’s meeting the employment conditions or good leaver provisions. Portion qualified for vesting FY22 Grant 2 FY23 Grant FY24 Grant Mr R.De Luca1 - - - Mr A. Conn2 60.8% - - 1 Mr. R. De Luca commenced 16 May 2022 2 The achievement of FY22 grants by Mr A. Conn was based on the following, Tranche 1: 14%, Tranche 2: 0%, Tranche 3a: 40% and Tranche 3b: 6.81%. The Rights that have qualified and are subject to meeting the relevant employment conditions in the table above will result in 28,778 ordinary MMS shares being provided to Mr A. Conn detailed above and will be issued by the MMS Employee Share Trust. Alignment between performance and remuneration FY22 Grant 1 – 2 & 3 Year Performance LTI Metrics FY21 FY22 FY23 FY24 Metric Achieved Period Achieved Vesting Target Range Vesting Target Met Strategic targets N/A 3 of 6 N/A N/A 3 of 6 1 year Various Partially Met ROCE 2 N/A 34.8% 22.4% 52.2% 28.6% 2 year 36.0% – 41.0% No 36.5% 3 year 36.0% – 41.0% Met EPS growth (cps) 102.4 93.4 47.2 128.9 8.0% 3 year 3.6 – 7.7% Met FY23 Grant – 3 Year Performance LTI Metrics FY22 FY23 FY24 Metric Achieved Period Achieved Vesting Target Range Vesting Target Met Normalised ROCE 2 N/A 27.5% 58.8% 43.2% 3 year 36.0% – 40.0% To be tested Normalised EPS growth (cps) 108.3 63.3 145.3 51.9% 3 year 7.0% – 12.0% To be tested FY24 Grant – 3 Year Performance LTI Metrics FY23 FY24 Metric Achieved Period Achieved Vesting Target Range Vesting Target Met Normalised ROCE 2 N/A 58.8% 58.8% 3 year 45.0% – 50.0% To be tested Normalised EPS growth (cps) 119.6 145.3 9.5% 3 year 7.0% – 12.0% To be tested 1 The FY22 LTI grant had a 1-year strategic targets metric, referred to as Tranche 1. When assessed it was deemed 40% of the overall 35% for this metric was achieved which equates to a 14% outcome. 2 ROCE is based on the average in the performance period. The FY21 AGM notice setting out the terms of the FY22 LTI grant noted that the Warehouse would impact the reported financial results over the testing period. In FY24 the amount of novated leases and net amount financed through the Warehouse was higher than anticipated. This increased activity which benefits shareholders, adversely impacted the quantum of the EPS outcome achieved for FY24 relating to the FY22 grant. In assessing the EPS outcome, the Board has adjusted for the higher than anticipated activity. Remuneration Report (Audited) REMUNERATION 32 MMS Annual Report 2024 Remuneration Report (Audited) REMUNERATION Executive remuneration statutory disclosures Executive remuneration The following table sets out the executive remuneration for FY24 in accordance with the requirements of the Accounting Standards and Corporations Act 2001 (Cth). Cash Salary / Cash STI Annual Leave Entitlements Other Benefits 1 Superannuation Long Service Leave Rights 2,3 Total remuneration Percentage of remuneration as rights Executive KMP $ $ $ $ $ $ $ % Mr R. De Luca (CEO and Managing Director) FY24 909,539 49,336 20,504 27,399 32,761 784,751 1,824,290 43% FY23 804,755 31,397 1,540 25,293 14,549 361,688 1,239,222 29% Mr A. Conn (Group CFO and Company Secretary) FY24 675,643 79,481 21,450 27,399 43,126 524,870 1,372,329 38% FY23 602,710 47,646 17,570 25,293 27,216 246,208 966,643 25% Total Remuneration FY24 1,585,181 129,178 41,954 54,798 75,888 1,309,621 3,196,619 41% FY23 1,407,465 79,043 19,110 50,586 41,765 607,896 2,205,865 28% 1 Other benefits reflect motor vehicle packaging payments. 2 The equity value comprises the value of Performance Rights issued. The value of Performance Rights issued to Executive KMP (as disclosed above) are measured at fair values at the date that the Performance Rights were granted to the executives and which are allocated equally over the period from when the services are provided to vesting date. Fair values at grant date are determined using a Black-Scholes pricing model that takes into account the expected term of the right, share price at grant date, the expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the right. 3 The expense in FY24 comprises the fair value expense of Performance Rights granted in FY22, FY23 and FY24 based on the number of rights estimated to vest based on the Company’s performance against the EPS and ROCE performance targets (subject to continuing employment) with vesting periods in FY25, FY26 and FY27. Share rights include STI share rights and LTI performance rights. 33 MMS Annual Report 2024 Remuneration Report (Audited) REMUNERATION 5. Non-Executive Director remuneration Remuneration policy and arrangements The Board’s policy is to remunerate the Chair and Non-Executive Directors (NED) in line with the following principles: Market competitiveness Preservation of independence Non-Executive Directors are remunerated at market competitive rates, having regard to the fees paid for comparable companies, the need to attract Non- Executive Directors of the requisite calibre and expertise and their workloads (taking into account the size and complexity of the Company’s operations and their responsibility for the stewardship of the Company). Non-Executive Directors are remunerated in a manner which preserves and safeguards their independence. Neither the Chair nor the other Non-Executive Directors are entitled to any performance-related pay. The primary focus of the Board is on the long-term strategic direction of the Company. Fees and other benefits The Non-Executive Directors are remunerated for their services from the maximum annual aggregate amount last approved by the shareholders of the Company on 22 November 2021 (currently $1,200,000 per annum). The table below sets out the annual fees payable (inclusive of superannuation) to the directors of MMS. Fees are inclusive of superannuation contributions that are required under legislation to be made by the Company on behalf of Non-Executive Directors. There is no scheme for the payment of retirement benefits or termination payments (other than payments relating to accrued superannuation entitlements). Based on FY23 benchmarking data of Chair and NED fees provided by an independent remuneration consultant, the Board approved the following changes to NED fees for FY24 (effective from 1 July 2023): − An increase to the Board Chair fee to $255,000. − Align the People, Culture and Remuneration Committee Chair (PCRC) and Member fees with those paid to the Audit, Risk and Compliance Committee Chair and Members reflecting the workload and responsibilities of the PCRC. No other changes were made to NED fees in FY24, other than the statutory 0.5% increase in superannuation guarantee contribution, effective 1 July 2023. Role FY24 Fee Chair1 $255,000 Non-Executive Directors $116,575 Audit, Risk and Compliance Committee Chair $25,342 Membership $12,672 People, Culture and Remuneration Committee Chair $25,342 Membership $12,672 Nomination Committee Chair $Nil Membership $Nil 1 The Chair fee is inclusive of all other committee Chair or Membership roles. 34 MMS Annual Report 2024 Remuneration Report (Audited) REMUNERATION Non-Executive Director remuneration – statutory disclosure The fees paid or payable to the directors of the Company in respect of the 2024 financial year are set out below. Cash Salary / Fees Other Benefits 1 Superannuation Total value of remuneration received Total remuneration received Non-Executive Directors $ $ $ $ $ Ms H. Kurincic (Non-Executive Chair) FY24 229,730 - 25,270 255,000 255,000 FY23 191,895 - 20,149 212,044 212,044 Mr B. Akhurst (Non-Executive Director) FY24 150,885 - 3,704 154,589 154,589 FY23 141,775 - 7,072 148,847 148,847 Mr J. Bennetts (Non-Executive Director) FY24 105,025 - 11,553 116,575 116,575 FY23 105,023 - 11,027 116,050 116,050 Mr R. Chessari (Non-Executive Director) FY24 105,025 - 11,553 116,575 116,575 FY23 105,023 - 11,027 116,050 116,050 Ms K. Parsons (Non-Executive Director) FY24 133,527 5,743 15,320 154,589 154,589 FY23 131,244 5,743 14,384 151,370 151,370 Mr T. Poole2 (Non-Executive Director) FY24 - - - - - FY23 20,928 - 2,197 23,126 23,126 Ms A. Tansey3 (Non-Executive Director) FY24 127,855 - 14,064 141,919 141,919 FY23 81,441 - 8,551 89,992 89,992 Total Remuneration FY24 852,042 5,743 81,463 939,248 939,248 FY23 777,329 5,743 74,407 857,479 857,479 1 Other benefits reflect motor vehicle packaging. 2 Mr T Poole retired 31 August 2022. 3 Ms A Tansey joined 7 November 2022. 35 MMS Annual Report 2024 6. Remuneration Governance Responsibility for setting remuneration Responsibility for setting MMS’ remuneration policy and determining Executive and Non-Executive Director remuneration rests with the Board. The People, Remuneration and Culture Committees objectives are to oversee the formulation and implementation of remuneration policy and make recommendations to the Board on remuneration policies and packages applicable to Non-Executive Directors , the Chief Executive Officer & Managing Director and approves recommendations on remuneration for the Executive Leadership Team. For further details on the composition and responsibilities of the PCRC, please refer to the Corporate Governance Statement on our website www.mmsg.com.au/governance. The following chart outlines key stakeholders in the governance of remuneration at MMS. Remuneration Consultants Board Provide independent advice, information and recommendations relevant to remuneration decisions. Responsibility for setting a remuneration policy and determining Executive and Non- Executive Director remuneration rests with the Board. Shareholder and Advisory Bodies People, Culture and Remuneration Committee and Nomination Committee Audit, Risk and Compliance Committee Includes consultation, investor and proxy meetings and engagement at the Annual General Meeting. Assist the Board to achieve its objective by making recommendations to the Board in relation to its composition and recruitment, retention, remuneration and succession planning for Directors and Senior Executives. Support the People, Culture and Remuneration Committee by providing relevant information as required for incentive awards. Use of independent remuneration consultants The PCRC obtains external independent advice from remuneration consultants when required and will use it to guide and inform their decision-making. During FY23, no remuneration recommendations (as defined in the Corporations Act 2001 (Cth)) were received. Board discretion The Board has adopted a set of guiding principles when it considers adjustments to performance outcomes under the STI and LTI Plans. The principles for adjustments applied are: 1. Transparency: for any fair, appropriate and reasonable adjustments made, MMS will provide clear disclosure and rationale. 2. Timing of adjustments: adjustments will be made to reward outcomes at the time of payment or vesting, applying to both positive and negative adjustments. 3. Shareholders and management alignment: adjustments will be made in the interests of balancing the shareholder and management alignment ensuring consistency in Company objectives. Remuneration Report (Audited) REMUNERATION 36 MMS Annual Report 2024 Details of executive service agreements The table below sets out key information in respect of the service agreements of the CEO and Managing Director and CFO and Company Secretary. Element Description Duration Ongoing Notice period − CEO: 9 months’ written notice by the Company or CEO. The agreement may, however, be terminated by the Company for cause without notice or any payment. − CFO: 6 months written notice by the Company or CFO. The agreement may, however, be terminated by the Company for cause without notice or any payment. Termination payments The Company has discretion to make a payment in lieu of notice in respect of the above notice periods. No contracted retirement benefits are in place with any of the Company’s Executives. Restraint of trade A restraint period not exceeding 12 months. Minimum shareholding requirements The Company has minimum shareholding requirements for its Executive KMP and Non-Executive Directors to facilitate share ownership and encourage an ‘ownership’ mindset. Refer section 7 for further details on current KMP and director share ownership. The table below sets out key information in respect of this policy. Please refer to the ‘Share Ownership and Retention Policy’ on the Company’s website for further detail www.mmsg.com.au/overview/#governance. Directors and officers Description Requirement Executive KMP 50% of one year’s fixed remuneration − 5 years from date of commencement as Executive KMP Non-Executive Directors1 100% of one year’s base director fees − 5 years from date of commencement as Non-Executive Director 1 As outlined in the Share Ownership and Retention Policy. Remuneration Report (Audited) REMUNERATION 37 MMS Annual Report 2024 Non-Executive Director and Executive KMP share ownership The following table sets out the number of shares held directly, indirectly or beneficially by Directors and Executive KMP (including their related parties). All NED and Executive KMP are compliant with the share ownership policy. Start date Balance at the start of the year Shares acquired during the year Other changes during the year Balance at the end of the year Value of Shares 1 $ Minimum Shareholding Requirement 2 $ Non-Executive Directors Ms H. Kurincic 15/9/2018 25,000 - - 25,000 438,000 255,000 Mr B. Akhurst 1/4/2021 25,000 - - 25,000 438,000 116,575 Mr J. Bennetts 1/12/2003 3,068,025 - - 3,068,025 53,751,798 116,575 Mr R. Chessari 1/12/2003 6,050,941 6,050,941 106,012,486 116,575 Ms K. Parsons 22/5/2020 13,000 500 - 13,500 236,520 116,575 Ms A. Tansey 7/11/2022 - - - - - 116,575 Executive KMP Mr R. De Luca 16/5/2022 - - - - - 401,916 Mr A. Conn 5/10/2020 - 22,460 - 22,460 393,499 312,353 1 Calculated as the number of shares multiplied by the share price as at 30 June 2024 of $17.52. 2 Minimum shareholding required, within a 5 year timeframe from commencement as outlined above and based on the FY24 fixed remuneration. Remuneration Report (Audited) REMUNERATION 38 MMS Annual Report 2024 7. Other statutory disclosures Detail of LTI securities The terms and conditions of each grant of Performance Rights to Executive KMP affecting their remuneration in FY24 and each relevant future financial year are set out below. Grant Date Type of LTI securities Expiry Date Share price at valuation date Value per option at grant date 1 Date Exercisable 15/10/2021 3 Year Performance Date that the FY24 financial statements are lodged $14.52 $12.82 3 Year Lodgement Date (expected to be 30 September 2024) 22/11/2021 3 Year Performance Date that the FY24 financial statements are lodged $13.18 $11.54 3 Year Lodgement Date (expected to be 30 September 2024) 15/11/2022 3 Year Performance Date that the FY25 financial statements are lodged $13.31 $11.54 3 Year Lodgement Date (expected to be 30 September 2025) 27/10/2023 3 Year Performance Date that the FY26 financial statements are lodged $16.82 $13.56 3 Year Lodgement Date (expected to be 30 September 2026) 10/11/2023 3 Year Performance Date that the FY26 financial statements are lodged $17.46 $14.23 3 Year Lodgement date (expected to be 30 September 2026) 1 Reflects the fair value at grant date for rights granted as part of remuneration, calculated in accordance with AASB 2 Share-based Payments. Details of the LTI securities over ordinary shares in the Company provided as remuneration to each Executive KMP are set out below. Executive KMP Date of grant Type of LTI securities Number of securities granted Value of one security granted during the year $ Number of securities vested during year Vested % Number of securities forfeited / lapsed Forfeited or lapsed % Year in which securities may vest Mr R. De Luca 28/11/2022 3 Year Performance Rights 82,822 - - - - - FY26 27/10/2023 3 Year Performance Rights 45,362 $13.56 - - - - FY27 Mr A. Conn1 30 Oct 2020 3 Year Performance rights 48,362 - 22,460 46.4% (25,902) 53.6% FY24 15 Oct 2021 3 Year Performance rights 47,322 - - - - - FY25 28 Nov 2022 3 Year Performance rights 35,374 - - - - - FY26 27 Oct 2023 3 Year Performance rights 19,389 $14.23 - - - - FY27 1 Mr Ashley Conn’s employment with MMS will conclude on 12 September 2024. Remuneration Report (Audited) REMUNERATION 39 MMS Annual Report 2024 Movement of STI and LTI securities granted The table below reconciles the Performance Rights held by each Executive KMP from the beginning to the end of FY24. Executive KMP Security type Balance at start of the year Granted during the year 1 Vested during the year Forfeited during the year Other changes during the year Exercisable at end of the year Unvested at end of the year Mr R De Luca Performance rights (LTI) 82,822 45,362 - - - - 128,184 Mr R De Luca Share rights (STI) 20,706 13,608 - (12,038) - - 22,276 Mr A Conn Performance rights (LTI) 107,820 19,389 (22,460) (21,208) - - 83,541 Mr A Conn Share rights (STI) - 5,631 - - - - 5,631 1 Granted pursuant to the Company’s Executive Remuneration Plan. Other transactions and balances with KMP There were no loans made during the year, or remaining unsettled at 30 June 2024, between the Company and its KMP and/or their related parties. Signed in accordance with a resolution of the Directors made pursuant to s.298(2) of the Corporations Act 2001. On behalf of the Directors. Bruce Akhurst Helen Kurincic Non-Executive Director and Chair of the PCRC Non-Executive Chair of the Board End of the audited Remuneration Report Remuneration Report (Audited) REMUNERATION 40 MMS Annual Report 2024 Unissued shares At the date of this Annual Report, there were no unissued ordinary shares of the Company under option. No options were granted to the Directors or any of the five highest remunerated officers of the Company since the end of the financial year. Directors’ interests At the date of this Annual Report, the relevant interest of each Director in the securities issued by the Company and its controlled entities, as notified by the Directors to the Australian Securities Exchange Limited (ASX) in accordance with section 205G(1) of the Corporations Act 2001 (Cth), is as follows: Director Rights Ordinary shares Ms H. Kurincic (Chair) - 25,000 Mr R. De Luca 150,460 - Mr B. Akhurst - 25,000 Mr J. Bennetts - 3,068,025 Mr R. Chessari - 6,050,941 Ms K. Parsons - 13,500 Ms A. Tansey - - No Director during FY24, became entitled to receive any benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by the Directors shown in the Remuneration Report or the fixed salary of a full time employee of the Company) by reason of a contract made by the Company or a controlled entity with the Director or an entity in which the Director has a substantial financial interest or a firm in which the Director is a member. Non-audit services Details of the amounts paid or payable to the auditor of the Company, Ernst & Young and its related practices, for non-audit services provided, during FY24, are disclosed in Note 7.3 to the Financial Report. The ARCC has reviewed the services other than the statutory audit provided by Ernst & Young during the financial year ended 30 June 2024. The other services related to non-statutory audit services and other assurance services which are compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 (Cth). This has been formally advised to the Board. Consequently, the Directors are satisfied that the provision of non-audit services during the year by the auditor and its related practices did not compromise the auditor independence requirements of the Corporations Act 2001 (Cth). Events occurring after the reporting date Other than the matters disclosed in this