A Greener Future Annual Report 2023 ANNUAL REPORT 2023 Contents Chairman’s Report Managing Director’s Report Lifting Operating Performance Leveraging New Growth Opportunities Carbon Management Opportunities Port and Processing Facilities Continued Progress Against Our Commitments Sustainability 02 04 06 08 10 12 13 14 Directors’ Report Auditor’s Independence Declaration Remuneration Report (Audited) Financial Report Directors’ Declaration Independent Auditor’s Report Additional Shareholder Information Corporate Directory 18 28 29 39 79 80 84 87 MIDWAY LIMITED ABN 44 005 616 044 ANNUAL REPORT 2023MIDWAY LIMITED Our Strategy ANNUAL REPORT 2023 Midway was founded in 1980 by a collective of Victorian sawmillers seeking a valuable market for their sawmill residue waste that was otherwise being burned. Today Midway is one of Australia’s largest woodfibre processors and exporters, with a strong and growing plantation and carbon management business. Our fibre goes into recyclable paper and packaging, plastic replacement products and coal replacing energy generation. Our Strategy is to maximise shareholder returns and focusses on three key areas: • Lifting the operating performance of the Group • Leveraging capabilities and maximising the value of assets • Pursuing and developing our carbon growth strategy We provide solutions for carbon abatement and emissions offsets using natural processes and our expertise. Maximising Shareholder Returns 1 3 5 7 2 4 6 8 Partnerships Plantation Management Haul Stockpile Planning and Establishment Harvest Processing Marketing and Export Sales Carbon Sequestration and Abatement 01 01 MIDWAY LIMITED MIDWAY LIMITED Chairman’s Report I am very pleased with the work of the management team over the last 12 months to successfully implement a range of initiatives to improve business performance and develop a range of other options that will maximise long-term shareholder returns. Gordon Davis Chairman When I became Midway Chairman in March 2022, I implemented a strategic review of the Company, and the Board of Directors has actively supported efforts by the management team to develop and implement an action plan that will positively position Midway for future growth. Financial Performance Midway recorded sales revenue of $187.8 million across the full financial year, which was effectively flat on the previous corresponding period after Midway Logistics is removed as a discontinued business. I am very pleased with the work of the management team over the last 12 months to successfully implement a range of initiatives to improve business performance and develop a range of other options that will maximise long-term shareholder returns. The Company also achieved a positive underlying EBITDA for FY23 of $2.9 million, a $4.7 million turnaround on an underlying EBITDA loss of $1.8 million in the previous corresponding period. Unfortunately, the underlying improvement in business performance by Midway in FY23 has been masked by the deterioration in woodfibre trading conditions in China during the second half of the financial year. Trading Conditions The Japanese economy bounced back from its COVID-19 shutdown and our major customers in that country committed to a 10 per cent increase in the export price to US$198.75 per bone dry tonne. However, new pulp paper mill capacity coming on stream in China, at a time of prolonged weakness of the Chinese economy following the end of their COVID-19 shutdown, resulted in higher pulp and paper stocks and Chinese customers deferring woodfibre export contracts. The management team responded quickly to these external developments outside our control by implementing a range of remedial measures; these mitigated the impact on Midway earnings and cash flow, including deferral of harvest plans and production at various mill sites. The full year accounts have several significant items including a pre-tax $7.8 million provision for the value of an aged receivable held by PMP on the Tiwi Islands. The decision to write off the aged receivable was due to a deterioration in trading conditions in China in the second half of the financial year. The net impact of these significant items meant that Midway recorded a Statutory net loss after significant items from continuing operations of $2.2 million in FY23. This followed a Statutory net loss after tax and significant items from continuing operations of $9.1 million in the previous corresponding period in FY22. Capital Management Given the increasingly uncertain trading outlook during the year, the Board of Directors applied a prudent approach to capital management. As a result, the Company used the proceeds from the sale of surplus land and the Victorian plantation assets to repay all long-term corporate debt, substantially repay the legacy Strategy financial liability and manage through the unexpected working capital build in the second half of FY23. 02 ANNUAL REPORT 2023MIDWAY LIMITED ANNUAL REPORT 2023 This prudent approach to capital management saw Company net debt fall from $41.9 million in FY22 to only $3.9 million as at 30 June 2023 and Midway build a very strong balance sheet, with Net Tangible Assets (NTA) of $1.43 cents per share. Midway expects further cash injections in the next few years, including another $33.6 million in net proceeds from the sale of its Victorian plantation estate to MEAG in FY24 and FY25 subject to completion of all remaining transactions. The Midway Board will consider a return to annual dividend payments when trading conditions and operating cash flow improve. Board Renewal The size and composition of the Midway Board of Directors has changed significantly in the last few years as the Company sought to broaden its skill set and expertise to understand and facilitate our new growth strategy. With the retirement of former Chairman and founder shareholder Greg McCormack, and Independent Non-Executive Director Tom Keene in November 2022, Midway appointed Kellie Benda to the Board as an independent Non-Executive Director. Kellie Benda brings a wealth of experience in energy markets and logistics as well as forest products to the Board. Midway expects to receive another $33.6 million in net proceeds from the sale of its Victorian plantation estate to MEAG, a subsidiary of Munich Re, in FY24 and FY25. The Midway Board now comprises three Independent Non-Executive Directors, including myself as Chair, Kellie Benda and Leanne Heywood, two shareholder Non-Executive Directors, Tom and Nils Gunnersen, and the Managing Director, Tony McKenna. The Board is working well together with the management team to achieve one objective – to positively position Midway for future growth that will extract greater value for shareholders. We will continue to explore all options to reach that objective. Gordon Davis Chairman 03 MIDWAY LIMITED Managing Director’s Report A number of important strategic review initiatives were completed in the last 12 months that positively repositioned Midway for future improvement regardless of short-term global woodfibre trading conditions. A comprehensive action plan to positively reposition Midway for future growth and maximise shareholders returns has been the central focus of the Midway management team over the last 12 months. The management team implemented a range of initiatives to improve business performance, maximise asset utilisation and leverage our capabilities despite the sudden deterioration in trading conditions in China during the second half of the financial year. Trading Conditions In April, the benchmark E. Globulus price was settled for the calendar year with Japanese customers, securing a 10 per cent increase. However, as the Chairman has reported, the benefit of the price increase was largely offset by a slowdown in the global pulp market and the deferral of woodfibre contracts by major customers in China. When the full extent of the China contract deferrals became evident, Midway immediately advised shareholders, and the management team rapidly implemented a range of remedial actions to limit the impact on our FY23 financial performance. We visited our major customers and a range of prospective customers in Japan and China to secure existing and future contracts, both for pulp and the emerging biomass markets. Management also took the hard decision to defer harvest plans and reduce woodfibre processing at some of our major production sites to reduce our operating costs and working capital exposures. Anthony McKenna Managing Director Financial Performance The FY23 results demonstrate that Midway is improving underlying business performance and is successfully implementing its strategic plan despite difficult trading conditions in China in the second half of the year. I am pleased to report that Midway recorded solid sales revenue of $187.8 million, which was flat on last year, and a positive underlying EBIDTA of $2.9 million in FY23, compared to an underlying EBITDA loss of $1.8 million in the previous corresponding period. The Company used the proceeds from the sale of surplus land and the Victorian plantation assets to repay all long-term corporate debt, substantially repay the AFF/Strategy financial liability and manage through the unexpected working capital build in the second half of FY23. With the sale of the Victorian plantation assets, Midway’s balance sheet has been transformed. The plantation estate has been removed as an asset, both long and short-term bank debt has been largely repaid, the AFF/Strategy liability materially reduced, and the future settlement tranches appear as receivables. The balance sheet remains very strong, with Net Tangible Assets (NTA) of $1.43 per share, very low levels of debt and a strong current asset position that has been utilised to sustain the Company during short-term cyclical downturns in the market. Midway has reduced net debt to just $3.9 million at 30 June 2023, down from $41.9 million at 30 June 2022. Midway had bank borrowings of $6.6 million at 30 June 2023, with $5.6 million of this debt in hire purchase arrangements and $1.0 million for working capital. Midway expects to receive another $33.6 million in net proceeds from the sale of its Victorian plantation estate over the course of FY24 and FY25, subject to completion of all remaining transactions. 04 ANNUAL REPORT 2023MIDWAY LIMITED ANNUAL REPORT 2023 Strategic Initiatives A number of important strategic review initiatives were completed in the last 12 months that will positively reposition Midway for future improvement regardless of short-term global woodfibre trading conditions. As a part of the transaction, MEAG also agreed to invest at least A$200 million in greenfield expansion of the plantation estate, which will bring Midway’s plantation and carbon assets under management to over $350 million when fully invested. During FY23 the first greenfield acquisitions have been completed and the first carbon projects for MEAG have been registered. Lifting Operating Performance The Midway management team had several priority areas across the business that we targeted to lift operating performance in FY23. The first priority was to exit the loss-making Midway Logistics business in Western Australia. In 2023 the operations were closed and the impact on earnings was immediate. The second priority was to get the Bell Bay facility in Tasmania up and running. In 2023 the Company established processing and export infrastructure, secured supply volumes, established contractor teams and has received strong customer enquiries for the regrowth thinnings product. Our new processing site at Norfolk Street, Bell Bay, was opened in October 2022 and the first softwood exports were made from the port facility in July 2023. The first shipment of Midway’s Tasmanian regrowth thinnings product was exported in August 2023. The Company remains confident that Midway Tasmania will play an important part in growing export operations, despite a difficult year. The third priority was to address under-performance of PMP on the Tiwi Islands. During 2023, the Company had issues with some customers and has since been targeting increased biomass shipments. The key to the Tiwi project is the second rotation, which is progressing well. The second rotation will have even greater active participation from Tiwi traditional owners and on completion, it will be Australia’s largest plantation carbon project. A fourth priority was to address declining volume through the Geelong operation. While the market constrained export volumes in 2023, future sources of export volumes were established with a new softwood line commissioned and arrangements initiated with new sources of plantation hardwood. Other export commodities, such as grain, have also been progressed. Maximising the value of assets In the strategic review the Midway management team assessed natural ownership of Company assets to maximise value to shareholders. In October 2022, Midway settled the first tranche of the sale of its Victorian plantation estate to MEAG, a wholly owned subsidiary of Munich Re. Midway entered into management and offtake agreements that secured future woodfibre supply for the North Shore processing and export site. Further tranches were settled in November and December 2022. Leveraging Capabilities The Midway management team also spent considerable time over the last 12 months commencing and progressing projects that leverage our capabilities in other commodities and adjacent sectors. The Company is continuing to progress plans for a grain storage and export terminal on surplus land at its North Shore site in Geelong. The negotiations with various counterparties have been complex. However, Midway remains confident that a satisfactory commercial solution will be found that enables a grain trading company to own and operate the terminal and contribute to Midway’s take-or-pay contract with GeelongPort. Carbon Midway is also building on its dedicated carbon management capabilities in the business and progressing aggregation opportunities with private landholders in Tasmania and Victoria as part of our carbon management strategy. These activities complement the large-scale Tiwi carbon project and the fee for service carbon management for MEAG. Midway is now a Corporate Authorised Representative under a carbon endorsed AFSL, enabling the company to pursue a range of carbon projects and opportunities. The first contracts in the Tasmanian carbon aggregation project have been signed and planting is scheduled for August/ September. Staff and Safety Given the difficult operating environment in the last 12 months, I would particularly like to recognise the efforts of all Midway staff and our contractor partners who work tirelessly to keep the business running and work diligently to avoid safety incidents in what can be a hazardous operating environment. Safety is the number one priority at Midway, and we are always looking to improve how we do things to reduce the risk of incidents and harm to staff and contractors. Tony McKenna Managing Director 05 MIDWAY LIMITED ANNUAL REPORT 2023 Lifting Operating Performance We continue to transform our operations and turn around under-performing divisions. FY23 earnings showed signs of improvement despite the market slowdown, with underlying EBITDA improving by $4.7 million to $2.9 million. We are taking action to improve our operating performance of the business including a strong focus on the key drivers at each of our operating sites. Increased pricing achieved in the second half allowed improvement in gross margin from 6 per cent to 11 percent in the year. We continue to focus on controlling costs. Progress in FY23 Geelong As part of our strategy to maximise asset utilisation, we have commenced production of softwood from Gippsland and other locations and are actively seeking additional long-term supply sources to build our capabilities in this product line. Our team is continually working to expand contracted hardwood volume by exploring new sources. MEAG has invested $21 million of the $200 million committed to expand the plantation estate, which will provide an additional source of hardwood in the future. The MEAG deal also generates management income from the estate with assets currently valued at $122 million, set to increase to $350 million on completion of the investment commitment. Our team is also progressing complementary uses of the Geelong site, including export of grain through the Geelong site. This will generate value for the Group from otherwise underutilised land at the Geelong site. Tasmania As part of our strategy to expand our core business we were pleased to commission the new mill at Bell Bay during the year, with production of the new regrowth thinnings product commencing and the first shipment being made in FY24. We have received positive market response for the Thinnings product, with opportunities existing for the Group to market the product to a range of customers in Japan and China. Additionally, the increase of our key supply agreement with Sustainable Timber Tasmania has been achieved, which places the Tasmania operation in a position to produce and sell strong volumes in the coming years. Tiwi Islands In a difficult market, we have been successful in increasing shipped volume from the Tiwi Islands, delivering four shipments in FY23 compared to two in FY22. We have expanded the customer base with biomass sales into the Japanese market, which positions the business to meet the needs of several customers as part of the ongoing rotation one wood supply. Our team is also focussed on progression of rotation two, which will be transformational for the Tiwi Islands operations and be a significant step in the Group’s carbon strategy. 06 MIDWAY LIMITED Our team is continually working to expand contracted hardwood volume by exploring new sources. Queensland Our Queensland operations delivered another satisfactory performance in FY23, on the back of favourable margins in the softwood market. We have also successfully renewed our port lease to secure export capability well into the future and have also renewed key supply agreements during the year. Plantations and Carbon Segment The MEAG transaction supports the turnaround and growth strategy for the Group’s operating performance. In conjunction with the MEAG plantation estate, from which we are generating management income, we are actively pursuing other plantation management opportunities. Portland Our Portland site had an improved year with shipped volume of 721,000 GMT, a 33 per cent uplift on the prior year. We continue to focus on renewing existing and securing new long-term wood supply arrangements to position the operation for success in the future. Development of our plantation management activities will also allow us to drive our carbon strategy forward. Logistics In addition to the above progress made, we have successfully exited the loss-making logistics business during the year, delivering an immediate improvement in the Group’s performance. 07 ANNUAL REPORT 2023MIDWAY LIMITED Leveraging New Growth Opportunities A key part of delivering our strategy is our pursuit of growth opportunities. We are pleased to report good progress on the following key areas: Geelong Land and Grain Opportunity We are actively progressing the grain opportunity at the Geelong site. This will involve a grain storage and export terminal to be developed on underutilised land in Geelong, and potentially include a sale of a portion of land owned by the Group. Plantation Management The sale of the plantation estate to MEAG has boosted operating performance by generating revenue from plantation management activities. The MEAG land portfolio is set to increase from its $122 million value today to $350 million over the next few years, further increasing management revenue recognized by the Group. We are also exploring other opportunities to leverage our expertise and geographic footprint in this area. Carbon Opportunities We are leveraging our core plantation and carbon skill set to enter new markets to support our three-pronged carbon growth strategy, with growth opportunities arising for the Group in the form of plantation owner / lessor, carbon aggregator and a combined plantation and carbon manager role. 08 ANNUAL REPORT 2023MIDWAY LIMITED ANNUAL REPORT 2023 The MEAG land portfolio is set to increase from its $122 million value today to $350 million over the next several years, further increasing management revenue recognised by the Group. 09 MIDWAY LIMITED Carbon Management Opportunities We are a provider of nature-based solutions to reduce and mitigate carbon emissions. We are using all business units to access and deliver carbon opportunities covering our three-pronged carbon strategy. Plantation Owner / Lessor • Negotiations on the second rotation on the Tiwi Islands is progressing well with a joint Midway and Tiwi ownership structure proposed. • We could potentially generate approximately 6.5 million Australian Carbon Credit Units (ACCUs), which could be utilised to fund the project. • We are excited to be involved with what would be the largest carbon plantation project with Traditional Owner involvement in Australia. Carbon Aggregator • We have arranged to be a Corporate Authorised • Our first properties in Tasmania have been agreed for FY23, with carbon earnings to commence in FY24. • Our pipeline of future properties is very strong heading into the next financial year. Plantation and Carbon Manager • We are developing further carbon opportunities in Tasmania and Victoria for forestry-based projects. • Large-scale properties in the Northern Territory are also being explored for further carbon expansion. • We are also leveraging our strong relationship with MEAG to develop further carbon and plantation management opportunities. Representative under a carbon Australian Financial Services Licence (AFSL), allowing us to progress carbon projects. • Our carbon and plantation expertise is also being leveraged for other related project opportunities such as bio diesel. Strong Carbon Market Economics Forecasted Demand for ACCUs (millions) ) s n o i l l i M ( s U C C A 60 50 40 30 20 10 0 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Low Case Central Case High Case ACCU Market Pricing Expectations (A$) 75 54 48 43 77 57 51 48 78 59 53 48 61 56 45 68 57 51 50 34 29 93 69 59 96 77 59 93 82 58 81 63 55 Central Case High Case Low Case Cost Containment +2% (no inflation) Feb 24 Mar 25 Mar 26 Mar 27 Mar 28 Mar 29 Mar 30 Mar 31 Mar 32 Mar 33 Source: RepuTex Energy, 2023 MIDWAY LIMITED 10 ANNUAL REPORT 2023MIDWAY LIMITED ANNUAL REPORT 2023 In the Tiwi Islands, we are excited to be involved with what will be the largest carbon plantation project with Traditional Owner involvement in Australia. 