report, there were no material events subsequent to the reporting date. Directors’ Report DIRECTORS’ REPORT 41 MMS Annual Report 2024 Environmental regulations The Company and its controlled entities have adequate systems in place for the management of relevant environmental requirements and are not aware of any breach of those environmental requirements as they apply to the Company and its controlled entities. Indemnification and Insurance Under the Company’s Constitution, the Company indemnifies the Directors and Officers of the Company and its wholly owned subsidiaries to the extent permitted by law against any liability and all legal costs in connection with proceedings incurred by them in their respective capacities. The Company has also entered into a Deed of Access, Indemnity and Insurance (Deed) with each Director and each Company Secretary which protects individuals acting as officeholders during their term of office and after their resignation. Under the Deed, the Company also indemnifies each officeholder to the full extent permitted by law. The Company has a Directors & Officers Liability Insurance policy in place for all current and former Officers of the Company and its controlled entities. The policy affords cover for loss in respect of liabilities incurred by Directors and Officers where the Company is unable to indemnify them and covers the Company for indemnities provided to its Directors and Officers. This does not include liabilities that arise from conduct involving dishonesty. The Directors have not included the details of the premium paid with respect to this policy as this information is confidential under the terms of the policy. Corporate governance practices Our full corporate governance statement is available on our website at www.https://mmsg.com.au/governance. Auditor’s independence declaration A copy of the auditor’s independence declaration, as required under section 307C of the Corporations Act 2001 is included on page 45 of this Annual Report. Directors’ declaration The Directors have received and considered written representations from the Chief Executive Officer and the Chief Financial Officer in accordance with the ASX Principles. The written representations confirmed that: – the financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operating results of the Company and its controlled entities and are in accordance with all relevant accounting standards; – the consolidated entity disclosure statement is true and correct; and − the above statement is founded on a sound system of risk management and internal compliance and control that implements the policies adopted by the Board and that compliance and control is operating efficiently and effectively in all material respects. Signed in accordance with a resolution of the Directors. Helen Kurincic Chair 27 August 2024 Melbourne, Australia Rob De Luca Managing Director & Chief Executive Officer Directors’ Report DIRECTORS’ REPORT 42 MMS Annual Report 2024 Five year summary 2024 10 2023 10 2022 9 2021 2020 Financial Performance Group Revenue from continuing operations ($m) 521.0 464.0 594.1 544.5 494.0 NPAT from continuing operations ($m) 8 90.1 64.4 70.3 61.1 1.3 UNPATA from continuing operations ($m) 1,8 90.4 66.4 82.1 79.2 69.0 Normalised UNPATA from continuing operations ($m) 2 107.6 77.9 83.8 71.9 N/A Group Remuneration Services segment Segment revenue ($m) 289.1 225.5 206.5 202.6 214.8 Segment NPAT ($m) 8 64.3 41.0 46.7 55.8 60.9 Segment UNPATA ($m) 3,8 64.3 41.0 46.7 55.8 60.9 Normalised segment UNPATA ($m) 2 80.7 52.5 48.4 49.4 N/A Asset Management Services segment Segment revenue ($m) 177.8 187.4 346.1 315.5 229.3 Segment NPAT ($m) 8 19.1 18.7 21.1 1.4 (9.9) Segment UNPATA ($m) 3,8 19.1 18.7 30.3 19.6 6.0 Normalised segment UNPATA ($m) 2 19.1 18.7 30.3 18.5 N/A Plan and Support Services segment Segment revenue ($m) 50.6 48.5 41.2 26.2 - Segment NPAT ($m) 8 8.2 7.3 5.3 5.4 - Segment UNPATA ($m) 3,8 8.5 8.0 6.6 5.4 - Normalised segment UNPATA ($m) 2 8.5 8.0 6.6 5.4 N/A Retail Financial Services segment Segment revenue ($m) - - - - 49.5 Segment NPAT ($m) 8 - - - - (47.3) Segment UNPATA ($m) 3,8 - - - - 3.0 Shareholder Value Dividends per share (cps) 154 124 108 61 34 Dividend payout ratio (%) 4 100 100 92.9 66 42 Basic earnings per share (cps) 129.3 89.4 90.9 78.9 1.6 Underlying earnings per share (cps) 5 129.8 92.1 106.1 102.4 87.4 Underlying return on equity (%) 64 32 29 31 21 Normalised return on capital employed (%) 62.1 40.0 39 31 20 Other Employees (FTE) 6 1,328 1,290 1,294 1,286 1,295 Employee engagement score (%) 7 77 80 83 85 87 1 FY24 UNPATA excludes amortisation of intangibles $0.3m. FY23 UNPATA excludes amortisation of intangibles $0.6m, acquisition and disposal related costs of $1.0m and capital structure costs of $0.4m. FY22 UNPATA excludes amortisation of intangibles $1.8m, impairment of CLM goodwill of $6.0m, acquisition and disposal related costs of $3.3m and adjustments related to new accounting standards of $0.4m. FY21 UNPATA excludes amortisation of intangibles $1.6m, UK restructuring costs of $14.6m and impairment of CLM goodwill for $2.0m. FY20 UNPATA excludes amortisation of intangibles $2.9m, impairments of UK and RFS businesses of $49.8m, one-off adjustments for Deferred Income and DAC of $9.8m, class action settlement and legal costs of $5.1m, acquisition and disposal related costs of $1.2m, deferred consideration (no longer payable) ($1.4m) and capital structure costs $0.4m. 2 Normalised UNPATA is UNPATA adjusted for the Warehouse in FY22, FY23 and FY24, and JobKeeper in FY21 3 Segment UNPATA does not include unallocated public company costs and interest from Group treasury funds. 4 For the FY22 year, dividend payout ratio is calculated as total dividend declared for the financial year divided by normalised UNPATA. 5 Underlying earnings per share is based on UNPATA. 6 From 30 June 2023 this value excludes UK. 7 Employee engagement survey conducted biennially with regular Pulse Survey’s conducted in intervening periods; the 2024 result represents the May 2024 Pulse Survey Sustainability Engagement score. 8 In FY20 and FY21 NPAT and UNPATA includes JobKeeper of $7.3m (net of tax) for FY21 and $7.0m (net of tax) for FY20 which has been recognised as an offset against employee benefit expenses. 9 In FY22 the reportable segments of the Group changed. Plan and Support Services is now reported as a separate segment (previously included in Group Remuneration Services) and Retail Financial Services is included as part of Asset Management Services. The FY21 comparatives were restated on this basis. 10 In FY24 the Group disposed of its Australian Asset Finance Aggregation and UK businesses and these businesses are reported as discontinued operations. In FY23 the results of these segments were reported as discontinued operations relating to assets held for sale. The financial summary provides the financial performance in respect of the continuing operations of the Group for FY24 and FY23. Directors’ Report DIRECTORS’ REPORT Financial Report FOR THE YEAR ENDED 30 JUNE 2024 FINANCIALS FINANCIALS 44 The Directors are of the opinion that: 1. The financial statements and notes of McMillan Shakespeare Limited and its subsidiaries (the Group) for the year ended 30 June 2024 on pages 46 to 96 are in accordance with the Corporations Act 2001, including: a. giving a true and fair view of the Company and the Group’s financial position as at 30 June 2024 and financial performance for the financial year ended on that date; and b. complying with Accounting Standards, the Corporations Regulations 2001 (Cth) and other mandatory professional reporting requirements. 2. The consolidated entity disclosure statement required by section 295(3A) of the Corporations Act is true and correct. 3. There are reasonable grounds to believe that the Company and the Group will be able to pay its debts as and when they become due and payable. 4. At the date of this declaration, there are reasonable grounds to believe that members of the extended closed group identified in Note 6.2 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the deed of cross guarantee described in Note 6.2. Note 1 confirms that the financial statements also comply with International Financial Reporting Standards as disclosed as issued by the International Accounting Standards Board. The Directors have been given declarations by the Chief Executive Officer and Chief Financial Officer required by s295A of the Corporations Act 2001 (Cth). This declaration is made in accordance with a resolution of the Directors of McMillan Shakespeare Limited. Helen Kurincic Chair 27 August 2024 Melbourne, Australia Rob De Luca Managing Director & Chief Executive Officer Directors’ Declaration MMS Annual Report 2024 FINANCIALS FINANCIALS MMS Annual Report 2024 45 Auditor’s Independence Declaration As at 30 June 2024 FINANCIALS 46 Consolidated Group Parent Entity Note 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Revenue 2.2 499,723 450,223 - - Interest revenue 21,295 13,781 384 256 Dividends received - - 91,655 99,255 Revenue from continuing operations 521,018 464,004 92,039 99,511 Expenses Employee benefit expenses (173,573) (160,486) (1,035) (3,714) Leasing and vehicle management expenses (67,680) (84,707) - - Depreciation and amortisation expenses 2.3b (68,361) (66,516) - - Other operating expenses 2.3c (54,144) (49,905) (6,363) (3,282) Finance costs (25,293) (9,747) (3,557) (2,110) Operational expenses excluding impairment and other (389,051) (371,361) (10,955) (9,106) Impairment of financial assets 2.3d (1,345) (840) - - Impairment of investment in subsidiaries 6.1 - - (18,349) (17,289) Gain on loss of control of subsidiary - - 1,936 - Impairment of financial assets / Gain on disposal of subsidiary (1,345) (840) (16,413) (17,289) Total expenses from continuing operations (390,396) (372,201) (27,368) (26,395) Profit before income tax expense from continuing operations 130,622 91,803 64,671 73,116 Income tax (expense)/benefit 2.4 (40,565) (27,354) 1,654 2,793 Net profit for the year from continuing operations 90,057 64,449 66,325 75,909 Discontinued operations (Loss) after tax from discontinued operations 6.3 (6,510) (32,177) - - Net profit attributable to Owners of the Company 83,547 32,272 66,325 75,909 Other comprehensive income Items that may be reclassified subsequently to profit: Changes in fair value of cash flow hedges (261) (838) - - Exchange differences on translating foreign operations (450) 1,899 - - Income tax on other comprehensive income 213 251 - - Other comprehensive (loss) / income, net of tax (498) 1,312 - - Total comprehensive income for the year 83,049 33,584 66,325 75,909 Other comprehensive income after tax from discontinued operations - 1,472 - - Total comprehensive income for the year is attributable to: Owners of the Company 83,049 35,056 66,325 75,909 Total comprehensive income for the year 83,049 35,056 66,325 75,909 Basic earnings per share (cents) from continuing operations 2.5 129.3 89.4 Diluted earnings per share (cents) from continuing operations 2.5 128.3 89.0 Basic earnings per share (cents) from total operations 2.5 120.0 44.8 Diluted earnings per share (cents) from total operations 2.5 119.0 44.6 The above Statements of Profit or Loss and Other Comprehensive Income should be read in conjunction with the accompanying notes. Statements of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2024 MMS Annual Report 2024 MMS Annual Report 2024 FINANCIALS 47 The above Statements of Financial Position should be read in conjunction with the accompanying notes. Consolidated Group Parent Entity Note 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Current assets Cash and cash equivalents 3.1 152,952 60,581 22,598 1,255 Restricted client trust funds 3.1 403,364 402,608 - - Trade and other receivables 3.2 39,495 39,985 83 448 Finance lease receivables 3.3 68,067 22,794 - - Inventories 10,315 13,552 - - Prepayments 9,863 5,246 - 108 Current tax receivable - - 2,579 - Derivative financial instruments 4.5 1,680 2,037 - - Assets held for sale 6.3 - 77,617 - - Total current assets 685,736 624,420 25,260 1,811 Non-current assets Finance lease receivables 3.3 268,545 86,327 - - Assets under operating lease 3.5 227,834 204,957 - - Right-of-use assets 3.6 25,894 30,054 - - Property, plant and equipment 11,793 13,673 - - Intangible assets 3.7 83,248 73,411 - - Deferred tax assets 2.4 - - 2,655 313 Investment in subsidiaries 6.1 - - 167,713 237,533 Total non-current assets 617,314 408,422 170,368 237,846 Total assets 1,303,050 1,032,842 195,628 239,657 Current liabilities Trade and other payables 3.8 99,893 73,117 46,367 56,335 Restricted client trust funds for salary packaging 3.1 403,364 402,608 - - Contract liabilities 3.9 11,497 14,937 - - Other liabilities 3.10 4,427 3,389 - - Provisions 3.11 16,375 14,687 - - Current tax liability 37,972 4,684 - 1,671 Other loans payable 4.1 2,200 3,800 - - Lease liabilities 3.6 5,589 5,130 - - Liabilities directly associated with assets held for sale 6.3 - 28,329 - - Total current liabilities 581,317 550,681 46,367 58,006 Non-current liabilities Provisions 3.11 1,965 2,006 - - Borrowings 4.1 540,998 268,722 60,000 60,000 Other loans payable 4.1 4,034 6,094 - - Lease liabilities 3.6 35,308 41,383 - - Deferred tax liabilities 2.4 10,584 18,379 - - Total non-current liabilities 592,889 336,584 60,000 60,000 Total liabilities 1,174,206 887,265 106,367 118,006 Net assets 128,844 145,577 89,261 121,651 Equity Issued capital 4.2 68,597 68,597 68,597 68,597 Reserves (2,443) (3,219) 4,487 4,309 Retained earnings 62,690 80,200 16,177 48,745 Total equity 128,844 145,577 89,261 121,651 Statements of Financial Position As at 30 June 2024 FINANCIALS 48 Statements of Changes in Equity For the year ended 30 June 2024 Consolidated Group 2024 Note Issued capital $’000 Retained earnings $’000 Share-based payment reserve $’000 Cash flow hedge reserve $’000 Foreign currency translation reserve $’000 Acquisition reserve $’000 Total $’000 Equity at start of the year 4.2 68,597 80,200 4,104 1,342 (1,462) (7,204) 145,577 Net profit for the year from continuing operations - 90,057 - - - - 90,057 Net (loss) for the year from discontinued operations - (8,079) - - 1,569 - (6,510) Other comprehensive (loss) for the year after tax from continuing operations - - - (183) (315) - (498) Total comprehensive income for the period - 81,978 - (183) 1,254 - 83,049 Transactions with owners in their capacity as owners: Share based payments - - (889) - - - (889) Dividends paid 4.3 - (98,893) - - - - (98,893) Transfers (from)/to retained earnings - (595) 595 - - - - Equity at end of the year 68,597 62,690 3,810 1,159 (208) (7,204) 128,844 Consolidated Group 2023 Note Issued capital $’000 Retained earnings $’000 Share-based payment reserve $’000 Cash flow hedge reserve $’000 Foreign currency translation reserve $’000 Acquisition reserve $’000 Total $’000 Equity at start of the year 4.2 76,257 222,422 2,861 2,023 (4,928) (7,204) 291,431 Net profit for the year from continuing operations - 64,449 - - - - 64,449 Net (loss) for the year from discontinuing operations (32,177) (32,177) Other comprehensive income / (loss) for the year after tax from continuing operations - - - (586) 1,898 - 1,312 Other comprehensive income / (loss) for the year after tax from discontinued operations - - - (94) 1,568 - 1,474 Total comprehensive income for the period - 32,272 - (680) 3,466 - 35,058 Transactions with owners in their capacity as owners: Share based payments - - 1,243 - - - 1,243 Dividends paid 4.3 - (91,929) - - - - (91,929) Share buy-back (7,661) (82,565) - - - - (90,226) Equity at end of the year 68,597 80,200 4,104 1,343 (1,462) (7,204) 145,577 The above Statements of Changes in Equity should be read in conjunction with the accompanying notes. MMS Annual Report 2024 MMS Annual Report 2024 FINANCIALS 49 Parent Entity 2024 Note Issued capital $’000 Retained earnings $’000 Share-based payment reserve $’000 Total $’000 Equity at start of the year 4.2 68,597 48,745 4,309 121,651 Net profit for the year - 66,325 - 66,325 Other comprehensive income for the year after tax - - - - Total comprehensive income for the period - 66,325 - 66,325 Transactions with owners in their capacity as owners: Share based payments - - 178 178 Dividends paid 4.3 (98,893) - (98,893) Equity at end of the year 68,597 16,177 4,487 89,261 Parent Entity 2023 Note Issued capital $’000 Retained earnings $’000 Share-based payment reserve $’000 Total $’000 Equity at start of the year 4.2 76,258 147,541 2,861 226,659 Net profit for the year - 75,909 - 75,909 Other comprehensive income for the year after tax - - - - Total comprehensive income for the period - 75,909 - 75,909 Transactions with owners in their capacity as owners: Opening retained earnings adjustments - (211) 206 (5) Share based payments - - 1,243 1,243 Dividends paid 4.3 - (91,929) - (91,929) Share buy-back (7,661) (82,565) - (90,226) Equity at end of the year 68,597 48,745 4,309 121,651 Statements of Changes in Equity For the year ended 30 June 2024 The above Statements of Changes in Equity should be read in conjunction with the accompanying notes. FINANCIALS FINANCIALS 50 Statements of Cash Flows For the year ended 30 June 2024 Consolidated Group Parent Entity Note 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Cash flows from operating activities Receipts from customers 501,694 553,008 - - Payments to suppliers and employees (311,515) (449,053) (2,232) (5,818) Proceeds from sale of assets previously under lease 82,569 110,829 - - Payments for assets under lease (358,745) (177,043) - - Interest received 21,303 13,775 319 256 Interest paid (23,637) (8,849) (3,556) (2,110) Dividends received - - 91,655 99,255 Income taxes paid (17,666) (18,060) - - Net cash from operating activities excluding movements in restricted client trust funds 3.1 (105,997) 24,607 86,186 91,583 Receipts of restricted client trust funds 6,540,060 6,054,917 - - Payments of customer salary packaging liability (6,539,304) (6,101,224) - - Net cash (used in) / from operating activities in restricted client trust funds 756 (46,307) - - Cash flows from investing activities Payments for capitalised software 3.7 (20,756) (11,912) - - Payments for plant and equipment (880) (4,399) - - Cash transferred on disposal of subsidiaries net of cash consideration received 20,290 - 1,937 - Cash received from return of capital from subsidiaries - - 51,470 - Net cash from / (used in) investing activities (1,346) (16,311) 53,407 - Cash flows from financing activities Proceeds from borrowings 302,642 162,214 - 60,000 Repayments of borrowings (33,928) (48,343) - - Payments of lease liabilities (4,769) (3,239) - - Payments for treasury shares (3,028) - (3,028) - Payments in respect of share buy back - (90,226) - (90,226) Dividends paid 4.3 (98,893) (91,929) (98,893) (91,929) Proceeds from controlled entities - - (16,329) 31,247 Net cash from / (used in) financing activities 162,024 (71,523) (118,250) (90,908) Net increase / (decrease) in cash and cash equivalents 54,681 (63,227) 21,343 675 Net increase / (decrease) in restricted client trust funds 756 (46,307) - - Cash and cash equivalents at start of the year 60,581 160,797 1,255 580 Cash and cash equivalents of assets held for sale 37,702 - - - Restricted client trust funds at start of the year 402,608 439,694 - - Effects of foreign exchange changes on cash and cash equivalents (12) 713 - - Restricted client trust funds at end of the year 403,364 402,608 - - Cash and cash equivalents of assets held for sale - (37,702) - - Cash and cash equivalents at end of the year 152,952 60,581 22,598 1,255 The above Statements of Cash Flows should be read in conjunction with the accompanying notes. MMS Annual Report 2024 FINANCIALS FINANCIALS MMS Annual Report 2024 51 Notes to the Financial Statements For the year ended 30 June 2024 1 Introduction to the Report 2 Performance 2.1 Segment Reporting 2.2 Revenue 2.3 Profit and Loss Information 2.4 Income Tax 2.5 Earnings Per Share 3 Assets and Liabilities 3.1 Cash and Cash Equivalents 3.2 Trade and Other Receivables 3.3 Finance Lease Receivables 3.4 Inventories 3.5 Assets Under Operating Lease 3.6 Right-of-use Assets and Lease Liabilities 3.7 Intangible Assets 3.8 Trade and Other Payables 3.9 Contract Liabilities 3.10 Other Liabilities 3.11 Provisions 4 Capital Management 4.1 Borrowings 4.2 Issued Capital 4.3 Dividends 4.4 Financial Risk Management 4.5 Financial Instruments 5 Employee Remuneration and Benefits 5.1 Share-based Payments 5.2 Key Management Personnel Compensation 5.3 Other Employee Benefits 6 Group Structure 6.1 Investment in Subsidiaries 6.2 Deed of Cross Guarantee 6.3 Discontinued operations 7 Other Disclosures 7.1 Reserves 7.2 Related Party Transactions 7.3 Auditor’s Remuneration 7.4 Events Occurring after the Reporting Date 8 Unrecognised Items 8.1 Commitments FINANCIALS MMS Annual Report 2024 52 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 1 Introduction to the Report The financial report of McMillan Shakespeare Limited (Company or Parent Entity) in respect of the Company and the entities it controlled at the reporting date or during the year ended 30 June 2024 (Group or Consolidated Group) was authorised in accordance with a resolution of the Directors on 27 August 2024. Reporting entity The Company is a for-profit company limited by shares which is incorporated and domiciled in Australia and listed on the Australian Securities Exchange (ASX). Basis of preparation and accounting policies The financial report and notes are a general purpose financial report which has been prepared in accordance with the Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 (Cth). The financial report also complies with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. Except for cash flow information, the financial statements have been prepared on an accrual and historical cost basis except for certain financial instruments measured at fair value as explained in the notes to the financial statements (the Notes). The Group has prepared the financial statements on the basis that it will continue to operate as a going concern. The accounting policies adopted are consistent with those of the previous financial year unless stated otherwise. The financial report presents reclassified comparative information where required for consistency with current year’s presentation. Key judgements, estimates and assumptions The preparation of the financial statements requires judgement and the use of estimates and assumptions in applying the Group’s accounting policies, which affects amounts reported for assets, liabilities, income and expenses. Judgements, estimates and assumptions are continuously evaluated and are based on: > historical experience; > current market conditions; and > reasonable expectations of future events. Actual results may differ and uncertainty about these judgements, estimates and assumptions could result in a material adjustment to the carrying amount of assets or liabilities in future periods. The key areas involving judgement or significant estimates and assumptions are set out below: Note Item Judgements, estimates and assumptions 3.1 Restricted client trust funds Balance sheet classification 3.5 Assets under operating lease Lease assets residual value 3.7 Intangible assets Assessment of recoverable amount Cost capitalisation 4.4(b) Trade, other and finance lease receivables Assessment of recoverable amount Detailed information about each of these judgements, estimates and assumptions is included in the Notes together with information about the basis of calculation for each affected line item in the financial statements. Presentation of Restricted client trust funds Pursuant to contractual arrangements with clients, GRS administers cash flows on behalf of clients as part of the remuneration benefits administration service. These funds are for the purpose of making salary packaging payments on behalf of those clients only and therefore are not available for use in the Group’s operations. These funds are not available to be used to settle group liabilities and are held on trust for the benefit of those clients. The Group has recognised these funds in the Statement of Financial Position. The Notes The Notes include information which is required to understand the financial statements and is material and relevant to the operations, financial performance and position of the Group. Information is considered material and relevant where: > the amount in question is significant because of its size or nature; > it is important for understanding the results of the Group; or > it helps explain the impact of significant changes in the Group’s business. The Notes are organised into the following sections: 2 Performance Information on the performance of the Group, including segment results, earnings per share (EPS) and income tax. 3 Assets and Liabilities Details the assets used in the Group’s operations and the liabilities incurred as a result. 4 Capital Management Information relating to the Group’s capital structure and financing as well as the Group’s exposure to various financial risks. 5 Employee Remuneration and Benefits Information relating to remuneration and benefits provided to employees and key management personnel. 6 Group Structure Information relating to subsidiaries and other material investments of the Group. FINANCIALS 53 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS MMS Annual Report 2024 7 Other Disclosures Other disclosures required by Australian Accounting Standards that are considered relevant to understanding the Group’s financial performance or position. 8 Unrecognised Items Information about items that are not recognised in the financial statements but could potentially have a significant impact on the Group’s financial performance or position in the future. Basis of consolidation Subsidiaries are consolidated from the date the Group gains control until the date on which control ceases. Control is achieved when the Group is exposed to, or has rights to, variable returns from its involvement in the entity and has the ability to affect those returns through its power to direct the activities of the entity. The Group’s share of all intercompany balances, transactions and unrealised profits are eliminated. The financial statements of subsidiaries are prepared for the same reporting period as the Parent Entity, using consistent accounting policies. Foreign currency The consolidated financial statements of the Group are presented in Australian dollars which is the presentation currency. The financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (functional currency). Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Differences resulting at settlement of such transactions and from the translation of monetary assets and liabilities at reporting date are recognised in profit or loss. Non-monetary items are not retranslated at reporting date and are measured at historical cost (being the exchange rates at the dates of the initial transaction), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. Group companies On consolidation of the financial results and affairs of foreign operations, assets and liabilities are translated to the presentation currency at prevailing exchange rates at reporting date and income and expenses for the year at average exchange rates. The resulting exchange differences on consolidation are recognised in other comprehensive income (OCI) and accumulated in equity. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is recognised in profit or loss. Accounting policies Accounting policies that summarise the classification, recognition and measurement basis of financial statement line items and that are relevant to the understanding of the consolidated financial statements are provided throughout the Notes. Current versus non-current classification Assets and liabilities are presented in the Statements of Financial Position based on current / non-current classification. An asset is current when it is: > expected to be realised or intended to be sold or consumed in the Group’s normal operating cycle; > held primarily for the purpose of trading; > expected to be realised within 12 months after reporting date; or > cash or a cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after reporting date. A liability is current when: > it is expected to be settled in the Group’s normal operating cycle; > it is held primarily for the purpose of trading; > it is due to be settled within 12 months after reporting date; or > there is no unconditional right to defer the settlement of the liability for at least 12 months after reporting date. Rounding of amounts The amounts contained in the financial report have been rounded to the nearest thousand dollars (unless specifically stated to be otherwise) under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191. New or amended Accounting Standards and Interpretations adopted The Group applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after 1 July 2023 (unless otherwise stated). The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality Judgements provide guidance and examples to help entities apply materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a requirement to disclose their ‘material’ accounting policies. MMS Annual Report 2024 54 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 2 Performance 2.1 SEGMENT REPORTING Description of segments Operating segments have been identified after considering the nature of the products and services, type of customer and distribution methods. Reportable Segment Services provided Group Remuneration Services (GRS) Administrative services in respect of salary packaging and facilitating motor vehicle novated leases for customers. Ancillary services associated with motor vehicle novated lease products, including the provision of novated lease finance. Asset Management Services (AMS) Financing and ancillary management services associated with motor vehicles, commercial vehicles and equipment from continuing operations in Australia and New Zealand. Plan and Support Services (PSS) Plan management and support coordination services to participants in the National Disability Insurance Scheme (NDIS). Underlying net profit after tax and amortisation (UNPATA), being net profit after tax but before the after-tax impact of acquisition and divestment related activities and non-operational items (as outlined in the following tables), is the key measure by which management monitors the performance of the segments. Segment revenue and expenses are reported as attributable to the shareholders of the Company. Normalised UNPATA refers to adjustments made for the negative earnings transitional period for the implementation of the funding warehouse, Onboard Finance (Warehouse). It normalises for the Warehouse’s in year operating and establishment expenses and for an adjustment for commissions that would have otherwise been received in period had the sales been financed via a principal and agency (P&A) funder rather than through the Warehouse. Normalised financials are stated for FY23 and FY24 and expected to be stated up to and including FY25. 55 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS 2.1 SEGMENT REPORTING (CONTINUED) The segment reporting presented below reflects the results from continuing operations. The prior year figures have also been updated for comparative purposes. 2024 GRS $’000 AMS $’000 PSS $’000 Unallocated1 $’000 Consolidated Group $’000 Revenue 273,371 175,715 50,637 - 499,723 Interest revenue 15,689 2,082 - 3,524 21,295 Segment revenue 289,060 177,797 50,637 3,524 521,018 Normalised UNPATA 80,657 19,061 8,523 (592) 107,649 Normalisation adjustment (23,322) - - (1,316) (24,638) Income tax related to normalised UNPATA adjustments 6,996 - - 395 7,391 UNPATA 64,331 19,061 8,523 (1,513) 90,402 Reconciliation to statutory net profit after tax attributable to members of the parent entity Amortisation of intangible assets acquired on business combination - - (493) - (493) Income tax related to UNPATA adjustments - - 148 - 148 UNPATA adjustments after tax - - (345) - (345) Statutory net profit after tax attributable to members of the parent entity 64,331 19,061 8,178 (1,513) 90,057 Assets and Liabilities Segment assets 991,242 324,003 36,180 - 1,351,425 Segment liabilities 857,307 246,388 19,123 99,762 1,225,580 Additions to segment non-current assets 20,660 107,437 666 - 128,763 Segment depreciation and amortisation 14,895 52,122 1,422 - 68,439 1 Unallocated revenue and assets include cash and bank balances of segments other than AMS, maintained as part of the centralised treasury and funding function of the Group and interest earned on those balances. FINANCIALS MMS Annual Report 2024 56 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 2.1 SEGMENT REPORTING (CONTINUED) 2023 GRS $’000 AMS $’000 PSS $’000 Unallocated1 $’000 Consolidated Group $’000 Revenue 215,091 186,582 48,550 - 450,223 Interest revenue 10,361 821 - 2,599 13,781 Segment revenue 225,452 187,403 48,550 2,599 464,004 Normalised UNPATA 52,477 18,683 8,012 (1,253) 77,919 Normalisation adjustment (16,438) - - - (16,438) Income tax related to normalised UNPATA adjustments 4,932 - - - 4,932 UNPATA 40,971 18,683 8,012 (1,253) 66,413 Reconciliation to statutory net profit after tax attributable to members of the parent entity Amortisation of intangible assets acquired on business combination - - (813) - (813) Capital restructure costs - - - (553) (553) Acquisition and disposal related expenses2 - - (176) (1,264) (1,440) Income tax related to UNPATA adjustments - - 297 545 842 UNPATA adjustments after tax - - (692) (1,272) (1,964) Statutory net profit after tax attributable to members of the parent entity 40,971 18,683 7,320 (2,525) 64,449 Assets and Liabilities Segment assets 301,926 294,386 29,732 195,569 821,613 Segment liabilities 191,412 272,159 7,881 58,758 530,210 Additions to segment non-current assets 19,822 8,572 1,027 176,019 205,440 Segment depreciation and amortisation 14,895 59,340 1,422 - 75,657 1 Unallocated revenue and assets include cash and bank balances of segments other than AMS, maintained as part of the centralised treasury and funding function of the Group and interest earned on those balances. 2 Costs incurred in relation to potential acquisition and disposal transactions and related costs. Segment profit includes the segment’s share of centralised general management and operational support services which are shared across segments based on the lowest unit of measurement available to allocate shared costs that reasonably measure each segment’s service level requirements and consumption. Segment profit does not include corporate costs of the parent entity including director’s fees and finance costs relating to borrowings not specifically sourced for segment operations, costs directly incurred in relation to acquisitions and divestments or interest revenue not directly attributable to a segment. Included in segment revenue for GRS are revenues of $87,063,210 (2023: $69,845,808) from the Group’s largest customer. This is the only customer representing greater than 10% of total segment revenue. FINANCIALS 57 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS MMS Annual Report 2024 Other segment information Assets are allocated based on the operations of the segment. The Parent Entity’s borrowings are not considered to be segment liabilities. Geographical segment information Revenue from continuing operations by location of operations and assets is detailed below. Revenue from external customers Non-current assets1 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Australia 500,804 286,923 591,372 381,502 New Zealand 16,689 22,291 25,942 26,920 517,493 309,214 617,314 408,422 1 Non-current assets do not include deferred tax assets. 2.2 REVENUE Set out below is the disaggregation of the Group’s revenue: Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Revenue from contracts with customer Remuneration services 245,070 210,585 - - Sale of leased and other assets 82,569 98,963 - - Plan and support services 50,637 48,550 - - Total revenues from contracts with customers 378,276 358,098 - - Lease rental services 119,960 92,111 - - Other revenue 1,487 13 - - 499,723 450,223 - - MMS Annual Report 2024 58 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS Revenue Description Remuneration services Administration fees for the provision of salary packaging and ancillary services including novated leasing and finance procurement, motor vehicle administration and other services. Fees are recognised over the period that the services are rendered, net of any rebates payable to the employer organisation. Fee rates are contractually agreed with each client employer and the provision of administration services is considered to have been satisfied for each period completed. Fees derived from the origination of financing and insurance products are recognised at a point in time when the customer has executed the lease finance or activated the insurance cover and the Group has no outstanding obligations. Volume-based rebates from providers of package benefit services are estimated and recognised based on the period of entitlement. Sale of leased and other assets The Group assumes control of motor vehicles at the termination of lease contracts and disposes of the asset as principal. The net proceeds are recognised when settlement is completed and ownership of the motor vehicle passes to the purchaser. Plan and support services Fees for the provision of set up and renewal of plans and support coordination services are recognised at the point in time of providing the service. Fees for the provision of plan management services are recognised over time based on the individual plans. Lease rental services Rental income received for operating lease assets is recognised on a straight line basis over the term of the lease. Interest from finance leases is recognised over the term of the lease as a constant periodic return on the amount invested in the lease asset. Fees for tyre and maintenance services are recognised to the extent that services are completed based on the percentage of costs incurred relative to total expected costs over the term of the lease. Fleet administration fees are recognised in the period that services are provided. 59 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS 2.3 PROFIT AND LOSS INFORMATION (a) Superannuation contributions expense Superannuation contribution expenses are included within employee benefit expenses. Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Superannuation Superannuation contribution expense 13,507 12,401 - - (b) Depreciation and amortisation expenses Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Depreciation and amortisation expenses Depreciation of assets under operating lease 50,258 48,206 - - Depreciation of right-of-use (ROU) assets 4,664 5,377 - - Depreciation of plant and equipment 2,629 2,045 - - Amortisation of software development 10,317 10,285 - - Amortisation of intangible assets 493 603 - - 68,361 66,516 - - (c) Other operating expenses Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Consulting and professional services 6,258 7,039 321 2,286 Marketing 9,146 7,782 - - Property and corporate expenses 10,218 9,940 411 336 Technology and communication 21,632 20,386 - - Other 6,890 4,478 5,631 660 54,144 49,625 6,363 3,282 (d) Impairment of financial assets Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Trade debtors specific and expected credit loss allowance (264) (347) - - Finance lease receivable expected credit loss allowance (1,081) (493) - - (1,345) (840) - - Finance lease receivable expected credit loss (ECL) allowance movement of $1,081,000 (2023: $493,000) is affected largely by an increase of $229,094,000 (2023: $80,980,000) in the carrying value of finance lease receivables. The Group uses assessment criteria from its credit management system and adds forward looking indicators to reflect macro-economic factors to estimate ECL. MMS Annual Report 2024 60 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 2.4 INCOME TAX Components of tax expense / (benefit) Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Current tax expense 47,456 27,180 688 (1,915) Adjustments for current tax of prior years 1,383 (174) - (174) Deferred tax (benefit) /expense (8,274) (1,727) (2,342) (704) Income tax expense / (benefit) of assets held for sale1 - 2,075 - - Income tax expense / (benefit) 40,565 27,354 (1,654) (2,793) 1 Income tax expense includes deferred tax assets of $6,605,000 and deferred tax liabilities of ($4,538,000) related to assets held for sale in the prior year. The tax expense included in the Statement of Profit or Loss consists of current and deferred income tax. Current income tax is: Deferred income tax is: > the expected tax payable on the current period’s taxable income; > calculated using tax rates for each jurisdiction enacted or substantively enacted at the end of the reporting period in the countries where the entities in the Group operate and generate taxable income; and > inclusive of any adjustment to income tax payable or recoverable of prior years. > recognised using the liability method; > based on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their respective tax bases; > calculated using the tax rates that are expected to apply when the assets are recovered or liabilities settled, based on those rates which are enacted or substantially enacted; and > not recognised if they arise from the initial recognition of goodwill. Current and deferred income tax is recognised in the Statement of Profit or Loss. However, when it relates to items charged directly to the Statement of Other Comprehensive Income (OCI) or Statement of Changes in Equity, the tax is recognised in OCI or equity respectively. 61 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS The prima facie tax payable on profit before income tax is reconciled to the income tax expense / (benefit) as follows: Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Profit before income tax 130,622 91,803 64,671 73,116 Prima facie tax payable on profit before income tax at 30% (2023: 30%) 39,187 27,542 19,401 21,935 Add tax effect of: – Non-deductible impairment expense - - 5,505 5,187 – Non-deductible costs 49 45 (580) - – Intercompany loan forgiveness - - 1,517 - – Overseas tax rate differential of subsidiaries (38) (59) - - – (Over) / under provision of tax from prior year 1,383 (174) - (174) – Other (16) - - 36 40,565 27,354 25,843 26,984 Less tax effect of: – Dividends received - - (27,497) (29,777) Income tax expenses / (benefit) 40,565 27,354 (1,654) (2,793) FINANCIALS MMS Annual Report 2024 62 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS Deferred tax asset / (liability) Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 The balance comprises temporary differences attributed for: Amounts recognised in profit or loss Doubtful debts 1,063 471 - - Provisions 8,104 5,206 - - Property, plant and equipment (32,951) (32,106) - - Right-of-use assets (8,198) (2,580) - Lease liabilities 12,269 3,470 - Accrued expenses 4,073 6,132 - - Unearned income 1,294 2,824 - - Deferred acquisition expense 661 254 383 250 Intangible assets (856) (2,641) - - Losses 2,123 - 2,235 Other (51) 147 11 63 (12,469) (18,823) 2,629 313 Amounts recognised in equity Derivatives recognised directly in equity (496) (446) - - Share based payment reserve 2,381 890 26 - Balance at end of the year (10,584) (18,379) 2,655 313 Recognised as: Deferred tax asset (DTA) 29,869 16,720 2,655 313 Deferred tax liability (DTL) (40,453) (35,099) - - (10,584) (18,379) 2,655 313 Movements in deferred tax asset / (liability) Balance at start of the year (18,380) (18,253) 313 (391) Charged to profit or loss 8,274 1,727 2,342 704 Charged to other comprehensive income (496) 292 - - Foreign exchange translation 18 (78) - - Deferred tax for assets held for sale - (2,067) - - Balance at end of the year (10,584) (18,379) 2,655 313 The carrying value of DTAs are reduced to the extent that it is probable future taxable profits will be available to utilise these temporary differences. DTAs and DTLs are offset only if certain criteria are met with respect to legal enforceability and within the same tax jurisdiction. DTAs and DTLs are not recognised for temporary differences between the carrying amounts and tax bases of investments in subsidiaries where the parent entity is able to control the timing of reversal and it is probable that the differences will not reverse in the foreseeable future. FINANCIALS 63 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS MMS Annual Report 2024 Unrecognised temporary differences Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Temporary differences that have not been tax effected: – Unused capital tax losses 26,457 22,713 - - Balance at end of the year 26,457 22,713 - - Unused capital tax losses relate to subsidiaries that are currently dormant and / or unlikely to generate sufficient taxable income to use the capital losses generated from disposal of subsidiaries. Tax consolidation The Company and its wholly owned Australian resident entities are members of a tax consolidated group under Australian taxation law. The Company is the head entity in the tax consolidated group. Entities within the tax consolidated group have entered into a tax funding agreement and a tax sharing agreement with the head entity. Under the terms of the tax funding arrangement, the Company and each of the entities in the tax consolidated group have agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the head entity. 2.5 EARNINGS PER SHARE Consolidated Group 2024 2023 Basic EPS (cents) from continuing operations 129.3 89.4 Diluted EPS (cents) from continuing operations 128.3 89.0 Basic EPS (cents) from total operations 120.0 44.8 Diluted EPS (cents) from total operations 119.0 44.6 Earnings used to calculate basic and diluted EPS ($’000) Net profit after tax ($’000) 83,547 32,272 Weighted average number of ordinary shares used in the calculation of basic EPS (‘000) 69,643 72,102 Weighted average numbers of rights outstanding (‘000) 564 299 Weighted average number of ordinary shares used in the calculation of diluted EPS (‘000) 70,207 72,401 Basic EPS is calculated by dividing the profit attributable to members of the Company by the weighted average number of ordinary shares outstanding during the financial year. Diluted EPS is calculated from earnings and the weighted average number of shares used in calculating basic EPS adjusted for the dilutive effect of all potential ordinary shares from the employee incentive plan. MMS Annual Report 2024 64 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 3 Assets and Liabilities 3.1 CASH AND CASH EQUIVALENTS Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Bank balances 152,699 60,328 22,598 1,255 Short-term deposits 253 253 - - 152,952 60,581 22,598 1,255 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 3 months or less that are readily convertible to known amounts of cash subject to an insignificant risk of changes in value. Cash and cash equivalents are controlled by the Group and the contractual rights transfer to the Company substantially all of the benefits and risks of ownership. Cash at bank and short-term deposits earn interest at floating rates at an average interest rate of 4.50% pa (2023: 2.81% pa). Short-term deposits have an average maturity of 90 days (2023: 90 days) and are highly liquid. Restricted client trust funds Consolidated Group 2024 $’000 2023 $’000 Restricted client trust funds 403,364 402,608 Restricted client trust funds for salary packaging (403,364) (402,608) Restricted client trust funds recognised in the Statement of Financial Position Pursuant to contractual arrangements with clients, GRS administers cash flows on behalf of clients as part of the remuneration benefits administration service. These funds are for the purpose of making salary packaging payments on behalf of those clients only and therefore not available for use in the Group’s operations. These funds are not available to be used to settle group liabilities and are held on trust for the benefit of those clients. The Group has recognised these funds in the Statement of Financial Position. The cash in the Restricted client trust funds is held in bank accounts specifically designated as funds in trust for clients, with all client trust funds segregated from the Group’s own cash. Pursuant to contractual arrangements, the Group may earn interest from these client funds held in trust. The average interest rate on Restricted client trust funds for the year ended 30 June 2024 was 4.53% (2023: 2.94%). The Parent Entity does not hold any client monies. 65 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS Cash flow Information Reconciliation of cash flow from operations with profit from operating activities after tax Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Profit for the year 83,547 32,272 66,325 75,909 Non-cash flows in profit from operating activities Amortisation 556 2,268 - - Depreciation 63,226 63,189 - - ROU assets depreciation 4,656 4,019 - - Impairment 8,563 43,374 18,349 17,290 Share based expenses 2,737 1,243 3,208 1,243 Loss on disposal of subsidiary 2,921 - - - Loan forgiveness - - 5,059 - Changes in assets and liabilities Decrease / (increase) in trade receivables and other assets (11,727) 2,616 474 (61) (Increase) in finance lease receivables (227,619) (86,207) - - (Increase) in assets under lease (73,246) (78,491) - - Decrease in written down value of assets sold 30,501 52,311 - - (Decrease) in trade payables and accruals (8,459) (2,158) (637) (858) Increase / (decrease) in income taxes payable 24,908 9,861 (4,250) (1,235) (Decrease) in deferred taxes (5,731) (1,817) (2,342) (704) Increase / (decrease) in unearned revenue 1,697 (346) - - (Decrease) in provisions and accruals (2,527) (17,527) - - Net cash (used in) / from operating activities (105,997) 24,607 86,186 91,584 Cash from operating activities Cash flows other than investing or financing are classified as cash from operating activities. As the AMS segment provides operating and finance leases for motor vehicles and equipment, the cash outflows to acquire the lease assets as well as interest received and interest paid are classified as operating cash outflows. MMS Annual Report 2024 66 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS Net debt reconciliation A summary of the movement in borrowings (excluding capitalised borrowing costs) affecting financing cash flows during the year is provided below: Financing cash flow from liabilities Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Borrowings (excluding capitalised borrowing costs) 547,232 278,616 60,000 60,000 Payable due to wholly owned entities - - 46,367 56,335 Financing liabilities 547,232 278,616 106,367 116,335 Movements during the year Liabilities at start of the year 278,616 167,967 116,335 25,576 Cash flows relating to borrowings 268,715 113,871 - 60,000 Cash flows relating to payables due to wholly owned entities - (8,738) (16,326) 31,247 Non-cash settlement of payables due to wholly owned entities - 6,094 1,300 (488) Related party loan forgiveness - - 5,058 - Foreign exchange adjustments (99) (578) - - Liabilities at end of the year 547,232 278,616 106,367 116,335 3.2 TRADE AND OTHER RECEIVABLES Current Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Trade receivables 28,865 23,978 - - Other receivables 10,630 16,007 83 - Amounts receivable from wholly owned entities - - - 448 39,495 39,985 83 448 Trade receivables Trade receivables are amounts due from customers for services performed in the ordinary course of business and held with the objective of collecting cash flows. They are generally settled within 30 days. The carrying amount includes a total loss allowance of $1,872,000 (2023: $1,608,000) which includes a specific loss allowance of $133,000 (2023: $131,000). The carrying amount is generally considered to equal their fair value. Other receivables None of the other receivables are impaired or past due. 67 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS 3.3 FINANCE LEASE RECEIVABLES Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Current finance lease receivables 68,067 22,794 - - Non-current finance lease receivables 268,545 86,327 - - 336,612 109,121 - - The Onboard Finance and AMS finance lease contracts entered into are recognised as finance lease receivables and classified as financial assets measured at amortised cost as the contract transfers substantially all the risks and rewards of ownership of an underlying asset. The net investment in the lease equals the net present value of the future minimum lease payments. Finance lease income is recognised as income in the period to reflect a constant periodic rate of return. Amounts receivable under finance lease receivables Consolidated Group Minimum lease payments 2024 $’000 Present value of lease payments 2024 $’000 Minimum lease payments 2023 $’000 Present value of lease payments 2023 $’000 Within one year 69,024 68,067 26,249 22,795 Within 1 to 2 years 66,704 65,240 21,010 18,434 Within 2 to 3 years 70,618 69,271 23,583 21,573 Within 3 to 4 years 71,028 69,831 19,715 18,102 Within 4 to 5 years 62,981 62,416 29,368 28,166 Later than five years 2,612 1,787 51 51 342,967 336,612 119,976 109,121 Less: Unearned finance income (6,355) - (10,855) - Present value of minimum lease payments 336,612 336,612 109,121 109,121 Fair value of finance lease receivables 338,426 110,210 Fair values were calculated based on cash flows discounted using an average of current lending rates appropriate for the geographical markets the leases operate of 13.21% pa (2023: 11.45% pa). 3.4 INVENTORIES Motor vehicles are stated at the lower of cost and net realisable value. Following termination of a lease or rental contract, the relevant assets are transferred from assets under operating lease to Inventories at their carrying amount. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs to make the sale. MMS Annual Report 2024 68 FINANCIALS 3.5 ASSETS UNDER OPERATING LEASE Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Assets held under operating lease terminating within the next 12 months 63,669 58,179 - - Assets held under operating lease terminating after more than 12 months 164,165 146,778 - - 227,834 204,957 - - Consolidated Group 2024 $’000 2023 $’000 Depreciation rate (range) 20% - 33% 20% - 33% At cost 360,477 337,699 Accumulated depreciation (132,643) (132,742) Net carrying value 227,834 204,957 Movements during the year Balance at start of the year 204,957 223,667 Additions 101,251 80,742 Disposals/transfers to inventory (28,140) (49,310) Depreciation expense (50,258) (48,801) Residual value adjustment 83 129 Change in foreign currency (59) (501) Assets held for sale - (969) Balance at end of the year 227,834 204,957 Assets held under operating leases are for contracts with customers other than finance leases. The initial investment in the lease is added as a cost to the carrying value of the leased assets and recognised as lease income on a straight-line basis over the term of the lease. Operating lease assets are depreciated as an expense on a straight line basis over the term of the lease based on the cost less residual value of the lease. Assets held under operating lease include an accumulated provision for impairment loss at reporting date of $2,888,000 (2023: $3,189,000). Notes to the Financial Statements For the year ended 30 June 2024 69 MMS Annual Report 2024 FINANCIALS Provision for residual value The provision estimates the probable diminution in value of operating lease and rental assets at the end of lease contract dates. The estimate is based on the deficit in estimated recoverable value from contracted cash flows. A residual value provision is also recognised for the estimated loss in recoverable value of lease assets which are transferred to the Group at the end of the lease term pursuant to some principal and agency (P&A) arrangements with financiers and other residual value guarantees. The asset from the financier is acquired at its residual value on termination of the lease which creates an exposure of the carrying value to the expected market price for which the potential impact is assessed at each reporting date and the shortfall provided for. 3.6 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES The Group acts as a lessee in operating lease arrangements for the use of property and equipment. Right-of-use Assets Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 At cost 74,732 77,312 - - Accumulated depreciation (48,838) (47,258) - - Net carrying value 25,894 30,054 - - Movements during the year Balance at start of the year 30,054 35,982 - - New assets leased - 185 - - Depreciation (4,664) (5,686) - - Other 441 - - - Change in foreign currency 63 29 - - Assets held for sale - (456) - - Balance at end of the year 25,894 30,054 - - Key judgement: Lease assets residual value Operating leases carry an inherent risk for the residual value of the asset. Estimates of significance are used in determining the residual values of operating lease and rental assets at the end of the contract date. The assessment includes forecasts of the future value of the asset lease portfolio at the time of sale and considers the potential impact of economic and vehicle market conditions and dynamics. Under the P&A financing arrangement with external financiers, the Group acquires the lease assets on the termination of the lease contract and is thereby exposed to the residual value of the underlying asset. A provision is recognised when the estimated residual value is lower than the assessment of the future value of the P&A funded assets. If the estimated residual values reduced by 5%, this would result in the residual value adjustment increasing by $2.2m. Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 70 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS Lease liabilities Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Movements during the year Balance at start of the year 46,513 51,064 - - New assets leased - 186 - - Finance charges 1,518 1,795 - - Lease payments (7,134) (8,224) - - Lease incentives - 2,116 - - Change in foreign currency - 40 - - Assets held for sale - (464) - - Balance at end of the year 40,897 46,513 - - Carrying value of lease liabilities Current 5,589 5,130 - - Non-current 35,308 41,383 - - 40,897 46,513 - - Recognition and measurement of lease assets and liabilities Right-of-use (ROU) assets and the lease liability are initially measured on a present value basis. Leases brought to account are for the value of the property and exclude non lease components. Lease liabilities include the net present value of fixed rental payments less any lease incentives receivable plus any rental adjustments where the extensions available under the lease will probably be exercised. Lease payments are discounted using the Group’s incremental borrowing rate. ROU assets are measured at cost comprising the amount of the initial measurement of the lease liability, any initial direct costs and any provision for make-good or restoration. ROU assets are depreciated over the shorter of the asset’s useful life and lease term on a straight line basis. Short term leases of less than 12 months and low value leases are expensed on a straight line basis to the profit or loss. The principal portion of payments is included in financing activities in the Statements of Cash Flows and the finance charges is included in operating activities. 71 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS 3.7 INTANGIBLE ASSETS Consolidated Group 2024 Goodwill $’000 Brands – indefinite life $’000 Brands – finite life $’000 Dealer relationships $’000 Customer lists and relationships $’000 Software development costs $’000 Contract rights $’000 Total $’000 Useful life range Not applicable Indefinite 2–6 years 6–13 years 5–13 years 3–5 years Contract life Cost 216,292 23,073 6,598 13,876 8,166 106,208 13,132 387,345 Accumulated amortisation - (13,171) (6,598) (3,284) (5,648) (65,764) (13,132) (107,597) Accumulated impairment loss (175,785) (9,272) - (10,592) (293) (558) - (196,500) Net carrying value 40,507 630 - - 2,225 39,886 - 83,248 Reconciliation of written down values Balance at start of the year 40,507 630 - - 2,553 29,721 - 73,411 Additions - - - - - 20,756 - 20,756 Amortisation - - - - (556) (10,339) - (10,895) Impairment - - - - - (252) - (252) Changes in foreign currency - - - - 228 - - 228 Balance at end of the year 40,507 630 - - 2,225 39,886 - 83,248 Consolidated Group 2023 Goodwill $’000 Brands – indefinite life $’000 Brands – finite life $’000 Dealer relationships $’000 Customer lists and relationships $’000 Software development costs $’000 Contract rights $’000 Total $’000 Useful life range Not applicable Indefinite 2–6 years 6–13 years 5–13 years 3–5 years Contract life Cost 216,292 23,073 6,598 13,876 8,166 86,973 13,132 368,110 Accumulated amortisation - (6,598) (3,284) (5,155) (56,907) (13,132) (85,076) Accumulated impairment loss (168,013) (14,269) - (6,990) - - - (189,272) Assets held for sale1 (7,772) (8,174) - (3,602) (458) (346) - (20,351) Net carrying value 40,507 630 - - 2,553 29,7212 - 73,411 Reconciliation of written down values Balance at start of the year 88,425 9,902 - 4,621 3,918 28,682 - 135,548 Additions - - - - - 11,912 - 11,912 Amortisation - - - (1,316) (954) (10,527) - (12,797) Impairment (41,436) (1,098) - - - - - (42,534) Changes in foreign currency 1,290 - - 297 46 - - 1,633 Assets held for sale1 (7,772) (8,174) - (3,602) (457) (346) - (20,351) Balance at end of the year 40,507 630 - - 2,553 29,7212 - 73,411 1 The values for movements in Assets held for sale at 30 June 2023 have been re-allocated: Goodwill $7,772 ($7,709), brands – indefinite life $8,174 ($7,404), dealer relationships $3,602 ($1,944) and customer relationships $457 ($2,906). No changes to the total intangibles or total assets held for sale have been made. 2 The carrying value of software development costs includes an amount of $7,814 reallocated between capitalised costs and property, plant and equipment. MMS Annual Report 2024 72 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS Goodwill Goodwill represents the excess of the cost of the business combination over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity. Goodwill is measured at cost less any accumulated impairment losses and is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Any impairment is recognised immediately in the profit or loss. Identifiable intangible asset acquired from business combination Brands, dealer relationships and customer lists and relationships acquired in a business combination are recognised at their fair value at the date of acquisition. Following initial recognition, these assets are carried at their initial value less any accumulated amortisation and accumulated impairment. Identifiable intangible assets with finite lives are amortised over their estimated useful lives on a straight line basis and assessed for impairment annually. Brand names that have indefinite useful lives are not amortised but are subject to annual impairment assessments. Brands are assessed for impairment as part of the relevant cash generating unit (CGU). Brand names that have an indefinite life are pursuant to the Group’s plan for its continued use into the foreseeable future are expected to continue to generate cash flows indefinitely. The useful life assessment is reviewed annually. Capitalised software development costs Software development costs which are not acquired from a business combination are initially measured at cost and subsequently re-measured at cost less amortisation and impairment. Costs are capitalised when it is probable that future economic benefits will flow to the entity through revenue generation and / or cost reduction. Costs include external direct costs for services, materials and internal labour related costs directly involved in the development of the software and are amortised from the date of commissioning on a straight line basis over three to five years, during which the benefits are expected to be realised. Software-as-a-Service (SaaS) arrangements are service contracts providing the Group with the right to access the cloud provider’s application software over the contract period. As such the Group does not receive a software intangible asset at the contract commencement date. Fees for the use of the application software and customisation costs are recognised as an operating expense over the contract term if not distinct while other configuration, data conversion, testing and training costs are expensed as the service is received. Other costs which give rise to a separate intangible asset are recognised as capitalised software development costs. Contract rights Contract rights not acquired from a business combination are initially measured at cost being the amounts paid plus any expenditure directly attributable to the transactions and subsequently measured at cost less amortisation and impairment. Contract rights are amortised over the life of the contract and reviewed annually for indicators of impairment. Impairment test of Goodwill The Group assesses at each reporting date, whether there is an indication that an asset may be impaired. An asset’s recoverable amount is the higher of an asset or CGU’s fair value less costs of disposal and its value in use (VIU). An impairment loss is recognised in the profit or loss for the amount that the asset or CGU’s carrying value exceeds the recoverable amount. For the purpose of assessing fair value, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of cash inflows from other assets (CGUs). Where the asset does not generate independent cash flows, the Group estimates the recoverable amount of the CGU to which the asset belongs. The carrying amount of goodwill is allocated to the Group’s CGUs based on the organisation and management of its businesses. Set out below are the details of the goodwill allocated to the CGUs as well as the value of intangibles. Key judgement: Assessment of recoverable amount Recoverable amounts of CGUs have been determined using the VIU methodology. The variables used require the use of assumptions that affect earnings projections and the estimation of a discount rate that uses a cost of capital and risk premium specific to the CGU amongst other factors. Cash projections used in the financial models to assess the recoverable amount of goodwill and indefinite life intangible assets required significant estimates in uncertain economic and business environments. These are discussed in more detail below. 73 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS Key Assumptions used for VIU calculations Cash flow projections Cash flow projections are based on the financial year 2025 (FY25) budgets. Growth assumptions used for subsequent years reflect strategic business plans and forecast growth rates. Financial projections also take into account any risk exposures in changes to the trading, market and regulatory environments. The after-tax discounted cash flow (DCF) models were based on after-tax cash flows discounted by an after-tax discount rate. Cash flows beyond five years are extrapolated using growth rates of 2.0% pa (2023: 2.0% pa), which is lower than long term consumer price index (CPI). GRS CGUs The Maxxia and RemServ CGUs that form the GRS business operate largely in the same business environment and are exposed to similar risks. The equivalent pre-tax discount rate of 21.2% (2023:19.7%) was applied in the VIU calculation. VIU cash flow projections for each of the GRS CGUs are substantially higher than the carrying value of the CGUs. A key assumption for each of the GRS CGUs is that there are no significant changes to Australian tax legislation that could affect the salary packaging and novated lease businesses. There are no reasonably possible changes to assumptions which would result in any indicator of impairment. PSS CGU The Plan Tracker business was acquired 1 July 2021 with goodwill and other intangibles recognised on acquisition. As the Plan Tracker business has integrated with the Plan Management Partners business across systems and platforms, participant services, operations and business performance management, goodwill and intangibles have been allocated fully to the PSS CGU. The equivalent pre-tax discount rate of 21.2% pa (2023: 19.7% pa) was applied in the VIU calculation. The Group has reviewed actual and forecast performance to assess impairment using VIU cash flow projections which exceed the carrying value of the CGU indicating no impairment exists. The Group has considered the impact of changes in key assumptions, including possible legislative changes, on the impairment testing results. There are no reasonably possible changes to assumptions which would result in any indicator of impairment. AMS CGUs For the year ended 30 June 2024 the ASF and RFS Aggregation CGUs were disposed. Refer Note 6.3 for further details. Consolidated Group Goodwill Intangibles Total Goodwill Intangibles Total 2024 $’000 2024 $’000 2024 $’000 2023 $’000 2023 $’000 2023 $’000 Maxxia Pty Limited (Maxxia) 24,190 21,307 45,497 24,190 20,086 44,276 Remuneration Services (Qld) Pty Limited (RemServ) 9,102 13,064 22,166 9,102 3,378 12,480 Plan Tracker Pty Ltd (Plan Tracker) 7,215 4,759 11,974 7,215 3,347 10,562 Onboard Finance Pty Ltd - 3,504 3,504 - 4,578 4,578 Other - 107 107 - 1,515 1,515 40,507 42,741 83,248 40,507 32,904 73,411 MMS Annual Report 2024 74 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 3.8 TRADE AND OTHER PAYABLES Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Unsecured liabilities Trade payables 19,098 15,784 - 25,088 GST payable 86 522 - - Accrued expenses 48,435 29,117 - - Sundry creditors 32,274 27,694 794 - Amounts payable to wholly owned entities - - 45,573 31,247 99,893 73,117 46,367 56,335 Trade and other payables from normal business activities are non-interest bearing and are short term in nature. They are recognised initially at fair value and subsequently at amortised cost. Due to short term nature, carrying value approximates fair value. 3.9 CONTRACT LIABILITIES Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Maintenance fees received in advance 3,701 4,489 - - Rebates and cancellations 430 984 - - Deferred revenue 7,366 9,464 11,497 14,937 - - Maintenance fees received in advance Maintenance fees received in advance is income from maintenance service contracts that are unearned based on the historical profile of costs incurred to date over the expected total cost. Profit attributed over the life of the contract and losses that are provided in full in the period that the loss-making contract is first determined, are adjusted in the amount of revenue recognised. Rebates and cancellations Brokerage commissions from the provision of financial services allow that rebates paid to its dealer / broker network and commissions received from the origination business may be clawed back by the financial service providers. The potential for rebates and clawback are calculated based on the historical profile of rebates and commissions. 3.10 OTHER LIABILITIES Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Customer receipts in advance 4,427 3,389 - - 4,427 3,389 - - 75 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS 3.11 PROVISIONS Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Current Employee benefit liabilities 13,672 13,244 - - Employee incentives 1,547 837 - - Other provisions 1,156 606 - - 16,375 14,687 - - Non-current Employee benefit liabilities 1,965 2,006 - - 1,965 2,006 - - Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event and where it is probable that the Group is required to settle the obligation, and the obligation can be reliably estimated. Provisions are measured at the present value of expenditure expected at settlement. Employee benefits Employee entitlements to annual and long service leave have been provided for based on amounts expected to be paid when the leave entitlements are used. Annual leave and long service leave that are not expected to be settled wholly within 12 months have been measured at the present value of the estimated future cash outflows. Expected future payments are discounted using interest rates attaching to high quality corporate bonds with terms to maturity that match, as closely as possible, the estimated future cash outflows. Employee benefit liabilities Employee incentives Other provisions 2024 $’000 2023 $’000 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Movement during the year Balance at start of the year 15,250 14,358 837 - 606 220 Employee benefits earned and accrued 9,783 10,331 2,255 837 - - Payments (9,396) (9,532) (1,545) - - - Write offs and adjustments - 93 - - (294) (234) Provision made - - - - 844 620 Balance at end of the year 15,637 15,250 1,547 837 1,156 606 MMS Annual Report 2024 76 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 4 Capital Management This section provides information relating to the Group’s capital structure and its exposure to financial risks, how they affect the Group’s financial position and performance, and how the risks are managed. The Group’s capital management strategy aims to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The Group monitors capital on the basis of a number of metrics such as the gearing ratio, interest cover, debt to EBITDA and various other metrics. The capital structure of the Group is reviewed on an ongoing basis and considers the allocation and type of capital, and the associated risks and returns. 4.1 BORROWINGS Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Current Other external loans payable 2,200 3,800 - - 2,200 3,800 - - Non-current Bank loans 229,737 200,642 60,000 60,000 Notes payable 311,261 68,080 - - Other external loans payable 4,034 6,094 - - 545,032 274,816 60,000 60,000 Total borrowings 547,232 278,616 60,000 60,000 Bank loans, notes payable and other loans payable are initially recorded at fair value, net of transaction costs and subsequently measured at amortised cost using the effective interest rate method. The effective interest rate method exactly discounts the estimated cash flows through the expected life of the borrowing. Transaction costs comprise fees paid for the establishment of loan facilities and are amortised over the term of the borrowing facilities. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. The fair value of current borrowings approximates the carrying amount, as the impact of discounting is not significant. Security and financial covenants Bank loans The Parent Entity and all subsidiary companies guarantee all bank loans of subsidiaries in the Group, totalling $235,503,000 (2023: $210,362,000). Fixed and floating charges are provided by the Group and all subsidiary companies in respect to financing facilities provided by its syndicate of financiers for the financing of Interleasing’s lease receivables, and for group working capital purposes. The assets identified in Note 3.5 form part of the security. Bank loans are also secured by the following financial undertakings from all subsidiary companies in the Group: > Negative pledge that imposes certain covenants including a restriction to provide other security over its assets, cap on its maximum finance debt, acquire assets which are non-core business to the Group, not to dispose of a substantial part of its business and reduction of its capital; > Maintenance of certain financial thresholds for shareholders’ equity, gearing ratio and fleet asset portfolio performance; and > Various business parameters of the Interleasing Group. The Group operated with significant headroom against all of its bank loan covenants at all times. 77 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS Notes payable Notes payable are issued by the Onboard Finance Warehouse Trust 2020-1 for the financing of novated and finance lease receivables of Onboard Finance. The notes are secured solely by fixed and floating charges over the motor vehicles that are leased to customers financed by the Onboard Warehouse Trust and are subject to portfolio parameters and performance obligations. All portfolio parameters and performance obligations were met at all times during the year. There is no recourse to the Group subsidiary companies or the Parent Entity. The notes payable are pursuant to revolving debt facilities with an availability period to 1 March 2026, and a maturity date of 1 March 2028. The carrying amount of warehouse assets pledged as security was $311,980,000 (2023 $71,942,000) Other external loans payable Other external loans payable is an amount payable in respect of the sale of the RFS retail business. There are no financial covenants in respect of this outstanding loan balance. 4.2 ISSUED CAPITAL Ordinary share capital issued and fully paid – Group and Parent Entity Movements in share capital are shown below: Number of shares Ordinary shares $’000 Shares held by external shareholders at 30 June 2024 69,643,024 68,597 Shares held by external shareholders at 30 June 2023 69,643,024 68,597 Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Parent Entity in proportion to the number of members’ shares held. At members’ meetings, each fully paid ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. Treasury shares The Group maintains the McMillan Shakespeare Limited Employee Share Plan Trust (EST) to facilitate the distribution of McMillan Shakespeare Limited shares under the Group’s Long Term Incentive Plan (LTIP). The external trustee of the EST is CPU Share Plans Pty Limited. Treasury shares are shares in McMillan Shakespeare Limited that are held by the EST for the purpose of issuing shares under the LTIP. During the year 186,102 treasury shares were acquired and distributed on the exercise of employee performance share rights. Details of performance share rights are provided in Section 5 Employee Remuneration and Benefits. 4.3 DIVIDENDS Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Final fully-franked ordinary dividend for the year ended 30 June 2023 of $0.66 (2023: $0.74) per share franked at the tax rate of 30% (2023: 30%) 45,964 51,536 45,964 51,536 Interim fully-franked ordinary dividend for the year ended 30 June 2024 of $0.76 (2023: $0.58) per share franked at the tax rate of 30% (2023: 30%) 52,929 40,393 52,929 40,393 98,893 91,929 98,893 91,929 Franking credits available for subsequent financial years based on a tax rate of 30% (2023: 30%) 28,616 62,547 28,616 62,547 Dividends are recognised when the Company’s right to receive payment is established. They are brought to account when declared and appropriately authorised before the end of the financial year but not distributed at reporting date. The consolidated amounts include franking credits that would be available to the Parent Entity if distributable profits of subsidiaries were paid as dividends. MMS Annual Report 2024 78 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 4.4 FINANCIAL RISK MANAGEMENT The Group maintains a Risk Management Framework to support the identification, assessment, management, monitoring, and reporting of internal and external sources of risk that could impact on the Group’s operations and strategic objectives. Risk Management is a continuous process that is embedded within day-to-day operational activities of the Group with active involvement of the Executive Leadership Team and oversight from the Audit, Risk & Compliance Committee (ARCC), and the Board. Financial risks of the Group are managed and monitored through: > Active management of credit, asset, liquidity, funding, and market risks in line with policies approved by the Board. > Ongoing oversight of the Group’s financial risk profile by the Executive Credit, Residual Value, and Treasury Committees. > Regular reporting of the Group’s financial risk profile (including compliance with Board’s risk appetite settings) to the ARCC, and the Board. > The Group’s Internal Audit function also periodically reviews and provides independent assurance regarding the adequacy of controls and processes for managing risks and compliance obligations. In the normal course of business, the Group is exposed to various financial risks including those as set out below: Risk Exposure Response Liquidity risk Risk that the Group will not be able to meet its financial obligations as they fall due. The AMS and GRS businesses’ borrowings exposes the Group to potential mismatches between the refinancing of its assets and liabilities. The Group maintains continuity and flexibility of funding through the use of committed revolving and bullet bank club facilities based on common terms, asset subordination and surplus cash to match asset and liability requirements. Additionally the GRS warehouse receivables are funded through revolving note payable facilities supported by major financial institutions. All facilities are subject to lender terms and conditions which, if breached, can trigger review events, early amortisation events or default events. The Group maintained compliance with all such conditions at all times during the year, and has risk prevention and mitigation processes in place to ensure continued compliance. The Group also ensures there is sufficient liquidity through contractual cash flows and access to committed available funds to meet at least 12 months of average net asset funding requirements augmented with uncommitted P&A facilities. This level is expected to cover any short-term financial market constraint for funds. The Group monitors operating cash flows and forecasts cash flows for a 12-month period, recognising the Group’s capital management philosophy. Significant cash balances have been maintained which enable the Group to settle obligations as they fall due without the need for short-term financing facilities. Credit risk Risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Exposure to credit risk is through the receivables balances, customer leasing commitments, deposits with banks and counterparty risks associated with interest and currency swaps. For deposits with banks, only independently rated institutions with upper investment-grade ratings are used, in accordance with the Board approved Investment Policy. Leasing credit risk is managed pursuant to the Board approved Credit Policy and Delegations of Authority. The policy is reviewed periodically and prescribes minimum criteria in the credit assessment process that includes the credit risk rating of the customer, concentration risk parameters, type and intended use of the asset, the value of the exposure, and portfolio management protocols. Credit risk concentration is spread through exposure to individual customers, industry sectors, asset types, asset manufacturers and regions. Where customers are independently publicly rated, these ratings are taken into account. If there is no independent public rating, credit quality is assessed using the Group’s internal risk rating tool, considering information from an independent national credit bureau, the customer’s financial position and performance, business segment, past experience and other factors using an application scorecard or other risk-assessment tools. Collateral is obtained where appropriate, to mitigate the risk of financial loss from defaults. 79 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS Risk Exposure Response Credit risk (continued) A Credit Committee structure is in place to approve certain applications pursuant to the Board’s Delegations of Authority, oversee the administration and effectiveness of, and compliance with the Group’s credit policies, and monitor the performance and quality of the Group’s credit portfolio through the review of selected measures of credit quality and trends including concentrations, criticised / classified and non-performing assets, and loss reports. The Board receives regular reports from the Credit Committee and periodically reviews concentration limits that effectively spread the risks as widely as possible across asset classes, client base, industries, regions and asset manufacturers. Market risk Interest rate risk Movements in interest rates could directly affect the margins from existing contracts and the pricing of new contracts for assets leased and income earned from surplus cash. Borrowings issued at variable rates expose the Group to interest rate repricing risk. The Group’s Treasury Policy and pricing disciplines aim to minimise mismatches between the amortised value of lease contracts and the sources of financing to mitigate repricing and basis risk. Mismatch and funding graphs including sensitivity analysis, are reported monthly to the Board. The Group has entered into interest rate swaps with counterparties rated as AA- by Standard & Poor’s to exchange, at specified periods, the difference between fixed and variable rate interest amounts calculated on contracted notional principal amounts. Swaps are designed to hedge underlying borrowing obligations and match the interest repricing profile of the lease portfolio in order to preserve the contracted net interest margin. Foreign currency risk Foreign currency risk arises from holding financial instruments that are denominated in a currency other than the functional currency in which they are measured. Translation related risks from financial and non-financial items of the New Zealand entities do not form part of the Group’s risk exposure given these entities are part of longer-term investments and consequently, their sensitivity to foreign currency movements are not hedged, other than for anticipated cross-currency cash flows. New Zealand revolving debt facilities are denominated in New Zealand dollars. The Group’s transactions are predominantly denominated in Australian dollars which is the predominant functional currency and the presentation currency of the Group. Asset risk Asset risk arises from the residual value of assets under operating lease and the tyre and maintenance obligations to meet claims for these services sold to customers. Residual value is an estimate of the value of an asset at the end of the lease. The estimate is formed at the inception of the lease and any subsequent impairment exposes the Group to potential loss from resale if the market price is lower than the value as recognised. Risk relating to tyre and maintenance services arises where the costs to meet customer claims over the contracted period exceed estimates made at inception. The Group continuously reviews the portfolio’s residual values via a Residual Value Committee comprising experienced senior staff with a balance of disciplines and responsibilities who monitor, measure and report all matters of risk that could potentially affect residual values and maintenance costs and associated mitigating actions. The Asset Risk Policy sets out a framework to measure and assess such critical variables as used car market dynamics, economic conditions, government policies, the credit market and the condition of assets under lease. MMS Annual Report 2024 80 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS (a) Liquidity risk Financing arrangements Committed revolving borrowing facilities for the AMS and GRS businesses to finance their lease portfolios, together with other borrowing requirements used for Group liquidity purposes are as follows: Bank loan and notes payable facilities in local currency (AUD’000) 2024 2023 Facility Used Unused Facility Used Unused AMS bank loan facilities1 210,903 169,737 41,166 194,265 140,468 53,797 Other bank loan facilities 60,000 60,000 - 60,000 60,000 - Warehouse notes payable facilities 364,200 311,261 52,939 135,640 68,080 67,560 Total bank loans and notes payable facilities 635,103 540,998 94,105 389,905 268,548 121,357 1 Bank loans do not include capitalised borrowing costs of $468,000 (2023: $174,000). Capitalised borrowing costs include loan establishment fees and legal costs. Establishment fees were applied at an average rate of 0.26% (2023: 0.18%). Bank loan facilities Revolving AMS facilities with varying maturity dates above have been provided by a financing club of three major Australian banks operating under common terms and conditions. During the year the AMS revolving debt facilities were increased and the maturity dates of each facility extended. Bank loan facilities are denominated in the local currency of the principal geographical markets to remove associated foreign currency cash flow exposure. The maturity profile of secured bank loan facilities in local currency are as follows: 2024 2023 Secured bank borrowings (excluding borrowing costs) Maturity dates Facility Used Unused Facility Used Unused AUD’0001 31/03/2025 - - - 95,000 54,600 40,400 AUD’0001 30/06/2025 - - - 10,000 10,000 - AUD’0001 30/06/2026 - - - 48,000 48,000 - AUD’0001 31/03/2027 135,000 103,600 31,400 - - - AUD’0002 25/08/2027 60,000 60,000 - 60,000 60,000 - AUD’0001 30/06/2028 48,000 44,000 4,000 - - - NZD’0001 31/03/2025 - - - 11,000 7,600 3,400 NZD’0001 30/06/2025 - - - 20,000 15,000 5,000 NZD’0001 30/06/2026 - - - 11,000 7,600 3,400 NZD’0001 31/03/2027 31,000 24,700 6,300 - - - 1 AMS revolving bank loan facility. 2 Parent entity bullet bank loan facility. Warehouse notes payable facilities During the year the Onboard Finance Warehouse Trust notes payable facilities were increased and the maturity dates of each facility extended. Details of the Onboard warehouse trust notes payable facility in local currency are as follows: 2024 2023 Notes payable facilities Maturity dates Facility Used Unused Facility Used Unused AUD’000 10/02/2026 - - - 135,640 68,080 67,560 AUD’000 1/03/2028 364,200 311,261 52,939 - - - 81 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS AMS Principal and Agency borrowing facilities held off balance sheet The AMS committed revolving bank loan facilities are further augmented by uncommitted P&A facilities of $243.9 million for the financing of AMS originated operating lease receivables, of which $124.1 million is utilised (2023: $249.7 million facility with $104.2 million utilised). The Group has a call/put option structure in place for such facilities, with the exercise price being equivalent to the residual value for each asset under operating lease. These are referred to as unsecured residual value facilities, which totalled $123.0 million, of which $74.9 million was utilised (2023: $123.0 million, $66.4 million utilised). The Group, therefore, carries a potential asset exposure in relation to the residual value facilities, if the call or put options is exercised. The put option value was assessed at the lower of the exercise price and the asset’s estimated disposal value resulting in a provision impairment of $2,888,000 (2023: $3,189,000) for put options that may be at an exercise price identified to be possibly above market value. The Group believes that the balanced arrangement of committed revolving financing facilities and the use of uncommitted off-balance sheet P&A facilities improves liquidity, provides funding diversification and helps to optimise capital management. Maturities of financial liabilities The AMS bank loan facilities and the Onboard Warehouse notes payable facilities are revolving debt facilities, serviced from the contractual cash flows from the underlying lease receivables. The table below summarises the maturity profile of the Group and the Parent Entity’s financial liabilities. Bank loans and notes payable amounts are based on undiscounted contractual payments at the expected settlement dates, and therefore do not reconcile to amounts in the statement of financial position. Consolidated Group 2024: Contractual maturities of financial liabilities Less than 6 months $’000 6–12 months $’000 1–2 years $’000 2–5 years $’000 Over 5 years $’000 Total contractual cash flows $’000 Carrying amount $’000 Trade payables 19,098 - - - - 19,098 19,098 Other creditors and liabilities 43,144 6,836 - - - 49,980 49,980 Lease liabilities 3,047 3,177 4,330 13,734 17,244 41,532 40,897 Bank loans 6,732 6,852 13,498 245,668 - 272,750 229,737 Notes payable 6,717 7,578 130,194 204,595 - 349,084 311,261 Other external loans payable 2,200 - 4,034 - - 6,234 6,234 80,938 24,443 152,056 463,997 17,244 738,678 657,207 Consolidated Group 2023: Contractual maturities of financial liabilities Less than 6 months $’000 6–12 months $’000 1–2 years $’000 2–5 years $’000 Over 5 years $’000 Total contractual cash flows $’000 Carrying amount $’000 Trade payables 15,784 - - - - 15,784 15,784 Other creditors and liabilities 36,281 6,622 - - - 42,903 42,903 Lease liabilities 2,818 2,912 6,142 13,100 22,141 47,113 46,513 Bank loans 5,090 5,533 94,978 124,167 - 229,768 200,642 Notes payable 1,213 1,228 2,532 76,211 - 81,184 68,080 Other external loans payable 3,800 - 6,094 - - 9,894 9,894 64,986 16,295 109,746 213,478 22,141 426,646 383,816 MMS Annual Report 2024 82 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS Parent Entity 2024: Contractual maturities of financial liabilities Less than 6 months $’000 6–12 months $’000 1–2 years $’000 2–5 years $’000 Over 5 years $’000 Total contractual cash flows $’000 Carrying amount $’000 Amounts payable to wholly owned entities and other payables 45,573 - - - - 45,573 45,573 Bank loans 1,888 1,888 3,775 68,179 - 75,730 60,000 Financial guarantee contracts 235,971 - - - - 235,971 - 283,432 1,888 3,775 68,179 - 357,274 105,573 Parent Entity 2023: Contractual maturities of financial liabilities Less than 6 months $’000 6–12 months $’000 1–2 years $’000 2–5 years $’000 Over 5 years $’000 Total contractual cash flows $’000 Carrying amount $’000 Amounts payable to wholly owned entities and other payables 56,335 - - - - 56,335 56,335 Bank loans 1,670 1,670 3,340 67,236 - 73,916 60,000 Financial guarantee contracts 210,536 - - - - 210,536 - 268,541 1,670 3,340 67,236 - 340,787 116,335 (b) Credit risk The following carrying amount of financial assets represent the maximum credit exposure at reporting date: Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Deposits with banks 152,952 60,581 22,598 1,255 Trade and other receivables 39,495 39,985 83 448 Finance lease receivables 336,612 109,121 - - Operating lease assets 227,834 204,957 - - 756,893 414,644 22,681 1,703 Impairment of trade receivables and finance lease receivables Key judgement: Impairment of financial assets Finance lease, trade and other receivables are assessed for impairment at the end of each reporting period on an expected credit loss (ECL) basis. The Group applies the AASB 9 simplified model of recognising lifetime expected credit losses for all receivables as these items do not have a significant financing component. In measuring the ECLs, the trade receivables and finance lease receivables have been grouped based on substantially shared credit risk characteristics. ECL for finance lease receivables includes the inherent risk attached to the credit assessment of each customer, estimate of customer default risk, environment and inventory risk and other macroeconomic factors affecting default risk and recoverability. Recoverability of trade receivables is reviewed on an ongoing basis. The expected loss rate for trade receivables is based on the credit loss history on amounts outstanding over the previous 36 months and adjusted for forward looking factors. 83 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS Trade receivables The loss allowance for trade receivables has been estimated as follows: Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Expected loss rate (%) 5.7% 5.8% - - Gross carrying amount 30,738 25,586 - - Loss allowance 1,740 1,477 - - Specific loss allowance 133 131 - - Total loss allowance 1,873 1,608 - - 2024 2023 Ageing and expected credit loss of trade receivables Total $’000 Loss allowance $’000 Amount not impaired $’000 Total $’000 Loss allowance $’000 Amount not impaired $’000 Not past due 28,340 (1,733) 26,607 22,571 (1,431) 21,140 Past due 30 days 366 (20) 346 883 (63) 820 Past due 31 – 60 days 258 (15) 243 866 (44) 822 Past due 61 – 90 days 201 (12) 189 130 (7) 123 Past due > 90 days 1,573 (93) 1,480 1,136 (63) 1,073 30,738 (1,873) 28,865 25,586 (1,608) 23,978 The Group’s maximum exposure to credit risk at reporting date by geographic region is predominantly in Australia and New Zealand based on the location of originating transactions and economic activity. Finance lease receivables The finance lease receivables expected credit loss allowance and movements during the year is set out below: Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Balance at start of the year 592 209 - - Expected loss allowance 1,081 493 - - Changes in foreign currency - (110) - - Balance at end of the year 1,673 592 - - Expected credit loss rate (%) 0.49% 0.54% - - Gross carrying amount 338,214 109,121 - - Loss allowance 1,673 592 - - The expected credit loss rate is calculated using the credit management system’s default rate assigned for each customer adjusted by the expected recoverable rate plus deflators for duration and other economic or business environmental factors. MMS Annual Report 2024 84 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS (c) Market risk Interest rate risk At reporting date, the Group had the following variable rate borrowings under long-term facilities attributable to the AMS and Onboard Finance businesses and other loan facilities drawn on. 2024 2023 Borrowings $’000 Weighted average interest rate % pa Borrowings $’000 Weighted average interest rate % pa AUD 518,861 5.56% 240,680 5.79% NZD 24,700 7.19% 30,700 7.20% Total AUD equivalent 543,561 5.64% 271,380 5.94% The weighted average interest rate on borrowings is used as an input to asset repricing decisions for the respective geographical markets the Group operates in. Analysis of maturities is provided in Note 4.4(a). Bank loans for the AMS business of $152,833,000 (2023: $138,326,000) were covered by interest rate swaps at a fixed rate of interest of 5.65% pa (2023: 4.39% pa). Notes payable for the Onboard warehouse of $329,032,000 (2023: 81,718,000) were covered by interest rate swaps at a fixed rate of 5.0% pa (2023: 5.90% pa). Interest rate risk also arises from cash at bank and deposits, which are at floating interest rates, and offset partially by floating rate bank loan facilities. At reporting date, the Group had the following variable rate financial assets and liabilities outstanding: 2024 $’000 2023 $’000 Cash and deposits 152,952 60,581 Bank loans 1 (229,737) (200,468) Notes payable (311,261) (68,080) Interest rate swaps (notional amounts) 481,822 220,044 Net exposure to cash flow interest rate risk 93,776 12,077 1 Excluding capitalised borrowing costs of $468,000 (2023: $174,000) for AMS. Sensitivity analysis – floating interest rates: If the Australian interest rate weakened or strengthened by 25 basis points, and all other variables were held constant, the Group’s post-tax profit for the year would have been $880,000 (2023: $834,000) higher or lower and the Parent Entity $104,000 (2023: $104,000) higher or lower, depending on which way the interest rates moved based on the balances at reporting date. (d) Asset risk The portfolio of motor vehicles under operating lease and the residual value of assets under P&A and other facilities of $271,888,000 (2023: $262,627,000) included a residual value provision of $2,888,000 (2023: $3,189,000). Refer Note 3.5 for further details. 