11 MIDWAY LIMITED ANNUAL REPORT 2023 ANNUAL REPORT 2023 Port and Processing Facilities Plantation Management Partners QCE Brisbane South West Fibre/ Portland Midway Geelong (Head Office) Midway Tasmania Midway Geelong • 19 hectares of freehold land adjacent to GeelongPort. • Two woodfibre mills (separate plantation and native processing facilities). • Mobile debarking and chipping line (allowing for processing of softwood product). • Three stockpiles including three reclaimers with 200,000 green metric tonnes (GMT) total capacity. • Capacity to process and export up to 1.8 million GMT per annum of woodfibre. QCE Brisbane • Sole woodfibre exporter from Port of Brisbane – provides geographic and marketing diversity. • Lease on a four hectare site with the Port of Brisbane for producing, storing and loading. • GrainCorp provides toll ship loading. • 300,000 GMT per annum softwood export capacity. • Hardwood exports commenced in 2016. Capacity of 300,000 GMT per annum. • Stockpile capacity: 100,000 GMT of softwood and/or hardwood. South West Fibre Portland South West Fibre is the first plantation hardwood processing and marketing operation in the Green Triangle – provides geographic and future market diversity. • Myamyn – 1.2 million GMT per annum current site capacity plus in-field chipping and ‘upstream’ chip and log storage. • Supply agreement with Australian Bluegum Plantations. • 51 per cent owned joint venture with Mitsui. • Portside woodfibre receival, storage and loading facilities contracted with GrainCorp. • 80,000 GMT woodfibre stockpile capacity. • Woodfibre receival capacity of 1.8 million GMT per annum. Plantation Management Partners Melville Island • Plantation Management Partners Pty Ltd (PMP) provides exclusive forestry management services to the 35,000 hectare Tiwi Islands forestry plantation project, and provides woodchip marketing services to the project. • Acacia mangium woodchip exports commenced in November 2015 out of Port Melville. • Stockpile capacity 60,000 tonnes. • 400,000 GMT per annum export capacity. Midway Tasmania • New mill site at Bell Bay commenced production in October 2022 with an 80,000 tonne stockpile capacity. • Marketing and sales activities ongoing. • Total export capacity > 600,000 tonnes 12 MIDWAY LIMITED Continued Progress Against Our Commitments ANNUAL REPORT 2023 • Midway has FSC (Forestry Stewardship Council) certification across all our established operations including recent FSC certification being awarded to Midway Tasmania. • 27 per cent of Midway’s employees on the Tiwi project are Tiwi people and the Group is committed to ongoing skills and development training. • Midway has PEFC (Programme for the Endorsement of Forest Certification) – Sustainable Wood certifications across all our operations. • The team planted 1.07 million seedlings in FY23. • There is 4.22 million tonnes CO2 equivalent stored in Midways “Defined Forest Area”. The Group is focussed on increasing that figure as more forestry land is developed with our partners. • Midway built a team committed to registering and managing carbon sequestering plantation projects. • Over the last four years Midway has spent $3.6 million maintaining public roads on Melville Island. • Safety – 2023 LTIFR was 5.7, below industry average of 14.5. • Our products contributed to the Circular Bioeconomy for: recyclable and biodegradable packaging, hygiene products and print materials; plastic replacement packaging; and coal replacement energy generation. Certification Status Geelong SWF QCE PMP Midway Tasmania AFS CoC (AS4707) (PEFC) FSC FSC-STD-40-004 FSC FSC-STD-40-005 Implementation planned FY24 Implementation planned FY24 FSC FSC-STD- AUS-01-2018 Implementation planned FY24 – – – – 13 MIDWAY LIMITED Sustainability Midway (MWY) is an industry leader in the sustainable growth, harvest and sales of forest products, as well as an emerging leader in the carbon sequestration and abatement management sector. MWY continues to work closely with the communities in which it operates to provide employment, income and growth opportunities. This is particularly evident within our Tiwi Islands project managed by Plantation Management Partners. The nature of MWY’s activities provide significant opportunities for advancement of sustainability objectives, providing a pathway for further growth for the Company particularly in the Carbon sector. Midway reports annually to the Workplace Gender Equality Agency (WGEA). Midway’s Modern Slavery Statement for the 2020/2021 financial year was submitted at the end of December 2021. Copies of the WEGA report and Modern Slavery Statement can be found on Midway’s website. Midway Governance Bodies and Employee Diversity Summary Male Female Board/ Senior Manager Manager Professional Technicians and Trades Worker Clerical and Administrative Worker Machinery Operations and Driver Labourer -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% Percentage of Employees (%) < 30 years old 30-50 years old > 50 years old Certifications Underpinning MWY’s sustainability credentials it holds and maintains certification for: • Sustainable Forest Management: AS 4708-2013. • Chain of custody for forest products AS 4707:2014. • Occupational health and safety management systems AS/NZS 4801:2001. • Quality management systems – requirements AS/NZS ISO 9001:2008. • Chain of Custody Certification FSC-STD-40-004 V3-0. • Requirements for Sourcing FSC® Controlled Wood FSC-STD-40-005 V3-1. External audits for each certification held are conducted on an annual basis. Safety (AS45001) Quality (ISO9001) Midway SWF QCE PMP Forestry (AS4708) AFS CoC (AS4707) (PEFC) FSC® CW, CoC Midway Logistics Midway Tasmania Employment and Safety Over the reporting period a total of 23 new full-time, three part-time and 31 casual employees were recruited, representing 38 per cent of the total workforce including Board members. Female representation within the Midway Group marginally increased from 20 per cent to 22 per cent of total workforce including Board members, with 23 per cent of females in managerial roles. Staff turnover increased by 2 per cent compared to the previous year. A total of 149 staff and Board members were directly employed by the Group by the end of FY23. Midway continued its commitment to employ emerging talent, with two graduate foresters being recruited in the Midway Geelong business. This commitment will be broadened into other parts of the business. 14 ANNUAL REPORT 2023MIDWAY LIMITED Midway Job Type and Indigenous Employee Summary 5% 6% 4% 23% 19% 5% 11% 13% 14% Senior Manager Manager Professionals Technicians and Trades Workers Clerical and Administrative Worker Machinery Operations and Drivers Machinery Operators and Drivers – Indigenous Labourers Labourers – Indigenous MWY recorded a total of 5 Lost Time Injuries (LTIs) during the reporting period, a decrease from nine the previous year. Due to an increase in the number of hours worked and decrease in LTIs, the Lost Time Injury Frequency Rate (LTIFR) decreased from 13.5 in the previous year to 5.7 in the current reporting period. The Lost Time Injury Severity Rate (LTISR) also decreased from 33.1 last year to 23.0 this year. Safety initiatives undertaken include but are not limited to: • Active consultation with workers to identify, report and rectify site safety hazards. Increasing use of RiskTalk, an efficient mobile app for voice recording risk assessments, reporting hazards and incidents. • Critical risk review conducted across business units and standardisation of controls. Midway participating in AFPA (Australian Forest Products Association) industry critical risk review. • Safety alerts posted including unannounced entry to harvest sites, incident reporting and notification – high potential consequence and LTIs, Log Truck rollover, runaway vehicles, bullying and harassment, slips trips falls, and guarding. • Safety calendar introduced for FY23 with focus on a safety topic each month across entire organisation and at Board level. • FY23 training completed included drone use, OHS for Managers and Supervisor, HSR rep, Chemwatch, FIB training, Risk Assessment and Hazard Id, RiskTalk, Working at Heights, Elevated Work Platforms, Emergency and Fire Warden, Forklift and Front-end Loader, 4WD Driver Training, HV Electrical operator, First aid and CPR refresher, Confined Space and Chainsaw use. • Safety champions nominated for each site to help support and drive safety strategy and improvements. 15 MIDWAY LIMITED ANNUAL REPORT 2023 Sustainability continued Midway Work Health and Safety Performance Summary Measure Total number recordable work-related injuries Total number high consequence work-related injuries Total number Lost Time Injuries Total number of fatalities Total recordable injury frequency rate High consequence injury frequency rate Lost Time Injury Frequency Rate (LTIFR) Fatal accident frequency rate Midway Employees Midway Contractors Midway All FY22 5 FY23 13 FY22 9 1 1 - 0 1 - 22.4 44.8 4.5 4.5 - 0 6.9 - 1 8 - 20.3 2.3 18.1 - FY23 8 1 4 - 13.8 1.7 5.2 - FY22 14 FY23 21 2 9 - 21.0 3.0 13.5 - 1 5 - 24.1 1.1 5.7 - Note: All frequency rates shown in the table above are based on rate per 1,000,000 hours worked. Midway Tasmania continued partnering with private landowners across Tasmania to deliver forestry carbon projects, providing landowners with the opportunity to generate sources of income through enhancing agricultural production, replanting failed or harvested plantations which would otherwise be converted to non-forest use and the creation of Australian Carbon Credit Units (ACCUs). Through these partnerships a total of 235 hectares of land will be planted and managed by Midway Tasmania as part of the 2022-2023 aggregated carbon project. The 2022-2023 aggregated project is forecast to generate approximately 65,000 ACCUs each representing one tonne of carbon dioxide equivalent (tCO2-e) stored. An additional 1,200 hectares of land is under consideration for the 2024 aggregated project. Environmental Performance Managing our environmental compliance obligations and community expectations remains a high priority across the Group. Midway observed improvement across the Group in relation to compliance with environmental laws and regulation. MWY continue to conduct annual stakeholder consultations for both interested and affected parties in accordance with requirements of the Responsible Wood Standard AS4708, and the FSC® Controlled Wood Standard (FSC-STD-40-005). Midway continued to actively engage with several stakeholders and environmental non-governmental organisations during the reporting period and will continue to build relationships with these and other stakeholders in the future. Midway Environmental Performance Summary 2018/ 2019 2019/ 2020 2020/ 2021 2021/ 2022 2022/ 2023 1 2 2 - - Non-compliance with environmental laws and regulations Energy and Climate Group energy consumption and greenhouse gas emissions have been calculated for the 2022/2023 financial year for Midway operations. Total energy consumption decreased across the Group by 62 per cent compared to the previous year with a 66 per cent decrease in electricity use and a 34 per cent decrease in fuel consumption observed. Decreased fuel consumption was driven by the closure of Midway Logistics, with the Geelong mill responsible for the decrease in electricity consumption. Greenhouse gas emissions totalled 6,283 tonnes of CO2 equivalent (Scope 1 and 2 emissions) during the 2022/2023 financial year and represented a 50 per cent decrease on the previous financial year. The current carbon storage of plantation trees within MWY’s defined forest area is estimated to be 4.217 million tonnes of CO2 equivalents. This includes 1.213 million tonnes managed by Midway Plantations, 2.328 million tonnes managed by PMP, and 0.676 million tonnes managed by Midway Tasmania. 16 ANNUAL REPORT 2023MIDWAY LIMITED Midway Energy and Greenhouse Gas Emissions Summary MWP MWG MWL MWT QCE PMP TOTAL ENERGY Total energy consumption within the organisation GJ/yr FY21/22 FY22/23 20 15 19,161 6,847 367 63 0 18 1,057 885 0 0 20,604 7,828 Total electricity purchased from the grid kWh/yr Total fuel consumption within the organisation GJ/yr Direct (Scope 1) GHG emissions tCO2-e/yr Indirect (Scope 2) GHG emissions tCO2-e/yr FY21/22 5,470 5,322,505 103,143 0 293,511 0 5,724,629 FY22/23 4,081 1,901,969 17,488 4,938 245,888 0 2,174,365 FY21/22 FY22/23 FY21/22 FY22/23 FY21/22 FY22/23 712 886 56 70 5 3 11,245 33,105 1,271 4,428 35,883 86,654 12,896 2 4,771 3,473 34,444 56,473 888 2,643 1,019 5,110 1,617 0 54 9 101 378 0 1 399 275 187 179 2,842 2,730 0 0 6,292 4,474 5,356 1,809 Biodiversity MWY manages more than 57,000 hectares of land covering a broad geographical range including Victoria, Tasmania and the Tiwi Islands, and include both plantation and native forests and vegetation. These areas provide habitat for a wide range of terrestrial and aquatic organisms including species listed as rare, threatened, or endemic. MWY is committed to maintenance of biodiversity values within owned or managed estate in line with third party certification schemes and standards. MWY continued water quality monitoring in key waterways in the Otways near planned, active or completed activities to ensure these activities continue to have minimal effect on the local environmental receptors in line with its biodiversity monitoring program. PMP also continued to monitor and record sightings of key threatened species such as Red Goshawk, Tiwi Island Masked Owl and Partridge Pidgeon to ensure harvesting and haulage activities were managed to minimise disturbance in line with EPBC approval requirements. Community Initiatives MWY engages with key stakeholders in the communities in which we operate to manage our activities and mitigate adverse impacts on those communities. We also invite stakeholders to communicate concerns regarding high conservation values and other environmental and community values associated with MWY’s wood supply area. The MWY Group is a significant employer in regional communities through direct employees and indirect contractor employees. Our policy is to support communities in the areas where we conduct our business and where our employees and contractors live. In addition to our direct economic support for employment and the local economy, we provide sponsorship to a range of community organisations in these areas. During the reporting period MWY provided in kind contributions to multiple community groups and organisations including the North Shore Football and Netball Club, Otway District Football and Netball Club, 1st Modewarre Scout Group and Variety Club of Victoria. These community groups are fundamental to the regions in which Midway operates, providing not only social benefits for the local people, but often word of mouth opportunities for Midway’s business groups including access to staff and contractors, land opportunities and local business support. This material references Disclosure 405-1 from GRI 405: Diversity and Equal Opportunity 2016, Disclosures 403-1 and 403-9 from GRI 403: Occupational Health and Safety 2018, Disclosures 302-1 and 302-3 from GRI 302: Energy 2016 Emissions, and Disclosures 305-1, 305-2 and 305-4 from GRI 305: Emissions 2016. 17 ANNUAL REPORT 2023MIDWAY LIMITED Directors’ Report The Directors present their report together with the consolidated financial statements of the Group comprising of Midway Limited (the Company) and its subsidiaries for the financial year ended 30 June 2023 and the Auditor’s Report thereon. Directors The names and details of the Company’s Directors in office during the financial year and until the date of this report are as follows: Name Directors Gordon Davis Kellie Benda Nils Gunnersen Tom Gunnersen Leanne Heywood Anthony McKenna Gregory McCormack Thomas Keene Position Held Employment Status Independent Non-Executive Chair Independent Non-Executive Director Appointed 5 October 2022 Non-Executive Director Non-Executive Director Independent Non-Executive Director Managing Director and CEO Non-Executive Director Independent Non-Executive Director Retired 28 November 2022 Retired 28 November 2022 All of the Directors have been in office for the entire period unless otherwise stated. Gordon Davis B.Sc (Forestry), M.Sc (Ag), MBA Independent Non-Executive Chairman Gordon has spent most of his career in the forestry and commodities industries. He was Managing Director of AWB Limited from 2006 to 2011, and Chair of VicForests from 2011 to 2016. He has been a Director of Nufarm Limited (ASX: NUF) since 2011, and Healius Limited (ASX: HLS) since 2015. Gordon was also the Chair of Greening Australia between 2014 and 2019, and was appointed Chairman of the Company from 1 May 2022. Gordon was appointed a Director in April 2016. Kellie Benda LLB, BA (Industrial Relations), MAppFin, Harvard AMP, FAICD Independent Non-Executive Director (appointed 5 October 2022) Kellie commenced her career with Mallesons (now King & Wood Mallesons) as a corporate lawyer and then moved into investment banking. She held senior executive positions as Chief Risk Officer, Chief Operating Officer and Executive General Manager in organisations including AGL Limited, Origin Energy Limited, Emeco Holdings Limited and Aurizon Limited. She has served as a Non-Executive Director of the WA Forests Products Commission and IMX Resources Limited, including a period as Chair. She is a Director of PSMA Australia Limited (Geoscape Australia) and several not-for-profit entities. Kellie is a member of the Safety and Sustainability Committee, Audit and Risk Committee and People and Remuneration Committee. She was appointed a Director on 5 October 2022. Nils Gunnersen B.Bus (Agricultural Commerce) Non-Executive Director Nils has over 25 years’ experience across the forests and wood products industry. He is a graduate of the Australian Rural Leadership Programme. He was Executive Director of Operations and then Managing Director of Gunnersen Pty Ltd, a large independent wood products importer and distributor in Australia and New Zealand (2008-2019). He is a Trustee of the JW Gottstein Trust, a charitable trust which supports education in the forest products industry. Nils is a Director of Chebmont Pty Ltd, which is a substantial holder of Midway shares. Nils is Chair of the Safety and Sustainability Committee, and was appointed a Director in October 2012. Tom Gunnersen B.A (Melb), MBA (Finance) (Bond) Non-Executive Director Tom has 20 years of corporate, investment and capital markets experience in Australia and Asia. He is a co-founder and current Director of boutique corporate advisory firm KG Capital Partners and is a Director of Chebmont Pty Ltd, which is a substantial holder of Midway shares. Previously, Tom was a Director of Equities for global investment bank Canaccord Genuity Limited during which time he was based in Hong Kong for several years. Tom is a member of the People and Remuneration Committee, and was appointed a Director in February 2018. 18 ANNUAL REPORT 2023MIDWAY LIMITED Leanne Heywood OAM, B.Bus (Acc), MBA, FCPA, GAICD Independent Non-Executive Director Leanne has broad general management experience gained through an international career in the mining sector, including 10 years with Rio Tinto. Her experience includes strategic marketing, business finance and compliance and she has led organisational restructures, disposals and acquisitions. She has been a Director of Allkem Limited (ASK:AKE) since 2016, Snowy Hydro Limited since March 2022, Symbio Limited (ASX:SYM) since March 2022, Quickstep Holdings Limited (ASX:QHL) since February 2019 and is a Graduate member of the Charles Sturt University Council. Leanne is Chair of the Audit and Risk Committee and the People and Remuneration Committee. She was appointed a Director in March 2019. Anthony McKenna BA, MBA, CFA, GAICD Managing Director and Chief Executive Officer (appointed 24 January 2022) Tony has broad experience in private investment, M&A, and agribusiness. He was Managing Director of Ruyi Australia Group, part of Shandong Ruyi Technology, a Chinese multinational group, from 2016 to 2022. During that time, he was responsible for the operations of Cubbie Station, Australia’s largest cotton farm, and Lempriere Wool, an international wool processing and trading business. Prior to 2016, Tony was CEO of Lempriere Capital, a private investment group specialising in agribusiness, and Executive Director of agri funds manager AgCAP. Tony was appointed Managing Director and Chief Executive Officer on 24 January 2022. Gregory McCormack B.Bus Non-Executive Director (retired 28 November 2022) Greg has spent his entire career in the forest products industries. He was the Managing Director of McCormack Timbers, a timber milling and wholesale business, and was a founding Director of Midway in 1980. He has held senior positions with both the National and the Victorian Association of Forest industries (having served as President of both associations). Greg is the current President of the Australian Forest Products Association. Greg was appointed a Director in November 1997 and is a member of the People and Remuneration Committee. Greg stood down as Chair of the Board on 1 May 2022. Thomas Keene B.Ec, FAICD Independent Non-Executive Director (retired 28 November 2022) Tom has a commercial and agribusiness background, having held the position of Managing Director of GrainCorp Ltd between 1993 and 2008. In 2007, Tom was awarded the NAB Agribusiness Leader of the Year. He is a former Chairman of Allied Mills Ltd and Grain Trade Australia and a former Director of Cotton Seed Distributors Ltd. He has been a Director of Australian Agricultural Company Limited (ASX: AAC) since 2011. Tom is a member of the Audit and Risk Management and the People and Remuneration Committees, and was appointed a Director in August 2008. Company Secretary Robert Bennett B.Com, CA, FGIA Rob has many years of company secretarial and governance experience with Coles Group Limited, AWB Limited, and Medibank Private Limited. Committee Membership As at the date of this report, the Company has an Audit and Risk Committee (ARC) (previously Audit and Risk Management Committee), a People and Remuneration Committee (PRC) (previously Remuneration and Nomination Committee) and a Safety and Sustainability Committee (SSC) (previously Workplace Health Safety and Sustainability Committee) of the Board of Directors. Name Directors Gordon Davis Kellie Benda Nils Gunnersen Tom Gunnersen Leanne Heywood Anthony McKenna ARC SSC PRC Comments Chair Chair SSC Chair ARC | Chair PRC CEO 19 ANNUAL REPORT 2023MIDWAY LIMITED Directors’ Report continued Meetings of Directors The number of meetings of the Company’s Board of Directors and of each Board committee held during the year and the number of meetings attended by each Director were as follows: Board ARC PRC SSC Other Committees Directors Gordon Davis Kellie Benda Nils Gunnersen Tom Gunnersen Leanne Heywood Anthony McKenna Thomas Keene Gregory McCormack Held Attended Held Attended Held Attended Held Attended Held Attended 11 11 3 3 – – – – – – 9 11 11 11 11 3 3 9 11 11 11 11 2 3 4 – 6 6 – 2 – 4 6 6 – 2 – 3 3 4 – 1 1 3 3 4 – 1 1 1 3 3 2 – – – 1 3 3 2 – – – – – – 3 1 – – – – 3 1 – – Principal Activities The principal activities of the Group during the 2023 financial year are based on the reportable segments of the Group as below: Reportable Segments Woodfibre Forestry Logistics1 Plantation and Carbon Management Products/Services Includes primary operations whereby the Group purchases and sells both own and third party wood. SWF is also proportionally consolidated at 51per cent for segment reporting, which reflects how management views and makes decisions of its operations. Forestry logistics provides support services to third parties engaged in growing woodfibre including harvest and haul. Plantation management is the provision of silviculture services including on group owned trees combined with carbon management activities. The segment also holds any Group owned plantation land and trees. Ancillary Other aggregated costs which are not individually significant. 1. Discontinued operation, refer to Note 1.3 for details. Operating and Finance Review Financial Results Full Year Results Impacted by Recent Pulp and Paper Market Developments and Residual Supply Chain Disruption • The Group achieved positive underlying earnings before interest, tax, depreciation and amortisation (EBITDA) from continuing operations and before significant items of $2.9M (2022: $1.1M). • The Group’s balance sheet remains strong with Net Tangible Assets of $1.43 cents per share. • The Group recognised a gain of $12.5M arising from the sale of the plantation estate during the half, with proceeds used to repay the Group’s long-term debt, resulting in a reduction in the Group’s net debt position to $3.9M (2022: $41.9M). • No dividend will be paid in respect of full year FY23 results. Group Performance • The Group secured an improved benchmark Eucalyptus Globulus sales price of US$198.75/BDMT for major Japanese customers for calendar year 2023. • The Group utilised long-standing FX contracts in the first half, set at a rate of 0.75, which adversely impacted margins. • The Group’s share of profit from SWF is $2.4M in FY23 (FY22: profit of $1.0M), an improvement of $1.4M. • The loss-making Logistics segment has been exited. • In the second half, a weak international pulp and paper market, at a time when new pulp paper mill capacity was coming on stream, resulted in high inventories and a slow-down in production. Chinese customers subsequently responded by deferring the majority of their 2023 contracted woodfibre shipments, ongoing pressure on volumes and margins in the woodfibre segment. • This compounded the challenges experienced in the first half, with labour cost pressure, ongoing elevated fuel prices and wet weather impacting access to plantations, particularly in Midway Tasmania. 20 ANNUAL REPORT 2023MIDWAY LIMITED A summary of the financials has been provided below to the previous corresponding period: Revenue and other income Sales revenue Other income Notes 1.1 4.8 2023 $’000 2022 $’000 Change 187,808 198,480 (10,672) 6,668 2,845 194,476 201,325 3,823 (6,849) Less: expenses Changes in inventories of finished goods and work in progress Materials, consumables and other procurement expenses 14,156 5,353 (137,564) (133,563) Employee benefits expense Plantation management expenses Freight and shipping expense Repairs and maintenance expense Other expenses Share of net profits from equity accounted investments EBITDA – S Depreciation and amortisation EBIT – S Net finance expense Net loss before tax – S Income tax expense Net loss after tax – S Less: Net loss after tax – Statutory (discontinued operations) Net profit/(loss) after tax – S (underlying, continued operations) (20,620) (3,995) (24,897) (9,865) (11,222) 2,386 2,855 (6,318) (3,463) (2,132) (5,595) 2,478 (3,117) (191) (2,926) 8,803 (4,001) (1,462) (3,915) (19,158) (80) (40,945) 16,048 (7,680) (8,050) 1,036 (1,762) (8,544) (10,306) (2,430) (12,736) 4,177 (8,559) (3,809) (4,750) (2,185) (3,172) 1,350 4,617 2,226 6,843 298 7,141 (1,699) 5,442 3,618 1,824 Non-IFRS Measures Throughout this report the Group has used certain non-IFRS measures, predominately EBIT and EBITDA. The non-IFRS measures have been deemed useful for recipients in measuring the underlying performance of the Group. The non-IFRS measures have not been audited. Non-IFRS Measure EBIT EBITDA Underlying NPAT – S Description Earnings, before interest and tax Earnings, before interest, tax, depreciation and amortisation Statutory net profit after tax adjusted to remove the impact of one-off or non-recurring items and the net fair value gain/(loss) on biological assets Underlying EBITDA – S Earnings, before interest, tax, depreciation and amortisation adjusted to remove impact of one-off or non-recurring items and the net fair value gain/(loss) on biological assets 21 ANNUAL REPORT 2023MIDWAY LIMITED Directors’ Report continued Operating and Finance Review continued Reconciliation of Underlying Net Profit/(loss) After Tax to Statutory Net Profit After Tax (NPAT) Net profit/(loss) after tax – S (consolidated) Net fair value increment on biological assets Non-cash interest expense (AASB 15 Strategy impact)1 Insurance costs, net of proceeds received2 Midway Logistics wind-down costs, net Impairment loss on non-current assets Impairment loss on current assets Interest received3 Profit on sale of non-current assets Transaction costs incurred Net profit/(loss) after tax statutory (consolidated) Less: Net loss after tax – statutory (discontinued operations) Net profit/(loss) after tax – statutory (continuing operations) 2023 $’000 (3,117) 105 (3,218) 65 – (5,489) (245) 1,374 8,726 (580) (2,379) (191) (2,188) 2022 $’000 (8,559) 4,543 (7,997) – (500) (98) – – 1,361 (1,628) Change 5,442 (4,438) 4,779 65 500 (5,391) (245) 1,374 7,365 1,048 (12,878) 10,499 (3,809) (9,069) 3,618 6,881 1. Non-cash interest expense is incurred on the liability created on 1 July 2018 to repurchase trees under the Strategy arrangement, which was deemed a financing arrangement upon the adoption of AASB 15 Revenue from Contracts with Customers. The Strategy arrangement is a contractual obligation to repurchase hardwood trees the Group sold in February 2016. 2. Costs related to insurance works, and reimbursements received from the Group’s insurers, are presented gross under the Consolidated Statement of Comprehensive Income. 3. Includes interest received by the Group on cash deposits relating to proceeds received from the sale of the plantation estate. Reconciliation of Underlying Earnings, Before Interest, Tax, Depreciation and Amortisation to Statutory Earnings, Before Interest, Tax, Depreciation and Amortisation (EBITDA) EBITDA – S – continuing operations EBITDA – S – discontinued operations EBITDA – S – (underlying) – consolidated Net fair value increment/(decrement) on biological assets Insurance costs, net of proceeds received Profit/loss on sale of assets – Midway Plantations Impairment loss on non-current assets Impairment loss on current assets MWL wind-down Transaction costs incurred EBITDA – statutory – consolidated Less: EBITDA gain/(loss) – discontinued operations EBITDA – continuing operations 2023 $’000 2,858 (3) 2,855 151 93 12,465 (7,842) (350) – (829) 6,543 (3) 6,546 2022 $’000 1,089 (2,851) (1,762) Change 1,769 2,848 4,617 6,490 (6,339) – 1,943 (98) – (714) (2,326) 3,533 (3,565) 7,098 93 10,522 (7,744) (350) 714 1,497 3,010 3,562 (552) 22 ANNUAL REPORT 2023MIDWAY LIMITED Performance Against Prior Corresponding Period Woodfibre Revenue1 EBITDA – S EBITDA2 Export sales volume in Green Metric Tonnes (GMT) achieved by site Geelong Portland1 Brisbane Melville Island Tasmania Total 2023 Actual 225,182 8,237 139 2022 Actual 186,185 6,080 5,982 GMT ’000s GMT ’000s 597 721 237 143 295 613 541 276 77 450 1,993 1,957 21% 35% -98% (16) 180 (39) 66 (155) 36 1. Includes the Group’s 51% share of SWF’s revenue, which is eliminated per Note 1.1. 2. Woodfibre EBITDA includes a total of $8.2M of impairment losses recognised in PMP. Refer to Note 1.7 for details. Improved EBITDA-S is due to more favourable export pricing obtained in the second half combined with more favourable FX rates following usage of the legacy hedging contracts in the first half, providing benefits to margin achieved. Key points include: • Volume increased at PMP and our joint venture operations in Portland (South West Fibre) by 66k GMT and 180k GMT respectively. The Group’s share of profit recorded from SWF increased by $1.4M to $2.9M (FY22: $1.0M). • In Geelong and Brisbane, volumes reduced in FY23; however, margins on E. Globulus and softwood improved in the second half. • Favourable pricing was obtained for calendar year 2023 across most products, benefitting the margin realised in the second half. • Tasmania noted a 155k GMT fall in volume, driven by recent market volatility impacting demand in the second half, combined with adverse weather experienced in the first half that impacted access to plantations. • Other key movements include a 1.5% decrease in dry fibre % in the first half of the year particularly in Tasmania and Victoria. Plantation and Carbon Management Plantation Management Revenue EBITDA – S EBITDA 2023 Actual 9,943 (1,625) 10,991 2022 Actual 10,634 (2,406) 6,027 -6% 32% 82% The increase in EBITDA in the year was due to a combination of the gain recognised from the sale of the plantation estate combined with increased management fees arising from plantation estate management activities. Now the estate has been sold and earnings are being generated from management of the estate along with carbon solutions being developed for third parties, this segment is expected to return to profitability. Forestry Logistics Forestry Logistics (Discontinued) Revenue EBITDA-S EBITDA Midway Logistics has been exited within FY23. 2023 Actual 315 (3) (3) 2022 Actual 4,883 (2,851) (3,565) -94% 100% 100% 23 ANNUAL REPORT 2023MIDWAY LIMITED Directors’ Report continued Operating and Finance Review continued Financial Position Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets 2023 $’000 75,147 107,452 182,599 37,645 17,977 55,622 126,977 2022 $’000 46,109 211,066 257,175 62,930 69,447 132,377 124,798 Highlights • The ongoing challenging trading environment was reflected in reduced operating cash flows (from continuing operations) of negative $12.3M (FY22: negative $3.2M). This is principally due to working capital influences, with inventory of $35.0M being held (2022: $20.8M). • The Group’s net debt profile has improved, with long-term debt facilities being repaid and a net debt position of $3.9M (2022: $41.9M). • No dividend declared in FY23. Net Debt Bank loans – current Bank loans – non-current Hire purchase liabilities – current Hire purchase liabilities – non-current Other finance arrangements AASB 16 Lease liabilities Cash and cash equivalents Term deposit Net debt 2023 $’000 1,000 – 2,027 3,599 – 4,888 (5,606) (2,009) 3,899 2022 $’000 16,950 20,675 2,354 1,922 – 4,990 (2,969) (2,000) 41,922 Highlights • Net debt decreased following the sale of the plantation estate with repayments made to long and short-term borrowings. Outlook The Directors believe that the long-term outlook for woodfibre exports into Asia, specifically China and Japan, remains positive. The Group has positioned itself for success in FY24 by completing the building of the new processing site at Bell Bay in Tasmania and exiting the loss-making logistics business in the year. The Group also achieved a 10% increase in the headline FOB pricing to our major customers and saw an increase in underlying EBITDA (consolidated) of $4.7M to $2.9M (FY22: $1.8M loss). Global trading conditions remain challenging for many businesses, including Midway. During the first half of FY24 Midway will closely watching global pulp and paper stocks for signs that woodfibre demand will return to normal levels in calendar year 2024. In the interim, Midway continues to progress its strategic initiatives to improve the business and maximise returns to shareholders. The timing of the market turnaround remains uncertain; however, the Directors are looking at additional performance improvement initiatives and diversification strategies that may generate future revenue and earnings streams. We remain confident that there are potential growth opportunities for Midway that will benefit shareholders in the longer term. 24 ANNUAL REPORT 2023MIDWAY LIMITED Key Risks and Business Challenges The principal risks and business challenges for the Group are: • Security of supply – There is a risk that Midway may not be able to secure sufficient timber supply necessary to meet customer demand. • Customer demand – As most sales are achieved on a short-term contractual basis, there can be no guarantee that these relationships will continue. • Exposure to foreign exchange rates – As most sales are denominated in USD whilst costs are in AUD, any adverse exchange rate fluctuations would have an adverse effect on Midway’s future financial performance and position. • Banking facilities – There is a risk that Midway may not be able to refinance its existing or future bank facilities as and when they fall due, or that the terms available to Midway on refinancing may not be as favourable as the terms of its existing or future bank facilities. In addition, Midway has a debt facility which is subject to various covenants. Factors such as a decline in Midway’s operations and financial performance (including any decline arising from any adverse foreign exchange rate fluctuations) could lead to a breach of its banking covenants. If a breach occurs, Midway’s financier may seek to exercise enforcement rights under the debt facility, including requiring immediate repayment, which may have a materially adverse effect on Midway’s future financial performance and position. • Excess system capacity – Midway is subject to a number of contracts which contain minimum annual volume commitments. Financial costs are imposed if these volume commitments are not met. • Contamination of product – Woodfibre export contracts all contain similar contamination requirements. There is a risk of financial recourse in the event of a breach of contract. • Costs – Midway’s profitability could be materially and adversely affected by changes in costs which are in many respects beyond its reasonable control. • Australian Carbon Credit Units (ACCUs) – The Group is exposed to volatility in future ACCU price and demand movements as it is now entering carbon management activities. The Group’s future profit could be impacted if demand or pricing falls. • Vessel chartering – There is a risk that Midway may not be able to finalise an export sale contract rendering a vessel idle, or that a vessel cannot be chartered when needed, causing a potential shipment to be adversely impacted. • Employee recruitment and retention risk – There is a risk the Group may not be able to attract and retain key staff, particularly in remote regions. • Fire – The loss of plantation resource and therefore supply due to fire is an ever-present industry risk. • Extreme weather events – There is a risk of extreme weather events occurring. • Geopolitical conditions – There is a risk that global political developments may adversely affect market conditions. • Other risks facing the Company include failure to comply with laws, regulations and industry standards generally (and environmental matters and industry accreditations specifically), risk of litigation, claims and disputes, bribery and corruption in foreign jurisdictions. In order to manage these challenges, the Company hedges a significant proportion of its forward sales through foreign exchange hedging contracts and continues to maintain and strengthen its business relationships including entering into strategic alliances with key suppliers. Additionally, imposing a strong control environment focusing on preventative controls acts to further manage these business challenges. Dividends There were no dividends declared during the 2023 financial year, or since the end of the financial year. Corporate Governance The Group has adopted a range of charters and policies aimed at ensuring that the Group’s business is conducted in an ethical manner and in accordance with the expected standards of corporate governance. Significant Changes in the State of Affairs Wind-down of Midway Logistics On 1 April 2022 the Group announced its intention to exit Midway Logistics, which was completed within the first half of this financial year. 25 ANNUAL REPORT 2023MIDWAY LIMITED Directors’ Report continued Significant Changes in the State of Affairs continued Plantation Management Partners During the year, Northern Territory Port and Marine Pty Ltd, operator of the Port Melville facility in the Tiwi Islands, entered administration. The port is utilised by PMP to ship the woodfibre processed by the operation. While the administration creates some uncertainty around the port, the administrator has advised that the Port operations will continue through the administration. Sale of Plantation Estate • In 2022 Midway signed contracts for the sale of 17,000 hectares of its existing plantation estate in the central and south-west regions of Victoria to a special purpose vehicle (SPV) owned by clients of MEAG, Munich Re’s asset manager, for $154.1M. • Settlement of the remaining two tranches is due to occur in September 2023 and September 2024. • Proceeds received to-date have been used to improve the Group’s balance sheet position, with net debt substantially improving to $3.9M (from $41.9M in FY22). Other usage includes $27.4M to repay a proportion of the Strategy liability, $8.0M in net capital gains tax paid, $4.6M in capital expenditure, $5.1M to purchase pine, and support of the Group’s $14.2M inventory build in FY23. • The SPV has also committed to invest $200M in land acquisition for new hardwood ‘greenfield’ plantations in south-west Victoria over the next five years under Midway’s management, with several land purchases being completed this financial year. Significant Events Subsequent to the End of the Financial Year In August 2023 the Group renewed its lease agreement with Port of Brisbane for a period of ten years, with two five-year option periods. The result is the recognition of a right of use asset and lease liability of $14.5M on the Group’s consolidated balance sheet. Other than this item and as noted in this report, the Directors are not aware of any matter or circumstance which has arisen since 30 June 2023 that has significantly affected or may significantly affect the operations of the Group in subsequent financial years, the results of those operations, or the state of affairs of the Group in future financial years. Likely Developments and Expected Results of Operations Midway will continue to pursue further growth opportunities through: • securing additional supply to meet expected unfulfilled demand from existing and potential customers, including through strategic supply arrangements with large plantation managers and collaboration with other interested parties; • proactively seeking new opportunities to utilise spare capacity in at least four processing and export facilities utilised by Midway; • continuing to evaluate potential adjacent growth opportunities, particularly in three fields of carbon emissions offsets and carbon abatement; and • exploring complementary business opportunities which utilise our marketing, plantation management, processing and supply chain management skills. Environmental Regulation • The Chief Executive Officer reports to the Board on any environmental and regulatory issues at each Directors’ meeting, if required. During the year, no significant incidents occurred. Greenhouse Gas and Energy Data Reporting Requirements • The Company is not subject to the reporting requirements of either the Energy Efficiency Opportunities Act 2006 or the National Greenhouse and Energy Reporting Act 2007. Share Option Plan • The Company has adopted a Long-term Incentive Plan (LTIP) under which it has issued 953,519 shares to senior executives in the current financial year. The rights and options vest over a performance period ending 30 June 2025, subject to satisfaction of vesting conditions such as a comparator measure of total shareholder return (TSR) benchmarked against the top ASX 300 companies. • Refer to the Remuneration Report for details on the rights issued to key management personnel (KMP). Indemnification and Insurance of Directors and Officers Indemnification The Company has indemnified the Directors and officeholders of the Company for costs incurred, in their capacity as a Director or officeholder, for which they may be held personally liable, except where there is a lack of good faith. 26 ANNUAL REPORT 2023MIDWAY LIMITED Insurance of Directors and Officers During the year the Company paid a premium for a Directors and Officers Liability Insurance Policy. This policy covers Directors and Officers of the Company and the Company. In accordance with normal commercial practices under the terms of the insurance contracts, the nature of the liabilities insured against and the amount of the premiums are confidential. Insurance of Auditor No payment has been made to indemnify the Company’s auditor during or since the end of the financial year. Proceedings on Behalf of the Company There are no legal proceedings currently outstanding. Non-Audit Services The Company may decide to employ the auditor on assignments additional to its statutory audit duties where the auditor’s expertise and experience with the Company are important. The Board of Directors has considered the position and, in accordance with the advice received from the Audit and Risk Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: • all non-audit services have been reviewed by the Audit and Risk Committee to ensure they do not impact the impartiality and objectivity of the auditor; and • none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Group, acting as an advocate for the Group or jointly sharing risks and rewards. KPMG Australia Audit and assurance services Statutory audit fees Other services – Non-assurance services – other advisory services 2023 $ 2022 $ 224,675 228,000 21,228 88,717 Auditor’s Independence Declaration A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 in relation to the audit for the financial year is set out on page 28 and forms part of this report. Rounding Off The Group is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191 and in accordance with that Instrument, amounts in the consolidated financial statements and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated. Signed in accordance with a resolution of the Directors. Gordon Davis Chairman Melbourne, 24 August 2023 27 ANNUAL REPORT 2023MIDWAY LIMITED Auditor’s Independence Declaration 28 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Midway Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Midway Limited for the financial year ended 30 June 2023 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii. no contraventions of any applicable code of professional conduct in relation to the audit. KPMG Simon Dubois Partner Melbourne 24 August 2023 ANNUAL REPORT 2023MIDWAY LIMITED Remuneration Report (Audited) Introduction The Directors are pleased to present the FY23 Remuneration Report, which forms part of the Midway Limited (Company) Directors’ Report. It outlines the Board’s remuneration philosophy and remuneration information for the Company’s Non-Executive Directors, Executive Directors and other KMP in accordance with the requirements of the Corporations Act 2001 and its regulations. For the purposes of this report, KMP is defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, including any Director (whether executive or otherwise) of the Company. Executive remuneration represents remuneration for the Executive KMPs and other members of senior management. This report discloses remuneration as it relates to Executive KMP’s; however, the framework is applied more broadly to other members of senior management. The information provided in this Remuneration Report, which forms part of the Directors’ Report, has been audited as required by section 308(3C) of the Corporations Act 2001. Key Management Personnel Disclosed in this Report Name Directors Gordon Davis Kellie Benda Nils Gunnersen Tom Gunnersen Leanne Heywood Gregory McCormack Thomas Keene Executives Anthony McKenna Anthony Price Michael McKenzie Ashley Merrett Position Held Employment Status Non-Executive Chairman Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Non-Executive Director Managing Director and CEO Managing Director and CEO Chief Financial Officer Chief Financial Officer Appointed 5 October 2022 Retired 28 November 2022 Retired 28 November 2022 Retired 24 January 2022 Retired 1 July 2022 Principles Used to Determine Nature and Amount of Remuneration The performance of the Group depends upon the quality and performance of its Directors and executives. To this end, the Company embodies the following principles in its remuneration framework: • Provide competitive rewards to attract high-performing executives; • Link executive rewards to shareholder value; • Have a portion of executive remuneration variable, dependent upon meeting performance benchmarks; and • Establish appropriate and demanding performance benchmarks in relation to variable executive remuneration. This section of the Remuneration Report outlines the Company’s remuneration framework and philosophy, which is designed to attract, motivate and retain highly skilled Directors and executives. 29 ANNUAL REPORT 2023MIDWAY LIMITED Remuneration Report (Audited) continued People and Remuneration Committee The Board has established a People and Remuneration Committee to assist the Board in reviewing and making recommendations to the Board in relation to the Company’s remuneration policy, and remuneration arrangements for the Directors and executives. The People and Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of high-quality, high-performing Directors and executives. The People and Remuneration Committee is comprised of Non-Executive Directors, the majority of whom are independent in accordance with the People and Remuneration Committee Charter. The Board considers that having a separate remuneration committee serves as an efficient and effective mechanism to bring the transparency, focus and independent judgement needed on remuneration decisions. The Board has also adopted a number of key policies to support the Company’s remuneration framework. The Company’s policies and the People and Remuneration Committee Charter, which sets out the functions and responsibilities of that committee, are available at www.midwaylimited.com.au. Remuneration Framework In accordance with best practice corporate governance standards, the Company’s remuneration policies and practices regarding the remuneration of Non-Executive Directors are separate and distinct from the remuneration of Executive Directors and other senior executives. These policies and practices appropriately reflect the different roles and responsibilities of Non-Executive Directors compared with Executive Directors and other senior executives of the Company. Use of Remuneration Consultants The People and Remuneration Committee may, from time to time, engage external remuneration consultants to provide it with advice, information on current market practices, and other matters to assist the committee in the performance of its duties. Non-Executive Director Remuneration Objective Fees and payments to Non-Executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain Directors of the highest calibre, whilst incurring a cost which is acceptable to shareholders. Framework Under the Company’s Constitution, the Non-Executive Directors as a whole may be paid or remunerated for their services a total amount or value not exceeding $1.2M per annum or such other maximum amount fixed by the Company in general meeting. An amount not exceeding the amount determined is then divided between the Non-Executive Directors as approved by the Board upon recommendation from the People and Remuneration Committee. Non-Executive Directors’ fees and payments are reviewed periodically by the People and Remuneration Committee. Directors may also be reimbursed for expenses properly incurred by the Directors in connection with the affairs of the Company including travel and other expenses in attending to the Company’s affairs. 