85 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS 4.5 FINANCIAL INSTRUMENTS Fair value measurement The Group measures financial instruments such as derivatives at fair value at each balance date. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement: Level 1 Derived from quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2 Derived from inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 Derived from inputs for the asset or liability that are not based on observable market data (unobservable inputs). The Group has classified its financial assets and financial liabilities into the three levels as prescribed under the accounting standards, with details provided in the following table of those financial assets and liabilities measured at fair value. Consolidated Group: 2024 Level 1 $’000 Level 2 $’000 Level 3 $’000 Total $’000 Financial assets / (liabilities) Derivatives used for hedging - 1,680 - 1,680 Total financial assets / (liabilities) - 1,680 - 1,680 Consolidated Group: 2023 Financial assets / (liabilities) Derivatives used for hedging - 2,037 - 2,037 Total financial assets / (liabilities) - 2,037 - 2,037 The carrying amount of the Group’s financial assets and financial liabilities approximate their fair values, except for finance lease receivables as detailed in Note 3.3. The carrying amount of trade and other receivables, trade and other payables and other liabilities is assumed to be the same as their fair values, due to their short-term nature. The Group considers the fair value of borrowings to be not materially different to their carrying amounts as the interest rates applicable are consistent with market rates. For assets and liabilities that are recognised at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level of input that is significant to the fair value measurement as a whole) at the end of each reporting period. There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements for the year ended 30 June 2024. There were no changes in the Group’s valuation processes, valuation techniques, and types of inputs used in the fair value measurements during the period. Interest rate swaps The valuation technique for interest rate swaps and key inputs are discounted cash flows using estimated future cash flows based on forward interest rates (from observable yield curves at the end of the reporting period) and contract interest rates, discounted to reflect the credit risk of various counterparties. MMS Annual Report 2024 86 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 4.5 FINANCIAL INSTRUMENTS (C0NT.) Derivative financial instruments In accordance with the Group’s Treasury Policy, derivative interest rate products entered into include interest rate swaps, forward rate agreements and options as cash flow hedges to mitigate both current and future interest rate volatility that may arise from changes in the fair value of its borrowings. Hedge accounting Where the Group undertakes a hedge transaction, it documents at inception of the transaction the type of hedge, the relationship between the hedging instruments and hedged items and its risk management objective and strategy. The documentation also demonstrates, both at hedge inception and on an ongoing basis that the hedge has been, and is expected to continue to be, highly effective. The Group uses derivative financial instruments for cash flow hedging purposes and designates them as such. Cash flow hedge Derivatives or other financial instruments that hedge the exposure to variability in cash flows from external borrowings that are priced using variable interest rates. Cash flow hedges are used to manage interest rate exposure to interest rate volatility and its impact on leasing product margins. This process seeks to have more control in balancing the spread between interest rates charged on lease contracts and interest rates and the level of borrowings assumed in its financing as required. Recognition date Inception Measurement Fair value Changes in fair value Any gains or losses arising from changes in the fair value of the hedge contracts are taken to OCI to the extent of the effective portion of the cash flow hedge and the ineffective portion recognised in profit or loss. These gains or losses in OCI are accumulated in a component in equity and are reclassified to profit or loss to match the timing and relationship with the amount that the derivative instruments was intended to hedge. The amounts relating to hedged items and hedging instruments are as follows: Cash flow hedges Nominal amount of the hedging instrument Carrying amount of the hedging instrument Statement of financial position where the hedging instrument is located Changes in fair value used for calculating hedge ineffectiveness Assets Liabilities Interest rate risk $’000 $’000 $’000 $’000 $’000 Interest rate swaps 2024 481,822 1,676 26 540,998 (261) 2023 220,044 1,904 - 268,832 (838) There has been no hedge ineffectiveness in relation to the cash flow hedges and therefore $nil profit or loss recognised for the year ended 30 June 2024. The following table shows the maturity profile of hedging instruments (ie. notional amount of interest rate swaps): Consolidated Group: 2024 Less than 1 year $’000 1–2 years $’000 2–5 years $’000 Over 5 years $’000 Total $’000 Derivatives Interest rate swaps 104,756 48,033 329,033 - 481,822 Consolidated Group: 2023 Derivatives Interest rate swaps 99,614 38,712 81,718 - 220,044 87 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS 5 Employee Remuneration and Benefits 5.1 SHARE BASED PAYMENTS The Company operates both a STIP and LTIP for certain executives and employees under the McMillan Shakespeare Limited Employee Share Plan (Plan). The Company issues Share rights annually with a one year service deferral under the short term incentive plan, and the Company issues Performance Rights annually with a three-year vesting period under the long term incentive plan. No executive can enter into a transaction that is designed or intended to hedge the exposure. Executives are required to provide declarations to the Board on their compliance with this policy. Performance Rights A Performance Right is an entitlement to acquire a fully paid ordinary share in the Company for $nil consideration at grant for conversion to a share, subject to the achievement of performance hurdles and service conditions being satisfied. Performance Rights carry no dividend or voting rights. Performance hurdles and vesting entitlements Refer page 31 for details of the terms and conditions for Performance Rights issued in the year. Set out below is a summary of Performance Rights granted under the Plan: Consolidated Group and Parent Entity 2024 Grant date Exercise date 1 Balance at start of the year Granted Vested Forfeited Balance at end of the year 20 October 2020 30 September 2024 63,113 - (45,095) (18,019) - 30 October 2020 30 September 2024 214,654 - (141,007) (73,647) - 15 October 2021 30 September 2024 27,039 - - (4,478) 22,561 22 November 2021 30 September 2024 200,472 - - (31,882) 168,590 15 November 2022 30 September 2025 236,748 - - (12,038) 224,710 27 October 2023 30 September 2025 - 13,608 - - 13,608 27 October 2023 30 September 2026 - 45,362 - - 45,362 10 November 2023 30 September 2025 - 23,198 - - 23,198 10 November 2023 30 September 2026 - 65,898 - - 65,898 742,026 148,066 (186,102) (140,064) 563,927 Consolidated Group and Parent Entity 2023 Grant date Exercise date 1 Balance at start of the year Granted Vested Forfeited Balance at end of the year 1 July 2019 30 September 2023 95,723 - (95,723) - - 22 October 2019 30 September 2023 38,047 - (25,942) (12,105) - 20 October 2020 30 September 2024 81,272 - - (18,159) 63,113 30 October 2020 30 September 2024 288,378 - - (73,724) 214,654 15 October 2021 30 September 2024 42,103 - - (15,064) 27,039 22 November 2021 30 September 2024 283,067 - - (82,595) 200,472 15 November 2022 30 September 2025 - 236,748 - - 236,748 828,590 236,748 (121,665) (201,647) 742,026 1 The first available vesting date is the date that the Company’s financial statements for the respective years are lodged with ASX. For the purpose of this table it is assumed to be 30 September of that year. MMS Annual Report 2024 88 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS Fair value of performance rights granted Consolidated Group and Parent Entity Grant Share price at grant date Expected life (years) Expected dividend yield Fair value 27 October 2023 16.82 3.0 7.4% 13.56 10 November 2023 17.46 3.0 7.1% 14.23 Recognition and measurement The Performance Rights are accounted for as equity-settled share-based payments and recognised at the fair value at grant date as an employee benefit expense over the period from issue date to vesting date with a corresponding increase in equity (share-based payment reserve). Fair value is determined using a Black-Scholes pricing model and does not include any conditions that are market based. The cumulative expense recognised is adjusted to reflect the Directors’ best estimate of the number of rights that will ultimately vest based on the vesting conditions attached to the rights, such as the employees having to remain with the Group until vesting date, or such that employees are required to meet financial targets. No expense is recognised for rights that do not ultimately vest. Expenses arising from share-based payment transactions Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Performance Rights issued under the LTIP 2,843 1,243 2,843 1,243 2,843 1,243 2,843 1,243 5.2 KEY MANAGEMENT PERSONNEL COMPENSATION Consolidated Group Parent Entity 2024 $ 2023 $ 2024 $ 2023 $ Short-term employment benefits 2,614,097 2,288,690 857,784 783,072 Post-employment benefits 136,261 124,993 81,463 74,407 Long-term employment benefits 75,888 41,765 - - Benefit payments issued under STIP and LTIP 1,310,280 607,896 - - 4,136,526 3,063,344 939,247 857,479 5.3 OTHER EMPLOYEE BENEFITS Bonuses A liability for employee benefits in the form of bonuses is recognised in the Statement of Financial Position. This liability is based upon pre-determined plans tailored for each participating employee measured on an ongoing basis and is dependent on the outcomes for each participating employee. 89 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS 6 Group Structure 6.1 INVESTMENT IN SUBSIDIARIES Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Shares in subsidiaries at cost 1 - - 167,713 237,533 1 Impairment of subsidiaries of $18.3m (2023: $17.3m) was recorded in the period relating to the disposal of the Australian Asset Finance Aggregation and UK businesses. The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in the relevant notes above. Name Country of incorporation and principal place of business % Owned 2024 % Owned 2023 Principal activities Parent entity McMillan Shakespeare Limited Australia Subsidiaries in Group Maxxia Pty Ltd 1 Australia 100% 100% Remuneration services provider Remuneration Services (Qld) Pty Ltd 1 Australia 100% 100% Remuneration services provider Easilease Pty Limited Australia 100% 100% Remuneration services provider Onboard Finance Pty Ltd Australia 100% 100% Remuneration services provider Onboard Warehouse Trust Australia 100% 100% Securitisation trust Oly Pty Ltd 5 Australia 100% - Remuneration services provider MaxxiMe Pty Ltd Australia 100% 100% Remuneration services provider Interleasing (Australia) Limited 1 Australia 100% 100% Asset management services TVPR Pty Limited 1 Australia 100% 100% Asset management services Carila Pty Limited 1 Australia 100% 100% Asset management services Presidian Holdings Pty Ltd Australia 100% 100% Retail financial services Money Now Pty Ltd Australia 100% 100% Retail financial services National Finance Choice Pty Ltd 2 Australia - 100% Retail financial services Franklin Finance Group Pty Ltd Australia 100% 100% Retail financial services Australian Dealer Insurance Pty Ltd Australia 100% 100% Retail financial services National Finance Solutions (Aust) Pty Ltd Australia 100% 100% Retail financial services National Insurance Choice Pty Ltd Australia 100% 100% Retail financial services National Dealer Services Pty Ltd Australia 100% 100% Retail financial services Motorsure Pty Ltd Australia 100% 100% Retail financial services ADU Investments Pty Ltd Australia 100% 100% Retail financial services United Financial Services Pty Limited 2 Australia - 100% Retail financial services United Financial Services Network Pty Limited2 Australia - 100% Retail financial services United Financial Services (QLD) Pty Limited 2 Australia - 100% Retail financial services Plan Management Partners Pty Ltd Australia 100% 100% Plan management services Plan Tracker Pty Ltd Australia 100% 100% Plan management services Maxxia (UK) Limited United Kingdom 100% 100% Investment holding Maxxia Finance Limited 3 United Kingdom - 100% Asset management services Anglo Scottish Asset Finance Limited 3 United Kingdom - 100% Asset management services Capex Asset Finance Limited 4 United Kingdom - 100% Dissolved Maxxia Ltd 3 United Kingdom - 100% Asset management services Maxxia Limited New Zealand 100% 100% Dormant Interleasing (New Zealand) Limited New Zealand 100% 100% Asset management services 1 These subsidiaries have been granted relief from the necessity to prepare financial reports in accordance with ASIC Corporations (Wholly-owned Companies) Instrument 2016/785 issued by the Australian Securities and Investments Commission. For further information refer to Note 6.2. 2. On 31 July 2023, the Group disposed of 100% of the share capital of National Finance Choice Pty Ltd, United Financial Services Pty Ltd, United Financial Services Network Pty Ltd, United Financial Services (QLD) Pty Ltd. 3. On 30 September 2023, the Group disposed of Maxxia Limited and Maxxia Finance Limited. On 30 November 2023 the Group disposed of Anglo Scottish Finance Limited. 4. On 10 October 2023, the Group dissolved Capex Asset Finance Limited. 5. Oly Pty Ltd was incorporated on 8 February 2024. MMS Annual Report 2024 90 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS Investments in subsidiaries are accounted for at cost less impairment in the individual financial statements of the Parent Entity. 6.2 DEED OF CROSS GUARANTEE McMillan Shakespeare Limited, Maxxia Pty Ltd and Remuneration Services (Qld) Pty Ltd are parties to a deed of cross guarantee entered into during the year ended 30 June 2009 and Interleasing (Australia) Ltd, CARILA Pty Ltd and TVPR Pty Ltd (Interleasing Group) in the year ended 30 June 2010. Under the deeds, each company guarantees the debts of the others and is relieved from the requirement to prepare a financial report and directors’ report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. The above companies represent a ‘Closed Group’ for the purposes of the Class Order, and as there are no other parties to the deed of dross guarantee that are controlled by McMillan Shakespeare Limited, they also represent the ‘Extended Closed Group’. Set out below is the financial information of the Closed Group: Consolidated Statement of Comprehensive Income and summary of movements in Retained Earnings Consolidated Group 2024 $’000 2023 $’000 Revenue and other income 446,093 354,874 Employee and director benefits expenses (142,646) (130,920) Depreciation and amortisation expenses and impairment (59,172) (56,384) Leasing and vehicle management expenses (67,377) (45,629) Consulting cost expenses (4,841) (4,126) Marketing expenses (7,589) (6,847) Property and corporate expenses (2,763) (2,802) Technology and communication expenses (21,478) (18,708) Finance costs (12,096) (6,909) Impairment (16,595) (755) Other expenses (19,300) 327 Profit before income tax 92,236 82,120 Income tax expense (35,512) (24,508) Profit attributable to members of the parent entity 56,724 57,612 Other comprehensive income Other comprehensive income after tax - - Total comprehensive income for the year 56,724 57,612 Movements in consolidated retained earnings Retained earnings at start of the year 78,491 195,373 Profit for the year 56,724 57,612 Dividends paid (97,553) (91,929) Share buy-back - (82,565) Retained earnings at end of the year 37,662 78,491 91 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 FINANCIALS Consolidated Statement of Financial Position 2024 $’000 2023 $’000 Current assets Cash and cash equivalents 106,797 35,073 Restricted client trust funds 403,364 402,608 Trade and other receivables 54,309 69,321 Finance lease receivables 3,743 2,604 Inventories 9,972 6,195 Derivative financial instruments 1,620 - Total current assets 579,805 515,801 Non-current assets Finance lease receivables 4,515 5,278 Assets under operating lease 197,861 170,845 Right-of use assets 25,764 28,844 Property, plant and equipment 11,757 13,529 Intangible assets 68,708 50,015 Investments in subsidiaries 14,228 102,402 Total non-current assets 322,833 370,913 Total assets 902,638 886,714 Current liabilities Trade and other payables 96,595 84,768 Restricted client trust funds payable 403,364 402,608 Provisions 16,208 14,578 Current tax liability 37,884 7,840 Lease liabilities 5,522 4,705 Total current liabilities 559,573 514,499 Non-current liabilities Provisions 1,965 2,006 Borrowings 207,187 172,440 Lease liabilities 35,251 40,502 Deferred tax liabilities (13,357) 15,046 Total non-current liabilities 231,046 229,994 Total liabilities 790,619 744,493 Net assets 112,019 142,221 Equity Issued capital 68,597 68,597 Reserves 5,760 (4,867) Retained earnings 37,662 78,491 Total equity 112,019 142,221 FINANCIALS MMS Annual Report 2024 92 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS 6.3 DISCONTINUED OPERATIONS On 31 July 2023, the Group completed the sale of its Australian Asset Finance Aggregation business (trading as UFS and NFC). As a result of the sale the Retail Financial Services (RFS) segment is no longer presented in the segment note and are discontinued operations. On 30 November 2023, the Group completed the sale of its UK businesses. As a result of the sale the remaining Asset Management Services (AMS) UK business is no longer presented in the segment note and are discontinued operations. Net loss from discontinued operations 2024 $’000 2023 $’000 Revenue 2,446 145,722 Expenses (2,649) (136,103) Finance costs 131 (300) Loss / impairment on disposal of subsidiaries (10,140) (42,534) Net loss before income tax from discontinued operations (10,212) (33,215) Income tax benefit 3,702 1,038 Net loss after income tax from discontinued operations (6,510) (32,177) Net loss from discontinued operations – Attributable to Owners of the Company (6,510) (32,177) Earnings per share 2024 Cents per share 2023 Cents per share Basic EPS – loss from discontinued operations (9.4) (44.6) Diluted EPS – loss from discontinued operations (9.4) (44.6) FINANCIALS 93 Notes to the Financial Statements For the year ended 30 June 2024 FINANCIALS MMS Annual Report 2024 Statement of Financial Position 2023 $’000 Current assets Cash and cash equivalents 37,702 Trade and other receivables 2,756 Finance lease receivables 5,544 Inventories 2,399 Prepayments 560 Total current assets 48,961 Non-current assets Assets under operating lease 968 Right of use assets 456 Property, plant and equipment 277 Intangible assets 20,350 Deferred tax assets 6,605 Total non-current assets 28,656 Total assets held for sale 77,617 Current liabilities Trade and other payables 14,166 Other liabilities 2,770 Current tax liability 6,407 Lease Liabilities 166 Total current liabilities 23,509 Non-current liabilities Lease Liabilities 282 Deferred tax liabilities 4,538 Total non-current liabilities 4,820 Total liabilities directly associated with assets held for sale 28,329 FINANCIALS 94 Notes to the Financial Statements For the year ended 30 June 2024 MMS Annual Report 2024 7 Other Disclosures 7.1 RESERVES (a) Cash flow hedge reserve Consolidated Group Parent Entity 2024 $’000 2023 $’000 2024 $’000 2023 $’000 Revaluation – gross 1,680 2,037 - - Deferred tax (521) (696) - - Balance at the end of the year 1,159 1,341 - - The hedging reserve is used to record gains and losses on interest rate swaps that are designated and qualify as cash flow hedges. 