30 ANNUAL REPORT 2023MIDWAY LIMITED Table 1.1 Non-Executive Director Fee Structure Non-Executive Director Chair Chair – Audit and Risk Committee Chair – People and Remuneration Committee Chair – Work, Health, Safety and Sustainability Committee Committee member Board Base Fee $ 90,000 180,000 – – – – Additional Fee $ – – 15,000 15,000 15,000 7,500 The aggregate remuneration of Non-Executive Directors for the year ended 30 June 2023 was $680,836. Executive Remuneration In determining the level and make-up of executive remuneration, the Remuneration and Nomination Committee uses a combination of business experience, comparisons with executive remuneration of comparable companies and comparative remuneration in the market and makes its recommendations to the Board. The executive remuneration and reward framework includes both fixed and ‘at risk’ reward components. ‘At risk’ reward includes short and long-term incentives which are based on performance outcomes. The structure has four components: • base pay and non-monetary benefits; • short-term performance incentives; • long-term share-based performance incentives; and • other remuneration such as superannuation and long service leave. From time to time the Remuneration and Nomination Committee may consider ‘one-off’ payments to executives as part of their remuneration, in relation to specific events. The combination of these comprises each executive’s total remuneration. Fixed Remuneration Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the People and Remuneration Committee, based on individual and business unit performance, the overall performance of the Company, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices. The level of fixed remuneration is set so as to provide a base level of remuneration which is both appropriate to the position and is competitive in the market. Variable Remuneration Objective The objective of the variable remuneration component of executive remuneration, comprising short-term performance incentives and share-based performance incentives, is to link the achievement of the Company’s targets with the remuneration received by the executives charged with meeting those targets, and to reward executives in a manner which is consistent with the interests of shareholders. The total potential variable component is set at a level so as to provide sufficient incentive to the executive to achieve the targets and such that the cost to the Company is reasonable in the circumstances. 31 ANNUAL REPORT 2023MIDWAY LIMITED Remuneration Report (Audited) continued 2023 Executive Remuneration Structure Actual variable incentives granted to each executive depend on the extent to which specific targets set at the beginning of the financial year are met. The targets consist of a number of key performance indicators (KPIs) covering both financial and non-financial measures of performance. Typically included are measures such as contribution to operational profit, occupational health and safety and risk management, leadership and team contribution. The Company has predetermined benchmarks which must be met in order to trigger payments. The type of variable incentives and performance against KPIs of the Company and the individual performance of each executive are taken into account when determining the amount, if any, of the variable incentive that is to be awarded to each executive. Any variable incentives to be awarded to executives across the Company are subject to the approval of the Board. Total remuneration for the CEO and CFO includes a combination of fixed remuneration, short-term incentives and long-term incentives in the form of issued performance rights. In assessing whether the KPIs for each variable component have been met, the Company measures actual results against internal targets. A summary of contractual arrangements is provided below: Chief Executive Officer Chief Financial Officer 1. Includes superannuation and car allowances. The remuneration mix is outlined below: Base Salary1 $ 561,290 Maximum STI $ 167,888 Eligibility LTIP Termination Notice 6 months Restraint of Trade Provisions 290,214 95,700 3 months 59% 41% 72% 28% CEO CFO Fixed At risk Short Term Incentive Plan The Company’s executive KMP and other members of senior management are eligible to participate in the Company’s short-term incentive plan (STI Plan). Participants in the STI Plan have a maximum cash payment which is set as a percentage of their total fixed remuneration (TFR). Actual short-term incentive payments in any given year are dependent on the achievement of financial and non-financial criteria as approved by the Board. No incentive payment is payable if the threshold performance target is not met. 32 ANNUAL REPORT 2023MIDWAY LIMITED FY23 Short-term Incentives In FY23, an offer to participate in the short-term incentive (STI) plan was made to the Company’s executives including Executive KMP and other senior managers. Under the offer, employees will receive a STI payment calculated as a percentage of their TFR conditional on achieving performance measures including: • board-approved underlying earnings before interest, tax, depreciation and amortisation (EBITDA) Actual vs Budget measured annually; • lost Time Injury Frequency Rate (LTIFR) Actual vs Previous Year measured annually; and • agreed and documented objectives specific to each executive’s position measured annually. EBITDA represents how the Company monitors its performance against budget, including achieving its strategic goals. Achieving the targeted EBITDA has a linkage to shareholder returns and therefore is an appropriate measure to incentivise executive performance. LTIFR is an appropriate operational performance target as it is critical to the Company on two fronts: (1) It ensures the occupational health and safety measures implemented by the Company are first class to ensure employees are appropriately protected from any hazards in the workplace, and (2) by having limited downtime due to workplace injuries ensures maximum operational time of the Company’s equipment. A summary of the key terms of the Company’s FY23 STI Plan is set out as follows: Term Objective Description To reward participants for achieving targets linked to the Company’s business strategy Participants All Executive Key Management Personnel and selected senior management members Performance period Financial year ended 30 June 2023 STI is assessed against both financial and non-financial measures with the following weighting: Performance measures Measure EBITDA LTIFR Individual performance measures Payment Upon final endorsement by Board Weighting CEO 40% Weighting CFO 40% 20% 40% 20% 40% A sliding scale exists for each KPI target in relation to % of STI paid as set out below: EBITDA CEO EBITDA CFO LTIFR CEO LTIFR CFO % of Target KPI (Maximum STI) 100% (max. $67,155) 100% (max. $38,280) 150% (max. $50,366) 150% (max. $28,710) % of Target KPI (Minimum STI) 100%1 100%1 100%1 100%1 1. No incentive will be paid if the minimum % of the KPI target is not met. FY23 Short-term Incentive Outcomes The following is a breakdown of the short-term incentive outcomes achieved by key management personnel at the end of the 2023 financial year: KMP CEO CFO Maximum STI 167,888 95,700 % of Maximum STI Achieved – – 33 ANNUAL REPORT 2023MIDWAY LIMITED Remuneration Report (Audited) continued 2023 Executive Remuneration continued Long-term Incentive Plan Objective The Company has established and adopted a Long-term Incentive Plan (LTIP), which is intended to assist in the motivation, retention and reward of certain executives. The LTIP is designed to align the interests of executives more closely with the interests of shareholders by providing an opportunity for senior executives to receive an equity interest in Midway through the granting of awards including shares, options and performance rights, subject to satisfaction of certain conditions. In FY23, the Group issued performance rights to the Chief Executive Officer and Senior Executive Team. In total, 953,519 rights were issued based on the conditions set out in section (a). Structure The key terms of the LTIP are summarised below. Term Administration Description The Board has the discretion to determine which executive Directors and employees of Midway or any related company are eligible to participate in the LTIP (Eligible Employees). Eligibility The awards (Awards) that may be issued under the LTIP currently include: • shares; • options; and • performance rights. Awards Vesting conditions Vesting date Shares as an Award, or on vesting of an Award Dividend and voting entitlements Change of control The Board may determine that the Awards will be subject to performance, service or other conditions (Vesting conditions) and, if so, will specify those Vesting Conditions in the offer. Vesting Conditions may include conditions relating to continuous employment, performance of the participant or the occurrence of particular events. Subject to the satisfaction of any applicable Vesting Conditions, Awards held by a participant will vest on the date specified in the terms of the offer for those Awards, which are to be determined by the Board at the time of offer and advised to the participant in individual offer documents. Shares allocated on vesting of an Award carry the same rights and entitlements as other issued Shares, including dividend and voting rights. Depending on the terms issued, the Shares may be subject to disposal and/or forfeiture restrictions, which means that they may not be disposed of or dealt with for a period of time and/or may be forfeited if certain further conditions are not satisfied. Awards, other than Shares, are not entitled to dividend or voting rights. Upon the occurrence of a change of control of Midway, the Board may at its discretion and subject to such terms and conditions as it determines, resolve that the Vesting Conditions applicable to any unvested Awards be waived. Restrictions Without the prior approval of the Board or as expressly provided in the LTIP: • options and performance rights may not be disposed of, transferred or encumbered; and • unvested Shares may not be disposed of, dealt with or encumbered or transferred in any way whatsoever until the first to occur of the following: (i) the satisfaction of the applicable Vesting Conditions; and (ii) the time when the Participant is no longer employed by the Company or a related Company. At the direction of the Board, the Company or a related company may offer a participant a loan for the purpose of acquiring any Shares offered to the participant under the LTIP. To the extent permitted by the Listing Rules, Midway may amend all or any of the provisions of the LTIP rules. The LTIP also contains customary and usual terms having regard to Australian law for dealing with the administration, variation, suspension and termination of the LTIP. Loans Amendments Other terms 34 ANNUAL REPORT 2023MIDWAY LIMITED 2023 Long-term Incentives The LTIP offered to Midway’s Executive KMP and other senior executives is summarised below: (a) Performance Rights In FY23, the Board granted the Chief Executive Officer and members of the Senior Executive Team 953,519 performance rights, subject to Vesting Conditions (see below). Following satisfaction of the vesting conditions the rights will automatically vest and the underlying shares will be issued. The performance period is until 30 June 2025. Term Eligibility Description Chief Executive Officer, Chief Financial Officer and members of the Senior Executive Team. Consideration for grant Nil. Instrument 2023 plan: Performance rights issued on 9 December 2022 and 13 April 2023. Number of rights granted Additional cash settlement performance rights to CEO 2022 plan: Performance rights issued on 1 December 2021 and 24 January 2022 (CEO only) respectively. 2023 plan: CEO 349,940; CFO 132,950; other Senior Executives 470,629. 2022 plan: CEO 89,227; CFO nil; other Senior Executives 471,659. Due to an error in the 2022 Notice of Annual General Meeting, it may have been unclear whether shareholders approved 489,916 performance rights or the 349,940 performance rights issued and shown above. Both numbers appeared in the notice, but the intended number of performance rights was 489,916. To correct the situation, the Board approved a cash settlement equivalent to 489,916-349,940 = 139,976 performance rights on 11 January 2023. A cash amount equivalent to the fair value of 139,976 performance rights (or a proportionate number) will be paid to the CEO at around the same time that any of the 349,940 performance rights vest. Service conditions Participant must maintain continuous employment over the performance period. Performance period Performance measure 2023 plan: 1 July 2022 to 30 June 2025 The percentage of performance rights that will vest will depend on Midway’s total shareholder return (TSR) over the performance period, relative to the comparator Company (companies in the S&P/ASX 300 Index excluding mining and energy companies). Performance rights will only vest on the following conditions: 2022 plan: 1 July 2021 to 30 June 2024 Entitlement Restrictions • less than median of the comparator company, no performance rights will vest; • at median of the comparator company, 50% of the performance rights will vest; • between median and the 75th percentile of the comparator company, a straight-line pro rata vesting between 50% and 100% of the performance rights will occur; and • greater than 75th percentile of the comparator company, 100% of the performance rights will vest. Each performance right entitles the participant, on vesting of the performance right, to receive (at the discretion of the Board, other than as provided in the Plan Rules) by issue or transfer, one fully paid ordinary share in the capital of the Company (Share). Performance rights are subject to the restrictions set out in the Plan Rules. In particular the participants must not: • dispose of any performance rights without the prior consent of the Board or otherwise in connections with the Plan Rules; or • enter into any arrangement for the purpose of hedging, or otherwise affecting the participants economic exposure to the Performance Rights. Fair value at grant date1 2023 plan: Rights issued 9 December 2022 ($0.65 cents); Rights issued 13 April 2023 ($0.54 cents). 2022 plan: Rights issued 1 December 2021 ($0.89 cents); Rights issued 24 January 2022 ($0.74 cents. 1. Represents the fair value as calculated using a Monte Carlo Simulation model which incorporates the TSR performance conditions. 35 ANNUAL REPORT 2023MIDWAY LIMITED Remuneration Report (Audited) continued 2023 Long Term Incentives continued (b) FY21 LTI Plan The performance period ended on 30 June 2023 was subject to the performance measures outlined in the LTI Plan described in section (a) performance rights. Midway’s total shareholder return over the performance period between 1 July 2020 and 30 June 2023 was less than median of the comparator company’s and as a result 344,944 performance rights issues will not vest. Relationships Between Company Remuneration Policy and Company Performance The relationship between remuneration policy and Company performance is assessed for the current financial year and the prior four comparative periods. Measures set out below are not necessarily consistent with the measures used in determining variable amounts of remuneration to be awarded to KMP’s. As a consequence, there may not always be a direct correlation between the statutory key performance measures and the variable remuneration awarded. Key Performance Indicator Net profit/(loss) after tax EBITDA Underlying EBITDA-S2 Dividend paid (cents per share) 1. Consolidated figures shown. 2. Underlying figures have not been audited. FY231 Actual $’000 (2,379) 6,543 2,855 – FY221 Actual $’000 (12,878) 3,533 (1,762) – FY21 Actual $’000 (5,178) 10,933 14,632 – FY20 Actual $’000 (11,733) 752 13,836 – FY19 Actual $’000 26,158 50,669 37,075 18 Other non-financial measures such as Lost Time Injury Frequency Rate (LTIFR) Actual vs Previous Year are also taken into account when assessing the variable remuneration awarded. 36 ANNUAL REPORT 2023MIDWAY LIMITED Key Management Personnel Remuneration The statutory remuneration disclosures for the year ended 30 June 2023 are detailed below and are prepared in accordance with Australian Accounting Standards (AASBs). Short-term Benefits Post Employment Long-term Benefits Share-based Payments Total Salary and Fees Non- monetary1 STI Super- annuation Other2 Directors Gordon Davis Kellie Benda3 Nils Gunnersen Tom Gunnersen 2023 2022 2023 2022 2023 2022 2023 2022 Leanne Heywood 2023 2022 Gregory McCormack4 2023 2022 Thomas Keene4 Current Executives Anthony McKenna5 Michael McKenzie6 Former Executives Anthony Price7 Ashley Merrett6 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 180,074 142,691 72,350 – 99,091 107,984 95,058 107,984 111,396 123,058 36,185 183,022 38,968 107,984 533,684 229,481 262,608 54,837 – 287,094 – 230,585 – – – – – – – – – – – – – – – 18,000 – 10,000 – – – – – – – – – – – – – – – – – – – – – – – 31,045 – 17,896 1. Relates to vehicle allowance paid by the Group. 2. Includes the movement in annual leave and long service leave provisions. 3. Appointed 5 October 2022. 4. Retired 28 November 2022. 5. Anthony McKenna was appointed as Managing Director and CEO from 24 January 2022. 6. Ashley Merrett retired on 1 July 2022. Michael McKenzie was appointed as CFO on 1 July 2022. 7. Anthony Price was Managing Director and CEO until 24 January 2022. – – 7,623 – 10,332 10,838 10,019 10,838 11,741 12,345 3,851 18,367 4,148 10,838 27,606 12,058 27,606 5,775 – 16,192 – 21,410 – – – – – – – – – – – – – – – – – – – – – – – – – – – – 14,915 6,902 7,215 6,566 – – – 11,255 224,610 75,348 18,732 – – 41,194 – 45,334 180,074 142,691 79,973 – 109,423 118,822 105,077 118,822 123,137 135,406 40,036 201,389 43,116 118,822 800,815 341,789 316,161 77,178 – 375,525 – 326,480 37 ANNUAL REPORT 2023MIDWAY LIMITED Remuneration Report (Audited) continued Key Management Personnel Remuneration continued Equity Instruments KMP Gordon Davis Kellie Benda Nils Gunnersen Tom Gunnersen Leanne Heywood Anthony McKenna Michael McKenzie Gregory McCormack1 Thomas Keene1 1. Held at retirement date. Held at 1 July 2022 90,000 Shares Acquired – Shares Sold – Other Changes – – 9,829 – 5,000 – – 9,604,599 229,378 – – – – – – – – – – – – – – – – – – – – – – (9,604,599) (229,378) Held at 30 June 2023 90,000 – 9,829 – 5,000 – – – – Details of Equity Incentives Affecting Current and Future Remuneration The table below outlines each KMP’s unvested performance rights at the end of the reporting period. Details of vesting profiles of the performance rights held by each KMP are detailed below: Anthony McKenna Anthony McKenna Anthony McKenna Anthony McKenna Michael McKenzie Instrument Performance Rights Options Options Performance Rights Performance Rights Number Grant Date 89,227 24/01/2022 360,718 24/01/2022 360,718 24/01/2022 349,940 09/12/2022 132,950 09/12/2022 1. Options vested and remain uncalled at 30 June 2023. % Vested in Year 0% 100%1 0% 0% 0% % Forfeited in Year – Financial Year in Which Grant Vests 2024 – – – – 2023 2024 2025 2025 Other Transactions with KMP There are no other transactions between any of the KMP with any of the companies which are related to or provide services to the Company unless disclosed in this Remuneration Report. 38 ANNUAL REPORT 2023MIDWAY LIMITED Financial Report Introduction This is the Financial Report of Midway Limited (the Company) and its subsidiaries (the Group). The Company is a for-profit entity for the purposes of preparing a Financial Report. Accounting policies and critical accounting judgements applied to the preparation of the Financial Report are included throughout the Financial Report with the related accounting balance or financial statement matters to allow them to be easily understood by the users of this report. Contents Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Section 1: Our Performance 1.1 Segment Reporting 1.2 Individually Significant Items 1.3 Discontinued Operation 1.4 Income Tax 1.5 Earnings Per Share 1.6 Dividends 1.7 Impairment of Non-Financial Assets Section 2: Our Asset Base 2.1 Property, Plant and Equipment 2.2 Asset Held-For-Sale 2.3 Biological Assets 2.4 Commitments 2.5 Leases 2.6 Working Capital 2.7 Intangible Assets Section 3: Funding Structures 3.1 Net Debt 3.2 Financial Risk Management 3.3 Contributed Equity Section 4: Other Disclosures 4.1 Subsidiaries 4.2 Interest in Joint Ventures 4.3 Midway Limited – Parent Entity 4.4 Share-based Payments 4.5 Related Parties 4.6 Contingent Liabilities 4.7 Remuneration of Auditors 4.8 Other Income 4.9 Deed of Cross Guarantee 4.10 Subsequent Events 4.11 Basis of Preparation Directors’ Declaration Independent Auditor’s Report 39 40 41 42 43 44 44 44 46 47 48 49 50 50 51 51 53 54 56 57 58 59 60 60 62 67 69 69 69 71 71 73 73 74 74 75 77 77 79 80 ANNUAL REPORT 2023MIDWAY LIMITED Consolidated Statement of Comprehensive Income For the year ended 30 June Continuing operations Revenue and other income Sales revenue Other income Less: expenses Changes in inventories of finished goods and work in progress Materials, consumables and other procurement expenses Depreciation and amortisation expense Employee benefits expense Biological assets net fair value increment/(decrease) Plantation management expenses Freight and shipping expense Repairs and maintenance expense Impairment loss Other expenses Finance expense Finance income Net finance expense Share of net profit/(loss) from equity accounted investments Profit/(loss) before income tax expense Income tax expense benefit/(expense) Profit/(loss) for the period from continuing operations Discontinued operations Profit/(loss) for the period from discontinued operation Profit/(loss) for the period Items that will not be reclassified to profit and loss Revaluation of land fair value adjustment, net of tax Items that may be reclassified subsequently to profit and loss Cash flow hedges effective portion of changes in fair value, net of tax Foreign operations – foreign currency translation differences Equity accounted investees – share of OCI Other comprehensive income for the period Total comprehensive income for the period Profit/(loss) is attributable to: – Owners of Midway Limited – Non-controlling interests Total comprehensive income is attributable to: – Owners of Midway Limited – Non-controlling interests Earnings per share for profit attributable to equity holders: Basic (loss)/earnings per share Diluted (loss)/earnings per share Earnings per share for profit attributable to equity holders – continuing operations: Basic (loss)/earnings per share Diluted (loss)/earnings per share Notes 1.1 4.8 2.1|2.7 1.2|1.7 3.1 4.2 1.4 2023 $’000 2022* $’000 187,493 18,337 205,830 193,597 4,129 197,726 14,156 (137,133) (6,041) (20,561) 151 (3,995) (24,897) (9,648) (8,192) (11,551) (207,711) (6,470) 1,716 (4,754) 2,386 (4,249) 2,061 (2,188) 5,379 (130,602) (6,803) (15,926) 6,490 (80) (40,945) (5,334) (98) (10,548) (198,467) (13,731) (8) (13,739) 1,036 (13,444) 4,375 (9,069) (191) (2,379) (3,809) (12,878) 2.1 – 9,832 4,492 – – 4,492 2,113 (2,803) 424 (2,379) 1,689 424 2,113 ($0.03) ($0.03) ($0.03) ($0.03) (4,749) – 95 5,178 (7,700) (12,973) 95 (12,878) (7,801) 101 (7,700) ($0.15) ($0.15) ($0.10) ($0.10) The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes. * The comparative information has been re-presented due to a discontinued operation. 40 ANNUAL REPORT 2023MIDWAY LIMITED Consolidated Balance Sheet As at 30 June Current assets Cash and cash equivalents Receivables Inventories Biological assets Other assets Assets held for sale Total current assets Non-current assets Biological assets Other receivables Investments accounted for using the equity method Intangible assets Loan receivables Property, plant and equipment Total non-current assets Total assets Current liabilities Trade and other payables Current tax payable Borrowings Strategy financial liability Derivative financial liability Provisions Total current liabilities Non current liabilities Borrowings Strategy financial liability Provisions Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Contributed equity Share capital Reserves Accumulated losses Notes 3.1 2.6 2.6 2.3 2.2 2.3 4.2 2.7 2.1 2.6 3.1 3.1 1.4 3.3 3.3 Equity attributable to owners of Midway Limited Equity attributable to non-controlling interests Total equity The above consolidated balance sheet should be read in conjunction with the accompanying notes. 41 2023 $’000 5,606 27,567 34,996 1,744 5,234 – 2022 $’000 2,969 10,774 20,772 2,697 8,583 314 75,147 46,109 6,730 33,459 13,405 1,971 17 51,870 107,452 182,599 16,707 1,246 3,567 9,151 2,523 4,451 45,238 7,395 11,019 1,971 604 144,839 211,066 257,175 20,653 1,698 21,029 6,908 8,940 3,702 37,645 62,930 7,947 7,146 139 2,745 17,977 55,622 126,977 64,888 91,926 (31,544) 125,270 1,707 25,862 32,717 151 10,717 69,447 132,377 124,798 64,888 87,368 (28,741) 123,515 1,283 126,977 124,798 ANNUAL REPORT 2023MIDWAY LIMITED Consolidated Statement of Changes in Equity For the year ended 30 June $’000 Balance as at 1 July 2021 Profit/(loss) for the year Revaluation of land, net of tax Cash flow hedges effective portion of changes in fair value, net of tax Foreign operations – foreign currency translation differences Total comprehensive income for the year Other transactions: Issuance of ordinary shares, net of transaction costs Issuance of performance rights Share-based payments expense Transfer from asset revaluation reserve Transfer from profit reserve Transactions with owners in their capacity as owners: Dividends Total other transactions Balance as at 30 June 2022 Total Equity 132,241 (12,878) 9,832 (4,654) – Share Capital 64,888 Reserves 81,939 Retained Earnings (15,768) Non- controlling Interests 1,182 – – – – – – – – – – – – – (12,973) 9,832 (4,660) – – – – 95 – 6 – 5,172 (12,973) 101 (7,700) – – 257 (11,238) 11,238 – 257 – – – – – – – – – – – – – – – – 257 (11,238) 11,238 – 257 64,888 87,368 (28,741) 1,283 124,798 Balance as at 1 July 2022 64,888 87,368 (28,741) 1,283 124,798 Profit/(loss) for the year Revaluation of land, net of tax Cash flow hedges effective portion of changes in fair value, net of tax Foreign operations – foreign currency translation differences Total comprehensive income for the year Other transactions: Issuance of ordinary shares, net of transaction costs Issuance of performance rights Share-based payments expense Transfer from asset revaluation reserve Transfers to profits reserve Transactions with owners in their capacity as owners: Dividends Total other transactions Balance as at 30 June 2023 – – – – – – – – – – – – – – 4,492 – 4,492 – – 66 37,337 (37,337) – 66 (2,803) 424 (2,379) – – – – – – (2,803) 424 – – – – – – – – – – – – – – – 4,492 – 2,113 – – 66 37,337 (37,337) – 66 64,888 91,926 (31,544) 1,707 126,977 The above Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes. 42 ANNUAL REPORT 2023MIDWAY LIMITED Consolidated Statement of Cash Flows For the year ended 30 June Cash flow from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest paid Income tax (paid)/received Net cash flow – operating activities Cash flow from investing activities Payment for property, plant and equipment Proceeds from sale of fixed assets Payment for non-current biological assets Acquisition of equity accounted investees Income tax paid Cash flows from discontinued operation Net cash flow – investing activities Cash flow from financing activities Repayment of Strategy financial liability Principal repayment of lease liabilities Proceeds from bank borrowings Repayment of bank borrowings Proceeds from loan receivable Investment in term deposit Net cash flow – financing activities Reconciliation of cash Cash at beginning of the financial period Net increase/(decrease) in cash held Cash at end of financial period (net of overdrafts) Notes 2023 $’000 2022* $’000 200,034 199,772 (210,507) (201,901) 3.1 493 (2,025) (252) (12,257) (4,104) 97,776 (6,094) – (7,958) 374 79,994 (27,395) (4,068) 2,415 (36,289) 237 – – (1,944) 846 (3,227) (8,618) 19,939 (1,922) 448 – 197 10,044 (11,833) (4,660) 10,041 (10,975) 2,623 (2,000) (65,100) (16,804) 2,969 2,637 5,606 12,956 (9,987) 2,969 The above Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes. * The comparative information has been re-presented due to a discontinued operation. 43 ANNUAL REPORT 2023MIDWAY LIMITED Notes to the Consolidated Financial Statements Section 1: Our Performance This section provides an insight into the performance of Midway and its subsidiaries including: • The woodfibre segment performance improved in FY23, driven mainly by favourable pricing negotiations with customers for calendar year 2023, and also due to the Group’s legacy unfavourable hedging arrangements being utilised. Offsetting this was continued supply cost increase and the impacts of global market volatility in the second half, which adversely impacted demand. • The Group achieved an underlying consolidated EBITDA from continuing operations of $2.9M (2022: -$1.8M). • The Board has elected to not declare a dividend in light of the current market uncertainty. 1.1 Segment Reporting (a) Description of Segments The Group reports segment information based on the internal reporting used by management for making decisions and assessing performance. The operating segments are reported in a manner consistent with internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, is the Chief Executive Officer. Reportable Segments Woodfibre Forestry Logistics (discontinued operation; refer Note 1.3) Products/Services Includes primary operations whereby the Group purchases and sells both own and third party wood. SWF is also proportionally consolidated at 51% for segment reporting, which reflects how management views and makes decisions of its operations. Forestry logistics provides support services to third parties engaged in growing woodfibre including harvest and haulage. Forestry logistics also provides harvesting, processing and delivery service to BioGrowth Partners (100% owned by Midway Ltd), which supplies biomass woodchips and sawdust to domestic customers in WA. Plantation and Carbon Management Plantation management is the provision of silviculture services including on Group and third party owned trees, including carbon-related services. The segment also holds any Group owned plantation land and trees. Ancillary Represents any one-off, transactional and other non-recurring costs The Group evaluates the performance of its operating segments based on net sales (net of insurance and freight costs). Net sales for geographic segments are generally based on the location of customers. Earnings before interest, tax, depreciation and amortisation (EBITDA) for each segment includes net sales to third parties, related cost of sales and operating expenses directly attributable to the segment. EBITDA for each segment excludes other income and expense and certain expenses managed outside the operating segments. Key adjustment items relate to the gross up of revenue and cost of goods sold transactions relating to chip trading activities performed within the woodfibre segment. Management accounts are prepared on a segment basis with 51% share of SWF joint venture included in Woodfibre processing. For statutory accounts SWF is equity accounted with revenue and expenses of SWF eliminated. 44 ANNUAL REPORT 2023MIDWAY LIMITED (b) Segment Information Provided to Senior Management 2023 ($’000) Sales revenue Inter segment sales Other income Total revenue and other income Share of equity accounted profits EBITDA – S1 Significant items Fair value gain/(loss) on biological assets EBITDA Depreciation and amortisation EBIT Net finance expense Net profit/(loss) before tax Income tax benefit/(expense) Net profit/(loss) after tax Segment assets Equity accounted investees Capital expenditure Segment liabilities 2022 ($’000) Sales revenue Inter segment sales Other income Ancillary Eliminations Continuing Operations Forestry Logistics* (44,407) 187,493 (3,225) 12,104 – 18,337 315 – 889 (35,528) 205,830 1,204 207,034 Total 187,808 – 19,226 Woodfibre 225,182 – 5,519 Plantation Management 6,718 3,225 714 230,701 10,657 – 8,237 (8,098) – 139 (6,207) (6,068) (2,295) (8,363) 2,782 (5,581) – (1,625) 12,465 151 10,991 (1,161) 9,830 (2,591) 7,239 (2,172) 5,067 – – – – – (60) (830) – (890) – (890) – (890) 18 (872) 2,386 (3,694) – – (3,694) 1,327 (2,367) 132 (2,235) 1,433 (802) 2,386 2,858 3,537 151 6,546 (6,041) 505 (4,754) (4,249) 2,061 (2,188) 132,179 13,405 9,093 67,768 6,259 (24,495) 181,711 – 215 – – – (316) 13,405 8,992 (35,646) (27,958) (3,787) 23,816 (43,575) (12,047) (55,622) Woodfibre 186,185 Plantation Management 2 Ancillary Eliminations 7,410 – Continuing Operations 193,597 Forestry Logistics* 4,883 – 4,363 Total revenue and other income 190,548 Share of equity accounted profits EBITDA – S1 Significant items Fair value gain/(loss) on biological assets EBITDA Depreciation and amortisation EBIT Net finance expense Net profit/(loss) before tax Income tax benefit/(expense) Net profit/(loss) after tax – 6,080 (98) – 5,982 (7,170) (1,188) (2,389) (3,577) 1,819 (1,758) 10,632 2,008 12,642 – (2,406) 1,943 6,490 6,027 (1,544) 4,483 (11,510) (7,027) 2,091 (4,936) – – – – (52) (2,326) – (2,378) (17) (2,395) – (2,395) 20 (2,375) (10,632) (2,242) (5,464) 1,036 (2,533) – – (2,533) 1,929 (604) 160 (444) 444 – – 4,129 197,726 1,036 1,089 (481) 6,490 7,098 (6,802) 296 (13,739) (13,443) 4,374 (9,069) – (3) – – (3) (277) (280) (12) (292) 101 (191) 888 – 177 2,386 2,855 3,537 151 6,543 (6,318) 225 (4,766) (4,541) 2,162 (2,379) 182,599 13,405 9,169 Total 198,480 – 4,789 – 660 5,543 203,269 – (2,851) (714) – (3,565) (1,742) (5,307) (115) (5,422) 1,613 (3,809) 1,036 (1,762) (1,195) 6,490 3,533 (8,544) (5,011) (13,854) (18,865) 5,987 (12,878) Segment assets Equity accounted investees Capital expenditure Segment liabilities 171,685 151,069 6,254 (74,697) 254,311 2,864 257,175 11,019 (10,254) (76,701) – (541) – – – 428 11,019 (10,367) – (1,870) 11,019 (12,237) (84,427) (3,741) 46,245 (118,624) (13,753) (132,377) 1. EBITDA – S: Earnings before interest, tax, depreciation and amortisation, significant items and net fair value gain/(loss) on biological assets. * Discontinued; refer Note 1.3. 45 ANNUAL REPORT 2023MIDWAY LIMITED Section 1: Our Performance continued 1.1 Segment Reporting continued (c) Revenue by Geographic Region The presentation of geographical revenue is based on the geographical location of customers. Total 8,813 117,118 58,420 3,457 Total 7,089 138,191 53,200 – 2023 Revenue by Geographic Region Woodfibre Australia 1,780 Plantation Management 9,943 China Japan South-East Asia 132,664 87,281 3,457 – – – 225,182 9,943 Ancillary Eliminations Continuing Operations Forestry Logistics* (3,225) (15,546) (28,861) – 8,498 117,118 58,420 3,457 315 – – – – – – – – (47,632) 187,493 315 187,808 2022 Revenue by Geographic Region Woodfibre 2,204 Australia Plantation Management 10,634 Ancillary Eliminations (10,632) – Continuing Operations 2,206 Forestry Logistics 4,883 China Japan South-East Asia * Discontinued; refer Note 1.3. 98,203 85,778 – – – – 186,185 10,634 – – – – 39,988 138,191 (32,578) 53,200 – – – – – (3,222) 193,597 4,883 198,480 For the financial year ending 30 June 2023 there were four (2022: three) customers in China and Japan that individually made up 10% or above total sales for the Group. Policy Revenue Sales revenue is recognised on settlement of each performance obligation. Export woodfibre sales are generally on CIF or FOB shipping terms, with revenue recognised when last goods are loaded on board at the point when the performance obligation is settled under the shipping terms. All other sales are generally recognised as revenue at the time of delivery of the goods to the customer. The Group also arranges the insurance and freight for CIF vessels, which is deemed a separate performance obligation. The performance obligation is satisfied over time until the shipment arrives at the destination port. Therefore, the component of revenue relating to freight and insurance should also be recognised over time (i.e. as performance obligation settled). Revenue from the rendering of services is recognised over time as the performance obligations within each contract are settled. 1.2 Individually Significant Items Individually Significant Items Before Tax Profit on sale of assets (plantation land)1 Impairment loss on non-current assets Impairment loss on current assets Midway Logistics wind-down costs Insurance costs, net of recoveries2 Transactions costs3 Impact of individually significant items Notes 1.7 1.7 2023 $’000 12,465 (7,842) (350) – 93 (829) 3,537 2022 $’000 1,943 (98) – (714) – (2,326) (1,195) 1. The Group recognised a gain of $12.5M in relation to the disposal of the plantation estate. Refer to Note 2.3.(d) for details. 2. Costs related to insurance works, and reimbursements received from the Group’s insurers, are presented gross under the Consolidated Statement of Comprehensive Income. 3. Transaction costs of $2.3M were incurred in 2022 relating to the planned sale of the Victorian plantation estate, the sale being contingent upon approval from the Foreign Investment Review Board (FIRB). 46 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED 1.3 Discontinued Operation General In August 2022, the Forestry Logistics segment ceased operational activities because of the wind-down commenced in FY22. The Forestry Logistics segment was not previously classified as held-for-sale or as a discontinued operation. The comparative consolidated statement of comprehensive income has been represented to show the discontinued operation separately from continuing operations. Results of Discontinued Operation Total revenue and other income Elimination of intra-segment revenue Total external revenue and other income Expenses Elimination of expenses related to inter-segment sales External expenses Results from operating activities, before tax Income tax Results from operating activities, net of tax Gain on sale of discontinued operations Profit/(loss) from discontinued operations, net of tax Cash Flow From (and Used in) Discontinued Operation Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities 2023 $’000 1,333 (129) 1,204 (1,625) 129 (1,496) (292) 101 (191) – (191) 2023 $’000 (459) 1,951 (1,118) 374 2022 $’000 6,777 (1,234) 5,543 (12,199) 1,234 (10,965) (5,422) 1,613 (3,809) – (3,809) 2022 $’000 (3,234) (522) 3,953 197 Policy A discontinued operation is a component of the Group where the operations and cash flows can be clearly distinguished from the rest of the Group. It represents a separate major line of operations and is part of a single co-ordinated plan to dispose of a separate major line of operation or business. When an operation is classified as a discontinued operation, the comparative income statement and statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year. Such disposal groups are measured at the lower of their carrying amount and fair value less costs to sell. Once classified as held for sale, intangible assets and property, plant and equipment are no longer amortised or depreciated. 47 ANNUAL REPORT 2023MIDWAY LIMITED Section 1: Our Performance continued 1.4 Income Tax (a) Current Tax Reconciliation Current tax Deferred tax Over provision in prior years 2023 $’000 5,927 (7,984) (4) 2022 $’000 (5,238) (729) (20) (2,061) (5,987) (b) Prima Facie Tax Payable The prima facie tax payable on profit before income tax is reconciled to the income tax expense as follows: Prima facie income tax receivable on profit before income tax at 30.0% (2022: 30.0%) (1,275) (5,660) Add tax effect of: – Impairment on non-current assets (BioGrowth Partners) Less tax effect of: – Over provision for income tax in prior years – Share of (profits)/losses from joint ventures – Other Income tax expense/(benefit) attributable to profit (c) Deferred Tax Deferred tax assets Payables Biological assets Blackhole expenditure Provision for doubtful debts Hedge reserve Tax losses carried forward Other Deferred tax liabilities Biological assets Property, plant and equipment Net deferred tax liabilities (e) Deferred Income Tax (Revenue)/Expense Included in Income Tax Expense Comprises Decrease/(increase) in deferred tax assets (Decrease)/increase in deferred tax liabilities – (1,275) 30 (5,630) – (716) (70) (786) (20) (311) (26) (357) (2,061) (5,987) 918 – 222 2,353 757 7,847 105 664 1,432 788 – 2,682 5,934 – 12,202 11,500 1,323 13,624 14,947 2,745 (714) (7,270) (7,984) – 22,217 22,217 10,717 (465) (264) (729) (f) Deferred Income Tax Related to Items Charged or Credited Directly to Equity Increase in deferred tax liabilities 1,925 (3,514) 48 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED Policy Current income tax expense or benefit is the tax payable on the current period’s taxable income based on the applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. A balance sheet approach is adopted under which deferred tax assets and liabilities are recognised for temporary differences at the applicable tax rates when the assets are recovered or liabilities are settled. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. Tax Consolidation The parent entity Midway Limited and its subsidiaries have implemented the tax consolidation legislation and have formed a tax consolidated group from 1 July 2002. The parent entity and subsidiaries in the tax consolidated group have entered into a tax funding agreement such that each entity in the tax consolidated group recognises the assets, liabilities, expenses and revenues in relation to its own transactions, events and balances only. Key Estimates and Judgements From time to time the Group takes tax positions that require consideration, including an assessment of the recoverability of Deferred Tax Assets (DTA). The Group only recognises DTA to the extent it is probable they will be realised in the foreseeable future. 1.5 Earnings Per Share (a) Earnings Per Share From continuing operations attributable to ordinary shareholders of Midway Limited Earnings per share Diluted earnings per share* Total attributable to ordinary shareholders of Midway Limited Earnings per share Diluted earnings per share* 2023 2022 ($0.03) ($0.03) ($0.03) ($0.03) ($0.15) ($0.15) ($0.10) ($0.10) 2023 Number 2022 Number Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 87,336,222 87,336,222 Adjustments for calculation of diluted earnings per share: Performance rights1 – 87,336,222 87,336,222 – * Diluted earnings per share is basic earnings per share adjusted for the effects of all dilutive potential ordinary shares. 1. As at 30 June 2023, 1,089,171 performance rights and 721,436 options (2022: 1,180,911 performance rights and 721,436 options) were excluded from the diluted weighted average number of ordinary shares calculation because their effect would have been anti-dilutive. Basic earnings per share is calculated on the profit attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding. 49 ANNUAL REPORT 2023MIDWAY LIMITED Section 1: Our Performance continued 1.6 Dividends Fully franked at 30% (2022: 30%) 2023 $’000 – 2022 $’000 – The balance of the franking account at 30 June 2023 is $13,083,758 (2022: $5,125,895). 1.7 Impairment of Non-financial Assets Impairment tests for all assets are performed when there is an indicator of impairment, although goodwill is tested at each reporting date. If the carrying amount of the asset exceeds its recoverable amount, the asset is impaired, and an impairment loss is charged to the income statement. The Group’s cash generating units (CGUs) consist of individual business units at the lowest level at which cash inflows are made including: • Midway Geelong • Queensland Commodity Exports • Midway Tasmania • Plantation Management Partners • South West Fibre Key Assumptions and Estimates Key assumptions and estimates used in the impairment analysis consist of: Projected Cash Flows The recoverable amount of a CGU is based on value in use calculations that are based on detailed management prepared forecasts for five years through to FY28, unless the timing of tree crop rotation profiles justifies a longer period. As part of the prepared forecasts, management has considered ongoing global supply chain challenges on global markets, being an area of uncertainty, along with future potential impacts from climate change. Long-term Average Growth Rate A terminal growth rate of 2.2% has been used and only applied to CGUs whereby it is likely they will exceed into perpetuity and there is a reasonable chance of sourcing woodfibre in each catchment whereby a CGU resides. Discount Rate The Group used a pre-tax discount rate of between 11.5% and 13.3% for all CGUs (2022: 12.8% – 14.4%). Sensitivity Analysis The South West Fibre CGU is sensitive to variances in the post-tax discount rate used (8.43%) as part of the impairment modelling, which is an area of judgment. A reasonably possible increase in the discount rate used of 1.3% would result in a break-even result. Apart from the above items the Group believes any reasonable possible change in the key assumptions would not cause the carrying value of the CGUs to materially exceed their recoverable amount. Impairment of Plantation Management Partners Assets The Group has recognised an impairment expense of $7.8M relating to a provision raised on a long-term trade receivable. The impairment takes into account the current and prospective conditions in the woodfibre market. In addition an impairment expense of $0.4M was recognised in relation to a provision against slow-moving spare parts inventory. 50 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED Section 2: Our Asset Base This section provides an insight into the asset base the Group requires to operate a forestry business. • The Group sources wood supply primarily from third party plantation land, which is used to grow hardwood trees. • The Group did not record a change in fair value of its plantation land in FY23 (FY22: $10.3M before tax) due to the majority of the portfolio being disposed in the year (refer to Note 2.3(d) for details. • The Group holds $8.5M of biological assets for harvest of which $0.2M relates to seedlings, $4.6M is plantation hardwood and $3.7M of pine. • Plantation Land ($0.8M) and Biological Assets ($8.5M) are held on the balance sheet at fair value. 2.1 Property, Plant and Equipment Each class of property, plant and equipment is set out below: Depreciation policy Year ended 30 June 2022 Opening net book amount Additions Disposals Depreciation Reclassification to asset held-for-sale Revaluation Closing carrying amount Year ended 30 June 2023 Opening net book amount Additions Disposals Depreciation Reclassification to asset held-for-sale Revaluation Plantation Land $’000 Freehold Land $’000 Leased Land $’000 Buildings $’000 2.5-27% Plant and Equipment $’000 3-33% Roading $’000 5-15% Total $’000 95,670 12,670 – (14,362) – – – – – – 10,316 91,624 3,730 16,400 91,624 16,400 – (90,804) – – – – – – – 3,782 1,950 (84) (1,502) – – 3,053 4,961 – (496) – – 19,342 7,405 (1,522) (5,682) (314) – 6,550 141,067 236 – (864) – – 14,552 (15,968) (8,544) (314) 14,046 4,146 7,518 19,229 5,922 144,839 4,146 3,465 (2,020) (998) – – 7,518 1,386 – (432) – – 19,229 7,573 (1,957) (4,063) – 5,922 325 (4,896) (548) – – 144,839 12,749 (99,677) (6,041) – – Closing carrying amount 820 16,400 4,593 8,472 20,782 803 51,870 Right of use assets are included within each category of property, plant and equipment above. Refer to Note 2.5 for a full breakdown of right of use assets. 