7.2 RELATED PARTY TRANSACTIONS Transactions between the Company and other entities within the wholly owned group during the years ended 30 June 2024 and 30 June 2023 consisted of: (a) loans advanced to the Company; and (b) the payment of dividends to the Company. Aggregate amounts included in the determination of profit from ordinary activities before income tax that resulted from transactions with entities in the wholly owned group. Consolidated Group Parent Entity 2024 $ 2023 $ 2024 $ 2023 $ Dividend revenue - - 91,654,998 91,928,792 Aggregate amounts payable to entities within the wholly owned group at balance date: Current receivables - - 82,518 448,376 Current payables - - 45,573,229 56,335,334 MMS Annual Report 2024 FINANCIALS 95 Notes to the Financial Statements For the year ended 30 June 2024 7.3 AUDITOR’S REMUNERATION Consolidated Group 2024 $’000 2023 $’000 Statutory Audit services Remuneration of the auditor of the Parent Entity for statutory audit or review of the financial report of the entity and any other entity in the Consolidated Group > EY 617,346 375,000 Remuneration of the auditor of the Parent Entity for statutory audit or review of the financial statements of subsidiary entities in the UK. > Grant Thornton - 152,400 Other audit services related to client requirements for non-statutory audits > EY 40,052 38,000 > Grant Thornton - 4,000 Other assurance services Remuneration of the auditor of the Parent Entity for assurance related services > EY 489,662 163,000 > Grant Thornton - 23,000 Remuneration of a network firm of the auditor of the Parent Entity for assurance related services > Grant Thornton - 8,822 No non-assurance related services were provided. 7.4 EVENTS OCCURRING AFTER THE REPORTING DATE Other than the above and the matters disclosed in this report, there were no material events subsequent to the reporting date. 8 Unrecognised Items 8.1 COMMITMENTS Operating lease commitments All non-cancellable property leases have been recognised in the Statement of Financial Position. MMS Annual Report 2024 96 FINANCIALS Consolidated Entity Disclosure Statement As at 30 June 2024 Entity name Structure Place of incorporation Country of tax residence % Owned 2024 Parent entity McMillan Shakespeare Limited Body corporate Australia Australia Subsidiaries in Group Maxxia Pty Ltd Body corporate Australia Australia 100% Remuneration Services (Qld) Pty Ltd Body corporate Australia Australia 100% Easilease Pty Limited Body corporate Australia Australia 100% Onboard Finance Pty Ltd Body corporate Australia Australia 100% Oly Pty Ltd Body corporate Australia Australia 100% MaxxiMe Pty Ltd Body corporate Australia Australia 100% Interleasing (Australia) Limited Body corporate Australia Australia 100% TVPR Pty Limited Body corporate Australia Australia 100% Carila Pty Limited Body corporate Australia Australia 100% Presidian Holdings Pty Ltd Body corporate Australia Australia 100% Money Now Pty Ltd Body corporate Australia Australia 100% Franklin Finance Group Pty Ltd Body corporate Australia Australia 100% Australian Dealer Insurance Pty Ltd Body corporate Australia Australia 100% National Finance Solutions (Aust) Pty Ltd Body corporate Australia Australia 100% National Insurance Choice Pty Ltd Body corporate Australia Australia 100% National Dealer Services Pty Ltd Body corporate Australia Australia 100% Motorsure Pty Ltd Body corporate Australia Australia 100% ADU Investments Pty Ltd Body corporate Australia Australia 100% Plan Management Partners Pty Ltd Body corporate Australia Australia 100% Plan Tracker Pty Ltd Body corporate Australia Australia 100% Maxxia Limited Body corporate New Zealand New Zealand 100% Interleasing (New Zealand) Limited Body corporate New Zealand New Zealand 100% Maxxia (UK) Limited Body corporate United Kingdom United Kingdom 100% Trust Arrangements Onboard Warehouse Trust (Perpetual Corporate Trust Limited as trustee) Trust Australia Australia 100% MMS Employee Share Trust (CPU Share Plans Pty Limited as trustee) Trust Australia Australia - 97 MMS Annual Report 2024 FINANCIALS A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation Ernst & Young 8 Exhibition Street Melbourne VIC 3000 Australia GPO Box 67 Melbourne VIC 3001 Tel: +61 3 9288 8000 Fax: +61 3 8650 7777 ey.com/au Independent auditor’s report to the members of McMillan Shakespeare Limited Report on the audit of the financial report Opinion We have audited the financial report of McMillan Shakespeare Limited (the Company) and its subsidiaries (collectively the Group), which comprises: ► The Group consolidated and Company statements of financial position as at 30 June 2024; ► The Group consolidated and Company statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended; ► Notes to the financial statements, including material accounting policy information; and ► The consolidated entity disclosure statement; and ► The directors’ declaration. In our opinion, the accompanying financial report is in accordance with the Corporations Act 2001, including: a. Giving a true and fair view of the Company’s and the Group’s financial position as at 30 June 2024 and of their financial performance for the year ended on that date; and b. Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial report section of our report. We are independent of the Group in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (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 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 judgment, were of most significance in our audit of the financial report of the current year. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. Independent Audit Report As at 30 June 2024 FINANCIALS 98 Independent Audit Report As at 30 June 2024 MMS Annual Report 2024 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 2 We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial report section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial report. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial report. 1. Revenue Recognition Financial report reference: Note 2.2 Why significant to the audit How our audit addressed the key audit matter As at 30 June 2024, Revenue from continuing operations recorded during the year was $521,018,000. The Group exercises significant judgement relating to revenue recognition due to products and services with various contractual terms and different pricing elements in contracts with customers throughout the Group. The accuracy of amounts recorded as revenue is inherently subjective due to the complexity of billing systems, the complexity of customer arrangements and price and billing changes in the year. This was a key audit matter due to the significance of revenue and the complexity of revenue arrangements. Our audit procedures included the following: • Obtained an understanding of the nature of each significant type of revenue stream, and on a sample basis assessed agreements in place to evaluate whether the terms of each agreement were reflected in the accounting treatment of the Group and the requirements of Australian Accounting Standards. Focused on areas with higher risk of error by analysing manual processes, bespoke or complex contractual terms, and areas requiring significant judgment, to assess accurate revenue recognition. • Evaluated the design and operating effectiveness of relevant controls over the recognition and measurement of revenue transactions, including evaluating the relevant IT systems. • Assessed a sample of revenue generating transactions for each significant revenue stream and obtained supporting evidence such as; customer contracts, other contractual arrangements, service detail records and evidence of customer payment. • We assessed the adequacy and appropriateness of Group accounting policies disclosed in Note 2.2, to the financial report. MMS Annual Report 2024 FINANCIALS 99 Independent Audit Report As at 30 June 2024 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 3 2. Impairment of Goodwill Financial report reference: Note 3.7 Why significant to the audit How our audit addressed the key audit matter As at 30 June 2024 Goodwill totals $40,507,000 as a result of the Group’s historical acquisitions, representing the excess of the purchase consideration over the fair value of assets and liabilities acquired. On acquisition date, the Goodwill has been allocated to the applicable Cash Generating Units (CGUs). An impairment assessment is performed at each reporting period, comparing the carrying amount of each CGU containing Goodwill with its recoverable amount. The recoverable amount of each CGU is determined on a value in use basis. This calculation incorporates a range of assumptions, including future cash flows, discount rate and terminal growth rate. This was a key audit matter due to the size of Goodwill and the significant judgment and estimation uncertainty associated with the impairment assessment. Our audit procedures in conjunction with our valuation specialists included the following: • Assessed the valuation methodology used to calculate the recoverable amount of each CGU. • Agreed the projected cash flows used in the impairment models to the Board approved plan of the Group. • Compared the Group’s implied growth rate assumption to comparable companies. • Assessed the accuracy of historical cash flow forecasts. • Assessed the methodology and assumptions used in the calculation of the discount rate, including comparison of the rate to market benchmarks. • Tested the mathematical accuracy of the impairment model for each CGU. • Assessed the Group’s sensitivity analysis and evaluated whether any reasonably foreseeable change in assumptions could lead to a material impairment. • We assessed the Group’s determination of the CGUs to which goodwill is allocated and assessed the adequacy of the disclosure included in the Notes to the financial report. Information other than the financial report and auditor’s report thereon The directors are responsible for the other information. The other information comprises the information included in the Company’s 2024 annual report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and accordingly we do not express any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. FINANCIALS 100 Independent Audit Report As at 30 June 2024 MMS Annual Report 2024 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 4 In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the directors for the financial report The directors of the Company are responsible for the preparation of: a) the financial report (other than the consolidated entity disclosure statement) that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001; and b) the consolidated entity disclosure statement that is true and correct in accordance with the Corporations Act 2001, and for such internal control as the directors determine is necessary to enable the preparation of: i) the financial report (other than the consolidated entity disclosure statement) that gives a true and fair view and is free from material misstatement, whether due to fraud or error; and ii) the consolidated entity disclosure statement that is true and correct and is free of material misstatement, whether due to fraud or error. In preparing the financial report, the directors are responsible for assessing the Company’s and Group’s ability 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 Company or Group or to cease operations, or have no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with the Australian Auditing Standards, we exercise professional judgment and maintain professional scepticism throughout the audit. We also: ► Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. MMS Annual Report 2024 FINANCIALS 101 Independent Audit Report As at 30 June 2024 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation 5 ► Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s or the Group’s internal control. ► Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors. ► Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s or Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company or the Group to cease to continue as a going concern. ► Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. ► Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the financial report. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated to the directors, we determine those matters that were of most significance in the audit of the financial report of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the audit of the Remuneration Report Opinion on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2024. In our opinion, the Remuneration Report of McMillan Shakespeare Limited for the year ended 30 June 2024, complies with section 300A of the Corporations Act 2001. MMS Annual Report 2024 102 FINANCIALS Independent Audit Report As at 30 June 2024 103 MMS Annual Report 2024 FINANCIALS Shareholder Information Additional information required by the ASX Listing Rules and not disclosed elsewhere in this Annual Report is set out below: SUBSTANTIAL SHAREHOLDINGS As at 5 August 2024 the number of shares held by substantial shareholders and their associates is as follows: Shareholder Number of Ordinary Shares Percentage of Ordinary Shares 1 HSBC Custody Nominees (Aust) Ltd 14,341,226 20.59% Citicorp Nominees Limited 9,659,571 13.87% JP Morgan Nominees Australia Limited 9,055,068 13.00% Chessari Holdings Pty Limited 2 6,050,941 8.69% AP Group Pty Limited 3,976,229 5.71% 1 As at 5 August 2024, 69,643,024 fully paid ordinary shares have been issued by the Company. 2 Chessari Holdings Pty Limited is a company associated with Mr Ross Chessari, a Non-Executive Director. NUMBER OF SHARE HOLDERS As at 5 August 2024 the number of shares held by substantial shareholders and their associates is as follows: Class of Security Number of Holders Fully paid ordinary shares 8,159 VOTING RIGHTS In accordance with the Constitution of the Company and the Corporations Act 2001 (Cth), every member present in person or by proxy at a general meeting of the members of the Company has: > on a vote taken by a show of hands, one vote; and > on a vote taken by a poll, one vote for every fully paid ordinary share held in the Company. A poll may be demanded at a general meeting of the members of the Company in the manner permitted by the Corporations Act 2001 (Cth). DISTRIBUTION OF SHARE HOLDERS As at 5 August 2024 the number of shares held by substantial shareholders and their associates is as follows: Distribution of Shares Number of Holders of Ordinary Shares & Options 1 – 1,000 4,910 1,001 – 5,000 2,647 5,001 – 10,000 357 10,001 – 100,000 220 100,000+ 25 As at 5 August 2024 there were 276 shareholders who held less than a marketable parcel of 30 fully paid ordinary shares in the Company. BUY-BACK The Company does not have a current on-market buy back. FINANCIALS MMS Annual Report 2024 104 FINANCIALS Shareholder Information TOP 20 SHAREHOLDERS As at 5 August 2024 the details of the top 20 shareholders in the Company are as follows: No. Name Number of Ordinary Shares Percentage of Ordinary Shares (%) 1 HSBC Custody Nominees (Aust) Ltd 14,341,226 20.59% 2 Citicorp Nominees Limited 9,659,571 13.87% 3 JP Morgan Nominees Australia Limited 9,055,068 13.00% 4 Chessari Holdings Pty Limited 1 6,050,941 8.69% 5 AP Group Pty Limited 3,976,229 5.71% 6 Asia Pac Technology Pty Ltd 2 3,068,025 4.41% 7 UBS Nominees Pty Limited 1,642,741 2.36% 8 National Nominees Limited 1,603,815 2.30% 9 Ann Leslie Ryan 1,008,418 1.45% 10 BNP Paribas Nom Pty Limited 516,216 0.74% 11 BNP Paribas Noms Pty Ltd 432,139 0.62% 12 BNP Paribas Noms Pty Ltd 369,772 0.53% 13 HSBC Custody Nominees (Australia) Limited 317,722 0.46% 14 NewEconomy com AU Nominees Pty Limited 316,783 0.45% 15 MOHL Invest Pty Ltd 310,000 0.45% 16 Citicorp Nominees Pty Ltd 306,624 0.44% 17 Warbont Nominees Pty Ltd 194,956 0.28% 18 Mod Enterprises Pty Ltd 193,139 0.28% 19 Birdseye No.2 Management Pty Ltd 150,000 0.22% 20 Netwealth Investments Limited 141,977 0.20% 1. Chessari Holdings Pty Limited is a company associated with Mr Ross Chessari, a Non-Executive Director. 2. Asia Pac Technology Pty Limited is a company associated with Mr John Bennetts, a Non-Executive Director. UNQUOTED SECURITIES As at the date of this Annual Report, there are no unquoted securities in the Company. Corporate Directory Registered Office Level 21, 360 Elizabeth Street Melbourne Victoria 3000 Tel: +61 3 9097 3000 www.mmsg.com.au Company Auditor Ernst & Young 8 Exhibition Street Melbourne Victoria 3000 Share Registry Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street Abbotsford Victoria 3067 Tel: +61 3 9415 5000 McMillan Shakespeare Limited ABN 74 107 233 983 ASFL No. 299054 Level 21, 360 Elizabeth Street Melbourne Victoria 3000 www.mmsg.com.au 105 McMillan Shakespeare Limited ABN 74 107 233 983 AFSL No. 299054 Head office Level 21, 360 Elizabeth Street Melbourne Victoria 3000 Telephone: +61 (0) 3 9097 3000 mmsg.com.au

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