51 ANNUAL REPORT 2023MIDWAY LIMITED Section 2: Our Asset Base continued 2.1 Property, Plant and Equipment continued (a) Key Estimates and Judgements – Fair Value Freehold land Plantation land 2023 Fair Value $’000 Valuation Technique 16,400 Market approach1 820 Market approach/ Net present value approach1 Description of Valuation Technique The Company’s freehold land is stated at fair value. The fair value measurements of the Company’s land as at 30 June 2023 were performed internally by the Group and considered a range of observable and non-observable factors, and also consideration of the prior period independent valuer report obtained (as at 30 June 2022). The Company’s plantation land is stated at revalued amounts, being the fair value for its highest and best use at the date of revaluation. The highest and best use is subjective and judgemental given potential alternate uses. It requires careful analysis and detailed knowledge of the local market conditions and recent sales trends. Following the divestment of the plantation estate, plantation land is not material to the Group’s financial statements, and as such an independent valuation was not performed as at 30 June 2023. 1. Internal valuations were performed as at 30 June 2023. The stated techniques were used as at 30 June 2022. Freehold and forest plantation land have been classified as level three on the fair value hierarchy. Level three represents inputs that are not based on observable market data. No transfers in and out of level three occurred during the period. The potential future impact of current global supply chain challenges remain uncertain and could impact the key estimates and judgements noted above. 2023 Plantation Land Measurement The unencumbered value of the plantation land is $0.8M (2022: $91.6M). There are no encumbrances on the remaining plantation land held by the Group. (b) Sensitivity Analysis As at the balance date, the impact of a change of certain assumptions on the plantation land of the Group (all other things being equal) would have resulted in the following impacts on other comprehensive income (OCI): Plantation Land at Fair Value Discount rate +/- 1% Growth rate +/- 1% Reversionary costs +/- 10% 2023 2022 Increase $’000 Decrease $’000 – – – – – – Increase $’000 (2,554) 2,757 (176) Decrease $’000 2,693 (2,662) 176 The sole remaining plantation land block held by the Group is not subject to any encumbrances, and as such the valuation is not affected by changes to the above assumptions. A change in the value per hectare used in the valuation of +/1 10% would change the valuation by $0.8M depending upon the direction of the movement. For the prior period disclosure, a change in assumptions for the following variables may have a significant impact on the value of the portfolio dependent on the assumptions utilised, as there is significant judgement involved: • highest and best use classification of each block within the portfolio; • clearfall period of when trees harvested; and • rate per hectare applied to each individual block based on individual characteristics of that block. Freehold Land A 1% change in assumptions to the dollar rate per ha applied will increase the value by $0.2M (2022: $0.2M), or decrease by $0.2M (2022: $0.2M). Based on current and prior valuations of the land a 1% rate change is considered reasonable. 52 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED (c) Policy Freehold and Plantation Land Freehold and plantation land is measured at fair value. At each balance date the carrying amount of each asset is reviewed to ensure that it does not differ materially from the asset’s fair value at reporting date. Increases in the carrying amounts arising on revaluation of land is recognised in other comprehensive income and accumulated in equity in the asset revaluation reserve. To the extent that the increase reverses a decrease of the same asset previously recognised in profit or loss, the increase is recognised in profit or loss. Decreases that offset previous increases of the same asset are recognised in other comprehensive income with a corresponding decrease to the asset revaluation reserve; all other decreases are charged to the statement of profit or loss. Other Items of Property, Plant and Equipment Other items of property, plant and equipment are measured on a cost basis and are a separate asset class to land assets. Where roading is capitalised on third party or leased blocks, it is classified as an other asset if it is expected to be utilised within 12 months or an item of property, plant and equipment if it will be used for a period greater than 12 months. Depreciation The depreciable amount of all property, plant and equipment is depreciated over their estimated useful lives commencing from the time the asset is held ready for use. Roading which has been built on land owned by Midway is amortised on a straight-line basis over the period of one harvest. Roading which is built on third party properties is amortised using the unit production method at the earliest of the lease agreement with the supplier or the wood supply running out for a particular operation to which the roading relates. 2.2 Asset Held-For-Sale Opening balance Plantation land at fair value Fixed assets Closing balance 2023 $’000 314 – (314) – 2022 $’000 2,997 (2,997) 314 314 Policy Assets held-for-sale are measured at the lower of carrying amount and fair value less costs to sell. 53 ANNUAL REPORT 2023MIDWAY LIMITED Section 2: Our Asset Base continued 2.3 Biological Assets Current Plantation hardwood at fair value Plantation softwood at fair value Non-current Plantation hardwood at fair value Plantation softwood at fair value Plantation hardwood at fair value (new plantings) (a) Reconciliation of Carrying Amount At 1 July 2022 Harvested timber New plantings Purchase of standing timber (softwood) Sale of plantation estate Change in fair value less estimated point of sale costs – due to: Change in discount rate Change in volumes, prices and markets Balance at 30 June 2023 2023 $’000 – 1,744 4,566 1,951 213 8,474 2022 $’000 2,551 146 38,573 – 6,665 47,935 Biological Assets $’000 47,935 (3,146) 1,129 5,100 (42,173) – (371) 8,474 Policy Biological assets are held at fair value, with the exception of new plantings (see below). Biological assets are classified as current if it is anticipated they will be harvested within 12 months from balance date. The fair value net increase or decrease to the carrying value of the standing timber revaluation is recognised in the statement of profit or loss and other comprehensive income. Biological assets are classified as level 3 on the fair value hierarchy. There were no transfers between level 1, 2 or 3 on the fair value hierarchy. During the year the Group purchased standing pine plantation for $5.1M. Given the proximity of the transaction to the balance date, the pine plantation has not been subject to a fair valuation exercise, with the proportional cost base of the remaining standing trees considered to represent fair value. New Plantings Fair value is unable to be reliably measured until year three; however, cost is considered to approximate fair value up until this point. Once the trees are three years old they are measured at fair value and remeasured each year thereafter via an independent valuation if the carrying amount is significant. Site preparation costs are capitalised into the cost of the asset. Where there are no plantings, these costs are expensed. 54 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED Significant Unobservable Inputs • Estimated future timber market prices per tonne (weighed average USD/ BDMT $216.8 (2022: $212.9)). • Estimated yields per hectare (weighed average GMT/ha 196 (2022: 216 GMT/ha)). • Estimated harvest and transportation costs (weighted average $52.2/GMT (2022: $52.1/GMT)). Inter-Relationship Between Key Unobservable Inputs and Fair Value Measurement The estimated fair value would increase/(decrease) if the: • estimated timber prices per tonne were higher/(lower); • estimated yield per hectare or estimated timber projections were higher/(lower); • estimated average direct and indirect costs were lower/(higher); and/or • Risk-adjusted discount rate 7.0% (2022: 7.0%). • discount rate was lower/(higher). (b) Key Estimates and Judgements – Fair Value (Level 3) Valuation Technique Description of Valuation Technique An internally generated valuation is Net present performed based on a net present value value approach (NPV) calculation. An external expert is used to provide independent inputs to the calculation, including price, foreign exchange and inflation expectations. NPV is calculated as the net of the future cash inflows and outflows associated with forest production activities discounted back to current values at the appropriate discount rate. Key assumptions underpinning the NPV calculation include: • Forest valuations are based on the expected volumes of merchantable timber that will be realised from existing stands, given current management strategies and forecast timber recovery rates. • Only the current crop (standing timber) is valued. The cash flow analysis is based on the optimised timing of the harvest of existing stands, which has been developed in the context of sustained yield management. • Volume increments/decrements are determined both by periodic remeasurement of forest samples and by modelling growth from the date of the most recent measurement to date of harvest. • Ancillary income earned from activities such as the leasing of land for grazing and other occupancy rights is added to the net harvest revenues. (c) Sensitivity Analysis As at the balance date, the impact of key assumptions on the biological assets of the Group (all other things being equal) would have resulted in the following impacts in income statement: Biological Assets Discount rate +/- 1% Expected future sales prices +/- 10% Expected future harvest and transportation costs +/- 10% Expected future changes in volume +/- 10% 2023 2022 Increase $’000 Decrease $’000 (190) (1,357) 907 (646) 203 1,603 (413) 645 Increase $’000 (2,017) 12,905 (7,827) 5,567 Decrease $’000 2,172 (12,905) 7,827 (5,567) 55 ANNUAL REPORT 2023MIDWAY LIMITED Section 2: Our Asset Base continued 2.3 Biological Assets continued (d) Sale of Plantation Estate On 17 October 2022 following approval from the Foreign Investment Review Board (FIRB) the Group sold 17,000 hectares of existing brownfield hardwood plantation land in south-west Victoria to a special purpose vehicle managed by MEAG, a wholly owned subsidiary of Munich Re, for $156.3M. The sale resulted in a gain on disposal of $12.5M being recognised in the period (inclusive of a $0.2M true-up payment in the second half). At 30 June 2023, three of the five tranches have settled, with the two subsequent tranches expected to settle in September 2023 and 2024 respectively. The Group has determined that as at 17 October 2022, control over the plantation land, trees and roading assets was relinquished and these assets were derecognised from the balance sheet at that date. The sale also facilitated repayment of all long-term corporate debt held by the Group, and also a repayment of a significant amount of the “Strategy” liability (the remainder of which will be repaid as the final two tranches settle). A summary of the impact of the sale on the Group at the date of settlement with MEAG of the transaction is shown below. Assets Property, plant and equipment Plantation land Roading assets Biological assets – current Biological assets – non-current Cash and cash equivalents Receivables – current Receivables – non-current Net impact – assets Liabilities GST payable Provisions Net impact – liabilities Net gain on disposal recognised Impact $’000 (90,804) (4,896) (2,697) (39,476) 64,488 55,824 32,480 14,919 848 1,606 2,454 12,465 Of the cash and cash equivalents balance above, a total of $21.7M was used to repay borrowings. In addition, prior to the settlement of the second and third tranches, repayment was made to the existing strategy financial liability totalling $27.4M. 2.4 Commitments – not later than one year – later than one year and not later than five years – later than five years 2023 $’000 23,861 64,682 60,103 2022 $’000 27,993 64,383 54,463 148,646 146,839 Commitments relate to the minimum charges under the Port of Geelong bulk loader agreement and various supply agreements for the supply of timber to be used in production for which the Group is required to purchase minimum quantities. In addition, the Group has also secured a significant proportion of its long-term supply of woodfibre through a number of executory contracts, which allow for the Group to purchase woodfibre at market prices. Commitments are entered into by Midway Limited, the parent entity. 56 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED 2.5 Leases (a) Right of Use Assets Right of Use Assets by Category Balance at 1 July 2021 Additions Disposal Depreciation Closing carrying amount Balance at 1 July 2022 Additions Disposal Depreciation Closing carrying amount (b) Amounts Recognised in Profit or Loss Interest on lease liabilities Expenses relating to short-term leases (c) Amounts Recognised in the Statement of Cash Flows Total cash outflows for leases1 1. Continuing operations. Leased Land $’000 3,782 1,950 (84) (1,502) 4,146 4,146 3,465 (2,020) (998) 4,593 Leased Property, Plant and Equipment $’000 7,056 Leased Building $’000 499 1 – (284) 216 216 – – (193) 23 2,601 (1,068) (2,893) 5,696 5,696 169 (935) (2,230) 2,700 2023 $’000 201 – 2023 $’000 4,068 Total $’000 11,337 4,552 (1,152) (4,679) 10,058 10,058 3,634 (2,955) (3,421) 7,316 2022 $’000 168 74 2022 $’000 4,660 Extension Options Some property leases contain extension options exercisable by the Group up to one year before the end of the non-cancellable contract period. Where practicable, the Group seeks to include extension options in new leases to provide operational flexibility. The extension options held are exercisable only by the Group and not by the lessors. The Group assesses at lease commencement date whether it is reasonably certain to exercise the options if there is a significant event or significant changes in circumstances within its control. Policy The Group recognises a right to use asset for a lease whereby there is right to control the use of an identified asset for a period of time in exchange for consideration. At the commencement date, a right to use asset is measured at cost and a corresponding lease liability is created to reflect the present value of the lease payments that are not paid at that date, discounted using the incremental borrowing rate specific to that lease. Subsequently, the right to use assets are depreciated on a straight-line basis over the shorter of the asset’s useful life and the asset’s lease term. Lease liability is measured at amortised cost using the effective interest method. The Group will not recognise a right to use asset for any short-term or insignificant leases. 57 ANNUAL REPORT 2023MIDWAY LIMITED Section 2: Our Asset Base continued 2.6 Working Capital Working Capital Cash and cash equivalents Inventories Trade and other receivables Trade and other payables Provisions (a) Inventories At cost Finished goods Work in progress Section a b c 2023 $’000 5,606 34,996 27,567 (16,707) (4,590) 46,872 2023 $’000 34,205 791 34,996 2022 $’000 2,969 20,772 10,774 (20,653) (3,853) 10,009 2022 $’000 20,772 – 20,772 Policy Inventories are measured at the lower of cost and net realisable value. The cost of woodfibre includes direct material, direct labour and a proportion of manufacturing overheads based on normal operating capacity. At each balance date, the Group measures inventory to ensure it is held at the lower of cost and net realisable value. No write-downs occurred as a result of this test. Key Estimates and Judgements Woodfibre is purchased in Green Metric Tonnes (GMTs) (fibre inclusive of moisture), and is sold in Bone Dry Metric Tonnes (BDMTs), being fibre exclusive of moisture. Cost is determined on an actual cost basis. Moisture content and production losses are applied to the GMT values. Factors vary depending on the timber species and variations in moisture content. Volumetric chip stack surveys are used in determining inventory volumes at year end. Conversion from M3 to GMT ranges from 2.20 to 2.60 – the range depends upon factors such as timber species type and seasonal factors. 58 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED (b) Trade and Other Receivables Trade debtors Accrued income Deferred settlement receivable1 GST receivable 2023 $’000 1,028 1,111 23,758 1,670 27,567 2022 $’000 1,118 7,676 – 1,980 10,774 1. Deferred settlement receivable relates to pending settlement of a tranche of the plantation estate. Policy Trade and other receivables are measured at fair value and subsequently measured at amortised cost using the effective interest method. (c) Trade and Other Payables Unsecured liabilities Trade creditors Sundry creditors and accruals 2023 $’000 8,692 8,015 16,707 2022 $’000 9,788 10,865 20,653 Policy Financial liabilities include trade payables, other creditors and loans from third parties. Non-derivative financial liabilities are subsequently measured at amortised cost, comprising original debt less principal payments and amortisation. Financial liabilities are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. 2.7 Intangible Assets The reconciliation of the carrying amount is set out below: Year ended 30 June 2022 Opening net book amount Amortisation Closing carrying amount Year ended 30 June 2023 Opening net book amount Amortisation Closing carrying amount Goodwill arising on the acquisition of subsidiaries is measured at cost less accumulated impairment losses. Goodwill $’000 1,971 – 1,971 1,971 – 1,971 Total $’000 1,971 – 1,971 1,971 – 1,971 59 ANNUAL REPORT 2023MIDWAY LIMITED Section 3: Funding Structures The Group has a disciplined approach applying key principles in capital management and maximising shareholder returns. This includes: • Forward cover taken out against the USD currency fluctuations on USD denominated sales in accordance with the Group’s hedging policy to safeguard against volatility and maximise profits (see section 3.2). • Maintaining a gearing ratio which allows flexibility in the balance sheet (<0.3). 3.1 Net Debt Bank loans – current Bank loans – non-current Hire purchase liabilities – current Hire purchase liabilities – non-current Other finance arrangements AASB 16 Lease liabilities Cash and cash equivalents Term deposit 2023 $’000 1,000 – 2,027 3,599 – 4,888 (5,606) (2,009) 3,899 2022 $’000 16,950 20,675 2,354 1,922 – 4,990 (2,969) (2,000) 41,922 (i) Assets Pledged as Security The Midway facilities are secured by the following: • A fixed and floating charge granted by Midway Limited and Midway Plantations Pty Ltd. • A property mortgage over: – the property situated at 150-190 Corio Quay Road, North Shore VIC, granted by Midway Limited; – the property situated at 10 The Esplanade, North Shore, VIC, granted by Midway Properties Pty Ltd, and the property situated at 1A The Esplanade, North Shore VIC, granted by Midway Limited; and – one plantation block in south-west Victoria. (ii) Refinancing The following amounts represent the Group’s outstanding liabilities with external financiers: Type Working capital Asset finance Asset finance Utilised $’000 1,000 5,212 414 Total $’000 24,000 8,000 6,000 Maturity 30-Jun-24 31-Oct-231 30-Sep-23 1. The asset finance facility is repayable on the earlier of settlement of the next tranche of the plantation land sale (expected to complete by 30 September 2023) or 31 October 2023. Policy Borrowings are initially recognised at fair value, net of transactions costs incurred. Borrowings are subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current unless the Group has an unconditional right to defer settlement of the liability for at least 12 months following the reporting period. 60 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED (a) Cash and Cash Equivalents Cash at the end of the financial year as shown in the consolidated statement of cash flows is reconciled to the related items in the consolidated balance sheet as follows: Cash on hand Cash at bank Reconciliation of cash flow from operations with profit after income tax Profit from ordinary activities after income tax Adjustments and non-cash items Depreciation and amortisation Net (gain) on disposal of property, plant and equipment Sundry movements Share of equity accounted investees profit Fair value (increment)/decrement on revaluation of biological assets Impairment recognised Non-cash interest expense Impact of discontinued operations Changes in operating assets and liabilities (Increase)/decrease in receivables (Increase) in other assets (Increase)/decrease in inventories Increase in biological assets (net of revaluation increment/decrement) Increase/(decrease) in payables (Decrease) in deferred taxes Increase/(decrease) in tax provision (Decrease) in provisions Cash flows provided from operating activities from continuing operations 2023 $’000 1 5,605 2022 $’000 1 2,968 (2,379) (12,878) 6,318 (13,199) 68 (2,386) (151) 8,192 3,047 456 11,044 (511) (14,224) – (5,997) (2,050) (353) (132) (12,257) 8,544 (2,413) 326 (1,036) (6,490) 98 11,580 3,236 7,259 (1,341) (5,127) 4,566 (3,288) (8,844) 2,999 (418) (3,227) Policy Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less held at call with financial institutions, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated balance sheet. (b) Finance Expense1 Interest expenses Strategy finance expenses Bank charges Interest expense on lease liabilities 1. From continuing operations. 2023 $’000 1,744 4,068 197 461 2022 $’000 1,762 11,406 298 265 6,470 13,731 61 ANNUAL REPORT 2023MIDWAY LIMITED Section 3: Funding Structures continued 3.1 Net Debt continued (c) Reconciliation of Liabilities Arising from Financing Activities Balance at 1 July 2022 Cash changes Proceeds from borrowings Repayment of borrowings Total cash flows Non-cash changes Lease additions Interest Transfer Balance at 30 June 2023 Borrowings – Current $’000 21,029 Borrowings – Non-Current $’000 25,862 2,415 (25,095) (22,680) – (20,925) (20,925) 1,158 201 3,859 3,567 6,869 – (3,859) 7,947 Strategy Financial Liability Current $’000 6,908 Strategy Financial Liability – Non-current $’000 32,717 – (6,908) (6,908) – – 9,151 9,151 – (20,488) (20,488) – 4,068 (9,151) 7,146 3.2 Financial Risk Management Capital Risk Management The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital, so that it can provide returns to the shareholders and benefits for other stakeholders. This is achieved through the monitoring of historical and forecast performance and cash flows. Risk Management Framework The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board of Directors has established the Audit and Risk Committee, which is responsible for developing and monitoring the Group’s risk management policies. The committee reports regularly to the Board of Directors on its activities. The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to maintain a disciplined and constructive control environment in which all employees understand their roles and obligations. The Board of Directors has overall responsibility for identifying and managing operational and financial risks. The Group is exposed to a variety of financial risks comprising: (a) market risk; (b) credit risk; and (c) liquidity risk. 62 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED The Group holds the following financial instruments: Financial assets Cash and cash equivalents Receivables Other receivables Term deposit Non-current receivables Financial liabilities Bank and other loans Creditors AASB 16 Lease liabilities Finance lease liability Other payables Derivatives 2023 $’000 5,606 1,028 26,539 2,009 33,459 68,641 1,000 8,692 4,888 5,626 8,015 2,523 30,744 2022 $’000 2,969 7,988 2,786 2,000 – 15,743 37,625 9,788 4,990 4,276 10,865 8,940 76,484 (a) Market Risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices such as foreign exchange rates, interest rates and equity prices. The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, bills, leases and derivatives. The objective of market risk management is to maintain and control market risk exposures within acceptable parameters, while optimising the return. (i) Currency Risk The Group has an Australian Dollar (AUD) presentation currency, which is also the functional currency of its Australian entities. The Group is exposed to currency risk as below: What is the Risk? If transactions are denominated in currencies other than AUD. There is a risk of an unfavourable financial impact if there is an adverse movement in foreign currency. Export sales are denominated in U.S. Dollars (USD), with one of the Group’s bank accounts being in USD. How Does Midway Manage the Risk? The Group mitigates currency risk by entering into forward exchange/swap contracts and FX options to sell specified amounts of USD usually within 12 months at stipulated exchange rates in accordance with the Group’s hedging policy. The objective in entering the contracts is to protect the Group against unfavourable exchange rate movements for contracted and anticipated future sales undertaken in USD. Impact at 30 June 2023 At balance date the notional amount of outstanding forward exchange contracts was $62.5M (2022: $122.2M), and USD options was $0.0M (2022: $0.0M). Sensitivity analysis has been performed below. Derivative assets/(liabilities) held on the balance sheet representing the fair value of cash flow hedges at balance date are as follows: Derivative assets Derivative financial liability 2023 $’000 – (2,523) 2022 $’000 – (8,940) During the period there was no (2022: $0) hedge ineffectiveness resulting in a transfer to the income statement (no transactions were over-hedged in the year). 63 ANNUAL REPORT 2023MIDWAY LIMITED Section 3: Funding Structures continued 3.2 Financial Risk Management continued (i) Currency Risk continued Policy Certain derivatives are designated as hedging instruments and are further classified as either fair value hedges or cash flow hedges. At the inception of each hedging transaction, the Group documents the relationship between the hedging instruments and hedged items, its risk management objective and its strategy for undertaking the hedge transaction. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair value or cash flows of hedged items. The Group determines the existence of an economic relationship between the hedging instrument and hedge items based on the currency and amount of timing of their respective cash flows. The Group designates the spot element of forward exchange contracts to hedge its currency risk and applies a hedge ratio of 1:1. The effective portion of changes in the fair value of the derivatives that are designated and qualify as cash flow hedges is recognised in other comprehensive income and accumulated in the cash flow hedge reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. The Group does not speculate in the trading of derivative instruments. In these hedge relationships the main sources of ineffectiveness are: • the effect of the counterparties and the Group’s own credit risk on the fair value of the forward exchange contracts, which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in exchange rates; and • changes in timing of the hedged transactions. All exchange differences arising on settlement or revaluation are recognised as income or expenses for the financial year. Cash Trade receivables 2023 USD $’000 131 54 2022 USD $’000 392 52 The forward exchange and swap contracts in place are to hedge cash flows associated with the above-mentioned trade receivables and highly probable future sales. Sensitivity If foreign exchange rates were to change by 10% from USD rates used to determine fair values as at the reporting date, assuming all other variables that might impact on fair value remain constant, including effective hedging, then the impact on profit for the year and equity is as follows: USD Movement Impact [+/- 10%] Impact on profit after tax Impact on equity 2023 2022 Increase $’000 Decrease $’000 (12) 4,199 13 (8,318) Increase $’000 (28) 2,089 Decrease $’000 31 (15,433) A 10% change is deemed reasonable given recent historical trends in the AUD/USD. 64 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED (ii) Interest Rate Risk Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate as a result of changes in market interest rates. What is the Risk? The Group has variable interest rate debt, and therefore if interest rates increase, the amount of interest the Group is required to pay will also increase. How Does Midway Manage the Risk? Monitoring of announcements from the central banking authority and other sources which may impact movements in the variable rate. Effective interest rate monitored by Audit and Risk Committee. No swaps are currently taken out. Impact at 30 June 2023 If interest rates were to increase/ decrease by 100 basis points from rates applicable at the reporting date, assuming all other variables that might impact on fair value remain constant, the impact on profit for the year and equity is not significant. The Group’s exposure to interest rate risk in relation to future cash flows and the effective weighted average interest rates on classes of financial assets and financial liabilities is as follows: Interest Bearing $’000 Non-interest Bearing $’000 2022 Financial assets Cash Trade receivables Other receivables Term deposit Derivatives Financial liabilities Bank and other loans Creditors AASB 16 Lease liability Finance lease liability Sundry creditors and accruals Derivatives 2023 Financial assets Cash Trade receivables Other receivables Term deposit Derivatives Financial liabilities Bank and other loans Creditors AASB 16 Lease liability Finance lease liability Sundry creditors and accruals Derivatives 2,968 – – 2,000 – 4,968 37,625 – 4,990 4,276 – – 46,891 5,605 – – 2,009 – 7,614 1,000 – 4,888 5,626 – – Total Carrying Amount $’000 2,969 1,118 9,656 2,000 – Weighted Average Effective Interest Rate 0.00% Floating 0.1% Fixed 1 7,988 2,786 – – 10,775 15,743 – 37,625 2.64% Floating 9,788 – – 10,865 8,940 29,593 1 1,028 59,998 – – 9,788 4,990 4,276 10,865 8,940 76,484 5,606 1,028 59,998 2,009 – 61,027 68,641 – 8,692 – – 8,015 2,523 1,000 8,692 4,888 5,626 8,015 2,523 3.81% 3.83% Fixed Fixed 0.00% Floating 0.10% Fixed 5.70% Floating 3.50% 5.71% Fixed No other financial assets or financial liabilities are expected to be exposed to interest rate risk. 11,514 19,230 30,744 65 ANNUAL REPORT 2023MIDWAY LIMITED Section 3: Funding Structures continued 3.2 Financial Risk Management continued (b) Credit Risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date of recognised financial assets is the carrying amount of those assets, net of any provisions for impairment of those assets, as disclosed in the consolidated balance sheet and notes to financial statements. Credit risk for derivative financial instruments arises from the potential failure by counterparties to the contract to meet their obligations. The credit risk exposure of forward exchange and swap contracts is the net fair value of these contracts. What is the Risk? The Group has significant exposure to export customers as they represent a significant portion of the Group’s annual sales. How Does Midway Manage the Risk? Letters of credit with reputable financial institutions are used to mitigate credit risk with some customers where the Group determines there is sufficient rationale to do so, which comprise the majority of the Group’s annual woodfibre sales. Impact at 30 June 2023 As at 30 June 2023, there were no vessel-related receivables outstanding. Based on management’s assessment of its exposure, the Group has low credit risk. The balance of woodfibre sales are made to long-standing customers with the short trading terms applicable to these customers, being payment within seven business days of invoicing. The Group is exposed to credit risk on plantation management activities in addition to the sale of woodfibre to customers in China. The Group produces and markets woodfibre on the Tiwi Islands on behalf of the wood owners. Receiving outstanding receivables is contingent on sufficient volumes of woodfibre being sold into the market. The Group recognised a provision of $7.8M against aged receivables from the Tiwi Islands project. Whilst the Group believes that the second rotation in the Tiwi Islands will provide sufficient cash flows to facilitate recovery of the outstanding amount, due to current market uncertainty for the first rotation and the fact that the second rotation has not yet been contracted, the outstanding balance of the aged debtor has been fully provided for. As at 30 June 2023, the ageing of trade and other receivables that were not impaired was as follows: Neither past due nor impaired Past due 1–30 days Past due 31–60 days Past due 61–90 days Over 90 days 2023 $’000 60,554 384 – 58 30 61,026 2022 $’000 9,767 543 5 126 7,728 18,169 66 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED (c) Liquidity Risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group manages liquidity risk by monitoring forecast cash flows and ensuring that adequate unutilised borrowing facilities are maintained. Maturity Analysis The table below represents the undiscounted contractual settlement terms for financial assets and liabilities and management’s expectation for settlement of undiscounted maturities. < 6 Months $’000 6-12 Months $’000 1-5 Years $’000 >5 Years $’000 2023 Cash and cash equivalents Loan receivables Receivables Derivatives Payables Strategy financial liability1 Finance lease Borrowings Net maturities 2022 Cash and cash equivalents Loan receivables Receivables Derivatives Payables Strategy financial liability1 Finance lease Borrowings Net maturities 5,606 47 27,567 – (16,707) (9,546) (1,756) (161) 5,050 2,969 145 10,774 – (20,653) (3,758) (3,569) (1,071) (15,163) – 47 – – – – (1,248) (1,160) (2,361) – 145 – – – (3,758) (2,277) (15,685) (21,575) – 20 33,459 – – (8,826) (6,602) – – – – – – – (2,419) – 18,051 (2,419) – 761 7,395 – – (44,975) (6,970) (20,753) (64,542) – – – – – (17,050) (2,109) – Total Contractual Cash Flows $’000 Carrying Amount $’000 5,606 114 5,606 108 61,026 61,026 – (16,707) (18,372) (12,025) (1,321) 18,321 – (16,707) (16,297) (10,514) (1,000) 22,222 2,969 1,051 2,969 874 18,169 18,169 – (20,653) (69,541) (14,925) (37,509) – (20,653) (39,625) (9,267) (37,625) (85,158) (19,159) (120,439) 1. The face value of the Strategy financial liability will be paid out at the earliest possible point under the contract, which at this stage is expected to be completed by September 24. 3.3 Contributed Equity (a) Ordinary Share Capital Share Capital Ordinary shares Opening balance – 1 July Performance rights vested Issued during the year Capital raising costs incurred net of recognised tax benefit Closing balance 30 June Number of Shares Company 2023 2022 2023 $’000 2022 $’000 87,336,222 87,336,222 – – – – – 87,336,222 87,336,222 – 64,888 64,888 – – – – – – 64,888 64,888 Holders of ordinary shares are entitled to dividends as declared from time to time and are entitled to one vote per share at general meetings of the Company. 67 ANNUAL REPORT 2023MIDWAY LIMITED Section 3: Funding Structures continued 3.3 Contributed Equity continued (b) Reserves Reserves Movements: Cash flow hedge reserve1 Opening balance Cash flow hedges – effective portion Deferred tax Balance 30 June Share-based payments reserve2 Opening balance Share rights granted Share rights issued/vested Balance 30 June Asset revaluation reserve3 Opening balance Revaluation of land Asset disposals Deferred tax Balance 30 June Profit reserve4 Opening balance Transfers of current year profits Dividends paid Balance 30 June Foreign currency translation reserve Opening balance Foreign currency translation differences Balance 30 June 2023 $’000 2022 $’000 (6,259) 6,417 (1,925) (1,767) 374 66 – 440 (1,599) (6,657) 1,997 (6,259) 117 257 – 374 47,220 – 48,626 14,046 (37,337) (11,238) – 9,883 46,113 37,337 – (4,214) 47,220 34,875 11,238 – 83,450 46,113 (80) – (80) (80) – (80) 1. Cash flow hedge reserve The hedging reserve is used to record the effective portion of gains and losses on cash flow hedges that are recognised in other comprehensive income as described in section 3.2. Amounts are reclassified to profit or loss when the associated hedged transaction affects profit or loss. 2. Share-based payment reserve The shared-based payment reserve is used to recognise the expense over the vesting period. 3. Asset revaluation reserve The asset revaluation reserve is used to record increments and decrements on the revaluation of land and reclassified to retained earnings on disposal. Movements in the year relate to revaluation of plantation land. 4. Profit reserve The profit reserve is used to record transfers of profits that would otherwise be offset against accumulated losses. The balance of the profit reserve is available for distribution as a dividend in future periods. Movements in the current year relate to transfers to retained earnings for dividend payments and transfers in of current year profits. 68 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED Section 4: Other Disclosures This section includes additional financial information that is required by the accounting standards and the Corporations Act 2001. 4.1 Subsidiaries Subsidiaries of Midway Limited and controlled entities: Queensland Commodity Exports Pty Ltd Midway Plantations Pty Ltd Midway Properties Pty Ltd Midway Tasmania Pty Ltd Australian Carbon Products Pty Ltd Plantation Management Partners Pty Ltd Resource Management Partners Pty Ltd Plantation Management Partners Pte Ltd1 Midway Logistics Pty Ltd Midway Logistics Unit Trust Bio Growth Partners (BGP) Ownership Interest Held by the Company Ownership Interest Held by NCI 2023 % 2022 % 2023 % 2022 % 90 100 100 100 100 100 100 100 100 100 100 90 100 100 100 – 100 100 100 100 100 100 10 10 – – – – – – – – – – – – – – – – – – – – 1. 50% held in Trust by an independent party; however, all risks and benefits of ownership of the share are held by the Group. Continued the process of liquidation during the period. Policy The consolidated financial statements are those of the Company, comprising the financial statements of the parent entity and all of the entities the parent controls. The Company controls an entity where it has the power, for which the parent has exposure or rights to variable returns from its involvement with the entity, and for which the parent has the ability to use its power over the entities to affect the amount of its returns. 4.2 Interest in Joint Ventures (a) Carrying Amount South West Fibre Pty Ltd Nature of Relationship Ordinary shares Ownership Interest Carrying Amount 2023 % 51 2021 % 51 2023 $’000 13,405 13,405 2022 $’000 11,019 11,019 Policy Joint arrangements represent the contractual sharing of control between parties in a business venture where unanimous decisions about the relevant activities are required. Joint arrangements are classified as either joint operations or joint ventures based on the rights and obligations of the parties to the arrangement. The Company’s interest in joint ventures is bought to account using the equity method after initially being recognised at cost. Under the equity method, the profits or losses of the joint venture are recognised in the Company’s profit or loss and the Company’s share of the joint venture’s other comprehensive income is recognised in the Company’s other comprehensive income. 69 ANNUAL REPORT 2023MIDWAY LIMITED Section 4: Other Disclosures continued 4.2 Interest in Joint Ventures continued (a) Carrying Amount continued Key Estimates and Judgements 1. South West Fibre Pty Ltd South West Fibre Pty Ltd (SWF) is a joint venture in which the Company has a 51% ownership interest. Voting rights are proportionately in line with share ownership. The Company has joint but not ultimate control over the venture as the shareholder agreement requires a special resolution when making key decisions. SWF is structured as a separate vehicle and the Company has a residual interest in the net assets of SWF. Accordingly, the Company has classified the interest in SWF as a joint venture as the Company does not have control over the entity. (b) South West Fibre Pty Ltd Financial Information Cash and cash equivalents Other current assets Total current assets Property, plant and equipment Total non-current assets Total current liabilities Total non-current liabilities Net assets Revenue Interest income Depreciation and amortisation Income tax benefit/(expense) Total comprehensive income Reconciliation to carrying amount of interest in joint venture: Opening net assets Add: Current year profit/(loss) Less: Dividends paid Hedge revaluation reserve Closing net assets Company’s 51% share of net assets Carrying amount of investment 2023 $’000 14,260 13,129 27,389 15,197 15,188 (11,761) (4,532) 26,284 113,703 – 2,601 2,015 4,679 21,605 4,679 – – 26,284 13,405 13,405 2022 $’000 7,025 11,718 18,743 17,378 17,393 (8,401) (6,130) 21,605 75,807 – 3,778 871 2,216 19,389 2,031 – 185 21,605 11,019 11,019 70 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED 4.3 Midway Limited – Parent Entity Summarised Balance Sheet Assets Current assets Non-current assets Total assets Liabilities Current liabilities Non-current liabilities Total liabilities Net assets Equity Share capital Retained earnings Reserves Total equity Summarised Statement of Profit or Loss and Other Comprehensive Income Profit for the year after income tax Total comprehensive income 2023 $’000 2022 $’000 73,888 80,118 74,638 76,702 154,006 151,340 50,431 (723) 49,708 104,298 64,888 1,614 37,796 104,298 40,526 11,033 51,559 99,781 64,888 1,614 33,279 99,781 (475) 4,017 (17,085) (19,898) 4.4 Share-based Payments The Board has established a Long-term Incentive Plan (LTIP) under which Executive Directors and employees of Midway may be invited by the Board to participate. The awards which may be issued under the LTIP include: • shares; • options; and • performance rights. Currently the following share-based payment arrangements are in effect under the LTIP: (a) Long Term Incentive Rights (Equity Settled) In FY23, the Board granted the Chief Executive Officer and members of the Senior Executive Team 953,519 performance rights, subject to vesting conditions (see below). Following satisfaction of the vesting conditions the rights will automatically vest and the underlying shares will be issued. The performance period is until 30 June 2025. 71 ANNUAL REPORT 2023MIDWAY LIMITED Section 4: Other Disclosures continued 4.4 Share-based Payments continued (a) Long Term Incentive Rights (Equity Settled) continued 2023 Plan Assumption No. of shares Fair value at grant date1 Share price Risk free rate Dividend yield Volatility Initial TSR 2022 Plan Assumption No. of shares Fair value at grant date1 Share price Risk free rate Dividend yield Volatility Initial TSR Performance Rights Issued 9 December 2022 929,706 Performance Rights Issued 13 April 2023 23,813 $0.65 $0.98 3.03% 2.0% 57.0% 4.8% $0.54 $0.90 2.96% 2.0% 55.0% -3.7% 751,366 $0.89 $1.22 0.77% 3.0% 50.0% 34.3% Vesting Conditions Participant must maintain continuous employment over the performance period, which ends 30 June 2025. The percentage of performance rights that will vest at the end of the performance period will depend on Midway’s total shareholder return (TSR) over the performance period, relative to a comparator group of companies in the S&P/ASX 300 Index. Vesting Conditions Participant must maintain continuous employment over the performance period, which ends 30 June 2024. The percentage of performance rights that will vest at the end of the performance period will depend on Midway’s total shareholder return (TSR) over the performance period, relative to a comparator group of companies in the S&P/ASX 300 Index. 1. The fair value at grant date was derived using the Monte Carlo Simulation model, which incorporates the total shareholder return (TSR) performance conditions. Additionally in FY22, the Board granted the Chief Executive Officer 89,227 performance rights and 721,436 options, subject to vesting conditions (see below). Following satisfaction of the vesting conditions the rights will automatically vest and the underlying shares will be issued, with a performance period to 30 June 2024. The options will be exercisable for 24 months after the relevant vesting date. 2022 Plan – CEO Assumption No. of shares Fair value at grant date1,2 Share price Exercise price Risk free rate Dividend yield Volatility Initial TSR Options Vesting 30 June 2023 Options Vesting 30 June 2024 Performance Rights 360,718 360,718 89,227 $0.36 $1.06 $0.94 0.99% 3.0% 50.0% 16.6% $0.39 $1.06 $0.94 0.99% 3.0% 50.0% 16.6% $0.74 $1.06 N/A 0.99% 3.0% 50.0% 16.6% Vesting Conditions Participant must maintain continuous employment over the performance period, which ends 30 June 2023 (for the initial options granted) and 30 June 2024 (for performance rights and remaining options). The percentage of performance rights that will vest at the end of the performance period will depend on Midway’s total shareholder return (TSR) over the performance period, relative to a comparator group of companies in the S&P/ASX 300 Index. 1. The fair value at grant date was derived using the Monte Carlo Simulation model, which incorporates the total shareholder return (TSR) performance conditions. 2. The options have no market-based performance hurdle and therefore they have been valued using the Binomal method. The Group recorded a share-based payments expense of $0.1M in 2023 (2022: $0.2M). 72 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED 4.5 Related Parties KMP of the Group represent the Directors, CEO and CFO in line with their ability to influence strategy and decision making. (a) Remuneration of key management personnel Short-term employee benefits Post-employment benefits Share-based payments Other long-term incentives Total KMP remuneration expense 2023 $’000 1,429 103 243 22 2022 $’000 1,652 125 162 25 1,797 1,964 Transactions between related parties are on normal commercial terms no more favourable than those available to other parties unless otherwise stated. An accrual for Directors’ fees was recorded for three days to year end to 30 June 2023. The aggregate shareholdings of KMP at 30 June 2023 are 104,829 (2022: 9,938,806). (b) Transactions with South West Fibre Pty Ltd Nature Operator fee income Reimbursement of costs Dividends received Sale of wood products (at cost) 2023 $’000 1,657 681 – 9,818 12,155 2022 $’000 1,145 1,042 – 9,737 11,924 The outstanding receivable balance from South West Fibre Pty Ltd at 30 June 2023 is $0.2M (2022: $0.4M receivable). 4.6 Contingent Liabilities (a) Outstanding Matters As at the date of this report there are no claims or contingent liabilities that are expected to materially impact, either individually or in aggregate, the Company’s financial position or results from operations. As part of the wind-down of Midway Logistics and BioGrowth Partners, the Group is currently in negotiations with various parties to reassign or exit existing contracts. At this stage, it is not possible to provide a reasonable or accurate assessment of the Group’s potential exposure as a result of this process, if any. (b) Bank Guarantees Consolidated group Limit Amount utilised Parent entity Limit Amount utilised 2023 $’000 5,250 4,125 4,250 3,345 2022 $’000 6,200 2,286 5,250 2,061 73 ANNUAL REPORT 2023MIDWAY LIMITED Section 4: Other Disclosures continued 4.7 Remuneration of Auditors KPMG Australia Audit and assurance services – Statutory audit fees Other services 2023 $ 2022 $ 224,675 228,000 – Non-assurance services – other advisory services 21,228 88,717 4.8 Other Income Plantation management fees SWF operating fee Profit on sale of assets (plantation land) Other Policy 2023 $’000 685 1,657 12,465 3,530 18,337 2022 $’000 127 1,145 – 3,517 4,789 Dividend Income Dividend income is recognised when the right to receive a dividend has been established. Dividends received from joint venture entities are accounted for in accordance with the equity method of accounting. Other Income Rental income is recognised on a straight-line basis over the rental term. If the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commissions made by the Group. Royalty income is recognised on an accruals basis in accordance with the substance of the relevant agreement when it is probable that the royalty will be received, which is normally when the event has occurred. All income is measured net of the amount of goods and services tax (GST). 74 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED 4.9 Deed of Cross Guarantee The parent entity, Midway Limited, and certain subsidiaries (Midway Plantations Pty Ltd, Resource Management Partners Pty Ltd, Plantation Management Partners Pty Ltd, Midway Tasmania Pty Ltd and Midway Properties Pty Ltd) are subject to a Deed of Cross Guarantee (Deed) under which each company guarantees the debts of the others. By entering into the Deed, the wholly owned subsidiaries have been relieved from the requirement to prepare a Financial Report and Directors’ Report under ASIC Corporations (Wholly-owned Companies) Instrument 2016/785. A summarised consolidated statement of comprehensive income, retained earnings reconciliation and a consolidated balance sheet, comprising the Company and those controlled entities which are a party to the Deed of Cross Guarantee, after eliminating all transactions between parties to the Deed, at 30 June 2023 are set out below: Summarised Consolidated Statement of Comprehensive Income Sales revenue Other income Expenses Share of net profits from equity accounted investments Profit before income tax expense Income tax expense Profit for the period Other comprehensive income for the period Total comprehensive income for the period Retained earnings at the beginning of the financial year Profit/(Loss) for the year Transfers to/(from) reserves 2023 $’000 153,190 18,377 171,567 2022 $’000 162,662 4,178 166,840 (183,836) (195,811) 2,386 (9,883) 3,876 (6,007) 4,492 (1,515) (28,381) (6,007) – 1,036 (27,935) 4,787 (23,148) 5,172 (17,976) (5,233) (23,148) – Retained profits at the end of the financial year (34,388) (28,381) 75 ANNUAL REPORT 2023MIDWAY LIMITED Section 4: Other Disclosures continued 4.9 Deed of Cross Guarantee continued Consolidated Balance Sheet Current assets Cash and cash equivalents Receivables Inventories Biological assets Other assets Asset held for sale Total current assets Non-current assets Biological assets Other receivables Investments Property, plant and equipment Loan receivables – NC Total non-current assets Total assets Current liabilities Trade and other payables Borrowings Provisions Strategy financial liability Current tax liability Derivative financial liability Total current liabilities Non-current liabilities Borrowings Provisions Deferred tax liabilities Other financial liabilities Total non-current liabilities Total liabilities Net assets Contributed equity Share capital Reserves Retained earnings Total equity 76 2023 $’000 2,659 27,357 25,015 1,744 5,085 – 2022 $’000 1,991 9,953 15,467 2,697 8,222 314 61,860 38,644 6,730 33,459 19,638 50,130 17 109,974 171,834 13,865 4,205 4,387 9,151 – 2,523 34,131 7,947 120 1,639 7,146 16,852 50,983 120,851 64,888 90,379 (34,416) 120,851 45,238 7,395 17,251 140,810 604 211,298 249,942 17,805 20,576 3,547 6,908 1,867 8,940 59,643 25,478 131 9,820 32,717 68,146 127,789 122,153 64,888 51,209 6,056 122,153 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED 4.10 Subsequent Events There have been no other matters or circumstances which have arisen since 30 June 2023 that have significantly affected or may significantly affect: (a) the operations, in financial years subsequent to 30 June 2023, of the Group; or (b) the results of those operations; or (c) the state of affairs, in financial years subsequent to 30 June 2023 of the Group. 4.11 Basis of Preparation This Financial Report is a general purpose Financial Report that has been prepared in accordance with Australian Accounting Standards, Interpretations and other applicable authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The Financial Report was approved by the Board of Directors as at the date of the Directors’ Report. The Financial Report is for Midway Limited and its consolidated entities. Midway Limited is a company limited by shares, incorporated and domiciled in Australia. Midway Limited is a for-profit entity for the purpose of preparing financial statements. Unless explicitly highlighted in the Financial Report, cost approximates fair value for the carrying amounts of assets and liabilities held on the balance sheet. The financial statements have been prepared on a going concern basis and the Directors consider that there are reasonable grounds to believe the Group will be able to pay its debts as and when they fall due based on forecast operating cash flows, their debt funding position and capital management strategy. Over the course of the year, the Group has paid down all long-term debt and has current assets exceeding current liabilities of $37,502,000 as at 30 June 2023. The Group has experienced an increased degree of market volatility during FY23 which has been impacted by developments in the wider global pulp market during the year. This presents the risk that demand for the Group’s products may be impacted and has resulted in some customers deferring planned vessels. The Group has taken a number of actions in the year to address the cash flow impact of this risk, including but not limited to paying down all long-term debt and managing production and expense levels. The Directors have considered forecast cash flow scenarios (including downside scenarios if there are unexpected deferrals of committed vessels) for at least the 12-month period from the date of approval of these financial statements. As a result, having regard to the current level of current assets, low debt balance, forecast cash flow sensitivities as well as other capital management strategies available to the Group if required, the Directors consider that the Group is able to pay its debts as and when they are due and these financial statements can be prepared on a going concern basis. Further details of the Group’s capital risk management strategy has been outlined in Note 3.2. Compliance with IFRS The consolidated financial statements of the Company also comply with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). Historical Cost Convention The Financial Report has been prepared under the historical cost convention, as modified by revaluations to fair value for certain classes of assets and liabilities as described in the accounting policies. Significant Accounting Estimates and Judgements The preparation of the Financial Report requires the use of certain estimates and judgements in applying the Company’s accounting policies. Those estimates and judgements significant to the Financial Report are disclosed throughout the Financial Report. 77 ANNUAL REPORT 2023MIDWAY LIMITED Section 4: Other Disclosures continued 4.11 Basis of Preparation continued Comparatives Where necessary, comparative information has been reclassified and repositioned for consistency with current year disclosures. Accounting policies for subsidiaries are consistently applied. Adjustments are made to bring into line any dissimilar accounting policies which may exist. All inter-company balances and transactions, including any unrealised profits or losses, have been eliminated on consolidation. Subsidiaries are consolidated from the date on which control is transferred to the Company and are derecognised from the date that control ceases. Equity interests in a subsidiary not attributable, directly or indirectly, to the Company are presented as non-controlling interests. Non-controlling interests in the result of subsidiaries are shown separately in the consolidated statement of profit or loss and other comprehensive income and consolidated statement of financial position respectively. Functional and Presentation Currency The financial statements of each entity within the Group are measured using the currency of the primary economic environment in which that entity operates (the functional currency). The consolidated financial statements are presented in Australian Dollars (AUD), which is the parent entity’s functional and presentation currency. Transactions and Balances Transactions in foreign currencies of entities within the Group are translated into functional currency at the rate of exchange ruling at the date of the transaction. Foreign currency monetary items that are outstanding at the reporting date (other than monetary items arising under foreign currency contracts where the exchange rate for that monetary item is fixed in the contract) are translated using the spot rate at the end of the financial year. A monetary item arising under a foreign currency contract outstanding at the reporting date where the exchange rate for the monetary item is fixed in the contract is translated at the exchange rate fixed in the contract. Except for certain foreign currency hedges, all resulting exchange differences arising on settlement or restatement are recognised as revenues and expenses for the financial year. Impairment of Non-financial Assets Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. For impairment assessment purposes, assets are generally grouped at the lowest levels for which there are largely independent cash flows (‘cash generating units’). Accordingly, most assets are tested for impairment at the cash generating unit level. Because it does not generate cash flows independently of other assets or groups of assets, goodwill is allocated to the cash generating unit or units that are expected to benefit from the synergies arising from the business combination that gave rise to the goodwill. Assets other than goodwill are assessed for impairment whenever events or circumstances arise that indicate the asset may be impaired. An impairment loss is recognised when the carrying amount of an asset or cash generating unit exceeds the asset’s or cash generating unit’s recoverable amount. The recoverable amount of an asset or cash generating unit is defined as the higher of its fair value less costs to sell and value in use. Impairment losses in respect of individual assets are recognised immediately in profit or loss unless the asset is carried at a revalued amount such as property, in which case the impairment loss is treated as a revaluation decrease in accordance with the applicable standard. Impairment losses in respect of cash generating units are allocated first against the carrying amount of any goodwill attributed to the cash generating unit with any remaining impairment loss allocated on a pro rata basis to the other assets comprising the relevant cash generating unit. New Standards Not Yet Effective There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. 78 Notes to the Consolidated Financial Statements continuedANNUAL REPORT 2023MIDWAY LIMITED Directors’ Declaration The Directors of the Company declare that: 1. The consolidated financial statements and notes, as set out on pages 40 to 78 are in accordance with the Corporations Act 2001 including; (a) comply with Accounting Standards in Australia and the Corporations Regulations 2001; and (b) as stated in Section 4.11, the consolidated financial statements also comply with International Financial Reporting Standards; and give a true and fair view of the financial position of the Company and the Group as at 30 June 2023 and its performance for the year ended on that date. 2. There are reasonable grounds to believe that the Company and the Group entities identified in Note 4.9 will be able to meet any obligations or liabilities to which they are or may become subject to by virtue of the Deed of Cross Guarantee between the Company and those Group entities pursuant to ASIC Corporations (Wholly owned Companies) Instrument 2016/785. The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer as required by S 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the Board of Directors. Gordon Davis Chairman 24 August 2023 79 ANNUAL REPORT 2023MIDWAY LIMITED Independent Auditor’s Report 80 KPMG, an Australian partnership and a member firm of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation. Liability limited by a scheme approved under Professional Standards Legislation. Independent Auditor’s Report To the shareholders of Midway Limited Report on the audit of the Financial Report Opinion We have audited the Financial Report of Midway Limited (the Company). In our opinion, the accompanying Financial Report of the Company is in accordance with the Corporations Act 2001, including: •giving a true and fair view of theGroup’s financial position as at 30June 2023 and of its financialperformance for the year ended onthat date; and•complying with Australian AccountingStandards and the CorporationsRegulations 2001.The Financial Report comprises: •Consolidated Balance Sheet as at 30 June 2023.•Consolidated Statement of Comprehensive Income,Consolidated Statement of Changes in Equity, andConsolidated Statement of Cashflows for the yearthen ended•Notes including a summary of significant accountingpolicies•Directors’ Declaration.The Group consists of the Company and the entities it controlled at the year-end or from time to time during the financial year. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the Financial Report section of our report. We are independent of the Group in accordance with the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the Financial Report in Australia. We have fulfilled our other ethical responsibilities in accordance with these requirements. ANNUAL REPORT 2023MIDWAY LIMITED 81 Key Audit Matters Key Audit Matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial Report of the current period. These matters were addressed in the context of our audit of the Financial Report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. VVaalluuaattiioonn ooff nnoonn--ccuurrrreenntt aasssseettss (($$110077..55mm)) Refer to Note 1.7 to the Financial Report. The key audit matter How the matter was addressed in our audit A key audit matter was the Group’s annual testing of the recoverability of non-current assets given the size of the balance (being 59% of total assets) and estimation uncertainty associated with current economic and market conditions. The Group assesses valuation of its Cash Generating Units (CGUs) via detailed value in use (VIU) discounted cash flow modelling, which contains a number of assumptions. The Group’s VIU models are internally developed and use a range of internal and external data as inputs. Forward looking estimates may be prone to greater risk for potential bias, error and inconsistent application. These conditions necessitate additional scrutiny by us, over key assumptions including forecast cash flows, forecast growth rates over the forecast period and discount rates. In addition to the above, the Group recorded an impairment charge of $7.8 million pre-tax relating to non-current trade receivables relating to the Tiwi Islands project considering the current and prospective conditions in the woodfibre market. We involved valuation specialists to supplement our senior audit team members in assessing this key audit matter. Our audit procedures included: •assessing the Group’s VIU models andkey assumptions by:-evaluating the appropriateness of the VIU method applied by the Group against accounting standard requirements;-assessing the integrity of the models used, including the accuracy of the underlying calculation formulas;-comparing significant inputs into the relevant cash flow forecasts to the Group’s Board approved budgets;-assessing the accuracy of previous Group forecasts to inform our evaluation of forecasts incorporated in the models;-using our knowledge of the Group, its past performance, published studies on industry trends and our industry knowledge to challenge and assess key assumptions including forecast cash flows, forecast growth rates over the forecast period and discount rates; and-working with our valuation specialists, we independently developed a discount rate range using publicly available market data for comparable entities, adjusted by risk factors specific to the Group.•considering the sensitivity of the models by varying key assumptions, such as forecastANNUAL REPORT 2023MIDWAY LIMITED Independent Auditor’s Report continued 82 growth rates and discount rates, within a reasonably possible range, to identify those assumptions at higher risk of bias or inconsistency in application. We also assessed the related impairment breakeven points for these assumptions in order to identify those assets at higher risk of impairment and to focus our further procedures; and •assessing the disclosures in the financialreport using our understanding of therecoverability assessment obtained from ourtesting and against the requirements of theaccounting standards.Other Information Other Information is financial and non-financial information in Midway Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. The Other Information we obtained prior to the date of this Auditor’s Report was the Director’s Report including the Operating and Financial Review and the Remuneration Report. The Letter from the Chairman, Managing Director’s Review, Midway Operational Review, Sustainability Report, Shareholder Information and Corporate Directory are expected to be made available to us after the date of the Auditor’s Report. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: •preparing the Financial Report that gives a true and fair view in accordance with AustralianAccounting Standards and the Corporations Act 2001•implementing necessary internal control to enable the preparation of a Financial Report thatgives a true and fair view and is free from material misstatement, whether due to fraud orerror•assessing the Group and Company’s ability to continue as a going concern and whether theuse of the going concern basis of accounting is appropriate. This includes disclosing, asapplicable, matters related to going concern and using the going concern basis of accountingunless they either intend to liquidate the Group and Company or to cease operations, or haveANNUAL REPORT 2023MIDWAY LIMITED 83 no realistic alternative but to do so. Auditor’s responsibilities for the audit of the Financial Report Our objective is: •to obtain reasonable assurance about whether the Financial Report as a whole is free frommaterial misstatement, whether due to fraud or error; and•to issue an Auditor’s Report that includes our opinion.Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: https://www.auasb.gov.au/admin/file/content102/c3/ar1_2020.pdf.This description forms part of our Auditor’s Report. Report on the Remuneration ReportOpinion In our opinion, the Remuneration Report of Midway Limited for the year ended 30 June 2023, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included in pages 17 to 26 of the Directors’ report for the year ended 30 June 2023. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG Simon Dubois Partner Melbourne 24 August 2023 ANNUAL REPORT 2023MIDWAY LIMITED Additional Shareholder Information For the year ended 30 June 2023 Additional Securities Exchange Information In accordance with ASX Listing Rule 4.10, the Company provides the following information to shareholders not elsewhere disclosed in this Annual Report. The information is at 31 August 2023 (Reporting Date). Corporate Governance Statement The Company’s Directors and management are committed to conducting the Group’s business in an ethical manner and in accordance with the highest standards of corporate governance. The Company has adopted and substantially complies with the ASX Corporate Governance Principles and Recommendations (Fourth Edition) (Recommendations) to the extent appropriate to the size and nature of the Group’s operations. The Company has prepared a statement that sets out the corporate governance practices that were in operation throughout the financial year for the Company, identifies any Recommendations that have not been followed, and provides reasons for not following such Recommendations (Corporate Governance Statement). In accordance with ASX Listing Rules 4.10.3 and 4.7.4, the Corporate Governance Statement will be available for review on the Company’s website (https://www.midwaylimited.com.au/investor-center/), and will be lodged together with an Appendix 4G with ASX at the same time that this Annual Report is lodged with ASX. The Appendix 4G will particularise each Recommendation that needs to be reported against by the Company, and will provide shareholders with information as to where relevant governance disclosures can be found. The Company’s corporate governance policies and charters are all available on its website, https://www.midwaylimited.com.au/ investor-center/. Substantial Shareholders The substantial holders in the Company as at the Reporting Date were: Substantial Holders CHEBMONT PTY LTD GREGORY MCCORMACK AND MCCORMACK TIMBERS SANDON CAPITAL PTY LTD Number of Shares Held 20,798,294 9,604,599 7,729,697 % of Total Issued Share Capital 23.81 11.00 8.85 Voting Rights At a general meeting of the Company, every holder of ordinary shares present in person or by proxy, attorney or representative has one vote on a show of hands, and on a poll one vote for each ordinary share held. The performance rights and options, which are unquoted, have no voting rights. 84 ANNUAL REPORT 2023MIDWAY LIMITED Distribution of Holders of Equity Securities The distribution of holders of equity securities on issue in the Company as at the Reporting Date is as follows: Distribution of Ordinary Shareholders Holdings Ranges 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Total Distribution of Performance Rights Range 10.001 to 100,000 100,001 and over Total Distribution of Options Holdings Ranges 100,001 and over Total Number of Holders 280 Total Ordinary Shares 130,847 336 217 338 74 1,245 970,529 1,685,477 10,415,318 74,134,051 87,336,222 Number of Holders 4 Total Performance Shares 172,295 4 8 856,388 1,028,683 Number of Holders Total Options 1 1 721,436 721,436 % 0.15 1.11 1.93 11.93 84.88 100.00 % 16.75% 83.25% 100.00% % 100.00 100.00 Less Than Marketable Parcels of Ordinary Shares The number of holders of less than a marketable parcel of ordinary shares as at the Reporting Date is as follows: Unmarketable Parcels Minimum $500.00 parcel at $0.6100 per unit Minimum Parcel Size 820 Holders 219 Units 71,053 85 ANNUAL REPORT 2023MIDWAY LIMITED Additional Shareholder Information continued For the year ended 30 June 2023 Twenty largest shareholders The names of the 20 largest security holders of quoted equity securities (being ordinary shares) as at the Reporting Date are listed below: Ordinary Shareholders Rank Name 1 CHEBMONT PTY LTD 2 3 4 5 6 7 8 8 10 11 12 13 14 15 16 17 18 19 20 PALM BEACH NOMINEES PTY LIMITED CITICORP NOMINEES PTY LIMITED MCCORMACK TIMBERS PTY LTD MCCORMACK TIMBER HOLDINGS PTY LTD MR GREGORY HENRY MCCORMACK + MRS JOCELYN LORNA DELAFIELD MCCORMACKW.H. BENNETT & SONS PTY LTD LUSHERI FARMING PTY LTD M & M MURNANE HOLDINGS PTY LTD NATIONAL NOMINEES LIMITED JR MICAH PTY LTD J & J CORRIGAN NOMINEES PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED MCCORMACK TIMBERS PTY LTD EMINENT ASSET MANAGEMENT PTY LTD HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ESTATE LATE ESMA CLARA THIELE + ESTATE LATE MURRAY EDWARD THIELE JANAKIS PTY LTD J & J CORRIGAN NOMINEES PTY LTD JANAKIS PTY LTD Number of Shares 20,798,294 % 23.81 7,729,697 4,986,499 2,913,152 2,893,036 2,660,000 2,560,356 2,344,263 2,344,263 2,265,141 2,013,194 1,513,530 1,449,009 1,338,411 1,000,000 992,159 916,843 650,215 640,436 620,670 8.85 5.71 3.34 3.31 3.05 2.93 2.68 2.68 2.59 2.31 1.73 1.66 1.53 1.15 1.14 1.05 0.74 0.73 0.71 Total 62,629,168 Balance of register 24,707,054 Grand total 87,336,222 71.71 28.29 100 Stock Exchange Listing The Company’s ordinary shares are quoted on the Australian Securities Exchange (ASX) (ASX issuer code: MWY). On-market Buy-back The Company is not currently conducting an on-market buy-back. 86 ANNUAL REPORT 2023MIDWAY LIMITED Corporate Directory Midway Limited ABN 44 005 616 044 Registered Office 10 The Esplanade North Shore Victoria 3214 Australia T +61 3 5277 9255 F +61 3 5277 0667 Website www.midwaylimited.com.au Board of Directors Gordon Davis (Chairman and Non-Executive Director) Kellie Benda (Non-Executive Director) Nils Gunnersen (Non-Executive Director) Tom Gunnersen (Non-Executive Director) Leanne Heywood (Non-Executive Director) Anthony McKenna (Managing Director and Chief Executive Officer) Auditor KPMG Australia 727 Collins Street Melbourne Victoria 3008 Australia T +61 3 9288 5555 Solicitors SBA Law Level 13, 607 Bourke Street Melbourne Victoria 3000 Australia T +61 3 9614 7000 Share Registry Computershare Investor Services Pty Limited Yarra Falls, 452 Johnston Street Abbotsford Victoria 3067 Australia T 1300 850 505 (within Australia) or +61 3 9415 4000 (international) 87 ANNUAL REPORT 2023MIDWAY LIMITED midwaylimited.com.au